TMI Blog2012 (12) TMI 324X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee has recovered a sum of Rs. 9,58,197/- from its tenants thereby resulting into a net amount of Rs. 4,48,794/-. As it appears that this bifurcation of expenses was not before the lower authorities it is fit to restore this matter back to the file of AO to verify the details of this chart and restrict the disallowance of 10% to net amount only - in favour of assessee for statistical purposes. Disallowance of payment made to Ramabai Kokre - settlement amount in relation to a suit filed in the Small Causes Court in 1991 - Held that:- As the assessee had filed a plea made to Small Causes Court stating that the settlement has been arrived between the assessee and the wife of the driver by which the assessee has agreed to pay ex-gratia amount as paid by cheque No. 971080 dt, 17.11.1997 which has been acknowledged by the Legal heir of the deceased driver. Thus such payments are made to avoid unnecessary litigation and to buy peace of mind therefore need to allow the claim as business expenditure - in favour of assessee. Disallowance of expenditure of purchase of paintings - Held that:- Considering the nature of the business of the assessee he has to maintain the business cen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts and are recurring in nature and allowed them as Revenue expenditure - in favour of assessee. - ITA No. 3408/Mum/2002, ITA No. 3463/Mum/2002, ITA No. 2570/Mum/2005, ITA No. 2115/Mum/2005, ITA No. 2107/Mum/2006 - - - Dated:- 18-7-2012 - SHRI D. MANMOHAN AND SHRI N.K. BILLAIYA, JJ. Assessee by: Shri Parthasarthi Naik Department by: Shri Rajan R. Vora Shri Jay Unarkar ORDER PER N.K. BILLAIYA (AM): These cross appeals are filed by the assessee and the department against the orders of Ld. CIT(A)-XII, Mumbai for assessment years 1998-99, 2001-02 2002-03. Since issues are common in these appeals, these were heard together and are being disposed off through this consolidated order. 2. Firstly we take up appeal filed by assessee being ITA No. 3408/M/02 for A.Y. 1998-99 The assessee has shown its grievance by raising 5 grounds of appeal which are as under: 1. In confirming the computation of income from house property made by the AO in respect of the Madhukunj property situated at 7, Narayan Dhabolkar Road, Mumbai at Rs. 1,587,576 by- Holding that Sec. 7 of the Bombay Rents, Hotel and Lodging House Rates Control Act, 1947 is not appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly, the rent from the aforesaid property cannot exceed Rs. 59,000/- and Rs. 48,457/- respectively. The assessee also filed the details of the property which are reproduced as under: Area (Sq.ft) Tenant Date on which premises first let out Flat No.A 5,300 Bakul Investments Pvt. Ltd. 1.09.1972 Flat No. B 4,120 Bakul Investments Pvt. Ltd., 1.09.1972 Flat No. C 1,200 Stock Traders Pvt. Ltd. 01.03.1995 B.S. Marg Office Gr. Floor 2,127.14 IIT Ltd. Will be provided shortly Mez. Floor 2,101.15 IIT Ltd. Will be provided shortly Considering the reply filed by the assessee, the AO observed that the benefit of Sec. 7 of BRCA cannot be given to the assessee as the same has been let out since 1.3.1995. The AO concluded that the ALV of Madhukunj property has to be determined on the basis of rent receivables and accordingly made enquiries through the Inspectors of his office and found that a flat in Worli was given on rent by M/s. Ramkrishna Harivallabhdas M/s. Essar Invest. Pvt. Ltd. to M/s. Centurion bank. The flat was located in Samudra Mahal building in Worli admeasuring 1500 Sq. ft. The month ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i Sushil Kishore Premchand and M/s. Find Dye Stuff and Chemical Ltd and it is not a case of letting out of property by the assessee i.e. M/s. Premchand Roychand Sons and concluded that Sec. 7 of the BRCA is not applicable to Flat No. C of the Madhu Kunj property and the AO has rightly computed the ALV of the said property on the basis of the rent which the property might be expected to fetch in the market. The objection of the assessee that the AO has also taken notional rent on the basis of a hypothetical figure of interest free deposit was also rejected. 5. Before us, the Ld. Counsel for the assessee explained the history of the Madhu Kunj property. The Counsel submitted that the Madhu Kunj property was taken on lease in 1940 by the trustees of Tarabai Premchand Trust . In the year 1963, the Trustees Tarabai Premchand conveyed the said Trust property in favour of Sushil Kishore Premchand. It is only because of this the agreement with FDC is in the name of Sushil Kishore Premchand. In June, 1979, Mr Sushil Kishore Premchand brought the Madhukunj property as a share of capital for admission as partner in the firm, Premchand Roychand Sons alongwith all the tenants in the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of telephone, telex and fax charges. 9. We find that the AO has disallowed 20% of the expenditure claimed under the head telephone, telex and fax charges out of total debit of Rs. 14,06,991/-. The Ld. CIT(A) restricted the disallowance under this head 10% and confirmed the addition of Rs. 14,06,991/-. 10. Before us, the Ld. Counsel submitted a chart showing the amounts debited, recoveries made from tenants and the net amount claimed as deduction. The Ld. DR relied upon the findings of the Ld. CIT(A). 