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2014 (4) TMI 1133 - AT - Income TaxDepreciation on DG Sets transformers photocopier system and security camera - Held that - The Clause 3(c) of the Agreement mandates the assessee to furnish various facilities and clause 3(f) specifics the consideration for such facilities. In this case it is necessary to examine the relevant provisions of the Agreement between the owner of the property and the user (tenant). The assessee was supposed to provide services like lift transformer DG sets which require employment of personnel to discharge such responsibility. The various arrangements that the assessee has to make on a day to day basis to ensure availability of services and amenities to the user (tenant) in accordance with the Agreement reflects a clear manifestation of organized activity and therefore the income appears to have been correctly computed. In our view denying depreciation on lift is not justified while allowing depreciation for other assets used by the assessee for such activities. The learned CIT(A) has not given any convincing reasons but the fact remains that like any other items mentioned above lift has also been used and it requires day-to-day maintenance and attendance. - Decided against revenue Disallowance of professional charges - non deduction of tds - Held that - Services are definitely in the nature of business and it cannot be considered to be income from other sources . The sum referred to as administrative expenses is not the expenses debited to professional fee account. The assessee has credited the professional charges account with the above sum as some of these expenses were earlier debited to professional charges. The AO has completely misconstrued the credit entry as debit entry. The observations of the AO being based on non-existing facts are liable to be quashed. The AO s observation that tax has not been deducted at source is not based on any evidence. Even assuming that tax has not been deducted at source it cannot be a ground for disallowance as section 40(a)(ia) was introduced only with effect from assessment year 2005-06. The assessee cannot receive without incurring expenses. The assessee has engaged the services of professionals who have been paid for the services rendered by them.- Decided against revenue Interest towards the project development property acquisition and also advances made to suppliers disallowed - Held that - Where interest on borrowed funds are utilized towards other current assets and there is no finding that the loan has been taken for the specific construction activity interest has to be allowed as a period cost and cannot he added to the cost of work in progress.- Decided against revenue Claim of the assessee for deduction of interest allowed Assessment u/s 153C - Held that - With regard to the argument of the ld. counsel for the assessee that the documents seized should prima facie show undisclosed income to invoke the provisions of section 153C of the Act we are of the view that the same cannot be accepted. In this regard the decision of the Hon ble Delhi High court in the case of SSP Aviation ltd. v. DCIT (2012 (4) TMI 335 - DELHI HIGH COURT ) clearly lays down that at the time of arriving at a satisfaction for proceeding against the other person u/s. 153C of the Act it is not necessary that satisfaction should be recorded that such article or documents found in the course of search showed undisclosed income. The next argument of the assessee that proceedings u/s. 153A r.w.s. 153C should not be initiated for all the six assessment years and it should be restricted only to the assessment years relating to the incriminating documents found at the time of search unable to appreciated for the simple reason that once the condition for invoking the provisions of section 153C are satisfied then the AO has to proceed in accordance with the provisions of section 153A of the Act which mandates the AO to pass an order of assessment for six assessment years immediately preceding the assessment year relevant to previous year in which search is conducted or requisition is made. The request of the ld. counsel for the assessee is that in the context of section 153C of the Act provisions of section 153A should receive the restricted meaning. In our view such a course is not possible. If after analysis of seized document the AO finds no income chargeable to tax for the six assessment years referred to in section 153A of the Act then he has to pass NIL assessment. Hence in our view the assessee cannot have any grievance whatsoever. The other arguments which challenge to the validity of initiation of proceedings u/s.153C of the Act in relation to assessment years 2004-05 and 2005-06 are as follows. These arguments proceed on the basis of the decision of the Hon ble Special Bench in All Cargo Global Logistics Ltd vs. CIT 2012 (7) TMI 222 - ITAT MUMBAI(SB) wherein it was held that in respect of assessments that are completed prior to the date of search than the assessment to be made u/s.153A/153C of the Act in respect of the 6 Assessment years covered u/s.153A/153C of the Act should be restricted to only assessing income that are not disclosed earlier and which are detected consequent to the material found in the course of search. In other words in respect of assessment that are abated the AO retains the original jurisdiction as far as jurisdiction conferred on him under section 153A/153C of the Act of which the assessment shall be made for each of the six assessment years separately. For the purpose of Sec.153A/153C of the Act an intimation u/s.143(1) is also an order of assessment. We are therefore unable to accept the argument put forth by the learned counsel for the Assessee with reference to AY 05-06.
Issues Involved:
1. Validity of assumption of jurisdiction by the AO under section 153C of the Act. 2. Allowing depreciation on DG Sets, transformers, photocopier system, and security camera. 3. Allowing professional charges as expenses. 4. Allowing interest expenses. 5. Allowing capitalized interest as expenses. Detailed Analysis: 1. Validity of Assumption of Jurisdiction by the AO under Section 153C of the Act: The assessee challenged the validity of the assumption of jurisdiction by the AO under section 153C, arguing that documents found during a search should not automatically lead to proceedings under section 153C unless they prima facie show undisclosed income. The Tribunal held that the provisions of section 153C apply even if the premises searched are shared by the person searched and the assessee. The Tribunal rejected the argument that documents should show undisclosed income to invoke section 153C, citing the Delhi High Court's decision in SSP Aviation Ltd. v. DCIT, which clarified that satisfaction for proceeding under section 153C does not require proof of undisclosed income at that stage. 2. Allowing Depreciation on DG Sets, Transformers, Photocopier System, and Security Camera: The assessee claimed depreciation on assets used for providing services to tenants, which the AO disallowed, arguing that these assets were part of the building and thus income should be assessed under 'income from house property'. The CIT(A) allowed the claim, following the Tribunal's prior decision in the assessee's favor. The Tribunal upheld this decision, noting that the assets were used for business purposes and depreciation was rightly allowed. 3. Allowing Professional Charges as Expenses: The AO disallowed professional charges claimed by the assessee, considering them as investments. The CIT(A) allowed 25% of the gross fee as expenses, following the Tribunal's earlier decision in the assessee's case. The Tribunal upheld this decision, noting that the assessee incurred these expenses for construction management services, and thus, they were allowable. 4. Allowing Interest Expenses: The AO disallowed interest expenses, arguing that the loans were not used for constructing or acquiring property. The CIT(A) allowed the interest deduction, following the Tribunal's earlier decision. The Tribunal upheld this decision, noting that the assessee had commenced business activities, and the interest expenses were related to business operations. 5. Allowing Capitalized Interest as Expenses: The AO disallowed capitalized interest, which was not routed through the profit and loss account. The CIT(A) allowed the deduction, following the Tribunal's earlier decision. The Tribunal upheld this decision, noting that the interest was related to the let-out property and was paid during the relevant year. Conclusion: The Tribunal dismissed the revenue's appeals and partly allowed the assessee's cross-objections for AY 2004-05, quashing the assessment under section 153C as no undisclosed income was found. For AYs 2005-06 and 2006-07, the cross-objections were dismissed. The Tribunal emphasized the necessity of following established legal principles and prior decisions in similar cases.
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