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2016 (12) TMI 347 - ITAT MUMBAI

2016 (12) TMI 347 - ITAT MUMBAI - TMI - Admission of Additional Evidence - Held that:- It is a matter of record that at para 3.1 of the impugned order, the learned CIT(A) has noted that in the course of appellate proceedings the assessee submitted additional evidence in the form of copies of ledger accounts and vouchers, which were forwarded to the Assessing Officer (AO) under rule 46A of the I.T. Rules, 1962 for making necessary enquiries/verification and report thereon. It is also recorded tha .....

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axes, printing and stationery, property tax, rent, professional and legal fees, sundry expenses for fire extinguisher, office telephone and postage, sales promotion, etc. would appear to us to be expended for the assessee’s business purposes, since admittedly nothing adverse has been reported in respect of any such claim by the AO in remand proceedings. As submitted by the assessee, the element of personal expenditure is admittedly embedded in the telephone expenses for residence (viz. ₹ 3 .....

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0/- out of residential telephone/postage expenses) as against ₹ 50,000/- disallowed by the AO. The AO is accordingly directed. - Decided in favour of assessee partly - Income from Letting out of Bakery shop - Held that:- Respectfully following the decision of the Hon'ble Bombay High Court in the case of Dudhsagar [2014 (8) TMI 691 - BOMBAY HIGH COURT] which is factually similar to the case on hand and is squarely applicable, we hold that the income earned by the assessee from letting o .....

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per the recitals in the agreement and the confirmation of the builder, possession of the said properties by the assessee and the builder were made over/taken over simultaneously by both parties only on 30.12.2006 and not before that. Therefore, in this factual matrix of the case, in our view, the capital gains arising on relinquishment of tenancy rights by the assessee is not exigible to tax either substantially or protectively in the period under consideration, i.e. A.Y. 2006-07, but in the pe .....

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tax in the year under consideration, i.e. A.Y. 2006-07 as held by the authorities below and direct the AO to delete the addition made to the assessee’s income on this account. - Charging of Interest under sections 234B and 234C - Held that:- The charging of interest is consequent and mandatory and the AO has no discretion in the matter - ITA No. 1838/Mum/2011 - Dated:- 1-12-2016 - Shri Jason P. Boaz, Accountant Member And Shri Sandeep Gosain , Judicial Member Appellant by: Shri Nitesh Joshi .....

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return was processed under section 143(1) of the Income Tax Act, 1961 (in short 'the Act') and the case was subsequently taken up for scrutiny. The assessment was completed under section 143(3) of the Act vide order dated 19.12.2008; wherein the income of the assessee was determined at ₹ 95,76,400/-. The assessee s appeal before the CIT(A)-30, Mumbai was partially allowed vide the impugned order dated 20.12.2010. 3. Aggrieved by the order of the CIT(A)-30, Mumbai dated 20.12.2010 f .....

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kery (along with machinery and all amenities required for manufacturing bakery products) b. ₹ 240000 from leave and license of the Appellant's Shop (along with furniture, fixture & Kitchen Equipments required for running the shop for selling bakery products) situated at ground floor of building known as Prabhu Smaran under the head "Income from House Property" instead of income under the head "Income from Business" / "Income from Other Sources". 4. The .....

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r business carried on at Bandra and Jogeshwari, income from which is taxed under the head "Income from Business"), e. Depreciation of ₹ 1,93,515 on premises, f. Depreciation of ₹ 75,124 on machinery, equipment and furniture given along with factory and shop, and g. Depreciation of ₹ 70,553 on car (registered at Vasai address but used for other business carried on at Bandra and Jogeshwari, income from which is taxed under the head "Income from Business") 5. T .....

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tion 234C of the Act of ₹ 820 7. The CIT (A) erred in holding that the ground relating to initiation of the penalty proceedings u/s 271(1) (c) of the Act is premature. 4. Ground No. 1 - Admission of Additional Evidence 4.1 In this ground, the assessee contends that the learned CIT(A) erred in not admitting or considering the additional evidence put forth. We have heard the rival contentions put forth and perused and carefully considered the material on record. In our view, the averments ma .....

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he remand report dated 24.06.2010 in the matter. In these circumstances, we find no merit in the assessee s contentions that the additional evidence put forth was not admitted or considered by the learned CIT(A) and accordingly dismiss ground No. 1. 5. Ground No. 2 - Disallowance out of Administrative Expenditure - ₹ 50,000/- 5.1 In this ground, the assessee assails the learned CIT(A) in confirming the disallowance of ₹ 50,000/- out of administrative expenses of ₹ 6,84,372/-. A .....

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being assigned for the same and therefore the same should be deleted or substantially reduced. 5.2 Per contra, the learned D.R. for Revenue placed strong reliance on the orders of the authorities below. 5.3.1 We have heard the rival contentions and perused and carefully considered the material on record. It is not disputed that the AO made an adhoc disallowance of ₹ 50,000/- observing that the assessee could not produce all the bills and vouchers to support these expenses and also since th .....

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dorsed by the learned CIT(A). 5.3.2 Most of the expenses under the head administrative expenses incurred for advertisement, audit fees, computer expenses, inspection fees, licence fees, municipal taxes, printing and stationery, property tax, rent, professional and legal fees, sundry expenses for fire extinguisher, office telephone and postage, sales promotion, etc. would appear to us to be expended for the assessee s business purposes, since admittedly nothing adverse has been reported in respec .....

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ed for personal or /and non business purposes. We, therefore, sustain the disallowance of administrative expenses to ₹ 20,500/- (i.e. ₹ 14,000/- on account of donation plus ₹ 6,500/- out of residential telephone/postage expenses) as against ₹ 50,000/- disallowed by the AO. The AO is accordingly directed. Consequently, ground No. 2 of assessee s appeal is partly allowed. 6. Ground No. 4 - Income from Letting out of Bakery shop 6.1.1 In this ground, the assessee assails the .....

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for sale of bakery products) is to be assessed under the head income from house property instead of as income from other sources /income from business as declared by the assessee. 6.1.2 According to the learned A.R. of the assessee the leave and licence agreements for the aforesaid two properties were dated 04.07.2003. Earlier there was no dispute with Revenue in regard to the assessee s declaration of this income as income from other sources or income from business. It is only in the period un .....

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1) of the Act (details at pg 255 of paper book) and also for A.Y. 2008-09 the assessee s claim was not disputed by Revenue in order of assessment passed under section 143(3) of the Act vide order dated 08.12.2010 (details placed at pg. 287 to 315 of paper book). It was pleaded that there was no merit or consistency in the Revenue s stand and therefore the orders of the authorities below on this issue is not sustainable. 6.1.3 The learned A.R. further submitted that in coming to this finding that .....

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liance on the decision of the Hon'ble Bombay High Court in the case of Dudhsagar Investments (P) Ltd. (2014) 47 taxmann.com 354 (Bombay). It is submitted that in the cited case, which is factually similar to the case on hand, the question before the Hon'ble High Court was whether income received by the assessee towards letting out of a furnished office premises was to be assessed as business income or income from out sources as claimed by the assessee or as income from house property as .....

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Per contra, the learned D.R. placed strong reliance on the decision of the authorities below. 6.3.1 We have heard the rival contentions and perused and carefully considered the material on record; including the judicial pronouncements cited. The facts of the matter as emanate from the record are that the assessee entered into leave and licence agreements dated 04.07.2003 for letting out his bakery premises, alongwith all amenities for manufacture of bakery products @ ₹ 40,000/- p.m. and sh .....

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ected and the authorities below have held that the income earned from letting out or leave and licence the assessee s bakery and shop was assessable as income from house property; placing reliance on the decision of the Hon'ble Calcutta High Court in Shambhu Investments Pvt. Ltd. (supra). It is not disputed that, both for the earlier A.Y. 2005-06 vide order under section 143(3) of the Act dated 18.12.2007 (at pg. 137-138 of paper book); for A.Y. 2007-08 under section 143(1) of the Act of the .....

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e the Hon'ble High Court was whether income received by the assessee towards letting out of a furnished office premises was to be assessed as business income / income from other sources as declared by the assessee or as income from house property as assessed by Revenue. The Hon'ble Bombay High Court, after considering, inter alia, the decision of the Hon'ble Calcutta High Court in the case of Shambhu Investments P. Ltd. (supra), at paras 13 to 16 of its order held that income receive .....

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and was the owner of a building fitted with furniture and fixtures for being run as a Hotel. By the lease dated 30/08/1949, the appellant let out the building fully equipped and furnished to Voyantzis for a term of six years from 1946 for running a Hotel and for certain other ancillary purposes. The agreed monthly rent was ₹ 5,950/- for the building and ₹ 5,000/-for hire of furniture and fixtures. The question which fell for consideration before the Supreme Court was how the income .....

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922 as the income from the business. Regarding the question whether income can be assessed under Section 12 as an income from residuary sources or income from other sources, the observations of the Apex Court in paragraphs 13, 15 and 16 are relevant which are reproduced as under : 13. The next question is, does the present letting come within the terms of sub-section (4) of section 12? That provision requires two conditions, namely, that the furniture should be let and also buildings and the let .....

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uot;. The High Court held that the primary letting in the present case was of the building and, therefore, deprived the appellant of the benefit of section 12(4). We may state here that the Tribunal had thought that by requiring that the letting of one should be inseparable from the letting of the other, the section really meant that the primary letting was of the machinery and the letting of the building was only incidental to the letting of the machinery. It also held that in the present case .....

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hat where machinery, plant or furniture are inseparable from a building and both are let, etc. The language however is not that the two must be inseparably connected when let but that the letting of one is to be inseparable from the letting of the other. The next objection is that there can be no case in which one cannot be separated from the other. In every case that we can conceive of, it may be possible to dismantle the machinery or plant or fixtures from where it was implanted or fixed and s .....

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aming the following questions: Was it the intention in making the lease and it matters not whether there is one lease or two, that is, separate leases in respect of the furniture and the building that the two should be enjoyed together? Was it the intention to make the letting of the two practically one letting? Would one have been let alone and a lease of it accepted without the other? If the answers to the first two questions are in the affirmative, and the last in the negative then, in our vi .....

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e had not also been let along with it. 14. It is abundantly clear from the above observations that the appellant's income is required to be assessed under Section 56 as contended by the assessee. As far as the answers to three questions, which are mentioned in paragraph 16 of the judgment in Sultan Brothers (P) Ltd. (supra), quoted above, are concerned, there is no dispute amongst the learned Counsel appearing for the respective parties that answers to first two questions were in affirmative .....

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ses was intended to be inseparable from the letting of the furniture. The ratio of the Constitution Bench is, therefore, perfectly applicable to the present case. 15. In Smt. P. Andal Ammal (supra), the Division Bench of Madras High Court, in similar facts, held that the intention of the parties was that though there were two separate leases in respect of furniture and the building, both the species of the properties were enjoyed by payment of one lump sum which also gave indication that letting .....

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and 6466 of 2001 i.e. Shabhu Investment (P) Ltd Vs. CIT reported in (2003) 263 ITR 143 (SC). The Apex Court refused to interfere in the conclusion arrived at by the Calcutta High Court on the question framed under Section 56(2) of the Act and, therefore, Civil Appeals came to be dismissed. The question fell for consideration before the Division Bench of Calcutta High Court was whether the income derived from the premises in question is rental income or business income ? The Division Bench, in Ca .....

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ffice premises and furniture is required to be assessed under the head income from other sources. The appeals are, accordingly, allowed. Consequently, the impugned order is set aside to that extent. The Assessing Officer is directed to assess the assessee's income accordingly in the light of the above observations. 6.3.3 Respectfully following the decision of the Hon'ble Bombay High Court in the case of Dudhsagar, which is factually similar to the case on hand and is squarely applicable, .....

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d. Therefore, ground No. 3 of the assessee s appeal is allowed. 7. Ground No. 4 - Claim for Expenditures 7.1 In this ground, the assessee has raised an alternate plea; that if the income of the assessee from letting out on leave and licence its bakery (alongwith equipments for manufacture of bakery products) at Vasai was to be assessed as income from house property , as against the assessee s claim that it was to be assessed as income from other sources , certain expenditures listed therein at ( .....

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pugned order of the learned CIT(A) in upholding the taxing of capital gains on relinquishment of tenancy rights in part of ground floor and entire first floor in Villa Maria , Plot No. 54, CTS No. B/337, Rebello Road, Bandra (W) (referred to as Bandra Property ) in A.Y. 2005-06 on substantive basis and on protective basis in A.Y. 2006-07, the year under consideration instead of in A.Y. 2007-08 as claimed by the assessee. 8.2.1 We have heard the rival contentions and perused and carefully conside .....

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e assessee was to be paid ₹ 65 lakhs for relinquishing the rights to the said Bandra Property as under: - (i) ₹ 20 lakhs on 03.11.2003; in period relevant to A.Y. 2005-06 (as per clause 5(a). (ii) ₹ 45 lakhs during F.Y. 2005-06; in period relevant to A.Y. 2006-07 (as per clause 5(b). (iii) The possession of the Bandra Property was to be made over to the builder by the assessee tenant on 30.12.2006 (relevant to A.Y. 2007-08 simultaneously to the transfer of ownership of shop NO. .....

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006-07, the AO has discussed his views on the matter at paras 12 to 26 thereof. He was of the view that the surrender of tenancy rights in question has taken place as per provisions of section 2(47)(v) of the Act r.w.s. 53A of Transfer of Property Act and that the full consideration of ₹ 65 lakhs plus shop accrued to the assessee as on 27.05.2004 and is exigible to tax in A.Y. 2005-06. He held that although the LTCG on surrender of tenancy rights pertains to A.Y. 2005-06, to protect the in .....

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onsideration; (ii) It should be in writing; (iii) It should be signed by the transferor; (iv) It should pertain to the transfer of immovable property; (v) The transferee should have taken possession of the property; and (vi) The transferee should be ready to perform his part of the contract. Admittedly as per the recitals in the agreement and the confirmation of the builder, possession of the said properties by the assessee and the builder were made over/taken over simultaneously by both parties .....

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