Income Tax Appellate Tribunal - Kolkata
Kishore V. Samtani, Kolkata vs Assessee on 17 November, 2009
अधीकरण Ûयायपीठ - "बी " , कोलकाता,
आयकर अपीलीय अधीकरण, कोलकाता
IN THE INCOME TAX APPELLATE TRIBUNAL, "B" BENCH: KOLKATA
सम¢)
सम¢ ौी
(सम¢ महावीर िसंह, सदःय एवं ौी सी.डȣ
Ûयायीक सदःय, सी डȣ.राव
डȣ राव,
राव लेखा सदःय,
सदःय )
[Before Sri Mahavir Singh, J.M. & Sri C.D. Rao, A.M.]
आयकर अपील संÉया / I.T.A No. 250/Kol/2010
िनधॉरण वषॅ / Assessment Year: 2004-2005
Sri Kishore V. Samtani, Kolkata -v- Income Tax Officer, Ward-29(4),
(PAN: AMAPS 5156 K) Kolkata
अपीलाथȸ /Appellant)
(अपीलाथȸ ू×यथȸ/Respondent)
ू×यथȸ
(ू×यथȸ
&
आयकर अपील संÉया / I.T.A No. 989/Kol/2010
िनधॉरण वषॅ / Assessment Year : 2004-2005
Assistant Commissioner of Income Tax, -v- Shri Kishore V. Samthani, Kolkata
Circle-29, Kolkata
अपीलाथȸ /Appellant)
(अपीलाथȸ ू×यथȸ/Respondent)
ू×यथȸ
(ू×यथȸ
For the Assessee: Shri Subash Agarwal, A.R.
For the Department: Shri M. Bhattacharya, D.R.
सुनवाई कȧ तारȣख/Date
तारȣख of Hearing : 13.12.2011
घोषणा कȧ तारȣख/Date
तारȣख of Pronouncement : 29 .12.2011
आदे श/ORDER
Per Shri Mahavir Singh, Judicial Member/
ौी महावीर िसंह , Ûयायीक सदःय :-
These cross appeals, one by assessee and other by revenue, are arising out of order of CIT(A), Kolkata in Appeal No. 82/CIT(A.)-XVI/29(4)/06-07 dated 17.11.2009.Assessment was framed by ITO, Ward 29(4), Kolkata u/s. 143(3) of the Income-tax Act, 1961 [hereinafter referred to as 'the Act'] for the assessment year 2004-05 vide his order dated 29-12-2006.
First we will deal with assessee's appeal in ITA No. 250/Kol./2010.
2. The first issue in this appeal of assessee is against the order of CIT(A) confirming the disallowance of proportionate interest for earning exempted income by invoking provisions of section 14A of the Act. For this, assessee has raised following Grounds No. 1 & 2:-
2 ITA No.250/Kol./2010 & 989-Kol-2010(1) For that the ld. Commissioner of Income-tax (Appeals), without having due regard to the fact that the appellant never invested in purchase of shares for earning dividend therefrom and also in registered firm in which the appellant was a partner out of own funds earlier and not out of loan funds on which interest had to be paid as is evident from the statement showing nexus furnished before the Assessing Authority in course of assessment proceedings.
(2) For that the ld. Commissioner of Income-tax (Appeals), erred in law in not accepting that the appellant did not utilize any amount of loan funds having nexus with investment on purchase of shares and in registered firm and as such direction of the ld. Commissioner of Income-tax (Appeals) for application of the provisions of Rule 8D be considered unjustified.
3. We have heard rival contentions and gone through facts and circumstances of the case. The Assessing Officer during course of assessment proceedings, after going through accounts, (which are reproduced in the assessment order at page 3) came to the conclusion that balances in the capital account of the assessee is not sufficient for financing the entire amount of investment made in the fixed assets, investment in firm and investment in shares. According to Assessing Officer, investment in shares from where assessee has earned exempted income and on which interest paid, same is not allowable in terms of section 14A of the Act. Accordingly, he disallowed proportionate expenditure of interest at Rs.11,09,456/-. Aggrieved, assessee preferred appeal before CIT(A), who confirmed the action of Assessing Officer.
4. Ld. counsel for the assessee before us fairly conceded that the assessee could not file details of profit earned during the year and interest-bearing funds available with it for making investment during the year in shares from where it has earned dividend and share of profit which do not form part of total income in view of the provisions of section 10(2A) of the Act. Hence, he urged the Bench to set aside the issue to the file of Assessing Officer for allowing one more opportunity to furnish all these details and to prove that assessee has interest-bearing funds, cash profit and unutilized capital available for making investment during the year. On this, ld. Sr. D.R. has not objected for setting aside this issue to the file of Assessing Officer. We, after hearing both the parties, find that the Assessing Officer could not establish the nexus of utilization of interest bearing funds qua the exempted income earned, i.e. investment in shares and investment in firm from where share in profit is earned as assessee could not file details and Assessing Officer could not make out nexus, we set aside this issue to the file of 3 ITA No.250/Kol./2010 & 989-Kol-2010 Assessing Officer for fresh adjudication in terms of the above. This issue of the assessee's appeal is allowed for statistical purposes.
