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PER PAWAN SINGH, JUDICIAL MEMBER;
This appeal by assessee under Section 253 of Income-tax Act is directed against the order of ld. CIT(A)-4, Mumbai dated 23.02.2016 for Assessment Year 2010-11. The assessee has raised the following grounds of appeal:
1. The Ld. Com. Of Income Tax Appeals (4) has erred in coming to conclusion and confirming that Assessing Officer has rightly calculated Income From House Property by method of estimation and that the properties are not covered under Rent Control Act. For the reasons stated in Order.
2. Ld. Com. Of Income Tax Appeals (4) has erred in confirming that Section 14A is applicable and has confirm disallowance to the extent of Rs, 1,00,721/- which is the amount of Dividend earned and claimed as exempted for the reasons stated in order. 3. Ld. Com. Of Income Tax Appeals (4) has erred in confirming the disallowance of Claim of Rs. 1,00,000/- being the water charges paid for the period of construction while calculating Long Term Capital Gain of the Asset sold for the reasons stated in order.
Mum 2016-M/s Subhash Ghai
Brief facts of the case are that the assessee filed his return of income for Assessment Year 2010-11 on 31.07.2010 declaring total income at Rs. 2,42,62,609/-. The assessment was completed on 6th February 2013 under section 143(3) of the Act. The assessing officer while passing the assessment order made addition of Rs. 34,66,503/- on account of income from house property, addition under section 14A of Rs. 1,00,721 /-and disallowed Rs. 1,00,000/- on account of water charges from the computation of working of long-term capital gain on sale of shop situated at Bandra. On appeal before learned Commissioner (Appeals) all the additions/disallowances were confirmed. Thus further aggrieved by the order of Commissioner (Appeals) the assessee has filed present appeal before us.
We have heard the submissions of learned authorised representative (AR ) of the assessee and the learned departmental representative (DR) for the revenue and perused the material available on record. Ground number one relates to addition on account of income from house property. The learned AR of the assessee submits that similar ground of appeal
was restored to the file of assessing officer by Tribunal in assessee’s own case for assessment year 2008-09 & 2009-10 in /Mumbai /2011 and ITA No. 400 /Mumbai /2013 dated 14 October 2016, therefore, this ground of appeal may also be restored to the file of assessing officer to ITA No. 3766 Mum 2016-M/s Subhash Ghai decide afresh in accordance with the direction of the Tribunal in order dated 14th October 2016.
4. On the other hand the learned AR for the revenue has no objection if this ground of appeal is restored back to the file of assessing officer for adjudication afresh in accordance with the order of Tribunal in appeal for assessment year 2008-09 and 2009-10.
5. We have considered the rival submission of the parties and have gone through the orders of authorities below and the order of tribunal in assessee own case for AY 2008 -09 in ITA No. 6049/Mumbai/2011 dated 14 October 2016 wherein following order was passed:
2.4. Considering the totality of the facts, since the assessee has filed additional evidence before this Tribunal, for the first time which was not filed during assessment proceeding/first appellate stage. This evidence was obtained from Municipal Authorities through RTI and goes to root of the matter. The assessee is directed to file this additional evidence before the assessing officer. The learned assessing officer is directed to examine the evidence filed by assessee and decide afresh in accordance with law. The assessee be given a person 80 of being heard thus this appeal of the assessee is allowed for statistical purpose.
The similar issue in appeal for AY 2009-10 was also restored to the file of assessing officer by Tribunal in its order dated 14th October2016.
Considering the decision of Tribunal and the submissions of the parties, the ground of appeal is restored to the file of assessing officer to decided the issue afresh in accordance with the directions of the Tribunal in dated 14th October 2016. Needless to direct the assessing officer shall grant opportunity before passing the order in ITA No. 3766 Mum 2016-M/s Subhash Ghai accordance with law. In the result this ground of appeal is allowed for statistical purpose.
Ground No. 2 relates to the disallowance under section 14A. The ld AR for the assessee submits that this ground of appeal
is also covered by para nine of decision of tribunal in assessment year 2008-09 and by the decision of special bench of the Delhi Tribunal in ACIT versus Vireet investment private Ltd [(2017) 165 ITD
27. (Delhi-Trib)]. The learned AR further submits that the only those investment which yielded exempt income may be considered for computing an average value of investment during the year.
On the other hand the learned DR for the revenue supported the order of lower authorities.
