DCIT CENT. CIR. - 24, MUMBAI v. M/s. URMILA & CO., MUMBAI

ITA 1269/MUM/2008 | 2004-2005
Pronouncement Date: 21-01-2011 | Result: Allowed

Appeal Details

RSA Number 126919914 RSA 2008
Assessee PAN AAACU1651J
Bench Mumbai
Appeal Number ITA 1269/MUM/2008
Duration Of Justice 2 year(s) 11 month(s)
Appellant DCIT CENT. CIR. - 24, MUMBAI
Respondent M/s. URMILA & CO., MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 21-01-2011
Appeal Filed By Department
Order Result Allowed
Bench Allotted G
Tribunal Order Date 21-01-2011
Date Of Final Hearing 22-12-2010
Next Hearing Date 22-12-2010
Assessment Year 2004-2005
Appeal Filed On 20-02-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES G MUMBAI BEFORE SHRI J SUDHAKAR REDDY ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO JUDICIAL MEMBER ITA NO. 2350//MUM/2005 (ASSESSMENT YEARS: 2001-2002) URMILA AND CO.LTD MACKINNON MACKENZIE BUILDING 4 S V MARG BALLARD ESTATE MUMBAI-400001 PAN : AAACU1651J .. APPELLANT VS DCIT CENTRAL CIRCLE-24 AND 26 MUMBAI ROOM NO.408CINCOME TAX OFFICER WARD 8(3)(4) AAYAKAR BHAVAN MUMBAI-400020 RESPONDENT ITA NO. 466//MUM/2006 (ASSESSMENT YEARS: 2002-2003) URMILA AND CO.LTD .. APPELLANT VS DCIT CENTRAL CIRCLE-24 AND 26 RESPONDENT ITA NO. 1276//MUM/2006 (ASSESSMENT YEARS: 2002-2003) DCIT CENTRAL CIRCLE-24 .. APPELLANT VS URMILA AND CO.LTD RESPONDENT ITA NO. 2350//MUM/2005 ITA NO. 466//MUM/2006 ITA NO. 1276//MUM/2006 ITA NO. 582/MUM/2008 ITA NO. 1269//MUM/2008 2 ITA NO. 582/MUM/2008 (ASSESSMENT YEARS: 2003-2004) URMILA AND CO.LTD .. APPELLANT VS DCIT CENTRAL CIRCLE-24 AND 26 RESPONDENT ITA NO. 1269//MUM/2008 (ASSESSMENT YEARS: 2004-05) DCIT CENTRAL CIRCLE-24 AND 26 .. APPELLANT VS URMILA AND CO.LTD RESPONDENT ASSESSEE BY : SHRI HARI OM TULSIYANI REVENUE BY : SHRI A K NAYAK O R D E R PER VIJAY PAL RAO JM THESE THREE APPEALS BY THE ASSESSEE AND TWO BY THE DEPARTMENT ARE DIRECTED AGAINST THE RESPECTIVE ORDE RS OF THE CIT(A) FOR THE ASSESSMENT YEARS 2001-02 2002-2003 2003-04 AND 2004-05. APPEALS IN ITA NO. 466//MUM/2006 AND I TA NO. 1276//MUM/2006 ARE CROSS APPEALS BY THE ASSESSEE A S WELL AS THE DEPARTMENT FOR THE ASSESSMENT YEAR 2002-03. ALL OTHER APPEALS ARE EITHER BY THE ASSESSEE OR BY THE DEPART MENT. ITA NO. 2350//MUM/2005 ITA NO. 466//MUM/2006 ITA NO. 1276//MUM/2006 ITA NO. 582/MUM/2008 ITA NO. 1269//MUM/2008 3 THESE APPEALS WERE HEARD TOGETHER AND ARE BEING DEC IDED BY THIS COMPOSITE ORDER FOR THE SAKE OF CONVENIENCE. ITA NO. 2350//MUM/2005 (BY ASSESSEE) 2. THE ASSESSEE HAS RAISED FOLLOWING REVISED GROUND S OF APPEAL: 1. THAT THE LD. AO ERRED IN TAKING THE ALV OF THE ASSESSEES AGRA BUILDING AT RS.7 24 567 AS ERRONEOUSLY RETURNED BY IT AND THE LD. CIT(A) ERRE D IN UPHOLDING THE ORDER OF THE LD. AO; 1(A). 1(B) 1( C ). 2. THAT THE LD. CIT(A) ERRED IN UPHOLDING THE LD. AOS ORDER REDUCING THE ASSESSEES CLAIM OF DEPRECIATION ON BARGE BY RS.10 000/- ON THE GROUND THAT THE SAID BARGE WAS SOLD BY IT FOR RS.2 LAKHS INSTEAD OF RS.1 LAKH AS CLAIMED BY IT 3. THE GROUNDS OF APPEAL NO.1 REGARDING ERRONEOUS LY RETURNED THE RENTAL INCOME FROM AGRA BUILDING AN D THE AO HAS TAKEN THE ALV AT RS.7 54 657/-. DURING ASSESSM ENT YEARS THE ASSESSEE HAS SHOWN THE RENT RECEIVED FROM AGR A BUILDING AMOUNTING TO RS.7 24 567/-. THE AO AFTER DISALLOWI NG THE PART OF MUNICIPAL TAXES OF AGRA BUILDING ASSESSED THE RENTAL INCOME AS INCOME FROM HOUSE PROPERTY. THE ASSESSEE CHALLENGED THE DISALLOWANCE OF MUNICIPAL TAXES AS W ELL AS OTHER DISALLOWANCE MADE BY THE AO BEFORE THE CIT( A). THE ITA NO. 2350//MUM/2005 ITA NO. 466//MUM/2006 ITA NO. 1276//MUM/2006 ITA NO. 582/MUM/2008 ITA NO. 1269//MUM/2008 4 ASSESSEE ALSO RAISED THE ADDITIONAL GROUND BY AMEND ING THE GROUNDS OF APPEAL BEFORE THE CIT(A) REGARDING THE ALV OF THE AGRA BUILDING. THE CIT(A) DISMISSED THE ADDITIONA L GROUND RAISED BY THE ASSESSEE ON THE GROUND THAT THE ASSE SSEE IS PROHIBITED FROM RAISING THIS GROUND AT APPELLATE S TAGE. 3.1 BEFORE US THE LEARNED AR OF THE ASSESSEE HAS S UBMITTED THAT THE ASSESSEE HAS MISTAKENLY INCLUDED THE MUNI CIPAL TAXES CHARGED ON THE RENT RECEIVED FROM THE SUB-TEN ANT. HE HAS FURTHER CONTENDED THAT SOME OF SUB-TENANTS DEPO SITED THE MUNICIPAL TAXES DIRECTLY THEREFORE THE INCOME WHI CH WAS NOT EARNED AND WHICH WAS NOT THE INCOME OF THE ASSESSEE MISTAKENLY WAS ASSESSED TO TAX. HE HAS FURTHER CON TENDED THAT THE ADDITIONAL GROUND RAISED BY THE ASSESSEE B EFORE THE CIT(A) WAS RELATING TO THE CORRECT COMPUTATION OF A LV OF ITS AGRA BUILDING AND IN ANY CASE ONLY THE CORRECT AMO UNT OF INCOME HAS TO BE TAXED. HE HAS POINTED OUT THAT TH E ASSESSEE PURCHASED THE BUILDING AT M H ROAD FORT MUMBAI-4 0001 KNOWN AS AGRA BUILDING ALONG WITH THE EXISTING TEN ANTS. THE SOME OF THE TENANTS SUB-LET THE PORTION LET OUT TO THEM AT A VERY HIGHER RENT WITHOUT THE KNOWLEDGE AND THE CON SENT OF THE ASSESSEE. BOMBAY MUNICIPAL CORPORATION (BMC) RAISE D THE MUNICIPAL TAXES ON THE BASIS OF HIGHER RENT CHARGE D BY THE TENANTS FROM THE SUB-TENANTS. THOUGH THE ASSESSEE FOR THE AY ITA NO. 2350//MUM/2005 ITA NO. 466//MUM/2006 ITA NO. 1276//MUM/2006 ITA NO. 582/MUM/2008 ITA NO. 1269//MUM/2008 5 2001-02 RECEIVED A TOTAL RENT OF RS.13197 FROM ITS TENETS HOWEVER IN VIEW OF THE MUNICIPAL TAXES RAISED BY T HE BMC THE ASSESSEE HAS MISTAKENLY DISCLOSED THE ANNUAL VAL UE OF THE BUILDING AT RS.7 24 566/- WHICH CONSISTS OF RS.6 86 705 AS MUNICIPAL TAXES RECEIVABLE AND RS.24 664 MUNICIPA L TAXES ACTUALLY COLLECTED FROM THE TENANTS DURING THE YEAR APART FROM THE RENT ACTUALLY RECEIVED DURING THE YEAR OF RS.13 197/-. THE LEARNED AR HAS SUBMITTED THAT THIS IS AN APPARENT MISTAKEN IN TAKING THE ANNUAL LETTING VALUE AT RS.7 24 567/- AN D THE CIT(A) HAS NOT ADJUDICATED UPON THE ISSUE. 3.2 ON THE OTHER HAND THE LEARNED DR HAS SUBMITTED THAT THE ADDITIONAL ISSUE RAISED BY THE ASSESSEE COULD N OT BE ADJUDICATED UPON IN THE ABSENCE OF RELEVANT MATERIA L RECORD AND EVIDENCE. THEREFORE THE CIT(A) HAS RIGHTLY REJECTED THE GROUND RAISED BY THE ASSESSEE. HE HAS RELIED UP ON THE ORDER OF THE CIT(A). 