Shri Umesh Chandulal Patel, Baroda V. The Income tax Officer,Ward-1(4), Baroda

ITA 891/AHD/2011

• Counselvise Citation: 89120514 RSA 2011
• Duration Of Justice: 3 year(s) 2 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-05-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 30-05-2014
• Assessment Year: 2005-2006
• Appeal Filed On: 25-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P BATHEJA
• Keywords: Depreciation; Salary income; Earning of tax free income
• Section: 14A; 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD BEFORE SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER AND SHRI T.R. MEENA, ACCOUNTANT MEMBER ITA NO.891/AHD/2011 A.Y.2005-06 SHRI UMESH CHANDULAL PATEL, C/O. MANISH SHAH & ASSOCIATES, 101/38, RACE COURSE CIRCLE, BARODA. PAN: ACUPP 1733D VS ITO WARD 1(4), BARODA. (APPELLANT) (RESPONDENT) REVENUE BY : SHRI O.P. BATHEJA, SR.D.R. , ASSESSEE(S) BY : URVASHI SHODHAN, A.R. / DATE OF HEARING : 30/05/2014 / DATE OF PRONOUNCEMENT: 30/05/2014 / O R D E R PER SHRI MUKUL KUMAR SHRAWAT, JUDICIAL MEMBER THE REGISTRY HAS INFORMED THAT THIS APPEAL WAS BELA TEDLY FILED BY 14 DAYS. THE APPELLANT HAD MOVED AN APPLICATION FOR CONDONATION AND AFTER CONSIDERING THE REASONS ASSIGNING THEREIN WE HEREBY CONDONE THE DELAY AND ADMIT THIS APPEAL FOR ADJUDICATION AS FOL LOWS. 2. THIS IS AN APPEAL FILED BY THE ASSESSEE ARISING FROM THE ORDER OF THE LD. CIT (APPEALS)-IV, BARODA, DATED 02/12/2010 FOR A.Y. 2005-06. THE GROUND RAISED BY THE ASSESSEE IS REPRODUCED BEL OW: THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) H AS ERRED IN LAW AND ON FACTS OF THE APPELLANTSS CASE IN CONFIRMING THE AC TION OF THE LEARNED INCOME TAX OFFICER OF DISALLOWING DEPRECIATION OF RS.1,50, 543/- ON THE ERRONEOUS PLEA THAT IT IS NOT ALLOWABLE AS THE APPELLANT IS N OT ENGAGED IN ANY BUSINESS OR PROFESSION. ITA NO.891/AHD/2011 SHRI UMESH CHANDULAL PATEL VS. ITO WARD 1(4), BAR ODA. FOR A.Y. 2005-06 - 2 - 2.1 FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDIN G ASSESSMENT ORDER PASSED U/S.143(3) DATED 08.11.22007 WERE THAT THE A SSESSEE HAS FILED THE RETURN IN INDIVIDUAL CAPACITY DECLARING THE INCOME OF RS.5,11,541/-. IT WAS OBSERVED BY THE AO THAT THE ASSESSEE HAD EARNED INCOME FROM SALARY, INCOME FROM PROPERTY, SHARE FROM PARTNERSHIP FIRM A ND CLAIMED DEPRECIATION ON MOTOR CAR, OFFICE EQUIPMENT OF RS.1 ,50,543/-. ACCORDING TO AO, THE ASSESSEE WAS NOT ENGAGED IN ANY BUSINESS OF PROFESSION IN INDIVIDUAL CAPACITY OF DERIVING EXEMPTED PROFIT AND INTEREST IN INCOME FROM THE FIRM M/S. PRAPTI CONSTRUCTION COMPANY, THE REFORE, NOT ENTITLED FOR THE DEPRECIATION. THE