Sri Paul Christadas Salins , Bangalore V. The Assistant Commissioner of Income TAx Circle-2(3)(1), Bangalore

ITA 853/BANG/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 5900 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 1 month(s) 13 day(s)
• Appeal Type: Income Tax (Transfer Pricing) Appeal
• Pronouncement Date: 01-05-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Appeal Filed On: 19-03-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ABDUL HAKEEM M
• Assessee Lawyers: LOKESH JAIN
• Keywords: Opportunity of being heard; Earning of tax free income; Additional evidence; Question of law
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC-B BENCH : BANGALORE BEFORESHRI ARUN KUMAR GARODIA, ACCOUNTANT MEMBER ITA NO. 853 / BANG/201 8 ASSESSMENT YEAR : 20 1 3 - 14 DR. PAUL CHRISTADAS SALINS, NO. 186, AMARJYOTHI LAYOUT, OFF RING ROAD, DOMLUR, BANGALORE 560 071. PAN: BAWPS0815E VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 2 (3) (1), BANGALORE. APPELLANT RESPONDENT APPELLANT BY : SHRI LOKESH JAIN, CA RESPONDENT BY : SHRI ABDUL HAKEEM .M, JCIT (DR) DATE OF HEARING : 2 6 . 0 4 .2018 DATE OF PRONOUNCEMENT : 11 . 0 5 .201 8 O R D E R PER SHRI A.K. GARODIA, ACCOUNTANT MEMBER THIS APPEAL IS FILED BY THE ASSESSEE AND IT IS DIRE CTED AGAINST THE ORDER OF LD. CIT (A)-3, BANGALORE DATED 11.01.2018 FOR ASSESSMEN T YEAR 2013-14. 2. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER. 1. THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) IS OPPOSED TO LAW, FACTS AND CIRCUMSTANCES OF THE CASE . 2. THE ORDER IS PASSED IN HASTE, WITHOUT PROVIDING SUFFICIENT AND REASONABLE OPPORTUNITY OF BEING HEARD. 3. THE ORDER IS PASSED AGAINST THE PRINCIPLE OF NAT URAL JUSTICE AND THUS LIABLE TO BE QUASHED. 4. THE LD. CIT(A) ERRED IN CONFIRMING THE ORDER OF LD. AO WHO HAD DISALLOWED THE VACANCY ALLOWANCE CLAIMED BY THE APP ELLANTTO THE EXTENT OF RS. 6,00,000/-. 5. THE LD. CIT(A)OUGHT TO HAVE APPRECIATED THAT THE VACANCY ALLOWANCE CLAIMED BY THE APPELLANT WAS APROPOS TO P ROVISION OF SECTION 23(1)(C) OF THE INCOME TAX ACT, 1961. ITA NO.853/BANG/2018 PAGE 2 OF 6 6. THE LD. CIT(A) OUGHT TO HAVE CONSIDERED THE FACT THAT THE VACANCY ALLOWANCE CLAIMED ON THE SIMILAR FACTS WERE ACCEPTE D BY THE LD. AO DURING THE COURSE OF SCRUTINY PROCEEDINGS FOR THE S UBSEQUENT ASSESSMENT YEAR. 7. THE LD. CIT(A) OUGHT TO HAVE APPRECIATED THAT TH ERE WAS NO EXPENSE INCURRED WHICH WAS ATTRIBUTABLE TO EARN THE EXEMPT INCOME. THUS, DISALLOWANCE OF RS. 13,930/- MADE UNDER SECTI ON 14A OF THE ACT IS BAD IN LAW. 8. THE LD. CIT(A) ERRED IN APPROVING THE ACTION OF LD. AO OF DISALLOWING A SUM OF RS. 50,070/- ON ACCOUNT OF VEH ICLE MAINTENANCE WITHOUT PROVIDING A SUFFICIENT REASON FOR SUCH DISA LLOWANCE. THE APPELLANT SEEKS YOUR LEAVE TO ADD, ALTER, AMEND OR DELETE ANY OF THE GROUNDS URGED AT THE TIME OF HEARING. 