3.3. AFTER CONSIDERING THE RIVAL CONTENTION AND THE RELEVANT RECORD WE NOTE THAT THE AO HAS NOT DISCUSSED A BOUT THE ISSUE OF MUNICIPAL TAXES ON ACCOUNT OF SUBLETTING O F THE PROPERTY BY THE TENANTS. EVEN THE SUB-TENANTS HAS D IRECTLY DEPOSITED THE MUNICIPAL TAXES HAS ALSO NOT BEEN TAK EN INTO CONSIDERATION. IT APPEARS THAT THESE FACTS WER E NOT POINTED ITA NO. 2350//MUM/2005 ITA NO. 466//MUM/2006 ITA NO. 1276//MUM/2006 ITA NO. 582/MUM/2008 ITA NO. 1269//MUM/2008 6 OUT BY THE ASSESSEE BEFORE THE AO. THE ASSESSEE ITSELF HAS ADMITTED THE ALV WITHOUT EXPLAINING THESE FACTS. AS POINTED OUT BY THE LEARNED AR OF THE ASSESSEE THAT THE ISS UE REGARDING ALV OF AGRA BUILDING HAS BEEN CONSIDERED AND DECIDED BY THIS TRIBUNAL IN THE ASSESSEES OWN CAS E FOR THE ASSESSMENT YEAR 03-04 IN THE APPEAL FILED BY THE R EVENUE IN ITA NO.1227/MUM/2008 VIDE ORDER DATED 13.7.2009. THIS TRIBUNAL HAS HELD THAT THE BUILDING IN QUESTION IS COVERED UNDER THE BOMBAY MUNICIPAL RENT CONTROL ACT AND CA NNOT ARRIVE AT FAIR MARKET VALUE WHICH IS ABOVE THE STAN DARD RENT PAYABLE AS PER THE RENT CONTROL ACT. HAVING REGAR D TO THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN THE INTE REST OF JUSTICE WE SET ASIDE THIS ISSUE TO THE FILE OF THE AO FOR VERIFICATION AND EXAMINATION OF FACTS WHICH RAISED BY THE ASSESSEE WHILE RAISING THIS ISSUE AND THEN DECIDE T HE ISSUE KEEPING IN VIEW THE ORDER DATED 13.7.2009 OF THIS TRIBUNAL IN ASSESSEES OWN CASE. 3.4 GROUNDS OF APPEAL NO.1 IS ALLOWED FOR STATISTIC AL PURPOSE. 4. GROUND OF APPEAL NO.2 REGARDING DEPRECIATION ON REDUCED COST OF BARGE. ITA NO. 2350//MUM/2005 ITA NO. 466//MUM/2006 ITA NO. 1276//MUM/2006 ITA NO. 582/MUM/2008 ITA NO. 1269//MUM/2008 7 4.1. AT THE TIME OF HEARING THE LEARNED AR OF THE ASSESSEE STATED THAT THE ASSESSEE DOES NOT PRESS THIS GROUND AND REQUESTED THAT THIS GROUND MAY BE DISMISSED FOR WHI CH THE LEARNED DR DOES NOT OBJECT. ACCORDINGLY WE DISMIS S THIS GROUND BEING NOT PRESSED. 4.2. GROUNDS OF APPEAL NO.2 DISMISSED AS NOT PRESSE D. ITA NO. 466//MUM/2006 (BY ASSESSEE) 5. THE ASSESSEE HAS RAISED THE FOLLOWING REVISED GR OUNDS IN THIS APPEAL: 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) ERRED IN ALLOWING TUG HI RE CHARGE TO THE EXTENT OF RS.24 00 222/- ONLY @RS.2.00 LAKH PM FOR 12 MONTHS AS AGAINST THE ASSESSEES CLAIM OF RS.68 00 000; 1(A) THAT KEEPING IN VIEW THE SUB-CONTRACT PERIOD OF 13 MONTHS AS WELL AS THE DEMOBILIZATION PERIOD OF 3 MONTHS REQUIRED FOR RELEASING THE HIRED TUG THE L D. CIT(A) OUGHT TO HAVE ALLOWED THE TUG HIRE CHARGES AT LEAST TO THE EXTENT OF RS.32 00 000/- FOR 16 MON THS @ RS.2 00 000 PM; 2. THAT BOTH THE LD. AO AND CIT(A) ERRED IN DISALLOWING THE ASSESSEES CLAIM OF DEDUCTION OF RS..13 63 622/- BEING THE DIFFERENCE BETWEEN THE EXPENDITURE OF RS.60 96 165/- INCURRED BY IT IN CONNECTION WITH THE EXECUTION OF SUB-CONTRACT WITH M/S STOVEC AND REIMBURSES RECEIVED BY IT FROM M/S STOVEC TO THE EXTENT OF RS.47 32 543/- 3. THAT BOTH THE LD. AO AND CIT(A) ERRED IN DISALLOWING A SUM OF RS.84 179/- OUT OF TOTAL EXPENDITURE OF RS.168 358 INCURRED BY THE APPELLAN T ITA NO. 2350//MUM/2005 ITA NO. 466//MUM/2006 ITA NO. 1276//MUM/2006 ITA NO. 582/MUM/2008 ITA NO. 1269//MUM/2008 8 ON GIFTS GIVEN TO ITS CUSTOMERS AND EMPLOYEE ON THE OCCASION OF DIWALI CHRISTMANS NEW YEAR ETC. 4. THAT BOTH THE LD. AO AND CIT(A) ERRED IN DISALLOWING A SUM OF RS.5 00 000/- REPRESENTING SECURITY DEPOSITS PAID BY CONTRACTEE ON BEHALF OF T HE ASSESSEE SUB-CONTRACTOR TO THE EXECUTIVE ENGINEER S BARODA/GODHRA IN CONNECTION WITH THE EXECUTION ON I TS CONTRACT FOR TRANSPORTATION OF MACHINERIES WHICH HA D TO BE WRITTEN OFF AS THE SAME COULD NOT BE RECOVER ED FROM THEM. 4(A) THAT ALTHOUGH THE ASSESSEE CLAIMED THE SUM OF RS.5 00 000/- IN ITS P AND L ACCOUNT AS CIVIL WORK EXPENSES ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE SUCH CLAIM SHOULD HAVE BEEN ALLOWED AS TRADING LOSS INCIDENTAL TO ITS BUSINESS; 5. THAT BOTH THE AO AND THE CIT(A) ERRED IN DISALLOWING THE CLUB OF FEE OF RS.18 100/- PAID BY THE ASSESSEE TO MACKINNON CLUB 5.1 GROUNDS OF APPEAL NO.1. REGARDING THE DISALLOWA NCE OF TUG HIRE CHARGES. THE ASSESSEE ENTERED INTO AN AGR EEMENT TO SUB-CONTRACT M/S STOVEC INDUSTRIES LTD FOR TRANSP ORTATION OF HEAVY PLANT AND MACHINERY. THE MACHINERIES WERE TO BE IMPORTED BY SEA FROM GERMANY TO MUMBAI AND WERE F URTHER TRANSPORTED FROM MUMBAI TO CUDDALORE CHENNAI BY TUG. THE CONTRACT PERIOD WAS FROM 26.06.1999 TO 30.6.2000. THE ASSESSEE HIRED TUG FROM ITS SISTER COMPANY ABC AN D SONS AT RS.2 LAKHS PER MONTH FOR 34 MONTHS. SINCE TRANSPORT ATION UNDER THE SUB-CONTRACT FOR TRANSPORTATION OF MACHIN ERY FROM MUMBAI TO CUDDALORE WAS NOT FINALLY EXECUTED THE A SSESSEE CLAIMED THE EXPENSES FOR HIRE OF THE TRUCK AT RS.6 8 LAKHS FOR ITA NO. 2350//MUM/2005 ITA NO. 466//MUM/2006 ITA NO. 1276//MUM/2006 ITA NO. 582/MUM/2008 ITA NO. 1269//MUM/2008 9 THE ENTIRE PERIOD OF 34 MONTHS. THE ASSESSEE RECE IVED A COMPENSATION OF RS.4.82 CRORES AS AGAINST THE TOTA L CONTRACT AMOUNT OF RS.15.58 CRORES FROM M/S STOVEC INDUST RIES LTD. THE AO ALLOWED THE CLAIM OF THE ASSESSEE ON ACCOUNT OF TUG HIRE CHARGES TO THE EXTENT OF RS.7 45 841/- ON PRO PORTIONATE BASIS IN RATIO OF COMPENSATION RECEIVED TO TOTAL CO NTRACT AMOUNT. THE AO WAS OF THE VIEW THAT SINCE THE CLAI M OF RS.68 LAKHS WAS IN RESPECT OF THE PAYMENT MADE TO T HE SISTER CONCERN WHICH FALLS THE PERSONS SPECIFIED U/S 40A(2 )(B) OF THE ACT. SINCE THE EQUIPMENTS WERE HIRED FROM SISTER C ONCERN WAS NOT AT ALL UTILIZED DURING THE ENTIRE PERIOD FOR WH ICH IT WAS HIRED THE DEDUCTION IS ALLOWABLE TO THE EXTENT IT IS REASONABLE. THE AO FURTHER HELD THAT THE PAYMENT IS BASICALLY NOTHING BUT JUST PASSING THE BOOK ENTRIES IN THE AC COUNTS BY ISSUING THE CREDIT NOTE AND THUS THE TRANSACTION IS SHAM TRANSACTION. ACCORDINGLY THE AO WORKED OUT THE R EASONABLE ALLOWABLE DEDUCTION AT RS.7 45 841/- AND THE BALANC E WAS DISALLOWED. 5.2. ON APPEAL THE CIT(A) HAS ALLOWED THE HIRE CH ARGES TO THE EXTENT OF RS.24 LAKHS FOR THE CONTRACT PERIOD OF 12 MONTHS. 