A.R.Foundations P Ltd., CHENNAI V. DCIT Corporate Circle 1(1), CHENNAI

ITA 924/CHNY/2018

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 2803 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-08-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2014-2015
• Appeal Filed On: 19-03-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS RU GEORGECITD R
• Assessee Lawyers: S SRIDHAR
• Keywords: Business income; Depreciation; Business expenditure

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : CHENNAI , . , BEFORE SHRI GEORGE MATHAN, JUDICIAL MEMBER & SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ I.T.A.NO.924/CHNY./2018 / ASSESSMENT YEAR : 2014-15 M/S. A.R.FOUNDATIONS PVT. LTD ., 148,GROUND FLOOR,ACROPOLIS BUILDING, DR.R.K.SALAI,MYLAPORE,CHENNAI -4. VS. THE DCIT, CORPORATE CIRCLE-1(1), CHENNAI. [PAN AAFCA 1661 B] ( / APPELLANT) ( /RESPONDENT) ! ' # / APPELLANT BY : MR.S.SRIDHAR,ADVOCATE $% ! ' # /RESPONDENT BY : MRS.RUBY GEORGE,CIT,D.R & ' ' () / DATE OF HEARING : 29 - 08 - 2018 * ' () / DATE OF PRONOUNCEMENT : 29 - 08 - 2018 / O R D E R PER GEORGE MATHAN, JUDICIAL MEMBER THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-1, CHENNA I IN APPEAL NO.322/CIT(A)-1/2016-17 DATED 21.02.2018 FOR THE ASSESSMENT YEAR 2014-15. 2. MR.S.SRIDHAR REPRESENTED ON BEHALF OF THE ASSES SEE, AND MRS.RUBY GEORGE REPRESENTED ON BEHALF OF THE REVENU E. 3. IT WAS SUBMITTED BY LD.A.R THAT THE ASSESSEE IS A COMPANY, WHICH IS IN THE BUSINESS OF PROPERTY DEVELOPER AND REAL ESTATE. IT WAS A ITA NO.924/CHNY./2018 :- 2 -: SUBMISSION THAT ASSESSEE HAD DERIVED RENTAL INCOME FROM LETTING OUT OF ITS PREMISES TO AN EXTENT OF ` 16,81,15,215/-. THE ASSESSEE HAD ALSO RECEIVED AMENITY CHARGES TO AN EXTENT OF ` 1,99,37,145/-. THE RENTAL INCOME RECEIVED BY THE ASSESSEE HAD BEEN OFFERED UN DER THE HEAD INCOME FROM HOUSE PROPERTY AND THE AMENITY CHARGE S HAD BEEN OFFERED UNDER THE HEAD INCOME FROM BUSINESS. IT W AS A SUBMISSION THAT THE ASSESSEE HAD CLAIMED SET OFF OF VARIOUS EX PENSES AGAINST THE SAID BUSINESS INCOME. IN THE COURSE OF ASSESSMENT, THE LD. ASSESSING OFFICER HAD TREATED THE AMENITY CHARGES OFFERED BY THE ASSESSEE AS A RENTAL INCOME. FURTHER, IT WAS A SUBMISSION THAT TH E LD. ASSESSING OFFICER HAS ALSO HELD THAT EVEN ASSUMING THAT THE A MENITY CHARGES WERE LIABLE TO BE HELD AS BUSINESS INCOME, STILL TH E EXPENDITURE WAS LIABLE TO BE APPORTIONED BETWEEN THE RENTAL INCOME AND THE AMENITIES INCOME IN THE RATIO 89 : 11. IT WAS A SUBMISSION T HAT ON APPEAL THE LD.CIT(A) AGREED WITH THE ASSESSEE THAT THE INCOME FROM THE AMENITIES WAS LIABLE TO BE ASSESSED UNDER THE HEAD INCOME FROM BUSINESS. AND NO APPEAL HAS BEEN PREFERRED BY THE REVENUE. HOWEVER, LD.CIT(A) UPHELD THE APPORTIONMENT OF THE EXPENDITURE INCURRED BY THE ASSESSEE IN THE RATIO 89 : 11 AS DO NE BY THE LD. ASSESSING OFFICER. IT WAS A SUBMISSION THAT THE ASS ESSEE IS A COMPANY AND THE EXPENSES INCURRED BY THE ASSESSEE-COMPANY I N RESPECT OF PROVIDING OF THE AMENITIES ARE PER SE FULLY ALLOWABLE AGAINST THE HEAD ITA NO.924/CHNY./2018 :- 3 -: BUSINESS INCOME. IT WAS A SUBMISSION THAT THE AS SESSEE BEING A COMPANY, THE STATUTORY EXPENSES INCURRED BY THE ASS ESSEE COMPANY FOR EXISTENCE AS A COMPANY WAS ALSO LIABLE TO BE AL LOWED AS BUSINESS EXPENDITURE, IN SO FAR AS WITHOUT INCURRING SUCH EX PENDITURE, IT WILL BE IMPOSSIBLE OF THE ASSESSEE-COMPANY TO EXIST AS A CO MPANY. LD.A.R DREW OUR ATTENTION TO SCHEDULES 19, 20, & 21 OF THE PROFIT AND LOSS ACCOUNT TO SUBMIT THAT SCHEDULE-19 WAS SALARIES AN D DIRECTORS REMUNERATION WHICH WAS A STATUTORY EXPENDITURE; SC HEDULE-20 WAS FINANCE COST, WHICH WAS AGAIN LINKED TO THE BUSI NESS OF THE ASSESSEE, AND SCHEDULE-21 WAS OTHER EXPENSES, WHICH INCLUDED VARIOUS EXPENDITURE LIKE TRAVELLING & CONVEYANCE, POSTAGE, BUSINESS PROMOTION, PROFESSIONAL CHARGES, RATES AND TAXES E TC., WHICH WERE ALSO IN RELATION TO BUSINESS OF THE ASSESSEE AND WA S CONSEQUENTLY ALLOWABLE. IT WAS A PRAYER THAT APPORTIONMENT OF EX PENSES WAS NOT PERMISSIBLE. 