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Shri Rajnish J. Karki Versus The Income Tax Officer, Ward-32 (5) , New Delhi

2017 (11) TMI 637 - ITAT DELHI

Disallowance of depreciation in respect of furniture and fixtures in the office and interest - addition of property was found residential and was not used for the purpose of office/profession - Assessee relied upon the assessment order for A.Y. 2010-2011 to show that A.O. did not disallow depreciation and interest - Held that:- As noted here that the A.O. did not consider the issue of interest on depreciation in his order under section 143(3). It is a brief order passed by him without reference .....

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l CIT(A) correctly disallowed the balance amount of interest of ₹ 33,84,098 as having been incurred for purpose other than that of business. The depreciation on same analogy for sum of ₹ 2,54,511/- was rightly disallowed. The Ld. CIT(A) also noted that assessee did not produce any evidence that Ranikhet premises is used for the purpose of business. Therefore, depreciation have been correctly disallowed - Decided against assessee. - Disallowance of service tax - assessee did not p .....

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e of Axis Bank before Ld. CIT(A) which also did not reveal anything in favour of the assessee. The assessee has filed copy of the bank certificate from Axis Bank which only confirm that assessee paid service tax payment. But it is not clarified as to on which professional income assessee has paid the service tax. In the absence of clarification of the payment of service tax for earning professional income, no interference is called for in the matter. - Decided against assessee. - ITA.No.3067/Del .....

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e appeal and stated that rest of the grounds 1, 2, 6, 7 and 8 are general and did not press. I, therefore, dismiss ground Nos. 1, 2, 6, 7 and 8 being not pressed. The effective grounds of appeals argued by Learned Counsel for the Assessee i.e., ground Nos. 3, 4 and 5 are reproduced as under : 3. That Ld. CIT(A) has erred seriously in law and facts in confirming the disallowance of depreciation of ₹ 52,015/- in respect of furniture and fixtures in the office at Ranikhet office and also erre .....

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rding to the Registry, the appeal is time barred by 13 days. The assessee moved an application for condonation of delay. It is explained that the impugned order was received on 04th March, 2017, but the impugned order was placed by peon on a different file. It was only after some search in the entire Office record, the impugned order was found and appeal was immediately filed. Considering the nominal delay in filing the appeal in the light of explanation of assessee, I am satisfied with the expl .....

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peal. The assessee is providing professional services personally. He has neither employed any professional staff nor hired professional services from outside. The salary paid to the staff is ₹ 1,05,400 only to Office boy/Chowkidar etc. The assessee is having following immovable properties shown in fixed assets schedule on which he has claimed depreciation. Sl.No. Particulars WDV as on 01.04.2011 Depreciation WDV as on 31.03.2012 1. Plot at Ranikhet 15,01,983/- NIL 15,01,983/- 2. Office at .....

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aid house property is residential having plinth area of 279 sq. metres out of total plot area of 625 sq. metres in joint name of the assessee and his wife purchased on 1st September, 2009. The assessee admitted that he is also residing in portion of this House No.L-1/13, Hauz Khas Enclave, New Delhi. As per nature of professional services provided by the assessee, the A.O. was of the view that assessee requires only one table, one chair and one almirah for running his office. However, he has sho .....

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e year. The A.O. therefore, noted that Property No.L-1/13, Hauz Khas Enclave is personal residential house property for assessee and accordingly, interest claimed on loan for house property amounting to ₹ 36,90,804 was disallowed. The A.O. also disallowed depreciation on office at Ranikhet of ₹ 52,015 and depreciation on office premises of ₹ 2,77,578 and added back the sum of ₹ 3,29,539 to the income of the assessee. 6. The A.O. also noted that assessee has claimed servic .....

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were reproduced in the impugned order in which the assessee briefly reiterated the same facts as pleaded before A.O. and it was also explained that assessee is providing consultancy services and advised on strategy of Medium and Large organisations, on their growth and performance improvements. The assessee charged consultancy fees and maintain office for the same purpose. The claim of the assessee has been accepted by the department in past year after year. The assessee purchased the property N .....

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d to clarify as to which furniture and fixture are being referred. The assessee has not been able to clarify this issue and has only insisted that depreciation has not been claimed on office premises but same has been claimed on furniture and fixtures. The Ld. CIT(A) on perusal of the schedule of fixed assets found that assessee has claimed depreciation on office at Ranikhet @ 5%, office premises @ 10%, air-conditioner @ 15%, motor car @ 15%, office equipment @ 15% and computer @ 60%. The A.O. i .....

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The Ld. CIT(A) considering the facts of the case in the light of remand report and schedule of the depreciation, found that assessee has claimed depreciation on building. The Ld. CIT(A) also noted that assessee has not been able to establish that Raniket premises was being used for office purposes, therefore, disallowance of depreciation for Ranikhet office was confirmed. The Ld. CIT(A) as regards depreciation for office/ residential premises at L-1/13, Hauz Khas Enclave, New Delhi noted that A. .....

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purpose forwarded written submissions and documents furnished by the assessee at appellate stage to the A.O. and A.O. was directed to personally verify the factual position by making the inspection of the property so as to determine the actual use of the property. The A.O. submitted a remand report in which the A.O. on inspection of the property in question submitted that assessee is having one room with small pantry, one toilet for office use on North East side at ground fllor of L-1/13, Hauz K .....

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schedule of fixed assets filed during the course of assessment proceedings which is another proof for the said office asset and also claimed depreciation @ 10% for ₹ 2,77,578 under the Head Office Premises . The remand report was confronted to the assessee who has filed the rejoinder. The assessee explained that due to privacy, the staff guest meeting and conference area have been separated. 7.2. The Ld. CIT(A) considering the explanation of assessee in the light of remand report on recor .....

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e premises for business purpose only. Therefore, interest could be allowed to that extent only to the assessee. The Ld. CIT(A) rejected the contention of assessee as regards interest allowed by the department in earlier years. The Ld. CIT(A) accordingly found that since office area constitute 8.31% of the total area, therefore, interest amounting to ₹ 3,06,704 was allowed as business expenditure and balance amount of ₹ 33,84,098 was disallowed. 8. As regards the service tax, the asse .....

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ce of any evidence on record, the Ld. CIT(A) confirmed the disallowance of service tax also. 9. After considering the rival contentions, I do not find any merit in the appeal of the assessee. The Learned Counsel for the Assessee reiterated the submissions made before the authorities below and submitted copy of the assessment order under section 143(3) dated 19th March, 2013 for A.Y. 2010-2011 along with copy of the acknowledgment of the return of income and income and expenditure account to show .....

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of office/profession. The submissions of the assessee and documents were forwarded to the A.O. at appellate stage for factual verification of use of the property for business purpose or not. The A.O. gave his remand report after physical inspection of the property in question and submitted that assessee is having one room with small pantry and one toilet for office use on north-east side at ground floor of the property. This fact has not been disputed by the assessee through any evidence or mat .....

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ssional fees. These facts strengthen the findings of the A.O. that for such a small consultancy work, the assessee is required only one table, one chair and almirah for his office purpose because only one room at ground floor have been used for the purpose of business. Therefore, the Ld. CIT(A) on proper appreciation of facts and considering the inspection report of the A.O. correctly came to the finding that only 8.31% of the total area of the residential property have been used for office/busi .....

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actual inspection of the property in question to justify the claim of the assessee of use of the residential property for business purpose only. This fact was not considered in A.Y. 2010-2011. Therefore, when new facts have been brought on record, the rule of consistency would not apply in the facts and circumstances of the case. Considering the totality of the facts and circumstances, in the light of findings of the authorities below, I am of the view that the Ld. CIT(A) correctly disallowed th .....

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