ASST CIT 21(2), MUMBAI V. NEOSOFT TECHNOLOGIES, MUMBAI

ITA 926/MUM/2017

• Counselvise Citation: [2018] 124 COUNSELVISE.COM (IT) 9852 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-09-2018
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 09-02-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SUMAN KUMAR
• Assessee Lawyers: ASHOK D MEHTA; DIPESH N VORA
• Keywords: Depreciation; Earning of tax free income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B , BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM & SHRI AMARJIT SINGH , JM ITA NO. 926 / MUM/20 17 ( ASSESSMENT YEAR : 2012 - 13 ) ASSISTANT COMMISSIONER OF INCOME TAX 21(2), ROOM NO.115, 1 ST FLOOR, PIRAMAL CHAMBERS, LA LBAUG MUMBAI VS. M/S. NEOSOFT TECHNOLOGIES 124, PRABHAD E VI UNIQUE INDUSTRIAL ESTATE OFF. VEER SAVARKAR MARG PRABHADEVI, MUMBAI 400 025 PAN/GIR NO. AADFN9657R APPELLANT ) .. RESPONDENT ) CO. NO.133/MUM/2018 (ARISING OUT OF ITA NO. 9 26 /MUM/20 17) ( ASSESSMENT YEAR : 2012 - 13 ) M/S. NEOSOFT TECHNOLOGIES 124, PRABHAD E VI UNIQUE INDUSTRIAL ESTATE OFF. VEER SAVARKAR MARG PRABHADEVI, MUMBAI 400 025 VS. ASSISTANT COMMISSIONER OF INCOME TAX 21(2), ROOM NO.115, 1 ST FLOOR, PIRAMAL CHAMBERS, LALB AUG MUMBAI PAN/ GIR NO.A ADFN9657R APPELLANT ) .. RESPONDENT ) REVENUE BY SHRI SUMAN KUMAR ASSESSEE BY SHRI ASHOK D. MEHTA & SHRI DIPESH N. VORA DATE OF HEARING 11 / 07 /201 8 DATE OF PRONOUNCEMENT 24 / 09 /201 8 / O R D E R PER R.C.SHARMA (A.M) : THIS IS AN APPEAL FILED BY THE REVENUE AND CROSS OBJECTION FILED BY ASSESSEE AGAINST THE ORDER OF CIT(A) - 33, DATED 04/11/2016 FOR A.Y.2012 - 13 IN THE MATTER OF ORDER PASSED U/S.143(3) OF THE IT ACT. ITA NO. 926/MUM/2017 M/S. NEOSOFT TECHNOLOGIES 2 2. IN THIS APPEA L, REVENUE IS AGGRIEVED FOR DELETING DISALLOWANCE OF DEPRECIATION IN RESPECT OF PROPERTY ACQUIRED BY THE ASSESSEE WHERE AS IN CROSS OBJECTION ASSESSEE IS AGGRIEVED BY ACTION OF CIT(A) FOR DELETING THE DISALLOWANCE MADE U/S.14A. 3. RIVAL CONTENTIONS HAVE BE EN HEARD AND PERUSED. FACTS IN BRIEF ARE THAT D URING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTED THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE FIRM HAD PURCHASED A PROPERTY BEING UNIT NO.5, 4 TFL FLOOR, SOUTH CENTRAL WING, RUBY BUILDING, MUM BAI 400 028 VIDE AGREEMENT FOR SALE DATED 29/06/2011 FOR TOTAL CONSIDERATION OF RS.16.50 CRORES. DURING THE ASSESSMENT PROCEEDINGS, IT IS OBSERVED THAT THE ASSESSEE HAS CLAIMED DEPRECIATION OF RS.1,69,56,516/ - ON THE SAID PROPERTY. HENCE THE AO ASKED THE A SSESSEE TO PR ODUCE EVIDENCES IN SUPPORT OF CL AIM MADE WITH REFERENCE TO DEPRECIATION VIZ. OCCUPATION CERTIFICATE ISSUED BY LOCAL AUTHORITIES, POSSESSION TAKEN OF THE SAME PROPERTY, TELEPHONE BILL, INTERNET BILL, ELECTRICITY BILLS ETC. AND ALSO ASKED TO SUB MIT EXPLANATION FOR ALLOWABILITY OF DEPRECIATION CL AIMED. IN RESPONSE TO T H E SAME, THE AR OF THE ASSESSEE HAS FILED THE FOLLOWING DETAILS ALONG WITH EXPLANATION FOR ALLOWABLY OF DEPRECIATION : I ) LETTER DATED 29/06/2011 ISSUED BY M/S. RUBY MILLS LT D. II) POSSESSION LETTER DATED 29/06/2011 ISSUED BY M/S.MINDSET ESTATES P.LTD. III) LETTER DATED 13/03/2015 ADDRESSED TO M/S.TATA POWER CO. BY THE ASSESSEE FOR REQUIREMENT OF INVOICE AND RECEIPT FOR PAYMENTS MADE & COPY OF APPLICATION FORM IV) LETTER DT.29/12/2012 ADDRESSED TO M/S. TATA POWER CO. FOR CHANGE OF BILLING ADDRESS FOR CONSUMER NOL.851461 V) COPY OF ELECTRICITY BILL DT.25/02/2015 FOR THE PERIOD 23/01/2015 TO 22/02/2015 FOR RS.90.281/ - ITA NO. 926/MUM/2017 M/S. NEOSOFT TECHNOLOGIES 3 VI) COPY OF ELECTRICITY BILL DT. 13/03/2015 FOR THE PERIOD 06/01/2012 TO 14/02/2013 FOR RS.4,585/ - . 4. THE EXPLANATION FOR ALLOWABILITY OF DEPRECIATION FURNISHED BY THE AR OF THE ASSESSEE IS REFLECTED IN PARA 3 OF THE ASSESSMENT ORDER, WHICH IS NOT ACCEPTED BY THE AO DUE TO THE FOLL OWING REASONS: - (A) M/S. THE RUBY MILLS LTD. HAS ONLY CONFIRMED THAT THE POSSESSION OF THE SAID UNIT WOULD BE GIVEN TO M/S.NEOSOFT TECHNIOLOGIES ON THE PAYMENT OF FULL CONSIDERATION. AS PER THE DETAILS OF PAYMENT SUBMITTED BY THE ASSESSEE, FINAL PAYMENT W AS MADE ONLY AFTER TAKING LOAN FROM M/S.RELIANCE HOME FINANCE P.LTD. ON 29/07/2011 WHEN BROKERAGE CHARGES OF RS. 18,19,910/ - WAS PAID. B) ACCORDING TO THE AO, THE POSSESSION LETTER WAS PREPARED AFTER REGISTRATION OF SALE DEED AND HENCE IT IS NOT RELIABLE A DOCUMENT C) ON PERUSAL OF THE ELECTRICITY BILL SUBMITTED, AO OBSERVED THAT THE ASSESSEE HAS NOT DONE ANY BUSINESS ACTIVITY FROM THE SAID PREMISES AS THE INFRASTRUCTURE REQUIRED FOR THE PURPOSE OF ASSESSEE'S BUSINESS OF IT RELATED SERVICES OF SERVICE PRO VIDER I.E. COMPUTER, INTERNET CONNECTION ETC. WERE NOT INSTALLED. THE ASSESSEE'S PAYMENT FOR BILLS OF ELECTRICITY MADE AT 124, PRABHADEVI UNIQUE INDL. ESTATE IS NOT PAR WITH THE BILL FROM THE NEW PREMISES. ACCORDING TO THE AO, THE QUESTION OF SENDING OLD A DDRESS OF THE ASSESSEE DESPITE HIS SO CALLED POSSESSION AND CARRYING OUT THE BUSINESS FROM THE NEW PREMISES WAS NOT ACCEPTABLE. THE BILLS FOR THE ELECTRICITY WAS OBSERVED TO BE ISSUED BECAUSE OF ONGOING CONSTRUCTION WORK IN THE SAID PREMISES. 5. IN VI EW OF THE ABOVE DISCUSSIONS THE AO , IT WAS CONCLUDED THAT THE BUILDING WAS NOT PUT TO USE DURING THE YEAR. ACCORDINGLY, THE AO DISALLOWED THE DEPRECIATION CLAIMED OF RS.1 ,69,56,516/ - AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE FOR THE YEAR UNDER CONSIDE RATION. 6 . BY THE IMPUGNED ORDER, CIT(A) DELETED THE DISALLOWANCE OF DEPRECIATION AFTER OBSERVING AS UNDER: - ITA NO. 926/MUM/2017 M/S. NEOSOFT TECHNOLOGIES 4 14. I HAVE CAREFULLY CONSIDERED THE IMPUGNED ASSESSMENT ORDER ON THIS ISSUE, REMAND REPORT OF THE AO, REJOINDERS FILED BY THE ID. AR OF THE APPELLANT AND THE MATERIAL AVAILABLE ON RECORD. MY OBSERVATIONS ARE AS UNDER; - . 14.1 THE AO HAS NOTED IN PARA 3(A) THAT FINAL PAYMENT FOR PURCHASE OF THE PROPERTY WAS MADE BY THE APPELLANT FIRM ON 29/07/2011 I.E., IN F.Y. 2011 - 12 RELEVANT TO A.Y. 2012 - 13. IT IS FURTHER CONTENDED BY THE AO, AFTER VERIFICATION OF THE LETTER DATED 29/06/2011 ISSUED BY THE BUILDER - DEVELOPER M/S RUBY MILLS LIMITED, THAT THE POSSESSION OF THE SAME WOULD BE GIVEN ONLY AFTER RECEIPT OF THE FULL PAYMENT. SINCE FULL PAYMENT /AS A DMITTEDLY MADE IN F.Y. 2011 - 12, IT APPEARED TO THE AO THAT THE POSSESSION OF THE PROPERTY WAS NOT WITH THE APPELLANT FIRM DURING THE YEAR UNDER CONSIDERATION 14.2 FROM PERUSAL OF THE DOCUMENTS, I DO NOT FIND ANY REASON TO DOUBT THE RELIABILITY OF THE POSS ESSION LETTER DATED 29/06/2011 AS THE SAME WAS ISSUED POST REGISTRATION OF THE SALE DEED DATED 06/07/2011 AND BEARS THE REGISTRATION NO. MOREOVER, ISSUANCE OF POSSESSION LETTER AND REGISTRATION OF THE PROPERTY WERE DONE IN THE F.Y. 2011 - 12 RELEVANT TO A.Y. 2012 - 13. I DO NOT UNDERSTAND AS HOW THESE DATES, AS HIGHLIGHTED BY THE AO IN THE ASSESSMENT ORDER, WILL LEAD TO DENYING OF THE DEPRECIATION OF THE PREMISES FOR NO USE DURING THE YEAR. ON T H E OTHER HAND, THESE DATES REFLECT THAT THE APPELLANT CERTAINLY GOT THE POSSESSION OF THE PREMISES DURING THE YEAR UNDER CONSIDERATION ITSELF. 14.3 THE AO HAS ALSO RAISED CERTAIN QUERY REGARDING ISSUANCE OF ELECTRICITY BILLS OF THE NEW AS WELL AS OLD PREMISES USED BY THE APPELLANT. IN THIS REGARD, REMAND REPORT WAS CALLE D FROM THE AO. IN THE REMAND REPORT, THE AO HAS RAISED ISSUES VIZ., NO SEPARATE METER ISSUED TO THE APPELLANT, COMMON AREA MAINTENANCE INVOICES BEING IN THE NAME OF THE COMPANY, USE OF PODIUM AND HAVC CONSUMPTION ETC. . IN THIS REGARD, THE APPELLANT HAS BR OUGHT ON RECORD THAT: - (I) THE LIST OF THE 15 EMPLOYEES WHO WORKED FROM THE NEW RUBY OFFICE FROM 1ST AUGUST 2011 AND THEIR EMPLOYEES ID CARDS WERE PROVIDED TO THE AO. THE EMPLOYEES ID CARD BEARS THE ADDRESS OF THE NEW PREMISES. (II) IT IS FURTHER CLARI FIED THAT THE WORD 'NEOSOFT TECHNOLOGIES PVT. LTD' BY THE BUILDER IN SOME OF THE BILLS AND THE CREDIT NOTE WAS THE RESULT OF TYPING ERROR. THE FINAL REMINDER DATED 17.1.2015 BEARS THE NAME AS 'NEOSOFT TECHNOLOGIES'. APART FROM THAT IT IS OBSERVED THAT THE AGREEMENT AND ALL THE OTHER DOCUMENTS REFER TO 'NEOSOFT TECHNOLOGIES' AND THERE IS NO ENTITY BY THE NAME OF NEOSO F T TECHNOLOGIES PRIVATE LIMITED IN THE SAID BUILDING, AS EVIDENT FROM THE COPY OF AGREEMENT. ITA NO. 926/MUM/2017 M/S. NEOSOFT TECHNOLOGIES 5 (III) THE TESTING AND INSTALLATION OF COMPUTERS C ANNOT BE DONE WITHOUT ELECTRICITY CONNECTION DURING THE YEAR. THE COMPUTER CANNOT BE TESTED WITHOUT ELECTRICITY MAKES IT CLEAR THAT THE ASSESSEE HAD UTILISED ELECTRICITY WHEN THE COMPUTERS WERE INSTALLED AND TESTED AT THE N EW PREMISES . (IV) THE COMMON MAI NTENANCE BILL ISSUED BY BUILDER INCORPORATING THE COMMON ELECTRICITY CHA RGES ARE ALSO KEPT ON RECORD. THIS CLEARLY ESTABLISHES THAT THERE EXISTED ELECTRICITY CONNECTIONS IN THE NEW PREMISES USED BY THE APPELLANT. 14.4 APART FROM THAT CERTIFICATE ISSUED BY THE DY. DIRECTOR OF INDUSTRIES (MMR) DURING THE YEAR UNDER CONSIDERATION AND ALLOWANCE OF DEPRECIATION IN THE SUBSEQUENT YEAR JUSTIFY THE CLAIM OF THE POSSESSION AND USE OF THE NEW PREMISES BY THE APPELLANT DURING A.Y. 2012 - 13. IN THIS REGARD, IT IS FOUND THAT IN THE CASE LAWS RELIED UPON BY THE ID. AR, HON'BLE COURTS HAVE ALLOWED CLAIM OF DEPRECIATION IN THE CASES OF PASSIVE USERS TOO. 14.5 CONSIDERING TOTALITY OF FACTS AND CIRCUMSTANCES OF THE ISSUE INVOLVED, I DO NOT HAVE ANY DOUBT THAT THE APPELLANT WAS IN POSSESSION OF THE NEW PREMISES AND USED IT SO AS TO MAKE IT ELIGIBLE FOR DEPRECIATION FOR ITS BUSINESS PURPOSE DURING THE YEAR UNDER CONSIDERATION. HENCE, DISALLOWANCE OF DEPRECIATION OF RS. 1,69,56,516/ - IS DELETED. THUS GROUNDS OF APPEAL NO. 4.4 I S ALLOWED. 7 . AGAINST THE ABOVE ORDER OF CIT(A), THE R EVENUE IS IN FURTHER APPEAL BEFORE US. 8 . WE HAVE CONSIDERED RIVAL CONTENTIONS AND CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND FOUND FROM RECORD THAT AFTER CALLING REMAND REPORT, THE CIT(A) RECORDED A FINDING TO THE EFFECT THAT POSSESSION OF THE NEW PROPERTIES AND ITS USE MADE THE ASSESSEE ELIGIBLE FOR DEPRECIATION FOR ITS BUSINESS PURPOSE. FROM THE RECORD, WE FOUND THAT T HE ASSESSEE HAD PURCHASED THE OFFICE PREMISES. THE SAID PREMIS E WAS HANDED OVER BY THE BUILDER TO THE ASSESSE E ON 29/6/ 2011. THE OBJECTION RAISED BY THE AO THAT THE POSSESSION LETTER DATED 29 /6/ 2011 REFERS TO THE ITA NO. 926/MUM/2017 M/S. NEOSOFT TECHNOLOGIES 6 REGISTERED DOCUMENT DATED 6/7/ 2011 IS ONLY A TECHNICAL ISSUE. THE POSSESSION WAS HANDED OVER ON 29 / 6 / 2011 AND THEREAFTER THE LETTER WAS ISSUED BY THE BUILDER BY REFERRING TO THE REGISTERED DOCUMENT. BESIDES THIS THE ASSESSEE HAS PROVIDED VARIOUS OTHER DOCUMENTS IN THE FORM OF MAINTENANCE BILLS, AMENITIES BILL, SHIFTING OF FILES, PARKING SPACE LETTER, COMPUTER INSTALLATION REPORT, REGISTRATION WITH GOVERNMENT AUTHORITIES, ETC. THESE DOCUMENTS ARE ACKNOWLEDGED BY THIRD PARTY. THE DOCUMENTS HAVE NOT BEEN DOUBTED BY THE AO. WE ALSO FOUND THAT THE ASSESSEE HAD APPLIED TO TATA POWER AND THE ASSESSEE HAS PROVIDED BIL L FOR JANUARY AND FEBRUARY 2012 TO THE AO. THE ASSESSEE HAS PROVIDED THE COMPUTER INSTALLATION AND - TESTING REPORT AND ALSO THE CERTIFICATE FROM THE DEPUTY DIRECTOR OF INDUSTRIES TO PROVE THAT THE ASSESSEE HAD COMMENCED BUSINESS FROM THE SAID PREMISES ON 1 ST AUGUST 2011. 9 . IN VIEW OF THE ABOVE, WE OBSERVE THAT ASSESS E E HAS BEYOND DOUBT PROVED THAT THE ASSESS E E WAS THE OWNER OF THE OFFICE PREMISES AND HAD USED THE SAID PREMISES DURING THE PREVIOUS YEAR FROM 1 /8/ 2011. THE AO HAS HIMSELF ACCEPTED THE DATE OF COMMENCEMENT IN THE FOLLOWING YEAR AND ALLOWED THE DEPRECIATIO N. FURTHERMORE, THE DETAILED FINDING SO RECORDED BY CIT(A) AFTER CONSIDERING THE REMAND REPORT ARE AS PER MATERIAL ON RECORD WHICH DO NOT REQUIRE ANY INTERFERENCE ON OUR PART. 1 0 . IN THE RESU LT, APPEAL OF THE REVENUE IS DISMISSED. 1 1 . IN THE CROSS OBJECTION, ASSESSEE IS AGGRIEVED FOR UPHOLDING THE DISALLOWANCE MADE U/S.14A R.W.R. 8D AMOUNTING TO RS.1,54,091/ - . ITA NO. 926/MUM/2017 M/S. NEOSOFT TECHNOLOGIES 7 1 2 . WE HAVE CONSIDERED RIVAL CONTENTIONS AND FOUND THAT DISALLOWANCE HAS BEEN MADE BY THE AO UNDER RULE 8D 2(II) BY OBSERVING THAT ASSESSEE HAS INVESTED INTEREST BEARING FUNDS FOR EARNING EXEMPT INCOME. 13 . LEARNED AR INVITED OUR ATTENTION TO THE AVAILABLE SURPLUS FUNDS WITH THE ASSESSEE WHICH WAS INVESTED IN THE SECURITIES GIVING EXEMP T INCOME. FROM THE RECORD WE FOU ND THAT T HE ASSESSEE HAS A HUGE WORK FORCE WHICH HAS TO BE PAID SALARY REGULARLY AND THEREFORE IN ORDER TO MAKE FUNDS AVAILABLE TO THE ASSESSEE REGULARLY THE SURPLUS FUNDS ARE INVESTED IN MUTUAL FUNDS AND FIXED MATURITY PLAN S SO AS TO MAKE THE FUNDS AVAILABLE TO THE ASSESSEE WHEN REQUIRED FOR PAYMENT OF SALARY. THE MODE OF INVESTMENT IS THAT THE BANKS HAVE THEIR REPRESENTATIVES WHO COME TO THE ASSESSEE'S OFFICE FILL UP THE FORM AND TAKE THE CHEQUE FROM THE ASSESSEE. FOLLOWING THE PROPOSITION OF LAW LAID DOWN BY JURISDICTIONAL HIGH COURT IN CASE OF RELIANCE UTILITIES AND POWER PRIVATE LIMITED AND HDFC BANK, WE DO NOT FIND ANY MERIT FOR THE DISA LLOWANCE SO MADE BY AO U/S.14A WHEN UNDISPUTEDLY, THE ASSESSEE HAD SURPLUS FUNDS OF H IS OWN. 1 4 . IN THE RESULT, CROSS OBJECTION FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 24 / 09 /201 8 SD/ - ( AMARJIT SINGH ) SD/ - (R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 24 / 09 /201 8 KARUNA SR. PS ITA NO. 926/MUM/2017 M/S. NEOSOFT TECHNOLOGIES 8 COPY OF THE ORDER FORWARDED TO : BY ORDER, ( ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//