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Malabar Hill Club Ltd. Versus DCIT, Circle-5 (2) , Mumbai and Vica-Versa

2016 (12) TMI 179 - ITAT MUMBAI

Disallowance of Building - Repairs, Renovation & Maintenance expenses - Held that:- A perusal of the detail of expenditure reveals that the same is primarily incurred for maintenance and/or repairing/upgrading of existing structures. Though the Assessing Officer has canvassed that it results in creation of a new asset, but the details do not reflect so. Even with regard to the enduring benefit brought out by the Assessing Officer, it is to be understood that the enduring benefit in the case of r .....

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fit, if any, is in the revenue field. Therefore, considering the fact-position, we find no reason to uphold the stand of the Revenue that the impugned expenditure is of capital in nature. Thus, the order of CIT(A) is set-aside and the Assessing Officer is directed to delete the addition. - Decided in favour of assessee. - Disallowance u/s 14A - assessee had made a suo moto disallowance - Held that:- It is a well settled proposition that before the Assessing Officer proceeds to determine the .....

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proach is clearly inconsistent with the mechanics of Sec. 14A(2) of the Act and, therefore, the said action is hereby set-aside and Assessing Officer is directed to retain the disallowance to the extent of ₹ 13,000/- suo moto disallowed by the assessee itself. - Also assessee raised a point of law to the effect that the formula specified in Rule 8D(2)(iii) of the Rules prescribing disallowance @ 0.5% of the average value of investments should only take into consideration those investme .....

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ourt in assessee’s own case reported in (1979 (1) TMI 5 - BOMBAY High Court). - ITA NO. 4507/MUM/2012, ITA NO. 4735/MUM/2012 - Dated:- 18-11-2016 - SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI AMARJIT SINGH, JUDICIAL MEMBER For The Assessee : Shri J.D. Mistry For The Revenue : Shri Pradeep Kr. Singh ORDER PER G.S. PANNU, AM : These are cross-appeals filed by the assessee and the Revenue against the order of CIT(A)-9, Mumbai dated 16.04.2012, pertaining to the Assessment Year 2008-09, which in tur .....

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to the extent of ₹ 53,42,521/- was capital in nature and in sustaining the disallowance. 1 : 2 The Appellant submits that considering the facts and circumstances of its case and the law prevailing on the subject the repairs, renovation and maintenance expenses incurred by it during the year are revenue in nature and allowable as a deduction while computing its total income and the stand taken by the Assessing Officer in this regard is erroneous and not in accordance with law and the Commis .....

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#8377; 53,42,521/- so made by him and to re-compute its total income accordingly. 2 : 0 Re.: Disallowance u/s. 14A: 2 : 1 The Commissioner of Income Tax (Appeals) has erred in upholding the action of the Assessing Officer of disallowing a sum of ₹ 36,540/- u/s. 14A of the Income-tax Act, 1961, over and above the sum of ₹ 13,000/- disallowed by the Appellant suo-moto by applying the provisions of Rule 8D of the Income-tax Rules, 1962. 2 : 2 The Appellant submits that considering the f .....

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ly. ITA NO. 4735/MUM/2012 (Revenue s appeal) 1. Whether on facts, circumstances and in the law, the Ld. CIT(A) erred in deleting the entire addition of ₹ 58,89,925/- made by the Assessing Officer on account of membership fees treated as revenue receipts and further ignoring that the Hon'ble jurisdictional High Court decided the said issue in favour of the revenue for earlier years in assessee s own case? 3. Insofar as the appeal of assessee is concerned, the first issue relates to the .....

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cordingly, he treated the said expenditure as capital in nature and allowed depreciation @ 10% and thus made a net addition of ₹ 53,42,521/- (i.e. ₹ 5936134 - ₹ 593613) to the returned income. The same has been affirmed by the CIT(A) against which assessee is in further appeal before us. 5. At the time of hearing, the learned representative for the assessee pointed out that the stand of lower authorities is untenable and, in fact, it is based on a wrong appreciation of facts. I .....

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AY 2008-09 Items of Repairs and Maintenance expenditure treated as capital expenditure 6. Elaborating further, the learned representative for assessee pointed out that in Assessment Year 2007-08, the claim of assessee for expenditure as being revenue in nature stands allowed and there is no dispute. Notwithstanding the aforesaid, the learned representative pointed out that the nature of expenditure would itself show that it does not result in creation of a new asset or a benefit of enduring natu .....

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hand, the ld. DR has reiterated the stand of Revenue, which is based on the reasoning taken by the Assessing Officer, which we have already adverted to in the earlier part of the order, and is not being repeated for the sake of brevity. 8. We have carefully considered the rival submissions. A perusal of the detail of expenditure, which has been extracted above, clearly reveals that the same is primarily incurred for maintenance and/or repairing/upgrading of existing structures. Though the Assess .....

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erefrom, it is also to be appreciated that the expenditure in question, viz. plastering work, providing grills, granite flooring in corridors, terrace waterproofing, etc. are expenses which facilitate the upkeep of the premises and the enduring benefit, if any, is in the revenue field. Therefore, considering the fact-position, we find no reason to uphold the stand of the Revenue that the impugned expenditure is of capital in nature. Thus, the order of CIT(A) is set-aside and the Assessing Office .....

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me. The Assessing Officer, however, computed the disallowance at ₹ 36,540/- by applying the provisions of Rule 8D(2)(iii) of the Income Tax Rules, 1962. The said action of the Assessing Officer has since been upheld by the CIT(A) also. 10. Before us, the pertinent plea of assessee is that the lower authorities have made the disallowance in terms of Rule 8D(2)(iii) of the Rules without recording the satisfaction required in terms of Sec. 14A(2) of the Act. In this context, it is a well sett .....

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wance has been worked out in terms of Rule 8D of the Rules. The aforesaid approach is clearly inconsistent with the mechanics of Sec. 14A(2) of the Act and, therefore, the said action is hereby set-aside and Assessing Officer is directed to retain the disallowance to the extent of ₹ 13,000/- suo moto disallowed by the assessee itself. 11. Before parting, we may also say that assessee raised a point of law to the effect that the formula specified in Rule 8D(2)(iii) of the Rules prescribing .....

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