5. The next issue in this appeal of assessee is against the order of CIT(A) rejecting the claim of deduction under section 80DD of the Act on account of disability of his daughter. For this, assessee has raised Grounds No. 3, 4 & 5, which are as under:-
(3) For that the ld. Commissioner of Income-tax (Appeals), Kolkata, inadvertently proceeded to confirm rejection of appellant's claim of Rs.75,000/-
under section 80DD of the I.T. Act incurred for purpose of his daughter with disability as enacted in the provisions of law.
(4) For that the ld. Commissioner of Income-tax (Appeals), Kolkata's wrong impression that deduction is available in the case of person with permanent disability instead of disability is not correct which needs reversal of order.
(5) For that the appellant may kindly be given opportunity to produce evidence in relation to expenditure incurred for treatment of his daughter and same be directed exempt on merits.
6. At the outset, ld. counsel for the assessee stated that he has failed to produce disability certificate and in the absence of the same, lower authorities have decided against him, which is now available with him. On this, ld. Sr. D.R. has not objected for sending of the issue back to the file of Assessing Officer. We, after hearing both the parties, are of the view that let the Assessing Officer examine this issue in terms of disability certificate to be produced by the assessee. In case, if the assessee is eligible, the claim may be allowed. This issue is also set aside to the file of Assessing Officer.
Coming to ITA No. 989-Kol-2010 of revenue's appeal.
7. The first issue in this appeal is against order of CIT(A) deleting the disallowance of service expenses claimed against income from house property. For this, revenue has raised following Ground No. 1 :-
"That on the facts and circumstances of the case, the ld. CIT(A.) has erred in deleting Rs.1,97,725/- on account of proportionate services expenses on account of house property income".
8. We have heard rival contentions and gone through the facts and circumstances of the case. Brief facts are that the assessee is co-owner in one house property, whose income on 4 ITA No.250/Kol./2010 & 989-Kol-2010 account of composite rent was assessed in the hands of AOP named as M/s. N.K. Belani & Ors. The said AOP claimed expenses at Rs.7,90,901/- from the composite rent on account of salary & bonus to caretaker and sweeper, lift maintenance charges, electrical charges and staff welfare expenses. According to assessee, net income from house property was apportioned in the hands of co-owners in proportion to their respective shares. According to assessee, he was having 25% share in the said house property and declared income from house property in the return of income after claiming expenses on account of abovementioned services. The Assessing Officer while making assessment disallowed 1/4th of expenses of Rs.7,90,900/-, which was claimed by AOP out of composite rent on account of abovementioned services and disallowance in the case of assessee comes to Rs.1,97,725/-. Aggrieved, the assessee preferred appeal before CIT(A), who allowed the claim of assessee after considering the decision of ITAT, 'A' Bench, Kolkata in the case of N.K. Belani & Ors. in ITA No. 1999/Kol./2002 dated 19.05.2003 and in the case of ITO, Ward-14(5), Kolkata -v- Vinodrai Kanji Bhimani (decd.) in ITA No. 1555/Kol./2000 dated 25.06.2000 and also decision of CIT(A.), Central-II, Kolkata in the case of another co-owner Shri Nandu K. Belani for assessment year 2003-04 in Appeal No. 59/CC-XIII/CIT(A.)C-II/06-07 dated 09.10.2006. Aggrieved, Revenue is in appeal before us.
9. Ld. counsel for the assessee Shri Subash Agarwal reiterated the same submissions as made before CIT(A) and relied on the same decisions. Admittedly, the assessee is co-owner in house property in the AOP of M/s. N.K. Belani & Others to the extent of 25%. There is no dispute about the quantum of shares and quantum of expenses claimed. It is a fact that AOP claimed expenses of Rs.7,90,901/- from the total rent on account of salary & bonus to caretaker and sweeper, lift maintenance charges, electrical charges and staff welfare expenses, the details are as under :-
Service expenses Salary, bonus to caretaker, sweeper, etc. Rs.2,94,889/-
Lift service and upkeep Rs. 54,240/-
Electrical charges Rs.4,16,844/-
Staff welfare expenses Rs. 24,928/-
Total Rs.7,90,901/-
5 ITA No.250/Kol./2010 & 989-Kol-2010
Now the question arises, whether these expenses are allowable as deduction while computing income from house property. For computing income from house property annual value of property for which the assessee is the owner or co-owner, shall be chargeable to income-tax under the head "income from house property". In the present case, there is no dispute regarding annual rent value or total rent receipt but only dispute is regarding deduction of above stated service charges. Now for the purpose of deduction as authorized under section 24 of the Act, are as under:-
(i) For repairs,
(ii) Premium amount,
(iii) Annual charge,
(iv) Ground rent,
(v) Interest on borrowed capital,
(vi) Land revenue or any other Estate tax,
(vii) Collection charges upto assessment year 1992-93 only,
(viii) Allowance for vacancy;
(ix) Unrealized rent.
