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Abhishek Engineers (P) Ltd. Versus Income-Tax Officer, Ward 1 (1) , Ahmedabad

2015 (6) TMI 710 - ITAT AHMEDABAD

Disallowance of depreciation on the motor car - Held that:- For all practical purposes the car was owned by the company. The expenses have been debited in the accounts of the company. A similar issue had come up in the case of CIT vs. Basti Sugar Mills Co. Ltd. (2002 (5) TMI 27 - DELHI High Court) wherein upheld the allowance of depreciation on the car which was not registered in the name of company but used for the business purposes of the company. Also see CIT vs. Navdurga Transport Co. (1997 .....

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by CIT(A) - Held that:- Assessee has never accounted this asset as a stock in trade in the accounts, therefore, it can never claim as business loss on sale of the office premises which is otherwise a capital asset. We do not find any error in the finding of ld. CIT(A). - Decided against assessee.

Failure to deposit the PF contribution collected from the employees within the due date provided in the P.F. Act - Held that:- This issue is covered against the assessee by the decision of H .....

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om house property - Held that:- The main activity of the assessee was not earning rental income rather it was an activity of trading in the flats. Rental was an incidental income. Similar are the facts of other cases. The main activity of the assessee was not the earning of rental income. The Income-tax Act does not prohibit carrying out earning of rental income as a business income in an organized manner if that be so the income will be assessed as a business income and not under the head 'hous .....

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ssee before 30th September, 2006. Out of 17 flats, 9 flats were actually let out, exhibiting the fact that the asset was ready for use in the business. It is construed that assets were used passively for the purpose of business and, therefore, depreciation is admissible to the assessee. We direct the AO to grant depreciation on the value of these flats. As far as the properties purchased at Eternia Complex is concerned, these purchases were made on 31st March, 2007 i.e. last day of accounting ye .....

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Shah, AR For the Respondent : Shri Roopchand, Sr DR ORDER Per Shri Rajpal Yadav, Judicial Member The present two appeals are directed at the instance of assessee against the orders of ld. CIT(A) dated 24.2.2011 & 2.5.2011 for AYs 2006-07 & 2007-08 respectively. Common issues are involved in both the appeals, therefore, we heard together and deem it appropriate to dispose them by this common order. 2. The first common ground in both the appeals relates to disallowance of depreciation on t .....

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on on the car which has been disallowed by the AO in both the years stating that the company is not the registered owner of the car. 4. Appeal to the CIT(A) did not bring any relief to the assessee. 5. We have duly considered the rival contentions and gone through the record carefully. On page nos.2 to 12-A of the Paper Book, assessee has placed on record schedule of asset, declaration from Shri Suresh Jadavji Shah deposing therein that he has no right, title of interest in his personal capacity .....

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Court in the case of CIT vs. Basti Sugar Mills Co. Ltd. 257 ITR 88 (Del) wherein the Hon'ble High Court has upheld the allowance of depreciation on the car which was not registered in the name of company but used for the business purposes of the company. Hon'ble Allahabad High Court in the case of CIT vs. Navdurga Transport Co. 235 ITR 158 (All) has also allowed depreciation on vehicles though which were not registered in the name of the firm but become asset of the firm and used for the .....

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lowing the motor car expenses of ₹ 473/-. These expenses have been disallowed for the reasons that the car was not owned by the Company. In view of our findings on ground no.1, these are allowed. Ground No.2 of assessee's appeal is allowed. 7. In ground No.3 assessee has pleaded that ld. CIT(A) has erred in treating the business loss of ₹ 4,50,500/- suffered on sale of basement office as a short-term capital loss and allowed the same to be carried forward. 8. Brief facts of the c .....

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,50,500/-. The assessee claimed this loss in the return which has been disallowed by observing that it is a short-term capital loss. 9. Appeal to the CIT(A) did not bring any relief to the assessee. 10. Before us the ld. counsel for the assessee contended that assessee is in the business of real estate. It has purchased properties and sold them. It is also earning rental income as business income. Rentals earned from these properties were also offered as business income. The assessee has not cla .....

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#39;s submission. Appellant sold basement office building during the year on which loss was claimed as revenue. The said office premise was shown as capital work in progress in fixed assets in the balance sheet. It is not in dispute that the said asset was not shown as stock in trade in the accounts to claim that it was business asset and not capital asset. Since asset was not stock in trade but capital work in progress the loss on sale of the same is not business loss but capital loss assessabl .....

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ed as business loss only when the property in question was shown as stock in trade in the books of the appellant. Since the property was not shown as stock in trade but capital work in progress, the loss on sale is not business loss but capital loss. The copy of account of this property as per accounts submitted by the appellant also reflected this loss as capital loss of ₹ 450501/-. In view of this it cannot be said that the loss is business loss for tax purposes. Just because depreciatio .....

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ing officer is confirmed.'' From perusal of the above finding it reveals that assessee has never accounted this asset as a stock in trade in the accounts, therefore, it can never claim as business loss on sale of the office premises which is otherwise a capital asset. We do not find any error in the finding of ld. CIT(A). Accordingly this ground is rejected. 13. The appeal of the assessee for AY 2006-07 is partly allowed. 14. Now we take the remaining grounds of ITA No.1818/Ahd/2011 for .....

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Act. The ld. counsel for the assessee contended that this issue is covered against the assessee by the decision of Hon'ble Jurisdictional High Court in the case of G.S.R.T. Corpn. reported in 366 ITR 170. Hon'ble Gujarat High Court has held that if assessee fails to deposit employees' contribution within the due date provided under the P.F. Act then assessee will not be entitled for deduction. Accordingly, the ld. first appellate authority has rightly confirmed the disallowance. This .....

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The CIT(A) further erred in directing the AO to take remedial action wherever admissible in law for earlier years too. 17. Brief facts of the case are that on scrutiny of the accounts it revealed to the AO that assessee had made several additions in the assets under the head ''building''. The assessee has been earning rental income as ''business income'' from leasing of the properties owned by it or acquired by it on lease. It emerges out that assessee has made a .....

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claim of assessee and made an addition of ₹ 13,11,225/-. 18. On appeal the ld. first appellate authority has confirmed the disallowance. The ld. CIT(A) on the strength of following decisions - 1. Mangla Homes (P) Ltd. vs. Income-tax Officer (2009) 182 Taxman 55 (Bom). 2. East India Housing and Land Development Trust Ltd. vs. Commissioner of Income-tax (1961) 42 ITR 49 (SC) 3. Keyaram Hotels (P) Ltd. vs. Asstt. Commissioner of Income-tax (2008) 173 Taxman 262 (Mad) 4. Shambhu Investment (p .....

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d. counsel for the assessee has placed on record the details of the flats purchased during the year. At Ajarmar Flats, assessee had purchased 17 flats on 27.9.2006. Out of them 9 flats had been leased out. The assessee has offered rental income as 'business income'. The AO has also recognized this fact in the assessment order but he observed that lease rents were not received by the assessee from flat Nos. FF01, FF01A, FF03, FF10, GF01, GF01A, GF03, GF10. The contention of the assessee w .....

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2007. None of the unit was leased out. 20. The stand of the ld. DR on the other hand was, that the income from these properties are to be assessed under the head ''house property income'' and no depreciation can be granted to the assessee. It is stated that specific deduction is available under section 24 of the I.T. Act. 21. The ld. counsel for the assessee further contended that CIT(A) has erred in observing that the rental income can never be assessed under the head 'hous .....

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earning of rental income in an organized manner of running the business is being carried out then that income has to be assessed as business income. Hon'ble Allahabad High Court has upheld the view of the Tribunal in this respect. 22. On due consideration of the facts and circumstances we find that as far as the decisions referred to by the ld. CIT(A) are concerned, they are not applicable on the facts of present case. In those decisions earning of rental income was not carried out as a busi .....

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income was to be upheld as a house property income. There is a distinction between the facts. The main activity of the assessee was not earning rental income rather it was an activity of trading in the flats. Rental was an incidental income. Similar are the facts of other cases. The main activity of the assessee was not the earning of rental income. The Income-tax Act does not prohibit carrying out earning of rental income as a business income in an organized manner if that be so the income will .....

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