ASSESSEE, ON THE OTHER HA ND, PLACED RELIANCE ON S.B. GHOSH, 124 ITR 674 FOR THE LEGAL PROPOSITION T HAT THE INCOME FROM THE FIRM WAS UNDER THE HEAD BUSINESS OR PROFESSION ; HENCE, ELIGIBLE FOR EXPENDITURE. ACCORDING TO AO, THE DEPRECIATION ON M OTOR CAR COULD HAVE BEEN CLAIMED AGAINST THE INCOME OF THE FIRM BUT NOT IN THE HANDS OF THE ASSESSEE. THE CLAIM OF DEPRECIATION WAS, THEREFORE, DISALLOWED. 3. LEARNED CIT(A) HAS AFFIRMED THE ACTION OF THE AO IN THE FOLLOWING MANNER: I HAVE CAREFULLY CONSIDERED FACTS OF THE CASE AND A PPELLANT'S SUBMISSIONS. SHARE OF PROFIT FROM THE PARTNERSHIP FIRM WAS EXEMP T U/S.10(2A). EXPENSES, EVEN IF INCURRED IN RESPECT OF SUCH EXEMPT INCOME A RE NOT ALLOWABLE AS DEDUCTION AS PER SECTION 14A. THE DECISIONS RELIED UPON BY THE APPELLANT PERTAINED TO ASSESSMENT YEARS PRIOR TO A.Y. 1993-94 , I.E. BEFORE SECTION 10(2A) WAS BROUGHT ON TO THE STATUTE BOOK, I.E. WHEN SHARE FROM PARTNERSHIP FIRM WAS TAXABLE. THESE DECISIONS ARE NOT APPLICABLE FOR A.Y .2005-06. INTEREST INCOME FROM THE PARTNERSHIP FIRM IS ALSO ASSESSABLE AS BUS INESS INCOME IN VIEW OF SECTION 28(V); HOWEVER, THE INTEREST IS ON PARTNERS ' CAPITAL, I.E. IT IS A PASSIVE INCOME FOR WHICH USE OF MOTOR CAR, FURNITURE ETC. I S RULED OUT. WITHOUT PREJUDICE TO THE ABOVE, FIRSTLY, THERE IS NO EVIDEN CE THAT THE PERSONAL ASSETS WERE USED FOR THE FIRM'S BUSINESS AND SECONDLY, EVE N IF SUCH USE WAS THERE, DEPRECIATION CAN BE CLAIMED IN THE HANDS OF PARTNER SHIP FIRM ONLY SINCE ASSETS WERE USED FOR THE BUSINESS OF PARTNERSHIP FIRM. APP ELLANT HAD NOT TAKEN THE STAND REGARDING THERE BEING NO COMMISSION/CONSULTAN CY INCOME AND HAD NOT REFERRED TO THE APPELLATE DECISION IN HIS CASE FOR A.Y.2004-05 BEFORE THE ITA NO.891/AHD/2011 SHRI UMESH CHANDULAL PATEL VS. ITO WARD 1(4), BAR ODA. FOR A.Y. 2005-06 - 3 - ASSESSING OFFICER. IN OTHER WORDS, IT WAS NOT SUBMI TTED BEFORE THE ASSESSING OFFICER THAT APPELLANT CARRIED ON ACTIVITY OF COMMI SSION/CONSULTANCY DURING THE YEAR EVEN IF THERE WAS NO INCOME FROM THE SAME. SUCH A CONTENTION CANNOT BE ENTERTAINED AT APPELLATE STAGE. EVEN OTHERWISE, APPELLANT HAS NOT ADDUCED ANY EVIDENCE IN SUPPORT OF SOURCE OF COMMISSION/CON SULTANCY INCOME TO BE EXISTING DURING THE F.Y.2004-05. DISALLOWANCE OF DE PRECIATION OF RS.1,54,543/- IS CONFIRMED. 