We have considered the rival submission of the parties and have gone through the orders of authorities below. We have noted that similar issue arose in assessment year 2008 -09 and on appeal before Commissioner appeal the following order was passed in dated 14 October 2016:
“5.1. We have considered the rival submissions and perused the material available on record. The facts, in brief, are that assessee showed dividend income of Rs. 3.73 crore and the same was claimed as exempt. The learned assessing officer asked the assessee as to why disallowance should not be made under section 14 A of the Act. The assessee replied by letter dated 19/12/2011 (para 5.1 of assessment order). The learned assessing officer worked out the disallowance under Rule 8D amounting to Rs. 3,99,603/-, being 0.5% of the average investment to Rs. 7,99,20,519/-. On appeal before learned Mum 2016-M/s Subhash Ghai Commissioner of Income Tax ( Appeals) the addition made by assessing officer was confirmed. The assessee in the appeal before this Tribunasl. 5.1. If the observation made in the assessment order, leading to addition made to the total income, conclusion drawn in the impugned order, material available on record, assertion made by learned respective counsel, if kept in juxtaposition and analysed, there is no dispute to the fact that assessee earned dividend income of Rs. 3.73 crores. This stand of the assessee is that no expenditure was incurred for earning tax-free dividend and mutual fund. The assessee has debited D-mat charges of Rs. 26,213/-, bank interest, bank charges of Rs. 14563/-, electricity expenses in profit and loss account. The stand of the revenue is that at least some management/ administrative expenses might have been incurred. It is noted that Mumbai Tribunal in Reliance Capital Asset Management Ltd versus DCIT( 4459& 4795/Mum/2012) order dated 17 October 2014 held that there was no necessity to apply formula prescribed in Rule 8D (2)(iii). We find that disallowance was mechanically made because as per provision of section 14 A, the assessing officer is expected to re-compute the amount of disallowance under section 14 A of the Act only in a situation where he is not satisfied with the correctness of the amounts/claim of assessee. Our view file supported from decision in CIT versus Hero Cycle Ltd 323 ITR 158(P&H), Reliance Utility and Power Ltd 313 ITR 340(Bombay), DCIT versus Jindal Photo Ltd( Delhi Trib) and Shiva Industries & Holding Ltd versus ACIT(2011) 59 DTR 182. The Hon’ble jurisdictional High Court in Reliance Utility and Power Ltd categorically held that if interest free funds are available with the assessee, which are sufficient to make the investment and the same time assessee raised a loan, it can be presumed that investment was made from the available interest free funds. In the present case, the dividends are directly credited to the bank account and the salaries also directly credited the balance transaction are recorded once in a year. The assessee has also paid demat account and other small expenses; therefore, no specific expenditure was incurred by the assessee. There is no mention in the assessment order or in the impugned order that by road funds were invested by the assessee for earning exempt income or any interest was paid. At the same time, no evidence was produced by the assessee that professional staff was paid sale from house old withdrawal, (as claimed by assessee). Considering the totality of circumstances, written submission, filed before us, we are of the view that only investment which yielded tax-free income should be taken for computing average investment and thus the disallowance comes to Rs. 2,45,815/-, (as admitted by Consul of the assessee) and not Rs. 3,99,603/-, computed by learned assessing officer, thus this ground is partly allowed.”
The Special Bench of Delhi Tribunal in ACIT versus Vireet Investment (P) Ltd (supra) held that only those investments are to be considered for computing Mum 2016-M/s Subhash Ghai average value of investment which yielded exempt income during the year. The assessee has furnished the details of investment which yielded exempt income during the year. Therefore, considering the decision of Special Bench of Tribunal and the decision of Coordinate Bench in assessee own case for assessment year 2008-09, this ground of appeal is restored to the file of assessing officer to make the fresh computation of disallowance under section14A, after taking into consideration the decision of Special Bench in Vireet investment(P) Ltd (supra). Needless to direct the assessing officer shall grant opportunity before passing the order in accordance with law. In the result this ground of appeal is allowed for statistical purpose.
11. Ground No. 3 relates to disallowance of Rs. 1.00 lakh on account of water charges from the computation of long-term capital gain. The learned AR of the assessee submits that the expenses on account of water charges were incurred when the property was constructed. The assessee paid the water charges on 26th May 2010 and the expenses was claimed related to the cost of improvement of asset while computing the capital gain. In alternative, the learned AR of the assessee submits that the expenses may be considered under section 37 of the Act and the assessing officer may be directed to examine the claim of the assessee. In support of his submission the learned AR of the assessee relied upon the decision of Hon’ble Bombay High Court in SIBA of India Ltd versus CIT 202 ITR 1(Bombay).
On the other hand the learned DR for the revenue supported the order of authorities below. Mum 2016-M/s Subhash Ghai
We have considered the rival assumption of the parties and have gone through the orders of authorities below. The assessing officer disallowed the water expenses holding that such expenses incurred cannot be either considered as cost of purchase cost of improvement because what were charges is cost incurred for day-to-day use. The learned Commissioner (Appeals) also observed that water charges are not related either to the cost of purchase or on account of further development likes other factors such as property tax etc. The water charges might be charged during the vacant period of for utilisation of the property by caretaker, watchmen or anybody else. The property was purchased from the builder. The property was purchased long back and the water charges may be used for routine charge, therefore; cannot be presumed to be incurred on account of cost of acquisition or part of partial of the purchase of the property.
Before us the learned AR of the assessee submitted that the claim of assessee may be considered under section 37 of the Act, the learned AR of this assessee has taken support of the decision of jurisdictional High Court in Ciba of India Ltd(supra) wherein it was held that where the Tribunal turned down the assessee's claim for deduction of a particular amount by way of revenue expenditure and held it to be capital expenditure, it was the duty of the Tribunal, even without an alternative submission, to pass necessary consequential order suo motu to give such further directions in the matter as the situation might warrant. The powers of the Tribunal are expressed in the widest possible terms as is evident from the use of the expression 'pass such orders thereon as it thinks fit' in section 254(1). Thus, there was no Mum 2016-M/s Subhash Ghai restriction in regard to the nature of orders that the Tribunal could pass.
The only restriction on the powers of the Tribunal could be inferred from the expression 'thereon' which indicated that while passing orders it should confine itself to the subject-matter of the appeal and should not go beyond it. The Tribunal was, thus, not justified in refusing to consider the assessee's alternative submission on the plea that it was an additional ground raised by the assessee.
Considering the decision of jurisdictional High Court in Ciba of India Ltd (supra), we accept the alternative submission of the assessee and restore the issue to the file of assessing officer to consider the alternative submission of the assessee for allowability of the expenses under section 37 of the Act after verification of the facts and evidence and to pass the order in accordance with law. Needless to direct the assessing officer shall grant opportunity to file the necessary evidence and submissions, before passing the order in accordance with law. In the result this ground of appeal is allowed for statistical purpose
In the result, appeal of the assessee is allowed for statistical purpose.
Order pronounced in the open court on 26/09/2018.