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Income Tax Appellate Tribunal, DELHI BENCHES “SMC” : DELHI
Before: SHRI BHAVNESH SAINI
per the remand report, the assessee used only 249.66 sq. feet of the premises for business purpose only. Therefore, interest could be allowed to that extent only to the assessee. The Ld. CIT(A) rejected the contention of assessee as regards interest allowed by the department in earlier years. The Ld. CIT(A) accordingly found that
10 ITA.No.3067/Del./2017 Shri Rajnish J. Karki, New Delhi. since office area constitute 8.31% of the total area, therefore, interest amounting to Rs.3,06,704 was allowed as business expenditure and balance amount of Rs.33,84,098 was disallowed.
As regards the service tax, the assessee submitted before the Ld. CIT(A) that service tax files are not traceable. However, assessee filed the bank certificate from Axis Bank confirming the payment of service tax. Therefore, addition may be deleted. The Ld. CIT(A) noted that assessee did not produce any evidence of payment of service tax. No copies of return/challan have been produced. The bank certificate produced did not confirm whether it was service tax or penalty paid or whether it was paid for professional work. In the absence of any evidence on record, the Ld. CIT(A) confirmed the disallowance of service tax also.
After considering the rival contentions, I do not find any merit in the appeal of the assessee. The Learned Counsel for the Assessee reiterated the submissions made before the authorities below and submitted copy of the assessment order under section 143(3) dated 19th March, 2013 for A.Y. 2010-2011 along with copy of the acknowledgment of the return of income and income and 11 ITA.No.3067/Del./2017 Shri Rajnish J. Karki, New Delhi. expenditure account to show that interest on office/home loan have not been disallowed by A.O. in A.Y. 2010-2011. He has submitted that even depreciation has not been disallowed. He has, therefore, submitted that interest and depreciation may be allowed in full deduction.
On the other hand, Ld. D.R. relied upon the orders of the authorities below.
In the assessment year under appeal, the A.O. disallowed the entire interest and depreciation because the property was found residential and was not used for the purpose of office/profession. The submissions of the assessee and documents were forwarded to the A.O. at appellate stage for factual verification of use of the property for business purpose or not. The A.O. gave his remand report after physical inspection of the property in question and submitted that assessee is having one room with small pantry and one toilet for office use on north-east side at ground floor of the property. This fact has not been disputed by the assessee through any evidence or mateiral on record. During the assessment year under appeal the assessee was having total professional fees receipts of Rs.50,66,906 and out
12 ITA.No.3067/Del./2017 Shri Rajnish J. Karki, New Delhi. of the same, he has declared meagre taxable income of Rs.3,29,689.
Assessee was not maintaining any employee and did not hire any professional staff for earning of such income. The interest is the only major component which is charged in P & L A/c as deduction. The assessee is having only 05 clients during the year from whom he has received professional fees. These facts strengthen the findings of the A.O. that for such a small consultancy work, the assessee is required only one table, one chair and almirah for his office purpose because only one room at ground floor have been used for the purpose of business. Therefore, the Ld. CIT(A) on proper appreciation of facts and considering the inspection report of the A.O. correctly came to the finding that only 8.31% of the total area of the residential property have been used for office/business purpose.
The Learned Counsel for the Assessee relied upon the assessment order for A.Y. 2010-2011 to show that A.O. did not disallow depreciation and interest. It may be noted here that the A.O. did not consider the issue of interest on depreciation in his order under section 143(3). It is a brief order passed by him without reference to deduction of the interest and depreciation. Further, the 13 ITA.No.3067/Del./2017 Shri Rajnish J. Karki, New Delhi. facts are totally different in assessment year under appeal because A.O. was deputed to make factual inspection of the property in question to justify the claim of the assessee of use of the residential property for business purpose only. This fact was not considered in A.Y. 2010-2011. Therefore, when new facts have been brought on record, the rule of consistency would not apply in the facts and circumstances of the case. Considering the totality of the facts and circumstances, in the light of findings of the authorities below, I am of the view that the Ld. CIT(A) correctly disallowed the balance amount of interest of Rs.33,84,098 as having been incurred for purpose other than that of business. The depreciation on same analogy for sum of Rs.2,54,511/- was rightly disallowed. The Ld. CIT(A) also noted that assessee did not produce any evidence that Ranikhet premises is used for the purpose of business. Therefore, depreciation have been correctly disallowed. Ground Nos.3 and 4 of appeal of assessee are accordingly dismissed.
As regards disallowance of service tax, the assessee did not produce any evidence before authorities below to justify his claim of deduction. No copy of the return and challan of payment of service
14 ITA.No.3067/Del./2017 Shri Rajnish J. Karki, New Delhi. tax have been filed. Therefore, claim of assessee cannot be verified whether service tax is paid for professional receipts earned by the assessee in assessment year under appeal. A.O. also noted that the total service tax payable by the assessee comes to Rs.5,57,360 but assessee claimed payment of Rs.1,83,856. Therefore, facts were not verifiable from the explanation of assessee. The assessee filed copy of the bank certificate of Axis Bank before Ld. CIT(A) which also did not reveal anything in favour of the assessee. The assessee has filed copy of the bank certificate from Axis Bank which only confirm that assessee paid service tax payment. But it is not clarified as to on which professional income assessee has paid the service tax. In the absence of clarification of the payment of service tax for earning professional income, no interference is called for in the matter.
Ground No.5 of appeal of assessee is also dismissed.
In the result, appeal of assessee is dismissed.