DAMOS TRADING CO. P. LTD, MUMBAI v. ACIT CIR 6(2), MUMBAI

ITA 1684/MUM/2010 | 2005-2006
Pronouncement Date: 25-03-2011 | Result: Partly Allowed

Appeal Details

RSA Number 168419914 RSA 2010
Assessee PAN AAACI1018D
Bench Mumbai
Appeal Number ITA 1684/MUM/2010
Duration Of Justice 1 year(s) 23 day(s)
Appellant DAMOS TRADING CO. P. LTD, MUMBAI
Respondent ACIT CIR 6(2), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 25-03-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted D
Tribunal Order Date 25-03-2011
Assessment Year 2005-2006
Appeal Filed On 04-03-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES D MUMBAI BEFORE SHRI N. V. VASUDEVAN J.M. AND SHRI T.R. SOO D A.M. I.T.A. NO.: 1684/MUM/2010 ASSESSMENT YEAR : 2005-06 M/S. DAMOS TRADING CO. PVT LTD. GS-8 SHUBHADA CO.OP.HSG. SOC. SIR POCHKANWALA ROAD WORLI MUMBAI-400 030 PAN NO: AAACI 1018 D ACIT CIRCLE 6(2) AAYAKAR BHAVAN NEW MARINE LINES MUMBAI- 400 020 (APPELLANT) VS. (RESPONDENT) APPELLANT BY : SHRI S.K. GOPAL RESPONDENT BY : SHRI JITENDRA YADAV ORDER PER T.R. SOOD (AM) : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGA INST THE ORDER DATED 21.01.2008 OF COMMISSIONER OF INCOME TAX (APPEALS)- 12 MUMBAI AND RELATES TO THE ASSESSMENT YEAR 2005-06. 2. IN THIS APPEAL ASSESSEE HAS RAISED FOLLOWING GRO UNDS:- 1. THE LD. ACIT SERIOUSLY ERRED ON THE FACTS AND I N THE CIRCUMSTANCES OF THE CASE IN ARBITRARILY ALLOCATING ` .5 67 787/- OUT OF COMMON BUSINESS EXPENSES TREATING THE SAME A S INCURRED FOR EARNING OF RENTAL INCOME. THE LD. ACIT GROSSLY ERRED IN HOLDING THAT COMMON EXPENSES ARE SPENT FOR EARNING RENTAL INCOME AND ARBITRARY ALLOCATING OF THESE EXPENSES W ITHOUT ANY JUSTIFICATION AND DISALLOWING OF ` .5 67 787/- OUT OF COMMON BUSINESS EXPENSES. 2. THE LD. APPELLANT SERIOUSLY ERRED IN GIVING A WORKI NG FOR ALLOCATION OF COMMON EXPENSES WRONGLY STATING THAT IT HAS BEEN GIVEN BY THE APPELLANT. VIDE LETTER DT. 12.12.2007. 3. THE LD. ACIT SERIOUSLY ERRED IN LAW AND ON THE FACT S AND IN THE CIRCUMSTANCES OF THE CASE BY TREATING LOSS ON D ERIVATIVES AS SPECULATION LOSS IGNORING THE DECISION OF HONBLE I TAT (BOMBAY) GIVEN IN THE CASE OF DY. CIT V/S. SSKI INVESTORS PV T. LTD. VIDE ORDER NO. ITAT 3182 MUMBAI 204 DT. 25.09.2007 AND MISLEADING HIMSELF IN UNDERSTANDING DIFFERENCE BETW EEN 2 SPECULATION TRANSACTION AND TRANSACTION OF DERIVATI VES. THE APPELLANT PRAYS THAT THE LOSS OF DERIVATIVES OF ` .91 988/- TO BE ALLOWED TO BE SET OFF AGAINST BUSINESS INCOME. 