11. We have heard the rival submissions and perused the orders of the lower authorities and the chart submitted by the Ld. Counsel. We find that out of total debit of Rs. 14,06,991/-, the assessee has recovered a sum of Rs. 9,58,197/- from its tenants thereby resulting into a net amount of Rs. 4,48,794/-. Even if the findings of the AO are accepted that personal element cannot be denied disallowance of 10% on the gross amount is not justifiable. It appears that this bifurcation of expenses was not before the lower authorities. We therefore deem it fit to restore this matter back to the file of AO. The AO is directed to verify the details of this chart and restrict the disallo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the part of the assessee to maintain the decorations of the business centre, it has to furnish walls with paintings which are necessary for business and the same should be allowed as such. The Ld. DR submitted that paintings are of capital in nature and because of the same reason paintings are taxable under the Wealth Tax Act. 18. We have heard the rival submissions. We do not agree with the submissions of Ld. DR. Considering the nature of the business of the assessee, we are of the view that the assessee has to maintain the business centre by giving it a decent look therefore display of painting on its wall is to be treated as business expenditure. Having allowed the sum of Rs. 1,10,000/- as business expenditure, the assessee will have to forego the depreciation on this amount which has been allowed by the AO. Ground No. 4 raised by the assessee is accordingly allowed. 19. Ground No. 5 relates to disallowance of deduction of Rs. 18,515/- being 10% of the motor car expenses. 20. While deciding ground No. 2 of the appeal hereinabove, we have restored the matter for verification before the AO. The same view is taken for this ground also because from the chart submitted by the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee, the AO found that expenses aggregating to Rs. 72,744/- were for casual work. Without assigning any reason, the AO disallowed the same. 24. Before the Ld. CIT(A), the assessee explained that the payment for casual work was made in connection with errands and the expenditure was incurred on casual labour and is wholly and exclusively incurred for the purposes of the business. After considering the explanation of the assessee, the Ld. CIT(A) held that the AO has not made out any case and accordingly deleted the addition. 25. The Ld. DR relied on the findings of AO. Before us, the Ld. Counsel for the assessee pointed out that the AO has not assigned any reason for not accepting the claim of the assessee except, that, the assessee has separately claimed expenses under the head office repairs and maintenance, office equipments etc. We agree with the findings of Ld. CIT(A) that the AO has not made out any case of making such addition. Accordingly ground No. 1 raised by the revenue is dismissed. 26. Ground No. 2 relates to disallowance of Rs.1,56,995/- being expenditure on computer software. 27. During the course of assessment proceedings, the AO observed that the paymen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing of AO. 34. The Ld. Counsel for the assessee submitted that the expenses are of routine nature and cannot be terms as capital in nature. 35. We have considered the rival submissions. We find that all the expenses so incurred are periodic costs which are necessary to maintain a business centre. The nature of business of the assessee has also to be kept in mind and in this line of business , the center needs new and better look every year in the form of wall paintings , new furniture and carpets . Therefore, we do not find any reason to interfere with the findings of Ld. CIT(A) which are hereby confirmed. Ground No. 3 is accordingly dismissed. 36. In Ground No. 3(b) Revenue has shown its grievance in respect of payment of Rs. 5,14,000/- made to Conwood Contractor and Architects and Rs. 96,345/- incurred for fixing new woolen carpet in office premises being allowed as Revenue expenditure by the Ld. CIT(A). These expenses are covered by the grievances raised by ground No. 3 herein above. As we have held that considering the nature of the business of the assessee, these expenses are nothing but period costs and are recurring in nature and allowed them as Revenue expenditure. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on computer software. This ground is identical with the issue raised in ground No. 2 in ITA No. 3463/M/02 for assessment year 1998-99 at paras 27 to 30. While considering this issue in ITA No. 3463/M/02, we are of the view that these softwares do not give any enduring benefit therefore, this ground of the Revenue is dismissed. 43. Ground No. 3, relates to disallowance of Rs. 11,530/- only as capital expenditure out of the total disallowance of Rs5,97,260/- made by the AO. This ground is identical with the issue raised in ground No. 2 in ITA No. 3463/M/02 for assessment year 1998-99 at paras 31 to 35. While considering this issue in ITA No. 3463/M/02, we are of the view that all the expenses so incurred are periodic costs which are necessary to maintain a business centre. Ground No. 3 is accordingly dismissed. ITA No. 2107/Mum/2006 A.Y. 2002-03 Assessee s appeal` 44. The first ground relates to determination of income from house property at Rs. 14,23,757/-.This ground is identical with the issue raised in ground No. 1 ITA No. 3408/M/02 for assessment year 1998-99 at paras 3 to 7. While deciding this ground in ITA No. 3408, we direct the AO to delete the addition of money ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