5.3. BEFORE US THE LD. AR OF THE ASSESSEE HAS SUB MITTED THAT THE CIT(A) HAS ALLOWED TUG HIGHER CHARGES FOR 12 MONTHS ITA NO. 2350//MUM/2005 ITA NO. 466//MUM/2006 ITA NO. 1276//MUM/2006 ITA NO. 582/MUM/2008 ITA NO. 1269//MUM/2008 10 ON THE GROUND THAT THE SUB-CONTRACT OF THE ASSESSEE BETWEEN AND M/S STOVEC INDUSTRIES LTD. WAS FOR 12 MONTHS WHEREAS THE CONTRACT EXECUTED ON 23.6.1999 WAS VALID UP TO 30.6.2000 AND THUS CONTRACT WAS FOR THE PERIOD OF 13 MONTHS AND NOT FOR 12 MONTHS. HE HAS THUS SUBMITTED THAT EVEN IF ON THE ANALOGY OF ALLOWING CONTRACT TUG HIGHER CHARGE S FOR THE CONTRACT PERIOD THE ASSESSEE IS ENTITLED FOR AT LEAST 13 MONTHS IN STEAD OF 12 MONTHS. HE HAS FURTHER CONTE NDED THAT AS PER THE AGREEMENT WITH M/S ABC SONS LTD THE ASS ESSEE WAS REQUIRED TO PAY TUG HIRE CHARGES FOR DEMOBILIZE D PERIOD OF THREE MONTHS BEFORE ACTUALLY RELEASING THE TUG. T HUS THE LEARNED AR HAS SUBMITTED THAT TUG HIRE CHARGES WAS PAYABLE FOR A TOTAL PERIOD OF 13 + 3 (16 MONTHS) IN STEAD O F 12 MONTHS AS ALLOWED BY THE CIT(A). 5.4. ON THE OTHER HAND THE LEARNED DR HAS SUBMITT ED THAT AS PER THE AGREEMENT ENTERED THE ENTIRE WORK WAS TO BE COMPLETED BY 30.6.2000 AND NO ADDITIONAL GRACE PERI OD OF 90 DAYS WAS ALLOWED. THE ASSESSEE WAS LIABLE TO BE PAID THE PENALTY IN CASE IT DOESNT COMPLETE THE WORK BY 30.6.2000. WHEN THE ASSESSEE HAS NOT AT ALL EXECUTED THE CONT RACT AND CONSEQUENTLY THERE WAS NO QUESTION OF ALLOWING THE GRACE PERIOD THEN THE CLAIM OF THE ASSESSEE FOR THREE MON THS IS ITA NO. 2350//MUM/2005 ITA NO. 466//MUM/2006 ITA NO. 1276//MUM/2006 ITA NO. 582/MUM/2008 ITA NO. 1269//MUM/2008 11 WITHOUT ANY BASIS. HE HAS RELIED UPON THE ORDERS O F THE LOWER AUTHORITIES. 5.5. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND R ELEVANT RECORD. SO FAR AS THE CONTENTION OF THE LEARNED AR REGARDING THE TUG HIRE CHARGES SHOULD HAVE BEEN ALLOWED FOR 13 MONTHS INSTEAD OF 12 MONTHS IS CONCERNED WE FIND FORCE IN THE CONTENTION OF THE LEARNED AR. WHEN CONTRACT PERIO D WAS FROM 23.6.1999 TO 30.6.2000 WHICH IS MORE THAN 12 MONTHS AND SINCE THE HIRE CHARGES ARE ACCRUED BETWEEN THE PART IES AT THE RATE OF RS.2 LAKHS PER MONTH THEN THE CHARGES FOR THE MONTHS AND PART THEREOF SHALL BE ALLOWED AS PER THE RATE AGREED BETWEEN THE PARTIES. THE RATE OF HIRE CHARGES AS WELL AS THE PERIOD OF CONTRACT ARE NOT DISPUTED BY THE PARTIES THEREFORE WE FIND THAT THE CLAIM OF THE ASSESSEE REGARDING TH E HIRE CHARGES FOR TUG FOR 13 MONTHS IS JUST AND PROPER AN D ACCORDINGLY WE ALLOW THE SAME. 5.6. AS REGARDS THE CLAIM FOR THREE MONTHS ON ACCOU NT OF HIRE CHARGES FOR THE DEMOBILIZATION PERIOD REQUIRED FOR RELEASING THE HIRED TUG IS CONCERNED. IT IS PERTINENT TO NOTE THAT THE ASSESSEE HAS NOT EXECUTED THE WORK AT ALL AND THE C ONTRACTS BETWEEN THE PARTIES ARE IN THE NATURE OF BACK TO BACK. AS PER THE TERMS OF CONTRACT BETWEEN THE ASSESSEE AND M/S STOVEC INDUSTRIES LTD THE ADDITIONAL GRACE PERIOD OF 90 D AYS WAS ITA NO. 2350//MUM/2005 ITA NO. 466//MUM/2006 ITA NO. 1276//MUM/2006 ITA NO. 582/MUM/2008 ITA NO. 1269//MUM/2008 12 ALLOWED TO THE ASSESSEE IF THE ENTIRE WORK IS NOT COMPLETED IN THE PRESCRIBED PERIOD UP TO 30.6.2000 AND IN THAT EVENTUALITY THE ASSESSEE SHALL BE LIABLE TO PAY THE PENALTY AS PER CLAUSE 1(8) OF THE AGREEMENT. THE CARGO WAS TO BE LIFTED BY 15.03.2000 AND M/S STOVEC INDUSTRIES LTD WAS REQUI RED TO GIVE THE ASSESSEE AN PRE-ADVICE NOTICE OF MINIMUM 21 DAYS BEFORE THE LOAD READINESS.. WHEN M/S STOVEC INDUS TRIES LTD FAILED TO ARRANGE FOR THE LOAD OF GOODS LATEST BY 15.3.2000 TO ENABLE THE ASSESSEE TO EXECUTE THE WORK BY 30.6.20 00 THERE WAS NO QUESTION OF LEVY OF PENALTY ON THE ASSESSEE AND SIMILARLY THE ASSESSEE GOT ENOUGH TIME UP TO 30.6 .2000 TO DEMOBILIZE. THUS THERE WAS NO NEED OF AVAILING EX TRA THREE MONTHS FOR DEMOBILIZATION AND RELEASING OF THE TUG. HENCE WE DO NOT FIND ANY MERIT IN THE CLAIM OF THE ASSESSEE FOR HIRE CHARGES REGARDING THREE MORE MONTHS REQUIRED FOR DEMOBILIZATION. 5.7 THIS GROUND IS PARTLY ALLOWED. 6. THE NEXT GROUNDS OF APPEAL IS REGARDING DISALLOW ANCE OF EXPENSES OF RS..13 63 622/- AS EXPENSES NOT REIMBU RSED BY M/S STOVEC INDUSTRIES LTD CLAIMED AS BUSINESS EXPE NDITURE. THE AO DISALLOWED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT THE EXPENSES ARE TO BE RECOVERED BY THE ASSES SEE FROM ITA NO. 2350//MUM/2005 ITA NO. 466//MUM/2006 ITA NO. 1276//MUM/2006 ITA NO. 582/MUM/2008 ITA NO. 1269//MUM/2008 13 M/S STOVEC INDUSTRIES LTD AND M/S STOVEC INDUSTRI ES LTD IN TURN HAS TO RECOVER IT FROM M/S PENNAR GERMANY. T HUS THE AO HELD THAT THIS PAYMENTS ARE MADE BY THE ASSESSED TO CHENNAI PORT TRUST WHICH IS RECOVERABLE BY THE ASSE SSEE FROM M/S STOVEC INDUSTRIES LTD. THUS THESE EXPENSES ARE NOT ALLOWABLE AS DEDUCTION. 6.1 ON APPEAL THE CIT(A) HAS CONFIRMED THE DISAL LOWANCE MADE BY THE AO AND HELD THAT THE ASSESSEE FAILED T O DISCHARGE ITS RESPONSIBILITY TO SUBSTANTIATE HIS CL AIM BY PRODUCING THE SUITABLE EVIDENCE. 6.2. BEFORE US THE LEARNED AR OF THE ASSESSEE HAS SUBMITTED THAT THE ASSESSEE CLAIMED VARIOUS PAYMENTS TO SHIPP ING CORPORATION OF INDIA CHENNAI PORT TRUST AND PAYME NT BY GREEN CHANNEL. THE TOTAL OF SUCH PAYMENTS WAS AMOU NTING TO RS.60.96 165/-. THE ASSESSEE RECOVERED FROM M/S STOVEC INDUSTRIES LTD TO THE EXTENT OF RS.47 32 543. TH US THE AMOUNT WHICH WAS NOT RECOVERED BACK IS TO THE EXTE NT OF RS.13 63 622/- 6.3. THE LEARNED AR OF THE ASSESSEE HAS SUBMITTED T HAT THE ASSESSEE IS READY TO FURNISH ALL THE NECESSARY DETA ILS OF THE EXPENDITURES ALONG WITH THE SUPPORTING EVIDENCE SH OWING THE ITA NO. 2350//MUM/2005 ITA NO. 466//MUM/2006 ITA NO. 1276//MUM/2006 ITA NO. 582/MUM/2008 ITA NO. 1269//MUM/2008 14 PAYMENTS THEREOF. HE HAS PLEADED THAT THE EVIDEN CE MAY BE ADMITTED AS AN ADDITIONAL EVIDENCE BY THIS BY THIS TRIBUNAL OR THE MATTER MAY BE RESTORED TO THE RECORD OF THE LOW ER AUTHORITIES FOR VERIFICATION AND EXAMINATION OF THE EVIDENCE AND DECIDE THE ISSUE IN ACCORDANCE WITH LAW. THE LEARNED AR HAS SUBMITTED THAT THE ASSESSEE FILED ONLY A SAMPL E BILL BEFORE THE CIT(A) ALONG WITH THE WRITTEN SUBMISSIO NS AND THE ASSESSEE WAS NOT GIVEN ANY OPPORTUNITY TO PRODUCE THE ENTIRE EVIDENCE. SINCE THE AO DISALLOWED THE CLAIM ON LE GAL GROUNDS THEREFORE THE ASSESSEE WAS NOT GIVEN SUFF ICIENT OPPORTUNITY TO SUBSTANTIATE ITS CLAIM BY PRODUCING THE SUPPORTING EVIDENCE. 