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Income Tax Appellate Tribunal, DELHI BENCH: ‘H’ NEW DELHI
Before: SHRI C. M. GARG & SHRI L. P. SAHU
I.T.A. No. 5007/Del/2014 Assessment Year 2010-11
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: ‘H’ NEW DELHI
BEFORE SHRI C. M. GARG, JUDICIAL MEMBER AND SHRI L. P. SAHU, ACCOUNTANT MEMBER
I.T.A .No. 5007/DEL/2014 ASSESSMENT YEAR-2010-11
Texaco Overseas Pvt. Ltd. ACIT 11/2A, Circle-16(1) Pusa Road vs New Delhi New Delhi AABCT4812B (RESPONDENT) (APPELLANT)
Appellant by Shri Mukesh Gupta, Adv. Respondent by Shri. .R.C Danday, Sr. DR Date of Hearing 06.10.2015 Date of Pronouncement 04.12.2015
ORDER PER C. M. GARG, JM
This appeal by the assessee has been directed against the order of the Ld. CIT(A)-19, New Delhi dated 11/8/2014 for A.Y 2010-11 passed in Appeal No. 64/2013-14.
The grounds raised by the assessee read as under:- “1. Whether on the facts and in the circumstances of the case, the Ld. Assessing Officer has grossly erred in law and 1
I.T.A. No. 5007/Del/2014 Assessment Year 2010-11 on facts, in making an addition of Rs. 6,54,153/- under the head income from house property by ignoring the various facts & evidences etc on record. 2. Whether the Ld. Commissioner of Income Tax (A), New Delhi has further erred in law and on facts in enhancing the income from house property by further Rs. 7,88,684/- instead of deleting the addition made to the Returned income of Rs. 6,54,153/- by the Assessing Officer. 3. Whether on the facts and in the circumstances of the case, the Ld. Assessing Officer has grossly erred in law and on facts in disallowing the entire business loss as declared by the assessee amounting to Rs. 33,53,751/-. Whether on the facts the Ld. Ld Commissioner of Income fax (A), New Delhi has also erred in law in restricting tire business loss to Rs. 9,40,908/- instead of allowing the entire business loss of Rs. 33,53,751/- as returned by the appellant. 4. Whether the Ld. Commissioner of Income Tax (A), New Delhi has grossly erred in law and on facts in ignoring the facts that entire addition/disallowance was made by the Assessing Officer by without issuing I any show cause notice before making addition/disallowance as such the// entire addition/disallowance were bad is law. 5. Whether on the facts and in the circumstances of the case the Ld. Commissioner of Income-Tax (A), New Delhi has grossly erred in law and on I facts in making an addition of Rs. 12,58,665/- u/s 14A of the Act due to any one of the following reasons:-
(a) by without issuing an show cause notice for enhancing the income u/s 251 (2) of the Act by Rs. 12,58,659. (b) by ignoring the fact that addition u/s 14A of the Act was unwarranted as the addition u/s 14A was not the subject matter of appeal.
I.T.A. No. 5007/Del/2014 Assessment Year 2010-11 (c) by ignoring the fact that the provision of section 14A were not applicable to the instant case.” Ground No. 1 & 2.
Apropos these grounds of appeal, we have heard arguments of both the sides
and carefully perused the relevant materials placed on record before us. The Ld.
Assessee’s Representative challenging the action of the A.O and ld. CIT(A)
submitted that the A.O has grossly erred in law and on facts, in making an addition
of Rs.6,54,153/- under head of income from house property by ignoring vital facts
and evidence of the assessee. The Ld. Counsel further contended that the Ld.
CIT(A) has also erred in enhancing the income from house property by
Rs.7,88,684 instead of deleting the said addition. The Ld. Counsel also placed
copy of the order of ITAT “H” Bench, New Delhi dated 23/4/2010 passed in
assessee’s own case for A.Y 2006-07 in ITA No. 4050/Del/2009 and contended
that in the earlier assessment year in the similar set of facts and circumstances and
by following the dicta rendered by the Tribunal in the case of JB. Patel & Co. vs.
DCIT 312 (AT) 171 (Ahm) allowing the ground of the assessee, it was directed to
the A.O to reduce such expenses incurred by the assessee for rendering additional
services to the tenants for arriving at annual value and it was also directed to allow
30% deduction of such annual value u/s 24 of the Act.
I.T.A. No. 5007/Del/2014 Assessment Year 2010-11 4. The Ld. DR supported the action and stand of the authorities below. However, the Ld. DR fairly accepted that the assessee was granted relief by the said order of the Tribunal for A.Y 2006-07(supra).
On careful consideration of above, at the outset, we note that the Tribunal in the similar facts on the similar issue held in favour of the assessee. The relevant operative part of this order reads as follows:- “4. We have considered the rival submissions and have gone through the orders of the authorities below. We find that it was submitted before the CIT(A) by the assessee that the assessee was providing additional services on account of lighting in common areas during working hours, pest control services periodically for all common areas, cleaning services of common areas and security services. It was also submitted that the rental income declared by the assessee is composite income including charges for these services also and hence the expenses incurred on these additional services has to be reduced form such composite rental income to arrive at the annual value. The CIT(A) has followed a decision of the Tribunal rendered in the case of J.B. Patel & Co. vs. DCIT as reported in 312 (AT) 171 (Ahm.). In that case also composite income was received by the assessee f and it was held by the Tribunal that the annual value of the house property should be assumed at the reduced value i.e. after reducing expenses incurred in providing extra services from rental income. In the present case also, the facts are similar. It is claimed by the assessee that the assessee is providing additional services such as lighting in common areas during working hours, pest control services periodically for all common areas, cleaning services for common areas and security services. The rental income declared by the assessee is composite rental income. The rental income declared by the assessee is composite rental income including charges on account of these additional services being rendered by the assessee. For the purpose of computing income from house property, rental income in connection with user of house property only is assessable and when charges for other services stand included in such rental income, such additional charges should be reduced from rental income if the 4
I.T.A. No. 5007/Del/2014 Assessment Year 2010-11 quantification of the same is available. In the present case, quantification of charges for additional services is not readily available and hence we do not find any reason to interfere in the order of the CIT(A) on this issue as per which it was held by him that the annual value of the property should be determined after reducing the expenses incurred by the assessee for rendering these additional services. The CIT(A) has held so by following a decision of coordinate bench of the Tribunal rendered in the case of J.B. Patel & Co. (supra) and we therefore, decline to interfere in the order of the CIT(A) on this issue. Regarding submission of the Ld. DR of the Revenue that 30% standard deduction u/s 24(1) should be allowed on net income only, we find that CIT(A) has directed the AO to reduce such expenses for arriving at annual value and deduction @ 30% allowable u/s 24 is allowable to the extent of 30% of annual value only and hence this submission of the Ld. DR of the Revenue is already complied with by the assessee as well as by the CIT(A).”
