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Income Tax Appellate Tribunal, DELHI BENCH “A”, NEW DELHI
Before: SHRI R. K. PANDA & SHRI K.N. CHARY
PER R.K. PANDA, A.M: This appeal filed by the assessee is directed against the order dated 25th August, 2015 of the CIT(A), New Delhi relating to assessment year 2012- 13. 2. Ground no. 1 raised by the assessee is as under:- i. On the facts and circumstances of the case the Commissioner (Appeals) is wrong is disallowing a sum of Rs. 13,84,172/- on account of Repair & Maintenance Expenses.
Facts of the case, in brief, are that the assessee is a company and filed its return of income on 21st September, 2012 declaring total income of Rs. 1,93,33,963/-. During the course of assessment proceedings, the AO observed that the assessee company has claimed expenses of Rs. 13,84,172/- on account of repairs and maintenance of building. Since the assessee is claiming 30% deduction on income from house property, the AO disallowed the expenses claimed by the assessee on account of repair and maintenance.
3.1 Before CIT(A), the assessee filed the details of the expenses which are as under:-
Place where fun & fair A-38, Mohan Co-Operative 11,41,460,00 located Indl. Estate, Mathura Road, New Delhi Rented Accommodation A-39, Mohan Co-operative 1,46,483.00 Indl. Estate, Mahtura Road, New Delhi Registered Office of the LG-1, LG-2, Ground Floor, 5 63,453.00 Company Bhikaji Cama Place, New Delhi Administrative office of the Flat # 101, 102, 117-120, F- 32,776.00 Co. 14, Competent House, Connaught Place, New Delhi- 110001
So far as the property at A-38 Mohan Co-Operative Indl. Estate is concerned, it was submitted that no renovation was carried out for previous years and during the year, the renovation was carried out so that the place could attract more customers. So far as A-39 Mohan Co-operative Indl. Estate is concerned, it was submitted that the same is let out and repair expenses was claimed inadvertently. So far as the other two properties are concerned, it was submitted that these are the registered office and administrative office of the company.
4.1 However, the learned CIT(A) was also not satisfied by the argument of the assessee. He observed that the assessee himself had admitted that the expenses of let out premises should be disallowed. So far as the expenditure on repairs of the self occupied properties are concerned, since the assessee did not furnish any evidence in the form of bills/vouchers to substantiate the same or to establish that the expenses were of revenue and not capital in nature, the learned CIT(A) disallowed the claim.
Aggrieved with such order of the learned CIT(A), the assessee is in appeal before the Tribunal.
We have considered the rival arguments made by both the sides and perused the orders of the authorities below. We find identical issue had come up before the Tribunal in assessee’s own case in the Assessment Year 2010-11. The Tribunal restored the issue to the file of the AO by observing as under:- “4. I have heard the rival submissions and perused the relevant material on record. On a specific query, the Id. AR admitted that property at 5, Bhikaji Cama Place was partly let out and partly used as the assessee’s registered office. Out of total area of this property at 177.25 metres, the area let out was of 105.44 metres. The Id. AR also admitted that the property at A-39 Mohan Cooperative, Mathura Road, was let out and was not used for the purposes of business. Since the assessee has earned rental income of over Rs. 60 lac and claimed standard deduction @ 30%, there cannot be any question of allowing any repairs and maintenance of the properties which have been let out. The Id. CIT(A) has disallowed 50% of repairs and maintenance expenses in relation to the property at A-38, Mohan Cooperative, Mathura Road, which was stated by the Id. AR to have been used for business purpose. As against that, the claim of the assessee is that this property was not used for letting out and, hence, no disallowance be made to this extent. As the necessary details of expenses incurred in respect of the properties let out are not specifically available, I consider it expedient to set aside the impugned order and restore the matter to the file of the AO for restricting the deduction qua the properties used for the business purpose. The AO is directed to first identity the properties let out fully or partly and, the, disallow the repairs and maintenance expenses relatable to such let out properties. Needless to say, the assessee will be allowed a reasonable opportunity of being heard.”
Since the assessee in the instant case admittedly had not furnished the bills and vouchers before the ld. CIT(A) or before the AO, therefore, following the order of the Tribunal in the assessee’s own case for Assessment Year 2011-12 we restore the issue to the file of the AO with a direction to give one more opportunity to the assessee to substantiate its case and decide the issue as per fact and law. Needless to say the AO shall keep in mind the orders of the Tribunal in assessee’s own case for Assessment Year 2009-10, 2010-11 and 2011-12 on this issue. The ground raised
by the assessee is accordingly allowed for statistical purposes.
8. Ground no. 2 raised by the assessee is as under:- ii. That the Commissioner (Appeals) is wrong in disallowing a sum of Rs. 14,28,000/- on account of Other expenses.
