HAMILTON TECHNOLOGIES (INDIA) PVT. LTD.,NEW DELHI vs. ACIT, NEW DELHI

AY 2007-08: AY 2007 08:- AY 2007 AY 2007 08: 08: 2. Ground No.1 is general which does not require any adjudication.

Ground No.2 about the treatment of rental income by the Revenue as ‘Income from other sources’ instead of ‘Income from house property’ as claimed by the assessee, was not pressed by the learned AR. The same is, therefore, dismissed.

Ground No.3 is against computation of rental income at `1,84,34,516/- instead of `1,62,16,316/-. The facts of this ground are that the Assessing Officer, on perusal of lease agreement with M/s Fisherv India P. Ltd. to whom premises was let out, observed that there was a mention of rent of `1.84 crores. The Assessing Officer treated this amount of rent as ‘income from other sources’. The assessee argued before the learned CIT(A) that rent for one month was not received as the premises was given on rent to this party with a condition of free user for one month. The Learned CIT(A) did not accept this contention and approved the Assessing Officer’s action.

After considering the rival submissions and perusing relevant material on record, it is noticed that the assessee has in fact credited rental income of `1.62 crores to its profit & loss account. A copy of the Addendum dated 25.08.2006 to the Lease agreement has been placed at page 28 of the paper book, as per which, “the Lessor agrees to give an additional rent free period of one month from the rent commencement date towards delays in handover of the premises. Lessee hereby agree to adjust Rs.22,18,200/- out of the rent payable to the Lessor”. This addendum to the agreement amply proves that the assessee allowed rent free period of one month to the lessee because there was some delay in handing over of the premises. Once no rent is received as the same stood waived because of late handing over of the possession, there cannot be any question of charging such amount as ‘Income from other sources’. We, therefore, overturn the impugned order on this score and order for deletion of this addition.

Ground No.4 is against the confirmation of disallowance of `86,828/- on account of interest on O.D. account. The Assessing Officer disallowed interest for the reason that no evidence was filed in 3 ITA-3310 & 3311/D/2013 this regard. The learned CIT(A) countenanced the view taken by the Assessing Officer.

Having heard the rival submissions and perused relevant material on record, we observe that the assessee claimed deduction of interest amounting to `86,828/- on over draft account stated to have been utilized for purchase of the furniture and fixtures and repairs and maintenance of the building which was let out on rent. The Learned AR submitted that the AO did not allow a reasonable opportunity to adduce necessary evidence and requested that one more opportunity be given to the assessee for filing necessary evidence in this regard. It is noticed that it is a case of payment of interest to bank and hence the genuineness of payment of such interest cannot be denied. The only thing which remains is to link such interest with the purpose of loan. Agreeing with the contention, we set aside the impugned order on this score and send the matter to the Assessing Officer for examining this issue afresh in the light of the evidence which the assessee proposes to adduce in support of the claim of deduction of interest.

Ground No.5 is against disallowance of sum of `38,74,359/- on account of interest on bank loan. The facts and circumstances of this ground are similar to that of the immediately preceding ground. Here again, the assessee could not file evidence of spending the loan amount for acquiring building etc. with the help of loan on which interest was paid and the learned AR seeks one more opportunity for adducing such evidence. Following the view taken hereinabove, we set aside the impugned order and send the matter to the Assessing Officer for deciding this issue afresh in the light of the evidence to be filed by the assessee.

Ground No.6 is about the sustenance of disallowance of a sum of `54,827/- on account of Professional charges. The assessee claimed deduction for this amount which the Assessing Officer refused to allow for want of evidence of professional charges. We have examined the assessee’s audited accounts which are available in the paper book. It can be seen from the Profit & loss account that there is a debit of `54,827/- towards Professional charges. The learned AR contended that the Assessing Officer did not allow adequate opportunity to present evidence in support of the payment of such Professional charges. Setting aside the impugned order on this score, we remit the issue to the Assessing Officer with a direction to allow adequate opportunity to the assessee for producing necessary evidence in support of this payment and then decide as per law.

