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Income Tax Appellate Tribunal, MUMBAI BENCHES “D”, MUMBAI
Before: SHRI SAKTIJIT DEY & SHRI N.K. PRADHAN
ORDER PER N.K. PRADHAN, A.M This is an appeal filed by the assessee. The relevant assessment year is 2008-09. The appeal is directed against the order of the Commissioner (Appeals)-41 at Mumbai and arises out of the assessment completed under section 143(3) of the Income Tax Act 1961, (hereinafter ‘the Act’) .
The only ground raised by the assessee in this appeal is that the learned CIT(A) has erred in disallowing the depreciation of Rs. 17,84,651/- without considering the facts and circumstances of the case .
The AO during the course of assessment proceedings found that the assessee had purchased a plot of land and thereafter had constructed a tower years ago . The assessee submitted before the AO that ‘it is now recovering only maintenance and other charges from the owners of respective flats’. From this the AO concluded that the business of the assessee is property development. As the building on which it claimed depreciation is stock in trade (not an asset), he disallowed claim of depreciation of Rs. 17,84,651/-.
The learned CIT(A) concluded that the constructed flats which were sold to different parties in earlier years were not assets of the assesee but were stock-in-trade. Further, after sale of these properties, the assessee is no longer the owner of these properties. In view of the above he upheld the disallowance of depreciation made by the AO.
The learned counsel of the assessee referred to the balance sheet of the assessee as on 31/03/2008 and its accompanying schedule to explain the share capital. He brought to our notice the letter of allotment of premises dated 29/03/2004. It was stated by him that the collection of charges have been shown as a direct income as per Schedule – G to the P&L A/c. The maintenance charges have been debited to the P&L A/c as per Schedule – I 5.1 The learned counsel further stated that for the AY 2005-06, 2006-07, 2009-10, 2010-11 and 2011-12, the AO has reopened the assessment and passed the order on the basis of CIT’s instruction of treating the income of the assessee on the grounds of mutuality. For the above assessment years, the assessee has gone on appeal before the learned CIT(A) and the matters are pending for disposal. He, therefore, submitted to remit the matter back to the learned CIT(A) for the impugned assessment year also for deciding afresh along with appeals for other assessment years pending before him.
Before us, the learned DR refered to section 27(iii) of the Act and also relied on the order of the learned CIT(A).
We have heard the rival submissions and perused the relevant material on the record. We find that the appeal against the assessment/reassessment made by the AO for the AY 2005-06, 2006-07, 2009-10, 2010-11 and 2011-12 are pending before the learned CIT(A). We have further noted that the Commissioner of Income Tax while setting aside the assessment order for the AY 2007-08 under section 263 of the Act had asked the AO to examine the following issues :
(a) Whether the activities of the assesee of maintaining the building for and on behalf of shareholders are mutual activities or not.
(b) If yes, whether rental income and interest income or any other income earned from non members is covered by the concept of mutuality and hence not taxable.
(c) The assessing officer will also look afresh into the claim of the assessee that it has filed e-return for the current year and decide the issue on the basis of fact available.
Thus, as can be seen, the Commissioner has asked the AO to examine the taxability of income at the hands of the assessee keeping in view the concept of mutality . These issues for several assessment years which are pending for adjudication before the learned CIT(A) may have a bearing on the impugned assessment year also.
In order to bring consistency to the matter, we set aside the impugned appellate order passed by the learned CIT(A) and restore it to him to consider the matter afresh after giving reasonable opportunity of being heard to the assessee.
In the result appeal is allowed for statistical purposes.
Order pronounced in the open court on 19/08/2016.