Facts of the case, in brief, are that the AO during the course of assessment proceedings observed that the assessee has claimed other expenses amounting to Rs. 58,08,929/- excluding repair and maintenance of building. These expenses relate to advertisement and publicity, electricity charges, insurance charges printing and stationary charges, donation, brokerage etc. Out of these expenses, the assessee company had added 50% of the expenses under the head donation and service tax additional demand. However, he could not relate the balance expenses amount of Rs. 57,12,003/- for any particular activity. Since the assessee could not explain as to how these expenses are allowable as business expenses, the AO disallowed an amount of Rs. 14,28,000/- on an adhoc basis being 25% of such expenditure. In appeal the learned CIT(A) following his order for Assessment Year 2011-12 upheld the action of the AO. Aggrieved with such order of the assessee is before the Tribunal.
After hearing both the sides, we find the AO disallowed 25% of other expenses on adhoc basis in absence of any explanation by the assessee as to how these expenses are relatable to the business of the assessee. We find the learned CIT(A) following the order of his predecessor for Assessment Year 2011-12 upheld the action of the AO. We find identical issue had come up before the Tribunal in assessee’s own case in the preceding year and the Tribunal following the order in assessee’s own case for Assessment Year 2010- 11 had allowed the claim of the assessee by observing as under:-
“At the outset, we find that similar issue has already been decided by the Hon’ble ITAT in the own case of the assessee for the assessment year 2010-11 in ITAT No. 5384/Del/2014 vide order dated 16.6.2016. The relevant extract of the order is reproduced below:- “6. I have heard the rival submissions and perused the relevant material on record. It is observed that the AO has made an adhoc 25% disallowance of expenses by observing that the revenue from the business was much less than the expenses incurred. Apart from that, he has not disputed the factum of the assessee having actually incurred these expenses for the purpose of its business. Simply because the business receipts are less, cannot be a reason to disallow the expenditure incurred otherwise for the purpose of business. I, therefore, order to delete the disallowance of Rs. 6,17,549/- sustained in the first appeal. This ground is allowed.” Respectfully following the same, we reverse the order of lower authorities and thus ground of appeal filed by the assessee is allowed. Accordingly, we direct the AO to delete the same.”
11. Respectfully following the decision of the Tribunal in assessee’s own case for the two immediately preceding assessment years, we set aside the order of the ld. CIT(A) and direct the AO to delete the addition. Ground no. 2 is accordingly allowed.
12. Ground no. 3 raised by the assessee is as under:- iii. That the Commissioner (Appeals) is wrong in disallowing Depreciation of Rs. 23,27,656/-.
Facts of the case, in brief, are that the AO during the course of assessment proceedings observed that the assessee has claimed depreciation of 48,56,220/- against the income amounting to Rs. 6,44,769/- from Fun & Fair. Since the assessee is carrying on business of games and toys, the AO allowed the depreciation of Rs. 2,00,907/- on games and toys machines. However, he disallowed the claim of depreciation amounting to Rs. 23,27,656/- being 50% of depreciation on account of plant and machinery, vehicles and other items on which depreciation has been claimed. In appeal, the learned CIT(A) upheld the action of the AO. Aggrieved with such order of the CIT(A), the assessee is in appeal before the Tribunal.
We have considered the rival arguments made by both sides and perused the orders of the authorities below. We find the AO disallowed depreciation of 23,27,656/- being 50% of depreciation on plant and machinery, vehicles and other items which has been upheld by the CIT(A). We find identical issue had come up before the Tribunal in assessee’s own case in the immediately preceding assessment year. The Tribunal in order dated 30.11.2017 has allowed the claim of the assessee by observing as under:-
“16. We have heard the rival contentions and perused the material available on record. At the outset, we find that similar issue has been made in in the own case of the assessee wherein the Hon’ble has decided the issue as under:- "8. After considering the rival submissions and perusing the relevant material on record, it is noted from the impugned order that the assessee claimed depreciation under the 'Building' block in respect of three buildings, which were used for the business purpose. It shows that depreciation on the let out building(s) was not claimed. As regards depreciation on other assets, I find that the A.O. has here again given similar reasoning for restricting the depreciation by observing that the business activity was at a lower level. Once there are assets including Plant and machinery, vehicles, computers, etc. which I are being used for the purpose of business from earlier years, the A.O. cannot disallow depreciation on such assets simply by presuming that such assets must not have been used for the purpose of business. The A.O. has admitted that the assessee carried on the business activity of Game and toys. I am unable to appreciate as to how his business under the given circumstances can be carried on without the plant and machinery, vehicle, computers, etc., all of which are necessary items for carrying on the business activity. In my considered opinion, the authorities below were not justified in restricting the depreciation on ad hoc basis when the assets were used for the business purpose. I order for the deletion of addition.” Respectfully following the same, we reverse the order of lower authorities and thus ground of appeal filed by the assessee is allowed.”
15. Since the learned CIT(A) upheld action of the AO by following the order of his predecessor for Assessment Year 2011-12 and since the Tribunal has allowed the claim of the assessee for Assessment Year 2011-12, therefore, respectfully following the decision of the Tribunal in assessee’s own case for the two preceding years, we set aside the order of the learned CIT(A) and direct the AO to delete the disallowance. The ground raised
by the assessee is accordingly allowed.
16. In the result, ground no. 1 of the assessee is allowed for statistical purposes and ground nos. 2 and 3 are allowed.
Order pronounced in the open court on 28.02.2019.