ALKA N. MANDKE,MUMBAI vs. ASST CIT 11(2), MUMBAI

The assessee is a Doctor by profession. The assessee held about 8 flats in Pune and Bombay as detailed below :

The ld. AR submitted that the Municipal ratable value should be considered as Standard Rent for ascertaining the ALV of the property. Accordingly, he submitted that the amount of Rs.1,75,000/- offered by the assessee was reasonable. When a specific question was put to the AR as to whether the ALV of Rs.1,75,000/- offered by the assessee is based upon the Municipal Ratable value, he fairly admitted that it was an estimate made by the assessee. The ld. AR further submitted that the assessee

We heard the ld. DR and perused the record. We find merit in the prayer made by the ld.AR. There is no dispute with regard to the proposition that Municipal ratable value is considered as standard rent for the purpose of determining the ALV under section 23 of the Act. In the instant case, both the assessee as well as the AO has failed to bring the details relating to Municipal Ratable Value. Hence, under these set of facts, we are of the view that this issue requires fresh examination at the end of the AO. Accordingly, we set aside the order ld. CIT(A) on this issue and restore the same to the file of the AO with a direction to determine the ALV of the properties by duly considering the Municipal ratable value certificate of the respective properties and take appropriate decision in accordance with law. The assessee is also directed to co-operate with the AO by furnishing all the details that may be called for the by AO.

The next issue relates to rejection of claim of depreciation. The assessee’s father Dr.N V Mandke owned a hospital and he passed away in the year 2003. After the demise of her father, the assessee continued to run the above said hospital under the name Dr. N V Mandke Memorial Services. For the year relevant to the assessment year under consideration, the accounts of Dr.N V Mandke Memorial Services were merged with the accounts of the assessee. Accordingly, the assessee claimed depreciation on the assets owned by Dr.N V Mandke Memorial

The ld. AR submitted that the assessee has been offering income from the concern Dr.N V Mandke Memorial Services in the earlier years and depreciation claimed by the assessee was also allowed. It is submitted that the depreciation cannot be rejected only on the reasoning that the assessee did not generate any income out of the said concern. By placing reliance on the order dated 17.11.2015 passed by the Hon’ble Bombay High Court in the case of CIT V/s M/s Sonic Biochem Extractions Pvt Ltd in Income Tax Appeal No. 2088 of 2013, the ld. AR submitted that the identity of the individual assets is lost when it becomes the part of block of assets and hence, the user test is required to be satisfied only at the time of purchase of assets and not thereafter.

On the contrary, the ld. DR submitted that the assessee discontinued the operation of Dr.N V Mandke Memorial Services and hence, the ld.CIT(A) was justified in confirming the rejection of depreciation.

We heard the parties and perused the record. It is the submission of the assessee that the assessee has generated income from the concern Dr.N V Mandke Memorial Services in the earlier year. However, the ld. AR did not furnish any document to substantiate its claim. If the assessee has offered the income from the said concern and depreciation has also been allow on the assets owned by it, the depreciation for the year under 5 2356/M/2013

The next issue relates to the disallowance made u/s 14A of the Act. The assessee had declared dividend income of Rs.7,99,341/- and did not disallow any expenditure u/s 14A of the Act. The AO disallowed a sum of Rs.2,78,982/- under Rule 8D(2)(iii) of the I.T Rules towards administrative expenses. The Ld CIT(A) also confirmed the same.

The Ld A.R submitted that the assessee did not incur any expenses in relation to the dividend income and hence no disallowance is called for. On the contrary, the Ld D.R submitted that the assessee has claimed administrative expenses in his Profit and Loss account and hence it cannot be said that the assessee did not incur any expenses.

We have heard rival contentions and also perused the profit and loss account furnished by the assessee at page 14 of the paper book. The expenses incurred on salaries, telephone and sundry expenses works out to Rs.2.25 lakhs approximately. Other expenses appear to relate to the professional income of the assessee. Under these set of facts, we are of the view that the provisions of Rule 8D(2)(iii) should not be applied in this year and the disallowance should be estimated on a reasonable basis. We further notice that the assessee has received most of the dividend income from Mutual funds, investment of which does not require much analysis. Accordingly, we are of the view that the disallowance may be estimated on a round sum basis at Rs.20,000/- and the same, in our view, would meet

The next issue relates to the assessment of short term capital loss at Rs.17,716/-, where as the claim of the assessee is that it should have been assessed at Rs.5,06,182/-. Since this matter requires verification at the end of the AO, we set aside this matter to his file. Accordingly, the order of Ld CIT(A) on this issue is modified accordingly.

In the result, the appeal filed by the assessee is treated as partly allowed for statistical purposes. Pronounced accordingly on 3rd February, 2016. घोषणध खुरे न्मधमधरम भें ददनधंकः 3rd February, 2016 को की गई । (AMARJIT SINGH) ( B.R. BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER भुंफई Mumbai: 3rd Feb, 2016. व.नन.स./ SRL , Sr. PS आदेश की प्रतिलऱपप अग्रेपिि/Copy of the Order forwarded to : अऩीरधथी / The Appellant 1. प्रत्मथी / The Respondent. 2. आमकय आमुक्त(अऩीर) / The CIT(A)- concerned 3. आमकय आमुक्त / CIT concerned 4. ववबधगीम प्रनतननधध, आमकय अऩीरीम अधधकयण, भुंफई /

DR, ITAT, Mumbai concerned गधर्ा पधईर / Guard file. 6. आदेशधनुसधय/ BY ORDER,सहधमक ऩंजीकधय (Asstt.