6.4. ON THE OTHER HAND THE LEARNED DR HAS SUBMITTE D THAT THE ASSESSEE FAILED TO PRODUCE ALL THE RELEVANT REC ORD IN SUPPORT OF ITS CLAIM. THE ONUS IS ON THE ASSESSEE TO PROVE THE CLAIM OF DEDUCTION WITH THE RELEVANT EVIDENCE. IT IS NOT REQUIRED ON THE PART OF THE REVENUE AUTHORITY TO AS K THE ASSESSEE TO PRODUCE THE EVIDENCE. EVEN THE ASSESSEE FAILED TO PRODUCE ANY EVIDENCE EITHER BEFORE THE A.O. OR B EFORE THE CIT (A). 6.5. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND RELEVANT RECORD. THE ASSESSEE HAS CLAIMED THE DEDUCTION OF THE SAID ITA NO. 2350//MUM/2005 ITA NO. 466//MUM/2006 ITA NO. 1276//MUM/2006 ITA NO. 582/MUM/2008 ITA NO. 1269//MUM/2008 15 AMOUNT PAID BY THE ASSESSEE AND NOT RECEIVED BACK. THE DETAILS OF EXPENDITURES AS REPRODUCED BY THE CIT(A ) AT PAGE 25 OF THE IMPUGNED ORDER ARE AS UNDER: PAID TO RS. SHIPPING CORPORATION OF INDIA 20 16 776.00 CHENNAI PORT TRUST 19 71 319.00 PAYMENTS BY GREEN CHANNEL REIMBURSED BY THE APPELLANT 2 07 000.00 FEES PAID TO GREEN CHANNEL 19 01 070.00 TOTAL PAID 60 96 165.00 LESS RECOVERED FROM STOVEC 47 32 543.00 AMOUNT NOT RECOVERED 13 63 622.00 6.7. THE AO REJECTED THE CLAIM OF THE ASSESSEE ON T HE GROUND THAT WHEN THE EXPENDITURE ARE TO BE REIMBURSED AND RECOVERABLE FROM M/S STOVEC INDUSTIRES LTD THEN THE SAME IS NOT ALLOWABLE AS DEDUCTION. THE CIT(A) HAS CONFIRM ED THE DISALLOWANCE ON THE GROUND THAT THE ASSESSEE FAILED TO DISCHARGE THE ONUS OF PROVING ITS CLAIM BY PRODUCI NG THE SUITABLE EVIDENCE. SINCE THE AO HAS NOT EXAMINED THE EXPENSES ON MERITS AND THEREFORE NO EVIDENCE WAS CA LLED UPON OR EXAMINED BY THE AO. THUS THE RELEVANT E VIDENCE WAS NOT PRODUCED BY THE ASSESSEE AND THEREFORE THE SAME WAS NOT AVAILABLE ON RECORD BEFORE THE CIT(A). TH E ASSESSEE PRODUCED SAMPLE BILLS ALONG WITH THE WRITTEN SUBMIS SIONS WHICH WAS DULY ACKNOWLEDGED BY THE CIT(A) IN PARAG RAPHS 30 ITA NO. 2350//MUM/2005 ITA NO. 466//MUM/2006 ITA NO. 1276//MUM/2006 ITA NO. 582/MUM/2008 ITA NO. 1269//MUM/2008 16 OF THE IMPUGNED ORDER. WHEN THE RELEVANT EVIDENCE H AS NOT BEEN PROPERLY EXAMINED BY THE LOWER AUTHORITIES WHI LE DECIDING THE CLAIM OF THE ASSESSEE THEN IN THE INT EREST OF JUSTICE AND FAIR PLAY IT IS NECESSARY TO VERIFY AND EXAMINE THE EVIDENCE AT THE LEVEL OF THE LOWER AUTHORITIES. T HEREFORE WE SET ASIDE THIS ISSUE TO THE RECORD OF THE AO TO V ERIFY AND EXAMINE THE RELEVANT EVIDENCE ON THIS ISSUE TO BE PRODUCED BY THE ASSESSEE AND THEREAFTER DECIDE THIS ISSUE A S PER LAW. 6.8. THE GROUNDS OF APPEAL NO.2 IS ALLOWED FOR STA TISTICAL PURPOSES. 7. GROUNDS OF APPEAL NO. 3 REGARDING DISALLOWANCE OF 50% OF EXPENSES OF DIWALI GIFTS. DURING THE YEAR THE A SSESSEE CLAIMED A SUM RS.1 68 358/- ON ACCOUNT OF EXPENSE S BEING DIWALI GIFT. THE AO OBSERVED THAT CERTAIN VOUCHER S WERE MISSING AND THE MAXIMUM PAYMENTS WERE MADE IN CASH AND NOT SUPPORTED BY THE PROPER EVIDENCE. ACCORDINGLY THE AO HAS DISALLOWED 50% OF THE EXPENSES ON ACCOUNT OF D IWALI GIFTS AMOUNTING TO RS.84 179/- BY TREATING IT AS NON BUS INESS EXPENSES. 7.1. ON APPEAL THE CIT(A) CONFIRMED THE DISALLOWA NCE MADE BY THE AO ON SIMILAR GROUNDS. ITA NO. 2350//MUM/2005 ITA NO. 466//MUM/2006 ITA NO. 1276//MUM/2006 ITA NO. 582/MUM/2008 ITA NO. 1269//MUM/2008 17 7.2. WE HAVE HEARD THE LEARNED AR AS WELL AS THE L EARNED DR. IT IS UNDISPUTED FACT THAT THE ASSESSEE DID NO T PRODUCE THE COMPLETE VOUCHERS IN SUPPORTS OF ITS CLAIM. MOR EOVER THE MAJORITY OF PAYMENTS WERE MADE IN CASH. THEREFORE THE ASSESSEE HAS FAILED TO SUBSTANTIATE ITS CLAIM THAT THE EXPENDITURE HAS BEEN WHOLLY AND EXCLUSIVELY INCURR ED FOR BUSINESS PURPOSES. HENCE WE ARE OF THE VIEW THAT THE 50% DISALLOWANCE MADE BY THE AO AND CONFIRMED BY THE CIT(A) IS JUST AND PROPER KEEPING IN VIEW OF THE FACTS AND CI RCUMSTANCES OF THE CASE. THEREFORE WE ARE NOT INCLINED TO INT ERFERE IN THE ORDER OF THE LEARNED CIT(A). 7.3. GROUNDS OF APPEAL NO.3 IS DISMISSED. 8. THE FOURTH GROUNDS OF APPEAL REGARDING DISALLO WANCE OF A SUM OF RS.5 00 000/- REPRESENTING SECURITY DEPOS ITS PAID BY CONTRACTING PARTY. DURING THE PREVIOUS YEAR RELEVAN T TO THE ASSESSMENT YEAR UNDER CONSIDERATION THE ASSESSEE D EBITED A SUM OF RS.3 LAKHS AND RS.2 LAKHS AS PAID TO THE EXECUTIVE ENGINEER R & D DIVISION GODHARA AND BARODA RESPE CTIVELY UNDER THE HEAD CIVIL WORK. THE AO ISSUED NOTICES TO THE RESPECTIVE EXECUTIVE ENGINEERS U/S 133(6) OF THE A CT FOR SEEKING INFORMATION REGARDING THE SAID PAYMENTS. IN ITA NO. 2350//MUM/2005 ITA NO. 466//MUM/2006 ITA NO. 1276//MUM/2006 ITA NO. 582/MUM/2008 ITA NO. 1269//MUM/2008 18 RESPONSE TO THE SAID NOTICE IT WAS INTIMATED BY TH E OFFICE OF THE EXECUTIVE ENGINEER GODRA AS WELL AS BARODA T HAT NO WORK HAS BEEN ENTRUSTED TO THE ASSESSEE AND NO TRAN SACTION HAS BEEN DONE BY THEIR OFFICE WITH THE ASSESSEE. A FTER RECEIVING THE REPLY FROM THE RESPECTIVE EXECUTIVE E NGINEERS THE AO FURTHER ASKED THE ASSESSEE TO EXPLAIN AS TO HOW THE EXPENDITURE WAS CLAIMED. THE ASSESSEE EXPLAINED TH AT M/S ABC AND SONS LTD WAS AWARDED THE CONTRACT FOR TRA NSPORTATION OF GAS TURBINE OF 193 MT AND GT GENERATOR OF 168 MT FROM BHEL RAMADHANDRAPURAM TO GIPCL BARODA. THE SAID JOB WAS SUB-CONTRACTED BY ABC TO THE ASSESSEE AT 90% O F THE CONTRACT AMOUNT. SINCE MACHINERIES WERE HEAVY AND DUE TO OVER DIMENSIONAL CARGO IN HEIGHT LENGTH DEPTH AN D WEIGHT AND WHILE PASSING THROUGH BRIDGE NEAR BARODA GUJA RAT THE OFFICE OF THE EXECUTIVE ENGINEER (ROAD AND BUILDING DIVISION) GODHRA ASKED THE ABC AND SONS TO DEPOSIT RS.3 00 00 0/- OR BANK GUARANTEE IF THEY WANT TO TRANSPORT THE CARGO FROM THE SAID ROUTE TO PROTECT THEIR INTEREST. DUE TO SO ME FINANCIAL PROBLEMS THE ABC AND SONS LIMITED REQUESTED THE GIPCL TO ISSUE BANK GUARANTEE OF RS.3 LAKHS IN FAVOUR OF THE EXECUTIVE ENGINEER R AND D DIVISION GODHARA AND DEDUCT TH E SAME FROM THEIR PAYMENT TO AVOID THE DELAY FOR TRANSPORT ATION OF