In regard to other deductions, other amenities provided by landlord, i.e. lift maintenance charges, ground rent, water tax, passage lights, sweepers, gardeners salary, etc. etc, same gets into the rental charge by the landlord owner and it is, therefore, only just and proper that these are other expenditures and be taken into consideration in the fixation of the chargeable annual value. We, therefore, are of the view, that where owner gets composite rent for the property as well as for the services rendered to the tenants, such composite rent should be split up and the amount which is attributable to the property should be assessed under section 22 of the Act.
The amount which relates to services provided, such as amenities in the shape of electrical fittings, lift, cost of sanitation, etc. should be brought to tax under section 56 of the Act and assessed separately and can claim expenses qua those incomes separately. But this type of service charges cannot be deducted while claiming deduction from the annual value once determined. In the present case, assessee has to determined annual value as composite rent, we are not sure whether the assessee has claimed any income on account of amenities on this aspect and for this, agreement of rent is required to be verified. On query from the Bench, whether the assessee can produce the rent agreement, ld. counsel for the assessee fairly conceded that he cannot produce the rent agreement and the service charges are not part and 6 ITA No.250/Kol./2010 & 989-Kol-2010 parcel of rent agreement. After going through the provisions of sections 22, 23 and 24 of the Act, we are of the view that the method of determination of the annual value of house property has been statutorily prescribed in section 23 of the Act. Since it constitutes the annual rent received or receivable by the owner in respect of property alone, the deductions are also prescribed in section 24 of the Act. Therefore, computation has to be made in view of statutory deductions embodied in section 24 of the Act and apart from that income from house property no other deduction can be allowed. Ld. counsel for the assessee has produced before us the decision of this Tribunal in ITA No. 1999/Kol./2002 for assessment year 1998-99 in the case of N.K. Belani & Ors. dated 19.05.2008, wherein the issue was whether adjustment can be made under section 143(1)(a) or not. We have gone through the entire order of the Tribunal and find that merely on the basis that no prima facie adjustment can be made while processing the return under section 143(1)(a) of the Act and no issue is decided on merits. Another judgment dated 25.06.2002 referred by the ld. counsel for the assessee in ITA No. 1555/Cal./2000 in the case of ITO -v- Vinodrai Kanji Bhimani (Decd.) (Executor Paresh V. Bhimani), wherein 'SMC' Bench of this Tribunal has held that "it is just and reasonable to deduct the cost of providing common services from the composite rent in order to arrive at the actual rent received by the assessee. Since there is no dispute about the quantum of the cost of commons service provided by the assessee, the actual rent received for the purposes of section 22 was to be taken net of the cost of service charges". In view of the above, we are of the view that the assessee is not entitled for deduction of the services charges from income from house property as there is no provision for providing such deduction in the Act. This issue of revenue's appeal is allowed.
10. The next issue of the Revenue's appeal is against the order of CIT(A) deleting the addition of business loss. For this, revenue has raised following Ground No. 2 :-
"That on the facts and circumstances of the case, the ld. CIT(A.) has erred in deleting Rs.4,54,949/- on account of business loss".
