Ms. Rajshree Keyur Gandhi, Ahmedabad V. The CIT-V, Ahmedabad

ITA 923/AHD/2010

• Counselvise Citation: 92320514 RSA 2010
• Duration Of Justice: 2 year(s) 3 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-07-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 26-06-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 29-03-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAHUL KUMAR
• Assessee Lawyers: S N SOPARKAR
• Keywords: Depreciation; Principle of natural justice; Earning of tax free income
• Section: 14A; 32; 263

Judgement Text

, , , , A, IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD, A BENCH . .. . . .. . , !' !' !' !', , , , #$ #$ #$ #$ # ## #. .. .% %% % . .. .&'( &'( &'( &'(, , , , %) * %) * %) * %) * % ' % ' % ' % ' BEFORE S/SHRI G.C. GUPTA, VICE-PRESIDENT AND A. K. GARODIA, ACCOUNTANT MEMBER) ITA NO.923/AHD/2010 [ASSTT.YEAR : 2006-2007] MS.RAJSHREE KEYUR GANDHI 9 TH FLOOR, SUYOJAN BUILDING C.G. ROAD, AHMEDABAD. /VS. CIT-V, ASHRAM ROAD AHMEDABAD. ( (( (,- ,- ,- ,- / APPELLANT) ( (( (./,- ./,- ./,- ./,- / RESPONDENT) 01 2 3 %/ ASSESSEE BY : SHRI S.N. SOPARKAR * 2 3 %/ REVENUE BY : SHRI RAHUL KUMAR 5 2 16)/ DATE OF HEARING : 26 TH JUNE, 2012 7&8 2 16)/ DATE OF PRONOUNCEMENT : 6-7-2012 %9 / O R D E R PER G.C. GUPTA, VICE-PRESIDENT: THIS APPEAL OF THE ASSESSEE FOR A.Y.2006-2007 IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX-V, AHMEDABAD DATED 27.1.2010. 2. AT THE OUTSET, THE LEARNED COUNSEL FOR THE ASSES SEE SUBMITTED THAT THE ONLY EFFECTIVE GROUND OF THE ASSESSEES APPEAL IS GROUND NO.1 WHICH IS REPRODUCED BELOW: 1 ) THE LD. CIT HAS ERRED IN LAW AND ON FACTS IN PASS ING ORDER U/S.263 OF THE ACT HOLDING THE ASSESSMENT ORDER PAS SED U/S.143(3) SCRUTINY PROCEEDINGS AS ERRONEOUS AND PREJUDICIAL T O THE INTEREST OF REVENUE TO THE EXTENT OF ALLOWANCE OF EXPENDITURE C LAIMED BY THE ASSESSEE TOWARDS CAR MAINTENANCE, DEPRECIATION, INT EREST ON CAR LOAN AND MOBILE EXPENSES AGAINST INCOME EARNED FROM BUSINESS/PROFESSION. THE LD.CIT HAS FAILED TO APPR ECIATE THE FACT THAT THE ASSESSMENT ORDER SOUGHT TO BE REVISED WAS PASSED AFTER VERIFICATION OF THE CLAIM AND PROPER APPLICATION OF LAW BY AO AND ITA NO.923/AHD/2010 -2- HENCE THIS ORDER OF CIT, WHICH IS TOTALLY ERRONEOUS , PREJUDICIAL AND AGAINST THE PRINCIPLES OF NATURAL JUSTICE DESERVES TO BE QUASHED. 3. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT THE ASSESSEE IS A PRACTICING ADVOCATE AND A PARTNER IN THE FIRM FRO M WHERE SHE DERIVED SHARE INCOME AS ALSO REMUNERATION AS PARTNER OF THE FIRM. VARIOUS EXPENSES CLAIMED BY THE ASSESSEE, SUCH AS CAR EXPEN SES, INTEREST ON CAR LOAN, DEPRECIATION ON CAR, MOBILE EXPENSES ETC. WER E ALLOWED BY THE AO AT THE TIME OF ORIGINAL ASSESSMENT. HOWEVER, THE C IT WHILE EXERCISING HIS POWER UNDER SECTION 263 OF THE ACT SET ASIDE THE AS SESSMENT AND DIRECTED THE AO TO MODIFY THE ASSESSMENT AND RECOMPUTE THE T OTAL INCOME OF THE ASSESSEE BY RESTRICTING THE CLAIM OF EXPENDITURE TO WARDS, CAR MAINTENANCE, DEPRECIATION ON CAR, INTEREST ON CAR LOAN AND MOBIL E PHONE EXPENSES TO THE EXTENT 40% AND DISALLOWED 60% OF THE SAME, AS THE A SSESSEE HAS ROUGHLY 60% OF SHARE FROM THE SHARE INCOME OF THE FIRM IN W HICH SHE IS A PARTNER AND WHICH IS EXEMPT FROM TAX UNDER SECTION 10(2A) O F THE ACT. THE LEARNED COUNSEL