THE GOODS. ACCORDINGLY BANK GUARANTEE WAS FURNISHED BY THE GIPCL AND THE AMOUNT WAS DEBITED FROM THE PAYMENT D UE TO ITA NO. 2350//MUM/2005 ITA NO. 466//MUM/2006 ITA NO. 1276//MUM/2006 ITA NO. 582/MUM/2008 ITA NO. 1269//MUM/2008 19 ABC AND SONS. CONSEQUENTLY M/S ABC AND SONS DEDU CTED THE SAID AMOUNT FROM THE ASSESSEE. APART FROM THIS THE BANK GUARANTEE A DEMAND DRAFT OF RS.2 LAKHS WAS ALSO DRA WN IN FAVOUR OF THE EE R AND D BARODA. THE SAID EXPENS ES WAS RELATED TO THE DAMAGE OF THE BRIDGE ETC. THEREFORE THE ASSESSEE DEBITED THE SAME TO THE CIVIL WORK EXPENS ES. THE A. O. ALSO NOTED THAT THE PAYMENT OF RS.5 LAKHS WA S MADE DURING THE FINANCIAL YEAR 1997-98 WHEREAS THE ASSE SSEE HAS CLAIMED THE EXPENSES FOR THE FINANCIAL YEAR 2001-02 . THUS THE PAYMENTS DID NOT PERTAIN TO THE PREVIOUS YEAR R ELEVANT TO THE YEAR UNDER CONSIDERATION AND PRIOR PERIOD ITEMS . ACCORDINGLY THE AO DISALLOWED THE SAME AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. MOREOVER AS REGA RD THE PAYMENT OF RS.2 LAKHS NOT ONLY THE EXECUTIVE ENGI NEER BARODA DENIED THE SAID PAYMENT BUT THE ASSESSEE A LSO FAILED TO PROVIDE ANY EVIDENCE IN SUPPORT OF ITS CLAIM. 8.1. ON APPEAL THE CIT(A) CONFIRMED THE DISALLOWA NCE ON THE GROUND THAT THE ASSESSEE HAS FAILED TO BRING AN Y COGENT AND CONVINCING EVIDENCE TO ESTABLISH THE NEXUS O F ITS PAYMENT TO ITS BUSINESS. 8.2. BEFORE US THE LEARNED AR OF THE ASSESSEE HAS SUBMITTED THAT THE LOWER AUTHORITIES HAS NOT DISPUTED THE BAN K GUARANTEE ITA NO. 2350//MUM/2005 ITA NO. 466//MUM/2006 ITA NO. 1276//MUM/2006 ITA NO. 582/MUM/2008 ITA NO. 1269//MUM/2008 20 FURNISHED TO THE EXECUTIVE ENGINEERS AS REFUNDABLE SECURITY DEPOSITS FOR REPAIRING THE DAMAGE IF ANY TO THEIR B RIDGE. AS THERE WAS NO DAMAGES THE DEPOSITS WERE REFUNDABLE T O THE ASSESSEE. SINCE THE ASSESSEE FAILED TO RECOVER T HE AMOUNT WAS DEBITED TO THE PROFIT AND LOSS ACCOUNT AND RED UCING THE AMOUNT TO ITS DEBIT OF M/S ABC AND SONS WAS IN THE BALANCE SHEET. THUS THE LEARNED AR HAS SUBMITTED THAT THE CLAIM MAY BE ALLOWED AS BAD DEBTS WHICH WAS CLAIMED AS CI VIL WORK EXPENSES. THE LEARNED AR FURTHER CONTENDED THAT EVE N OTHERWISE THIS BUSINESS EXPENSES IS ALLOWABLE AS BU SINESS LOSS BECAUSE THE ASSESSEE SUFFERED THE SAME DURING THE COURSE OF BUSINESS. 8.3. ON THE OTHER HAND THE LEARNED DR SUBMITTED TH AT THE AMOUNT WAS DEBITED IN THE YEAR 1997-98 AND NOT DURI NG THE YEAR UNDER CONSIDERATION. HE HAS RELIED UPON THE ORDERS OF THE LOWER AUTHORITIES 8.4. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND R ELEVANT RECORD. THE CLAIM OF THE ASSESSEE IS BASED ON THE SUBMISSIONS AND THE CONTENTIONS ONLY. NO MATERIAL H AS BEEN PRODUCED EITHER BEFORE THE LOWER AUTHORITIES OR BEF ORE US TO SHOW THAT THE BANK GUARANTEE FURNISHED BY THE GIPC L AS WELL AS THE PAYMENT OF RS.2 LAKHS MADE BY THE GIPCL WAS FINALLY ITA NO. 2350//MUM/2005 ITA NO. 466//MUM/2006 ITA NO. 1276//MUM/2006 ITA NO. 582/MUM/2008 ITA NO. 1269//MUM/2008 21 TO BE PAID BY THE ASSESSEE. EVEN OTHERWISE NO EVI DENCE OR DOCUMENTS HAS BEEN PRODUCED TO SHOW THAT THE SAID A MOUNT WAS NOT ENCASHED BY THE CONCERNED DEPARTMENT IN LIE U OF SOME DAMAGED AND AS PER THE AGREEMENT THE ASSESSEE IS RESPONSIBLE FOR SUCH DAMAGE. THE ASSESSEE HAS MADE THE CLAIM AFTER A GAP OF 5 YEARS WITHOUT ESTABLISHING A S TO HOW THIS CLAIM HAS BEEN CRYSTALLIZED DURING THE YEAR UNDER CONSIDERATION. IN ABSENCE OF ANY RELEVANT RECORD AND EVIDENCE WE ARE UNABLE TO ACCEPT THE CONTENTION OF THE ASSESSEE BECAUSE THERE IS NOTHING ON RECORD TO SHO W THE ALLEGED ARRANGEMENT BETWEEN THE PARTIES REGARDING THIS DEPOSITS MADE WITH THE EXECUTIVE ENGINEERS R AND D GODRA BARODA. ACCORDINGLY WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDERS OF THE LOWER AUTHORITIES QUA THIS I SSUE. 9. THE FIFTH GROUNDS OF APPEAL IS REGARDING DISALLO WANCE OF CLUB FEE OF RS.18 100/- PAID BY THE ASSESSEE TO M ACKINNON CLUB. DURING THE ASSESSMENT PROCEEDINGS THE AO DISALLOWED AN AMOUNT OF RS.18 100/- PAID TOWARDS CLUB FEE BY THE ASSESSEE ON THE GROUND THAT THE EXPENDITURE IS FOR PERSONAL ENTERTAINMENT OF EXECUTIVE OFFICER OF THE ASSESSEE -COMPANY AND NOT INCURRED WHOLLY AND EXCLUSIVELY FOR THE PUR POSE OF BUSINESS OF THE ASSESSEE. ITA NO. 2350//MUM/2005 ITA NO. 466//MUM/2006 ITA NO. 1276//MUM/2006 ITA NO. 582/MUM/2008 ITA NO. 1269//MUM/2008 22 9.1. ON APPEAL THE CIT(A) HAS CONFIRMED THE DISAL LOWANCE MADE BY THE AO. 9.2. BEFORE US THE LEARNED AR SUBMITTED THAT THE CLUB FEES EXPENDITURES ARE ADMISSIBLE BUSINESS EXPENDITURE B EAUSE THE ASSESSEE HAS INCURRED THIS EXPENDITURE FOR PROMOTIO N OF THE BUSINESS OF THE ASSESSEE. HE HAS RELIED UPON THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF OTIS E LEVATOR (INDIA) CO. V/S CIT REPORTED IN 195 ITR 682 (BOM). 9.3. ON THE OTHER HAND THE LEARNED DR RELIED UPON THE ORDERS OF THE LOWER AUTHORITIES. 9.4. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND R ELEVANT RECORD. THE ASSESSEE PAID RS.10000/- TO MACKINN ON CLUB TOWARDS FEES FOR UTILIZATION OF THE CLUB FACILITIE S BY THE EXECUTIVE OFFICER OF THE COMPANY. THE FURTHER SUM OF RS.8 100/- WAS PAID AGAINST THE RECEIVABLES. AS FA R AS THE EXPENDITURE FOR TAKING THE MEMBERSHIP OF THE CLUB IS CONCERNED THE SAME IS AN ALLOWABLE DEDUCTION IN VI EW OF THE DECISIONS OF THE JURISDICTIONAL HIGH COURT IN THE C ASTE OF OTIS ELEVATOR (INDIA) CO. V/S CIT (SUPRA) AS WELL AS THE DECISION OF THE HON.DELHI HIGH COURT IN THE CASE OF NESTLE IN DIA LTD REPORTED IN 292 ITR 682. ACCORDINGLY THE EXPENDIT URE OF ITA NO. 2350//MUM/2005 ITA NO. 466//MUM/2006 ITA NO. 1276//MUM/2006 ITA NO. 582/MUM/2008 ITA NO. 1269//MUM/2008 23 RS.10000/- IS ALLOWABLE EXPENDITURE. AS REGARDS TH E SUM OF RS.8100/- TOWARDS THE RECEIVABLE. IT IS TO BE NOTED THAT IN THE ABSENCE OF ANY MATERIAL THAT THE SAME WAS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESSES OF TH E ASSESSEE I.E. FOR ENTERTAINING THE CLIENT ETC THE SAME CANN OT BE ALLOWED. ACCORDINGLY THIS CLAIM OF THE ASSESSEE I S PARTLY ALLOWED. 