Income Tax Appellate Tribunal - Mumbai
Sharda Textile Mills Combay P.Ltd, ... vs Department Of Income Tax on 7 March, 2013
ITA No.1417 of 2012 Sharda Textile Mills Bombay Pvt Ltd Mumbai
IN THE INCOME TAX APPELLATE TRIBUNAL
"E" Bench, Mumbai
Before Shri B. Ramakotaiah, Accountant Member
& Shri Amit Shukla, Judicial Member
ITA No.1417/Mum/2012
(Assessment year: 2008-09)
Income Tax Officer 4(3)(4), Vs. Sharda Textile Mills Bombay
Room No.638, Aayakar Bhavan, Pvt. Ltd, 2nd Floor, 86 Mirza
M.K. Road, New Marine Lines, Street, Zaveri Bazar,
Mumbai 400020 Mumbai 400003
PAN: AADCS 4473 P
(Appellant) (Respondent)
Department by: Shri Manoj Kumar, DR
Assessee by: Shri Rakesh Joshi
Date of Hearing: 07/03/2013
Date of Pronouncement: 15/03/2013
ORDER
Per B. Ramakotaiah, A.M.
This is a Revenue appeal against the order of the CIT (A)-8 Mumbai dated 05.12.2011 on the issue of disallowance of expenditure deleted by Ld. CIT(A).
2. Briefly stated, assessee is in the business of processing and trading of fabrics, partly let out the first floor of his factory premises. As part of the rent agreement, the tenant used the existing water and electricity connection of assessee and paid the charges on the basis of utilization of the water and electricity. Assessee recovered the amount from the tenant. As against the total amount spent on electricity and water charges of `.32,67,228, an amount of `.28,09,612 was recovered from the tenant. Assessee claimed an amount of `.4,57,616 as assessee's own expenditure under the head "electricity and water charges". AO after obtaining various details disallowed a sum of `.38,21,351 on the plea that the total area of the factory area is 27,028 sft out of which 13,550 sft was let out during the year which constitute 50.13% of the total area. Since assessee was using 49.87% of the premises for own Page 1 of 3 ITA No.1417 of 2012 Sharda Textile Mills Bombay Pvt Ltd Mumbai production, he was of the view that the expenses of power and water charges incurred for own production was adjusted against the rental income. Accordingly he disallowed the amount.
3. Before the CIT (A) it was contended that the disallowance was made on presumption and submitted that assessee had separate water and power connections for the tenant and the recovery was on actual basis. It was further submitted that the rental agreement was at `1,35,500 p.m. which comes to `.16,26,000 which assessee had offered for taxation in its return of income under the head "income from house property". Assessee also reconciled the total sales figures from the sales register to the amount credited to the Profit & Loss A/c, one of the observations made by AO while disallowing the above amount.
4. After considering the detailed submissions, the learned CIT (A) deleted the addition by stating as under:
"4.3 I have considered contention of AO as well as the learned AR. As per facts of the case the contention of AO that the appellant has not credited amount recovered on account of electricity & power charges is not correct. It is seen from the relevant ledger account of these expenses that assessee has credited these recoveries to the respective account and debited the net income to the Profit & Loss A/c which may be principally wrong but there is no understatement of income. Further the allocation of such expenses on the basis of area used is also not justifiable. Both these utilities depend upon actual use rather than area used. When assessee has separate meters for own use and tenant use, from where the question arises for allocation of the same? Assessee has billed electricity and water charges based on the meter readings to the tenant and the party has paid also accordingly. If there is any excess recovery from the tenant he would not have paid it as the meter reading was also available with him. Therefore, there is no merit in the allocation made by AO on the basis of area used. Further AO also found difference in sales as per sales register and the sales figure credited to Profit & Loss A/c . The appellant has reconciled the difference and in my view there is nothing wrong in the same. Therefore, in my opinion appellant has not claimed any expenses which are used for rental portion and accordingly addition made by AO on this account is deleted. Hence, this ground of appeal is allowed".Page 2 of 3
ITA No.1417 of 2012 Sharda Textile Mills Bombay Pvt Ltd Mumbai
5. After hearing the learned DR and the learned Counsel, we do not see any reason to interfere with the orders of the CIT (A). First of all AO has not made out any case why the entire amount recovered from tenant was disallowed in the hands of assessee when assessee's claim was only `.4,57,616. As seen from the assessment order AO has neither made out a case that assessee has wrongly recovered the amount or adjusted towards its expenditure. Further his action in disallowing on proportionate expenses on area basis without considering the actual consumption is also erroneous. The learned CIT (A) has correctly appreciated the facts and deleted the addition. We are unable to understand why Revenue has come in appeal on a factual matter which was examined and allowed by the CIT (A). The grounds are infructuous to say the least and are dismissed.
6. In the result appeal filed by the Revenue is dismissed.
Order pronounced in the open court on 15th March, 2013 Sd/- Sd/-
(Amit Shukla) (B. Ramakotaiah)
Judicial Member Accountant Member
Mumbai, dated 15th March, 2013.
Vnodan/sps
Copy to:
1. The Appellant
2. The Respondent
3. The concerned CIT(A)
4. The concerned CIT
5. The DR, "E " Bench, ITAT, Mumbai
By Order
Assistant Registrar
Income Tax Appellate Tribunal,
Mumbai Benches, MUMBAI
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