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Income Tax Appellate Tribunal, AHMEDABAD “D” BENCH AHMEDABAD
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “D” BENCH AHMEDABAD BEFORE, SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER AND SHRI S. S. GODARA, JUDICIAL MEMBER ITA No. 1170/Ahd/2015 (Assessment Year: 2011-12) Smt. Rachna Surotia Vinit Moondra, C.A. 201, Sarap, Opp. Navjivan Press, Ashram Road, Ahmedabad-14 Appellant Vs. DCIT, Circle-6, Ahmedabad Respondent PAN: AKJPS7736G आवेदक क� ओर से/By Assessee : Shri Vinit Moondra, A.R. राज�व क� ओर से/By Revenue : Shri V. K. Singh, Sr. D.R सुनवाई क� तार�ख/Date of Hearing : 13.12.2017 घोषणा क� तार�ख/Date of : 10.01.2018 Pronouncement ORDER PER S. S. GODARA, JUDICIAL MEMBER
This Assessee’s appeal for assessment year 2011-12 arises against the CIT(A)-13, Ahmedabad’s order dated 17.03.2015 in case no. CIT(A)- 13/AHD/Circle-6/170/2014-15, upholding Assessing Officer’s action inter alia disallowing/adding commission expenses of Rs.10,39,443/, depreciation of Rs.2,40,180/-, license fee of Rs.1,83,450/- and personal expenditure of Rs.1,50,587/-; respectively, in proceedings u/s.143(3) of the Income Tax Act, 1961; in short “the Act”.
ITA No. 1170/Ahd/15 [Smt. Rachna Surotia vs. DCIT] - 2 - A.Y. 2011-12 2. We come to the first substantive ground of commission expenditure disallowance amounting to Rs.10,39,443/- in case of six payees namely Umesh P. Surotia, Rita D. Brahmbhatt, Smita J. Desai, Marketing Associates, New Delhi, Prashant Kalantri, Dixita C. Gnadhi involving payments of Rs.5,05,000/-, Rs.1,28,000/-, 1,28,000/- Rs.69,002/-, Rs.38,801/- and Rs.1,70,640/-; respectively. Both the lower authorities are of the view that the assessee has failed to prove the impugned payments to have been made wholly and exclusively for the purpose of its business. Learned counsel files before us this tribunal’s order in assessee’s case itself dated 13.07.2017 (page 159 of the paper book) deleting identical disallowances in case of first and fourth payees. We therefore adopt consistency in the impugned assessment year as well to delete the impugned disallowance in case of two payees Shri Umesh P. Surotia and Marketing Associates, New Delhi. The said co-ordinate bench’s order has uphold identical disallowance in case of second, fifth and sixth payees. The assessee fails to prove before us the relevant services rendered by fifth payee namely Prashant Kalantri. We therefore see no reason to reverse the corresponding disallowance of Rs.38,801/-. The assessee’s instant first substantive ground is therefore partly accepted only qua first and fourth payees. Rest of the four payees disallowances stand confirmed.
We now advert to the second issue of depreciation disallowance amounting to Rs.2,40,180/-. The CIT(A)’s findings under challenge read as under:
“6. Disallowance of depreciation: The AO has stated in his order as follows: During course of assessment, it was observed that the assessee purchased two new offices during the previous year, on which he has claimed depreciation of Rs.60,000/- and Rs. 1,80,180/- respectively. The assessee was requested to give details of possession agreement and B.U. permission of these offices along with copy of bills for electricity expenses to prove the date on which the assets were put to use by the assessee for the purpose of business. The assessee submitted that office at 708, Abhishree Avenue was purchased on 27.12.2010 and office at Rajshree Enclave was purchased on 12.01.2011. The assessee has obtained possession of these assets but, the same has not been put to use. The copy of B.U. permission is not provided. Besides, in respect of electricity expenses, the assessee has submitted that no electricity expense has been incurred for these offices. The details of telephone expenses also reveals that no telephone line has been installed and at the above offices. In view of the same, it is clear that the offices mentioned above have not been put to use by the assessee during the previous year for the purpose of business which is essential for claim of depreciation.
ITA No. 1170/Ahd/15 [Smt. Rachna Surotia vs. DCIT] - 3 - A.Y. 2011-12 The total depreciation of Rs.2,40,180/- on these offices is therefore disallowed and added to the total income. The appellant has relied on judgements which are not applicable to this case because in those cases referred, there was a running business and trial rum was also done in one of the cases (CIT v/s Shahabad Coop Sugar Mill). In the case of the appellant, the new offices have not been put to business use and hence depreciation cannot be allowed in these cases during the year under consideration. Hence, the addition made by AO is confirmed.”
We have given our thoughtful consideration to rival submissions. Both the lower authorities are of the opinion that although the assessee has obtained possession of the relevant asset (s), the same have however not been put to use. We see no reason to concur with the same as once the assessee has started and enjoying possession of the two offices, it can safely be presumed that the same had been duly put to use. Case records qua this issue is indicate that the assessee had indeed occupied its office. We therefore observe that both the lower authorities have erred in disallowing corresponding depreciation claim in question. This substantive ground is accordingly accepted.
The assessee’s third grievance is that both the lower authorities have erred in law as well as on facts in disallowing its license fee expenses of Rs.1,83,450/-. We notice that the CIT(A)’s findings qua the instant issue read as under:
“7. Disallowance of license fee: During the course of assessment, it was observed by the AO that the appellant claimed membership fees paid to Heat Transfer Research Inc, USA. The assessee paid US Dollar 9391.51 towards license fees. On verification of voice dated 12.08.2010, it was observed that the fees have been paid from the period from 01.09.2010 to 31.08.2011. The period from 01.04.2011 to 31.08.2011 pertains to assessment year 2012-13. The proportionate expenditure of Rs.1,83,450/- pertaining to A.Y. 2012-13 was disallowed by the AO. The appellant has contended that the payment made is an annual expense payable every year and so there is no question of pre-paid expenses. The appellant is following mercantile system of accounting and hence the expenses paid for the next year cannot be allowed as an expenses for the year under consideration, as the same are not related to year under consideration. The addition made by the AO on this account is confirmed on this account.”
Heard both the parties reiterating their respective stands. There is no dispute qua genuineness of assessee’s payments. Both the lower authorities are of
ITA No. 1170/Ahd/15 [Smt. Rachna Surotia vs. DCIT] - 4 - A.Y. 2011-12 the opinion that the relevant period pertains to assessment year 2012-13 and not the impugned assessment year 2011-12 since the fee pertains to 01.04.2011 to 31.08.2011. They fail to dispute the fact that the assessee has been renewing its subscription of license fee well in advance. We further find that there is no revenue implication in claiming the expenditure in question in the impugned assessment year as the assessee is assessed on the same rate in two assessment years in question. We accordingly delete the impugned disallowance as well.
Mr. Moondra is fair enough in not pressing for assessee’s next substantive ground challenging personal expenditure addition of Rs.1,50,587/-. The same is accordingly rejected.
This assessee’s appeal is partly allowed. [Pronounced in the open Court on this the 10th day of January, 2018.]
Sd/- Sd/- (PRAMOD KUMAR) (S. S. GODARA) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad: Dated 10/01/2018 True Copy S.K.SINHA आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. राज�व / Revenue 2. आवेदक / Assessee 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त- अपील / CIT (A) 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड� फाइल / Guard file. By order/आदेश से,
उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, अहमदाबाद ।