3. IT WAS SUBMITTED BY LD. AR OF ASSESSEE THAT GROU ND NOS. 7 AND 8 ARE NOT PRESSED AND ACCORDINGLY THESE GROUNDS ARE REJECTED AS NOT PRESSED. HE ALSO SUBMITTED THAT IN THE REMAINING GROUNDS, ONLY ONE I SSUE IS INVOLVED I.E. REGARDING ALLOWABILITY OF ASSESSEES CLAIM FOR VACA NCY ALLOWANCE TO THE EXTENT OF RS. 6,00,000/-. HE SUBMITTED THAT THIS PROPERTY WAS ACTUALLY LET OUT BY THE ASSESSEE IN THE EARLIER YEARS AND IN THE IMMEDIATE PRECEDING YEAR I.E. ASSESSMENT YEAR 2012-13 ALSO, IT REMAINED LET OUT F OR TWO MONTHS AND THE ASSESSEE CLAIMED VACANCY ALLOWANCE OF 10 MONTHS IN THAT YEAR AND IT WAS ALLOWED ALSO. HE SUBMITTED A COPY OF COMPUTATION O F INCOME FOR ASSESSMENT YEAR 2012-13 AS PER WHICH THE ASSESSEE HAD DECLARED ANNUAL VALUE OF THE PROPERTY AT RS. 9.60 LAKHS AND CLAIMED VACANCY ALLO WANCE FOR 10 MONTHS AT RS. 8 LAKHS AND NET INCOME UNDER THE HEAD INCOME FR OM HOUSE PROPERTY WAS DECLARED AT (-) RS. 1,26,000/- AFTER CLAIMING STAND ARD DEDUCTION U/S. 24A AND INTEREST U/S. 24B OF RS. 48,000/- AND RS. 2,38,000/ - RESPECTIVELY. HE SUBMITTED THAT IN THAT YEAR, THERE WAS NO SCRUTINY AND HENCE, RETURN FILED BY THE ASSESSEE WAS ACCEPTED BY THE DEPARTMENT. HE SUBMITTED THAT UNDER THESE FACTS, IT HAS TO BE ACCEPTED THAT PROPERTY WAS OF A LET OUT PROPERTY AND THEREFORE, VACANCY ALLOWANCE HAS TO BE ALLOWED U/S. 23(1) (C) OF IT AC T. IN SUPPORT OF HIS CONTENTION, HE PLACED RELIANCE ON THE FOLLOWING TRI BUNAL DECISIONS. ITA NO.853/BANG/2018 PAGE 3 OF 6 A) SMT. SHAKUNTALA DEVI VS. DDIT IN ITA NO. 1524/BA NG/2010 DATED 20.12.2011, COPY AVAILABLE ON PAGES 33 TO 38 OF PAP ER BOOK. B) PREMSUDHA EXPORTS (P) LTD. VS. ACIT AS REPORTED IN 110 ITD 158 (MUM), COPY AVAILABLE ON PAGES 39 TO 45 OF PAPER BO OK. C) SHRI VIKAS KESHAV GARUD VS. ITO IN ITA NO. 747/P N/2014 DATED 31.03.2016, COPY AVAILABLE ON PAGES 47 TO 52 OF PAP ER BOOK. 4. REGARDING VARIOUS JUDGEMENTS NOTED BY CIT(A) IN HIS ORDER, HE SUBMITTED THAT THESE JUDGEMENTS ARE NOT APPLICABLE IN THE FACTS OF THE PRESENT CASE. HE ALSO SUBMITTED SOME ADDITIONAL EVIDENCES AS PER WHICH TH E ASSESSEE IS TRYING TO ESTABLISH THAT THE ASSESSEE WAS MAKING EFFORTS TO L ET OUT THE PROPERTY IN PRESENT YEAR AND FUTURE YEARS AND ULTIMATELY, THE ASSESSEE COULD LET OUT THE PROPERTY ON 28.03.2015 FOR A PERIOD OF 11 MONTHS COMMENCING FRO M 01.04.2015 TO 28.02.2016 AS PER COPY OF THIS DEED IS MADE AVAILAB LE IN THE ADDITIONAL EVIDENCE. HE ALSO SUBMITTED THAT IN THE PAPER BOOK ON PAGES 17 TO 22 OF PAPER BOOK IS THE COPY OF LEAVE AND LICENSE AGREEMENT DAT ED 15.07.2017 FOR A PERIOD OF 11 MONTHS FROM 15.07.2017 TO 15.06.2018. AS AGAINST THIS, LD. DR OF REVENUE SUPPORTED THE ORDER OF CIT(A). HE DRAWN MY ATTENTION TO PARAS 4.3 AND 4.4 OF ORDER OF CIT(A) AND POINTED OUT THAT IT IS NOTED BY CIT(A) IN THESE PARAS THAT THE ISSUE IS COVERED AGAINST THE ASSESSE E BY THE JUDGEMENT OF HONBLE APEX COURT RENDERED IN THE CASE OF SUSHAM S INGLA VS. CIT AS REPORTED IN [2017] 81 TAXMANN.COM 167 (SC) AS PER WHICH THE SLP FILED BY THE ASSESSEE AGAINST THE JUDGEMENT OF HONBLE PUNJAB & HARYANA H IGH COURT IN THE CASE OF SUSHAM SINGLA VS. CIT AS REPORTED IN 244 TAXMAN 302 WAS DISMISSED. HE SUBMITTED THAT THESE TWO JUDGEMENTS OF HONBLE PUNJ AB & HARYANA HIGH COURT AND HONBLE APEX COURT SHOULD BE FOLLOWED IN PREFER ENCE TO VARIOUS TRIBUNAL ORDERS CITED BY LD. AR OF ASSESSEE. 