3. GR.NO.1 AFTER HEARING BOTH THE PARTIES WE FIND THAT DURING THE ASSESSMENT PROCEEDINGS AO NOTICED THAT CERTAIN COMM ON EXPENSES HAVE BEEN INCURRED BY THE ASSESSEE AND SOME OF THE EXPEN SES RELATE TO THE INCOME EARNED FROM HOUSE PROPERTY. THEREFORE HE MA DE ANALYSIS OF THE INCOME AND FOUND THAT INCOME CONSTITUTED WAS FOLLO WING THE ELEMENTS:- DETERMINATION OF PRORATA EXPENSES DISALLOWANCE U/S.14A OF INCOME TAX ACT ANALYSIS OF INCOME AMOUNT % RENTAL INCOME 1 39 96 800 67.83% INTEREST RECEIVED 26 38 355 12.79% INCOME FROM MUTUAL FUND & DIVIDEND 39 99 229 19.38% _____________ __________ 20634 384 100.00% _____________ _________ THEN HE ANALYSED THE EXPENSES AND DISALLOWED A SUM OF ` .5 67 787/- AGAINST THE RENTAL INCOME. 4. BEFORE THE LEARNED CIT (APPEALS) IT WAS MAINLY A RGUED THAT NO EXPENSES WERE INCURRED IN RESPECT OF THE RENTAL INC OME. AFTER CONSIDERING THE SUBMISSION OF THE LEARNED CIT (APPEALS) HE HAS DECIDED THE ISSUE VIDE PARA 2.3 WHICH IS AS UNDER :- 2.3 MOST OF THE EXPENSES EXCEPT PAYMENT OF STAFF AN D TRAVELLING AND CONVEYANCE AND VEHICLE MAINTENANCE RELATE TO TH E OFFICE ADMINISTRATION. THE OFFICE IS MAINTAINED FOR ALL TH E DIFFERENT ACTIVITIES FROM WHICH INCOME IS EARNED. THE OFFICE EXPENSES SHOULD BE SPREAD OVER ALL EXPENSES PROPORTIONATELY. THE COMMON EXPENSES WHICH HAVE NEXUS WITH THE PROPERTY WORKS OUT TO ` .5 30 843/-. THE PROPORTIONATE EXPENDITURE AT 67.83 % WORKS OUT TO ` .3 60 070/-. THE DISALLOWANCE OF ` .5 67 787/- IS THEREFORE RESTRICTED TO ` .3 60 070/-. 3 5. BEFORE US THE LEARNED COUNSEL FOR THE ASSESSEE REFERRED TO PAGE 1 OF THE COMPUTATION AND POINTED OUT THAT ASSESSEE HAS A LREADY ADDED BACK A SUM OF ` .6 43 056/- TOWARDS RATES AND TAXES ETC. THEREFORE THERE WAS NO FURTHER NEED OF DISALLOWANCE OF EXPENDITURE. 6. ON THE OTHER HAND LEARNED DR SUPPORTED THE ORDE R OF THE LEARNED CIT (APPEALS). 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF BOTH THE PARTIES AND FIND THAT WHEN INCOME FROM HOUSE PROPERTY HAS BEEN COMPUTED SEPARATELY THEN THERE WAS NO NEED TO DISALLOW ANY MORE EXPENSES UNLESS AND UNTIL THERE WAS SOME EXPENDITURE CLAIMED ON AC COUNT INCOME FROM HOUSE PROPERTY. MOREOVER ASSESSEE HAS ITSELF DISAL LOWED A SUM OF ` .6 43 056/- AND ADDED BACK THE SAME TO THE BUSINESS INCOME AS PER COMPUTATION ON THE PAPER BOOK. HOWEVER IT IS NOT CLEAR WHAT IS THE NATURE OF EXPENDITURE WHICH HAS BEEN ADDED BACK BY THE ASSESSEE AND WE THEREFORE SET ASIDE THE ORDER OF THE LEARNED CIT ( APPEALS) AND REMIT THE MATTER BACK TO THE FILE OF AO FOR RE-EXAMINATION OF THE ISSUE. 8. GR.NO.2 DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE A O NOTICED THAT ASSESSEE HAS INCURRED THE LOSS ON ACCOUNT OF D ERIVATIVE TRANSACTION AMOUNTING TO ` .91 988/- AND THE SAME WAS HELD TO BE IN THE NATURE OF SPECULATION LOSS AND THE SAME WAS ACCORDINGLY DISA LLOWED. 9. ON APPEAL THE ACTION OF THE AO HAS BEEN CONFIRM ED BY THE LEARNED CIT(APPEALS). 10. BEFORE US THE LEARNED COUNSEL FOR THE ASSESSEE FAIRLY CONCEDED THAT THIS ISSUE IS COVERED BY THE DECISION OF THE SPECIA L BENCH OF THE TRIBUNAL IN CASE OF SHREE CAPITAL SERVICES LTD. REPORTED IN 121 ITD 498 (KOL). 