ASHOK VARANDANI, Jaipur V. ITO, Jaipur

ITA 965/JPR/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 5518 (ITAT-JAIPUR)
• Duration Of Justice: 2 year(s) 1 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-01-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 06-12-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: RAJINDER SINGH JCIT DR DHK
• Keywords: Depreciation; Proportionate interest

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES (SMC), JAIPUR JH VKJ-IH-RKSYKUH] U;KF;D LNL; DS LE{K BEFORE: SHRI R.P. TOLANI, JUDICIAL MEMBER VK;DJ VIHY LA-@ ITA NO. 965/JP/2013 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2008-09 SHRI ASHOK VARANDANI C-87, BASANT BAHAR COLONY TONK ROAD, JAIPUR CUKE VS. THE ITO WARD- 6 (3) JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO .: AAGPV 9092 D VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI RAJEEV SOGANI, CA JKTLO DH VKSJ LS@ REVENUE BY : SHRI RAJINDER SINGH, JCIT- DR LQUOKBZ DH RKJH[K@ DATE OF HEARING : 15/12/2015 ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 27 /01/2016 VKNS'K@ ORDER PER R.P. TOLANI, JM THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF THE LD. CIT(A)-II, JAIPUR DATED 24-07-2013 FOR THE ASSESS MENT YEAR 2008-09 RAISING SOLITARY GROUND AS UNDER: - IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ACTION O F THE AO IN DISALLOWING THE INTEREST OF RS. 2,23,556/- ON BO RROWED CAPITAL RIGHTLY CLAIMED BY THE APPELLANT U/S 24(B) OF THE I.T. ACT, 1961 ON THE BASIS OF IT BEING VACANT DURING TH E YEAR AS IT IS NO WHERE MENTIONED U/S 24(B) OF THE I.T. ACT,196 1 THAT PROPERTY SHOULD BE LET OUT FOR CLAIMING DEDUCTION O F INTEREST. ITA NO. 965/JP/2013 SHRI ASHOK VARANDANI VS. ITO ,WARD- 6 (3) JAIPUR . 2 THEREFORE, THE ACTION OF THE LD. CIT(A) IS ILLEGAL, UNJUSTIFIED, ARBITRARY AND AGAINST THE FACTS OF THE CASE. RELIEF MAY PLEASE BE GRANTED BY QUASHING THE ORDER BEING ILLEGAL AND WITHOUT AUTHORITY OF LAW. 2.1 DURING THE COURSE OF HEARING, IT IS FOUND THAT THE ASSESSEE HAS FILED THE APPEAL LATE BY 50 DAYS. THE APPLICATION FOR CON DONATION OF DELAY HAS BEEN FILED BY THE ASSESSEE CONTENDING THAT ASSESSEE 'S COMPUTER AND SOFTWARES WERE SEIZED BY M/S. ADOBE SYSTEMS INDIAN (P) LTD. DUE TO WHICH THE APPEAL WAS FILED LATE. THE REASONS WERE B EYOND THE CONTROL OF THE ASSESSEE. RELIANCE IS PLACED IN THE CASE OF COL LECTOR, LAND ACQUISITION VS. MST. KATIJI (1987) 167 ITR 471 (SC). 2.2 THE LD. DR IS HEARD. 2.3 I HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IN MY CONSIDERED VIEW THAT ASS ESSEE WAS PREVENTED BY SUFFICIENT CAUSE IN FILING THE APPEAL LATE. IN V IEW OF THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF MST. KATIJI (S UPRA), THE DELAY IS CONDONED. 3.1 BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE P URCHASED TWO FLATS AT MALL SHREE RESIDENCY, PLOT NO.29, MISSION COMPOUND, AJMER ROAD, JAIPUR FOR A TOTAL CONSIDERATION OF RS. 54,86,020/- ON WHICH A HOUSING ITA NO. 965/JP/2013 SHRI ASHOK VARANDANI VS. ITO ,WARD- 6 (3) JAIPUR . 3 LOAN OF RS. 40.50 LACS FROM INDIA BULLS FINANCING L TD. THE ASSESSEE LET OUT FLAT NO. G-102 SITUATED AT GROUND FLOOR BUT FLA T NO. B-2 SITUATED AT BASEMENT COULD NOT BE LET OUT. THE ASSESSEE WHILE F URNISHING THE INCOME FROM HOUSE PROPERTY CLAIMED DEDUCTION OF INTEREST O N THE ENTIRE HOUSING LOAN. THE AO HELD THAT FLAT NO. B-2 WAS NOT LET OUT BY THE ASSESSEE AND NO RENT WAS RECEIVED. THEREFORE, THE AO DISALLOWED PROPORTIONATE INTEREST OF RS. 2,23,556/- OUT OF TOTAL INTEREST OF RS. 5,52 ,316/-. 