DDIT, NEW DELHI vs. SH. ATUL MEHTA, NEW DELHI

1 I. T. Appeal No. 2669/Del/2014 Assessment Year : 2009-10.

IN THE INCOME TAX APPELLATE TRIBUNAL [ DELHI BENCHES: “A” NEW DELHI ]

BEFORE SHRI I. C. SUDHIR, JUDICIAL MEMBER AND SHRI L. P. SAHU, ACCOUNTANT MEMBER

I. T. Appeal No. 2669/Del/2014 Assessment Year : 2009-10.

Deputy Director of Shri Atul Mehta, Income Tax, Circle : 3 (1), Vs. A–31, Naraina Industrial Area, International Taxation, Phase : I, N e w D e l h i. N e w D e l h I – 110 065.

PAN : ANEPM 2429 E (Appellant) (Respondent)

Assessee by : Shri P. C. Yadav, Adv.; & Shri Gaurav Yadav, Adv.

Department by : Shri S. K. Jain, Sr. D. R.;

Date of Hearing : 24.05.2017 Date of Pronouncement : 31.07.2017

O R D E R. PER I. C. SUDHIR, J. M. :

The Revenue has questioned first appellate order on the following

grounds :-

“ 1. On the facts and in the circumstances of the case and law, whether ld. Commissioner of Income Tax (Appeals) was correct in holding that the depreciation under section 32 of the

2 I. T. Appeal No. 2669/Del/2014 Assessment Year : 2009-10.

Act was allowable to the assessee against the income from other sources, as he has ignored the findings of the Assessing Officer recorded in the assessment order that the assessee was not eligible for depreciation of Rs.38,25,000/- under section 57 on the amenities and services;

3 I. T. Appeal No. 2669/Del/2014 Assessment Year : 2009-10.

in view of orders of the authorities below, material available on record

and the decisions relied upon.

find that during the year the assessee had declared total income of

Rs.1,27,29,260/-. The case of the assessee was selected for scrutiny

and assessment under section 143(3) was framed. The assessee had

incurred in two separate leave and license agreement with (i) ICICI

Prudential Life Insurance Company to whom it had let out Unit Nos.

1 to 4 of First Floor, Trade Point, Kamla Mills, Lower Parel, Mumbai

[income offered - Rs.68,53,289/-] and (ii) Bharti Axa Life Insurance

Ltd. to whom Unit No.401, 4th Floor, Raheja Titanium, Western Express

Highway, Goregaon, Mumbai, was let out[income offered Rs.1,55,883/-].

Thus, the income offered was loss of Rs.66,97,406/- [Rs.68,53,289/- -

Rs.1,55,883/-]. The Assessing Officer was of the view that assessee

is not entitled for the depreciation and other expenses claimed by

him under section 57 of the Act and hence he made disallowances.

The ld. CIT (Appeals) has allowed the appeal of the assessee. This action

4 I. T. Appeal No. 2669/Del/2014 Assessment Year : 2009-10.

of the ld. CIT (Appeals) has been questioned by the Revenue on the

above grounds.

3.1 In support of the grounds the ld. Sr. DR has basically placed

reliance on the assessment order. The ld. AR, on the other hand, tried to

justify the first appellate order.

3.2 Considering the submissions of the parties, we find that the

assessee had declared negative income under the head “Income

from House Property” as much as the amount of interest paid by the

assessee was in excess to the income earned. The Assessing Officer

has not disputed the above discussed figures in para No. 3. The above

figures are arising out of the computation of income for the year

under consideration. The agreement with ICICI was entered on

12.07.2008 and with Bharti on 6.03.2009. As per these agreements

the assessee agreed to provide furniture, fixture and fittings, cabins,

lifts, usages of common lobby area, 24 hours power back-up with

genset and standby genset, provisions for air-conditioning etc. The

Assessing Officer held that depreciation is notional or an incidental

expense and has not actually been spent. The contention of the

5 I. T. Appeal No. 2669/Del/2014 Assessment Year : 2009-10.

assessee remained that the Assessing Officer had over-looked the

provisions of Explanation 5 of section 32 which provides that

depreciation is admissible irrespective of the fact whether an assessee

claimed it or not. It was contended that the Assessing Officer had also

over-looked the fact that section 56 is meant exclusively for taxing

such income, which are not covered under any head and hence, the

same are termed as “Income from Other Sources” and, therefore, it

would hardly makes any difference whether such income falls under

sub section (2)(ii) or (2)(iii) of the said section. The Assessing Officer

further failed to consider the provisions of section 57(ii), which covers

both sub sections (2)(ii) and (2)(iii) of section 56 of the Act. Therefore,

whether the income is taxable under sub section (2)(ii) or sub section

(2)(iii) of section 56, it would not make any difference for claiming

the benefits provided under section 57(ii) of the Act.

3.3 For a ready reference provisions laid down under section

57(ii) are being reproduced hereunder :-

“ (ii) in the case of income of the nature referred to in clauses (ii) and (iii) of sub section (2) of section 56, deductions, so far as may be, in accordance with the provision of sub clause (ii)

6 I. T. Appeal No. 2669/Del/2014 Assessment Year : 2009-10.

of clause (a) and clause (c ) of section 30, section 3] and [sub sections (1) and (2) of section 32 and subject to the provisions of [section 38]; ”

3.4 Having gone through the above provisions, we do not find

infirmity in the first appellate order wherein the ld. CIT (Appeals) has

rightly concur with the submission of the assessee especially when

there is no dispute that the assessee had entered into two separate

agreements with the tenants (licensees) and had offered the income from

house property separately. For a ready reference para No. 6 of the first

appellate order is being reproduced :-

“ 6.0 I have duly considered the submissions made by the appellant. The Assessing Officer has held that receipts from hiring of amenities etc. is taxable as income from other sources against which deduction of expenses is allowable as per provisions of section 57(iii). The Assessing Officer has further observed that if contention of the assessee is accepted that nature of income as declared by the assessee falls under section 56(ii) or (iii), then even income declared by him as income from house property shalkl be of the nature as income from other sources. I have carefully gone through provisions of section 56 and 57 of the Act. Section 56 describes various incomes which are assessable as income from other sources. Section 57 provided for deductions available against such incomes. Clearly, the income of the appellant falls under provisions of section 56(2)(ii).

7 I. T. Appeal No. 2669/Del/2014 Assessment Year : 2009-10.

Now, section 57(ii) says that if income is in nature prescribed in section 56(ii) / (iii), then depreciation under section 32 is allowable. Even if, for argument sake, it is assumed that income falls under section 56(2)(iii), then both streams of incomes shall be in nature of income from other sources and depreciation shall be available to the assessee even on income component pertaining to house property. The appellant has declared income pertaining to lease rental agreement as income from house property and claimed 30% on it under section 24(a) and further declared income from agreement for amenities and services as income from other sources and claimed depreciation allowable under section 32. Deduction of expenses available under section 57(iii) is residual section and is available to any kind of income from other sources. In view of above, I hold that depreciation under section 32 of the Act is allowable against income from other sources as declared by the appellant. The ground of appeal is accordingly allowed. ”

3.5 As discussed above, we fully concur with the findings of the ld.

CIT (A) on the issue. The same is upheld. Ground No. 1 is accordingly

rejected.

Rs.2,15,600/- on salaries and staff welfare for running of generator with

this submission that these were part of total expenses incurred for

whole building and shared proportionately with other land-lords. The

8 I. T. Appeal No. 2669/Del/2014 Assessment Year : 2009-10.

Assessing Officer disallowed the claim on the basis that no documentary

evidence in support was furnished. The contention of the assessee

remained that the claimed expenses were incurred on the salary of two

employees, who were employed for supervision of the two properties in

question. And if these expenses are bifurcated into months, the figure

would come to Rs.8,400/- approximately. It was submitted that separate

vouchers were not available since expenses were incurred in common

with other land-lords, which were later on divided proportionately. We

do not find there was any reason to doubt the submissions of the

assessee explaining the claimed expenses and thus, the ld. CIT (Appeals)

was justified in accepting the same. The same is upheld. Ground No. 2

is accordingly rejected.

maintenance expenses of Rs.3,94,625/- as no documentary evidence

was filed in support. During the first appellate proceedings, we

however, find that the assessee furnished copies of vouchers in

support of the claimed expenses with request to admit the same under

Rule 46A as additional evidences as the Assessing Officer had never

communicated the requirement of the documents in support to the

assessee. The ld. CIT (Appeals) sent it for remand report of the

9 I. T. Appeal No. 2669/Del/2014 Assessment Year : 2009-10.

Assessing Officer. Since no remand report was furnished, the ld. CIT

(Appeals) proceeded to adjudicate upon the issue. The ld. CIT

(Appeals) observed that it is not the case of the Revenue that these

expenses were not incurred wholly and exclusively for the purposes

of earning of income from other sources. The ld. CIT (Appeals) admitted

the additional evidence i.e. vouchers and has accordingly come to the

conclusion that the assessee had paid maintenance expenses to

Trade Premises (India) Pvt. Ltd. at fixed rate of Rs.3/- per sq. ft. per

month for maintaining building and equipment and allowed the

claimed expenses for deduction. The first appellate order is speaking

and reasoned one, hence we are not inclined to interfere there with.

The same is upheld. Ground No. 3 is accordingly rejected.

Sd/- Sd/- ( L. P. SAHU ) ( I. C. SUDHIR ) ACCOUNTANT MEMBER JUDICIAL MEMBER

Dated : the 31st July, 2017.

*MEHTA*

10 I. T. Appeal No. 2669/Del/2014 Assessment Year : 2009-10.

Copy of the Order forwarded to:-

ASSISTANT REGISTRAR

I. T. Appeal No. 2669/Del/2014 Assessment Year : 2009-10.