M/s. K.R. ENTERPRISES, MUMBAI V. ITO - 20(1)-4, MUMBAI

ITSSA 39/MUM/2006

• Counselvise Citation: [2011] 124 COUNSELVISE.COM (IT) 7854 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 10 month(s) 24 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 23-12-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: misc
• Appeal Filed On: 30-01-2006
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P K B MENON
• Keywords: Depreciation; Business expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A, MUMBAI BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER. IT(SS)A. NO. 39/MUM/2006 ASSESSMENT YEAR : 1-4-01 TO 31-3-02. M/S K.R. ENTERPRISES, THE INCOME-TAX OFFICER, 203, ANAND VIHAR, NEAR SHANTIVAN, VS. 20(1)-4, MUMBAI. MHADA, OSHIVARA, ANDHERI (W), MUMBAI 400053. PAN AAEFK 5869P APPELLANT. RESPONDENT APPELLANT BY : SHRI SANJAY PARIKH. RESPONDENT BY: SHRI P. K. B.MENON. DATE OF HEARING : 20-12-2011. DATE OF PRONOUNCEMENT : 23-12-2011. O R D E R. PER P.M. JAGTAP, A.M. : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF LEARNED CIT(APPEALS)-XX, MUMBAI DATED 18-11-2005. 2. THE FIRST ISSUE RAISED BY THE ASSESSEE IN GROUND NO. 1(A) OF THIS APPEAL IS RELATING TO ITS CLAIM FOR DEDUCTION OF RS.49,210/- ON ACCOUNT OF SOCIETY CHARGES WHILE COMPUTING INCOME FROM HOUSE PROPERTY. 3. AT THE TIME OF HEARING BEFORE US, THE LEARNED RE PRESENTATIVES OF BOTH THE SIDES HAVE AGREED THAT THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. R.J. WOOD P. LTD. 334 2 IT(SS)A.MO.39/MUM/2006. ITR 358 WHEREIN IT WAS HELD THAT THE MAINTENANCE AN D OTHER CHARGES PAID BY THE ASSESSEE ARE DEDUCTIBLE FROM THE RENT WHILE COMPUTI NG THE ANNUAL LETTING VALUE. RESPECTFULLY FOLLOWING THE SAID DECISION OF HONBLE DELHI HIGH COURT, WE DIRECT THE AO TO ALLOW THE CLAIM OF THE ASSESSEE FOR DEDUC TION ON ACCOUNT OF MAINTENANCE CHARGES PAID TO THE SOCIETY WHILE COMPUTING ITS INC OME FROM HOUSE PROPERTY. GROUND NO. 1 OF THE ASSESSEES APPEAL IS ACCORDING LY ALLOWED. 4. THE OTHER ISSUES RAISED BY THE ASSESSEE IN GROUN D NO. 1(B) OF THIS APPEAL RELATE TO THE DISALLOWANCE MADE BY THE AO AND CONFI RMED BY THE LEARNED CIT(APPEALS) ON ACCOUNT OF INTEREST AMOUNTING TO RS .2,12,584/-, MOTOR CAR EXPENSES AMOUNTING TO RS.34,192/- AND MOTOR CAR DEP RECIATION AMOUNTING TO RS.64,000/-. 