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Income Tax Appellate Tribunal, DELHI ‘G’ BENCH,
Before: SHRI N.K. BILLAIYA, & SHRI AMIT SHUKLA
PER N.K. BILLAIYA, ACCOUNTANT MEMBER:-
This appeal by the assessee is preferred against the order of the
CIT[A]- 20, New Delhi dated 16.03.2016 pertaining to Assessment Year
2011-12.
At the very outset, the ld. counsel for the assessee stated that he is
not pressing Ground Nos. 1, 3 and 5 and the same are dismissed as not
pressed.
Ground No. 2 relates to the disallowance of Rs. 6,05,150/- made by
the Assessing Officer.
Briefly stated, the facts relating to this grievance of the assessee
are that during the course of scrutiny assessment proceedings, the
Assessing Officer noticed that the assessee has claimed deduction for
interest on borrowed funds under section 24(b) of the Income-tax Act,
1961 [hereinafter referred to as 'The Act'] amounting to Rs. 6,05,150/-.
The assessee was asked to furnish documentary evidence with regard to
the loan taken as the same was used for the acquisition of the said
building situated at Jasola, Okhla industrial area, New Delhi.
The assessee explained that the loan has been taken from M/s
Perfect Turner for the purchase of the property and filed loan
confirmation. The submission of the assessee did not find any favour with
the Assessing Officer who was of the firm belief that the deduction under
section 24(b) of the Act cannot exceed Rs.1.50 lakhs and, accordingly,
went on to make addition of Rs. 6,05,150/–.
The assessee carried the matter before the ld. CIT(A) but without
success.
Before us, the ld. counsel for the assessee vehemently stated that
the said property is a let out property which was purchased out of
borrowed funds from M/s Perfect Turner and, therefore, interest paid by
the assessee should be allowed as deduction.
Per contra, the ld. DR strongly supported the findings of the
AO/CITA.
We have carefully considered the orders of the authorities below.
The assessee may have purchased the property out of borrowed funds,
but the onus is upon the assessee to demonstrate that the said borrowed
funds have been fully utilized for purchase of the said property and
further demonstrate that the payment of interest is in respect of the said
borrowed funds. No documentary evidences were furnished before the
lower authorities nor before us. Therefore, we do not find any reason to
interfere with the findings of the ld. CIT(A). Ground No. 2 is, accordingly,
dismissed.
Ground No. 4 relates to the disallowance of Rs. 7,02,000/–.
Facts relating to this addition show that during the assessment
proceedings, on perusal of the cashbook, the Assessing Officer noticed
that cash has been shown to be withdrawn from the bank as under:
Sr. No. Amount [Rs.] 1. 09/04/2010 2,50,000/- 2. 08/11/2010 2,00,000/- 3. 01/-3/2011 2,52,000/- Total 7,02,000/-
The assessee was asked to explain the above introduction of cash
entries in its books of account.
The assessee was asked to explain the above introduction of cash
entries in its books of account. The assessee explained that the said
amounts were withdrawals from the bank.
Submissions of the assessee were verified from the bank statement
but from the perusal of the bank statement, the Assessing Officer found
that no such cash withdrawals were made from the bank on the date of
introduction of cash in the books of account. The AO, accordingly, made
addition of Rs. 7,02,000/-.
The assessee carried the matter before the ld. CIT(A) but without
success.
Before us, the ld. counsel for the assessee stated that though the
cheques were issued for withdrawal of cash from bank and simultaneously
entries were made in the cashbook but cash withdrawals were made
subsequently, therefore, the dates do not match with the bank
statement.
We have carefully perused the bank statement qua the date of
cheque and date of withdrawal from the bank. We find force in the
contention of the ld. counsel for the assessee. The entries have been
made in the cash book on the date on which the cheque was issued but
the same was presented in the bank at subsequent date and therefore,
the withdrawal date from the bank is different from the entry date in the
cashbook. But at the same time, we do not find do not know whether on
entry date in cashbook any benefit has been taken by the assessee in
respect of cash in hand. We, therefore, remit this issue to the file of the
Assessing Officer. The Assessing Officer is directed to verify whether on
the date of entry the assessee has utilized the alleged withdrawal of cash
for making the payment/investment or for any other purpose and if the
AO does not find any utilization of cash, then the addition should be
deleted. Ground No. 4 is allowed for statistical purposes.
Ground No. 6 relates to the disallowance of Rs. 22,09,066/– out of
depreciation claimed.
