RAMNIKLAL S. GOSALIYA & CO,MUMBAI vs. JTCIT RG 17(3), MUMBAI

In ground no.1, assessee has challenged the disallowance of depreciation on intangible asset.

Brief facts are, during the assessment proceedings, the Assessing Officer noticed that the assessee has claimed depreciation of `

The learned Commissioner (Appeals) also following the decision of the Assessing Officer on the issue in assessee’s own case for assessment year 2007–08 and disallowed assessee’s claim.

Learned Authorised Representative submitted, assessee has set– up wind mill and has incurred certain expenditure towards payment made of ` 37.50 lakh to Suzlon Energy Ltd., in respect of infrastructure facility of common power evacuation. He submitted, as the expenditure incurred was for the purpose of assessee’s business it had claimed it as revenue expenditure in assessment year 2007–08 and has also made an alternative claim that in case it is held as capital then depreciation should be allowed by treating the expenditure incurred as intangible asset. Learned Authorised Representative submitted, in assessment year 2007–08, the Tribunal while deciding assessee’s appeal on the issue has restored the matter back to the file of the Assessing Officer for verifying assessee’s claim. He, therefore, submitted in assessment year 2007–08, if assessee’s claim as revenue expenditure is accepted, then the claim of depreciation in the 3 M/s. Ramniklal S. Gosalia & Co. impugned assessment year would not be allowable. He, therefore, submitted, the issue may be restored back to the file of the Assessing Officer for deciding on the basis of depreciation to be taken in assessment year 2007–08.

Learned Departmental Representative has no objection to the aforesaid submissions of the learned Authorised Representative.

We have considered the submissions of the parties and perused the material available on record. On a perusal of the order dated 22nd September 2016, in ITA no.6463/Mum./2012, for assessment year 2007–08, it is noticed that the Tribunal while deciding issue relating to assessee’s claim of expenditure towards common infrastructure facilities in power evacuation whether revenue or capital has restored the issue to the file of the Assessing Officer for fresh adjudication. Undoubtedly, both the Assessing Officer and the learned Commissioner (Appeals) while rejecting assessee’s claim of depreciation have relied upon the respective decisions in assessment year 2007–08. Since the Tribunal in assessment year 2007–08, has directed the Assessing Officer to verify assessee’s claim of expenditure, whether revenue or capital, the claim of depreciation in the impugned assessment year will depend upon the ultimate outcome of the decision to be taken on assessee’s claim in assessment year 2007–08. We, therefore, restore the issue to the file of the Assessing Officer for deciding afresh on the 4 M/s. Ramniklal S. Gosalia & Co. basis of decision on to be taken on the issue in assessment year 2007– 08. Ground no.1, is allowed for statistical purposes.

In ground no.2, assessee has challenged the addition of ` 1,73,390 under the head “Income From House Property”.

Brief facts are, from the computation of income filed by the assessee, the Assessing Officer found that the assessee has shown rental income from letting out of godown at 2AA, Zakaria Bander Road, Mumbai. From the copies of rent agreement submitted by the assessee, he found that the assessee has given the godown having 700 sq.ft. area on rent to one Shri Ramesh Jain, Proprietor, M/s. Ashok Paints, for a monthly rent of ` 500. In the same building, assessee has let out 1,500 sq.ft. area to AFL Ltd. on a lease agreement of 60 months on a monthly rent of ` 60,000 plus security deposit of ` 3.60 lakh refundable on surrender of the premise. On comparing the rental income received from the two premises, the Assessing Officer was of the view that the rent received from Shri Ramesh Jain, is much less than the rent received from AFL Ltd. which works out to ` 40 per sq.ft. The Assessing Officer observed, as per section 23 of the Act, the annual value of the property shall be deemed to be the same for which the property is reasonably accepted to be let out from year–to–year. He, therefore, applying the rate of 40 per sq.ft. at which the premise was let out to AFL Ltd., worked out the ALV of the godown let out to 5 M/s. Ramniklal S. Gosalia & Co. Ramesh Jain at ` 28,000 per month. Accordingly, he added back the differential amount between the rent shown by the assessee and the rent computed by him as income of the assessee. Assessee challenged the addition before the learned Commissioner (Appeals).

The learned Commissioner (Appeals) sustained the addition.

Learned Authorised Representative submitted, as both the properties rented out to two different persons are not equal in nature, rent charged cannot be the same. He submitted, as the assessee was not able to find a tenant for the property rented out to Shri Ramesh Jain, he was compelled to let it out at a lesser rent since the assessee is able to earn some income rather than keeping it vacant. He submitted, Shri Ramesh Jain, is not a relative of the assessee. Therefore, there is no question of charging lesser rent from him. He submitted, only in a case where the Assessing Officer on reasonable basis concludes that ALV shown by the assessee is not correct, then he can compute the ALV by referring to the market rent as per municipality valuation or the Maharashtra Rent Act. In this context, he relied upon the decision of the Hon'ble Jurisdictional High Court in CIT v/s Tip Top Typography, [2012] 368 ITR 330 (Bom.).