5. I HAVE CONSIDERED THE RIVAL SUBMISSIONS. I FIND THAT AS PER THE COMPUTATION OF INCOME BROUGHT ON RECORD BY LD. AR OF ASSESSEE FOR THE PREVIOUS ASSESSMENT YEAR 2012-13, THE PROPERTY WAS LET OUT IN THAT YEAR FOR TWO MONTHS AND FROM THE ANNUAL VALUE OF THAT PROPERTY IN THAT YEAR OF RS. 9 .60 LAKHS @ RS. 80,000/- PER MONTH, THE ASSESSEE CLAIMED VACANCY ALLOWANCE TO TH E EXTENT OF RS. 8 LAKHS ITA NO.853/BANG/2018 PAGE 4 OF 6 FOR 10 MONTHS AND THEREFORE, THE PROPERTY WAS ACTUA LLY LET OUT IN THE PRECEDING YEAR. THE CLAIM OF THE ASSESSEE IS THIS THAT IN TH E PRESENT YEAR, THE PROPERTY IN QUESTION REMAINED VACANT FOR THE WHOLE OF THE YEAR. IN THE LIGHT OF THESE FACTS, I NOW EXAMINE THE APPLICABILITY OF SECTION 23(1)(C) O F IT ACT AND HENCE, I REPRODUCE THE PROVISIONS OF THIS SECTION FOR READY REFERENCE. THE SAME ARE AS UNDER :- (C) WHERE THE PROPERTY OR ANY PART OF THE PROPERTY IS LET AND WAS VACANT DURING THE WHOLE OR ANY PART OF THE PREVIOUS YEAR AND OWING TO SUCH VACANCY THE ACTUAL RENT RECEIVED OR RECEIVABLE BY THE OWNER IN RESPECT THEREOF IS LESS THAN THE SUM REFERRED TO IN CLAUSE (A), THE AMOUNT SO RECEIVED OR RECEIVABLE: I FIND THAT IF IT IS ACCEPTED THAT THE PROPERTY IN QUESTION IS A LET OUT PROPERTY THEN AS PER THE PROVISIONS OF SECTION 23 (1) (C) OF IT ACT AS REPRODUCED ABOVE, SINCE THE PROPERTY WAS VACANT DURING THE WHOLE OF THE PREVIOU S YEAR IN QUESTION, ACTUAL RENT RECEIVED SHOULD BE CONSIDERED FOR THE PURPOSE OF SE CTION 23 (1) (A) OF IT ACT. HENCE AS PER THE PROVISION OF THIS SECTION, ACTUAL RENT R ECEIVED BY THE ASSESSEE BEING NIL SHOULD BE TAKEN AS ANNUAL VALUE BECAUSE OF THE VACA NCY OF THE PROPERTY IN QUESTION FOR THE WHOLE OF THE YEAR AND ACCORDINGLY, NO INCOM E CAN BE BROUGHT TO TAX U/S. 22 AND 23 FOR THIS PROPERTY IN THE PRESENT YEAR. BUT THE QUESTION IS THIS AS TO WHETHER IN THE FACTS OF THE PRESENT CASE, IT CAN BE SAID THAT IT IS A LET OUT HOUSE PROPERTY? NOW, I EXAMINE THE APPLICABILITY OF THE JUDGEMENT OF HONB LE PUNJAB & HARYANA HIGH COURT RENDERED IN THE CASE OF SUSHAM SINGLA VS. CIT (SUPR A). IN THIS CASE, THERE WAS ONLY ONE QUESTION OF LAW RAISED BEFORE THE HONBLE HIGH COURT AND FOR THIS, PARA 2 OF THE JUDGMENT IS RELEVANT AND IT IS REPRODUCED HEREIN UN DER:- 2. AT THE TIME OF HEARING OF THE APPEALS, MR. PANKA J JAIN, LEARNED SENIOR COUNSEL APPEARING ON BEHALF OF THE APPELLANT-ASSESSEE SOUGH T TO PRESS ONLY THE FOLLOWING SUBSTANTIAL QUESTION OF LAW FOR OUR CONSIDE RATION, WHICH, ACCORDING TO HIM, WAS COMMON AND AROSE TO ALL THE PRESENT APPEALS :- WHETHER UNDER THE FACTS & CIRCUMSTANCES OF THE CASE , PURSUANT TO THE EXPLANATION THERE IS NO