4. IN REPLY, LD.D.R VEHEMENTLY SUPPORTED THE ORDER S OF THE LD. ASSESSING OFFICER AND THE LD.CIT(A). IT WAS A SUBMI SSION THAT THE APPORTIONMENT WAS LIABLE TO BE MADE IN SO FAR AS BU SINESS EXPENDITURE COULD NOT BE SET OFF OF AGAINST RENTAL INCOME. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. ADMI TTEDLY, THE ASSESSEE IS A COMPANY. THE BUSINESS OF THE ASSESSEE -COMPANY IS REAL ITA NO.924/CHNY./2018 :- 4 -: ESTATE AND DEVELOPMENT. THE BUSINESS OF THE ASSESSE E BEING PUTTING UP OF BUILDINGS, SELLING THEM, OR LEASING THEM OUT, AS THE BUSINESS REQUIRES. THE INCOME FROM SUCH BUSINESS IS ASSESSE D UNDER THE SPECIFIED FIVE HEADS OF INCOME UNDER THE INCOME TAX ACT, 1961. JUST BECAUSE THE INCOME EARNED BY THE ASSESSEE FROM ITS BUSINESS OF LEASING OUT OF BUILDINGS IS ASSESSED UNDER THE HEAD INCOME FROM HOUSE PROPERTY, IT WOULD NOT MEAN THAT THE BUSINES S EXPENSES OF THE ASSESSEE-COMPANY WOULD NOT BE ALLOWABLE. THE STATU TORY EXPENDITURE INCURRED BY THE ASSESSEE FOR MAINTENANCE OF STATUS AS A COMPANY, ADMITTEDLY IS EXPENDITURE, WHICH IS LIABLE TO BE AL LOWED. THUS, THE EMPLOYEES BENEFIT EXPENSES UNDER SCHEDULE-19, IS A DMITTEDLY ALLOWABLE EXPENDITURE AND CANNOT BE APPORTIONED. IN RESPECT OF SCHEDULE-20, BEING FINANCE COST, THE SAME BEING IN RESPECT OF THE INTEREST PAID TO THE BANK AND ALSO THE BANKING CHAR GES, BEING FOR THE BUSINESS OF THE ASSESSEE IS AN ALLOWABLE EXPENDITUR E. COMING TO OTHER EXPENSES, THE ASSESSEE ITSELF IN ITS COMPUTATION OF TOTAL INCOME HAS CLAIMED THE RATES AND TAXES IN RESPECT OF THE PROPE RTY, WHEN COMPUTING THE INCOME FROM THE HOUSE PROPERTY. THE C OMPUTATION OF TOTAL INCOME CLEARLY SHOWS THAT THE ASSESSEE HAS NO T CLAIMED DEPRECIATION IN RESPECT OF THE LEASED OUT PROPERTY. THE INCOME DERIVED FROM LETTING OUT ACTIVITY HAS BEEN OFFERED AND ASSE SSED UNDER THE HEAD INCOME FROM HOUSE PROPERTY BY THE ASSESSEE. THIS BEING SO, PERUSAL ITA NO.924/CHNY./2018 :- 5 -: OF THE STATEMENT OF TOTAL INCOME AS FILED BY THE AS SESSEE ALONG WITH THE RETURN, CLEARLY SHOWS THAT IT IS ONLY THE EXPEN DITURE IN RELATION TO THE EARNING OF THE INCOME FROM THE AMENITIES AND TH E STATUTORY EXPENDITURE IN RELATION TO THE ASSESSEE-COMPANY, WH ICH ARE BEING CLAIMED BY THE ASSESSEE. THE REVENUE HAS NOT BEEN A BLE TO POINT OUT ANY OF THE EXPENSES, WHICH HAVE BEEN CLAIMED BY THE ASSESSEE AGAINST THE INCOME FROM THE AMENITIES, WHICH IS LIABLE TO B E APPORTIONED. THE APPORTIONMENT DONE BY THE ASSESSING OFFICER IS ALSO NOT SPECIFIC. THIS BEING SO, WE ARE OF THE VIEW THAT THE APPORTIONMENT OF THE EXPENDITURE AS DONE BY THE LD. ASSESSING OFFICER IS UNSUSTAINABLE AND CONSEQUENTLY, WE DELETE THE SAME. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT AFTER CONCLUSION OF HEARING ON 29 TH AUGUST, 2018, AT CHENNAI. SD/- SD/- ( . ) (A.MOHAN ALANKAMONY) ! '# / ACCOUNTANT MEMBER ( ) (GEORGE MATHAN) $ '# / JUDICIAL MEMBER - ' / CHENNAI . / DATED: 29-08-2018 . K S SUNDARAM / ' $(01 2 1( / COPY TO: 1 . ! / APPELLANT 3. & 3( () / CIT(A) 5. 145 $(6 / DR 2. $% ! / RESPONDENT 4. & 3( / CIT 6. 57 8' / GF