OF THE ASSESSEE SUBMITTED THAT THE ISSUE IS NOW COVERED WITH THE DECISION OF THE SPECIAL BENCH OF THE ITAT, AHMEDABAD IN THE CASE OF SHRI VISHNU ANANT MAHAJAN VS. ACIT, IN ITA NO.3002/AHD/2009 DATED 25-5-2012 WHEREIN IT IS HELD THAT THE DEPRECIATION HAS TO BE ALLOWED IN FULL AND OTHER EX PENSES WILL BE ALLOWED PRO-RATA IN CASE THE ASSESSEE HAS TAXABLE A WELL AS EXEMPT INCOME DURING THE YEAR. THE LEARNED DR HAS OPPOSED THE SUBMISSIO NS OF THE LEARNED COUNSEL OF THE ASSESSEE. HE HAS RELIED ON THE ORDE R OF THE CIT. 4. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND HAVE PE RUSED THE ORDERS OF THE AO AND THE CIT. WE FIND THAT THE ASSESSEE I S A PRACTICING ADVOCATE AND DERIVES SHARE INCOME AND ALSO REMUNERATION AS P ARTNER IN THE LAW FIRM, M/S.D.C.GANDHI ASSOCIATES, AHMEDABAD. THE AS SESSEES SHARE ITA NO.923/AHD/2010 -3- INCOME FROM THE FIRM BEING A PARTNER IS EXEMPT U/S. 10(2A) OF THE ACT WHEREAS THE REMUNERATION RECEIVED FROM THE FIRM AS A PARTNER IS TAXABLE. THE ASSESSEE HAS CLAIMED TOTAL EXPENSES OF RS.2,45, 367/- ON ACCOUNT OF CAR EXPENSES, CAR DEPRECIATION, MOBILE PHONE CHARGE S AND CAR LOAN INTEREST. WE FIND THAT THE ISSUE IS NOW COVERED WI TH THE DECISION OF THE SPECIAL BENCH OF THE AHMEDABAD TRIBUNAL IN SHRI VIS HNU ANANT MAHAJAN VS. ACIT (SUPRA) WHEREIN IT IS HELD THAT THE PROVIS ION OF SECTION 14A SHALL NOT BE APPLICABLE TO THE CLAIM OF DEPRECIATIO N MADE BY THE ASSESSEE, SINCE STATUTORY ALLOWANCE UNDER SECTION 32 IS NOT A N EXPENDITURE. WITH REGARD TO OTHER EXPENSES CLAIMED BY THE ASSESSEE, T HE SAME WOULD BE ALLOWED IN THE RATIO OF INCOME INCLUDIBLE IN THE TO TAL INCOME OF THE ASSESSEE AND THE RATIO OF EXPENDITURE TO THE EXEMPT INCOME OF THE ASSESSEE SHALL BE DISALLOWED. FOLLOWING THE DECISION OF THE SPECIAL BENCH OF THE AHMEDABAD TRIBUNAL IN SHRI VISHNU ANANT MAHAJAN (SU PRA), WE HOLD THAT THE CITS DIRECTION TO DISALLOW THE CAR DEPRECIATIO N OF RS.1,70,371/- ARE NOT SUSTAINABLE AND THE IMPUGNED ORDER OF THE CIT I N DIRECTING THE AO TO MODIFY THE ASSESSMENT TO THIS EXTENT IS SET ASIDE A ND NO DISALLOWANCE ON CAR DEPRECIATION IS CALLED FOR. HOWEVER, WITH REGA RD TO OTHER EXPENSES CLAIMED BY THE ASSESSEE, ON ACCOUNT OF CAR EXPENSES , MOBILE PHONE EXPENSES AND CAR LOAN INTEREST, THE CIT HAS DIRECTE D THE AO TO RESTRICT THE CLAIM OF THESE EXPENSES TO THE EXTENT OF 40% AND TO DISALLOW 60% OF THE SAME AND RECOMPUTE THE TOTAL INCOME OF THE ASSESSEE FOR THE RELEVANT YEAR, TO WHICH THE LEARNED COUNSEL OF THE ASSESSEE HAS NO OBJECTION. ACCORDINGLY, THE DIRECTION OF THE CIT TO DISALLOW T O THE EXTENT OF 60% OF CAR MAINTENANCE, INTEREST ON CAR LOAN AND MOBILE PH ONE EXPENSES IS SUSTAINED AND THE GROUND NO.1 OF THE APPEAL OF THE ASSESSEE IS ACCORDINGLY PARTLY ALLOWED. ITA NO.923/AHD/2010 -4- THE LEARNED COUNSEL FOR THE ASSESSEE HAS NOT PRESS ED THE OTHER GROUNDS RAISED BY THE ASSESSEE AND ARE ACCORDINGLY DISMISSED. 5. IN THE RESULT, THE ASSESSEES APPEAL IS PARTLY A LLOWED. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE. SD/- SD/- ( # ## #. .. .% %% % . .. .&'( &'( &'( &'( /A.K. GARODIA) %) * /ACCOUNTANT MEMBER ( . .. . . .. . /G.C. GUPTA) !' !' !' !' /VICE-PRESIDENT VK* C OPY OF THE ORDER FORWARDED TO: 1) : APPELLANT 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR, ITAT. BY ORDER DR/AR, ITAT, AHMEDABAD