4. WE HAVE HEARD BOTH THE SIDES. AT THE OUTSET, WE HAVE BEEN INFORMED THAT THE DECISION OF RESPECTED ITAT A BE NCH AHMEDABAD IN THE CASE OF SRI VISHNU ANANT MAHAJAN BEARING ITA NO .3002/AHD/2009 FOR A.Y. 2006-07 VIDE AN ORDER DATED 21.09.2012, WA S HELD AS UNDER: 4. NOW THE APPEAL IS RE-HEARD AS PER THE ORDER OF SPECIAL BENCH AS REFERRED ABOVE. THE HON'BLE SPECIAL BENCH HAD ALREADY DECIDE D THAT DEPRECIATION IS STATUTORY ALLOWANCE ADMISSIBLE TO THE ASSESSEE. BUT SECTION 14A DEALS WITH ONLY EXPENDITURE. THUS, THE DEPRECIATION BEING NOT A PART OF EXPENDITURE IS NOT TO BE CONSIDERED FOR DISALLOWANCE U/S.14A OF THE IT ACT. THEREFORE, WE RESPECTFULLY FOLLOWING THE DECISION OF SPECIAL BENC H IN ASSESSEE'S OWN CASE, DATED 25.05.2012 DELETE THE ADDITION ON ACCOUNT OF DEPRECIATION. FOR REMAINING ADDITIONS, THE ID. COUNSEL FOR THE APPELL ANT'S ARGUMENT WERE NOT FOUND CONVINCING TO US. THEREFORE, WE CONFIRM THE O RDER OF THE CIT(A) TO THAT EXTENT ONLY. 4.1 APART FROM THE ABOVE ORDER OF THE TRIBUNAL, AN ANOTHER CASE LAW CITED IS VISHNU ANANT MAHAJAN, 22 TAXMAN.COM 88 (SB ) (AHD), 137 ITD 189, WHEREIN THE FINDING ON THIS ISSUE WAS AS UNDER : COMING TO THE QUESTION REGARDING DEPRECIATION BEIN G AN EXPENDITURE OR NOT, IT HAS BEEN HELD IN THE CASE OF HOSHANG D. NANAVATI V. ACIT (IT APPEAL NO.3567 (MUM.) OF 2007, DATED 18.03.2011) THAT SECT ION 14A DEALS ONLY WITH THE EXPENDITURE AND NOT WITH ANY STATUTORY ALLOWANC E ADMISSIBLE TO THE ASSESSEE. THE DECISION HAS BEEN ARRIVED AT AFTER CO NSIDERING THE DECISION IN THE CASE OF NECTAR BEVERAGES (P.) LTD. VS. DY. CIT( 2009) 314 ITR 314 / 182 TAXMAN 319 (SC). THE COMMISSIONER HAS NOT BEEN ABLE TO EXPENDITURE INCURRED BY THE ASSESSEE IN RELATION TO INCOME. A STATUTORY ALLOWANCE UNDER SECTION 32 IS NOT AN EXPENDITURE. THEREFORE, THE DE CISION OF THE DIVISION BENCH IN THE CASE OF HOSHANG D. NANAVATI (SUPRA) HAS TO B E AGREED WITH. 4.2 ONE MORE ORDER OF ITAT A BENCH AHMEDABAD PRON OUNCED IN THE CASE OF M/S. RAJSHREE KEYUR GANDHI IN ITA NO.923/A HD/2010 FOR A.Y.2006-07 ORDER DATED 06.07.2012 HAS ALSO BEEN CI TED IN WHICH THE ITA NO.891/AHD/2011 SHRI UMESH CHANDULAL PATEL VS. ITO WARD 1(4), BAR ODA. FOR A.Y. 2005-06 - 4 - ORDER OF THE SPECIAL BENCH WAS FOLLOWED AND HELD TH AT THE DISALLOWANCE OF CAR DEPRECIATION BY INVOKING THE PROVISIONS OF S ECTION 14A WAS NOT SUSTAINABLE. CONSISTENT WITH THE VIEW TAKEN BY THE RESPECTED CO-ORDINATE BENCHES, WE HEREBY HOLD THAT THE ASSESSEE IS ENTITL ED FOR THE CLAIM OF DEPRECIATION. THE GROUND RAISED BY THE ASSESSEE IS HEREBY ALLOWED. 5. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . SD/- SD/- (T.R. MEENA) (MUKUL KR. SHRAWAT) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 30/05/2014 PRABHAT KR. KESARWANI, SR. P.S. / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A)-III, AHMEDABAD 5. , , / DR, ITAT, AHMEDABAD 6. / GUARD FILE. / BY ORDER, / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD