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Income Tax Appellate Tribunal, ‘C/SMC’ BENCH: CHENNAI
Before: SHRI V. DURGA RAO
M/s. Sterling Business Services The Income Tax Officer, Pvt. Ltd., Corporate Ward-VI(1), 62 Priya Flats, 1st Lane, Vs. Chennai. Pantheon Road, Egmore, Chennai – 600 008. [PAN: AADCS 9569A] ($%थ'/Respondent) (अपीलाथ"/Appellant) अपीलाथ' की ओर से/ Appellant by : Mr. J.C. Prakash, C.A $%थ' की ओर से /Respondent by : Mr. P. Sajit Kumar, JCIT सुनवाई की तारीख/Date of Hearing : 10.11.2021 घोषणा की तारीख /Date of Pronouncement : 29.11.2021 आदेश / O R D E R
Per V. Durga Rao, Judicial Member:
This appeal filed by the assessee is directed against the order of the Learned Commissioner of Income Tax (Appeals)-15, Chennai in dated 30.07.2019 relevant to the Assessment Year 2006-07. 2 -:
In the assessment order the Assessing Officer (A.O) has noted that the assessee has claimed depreciation of Rs. 1,29,915/- on various items located both in office premises and guest house at Akkarai Village. On verification of the assessment order dated 06.12. 2007 passed u/s. 143(3) of the Income Tax Act, 1961 (hereinafter "the Act") for the Assessment Year 2005-06, it was found that the depreciation on guest house and furniture was disallowed by the AO.
The A.O has asked the assessee to explain why he is eligible for the claim of depreciation. The assessee has submitted that the assessee is in the business of arranging finance, when the customers from outside city come to the city to meet the assessee for raising the funds, the assessee has provided them accommodation at the guest house.
Therefore, the expenses incurred by the assessee on guest house out of commercial expediency therefore, the same has to be allowed.
However, the A.O is of the view that the guest house is located 24 K.M away from the Income tax Dept. premises and 26 K.M away from the assessee’s office at Pantheon Road, Egmore, Chennai. The assessee’s business is arranging finances and getting commission for the arrangement. The AO has asked the assessee to explain about his business that he is only arranging finances on that what is necessity of maintaining the guest house. It was submitted by the assessee before 3 -: the A.O that the guest house is maintaining to entertain the clients therefore, the depreciation may be allowed. By considering the explanation of the assessee, the A.O came to the conclusion that entertaining the clients for the line of business is unwarranted and the guest house is also 50 KM away from the city. Therefore, the AO is of the opinion that there is no necessity between the maintaining of guest house and assesses’s business. Hence, the A.O has disallowed the total depreciation claimed by the assessee.
On appeal, the Ld. CIT(A) by following the order for the A.Y 2005- 06 passed by the Ld. CIT(A), depreciation was disallowed and confirmed the order of the A.O.
On being aggrieved, the assessee carried the matter in apeal before the Tribunal.
The Ld. counsel for the assessee has submitted that the guest house is maintained only for the purpose of entertaining the clients and therefore, depreciation may be allowed.
On the other hand, the Ld. D.R has strongly supported the orders passed by the authorities below.
4 -: 7. Both parties have been heard, perused the materials available on record and gone through the orders of the authorities below. The assessee is in the business of arranging finance and getting commission for the arrangement. In this connection, when the guest house is 50 KM away from the city, nobody will travel such a long distance for the purpose of getting the assistance from the assessee.
Particularly, when the assessee is having office at city itself. The assessee is not able to establish single evidence that who are the clients approached him for finance and to whom he has arranged the guest house. Even, the assessee is not able to establish a nexus between the maintaining of guest house and assessee’s business activity either before the AO or before the Ld. CIT(A). Even before me, no material has been placed. From the above facts and circumstances of the case, I am of the opinion that the assessee is not entitled for depreciation. Hence, this ground of appeal raised by the assessee is dismissed.
Set-off of brought forward depreciation:
In the assessment order, the AO has noted that the assessee in its computation of total income has arrived the income from the business or profession at Rs. 57,018/- after claiming set off of brought forward depreciation relating to earlier years i.e., from A.Y 2000-01 to 5 -: 2004-05 of Rs. 4,84,825/-. On verification of assessment order u/s. 143(3) of the Act dated 06/12/2007 passed for A.Y 2005-06, the A.O has mentioned that unabsorbed depreciation claimed to have been carry forward is not allowed as a part of the depreciation claimed was on guest House. In view of the above, there was no depreciation loss available to the assessee for set off against the current year’s income and hence, set off of brought forward depreciation is not allowed.
On appeal, the Ld. CIT(A) by following the order for A.Y 2005-06, he confirmed the order passed by the A.O.
Both the parties have been heard, perused the materials available on record and gone through the orders of the authorities below. It is found that the assessee is not eligible for the depreciation therefore, for set off of brought forward depreciation is also not eligible.
The assessee has not filed any material to substantiate his claim.
Hence, I find no reason to interfere in the order passed by the Ld. CIT(A). Thus, this ground of appeal raised by the assessee is dismissed.
11. In so far as enhancement of disallowance of expenses on maintenance of guest house is concerned, the Ld. CIT(A) has observed that the assessee has failed to establish nexus between the business 6 -: of the assessee and maintenance of guesthouse therefore, the expenses claimed by the assessee in respect of maintenance of guest house is not eligible.
It is found that once the A.O has already decided that the maintenance of guest House not for the purpose of business therefore, the expenditure incurred in connection with the maintenance of guest house cannot be allowed. Hence, I find no reason to interfere in the order passed by the Ld. CIT(A). Thus, this ground of appeal raised by the assessee is dismissed.