11. We have heard rival contentions and gone through facts and circumstances of the case. Brief facts are that the Assessing Officer disallowed a sum of Rs.4,54,949/- on account of consultancy charges, electrical charges, corporation surcharge, general expenses and water tax debited to the Profit & Loss A/c. by holding that the assessee's interest income is income from other sources and taxable under section 56 of the Act. According to him, once income is 7 ITA No.250/Kol./2010 & 989-Kol-2010 assessed from other sources under section 56 of the Act, only those expenses, which are incurred wholly and exclusively for the purposes of such income, are allowable under section 57of the Act. Accordingly, he made disallowance of above stated expenses by treating the same as personal in nature. Aggrieved, assessee preferred appeal before CIT(A), who allowed the claim of assessee vide para 12 of his order as under :-
"12. I have considered the submission of the appellant and .perused the assessment order. The A.O. has treated the interest income as income from other sources as against the claim of the appellant as income from business or profession. The A.O. has made the disallowances of expenses amounting to Rs.4,54,949/- as mentioned above for the reason that the expenses were personal in nature and even not allowable as business expenditure. On perusal of profit & loss account for the year under consideration and for the earlier years as well as subsequent years, it is observed that the appellant has declared sub6tantial amount of interest received and interest paid on the loans given and the loans taken by him. The amount of loan taken and given was also substantial. In all the assessment years the income on account of interest has been assessed as business income and expense were allowed. I do not find any reason for deviation to treat the interest income as income from other sources and rejecting the claim of the appellant that he was engaged in the business of money lending. Therefore, the A.O. is directed to treat the interest income as income from business or profession. The A.O. has disallowed the expenses for the reason that those were personal in nature. However, I am not inclined to agree with the A.O. that the expenses on account of consultancy, electrical, corporation surcharge and water tax etc. could be treated as expenses of personal nature. The A.O. is directed to delete the addition of Rs.4,54,949/- made by him. The ground no. 7 is allowed".
12. We find that revenue has not challenged basic findings of CIT(A) treating the interest income earned on loans and advances as business income. CIT(A) has specifically held that assessee is engaged in the business of money lending and once interest is assessed as income from business, expenses cannot be disallowed, in case these are genuine expenses. There is no charge that expenses are not genuine and reasonable and not for the purpose of business. These expenses cannot be termed in the nature of personal reason being consultancy charges, electrical charges, general expenses, water tax, etc. which relates to assessee's business. Accordingly, this issue of the Revenue's appeal is dismissed.
13. The next issue in this appeal of Revenue is against the order of CIT(A) deleting the addition of unexplained cash credits. For this revenue has raised following Ground No. 3:-
"That on the facts and circumstances of the case, the ld. CIT(A.) has erred in deleting Rs.4,31,513/- on account of unexplained cash credit".8 ITA No.250/Kol./2010 & 989-Kol-2010
14. We have heard rival contentions and gone through facts and circumstances of the case. At the outset, ld. counsel for assessee Shri Subash Agarwal stated that assessee had produced necessary documents before AO, i..e. Credit Notes of both brokers through whom shares were purchased and sold. Both brokers appeared before the AO and confirmed transactions of purchase and sale and also produced complete books of account and documents for examination. We find that AO made enquiry from the Calcutta Stock Exchange and noted that the date of purchase is 17.08.2002 whereas transaction took place on 29.07.2002. It is a fact that assessee had purchased from broker in view of invoice on 29.07.2002 and made payment by account payee cheque but this was transacted in the Stock Exchange on 17.08.2002 and credited in the Demat A/c. of the assessee on 24.08.2002. It is also a fact that the shares were sold through registered broker M/s. Mukesh Dokania and sold shares and debited in the Demat Account of the assessee. It is also a fact that sale proceeds were received by account payee cheque which was deposited in assessee's Bank account. From above evidences and documents produced before us, we are of the view that assessee has rightly disclosed transactions of sale of share as long-term capital gain and addition made by the Assessing Officer has rightly been deleted by CIT(A). We confirm the order of CIT(A) and this issue of Revenue's appeal is dismissed.
15. In the result, the appeal of assessee is partly allowed for statistical purposes and appeal of Revenue is allowed in part as indicated above.
पǐरणामतः िनधा[ǐरती का अपील अंशतः ऊपर उãलेǔखत सांǔख ्यकȧ उƧे य से मंजूर Ǒकया गया।
पǐरणामतः ǒवभाग का अपील अंशतः ऊपर उãलेǔखत के आधार पर मंजूर Ǒकया गया।
ORDER PRONOUNCED IN THE OPEN COURT ON 29 / 12 /2011.
खुली अदालत मɅ ःपƴ आदे श 29 /12/2011.
Sd/- Sd/-
सी.डȣ
सी डȣ.राव
[C.D. Rao/ (सी डȣ राव ] [Mahavir Singh / महावीर िसंह]
Accountant Member/ लेखा सदःय Judicial Member/ Ûयायीक सदःय
Dated : 29 / 12/ 2011
9 ITA No.250/Kol./2010 & 989-Kol-2010
Copy of the order forwarded to:
1. Sri Kishore V. Samtani, 1/B, Minto Park, Kolkata-27
2 ACIT Cir-29, Kolkata, 18, Rabindra Sarani, Kolkata-1
3. Commissioner of Income-tax (Appeals) , Kolkata
4. CIT , Kolkata
5. DR, Kolkata Benches, Kolkata
(True Copy)
By Order
Assistant Registrar, I.T.A.T., Kolkata
Laha, Sr. P.S.