ACIT, CHENNAI vs. EXPRESS INFRASTRUCTURE PRIVATE LIMITED, CHENNAI

PER N.R.S. GANESAN, JUDICIAL MEMBER: [

2.1. On the contrary Shri G. Baskar, the Ld. counsel for the assessee submitted that the Commissioner has not allowed the claim of the assessee straight away. The Commissioner directed the Assessing Officer to verify the claim of the assessee. After verification in fact the Assessing Officer disallowed the claim of the assessee with regard to pre-closure charges. Now the appeal is pending before the CIT (Appeals). Therefore, the Ld. counsel submitted that the CIT (Appeals) may be directed to dispose the claim of the assessee towards pre- closure charges independently on merit without any influence by any of the observation made by the CIT (Appeals) in the impugned order.

2.2. We have considered the rival submissions on either side and perused the material available on record. The assessee claimed deduction in respect of pre-closure charges for moving one vender to another. From the material available on record, it appears the assessee borrowed loans for the purpose of construction. The question arises for consideration is whether pre-closure charges would form part of the principal borrowed or it is an interest. If the pre-closure charges are to be treated as interest, then it has to be allowed under Section 24b of the Act.

Revenue however contends that the pre-closure cannot be construed as interest and would be construed only as principal amount. As rightly submitted by the Ld. counsel for the assessee even after the impugned order of the Commissioner, the Assessing Officer has passed the order disallowing the claim of the assessee and now the appeal is pending before the CIT (Appeals). Therefore, this Tribunal is of the considered opinion that the CIT (Appeals) has to consider the appeal independently in accordance with law without being influenced by any of the observation made by the CIT (Appeals) in the order which is impugned before this Tribunal. With the above observation, the order of the CIT (Appeals) is vacated.

We heard Shri G.M. Das, the Ld. Departmental Representative and Shri G. Baskar, the Ld. counsel for the assessee. Admittedly, the assessee claimed depreciation in respect of plant and machinery like AC, Fire fighting equipments etc. Referring to the order of this Tribunal in JCIT v Chennai Citi Centre Holdings Pvt. Ltd. in & 1001/Mds/2016 dated 23.09.2016, the Ld. counsel submitted that in identical set of fact that this Tribunal allowed the claim of depreciation in respect of plant and machinery. It is not in dispute that centralized AC, cleaning machine, water cooler, SSG system are installed in the premises of the assessee and the assessee is claiming depreciation under Section 57 (II) of the Act. This Tribunal is of the considered opinion that when the machinery was installed and used in the premises of the assessee and used for the purpose of business, the assessee is entitled for depreciation. Therefore this Tribunal do not find any reason to interfere with the order of the lower authority and the same is confirmed.

4.1 Shri G. Baskar, the Ld counsel for the assessee submitted that the rental income received by the assessee was offered for taxation under the head income from house property. However all other receipts like car parking charges, utility charges, event management and advertising are offered for taxation under the head income from other sources. The Assessing Officer disallowed the claim of the assessee to the extent of 50% pertaining to property income. The Ld. counsel submitted that rental income was received by the assessee from the Express Mall which is located in the heart of the city. On a query from the bench, how the rental income from Express Mall was claimed as income from house property, the Ld. counsel submitted that the assessee has claimed this as business income, however the Assessing Officer treated the same as income from house property. The Assessing Officer has also disallowed 50% of the common expenditure on adhoc basis.

Referring to the order of this Tribunal in Express Newspapers P Ltd v DCIT in & 1793/Mds/2014 dated 11.03.2015, an identical disallowance was deleted by this Tribunal.

4.2 Shri G.M. Das, the Ld. Departmental Representative submitted that the assessee has received rental income and also earned income from other sources. Even though, the expenditure for earning the income from other sources is allowable one, for the purpose of rental income the assessee cannot claim anything as expenditure either than what was allowable under Section 24 of the Act. Therefore, the Assessing Officer disallowed 50% of the expenditure which is relatable to the rental income.

4.3 We have considered the rival submissions on either side and perused the material available on record. As rightly submitted by the Ld. counsel, the Assessing Officer disallowed 50% of the common expenditure on the ground that the same may be attributable to rental income. On identical set of fact, this Tribunal in the sister concern of the assessee found that the disallowance cannot be justified. Accordingly, the same was deleted. In view of the order of this Tribunal for the assessment year 2008-09 & 2009-10 in Express Newspapers P Ltd., (supra), we are unable to uphold the order of the lower authorities.

Accordingly the orders of the lower authorities are set aside and the addition made by the Assessing Officer is deleted.

5.1 Shri G. Baskar, the Ld. counsel for the assessee submitted that the income of the assessee was from letdown of the property. The assessee has also received security deposit while letdown of the property. In the course of letdown of the property, the assessee has forfeited the security deposit. Since, the security deposit was forfeited, the assessee claimed before the Assessing Officer that it cannot be construed as income from house property. Hence the same has to be excluded. However, the Assessing Officer found that it is income of the assessee. The CIT (Appeals) also confirmed the order of the Assessing Officer. According to the Ld. counsel, since this was the security deposit received by the assessee which was forfeited, therefore it is not liable for taxation.

5.1 We heard Shri G.M. Das, the Ld. Departmental Representative also. Once the security deposit received by the assessee in the course of letdown of the property was forfeited, the same has to be treated as income of the assessee. Therefore, the CIT (Appeals) has rightly confirmed the addition made by the Assessing Officer.

5.2 We have considered the rival submissions on either side and perused the material available on record. It is not in dispute that what was forfeited by the assessee is the security deposit received in the course of letdown of the property. Once the security deposit was forfeited, this Tribunal is of the considered opinion that the same has to be construed as income of the assessee. It is not in dispute that security

8 & 691/Mds/2016 I.T.A. Nos.716 & 717/Mds/2016 deposit was not taken as income in the year in which it was received. Therefore, the CIT (Appeals) has rightly confirmed the order of the Assessing Officer. Therefore, this Tribunal do not find any reason to interfere with the orders of the lower authorities.

Order pronounced on 28th February, 2017 at Chennai.