Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, BENCH ‘SMC’ KOLKATA
Before: Hon’ble Shri J.Sudhakar Reddy, AM]
ORDER
PER J.SUDHAKAR REDDY, AM:
This is an appeal by the assessee directed against the order of the Commissioner of Income Tax-(A)-3, Kolkata relating to A.Y. 2013-14.
The Assessee is a company. It filed its return of income on 25.09.2013 declaring total income of Rs.10,06,090/-. The Central Processing Centre (CPC) processed the return u/s 143(1) of the Act on 22.04.2014 after making an adjustment of Rs.4,73,140/-. The assessee carried the matter in appeal. The ld.CIT(A) brought out the facts relating to the adjustment at page 2 to 4 of his order which is extracted for ready reference :- “The only issue in the case is the claim of the assessee for adjustment of loss of Rs.4, ,73,140/- , shown by them under the head 'other sources', against the house property income returned by them of Rs.14,79,230/-. It is the contention of the appellant that set off of the loss as claimed under the head 'other sources' has wrongly been denied. Accordingly, it was submitted that the loss of the current year under the head 'other sources' of R.4,73,140/- should be allowed to be set off against the house property income.
The basic facts of the case are that the assessee filed its return of income declaring total income of Rs.10,06,090/- on 25.09.2013. The case was processed by the CPC and the intimation was issued on 22.04.2014 wherein the loss Parakh Kothi Limited A.Y.2013-14 2 claimed by the assesse under the head 'other sources' of Rs.4,73,140/-was not allowed to be set off against the income under the head 'house property'. The appellant is the owner of the building named Parakh Kothi from which rental income is derived. There are number of tenants in the building. Apart from the rent, the assessee derived service charges from the tenants. The annual letable value has been shown by the appellant after reducing service charges from the rent received from the tenants. In this case, the net annual value, after deducting service and miscellaneous charges from the rent, has been declared by the assessee at Rs.3778341/-. Further, the appellant has claimed electricity expenses of Rs.6,05,789/- as a deductible expense under the head 'other sources'. In this regard, it is observed that deductions under the head 'house property' has been enumerated under section 24. These deductions are specified and exhaustive. No further deduction, apart from the ones specified u/s.24, are allowable to the appellant while computing the Income under the head "House Property". In this context, it was observed that in the return of income the assesee has already claimed deduction U/s.24(a), being the statutory deduction, for repair and maintenance charges. Therefore, it was noticed that the assessee is claiming expenses related to earning of house property income against the interest income shown under the head 'other sources'. Deduction for income under the head 'other sources' has been specified under section 57. The condition for claiming any deduction u/s.57 is that the expense should be laid out wholly and exclusively for the purpose of making or earning such income. On perusal of schedule 12 of the accounts of the appellant, the details of receipts declared under the head 'other sources' are as follows:-
Interest received on Fixed Deposits - Rs.l,08,100.77 Interest on IT refund - Rs. 9,948.00 Interest on Security deposit with CESC - Rs. 14,600.60 Rs.l,32,649.37
From the above, it is observed that the assessee has shown interest income of Rs.l,32,649/-. The interest income has been earned mainly from Fixed deposits from the Banks. No expenses have been incurred for earning the interest income. The electricity expense is for the House Property Income and has no relation or nexus for the purpose of earning interest income. Therefore, it was felt that the electricity expenses claimed by the assessee under the head 'other sources' of Rs.6,05,789/- had not been expended wholly and exclusively for earning interest income and therefore, the same was not allowable as a deductible expense u/s.57 .
He gave a notice to the assessee for enhancement of income and thereafter enhanced the income to Rs.16,11,880/-. He also recorded satisfaction u/s 271(1)(c) of the Act and issued notice for levying penalty. Aggrieved the assessee is in appeal.
Parakh Kothi Limited A.Y.2013-14 3
The ld. Counsel for the assessee Shri Anil Kochar submitted that the CPC could not have made an adjustment of this nature while processing the return u/s 143(1)(a) of the Act as this is a debatable issue. He submitted that the adjustment is not a prima facie adjustment and hence the ld. CIT(A) should have deleted the same. The ld. CIT(A) instead of holding that the adjustment made by CPC while processing the intimation u/s 143(1) of the Act is bad in law, enhanced the assessment. He submitted that what the CPC could not do u/s 143(1) of the Act, the ld. CIT(A) could not have done while adjudicating an appeal against the same.
The ld. Departmental Representative, on the other hand, vehemently contended that the claim in question is prima facie inadmissible. He pointed out that the assessee had claimed electricity charges as expenditure deductible from interest on deposits. Such blatantly wrong claim was rightly disallowed as a prima facie adjustment by CPC. He relied on the order of the ld. CIT(A) and supported the same.
After hearing the rival contentions, perusing the papers on record and orders of the authorities below as well as case laws cited, I hold as follows :- The assessee in its computation of income has claimed electricity charges u/s 57(iii) of the Act as expenditure incurred for earning interest on security deposit. Admittedly the electricity charges were incurred on house property on which the assessee had earned rental income. Thus this is a blatantly wrong claim. I do not find any infirmity in the order of the First Appellate Authority, where he has upheld the intimation processed by CPC. As regards the enhancement of the income, the ld. CIT(A) has followed a procedure laid down in law by issuing notice to the assessee. Hence I have no hesitation in upholding the same as factually the assessee could not controvert these findings.
6.1. The ld counsel for the assessee relied on the decision of the Mumbai bench of the Tribunal in the case of DCIT vs Yogen D.Sanghvi for the proposition that while computing income from house property the common area maintenance charges and Parakh Kothi Limited A.Y.2013-14 4 non-occupancy charges paid by the assessee to the society had to be considered. We find that such charges were directed to be taken into consideration while computing the annual letting value u/s 22 of the Act. The decision does not apply to the facts of the case because, it lays down the procedure of determining the annual letting value of a property. We also find that the decision of the Hon’ble Bombay High Court in the case of Bajaj Auto Finance Ltd. Vs CIT, Pune 2018 (2) TMI 1716 order dated 23.02.2018 does not apply to the facts of the case, as it was not a case of a blatantly wrong claim made . The provision of bad debts was made and the amended law was applied while processing the return. This was held as bad in law. In this case the issue is not debatable. For all the above reasons I uphold the order of the ld. CIT(A) and dismiss the appeal of the assessee.
In the result the appeal of the assessee is dismissed. Order pronounced in the Court on 21.03.2018.