While scrutinizing the balance sheet of the assessee, the Assessing
Officer found that in Schedule 4 of Fixed Assets, the assessee has shown
several properties and has claimed depreciation amounting to Rs.
22,09,066/–. The assessee was asked to justify its claim of depreciation.
The assessee explained that it is engaged in the business of hotelier
and has paid rent in respect of the premises at Raj Niwas Palace,
Dhoulpur. The said lease rent was paid to Shri Dushyant Singh, HUF.
The Assessing Officer was of the opinion that the assessee is
claiming deduction on lease rent as expenditure and is also claiming
depreciation on the said building. The Assessing Officer, accordingly,
disallowed the claim of depreciation.
The ld. CIT(A) confirmed the disallowance.
Before us, the ld. counsel for the assessee vehemently stated that
on the leased property in the assessment year 2008–09, the assessee has
made substantial addition which was capitalized by it and on such
capitalized expenditure, the assessee has claimed depreciation as per
provisions of law. We are of the considered view that the assessee is
eligible for claim of depreciation as per Explanation 1 Proviso 6 to Section
32 of the Act but, at the same time, it needs to be verified whether in
the year of expenditure, the same was claimed as revenue expenditure or
was capitalized by the assessee. The Assessing Officer is directed to
verify the same and if he finds that the amount of addition was
capitalized, the depreciation should be allowed. Ground No. 6 is allowed
for statistical purposes.
Ground No. 7 relates to the disallowance of Rs. 7,41,482/- on
account of building maintenance.
Under the head ‘Administration and General Expenses, the Assessing
Officer found that the assessee has claimed expenditure on account of
building maintenance amounting to Rs.7,41,482/- and on perusal of the
details, the AO noticed that the amount of Rs. 3,01,510/- was paid to M/s
Pest Control on which tax was deducted at source at Rs. 6,845/–. Invoking
the provisions of section 40(a)(ia) of the Act, the AO disallowed the
entire expenditure of Rs. 7,41,482/-
When the matter was agitated before the ld. CIT(A), the ld. CIT(A)
was not convinced with the submissions of the assessee and confirmed
the disallowance.
Before us, the ld. counsel for the assessee stated that only payment
made on account of M/s Pest Control was subject to TDS under section
194C of the Act and on which tax has been deducted at source and
balance amount is petty expenditure incurred on day to day maintenance
of the building.
On the other hand, the ld. DR supported the findings of the
AO/CITA.
We have carefully considered the order authorities below. It Is true
that on payment of pest control expenses, the assessee has deducted tax
at source and has fulfilled the conditions laid down in section 194C of the
Act. To this extent no disallowance should be made.
In respect of balance, no details of day to day expenditure have
been furnished before us. We, therefore, set aside the issue to the file of
the Assessing Officer. The Assessing Officer is directed to furnish details
of day to day expenditure on account of building maintenance and the AO
is directed to verify the same in light of provisions of section 194C of the
Act and decide the issue afresh as per the provisions of law. The assessee
gets relief of Rs. 3,01,510/-. Ground No. 7 is partly allowed.
Ground No. 8 relates to the disallowance of depreciation of Rs.
14,00,674/-.
The Assessing Officer found that the assessee has claimed
depreciation of Rs. 5,01,410/- on account of building on which
depreciation of Rs. 22,09,066/- is disallowed and from the remaining
depreciation, the Assessing Officer further disallowed Rs.14,00,672/- on
the ground that the assets have been used for less than 180 days.
Disallowance was confirmed by the ld. CIT(A).
Before us, the ld. counsel for the assessee stated that the assessee
is an hotelier and he is running a resort which has seasonal business but
the resort is used for the entire year, and, therefore, the claim of
depreciation cannot be restricted to 50%.
Per contra, the ld. DR supported the findings of the AO/CITA.
There Is no dispute that the assessee is running a resort at Raj
Niwas Palace, Dholpur. It Is also not In dispute that being a tourist place,
the occupancy is not throughout the year but only in seasons favourable
to the tourists. Therefore, basis the revenue of some months, it cannot
be construed that the asset was used only for less than 180 days. We,
therefore, direct the Assessing Officer to allow depreciation for entire
year. Addition of Rs. 14,00,672/- is directed to be deleted. Ground No. 8
is allowed for statistical purposes.
In the result, the appeal of the assessee in ITA No. 2725/DEL/2016
is partly allowed for statistical purposes.
The order is pronounced in the open court on 15.12.2021 in the
presence of both the representatives.
Sd/- Sd/- [AMIT SHUKLA] [N.K. BILLAIYA] JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated: 15th December, 2021
VL/