CHARGEABILITY OF RENT W HICH CANNOT BE REALIZED RESULTINGLY ACCORDING TO SECTION 23(1) (C) O F THE ACT, THE LESSOR OF THE AMOUNT EXPECTED TO BE LET & AS RECEIVA BLE SHALL BE CHARGED WHEREBY NOT REALIZABLE IS LESS RESULTINGLY NO CHARGE ? THE APPEAL IS ADMITTED ON THIS QUESTION OF LAW. ITA NO.853/BANG/2018 PAGE 5 OF 6 6. AS PER THE FACTS NOTED IN THIS CASE, IT IS FOUND THAT BEFORE THE TRIBUNAL, IT WAS CONTENDED ON BEHALF OF THE ASSESSEE THAT THE PROPER TY HAS NOT BEEN LET OUT AND REMAINED VACANT IN THE RESPECTIVE PREVIOUS YEAR AND THEREFORE, NO VALUE COULD BE DETERMINED U/S. 23(1) (A) OF IT ACT AND IT WAS A LSO URGED THAT AS PER PROVISIONS OF SECTION 23 (1) (C), THE ANNUAL VALUE OF PROPERTY HAS TO BE TAKEN AS NIL. THE HONBLE PUNJAB & HARYANA HIGH COURT HELD THAT SECTION 23 (1) (C) WOULD APPLY ONLY TO THOSE PROPERTY WHICH WAS ACTUAL LY LET OUT AND FOR WHICH RENT WAS ACTUALLY RECEIVED / RECEIVABLE BY THE ASSESSEE. IN THAT CASE, THE PROPERTY IN QUESTION WAS NOT A LET OUT PROPERTY AND THEREFOR E, THE ISSUE WAS DECIDED AGAINST THE ASSESSEE BUT IN THE PRESENT CASE, IT IS SEEN THAT IN THE PRECEDING YEAR, THE PROPERTY WAS ACTUALLY LET OUT AND THEREFO RE, IN MY CONSIDERED OPINION, THIS JUDGEMENT OF HONBLE PUNJAB & HARYANA HIGH COU RT IS NOT APPLICABLE IN THE PRESENT CASE AND AS A CONSEQUENCE, THE DISMISSAL OF SLP FILED BY THE ASSESSEE IN THAT CASE BEFORE HONBLE APEX COURT IS ALSO NOT RELEVANT. 7. NOW I EXAMINE THE APPLICABILITY OF THE TRIBUNAL ORD ER RENDERED IN THE CASE OF SHRI VIKAS KESHAV GARUD VS. ITO (SUPRA). IN THAT C ASE ALSO, IT IS NOTED BY THE TRIBUNAL IN PARA 7 OF THIS TRIBUNAL ORDER THAT PROP ERTY IN QUESTION WAS ACTUALLY LET OUT IN FINANCIAL YEAR 2006-07 BUT IN THE RELEVA NT ASSESSMENT YEAR I.E. 2009- 10, THE ASSESSEE COULD NOT LET OUT THE PROPERTY AND THUS IT REMAINED VACANT THROUGHOUT THE YEAR AND HENCE, IT IS SEEN THAT THE FACTS OF THE PRESENT CASE ARE SIMILAR. THE TRIBUNAL IN THAT CASE HAS ALSO CONSID ERED THE JUDGEMENT OF HONBLE ANDHRA PRADESH HIGH COURT RENDERED IN THE C ASE OF VIVEK JAIN VS. ACIT AS REPORTED IN 337 ITR 74 AND EVEN AFTER CONSI DERING THAT JUDGEMENT, IT WAS HELD IN THAT CASE THAT THE ASSESSEE IS ELIGIBLE FOR VACANCY ALLOWANCE FOR WHOLE OF THE YEAR U/S. 23 (1) (C) OF IT ACT. HENCE RESPECTFULLY FOLLOWING THIS TRIBUNAL ORDER RENDERED IN THE CASE OF SHRI VIKAS K ESHAV GARUD VS. ITO (SUPRA) IN WHICH THE JUDGEMENT OF HONBLE ANDHRA PRADESH HI GH COURT RENDERED IN THE CASE OF VIVEK JAIN VS. ACIT (SUPRA) IS ALSO CONSIDE RED, THE ISSUE IN PRESENT CASE IS DECIDED IN FAVOUR OF THE ASSESSEE. ITA NO.853/BANG/2018 PAGE 6 OF 6 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MENT IONED ON THE CAPTION PAGE. SD/- (ARUN KUMAR GARODIA) ACCOUNTANT MEMBER BANGALORE, DATED, THE 11 TH MAY, 2018. /MS/ COPY TO: 1. APPELLANT 4. CIT(A) 2. RESPONDENT 5. DR, ITAT, BANGALORE 3. CIT 6. GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY, INCOME TAX APPELLATE TRIBUNAL, BANGALORE.