3.2 BEFORE THE LD. CIT(A), THE ASSESSEE CONTENDED A S UNDER:- (I) ANNUAL VALUE OF THE FLAT B-2, REMAINING VACANT FOR THE RELEVANT ASSESSMENT YEAR SHOULD BE CONSIDERED AS NI L. (II) DEDUCTION OF INTEREST PAID FOR ACQUIRING THE F LAT SHOULD BE ALLOWED IN TERMS OF SECTION 24 OF THE I.T. ACT, 1961 (III) ASSESSEE MADE ALL THE EFFORTS TO LET OUT FLAT B-2 AND EVEN DID NOT USE IT FOR ITS OWN BUSINESS (IV) NO TAX CAN BE LEVIED ON NOTIONAL INCOME THE ASSESSEE RELIED ON FOLLOWING JUDGEMENTS BEFORE THE LD. CIT(A). (I) PREMSUDHA EXPORTS (P) LTD. VS. ACIT 110 ITD 158 (MUM.) (II) DLF OFFICE DEVELOPERS VS. ACIT 23 SOT 19 (DEL) HOWEVER, THE LD. CIT(A) CONFIRMED THE FOLLOWING OBS ERVATIONS OF LD. AO IN THIS BEHALF :- ITA NO. 965/JP/2013 SHRI ASHOK VARANDANI VS. ITO ,WARD- 6 (3) JAIPUR . 4 .FURTHER DURING THE YEAR UNDER REVIEW THE ASSE SSEE HAS GIVEN ONLY ONE FLAT ON RENT I.E. FLAT NO. F-102 (AR EA 1250 SQ. FT ) AND OTHER FLAT WAS REMAINED VACANT I.E. FLAT NO. B- 2 (AREA 850 SQ.FT). THEREFORE, THE ASSESSEE IS ALLOWED TOTAL IN COME GET AREA-WISE PROPORTIONATE DEDUCTION ON PAYMENT OF INTEREST ON T HE RENT FLAT INSTEAD OF WHOLE AMOUNT OF PAYMENT OF INTEREST OF R S. 5,52,316/- WHICH IS PAID FOR THE HOUSING LOAN TAKEN FOR THE TW O FLATS AS DISCUSSED ABOVE. HENCE, THE AMOUNT OF DEDUCTION COM ES TO RS. 3,28,760/- (PROPORTIONATE INTEREST CALCULATED ON TH E AMOUNT OF RS. 5,52,316/- & TOTAL AREA OF 2100 SQ.FT ) AND THE REM AINING SUM OF RS. 2,23,556/-(RS. 5,52,316/- RS. 3,28,760) IS DISALLO WED AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. IN VIEW OF THE FACTS DISCUSSED ABOVE, IT IS CLEAR T HAT THE ASSESSEE HAS CLAIMED EXCESS DEDUCTION TOWARDS PAYME NT OF INTEREST UNDER THE HEAD OF INCOME FROM HOUSE PROPERTY, THERE FORE, A TOTAL OF RS. 3,06,158/- (RS. 82,602+RS. 2,23,556/-) IS DISAL LOWED AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTICED THAT THE ASSESSEE HAS CLAIMED DEPRECIATION OF RS. 2,74,301/- ON THE TWO RESIDENTIAL FLATS PURCHASED DURING THE Y EAR UNDER CONSIDERATION I.E. FLAT NO.G-102 ON GROUND FLOOR AN D FLAT NO. B-2 IN THE BASEMENT SITUATED AT MALL SHREE RESIDENCY, P.NO .29, MISSION COMPOUND, AJMER ROAD, JAIPUR. FURTHER IT WAS INTERE STINGLY SEEN THAT ONE SIDE THE ASSESSEE HAS SHOWN INCOME FROM HO USE PROPERTY FROM THESE FLATS AND ON THE OTHER SIDE HE HAS CLAIM ED DEPRECIATION ON THESE FLATS UNDER THE HEAD INCOME FROM BUSINESS. AS THESE FLATS ARE NOT USED FOR BUSINESS PURPOSES, THEREFORE, DEPR ECIATION ON THE SAID FLATS IS NOT ALLOWABLE AS DEDUCTION UNDER THE HEAD INCOME FROM BUSINESS. HENCE, THE DEPRECIATION CLAIMED ON THESE FLATS AT RS. 2,74,301/- IS THUS DISALLOWED AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. THIS WOULD RESULT IN AN ADDITION OF R S.2,74,301/- 3.3 AGGRIEVED, THE ASSESSEE IS BEFORE ITAT, LD. COU NSEL FOR THE ASSESSEE CONTENDS THAT :- ITA NO. 965/JP/2013 SHRI ASHOK VARANDANI VS. ITO ,WARD- 6 (3) JAIPUR . 