5. IN SO FAR AS THE ISSUE RELATING TO DISALLOWANCE ON ACCOUNT OF INTEREST IS CONCERNED, THE LEARNED COUNSEL FOR THE ASSESSEE HAS NOT PRESSED THE SAME ON THE GROUND THAT ITS ALTERNATIVE CLAIM FOR DEDUCTION OF INTEREST UNDER THE HEAD INCOME FROM OTHER SOURCES HAS ALREADY BEEN ACCEPTED BY TH E LEARNED CIT(APPEALS) BY REMANDING THE MATTER BACK TO THE AO WITH A DIRECTIO N TO CONSIDER AND ALLOW THE SAME. 6. AS REGARDS THE ASSESSEES CLAIM FOR MOTOR CAR EX PENSES AND MOTOR CAR DEPRECIATION, IT IS OBSERVED THAT IN ITS RETURN OF INCOME FILED FOR THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD SHOWN INCOME OF RS. 2,79,465/- UNDER THE HEAD INCOME FROM HOUSE PROPERTY AND AFTER ADJUSTING TH E LOSS OF RS.1,97,998/- CLAIMED BY THE ASSESSEE UNDER THE HEAD PROFITS & G AINS OF BUSINESS OR PROFESSION, TOTAL INCOME OF RS.81,470/- WAS DECLAR ED BY THE ASSESSEE. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO DID NOT AC CEPT THE CLAIM OF THE ASSESSEE OF HAVING CARRIED ON THE BUSINESS OF DEVELOPERS AND CONTRACTORS IN THE YEAR UNDER 3 IT(SS)A.MO.39/MUM/2006. CONSIDERATION AS HE FOUND THAT THERE WAS NOT EVEN A SINGLE INSTANCE OF PURCHASE OF LAND BY THE ASSESSEE UPTO 31-03-2002 INSPITE OF THE FACT THAT THE ASSESSEE CLAIMED TO HAVE CARRIED ON THE BUSINESS OF DEVELOPERS FROM 01-01-1998. HE HELD THAT THE MERE FILING OF TENDER WITH MHADA DID NOT CONSTITUTE THE BUSINESS OF THE ASSESSEE. HE ALSO DID NOT ACCEPT THE SUBMISSION OF THE ASSESS EE THAT ITS PARTNERS WERE REQUIRED TO TRAVEL IN CONNECTION WITH THE VISIT TO VARIOUS SITES FOR THE PURPOSE OF LOCATION OF A GOOD PLOT FOR DEVELOPMENT ON THE GROU ND THAT THERE WAS NOT EVEN A SINGLE INSTANCE OF PURCHASE OF PLOT OF LAND DURING THE PERIOD OF MORE THAN 3 YEARS. THE AO HELD THAT THERE WAS NO OTHER DOCUMENTARY EVI DENCE PRODUCED BY THE ASSESSEE TO SUPPORT AND SUBSTANTIATE ITS CLAIM OF H AVING CARRIED ON THE BUSINESS OF DEVELOPERS. ACCORDINGLY THE EXPENSES MAINLY CLAIMED BY THE ASSESSEE ON ACCOUNT OF MOTOR CAR AND DEPRECIATION UNDER THE HEAD PROFI TS & GAINS OF BUSINESS OR PROFESSION WERE DISALLOWED BY HIM. ON APPEAL, THE LEARNED CIT(APPEALS) CONFIRMED THE SAID DISALLOWANCE MADE BY THE AO. 7. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. DURING THE COURSE OF PROCEEDING BEFORE US, THE ASSESSEE HAS FILED AN APPLICATION SEEKING ADMISSION OF THE ADDIT IONAL GROUNDS. IN THE SAID ADDITIONAL GROUNDS, THE ASSESSEE HAS SOUGHT TO CHAL LENGE THE DECISION OF THE LEARNED CIT(APPEALS) HOLDING THAT THE ASSESSEE DID NOT CARR Y ON ANY BUSINESS DURING THE YEAR UNDER CONSIDERATION. THE ASSESSEE HAS CLAIMED THAT ITS BUSINESS OF DEVELOPERS, IN ANY CASE, HAD BEEN SET UP IN THE YEAR UNDER CONS IDERATION AND THE EXPENSES PERTAINING TO THE SAID BUSINESS ARE ALLOWABLE AS DE DUCTION. SINCE THESE ISSUES RAISED BY THE ASSESSEE IN THE ADDITIONAL GROUNDS ARE ONLY INCIDENTAL TO THE MAIN ISSUE INVOLVED IN THE ORIGINAL GROUND RELATING TO DISALLO WANCE OF MOTOR CAR EXPENSES AND MOTOR CAR DEPRECIATION, WE ADMIT THE ADDITIONAL GRO UNDS AND PROCEED TO DISPOSE OF THE SAME ALONG WITH THE ISSUE RAISED BY THE ASSESSE E IN THE ORIGINAL GROUND. 4 IT(SS)A.MO.39/MUM/2006. 8. IT IS OBSERVED THAT THE ONLY EVIDENCE FILED BY T HE ASSESSEE IN SUPPORT OF ITS CLAIM OF HAVING CARRIED ON THE BUSINESS OF DEVELOPE RS WAS THE TENDER DOCUMENTS FILED WITH MHADA. IT IS OBSERVED THAT THE SAID EVEN T HAD TAKEN PLACE AT THE FAG END OF THE YEAR UNDER CONSIDERATION AND WE FIND OURSELV ES IN AGREEMENT WITH THE AUTHORITIES BELOW THAT THE SAME ALONE WAS NOT SUFFI CIENT TO SHOW THAT THE BUSINESS OF DEVELOPERS AND CONTRACTORS HAD BEEN CARRIED ON B Y THE ASSESSEE IN THE YEAR UNDER CONSIDERATION. WHEN THIS POSITION WAS CONFRONTED TO THE LEARNED COUNSEL FOR THE ASSESSEE AND HE WAS ASKED TO SHOW ANY OTHER EVIDENC E TO SUPPORT AND SUBSTANTIATE THE CLAIM OF THE ASSESSEE OF HAVING COMMENCED THE B USINESS OF DEVELOPERS IN THE YEAR UNDER CONSIDERATION, HE HAS INVITED OUR ATTENT ION TO THE COPY OF PROFIT & LOSS ACCOUNT OF THE ASSESSEE PLACED AT PAGE NO. 4 OF HIS PAPER BOOK. A PERUSAL OF THE SAID PROFIT & LOSS ACCOUNT SHOWS THAT BESIDES INTER EST AND OTHER EXPENSES INCURRED BY THE ASSESSEE IN RELATION TO EARNING OF HOUSE PRO PERTY INCOME AND INCOME FROM OTHER SOURCES, THE MAIN EXPENDITURE CLAIMED BY THE ASSESSEE AS BUSINESS EXPENDITURE WAS ON ACCOUNT OF MOTOR CAR EXPENSES AN D MOTOR CAR DEPRECIATION. THERE IS NO EXPENDITURE INCURRED BY THE ASSESSEE ON ACCOUNT OF ANY ROUTINE OFFICE AND ADMINISTRATIVE EXPENSES SUCH AS, POSTAGE, TELE PHONE, STAFF SALARY, STATIONERY ETC. WHICH CAN SUGGEST THAT BUSINESS OF DEVELOPER H AD ACTUALLY BEEN CARRIED BY THE ASSESSEE OR AT LEAST THE SAME WAS SET UP IN THE YEA R UNDER CONSIDERATION. IN OUR OPINION, THERE IS THUS NO EVIDENCE WHICH IS PRODUCE D BY THE ASSESSEE TO SUPPORT AND SUBSTANTIATE ITS CLAIM OF HAVING COMMENCED THE BUSI NESS OF DEVELOPERS AND IN THE ABSENCE OF THE SAME, WE ARE OF THE VIEW THAT THE CL AIM OF THE ASSESSEE FOR MOTOR CAR EXPENSES AND MOTOR CAR DEPRECIATION CANNOT BE ALLOW ED AS DEDUCTION UNDER THE HEAD PROFITS & GAINS OF BUSINESS OR PROFESSION. W E, THEREFORE, DECIDE THIS ISSUE AGAINST THE ASSESSEE AND UPHOLD THE IMPUGNED ORDER OF THE LEARNED CIT(APPEALS) CONFIRMING THE DISALLOWANCE MADE BY THE AO ON ACCOU NT OF MOTOR CAR EXPENSES 5 IT(SS)A.MO.39/MUM/2006. AND MOTOR CAR DEPRECIATION. GROUND NO. 1(B) OF THE ASSESSEES APPEAL IS ACCORDINGLY DISMISSED. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 23 RD DAY OF DEC.,2011. SD/- SD/ - (R.S.PADVEKAR) (P.M. JAGTAP) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED : 23 RD DEC., 2011. COPY TO : 1. APPELLANT 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. DR, A-BENCH. 6. GUARD FILE. (TRUE COPY ) BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI. WAKODE