9.5. GROUNDS OF APPEAL NO.5 IS PARTLY ALLOWED. ITA NO. 1276//MUM/2006 (BY REVENUE) THE GROUNDS OF APPEAL RAISED BY THE REVENUE ARE A S UNDER : 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN COMPUTING HOUSE PROPERTY INCOME FROM AGRA PROPERTY AT RS.23 715/- AS AGAINST THE INCOME COMPUTED BY THE AO 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN BIFURCATING THE RETABLE VALUE OF THE BUILDING OWNED BY THE ASSESSEE INTO LEGAL AND ILLEGAL OCCUPIERS WHEN THE SUITS FIL ED IN THE COURTS AGAINST THEM IS STILL PENDING. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN TAKING THE ANNU AL RETABLE VALUE OF THE SMALL PORTION OF BUILDING WHO SE OCCUPIERS ARE ACTUALLY PAYING THE RENT TO THE ASSESSEE IS CONTRARY TO HIS OWN DECISION IN HOLDING THAT THE TAX ON INCOME FROM HOUSE PROPERTY IS THE INHERENT CAPACITY OF THE BUILDING TO YIELD INCOME A ND NOT THE ACTUAL RENT RECEIVED. ITA NO. 2350//MUM/2005 ITA NO. 466//MUM/2006 ITA NO. 1276//MUM/2006 ITA NO. 582/MUM/2008 ITA NO. 1269//MUM/2008 24 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN NOT TAKING THE ENTIRE RETABLE VALUE FIXED BY THE BMC AT RS.7 81 4790/- A S THE GROSS ANNUAL VALUE WHICH IS THE EARNING CAPACIT Y OF THE BUILDING 5. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN NOT REALIZING THAT THE BMC EVEN IF IT RECEIVES TAXES/MONEY FROM THE OCCUPIERS AS PER SECTION 146 OF BMC ACT IT RAISED THE BILLS AND ISSUES RECEIPTS IN THE NAME OF OWNER ONLY. 6. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN ALLOWING HIGHER RATE OF DEPRECIATION @40% ON THE TRACTORS/TRAILERS WITHO UT APPRECIATING THE FACT THAT HIGHER RATE IS ALLOWABL E ONLY IF THE ASSESSEE CARRIES ON THE BUSINESS OF RUNNING THEM ON HIRE 10. GROUNDS OF APPEAL NO.1 TO 5 PERTAIN TO THE COMP UTATION OF INCOME FROM AGRA BUILDING. WE HAVE HEARD THE LEARNED DR AS WELL AS THE LEARNED AR AND CONSIDERED THE RELEV ANT RECORD. AT THE OUT SET WE NOTE THAT THIS ISSUES WAS CONSID ERED AND ADJUDICATED UPON BY THIS TRIBUNAL IN ITA NO.1227/ MUM/2008 DATED 13.7.2009 IN ASSESSEES OWN CASE FOR THE ASSE SSMENT YEAR 2003-04 WHEREIN THIS TRIBUNAL HAS DECIDED THE ISSUE IN PARAGRAPH 4.1 AS UNDER : 4.1 THE UNDISPUTED FACT IS THAT THE AGRA BUILDING IN QUESTION IS COVERED UNDER THE BOMBAY RENT CONTRO L ACT AND THE ASSESSEE IS PROHIBITED BY LAW IN CHARGI NG MORE THAN THE STANDARD RENT PERMISSIBLE UNDER THAT ACT. UNDER THESE CIRCUMSTANCES THE ASSESSING OFFICE R IN OUR HUMBLE OPINION CA N NOT ARRIVE AT5 THE FA IR MARKET VALUE WHICH IS ABOVE THE STANDARD RENT ITA NO. 2350//MUM/2005 ITA NO. 466//MUM/2006 ITA NO. 1276//MUM/2006 ITA NO. 582/MUM/2008 ITA NO. 1269//MUM/2008 25 PAYABLE AS PER THE RENT CONTROL ACT. THIS ISSUE I S COVERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE BY THE FOLLOWING DECISIONS: DIWAN DAULAT RAI KAPOOR V/S NEW DELHI RENT CONTROL COMMITTEE AND ORS 122 ITR 700 (SC) AMOLAK RAM KHOSLA S CIT DELHI 131 ITR 589 (SC) MRS. SHEILA KAUSHISH V CIT 131 ITR 435 (SC) M V SONAVALA V/S CIT 177 ITR 246 (BOM) CIT V/S BHASKAR MITTU 73 TAXMAN 437 (CAL) MAE PAES V CIT 230 ITR 60 (BOM) IN VIEW OF THE RATIO LAID DOWN IN THE ABOVE CASE LA WS WE UPHOLD THE ORDER OF THE CIT(A) AND DISMISS THE APPEAL FILED BY THE REVENUE 10.1. ACCORDINGLY WE REMIT THIS ISSUE TO THE RECOR D OF THE AO FOR COMPUTING THE INCOME FROM HOUSE PROPERTY /ALV A S PER STANDARD RENT PAYABLE UNDER THE RENT CONTROL. ACT. 10.2. GROUNDS OF APPEAL NO.1 TO 5 ARE ALLOWED FOR S TATISTICAL PURPOSE. 11.. GROUNDS OF APPEAL NO.6 REGARDING HIGHER RATE OF DEPRECIATION @40% ON THE TRACTORS/TRAILERS. 11.1. THE ASSESSEE CLAIMED DEPRECIATION AT THE RATE OF 40% ON TRACTORS/TRAILERS. THE AO HAS DENIED THE HIGHER RA TE OF DEPRECIATION AND ALLOWED ONLY 20% AND HELD THAT THE ASESEEE ITA NO. 2350//MUM/2005 ITA NO. 466//MUM/2006 ITA NO. 1276//MUM/2006 ITA NO. 582/MUM/2008 ITA NO. 1269//MUM/2008 26 IS NOT ENTITLED FOR HIGHER RATE OF DEPRECIATION AS THE TRACTORS AND TRAILERS NEVER UTILIZED FOR HIRING BUSINESS. 11.2. ON APPEAL THE CIT(A) HAS ALLOWED THE CLAIM O F THE ASSESSEE BY FOLLOWING THE CIRCULAR NO. 609 DATED 29 .7.1991 AND HELD THAT THE ASSESSEE IS ENTITLED TO THE DEPRE CIATION AT THE RATE OF 40% IN RESPECT OF TRACTORS AND TRAILER USED FOR THE BUSINESS OF THE TRANSPORTATION. 11.3. BEFORE US THE LD. DR HAS SUBMITTED THAT TH E ASSESSEE HAS NOT USED THE TRACTOR OR TRAILER FOR HIRING BUSI NESS. THEREFORE HIGHER RATE OF DEPRECIATION IS NOT APPLI CABLE. HE HAS RELIED UPON THE ORDER OF THE AO. 11.4. ON THE OTHER HAND THE LEARNED AR HAS SUBMITT ED THAT THE ASSESSEE IS ENGAGED IN THE TRANSPORTATION BUSIN ESS. IT HAS USED TRAILER AND TRUCK FOR TRANSPORTATION OF HIRING GOODS. THEREFORE IN VIEW OF THE CIRCULAR THE ASSESSEE IS ENTITLED FOR HIGHER RATE OF DEPRECIATION AT 40% ON THE TRUCK AND TRAILER. HE HAS FURTHER SUBMITTED THAT IN THE SUBSEQUENT CIRC ULAR NO.652 DATED 14.6.1993 IT HAS BEEN CLARIFIED THAT THE HIG HER RATE OF DEPRECIATION WILL ALSO BE PERMISSIBLE ON THE MOTOR LORRIES USED FOR THE ASSESSEES BUSINESS OF TRANSPORTATION OF GO ODS ON HIRE. ITA NO. 2350//MUM/2005 ITA NO. 466//MUM/2006 ITA NO. 1276//MUM/2006 ITA NO. 582/MUM/2008 ITA NO. 1269//MUM/2008 27 11.5. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND RELEVANT RECORD. IT IS UNDISPUTED FACT THAT THE ASSESSEE IS IN THE BUSINESS OF TRANSPORTATION OF THE GOODS ON HIRE BAS IS. THEREFORE IN VIEW OF THE CIRCULARS NO.652 DATED 15 .6.1993 IT HAS BEEN CLARIFIED THAT HIGHER RATE OF DEPRECIATION WILL BE ADMISSIBLE ON THE MOTOR LORRIES USED BY THE ASSESSE E FOR THE BUSINESS OF TRANSPORTATION OF GOODS ON HIRE. THE R ELEVANT PORTION OF THE CIRCULAR NO. 652 DATED 14.5.1993 IS REPRODUCED AS UNDER : UNDER SUB-ITEM 2(II) OF ITEM NO. III OF APPENDIX I TO THE INCOME- TAX RULES 1962 HIGHER RATE OF DEPRECIATION IS ADM ISSIBLE ON MOTOR BUSES MOTOR LORRIES AND MOTOR TAXIS USED IN A BUSINESS OF RUNNING THEM ON HIRE. A QUESTION HAS BEEN RAISED AS TO WHETHER FOR DERIVING THE BENEFIT OF HIGHER DEPRECIATION MO TOR LORRIES MUST BE HIRED OUT TO SOME OTHER PERSON OR WHETHER THE US ER OF THE SAME IN THE ASSESSEE'S BUSINESS OF TRANSPORTATION O F GOODS ON HIRE WOULD SUFFICE. 