5 VACANCY ALLOWANCE IN COMPUTATION OF PROPERTY INCOME IS GOVERNED BY SECTION 23(1) AS AMENDED BY T HE FINANCE ACT, 2001 W.E.F. APRIL 1,202 BY INSERTION O F CLAUSE . IN ORDER TO ATTRACT CLAUSE , THE FOLLOWING REQU IREMENTS MUST BE FULFILLED (I) THE PROPERTY OR ANY PART MUST BE LET OUT; (II) IT SHOULD HAVE BEEN VACANT DURING THE WHOLE OR ANY PART OF THE PREVIOUS YEAR; (III) DUE TO THE VACANCY, THE ACTUAL RENT RECEIVED BY THE OWNER SHOULD BE LESS THAN THE SUM R EFERRED TO IN CLAUSE (A) AS THE ANNUAL VALUE. THE EFFECT OF SU BSTITUTION OF SECTION 23 HAS BEEN ELABORATELY DEALT WITH IN DEPAR TMENTAL CIRCULAR NO.14 OF 2001 (2001) 252 ITR (ST.) 65, 89 WHEREIN IT HAS BEEN STATED THAT WHERE THE PROPERTY OR ANY P ART IS VACANT FOR THE WHOLE OF THE YEAR AND THE ACTUAL REN T RECEIVED OR RECEIVABLE IS LESS THAN THE ANNUAL LETTING VALUE , THE SUM RECEIVED OR RECEIVABLE IS LESS THAN THE ANNUAL LETT ING VALUE, THE SUM RECEIVED OR RECEIVABLE SHALL BE THE ANNUAL VALUE. SINCE ALL THE CONDITIONS MENTIONED ABOVE, FOR THE APPLICABILITY OF SECTION 23(1), WERE FULFILLED BY THE ASSESSEE, THE ANNUAL VALUE OF FLAT B-2 WAS RIGHTLY TAKEN BY THE ASSESSEE AS NIL. RELIANCE IN THIS REGARD IS PLA CED ON THE FOLLOWING JUDICIAL PRONOUNCEMENTS. (I) PREMSUDHA EXPORTS (P) LD VS. ACIT 110 ITD 158 ( MUM) (II) ACIT VS. DRR. PRABHA SANGHI 139 ITD 504 (DEL.) (III) DLF OFFICE DEVELOPERS VS. ACIT 23 SOT 19 (DEL .) ITA NO. 965/JP/2013 SHRI ASHOK VARANDANI VS. ITO ,WARD- 6 (3) JAIPUR . 6 IT IS CONTENDED THAT THERE BEING NO RENT EARNED; AN NUAL VALUE OF FLAT B-2 WAS RIGHTLY TAKEN AS NIL IN VIEW OF SECTION 23(1)(C ) AND AT THE SAME TIME THE ASSESSEE WAS RIGHT IN CLAIMING DEDUCTION OF INT EREST PAID ON LOAN TAKEN FOR ACQUIRING SUCH FLAT IN TERMS OF SECTION 24(B) O F THE ACT. 3.4 THE LD. DR ON THE OTHER HAND RELIED ON THE ORDE RS OF THE LOWER AUTHORITIES. 3.5 I HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IT IS EVIDENT FROM THE RECORD THAT THE ASSESSEE DID NOT OFFER THE AMOUNT OF RENT FOR WHICH IT IS REASONABLY ACCEPTED TO LET IN TERMS OF SECTION 23(1) OF THE ACT. BESIDES THE ASSE SSEE HAS CLAIMED DEPRECIATION THEREON ON THE PROPERTY WITHOUT USING THE SAID FLAT B-2. THUS THE ASSESSEE HAS UNJUSTIFIABLY CLAIMED DEDUCTION OF INTEREST; ON ONE HAND PROPERTY IS TREATED AS BUSINESS ASSET AND CLAIMED D EPRECIATION THEREON THOUGH DISALLOWED BY AO. EVEN IF HOUSE PROPERTY IN COME IN TERMS OF SECTION 23(1) IS CONCERNED, NO AMOUNT HAS BEEN SHOW N FOR WHICH PROPERTY MIGHT BE REASONABLY EXPECTED TO BE LET. TH US THE ASSESSEES CLAIM HAS NO TENABILITY AS NEITHER PROPERTY IS SELF -OCCUPIED NOR ITS REASONABLE RENTAL ALV IS OFFERED FOR TAX AND AT THE SAME TIME A CLAIM OF DEDUCTION OF INTEREST IS MADE. SINCE THE ASSESSEE H AS NOT COMPLIED WITH ITA NO. 965/JP/2013 SHRI ASHOK VARANDANI VS. ITO ,WARD- 6 (3) JAIPUR . 7 ANY OF THESE STATUTORY CONDITIONS, THE LOWER AUTHOR ITIES HAVE RIGHTLY DISALLOWED THE PROPORTIONATE INTEREST WRONGLY CLAIM ED BY THE ASSESSEE AS ALLOWABLE. THE CASE LAWS CITED BY THE ASSESSEE BEIN G DISTINGUISHABLE DO NOT HELP HIS CAUSE. IN VIEW THEREOF, THE APPEAL OF THE ASSESSEE IS DISMISSED. 4.0 IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMIS SED. ORDER PRONOUNCED IN THE OPEN COURT ON 27 /01/ 2016. SD/- VKJ-IH-RKSYKUH (R.P.TOLANI) U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 27 /01/ 2016 *MISHRA VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT-SHRI ASHOK VARANDANI, JAIPUR 2. IZR;FKHZ@ THE RESPONDENT- THE ITO, WARD- 6(3), JAIPUR 3. VK;DJ VK;QDRVIHY@ CIT(A). 4. VK;DJ VK;QDR@ CIT, 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO. 965/JP/2013) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR