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Income Tax Appellate Tribunal, Hyderabad ‘ A ‘ Bench, Hyderabad
Before: Smt. P. Madhavi Devi & Shri S.Rifaur RahmanShri K.N.V. Rajasekhar
Per Smt. P. Madhavi Devi, J.M.
This appeal is filed by the Revenue, while the Cross Objection is filed by the assessee. Both are against the order of the CIT (A) Kurnool, dated 10.04.2018.
Brief facts of the case are that the assessee, an individual is running a hostel in the name and style of
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ITA Nos 1348 and CO 1 of 2019 KNV Rajasekhar Kurnool.
“Montessori Hostel”. He filed his “e” return of income for the A.Y 2012-13 on 30.09.2012 admitting a total income of Rs.71,22,578/- as “income from house property” and also from “business”. During the assessment proceedings u/s 143(3) of the Act, pursuant to selection of scrutiny under CASS, the AO called for books of account for verification. The AO recorded that the information was furnished by the assessee. The AO observed that the assessee has claimed depreciation of Rs.42,90,096/- in respect of building but since the asset was not put to use, he disallowed the claim of depreciation of Rs.42,90,096/-. Thereafter, he observed that an amount of Rs.12,02,806 was excess depreciation debited to the P&L A/c, towards items other than the building and he disallowed such excess claim. Further, he also observed that the assessee was also not able to produce certain bills but prepared self-made vouchers for the expenditure towards gas, groceries, soap and other consumable products, Tavera Car Maintenance etc., The AO therefore, disallowed 10% of such expenditure and accordingly brought it to tax.
Aggrieved, the assessee preferred an appeal before the CIT (A) stating that all the relevant information has been filed before the AO but he has not considered the same. As regards depreciation on building, it was submitted that the building was already put to use in various years and a comparative statement regarding the strength of the hostel students, plinth area of the building which was put to use in the various years in the past and year-wise Municipal Taxes paid based on the plinth area was also enclosed. It was also submitted that the assessee’s case was subject to scrutiny by various AOs in various A.Ys and
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ITA Nos 1348 and CO 1 of 2019 KNV Rajasekhar Kurnool.
depreciation on building and all other items was also allowed. With regard to the original bills/vouchers, it was submitted that all the bills were produced before the AO. After considering the contention of the assessee, the CIT (A) observed that the expenditure of Rs.3,54,00,965/- on the construction of the building was incurred before 30.09.2011 and that a sum of Rs.1,50,00,000/- was incurred before 31.03.2012 and that all the expenditure is out of the Bank A/c (Punjab National Bank). He also observed that the assessee has provided the facilities to the students and therefore it was acceptable that all the buildings were put to use during the relevant previous year, particularly in view of the fact that the Panchayat Taxes were paid commensurate with the plinth area (including the newly constructed area) duly levied by the officials of the Panchayat Board. He also observed that there is also an increase in the electricity charges incurred. As regards the depreciation on other items, he observed that they were duly accepted and allowed in the earlier years. As regards the vouchers also, he accepted the assessee’s contention that all the vouchers were filed before the AO but the AO has failed to notice the same and mistook that the original vouchers were not filed. Therefore, he granted relief to the assessee. Against the relief granted by the CIT (A), the Revenue is in appeal before us, while the assessee has filed the cross objection before us supporting the orders of the CIT (A).
The learned Counsel for the assessee produced the copies of the original vouchers before us and submitted that all these were filed before the AO. We have gone through the same and found that they are all original vouchers. As regards
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depreciation on the building, the CIT (A) has brought out that the assessee has paid Panchayat Taxes commensurate with the plinth area and which included the newly constructed area also and also that there is an increase in the electricity charges evidencing that the newly constructed area also was put to use. The Revenue has not been able to rebut these findings of the CIT (A) with any evidence to the contrary. Similarly, with regard to the depreciation on items other than the buildings, the AO has not given any reason for disallowance of such claim of depreciation and without proper reasoning, it is not understandable as to how he has held that the assessee is eligible for certain claim of depreciation and whether the difference is on account of rate of depreciation or allowability of the expenditure is not known. Since the AO has not given any basis for disallowance of part of the depreciation on items other than building and the CIT (A) has given a finding that the AO has adopted a different rate of depreciation for the assets from the rate which was duly accepted and allowed in the earlier years, we do not see any reason to interfere with the order of the CIT (A).
In the result, both the Revenue’s appeal and the C.O filed by the assessee are dismissed. Order pronounced in the Open Court on 31st July, 2019.
Sd/- Sd/- (S.Rifaur Rahman) (P. Madhavi Devi) Accountant Member Judicial Member
Hyderabad, dated 31st July, 2019. Vinodan/sps
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Copy to:
1 Asstt. CIT, Circle 1, 2nd Floor, Aayakar Bhavan, NR Pet, Opp: Childrens Park, Kurnool 518001 2 Shri K.V.N.Rajasekhar, Prop. Montessori Hostels, 46/1/L-4, Camp Kurnool 3 CIT (A)-Kurnool 4 Pr. CIT - Kurnool 5 The DR, ITAT Hyderabad 6 Guard File
By Order
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