The last ground is against confirmation of disallowance of a sum of `4,19,083/- on account of Processing of loan fees by treating it as capital expenditure.

The Assessing Officer treated processing of loan fees as a capital expenditure and disallowed the same. No relief was allowed in the first appeal.

After considering the rival submissions and perusing relevant material on record, we do not find any substance in the view canvassed by the authorities below that the processing of loan fees is a capital expenditure. The fact that such processing fee has been paid by the assessee has not been denied by the AO. The dispute is only whether it is a capital or a revenue expenditure. We do not find any qualitative difference between interest and processing fee on loan. In our considered opinion, such processing fee cannot be capitalized and is deductible in the same manner in which the interest is deductible.

In the result, the appeal is partly allowed.

Ground No.2 treating the rental income as `Income from other sources’ instead of ‘Income from house property’ as claimed by the assessee was not pressed by the learned AR. The same is, therefore, dismissed.

Ground No.3 is against the computation of rental income at `2,66,18,256/- instead of `2,52,82,066/-, ignoring the fact that the rent received by the assessee was inclusive of service tax. The facts apropos this issue are that the assessee declared rent received at `2.52 crore. The Assessing Officer noticed that the actual rent paid by the company was of `2.66 crore. He, therefore, included the amount of `2.66 crore as assessee’s rental income. The assessee argued before the authorities below that this rental income is inclusive of service tax amounting to `0.14 crore which should be deducted from the gross rental receipts. This contention met with the fate of dismissal. Now, the assessee is before us.

After hearing the rival submissions and perusing relevant material on record, we find that the assessee categorically claimed before the authorities that gross rent of `2.66 crore includes service tax of `0.14 crore and only the net amount should be charged to tax. The amount of service tax is undoubtedly a part of assessee’s receipt

Ground No.4 against disallowance of `86,828/- on account of interest on O.D. account is similar to ground No.4 of the assessee’s appeal for the assessment year 2007-08 decided by us in the foregoing paragraphs of this order. For the reasons given above for the assessment year 2007-08, we set aside the impugned order on this score and send the matter to the Assessing Officer for examining it afresh in the light of the evidence which the assessee proposes to adduce in support of the claim of deduction of interest.

Ground No.5 against disallowance of sum of `67,43,094/- on account of interest on bank loan is similar to ground No.5 of the assessee’s appeal for the assessment year 2007-08 decided by us in the foregoing paragraphs of this order. Following the view taken hereinabove, we set aside the impugned order and send the matter to the Assessing Officer for deciding the same afresh in the light of the evidence to be filed by the assessee.

Ground No.6 about disallowance of sum of `60,000/- on account of Professional charges is similar to ground No.6 of the assessee’s appeal for the assessment year 2007-08 decided in the foregoing paragraphs of this order. Following the same, we set aside the 7 ITA-3310 & 3311/D/2013 impugned order on this score and remit the matter to the Assessing Officer with a direction to allow adequate opportunity to the assessee for producing necessary evidence in support of this payment.

Ground No.7 is against confirmation of disallowance of `14,04,048/- on account of brokerage charges. The assessee claimed deduction for this amount as brokerage charges paid. In the absence of any details, the Assessing Officer made disallowance, which came to be upheld in the first appeal.

The Learned AR argued that such brokerage charges were paid to commission agents for procuring tenants of the building and this brokerage was paid at the rate of 40 days’ rental value. He submitted that the assessee could not file evidence for the payment of such brokerage because of inadequate opportunity provided by the Assessing Officer. In our considered opinion, the ends of justice would meet adequately if the impugned order on this issue is set aside and matter is sent back to the Assessing Officer for a fresh determination after allowing a reasonable opportunity of hearing to the assessee. We order accordingly.

In the result, the appeal is partly allowed. Decision pronounced in the open Court on 23.10.2015.