2. IN BOARD'S CIRCULAR NO. 609 DATED 29TH JULY 19 91* IT WAS CLARIFIED THAT WHERE A TOUR OPERATOR OR TRAVEL AGEN T USES MOTOR BUSES OR MOTOR TAXIS OWNED BY HIM IN PROVIDING TRAN SPORTATION SERVICES TO TOURISTS HIGHER RATE OF DEPRECIATION W OULD BE ALLOWED ON SUCH VEHICLES. IT IS FURTHER CLARIFIED THAT HIGH ER DEPRECIATION WILL ALSO BE ADMISSIBLE ON MOTOR LORRIES USED IN TH E ASSESSEE'S BUSINESS OF TRANSPORTATION OF GOODS ON HIRE. THE HI GHER RATE OF DEPRECIATION HOWEVER WILL NOT APPLY IF THE MOTOR BUSES MOTOR LORRIES ETC. ARE USED IN SOME OTHER NON-HIRING BU SINESS OF THE ASSESSEE. 11.6. IN VIEW OF THE ABOVE CIRCULAR WE ALLOW THE GROUNDS OF APPEAL NO.6. ITA NO. 2350//MUM/2005 ITA NO. 466//MUM/2006 ITA NO. 1276//MUM/2006 ITA NO. 582/MUM/2008 ITA NO. 1269//MUM/2008 28 ITA NO. 582/MUM/2008 (BY ASSESSEE) 12. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS O F APPEAL 1. THE LD. CIT(A) ERRED IN CONFIRMING THE ORDER OF THE AO DISALLOWING THE PAYMENT OF TUG HIRE CHARGES OF RS.24 00 000/- TO M/S ABC AND SONS LTD. 2. THE LD. CIT(A) ERRED IN PARTLY CONFIRMING THE DISALLOWANCE OF TELEPHONE EXPENSES TO THE EXTENT OF RS.24 112/- 3. THE LD. CIT(A) ERRED IN CONFIRMING THE ORDER OF THE AO DISALLOWING A SUM OF RS.10500/- PAID AS SUBSCRIPTION FEES TO THE CLUB. 4. THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF MOTOR CAR EXPENSE TO THE EXTENT OF RS.30 000/- 12.1 GROUNDS OF APPEAL NO.1 REGARDING THE DISALLOW ANCE OF PAYMENT OF TUG HIRE CHARGES. THE ASSESSEE CLAIMED RS.24 LAKHS BEING PAID AS TUG HIRE CHARGES TO ITS SISTER CONCERNED M/S ABC AND SONS LTD. THE AO DISALLOWED THE CLAIM OF THE ASSESSEE BY APPLYING THE PROVISIONS OF SECTION 40 A(2)(B) OF THE ACT. THE AO NOTED THAT IN RESPONSE TO THE ENQ UIRY LETTERS WERE WRITTEN BY URMILA PROJECT SERVICES A DIVISION OF M/S ABC AND SONS LTD AND NOT BY THE ASSESSEE. M/S. ABC & S ONS LTD. IS COVED U/S 40A(2)(B) AS CETIFIED BY THE AUDITORS OF THE ASSESSEE. THE A.O. HELD THAT THERE WAS NO COMMERCI AL REASON ITA NO. 2350//MUM/2005 ITA NO. 466//MUM/2006 ITA NO. 1276//MUM/2006 ITA NO. 582/MUM/2008 ITA NO. 1269//MUM/2008 29 TO PAY TUG HIRE CHARGES TO M/S ABC AND SONS LTD BE CAUSE THE SAID TUG WERE NOT USED BY THE ASSESSEE FOR ANY TRAN SPORTATION WORK. THE PAYMENT WAS MADE TO THE SISTER CONCERN AND THE ASSESSEE WAS HAVING ITS OWN TUGS. THUS THE HIRING O F TUG FROM SISTER CONCERN DOES NOT FALL UNDER THE LEGITIMATE B USINESS NEEDS OF THE ASSESSEE. APART FROM THIS THE BENEFIT DERIVED BY THE ASSESSEE AS A RESULT OF HIRING THE TUGS IS NIL. THERE IS NO CONTRACT IN HAND TO JUSTIFY HIRING OF THE TUG AND T HE ASSESSEE PAID HUGE HIRING CHARGES ONLY BECAUSE THEY ARE ITS SISTER CONCERN. THE ASSESSEE WAS HAVING ITS OWN TUGS AND T HE HIRED TUGS WERE NOT USED FOR ANY TRANSPORTATION THEREFORE THE AO DISALLOWED THE ENTIRE HIRE CHARGES OF RS. 24 LAKHS U/S 40A(2)(B). 12.2 ON APPEAL THE CIT(A) HAS CONFIRMED THE ACTION OF THE AO IN DISALLOWING THE TUG HIRE CHARGES ON THE SIMIL AR REASONING. 12.3 BEFORE US THE LEARNED AR OF THE ASSESSEE HAS SUBMITTED THAT THE ASSESSEE HAD TO KEEP TUG AS STAN D BY AND READY AS IT WAS DIFFICULT TO HIRE TUG AT LAST MOVEM ENT. HE HAS FURTHER SUBMITTED THAT THE TUG OWNED BY THE ASSESS EE WAS NOT IN A TRANSPORTATION CONDITION DUE TO THE ACCIDENT. AS REGARDS THE APPLICABILITY OF THE PROVISIONS OF SECTION 40A (2)(B) THE LD. AR HAS SUBMITTED THAT THE CHAIRMAN MR. DIWAN WAS ON LY ITA NO. 2350//MUM/2005 ITA NO. 466//MUM/2006 ITA NO. 1276//MUM/2006 ITA NO. 582/MUM/2008 ITA NO. 1269//MUM/2008 30 KNOWN EXECUTIVE CHAIRMAN OF THE COMPANY OF M/S ABC AND SONS. HE HAS RECEIVED NO REMUNERATION EXCEPT SITT ING FEES. HE IS ALSO NOT HAVING ANY SHAREHOLDING IN THE COMPA NY. THUS THE LD. AR HAS SUBMITTED THAT WHEN THE ASSESSEE HAS MADE THE PAYMENT AGAINST THE HIRING OF THE TUG FOR THE P URPOSE OF ITS BUSINESS OF TRANSPORTATION OF HEAVY AND EXTRA LARGE MACHINES THE SAME IS ALLOWABLE EXPENDITURE HE HAS POINTED O UT THAT THE TRANSACTION IS TAXED NEUTRAL BECAUSE BOTH THE COMP ANIES I.E. ASSESSEE AS WELL AS M/S ABC AND SONS LTD SHOWN LOSS ES. 12.4 ON THE OTHER HAND THE LEARNED DR HAS SUBMITT ED THAT THE ASSESSEE HAS CLAIMED THE PAYMENT OF HIRE CHARGE S FOR TUG WITHOUT ANY CONTRACT IN HAND. THE PAYMENT WAS MADE TO THE SISTER CONCERN WITHOUT UTILIZING THE TUG. THEREFORE THE PROVISIONS OF SECTION 40A(2)(B) ARE APPLICABLE. H E HAS RELIED UPON THE ORDERS OF THE LOWER AUTHORITIES. 12.5 WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND R ELEVANT RECORD. THE ASSESSEE CLAIMED TO HAVE PAID 24 LAKH S FOR HIRING THE TUG FROM HIS SISTER CONCERN M/S ABC AND SONS LTD. THE ASSESSEE HAS FAILED TO PROVE THAT THE TUG WERE HIRING FOR ANY CONTRACT OF TRANSPORTATION OF GOODS BY THE ASSE SSEE. IT IS ADMITTED FACT THAT DURING THE PERIOD THE TUG WAS NOT USED FOR ANY TRANSPORTATION ACTIVITIES. . IT IS NOT THE CAS E OF THE ASSESSEE THAT THE TUG WAS HIRED IN RESPECT OF TRANS PORTATION OF ITA NO. 2350//MUM/2005 ITA NO. 466//MUM/2006 ITA NO. 1276//MUM/2006 ITA NO. 582/MUM/2008 ITA NO. 1269//MUM/2008 31 THE GOODS BY THE ASSESSEE UNDER SOME CONTRACT AND W HICH WAS NOT FINALLY MATERIALIZED. WHEN THERE WAS NO CON TRACT OR PROPOSED CONTRACT IN HAND FOR TRANSPORTATION OF GOO DS BY USING THE HIRED TUG THEN THE CLAIM OF HIRING CHARGES OF T HE ASSESSEE IS NOT ALLOWABLE AS EXPENDITURE FOR BUSINESS PURPO SE. NO CASE IS MADE OUT FOR COMMERCIAL EXPEDIENCY OF THE PAYME NT MADE TO THE SISTER CONCERN OF THE ASSESSEE WHICH FALLS U NDER SECTION 40A(2)(B) AS PER THE AUDIT REPORT. THEREFORE UNLES S AND UNTIL THE ASSESSEE ESTABLISH THE ACTUAL REQUIREMENT OF TH E EXPENDITURE INCURRED THE SAME CANNOT BE ALLOWED. W E DO NOT FIND ANY ERROR OR ILLEGALITY IN THE ORDERS OF THE L OWER AUTHORITIES. WE CONFIRM THE SAME. 13.6 GROUNDS OF APPEAL NO.1 IS DISMISSED. 14.1 GROUNDS OF APPEAL NO.2 AND 3 PERTAIN TO THE DISALLOWANCE OF TELEPHONE CHARGES 24 112/- AND SUBS CRIPTION FEES TO CLUB OF RS.10500/-. 