THE GREAT EASTERN SHIPPING COMPANY LTD,MUMBAI vs. DCIT CIR 5(3), MUMBAI

The ld. AR vehemently brought to our notice the observations of the ld. CIT(A) that the addition was upheld by the ITAT was factually incorrect as quantum was not confirmed by the ITAT but the ground as taken up as regard to Rs.189,975/- was not pressed. In order to corroborate the affirmation made by the ld.AR, he placed before us a copy of the order passed by the ITAT in quantum appeal in (AY-2006- 07) dated 14.9.2012. The ld. AR also invited our attention to page 13 of the said judgment, wherein it has clearly been stated that Ground No.1 as regard contribution towards the major repair funds aggregating to Rs.1,89,975/- was not pressed and dismissed as not pressed. The ld. AR also submitted before us that the contribution towards repairs funds was allowable expenses and the action of the AO and the ld.CIT(A) was wrong and against the spirit of law and therefore, the penalty should not be imposed on the said claim of the assessee as it was wholly and exclusively incurred in connection with transfer /sale of residential flat and without the payment of such the sale could not have been happened. In defence of his argument, the ld. AR strongly placed reliance on the decision of the Co-ordinate Bench of the Tribunal in the case of CIT V/s Madhur I Techchandaney reported in 93 ITD 65 (Mum). The ld. AR prayed that the penalty has been levied by invoking the provisions of section 271(1)(c) in wrong manner as the bonafide claim of the assessee was rejected and finally, in view of the decision referred to above, the ld. AR prayed that the penalty be deleted by allowing the appeal of the assessee.

On the contrary, the ld. DR strongly opposed the plea putforth by the ld.AR and relied on the decisions of lower authorities.

We have carefully considered the submissions of the parties, perused the material placed before us including the orders of authorities below and case laws relied upon by the parties. It is clear from the facts available before us that the contribution to the repair fund of the society was made by the assessee in which he owned the flat and the flat was sold and without such payment, the transfer of said flat could not have been materialized. Therefore, the expenditure incurred for the transfer/sale of flat was wholly and exclusively for the purpose of sale of flat. Therefore, this expenditure is allowable. We further observe the decision of the ld.CIT(A) is wrong and against the facts on record that both the authorities have sustained the addition in quantum appeal, whereas the facts are different. The ld.CIT(A) confirmed the addition whereas the ground taken up for challenging before the Tribunal the said addition was not pressed before the Tribunal which was duly stated by the Tribunal in para 13 of the judgment. Moreover, in the case of Madhur I Techchandaney (supra) it has been held that if any amount paid for repairs funds contribution made to the repair fund is allowable expenses as it was incurred by the assessee wholly and exclusively in connection with such transfer and the amount should be deducted while computing the income from capital gains in accordance with section 48(1) of the Act. We therefore are of the opinion that the facts of the assessee’s case are fully covered in favour of the assessee by the Decision of the Hon’ble Apex Court in the case of Reliance Petro Produce P Ltd (supra) as a bonafide and legitimate claim made by the assessee was rejected by the revenue. Moreover, the issue of allowability of contribution to repairs fund was settled by the decision of the co-ordinate Bench of the Tribunal. We, therefore, following the ratio laid down in the above decisions set aside the order of the ld. CIT(A) and direct the AO to delete the penalty.