11. ON THE OTHER HAND LEARNED DR SUPPORTED THE ORD ER OF THE LEARNED CIT (APPEALS). 4 12. AFTER CONSIDERING THE RIVAL SUBMISSIONS WE FIN D THAT SPECIAL BENCH OF THE TRIBUNAL IN CASE OF SHREE CAPITAL SERVICES L TD. (SUPRA) HAS HELD THAT CLAUSE (D) OF THE PROVISO TO SECTION 43(5) IS OF PR OSPECTIVE NATURE AND WOULD APPLY FROM 01.04.2006 AND THEREFORE THE LOS S ON ACCOUNT OF FUTURES AND OPTIONS WAS RIGHTLY TO BE TREATED AS SP ECULATIVE LOSS. FOLLOWING THIS DECISION WE CONFIRM THE ORDER OF THE LEARNED CIT (APPEALS). 13. GR.NO.3 AFTER HEARING BOTH THE PARTIES WE FIND THAT ASSESS EE HAD MADE A CLAIM OF ` .2 32 992/- PAID AS OCCUPANCY CHARGES AND THE SAME WAS CLAIMED AS DEDUCTION. THE AO OBSERVED THAT SINCE AS PER SECTION 24 OF THE ACT ONLY 30% OF THE ANNUAL VALUE IS TO BE ALLOWED AS DEDUCTION NO OTHER DEDUCTION IS ALLOWABLE AND ACCORDINGLY MADE DISALL OWANCES OF ` .2 32 992/-. 14. ON APPEAL THE ACTION OF THE AO WAS CONFIRMED B Y THE LEARNED CIT (APPEALS). 15. BEFORE US THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT SUCH DEDUCTION IS ALLOWABLE IN TERMS OF THE DECISION IN CASE OF AHMEDABAD BENCH OF THE TRIBUNAL IN THE CASE OF J.B. PATEL AND COMPANY VS. DCIT REPORTED IN 118 TD 556 IN THAT CASE DEDUCTIONS CLA IMED ON ACCOUNT OF SALARIES PAID TO PUMP MEN SWEEPER AND LIFT MAN AS WELL AS ELECTRICITY CHARGES WERE HELD TO BE ALLOWABLE. HE ALSO RELIED O N THE DECISION OF MUMBAI BENCH IN THE CASE OF SHARMILA TAGORE VS. JCI T REPORTED IN 93 TTJ 483 (MUM). 16. ON THE OTHER HAND THE LEARNED DR SUBMITTED THA T NO SUCH DEDUCTION IS ALLOWABLE BECAUSE SECTION 24 DOES NOT PERMIT THE SAME AND IN THIS REGARD HE RELIED ON THE DECISION OF MUMBAI BE NCH OF THE TRIBUNAL IN THE CASE OF ITO VS. BORODAWALA PROPRIETORS LTD. REP ORTED IN 83 ITD 467 (MUM) WHEREIN FOLLOWING THE DECISION OF THE HONBL E DELHI COURT IN THE CASE OF CIT VS. H.G. GUPTA AND SONS REPORTED IN 149 ITR 153 IT WAS HELD THAT ONLY THOSE DEDUCTIONS COULD BE ALLOWED WHICH A RE PROVED IN THE PARTICULAR SECTIONS. 5 17. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFU LLY AND FIND FORCE IN THE SUBMISSION OF LD. DR. ALL TYPES OF INCOMES ARE TO BE TAXED UNDER FIVE HEADS OF INCOME DEALING WITH DIFFERENT TYPES OF INC OME. INCOME FROM RENT FROM HOUSE PROPERTY IS REQUIRED TO TAXED IN CHAPTER IVC KNOWN AS COMPUTATION OF TOTAL INCOME FROM HOUSE PROPERTY. SE CTION 24 GIVES THE ITEMS OF DEDUCTIONS AND ONLY TOW TYPES OF DEDUCTION S ARE ALLOWABLE NOW (A) 30% OF THE ANNUAL VALUE AND (B) INTEREST INCURRED T OWARDS PURCHASE ETC. ON SUCH PROPERTY SUBJECT TO SOME OTHER LIMITATIONS. IT HAS TO BE REMEMBERED THAT EARLIER SECTION 24 BEFORE ITS AMEN DMENT BY FINANCE ACT 2001 CONTAINED MANY OTHER DEDUCTIONS WHICH HAVE NOW BEEN RESTRICTED ONLY TOW TYPES OF DEDUCTIONS. IT IS FURTHER SETTLED THAT WHILE COMPUTING THE INCOME UNDER A PARTICULAR HEAD DEDUCTIONS CAN BE GI VEN ONLY IF THE SAME ARE PROVIDED UNDER THAT CHAPTER. THIS BECOME FURTHE R CLEAR FROM THE DECISION OF HONBLE SUPREME COURT IN CASE OF CIT VS . DR. V. P. GOPINATHAN REPORTED IN 248 ITR 449 ON THIS QUESTION IT WAS HEL D AS UNDER :- THE ASSESSEE HAD PUT MONEYS IN FIXED DEPOSIT WITH A BANK AND HAD EARNED INTEREST OF ` .1 17 444/-. ON THE SECURITY OF THE AMOUNT SO DEPOSITED THE ASSESSEE TOOK A LOAN FROM THE BANK AND PAID IN RESPECT OF THE LOAN INTEREST OF ` .90 410/-. THE QUESTION WHETHER THE ASSESSEE COULD BE TAXED ONLY O N THE DIFFERENCE OF ` .27 034/-. HELD THAT THE INTEREST THAT THE ASSESSEE RECEIVED FROM THE BANK ON THE FIXED DEPOSI T WAS INCOME IN HIS HANDS AND IT COULD STAND DIMINISHED O NLY IF THERE WAS A PROVISION IN LAW PERMITTING SUCH DIMINUTION. THERE WAS NO SUCH PROVISION OF LAW AND THE INTEREST ON THE LO AN TAKEN FROM THE BANK DID NOT REDUCE HIS INCOME BY WAY OF INTERE ST ON THE FIXED DEPOSIT. 18. FROM ABOVE IT IS CLEAR THAT UNTIL AND UNLESS D EDUCTION IS PROVIDED UNDER THE RELEVANT HEAD THE SAME CANNOT BE ALLOWED. THIS POSITION FURTHER BECOMES CLEAR FROM DECISION OF HONBLE DELHI HIGH C OURT IN CASE OF H. G. GUPTA WHERE THE HONBLE COURT HAS OBSERVED AS UNDER :- THE LEGISLATURE HAS USED THE WORD NAMELY IN S. 2 4 OF THE I.T. ACT 1961 AND THIS SHOWS THAT THE HEADS OF EXPENDI TURE WHEREOF DEDUCTION CAN BE CLAIMED IN COMPUTATION OF INCOME FROM HOUSE PROPERTY ARE EXHAUSTIVE. IF A PARTICULAR TYPE OF EXPENDITURE IS NOT SPECIFICALLY PROVIDED TO BE DEDU CTIBLE DEDUCTION THEREOF CANNOT BE CLAIMED FROM OUT OF THE ANNUAL 6 VALUE. NEITHER S.23 NOR S.24 PROVIDES FOR THE DEDUC TION OF THE EXPENSES INCURRED TOWARDS STAMP DUTY OR REGISTRATIO N IN RESPECT OF THE LEASE OF THE HOUSE PROPERTY. HELD ACCORDINGLY THAT THE ASSESSEE-FIRM WAS NOT EN TITLED TO DEDUCTION OF A HALF SHARE OF THE STAMP DUTY AND REG ISTRATION CHARGES BORNE BY IT IN RESPECT OF A LEASE OF ITS HO USE PROPERTY FOR A PERIOD OF FIVE YEARS IN COMPUTING ITS INCOME FOR THE HOUSE PROPERTY. 19. SINCE NO DEDUCTIONS FOR OCCUPANCY CHARGES WERE PROVIDED U/S.24 THE SAME IS NOT ALLOWABLE. IN THESE CIRCUMSTANCES WE FIND NOTHING WRONG WITH THE ORDER OF LEARNED CIT(A) AND CONFIRM THE SA ME. 20. IN THE RESULT THE ASSESSEES APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THIS 25 TH DAY OF MARCH 2011. SD/- SD/- (N. V. VASUDEVAN) (T. R. SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI DT: 25/03/2011 COPY FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE C.I.T. 4. CIT (A) 5. THE DR D - BENCH ITAT MUMBAI //TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT MUMBAI BENCHES MUMBAI ROSHANI