Learned Departmental Representative on the other hand relying upon the observations of the Assessing Officer and the learned

We have considered the submissions of the parties and perused the material available on record. As is evident, the assessee had entered into agreement for a period of eleven months with Shri Ramesh Jain, for letting out a godown having area of 700 sq.ft. In the same building, the assessee has rented out another premise having 1,500 sq.ft. space to another person for a period of five years on a monthly rent of ` 60,000 plus refundable security deposit of ` 3.60 crore. The Assessing Officer taking as a basis the rent charged @ ` 60,000 per month to the other person, which works out to ` 40 per sq.ft. has applied the same to the premise let out to Shri Ramesh Jain and worked out the ALV. However, as could be seen, the premise let out to Shri Ramesh Jain is a godown. Whereas, what is the nature of other premise having area of 1,500 sq.ft. let out to AFL Ltd., is nowhere mentioned. Unless both the premises are of the same nature, it will not be proper to apply the rate of ` 40 per sq.ft. to both of them. Further, it is a fact on record that as far as lease agreement with Shri Ramesh Jain is concerned, the same is for a period of eleven months whereas, the lease agreement with AFL Ltd., for a period of five years.

In ground no.3, the assessee has challenged the addition of amount of ` 62,825 on the basis of AIR information.

Brief facts are, from the FIR information available on record, the Assessing Officer found that the assessee has not offered as income the interest of ` 4,820 received from Jem Trade Overseas Pvt. Ltd. Further, on the basis of AIR Information, the Assessing Officer found that the assessee has shown less commission income in the books of 8 M/s. Ramniklal S. Gosalia & Co. account to the extent of ` 58,005. Accordingly, he added back the amount of ` 62,825 to the income of the assessee.

They learned Commissioner (Appeals) also sustained the addition.

The learned Authorised Representative submitted, in the course of assessment proceedings the assessee was not supplied the details of AIR information nor the Assessing Officer pointed out to the assessee what exact reconciliation is required in respect of interest income and commission income. He submitted, only after completion of assessment, AIR information was supplied to the assessee. He submitted, even now the Department has not pointed out what reconciliation is to be made by the assessee on the basis of AIR information. He, therefore, submitted a direction may be given to the Assessing Officer to specify the exact nature of reconciliation required from the assessee’s side.

Learned Departmental Representative relying upon the observation of the Assessing Officer and the learned Commissioner (Appeals).

We have considered the submissions of the parties and perused the material available on record. As could be seen from the assessment order, on the basis of AIR information that assessee has 9 M/s. Ramniklal S. Gosalia & Co. not disclosed interest income of ` 4,820 received from Jem Trade Overseas Pvt. Ltd., and there is difference in commission income earned from TFL Ltd. and Orient Pace Ltd., as shown by the assessee in the books of account and as provided in the AIR information Assessing Officer has added back the amount of ` 62,825. It is the specific case of the assessee before us, the details contained in AIR information was not provided to the assessee during the assessment proceedings, nor the Assessing Officer disclosed the exact nature of reconciliation, the assessee is required to furnish. Considering the aforesaid submissions of the assessee, we are inclined to restore the issue back to the file of the Assessing Officer for fresh consideration after due opportunity of being heard to the assessee. It is made clear the Assessing Officer must point out to the assessee the details of income which as per the AIR information was not offered by the reconciliation to be made by assessee. Ground no.3, is allowed for statistical purposes.

In ground no.4, the assessee has challenged the decision of the learned Commissioner (Appeals) in dismissing the ground raised by the assessee in relation to claim of deduction under section 80IA.

Learned Authorised Representative submitted, the learned Commissioner (Appeals) has dismissed the ground raised by the 10 M/s. Ramniklal S. Gosalia & Co. assessee only for the reason that rectification application filed before the Assessing Officer on the issue is still pending.

We have considered the submissions of the parties and perused the material available on record. Undisputedly, the assessee has filed a rectification application before the Assessing Officer in relation to disallowance of deduction under section 80IA. As informed by the learned Authorised Representative, the petition filed under section 154 is still pending. Considering the aforesaid fact, we direct the Assessing Officer to consider assessee’s claim of deduction under section 80IA as raised in the petition filed under section 154A of the Act after due opportunity of being heard to the assessee.

Ground no.4, is allowed for statistical purposes.

In the result, appeal stands allowed for statistical purposes. Order pronounced in the open Court on 20.12.2016