14.2 WE HAVE HEARD THE RIVAL CONTENTIONS AND CONSID ERED THE RELEVANT RECORD. THE AO HAS DISALLOWED 25% OF THE TOTAL CLAIM OF TELEPHONE EXPENSES ON THE GROUND OF PERSO NAL USE OF THE TELEPHONE AT THE HOUSE OF THE EXECUTIVES AS WEL L AS OTHER PLACES. ACCORDINGLY THE AO DISALLOWED RS.1 69 37 8/- BEING 25% OF THE TOTAL TELEPHONE EXPENSES. ITA NO. 2350//MUM/2005 ITA NO. 466//MUM/2006 ITA NO. 1276//MUM/2006 ITA NO. 582/MUM/2008 ITA NO. 1269//MUM/2008 32 14.3 ON APPEAL THE CIT(A) FOUND THAT TOTAL REIMB URSEMENT OF TELEPHONE EXPENSES TO ITS EXECUTIVE BY THE ASSE SSEE IS RS.96449 AND 25% OF WHICH OF WHICH COMES OUT TO RS.24 112/-. ACCORDINGLY DISALLOWANCE WAS RESTRIC TED TO THE SUM OF RS.24 112. 14.3. BEFORE US THE LD. AR HAS SUBMITTED THAT THE E XPENDITURE REIMBURSED BY THE ASSESSEE TO ITS EXECUTIVE CANNOT BE DISALLOWED BECAUSE THE SAME SHOULD BE TREATED AS PE RQUISITES AND THE ADDITION MAY BE MADE IN THE HANDS OF THE RE SPECTIVE EMPLOYEES OF THE ASSESSEE. HE HAS RELIED UPON THE DECISION OF THE HON.BLE GUJARAT HIGH COURT IN THE CASE OF SAYAJI IRON AND ENGG. CO REPORTED IN 253 ITR 749. 14.4 ON THE OTHER HAND THE LEARNED DR HAS RELIED UPON THE ORDER OF THE CIT(A). 14.5 AFTER HEARING BOTH THE PARTIES WE FIND FORCE IN THE CONTENTIONS OF THE LEARNED AR THAT THE REIMBURSEMEN T OF TELEPHONE EXPENSES BY THE ASSESSEE CAN BE TREATED A S PERQUISITES IN THE HANDS OF THE RESPECTIVE EXECUTIV ES. THEREFORE THE ADDITION IS DELETED. REGARDING AN NUAL FEES PAID TO CLUB AS WELL AS DINERS CLUB FEES IS CONCE RNED. WE ITA NO. 2350//MUM/2005 ITA NO. 466//MUM/2006 ITA NO. 1276//MUM/2006 ITA NO. 582/MUM/2008 ITA NO. 1269//MUM/2008 33 HAVE ALREADY DISCUSSED THIS ISSUE IN PARAGRAPHS 10. 1 TO 10.4 AND PARTLY ALLOWED THE GROUNDS OF THE ASSESSEE. 14.6 ACCORDINGLY GROUNDS OF APPEAL NO.2 IS ALLOWED AND GROUND NO.3 IS PARTLY ALLOWED. 14.7. GROUND NO.4 REGARDING THE DISALLOWANCE OF MOT OR CAR EXPENSES. 14.8 WE HAVE HEARD THE RIVAL CONTENTIONS AND CONSI DERED THE RELEVANT RECORD. THE ASSESSEE CLAIMED MOTOR CAR EX PENDITURE OF RS.2 59 878/-. THE AO HAS DISALLOWED 25% OF THE TOTAL CLAIM OF MOTOR EXPENSES ON THE GROUND OF PERSONAL USE OF THE MOTOR CAR BY THE EXECUTIVES. ACCORDINGLY THE AO DISALLOWED RS.64 970/- BEING 25% OF THE TOTAL MOTOR CAR CONFIR M EXPENSES. 14.9 ON APPEAL THE CIT(A) RESTRICTED THE DISALL OWANCE TO RS.30 000/-. 14.10. BEFORE US THE LD. AR HAS SUBMITTED THAT THE NO DISALLOWANCE ON THIS ACCOUNT HAS BEEN MADE IN ANY EARLIER YEARS AND THE ASSESSEES CARS ARE USED BY THE EXECU TIVES AND STAFF MEMBERS WHENEVER REQUIRED FOR THE BUSINESS P URPOSES OF THE COMPANY. HE SUBMITTED THAT TOTAL EXPENDITUR E INCLUDES EXPENDITURE ON TAXES INSURANCE ETC WHICH GOES WIT H THE ITA NO. 2350//MUM/2005 ITA NO. 466//MUM/2006 ITA NO. 1276//MUM/2006 ITA NO. 582/MUM/2008 ITA NO. 1269//MUM/2008 34 OWNERSHIP OF THE CARS AND CANNOT BE DISALLOWED. IN THE ALTERNATIVE HE SUBMITTED THAT THE EXPENSES SHOULD BE TREATED AS PERQUISITES AND NO DISALLOWANCE IS CALLED FO R. HE HAS RELIED UPON THE DECISION OF THE HON.BLE GUJARAT HIG H COURT IN THE CASE OF SAYAJI IRON AND ENGG. CO REPORTED IN 2 53 ITR 749. 14.11 ON THE OTHER HAND THE LEARNED DR HAS RELIED UPON THE ORDER OF THE CIT(A). 14.12 AFTER HEARING BOTH THE PARTIES AND CONSIDERI NG THE RECORD WE FIND THAT THE ASSESSEE CONTENDED BEFOR E THE CIT(A) THAT THE DISALLOWANCE SHOULD BE LIMITED TO 10% OF THE EXPENDITURE ON PETROL AND CURRENT REPAIRS. ACCORD INGLY WE ARE OF THE VIEW THAT IT WOULD BE PROPER AND JUSTIFI ED IF THE 10% OF THE PETROL AND CURRENT REPAIRS BE DISALLOWED ON THIS ACCOUNT. THE ORDER OF THE CIT(A) IS MODIFIED TO THIS EXTENT.. 14.13 ACCORDINGLY GROUNDS OF APPEAL NO.4 IS PARTLY ALLOWED. ITA NO. 1269//MUM/2008 15. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS I N THIS APPEAL AS UNDER : 1A. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN COMPUTING HOUSE ITA NO. 2350//MUM/2005 ITA NO. 466//MUM/2006 ITA NO. 1276//MUM/2006 ITA NO. 582/MUM/2008 ITA NO. 1269//MUM/2008 35 PROPERTY INCOME FROM AGRA PROPERTY AT RS.5 103/- AS AGAINST THE INCOME COMPUTED BY THE AO; 1B. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN BIFURCATING THE RETABLE VALUE OF THE BUILDING OWNED BY THE ASSESSEE INTO LEGAL AND ILLEGAL OCCUPIERS WHEN THE SUITS FIL ED IN THE COURTS AGAINST THEM IS STILL PENDING; 1C.. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN TAKING THE ANNU AL RETABLE VALUE OF THE SMALL PORTION OF BUILDING WHOS E OCCUPIERS ARE ACTUALLY PAYING THE RENT TO THE ASSES SEE IS CONTRARY TO HIS OWN DECISION IN HOLDING THAT THE TAX ON INCOME FROM HOUSE PROPERTY IS THE INHERENT CAPACITY OF THE BUILDING TO YIELD INCOME AND NOT T HE ACTUAL RENT RECEIVED; 1D . ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN NOT TAKING THE ENTIRE RATABLE VALUE FIXED BY THE BMC AT RS.7 81 470/- AS THE GROSS ANNUAL VALUE WHICH IS THE EARNING CAPACIT Y OF THE BUILDING 1E. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN NOT REALIZING THAT THE BMC EVEN IF IT RECEIVES TAXES/MONEY FROM THE OCCUPIERS AS PER SECTION 146 OF BMC ACT IT RAISED THE BILLS AND ISSUES RECEIPTS IN THE NAME OF OWNER ONLY . 15.1 IN THE ABOVE GROUNDS THE REVENUE HAS RAISED O NLY ONE ISSUE REGARDING HOUSE PROPERTY INCOME FROM AGRA BU ILDING. WE HAVE ALREADY DISCUSSED AND DECIDED THIS IN ITA NO. 2350//MUM/2005 IN PARAGRAPHS 3.1 TO 3.4 AND ALLOWE D THIS GROUND FOR STATISTICAL PURPOSES. ACCORDINGLY WE R EMIT THIS ISSUE TO THE FILE OF THE AO FOR FRESH CONSIDERATION 16. IN THE RESULT THE APPEAL BEARING ITA NO. 2350//MUM/2005 IS PARTLY ALLOWED FOR STATISTICAL PU RPOSES ITA ITA NO. 2350//MUM/2005 ITA NO. 466//MUM/2006 ITA NO. 1276//MUM/2006 ITA NO. 582/MUM/2008 ITA NO. 1269//MUM/2008 36 NO. 466//MUM/2006 (BY ASSESSEE) IS PARTLY ALLOWED ITA NO. 1276//MUM/2006 ( BY REVENUE) IS PARTLY ALLOWED FOR STATISTICAL PURPOSES ITA NO. 582/MUM/2008 (BY ASSESSEE) IS PAR TLY ALLOWED AND ITA NO. 1269//MUM/2008 ALLOWED FOR STA TISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 21.01.2011 SD SD (J SUDHAKAR REDDY) (VIJAY PAL RAO) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ON THIS 21 ST DAY OF JAN 2011 SRL:10111 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT CONCERNED 4. CIT(A) CONCERNED 5. DR CONCERNED BENCH BY ORDER TRUE COPY ASSTT. REGISTRAR ITAT MUMBAI