In view of above, on specific query from the Bench, the Ld. DR replied that
to the best of his knowledge, the order of the Tribunal (supra) has not been
modified or set aside, hence, we hold that the issue is covered in favour of the
assessee in principle and thus we follow the same. However, some recalculation is
required at the end of the A.O, therefore the A.O is directed to reduce the expenses
incurred by the assessee for rendering additional services to the tenants for arriving
at annual rental value and thereafter, on such annual rental value, deduction u/s 24
of the Act @ 30% is to be allowed. The issue is restored to the file of the A.O to
recompute the income from house property on the same line as directed by the
I.T.A. No. 5007/Del/2014 Assessment Year 2010-11 Tribunal order for A.Y 2006-07 (supra). Accordingly, Ground No. 1 & 2 are
allowed in the manner as indicated above.
Ground No. 3 &4
Apropos these ground, the Ld. Counsel of the assessee submitted that the
issue is covered in favour of the assessee by the order of the Tribunal in assessee’s
own case for A.Y 2006-07(supra). The Ld. DR strongly supported the action of
the authorities below and contended that if the assessee is not carrying any
business activity during relevant period, then claimed expenses cannot be allowed.
However, he fairly accepted that in the similar issue the Tribunal granted relief to
the assessee for A.Y 2006-07.
On careful consideration of above contentions and relevant operative part of
the order of the Tribunal(supra), we observe that on the similar issue in the similar
facts and circumstances, the Tribunal for A.Y 2006-07 granted relief to the
assessee by observing as under:-
“5. Regarding the second objection i.e. allowing of set off of loss of Rs.33559/-, we find that it is noted by the CIT(A) in para 10 of his order that under ten different heads, expenses are incurred by the assessee which includes Rs. 15,000/- on account of audit fees, Rs.5533/- on account of bank charges, Rs.5877/- on account of fees and subscription, Rs.l129/- on account of preliminary expenses written off and Rs.l102/- on account of legal and professional fees. There are some petty expenses also under the head telephone, postage and telegram, printing and stationery, business promotion etc., CIT(A) has 6
I.T.A. No. 5007/Del/2014 Assessment Year 2010-11 followed a decision of coordinate bench of the Tribunal rendered in the case of Gojer Brothers Pvt. Ltd. vs. ITO, ITA No.2606/Kol./2000 dated 4.9.2003 in which it was held by the Tribunal that the expenses which are necessary for the purpose of maintaining registered office of a company to continue its existence and to comply with the statutory obligations are allowable as business expenditure even if assessee is not carrying out any business activities in the relevant year because these expenditure are incidental to the business activities of the assessee company. In the present case also, we find that these expenses incurred by the assessee are such which are necessary for the purpose of maintaining registered office of a company to continue its existence and also to comply with the statutory obligations and hence the same is allowable as business expenditure and the resulting loss from business is rightly claimed for set off against income from house property by the assessee and hence we find no reason to interfere in the order of the CIT(A) on this aspect also.” 9. On the basis of aforesaid recorded conclusions of the Tribunal we are
initiated to hold that the issue is squarely covered in favour of the assessee and Ld.
DR should not show us any contrary order to show that said Tribunal order has
either set aside or modified by the Tribunal itself or by any higher forum. Thus,
respectfully following the same we allow ground no. 3 & 4 of the assessee and the
A.O is directed compute and allow the claim of the assessee on the similar line as
was directed by the Tribunal order for A.Y 2006-07 (Supra). Accordingly, Ground
No. 3 & 4 are allowed in the manner as indicated above.
I.T.A. No. 5007/Del/2014 Assessment Year 2010-11 Ground No. 5
At the very outset, the Ld. Counsel of the assessee placing reliance on the
order of Hon’ble Jurisdictional High Court in the case of CIT vs. Holsin India (P)
Ltd. 272 CTR (Del) 282 submitted that since the assessee has not earned any
income during the relevant period, hence, no disallowance can be made u/s 14A of
the Act. The Ld. DR strongly supported the stand and action of the A.O, however,
he did not controvert the fact that the assessee has not earned any tax free income
during the relevant period.
Respectfully following the order of Hon'ble High Court of Delhi in CIT vs.
Holcin (supra), we allow Ground No.5 of the assessee and the A.O is directed to
delete the impugned addition u/s 14A of the Act.
In the result, appeal of the assessee is allowed in the manner as indicated
above.
Order pronounced in the open court on 04.12.2015.
Sd/- Sd/- (L.P. SAHU) (C.M. GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated: 04th December, 2015 ‘GS’
I.T.A. No. 5007/Del/2014 Assessment Year 2010-11