TMI Blog2016 (8) TMI 46X X X X Extracts X X X X X X X X Extracts X X X X ..... n proportioning this expenditure. As far as legal charges are concerned, before ld. CIT(A) the assessee had pointed out that the amount was paid to Associates Law Advisors, but it is not pointed out for which purpose the amount was paid. Therefore, both the lower revenue authorities rightly allocated this expenditure between rental income and service income. As far as travel & conveyance expenses are concerned, we find that before ld. CIT(A) the assessee had pointed out that this amount was expense on day to day travelling of the officials of Knight Frank for maintenance and operation of common area. Therefore, this amount was directly attributable to the service income derived by assessee and hence could not be allocated between rental income and service income and had to be allowed in full against the service income. As far as rates and taxes are concerned, merely because the amount has been paid to Registrar of Companies for statutory compliance, will not entitle the assessee to claim the entire expenditure against the service receipts, because against rental income statutory deduction has been allowed, which includes expenses incurred for all such statutory compliances ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2006-07. All these appeals were heard together and are being disposed of by this composite order for the sake of convenience. A.Y. 2004-05 (ITA 282/Del/2014): 2. Grounds taken by the assessee in its appeal are as under: 1. That the order of the Commissioner of Income-tax (Appeals) - V, New Delhi, dated 22.10.2013, is wrong on facts and bad in law; 2. That the Commissioner (Appeals) erred in confirming the disallowance of expenses of ₹ 6,18,802/- out of the total expenses of ₹ 7,83,363/- for (i) Auditors Remuneration: ₹ 3,32,190/-, (ii) Legal and Professional Expenses : ₹ 2,97,424/-, (iii) Travel and Conveyance: ₹ 87,744/-, (iv) Rate and Taxes: ₹ 3,000/- and (iv) Bank Charges : ₹ 63,005/- on proportionate basis, holding that the same were incurred for the purposes of earning income by way of rent. He failed to appreciate that the said expenses were incurred for the purposes of the business of the Appellant; 3. That the Commissioner (Appeals) erred in confirming the disallowance of depreciation of ₹ 3,84,684/-. He erred in holding that there was no justification for capitalizing the proportionate lease rent for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 Legal and professional 1267174 3. Travel and conveyance 87744 4. Rates and taxes 3000 5. Bank charges 63005 Total 1753113 4. The AO, accordingly, made addition of ₹ 13,84,837/-. 5. The AO further noticed that assessee had claimed depreciation on plant machinery on the ground that the same was used for the purpose of business. He noticed that besides claiming depreciation on lifts, windows cleaning system, HVAC, IBMS, uplift trolley and sound proofing system, the assessee had also made allocation of other preoperative expenses on proportionate basis. The AO, taking note of the fact that primary activity of the assessee was to derive rental income, though assessee was also rendering services, which was assessable as business income, considered the opening WDV pertaining to plant machinery used for maintenance and services at ₹ 3,14,33,917/-, after considering the depreciation already ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... both the parties and have perused the record of the case. There is no dispute that the income earned from rendering services to tenants has been assessed as business income and the primary source of assessee s activities was to earn rental income. It was assessed under the head Income from house property , against which assessee got statutory deduction and, therefore no expenditure relating to earning of rental income could be allowed any further. Therefore, in principle, we agree with the AO s action that common expenditure had to be allocated between the rental income and service income. 14. Now we will consider to the specific items of expenditure which have been allocated by AO and confirmed by ld. CIT(A). 15. As far as auditors remuneration is concerned, the said expenditure have to be incurred by assessee company to meet the statutory requirements. But since assessee was deriving income, both rental as well as service income, therefore, the entire auditors remuneration could not be allocated only towards service income, because auditors have audited the rental income also, which was reflected in the P L A/c. Therefore, AO as well as ld. CIT(A) were justified in propo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the proposition that any expenditure incurred to put an asset to use is to be capitalized: - Challapalli Sugars Ltd. Vs. CIT 98 ITR 167 (SC) - CIT Vs. Food Specialities Ltd. 136 ITR 203 (Del.) - Protien Products Ltd. 167 ITR 157 (Ker.) 24. After considering the submissions of both the parties, we are not inclined to accept the proposition advanced by the ld. counsel for the assessee for the simple reason that no depreciation is allowable in respect of cost of land in respect of which the lease rent was paid to DDA and, therefore, was to be capitalized. The lease rent paid could not be capitalized to the cost of land to plant machinery but to the cost of the land. We, accordingly, uphold the order of ld. CIT(A) on this count. 25. In the result assessee s appeal is partly allowed. A.Y. 2005-06 (ITA 283/Del/2014): 26. Grounds taken by the assessee in its appeal are as under: 1. That the order of the Commissioner of Income-tax (Appeals) - V, New Delhi, dated 31.10.2013, is wrong on facts and bad in law; 2. That the Commissioner (Appeals) erred in confirming the disallowance of expenses of ₹ 13,00,437/- out of the total expenses of ₹ 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... istance services. Therefore, these expenses were not identifiable only to service income and had to be allocated between rental income as well as service income. Since the assessee has not pointed out for which purpose the amount was paid, therefore, as held in AY 2004- 05, both the lower revenue authorities rightly allocated this expenditure between rental income and service income. 31. As far as travel conveyance expenses are concerned, in view of our discussion on this issue for AY 2004-05, we hold that the expenses in question were to be allowed in full against the service income. 32. As far as rates and taxes are concerned, facts being identical as in AY 2004-05, the same course will follow herein also. 33. In view of above discussion, the assessee s ground is partly allowed. 34. Ground no. 3: Undisputedly the facts are identical to AY 2004- 05. Therefore, in view of our discussion on this issue for AY 2004-05, the order of ld. CIT(A) on the issue in question is upheld. 35. In the result, assessee s appeal is partly allowed. A.Y. 2006-07 (ITA 283/Del/2014): 36. Grounds taken by the assessee in its appeal are as under: 1. That the order of the Commissio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plant machinery and equipment. The AO disallowed this claim, inter alia, observing that as per clause (iia) to section 32 of the Act, such deduction is allowable if the assessee is engaged in the business of manufacture or production of any article or thing. He pointed out that since no activities were carried on by the assessee company, the assessee was not entitled to claim such deduction and, therefore, he disallowed a sum of ₹ 2,72,122/-. Ld. CIT(A) confirmed the addition. 41. Ld. counsel pointed out that assessee had purchased D.G. Set which was used for the purpose of business of business of providing services to the tenants. He pointed out that assessee had to provide electricity to the tenants as per service agreement executed with them and for that purpose only DG set was installed, which was used for generating electricity to be provided to tenants when there was electricity or power failure. He pointed out that this was covered u/s 32(iia). 42. We have considered the submissions of both the parties and have perused the record of the case. 43. In order to properly appreciate the contention of ld. counsel for the assessee, we reproduce Section 32(iia) here ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
