UNIGEM INDIA P. LTD, MUMBAI v. ADDL CIT RG 5(3), MUMBAI

ITA 2490/MUM/2010 | 2005-2006
Pronouncement Date: 29-07-2011 | Result: Partly Allowed

Appeal Details

RSA Number 249019914 RSA 2010
Assessee PAN AAACU0081C
Bench Mumbai
Appeal Number ITA 2490/MUM/2010
Duration Of Justice 1 year(s) 3 month(s) 29 day(s)
Appellant UNIGEM INDIA P. LTD, MUMBAI
Respondent ADDL CIT RG 5(3), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 29-07-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted F
Tribunal Order Date 29-07-2011
Date Of Final Hearing 20-07-2011
Next Hearing Date 20-07-2011
Assessment Year 2005-2006
Appeal Filed On 30-03-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI F BENCH BEFORE SHRI T.R.SOOD ACCOUNTANT MEMBER & SMT. ASHA VIJAY RAGHAVAN JUDICIAL MEMBER I.T.A.NO.2490/MUM/2010 A.Y 2005-06 M/S UNIGEM INDIA PVT. LTD. 401/402 PRASAD CHAMBERS OPERA HOUSE MUMBAI 400 004. PAN: AAACU 0081 C VS. ADDL. COMMISSIONER OF I.T. RANGE 5(3) MUMBAI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI APURVA R. SHAH. RESPONDENT BY : SHRI R.K.GUPTA. DR DATE OF HEARING:27/07/2011 DATE OF PRONOUNCEMENT: 29/7/2011. O R D E R PER T.R.SOOD AM: IN THIS APPEAL VARIOUS GROUNDS HAVE BEEN RAISED B UT AT THE TIME OF HEARING LD. COUNSEL OF THE ASSESSEE SUBMITTED TH AT ONLY TWO DISPUTES ARE INVOLVED NAMELY: 1. CONFIRMATION OF DISALLOWANCE OF GRATUITY PAID AMOUN TING TO RS.1 30 818/- AND 2. CONFIRMATION OF ADDITION ON ACCOUNT OF RENTAL INCOM E. 2. ISSUE NO.1 : AFTER HEARING BOTH THE PARTIES WE FIND THAT DURI NG THE ASSESSMENT PROCEEDINGS AO NOTICED THAT ASSESSEE HAS CLAIMED DEDUCTION AMOUNTING TO RS.1 30 818/- ON ACCOUNT OF PAYMENT OF GRATUITY TO TWO PERSONS SHRI HITEN K. SHAH AND MS. HEMLATA NARAYAN SWAMI WHO HAD RESIGNED FROM THE COMPANY. ON QUERY I T WAS CLARIFIED THAT DEDUCTION IS NOT BEING CLAIMED U/S.43B. THE AO OBSERVED THAT ITA NO.2490/M/10 2 PAYMENT WAS NOT CLAIMED AS CONTRIBUTION TOWARDS APP ROVED GRATUITY FUND THEREFORE ALLOWABILITY HAS TO BE EXAMINED U/ S.37. ACCORDING TO HIM PAYMENT OF GRATUITY CRYSTALISED AND WAS GIVEN TO THE EMPLOYEES ONLY AFTER THEIR RESIGNATIONS AND THEREFORE SAME WAS NOT IN CONSIDERATION OF SERVICES BUT AS CONSIDERATION FOR TERMINATION OF THE SERVICES. 3. ON APPEAL ACTION OF THE AO HAS BEEN CONFIRMED B Y THE LD. CIT(A). 4. BEFORE US LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT ASSESSEE WAS REGULARLY CREATING PROVISION FOR GRATUITY AND S INCE SAME WAS NOT ALLOWABLE U/S.40A[VII] THEREFORE DEDUCTION HAS BE EN CLAIMED ON ACTUAL PAYMENT. 5. ON THE OTHER HAND LD. DR SUPPORTED THE ORDER OF THE CIT(A). 6. AFTER CONSIDERING THE RIVAL SUBMISSIONS WE ARE OF THE VIEW THAT IF GRATUITY HAS BEEN ACTUALLY PAID THEN SAME IS AL LOWABLE AS EXPENDITURE. HOWEVER IT IS NOT CLEAR WHETHER ASSES SEE HAD ACTUALLY CREATED THE PROVISION OR NOT. EVEN IF IT IS ASSUMED THAT GRATUITY WAS PAID AFTER THE TERMINATION/RESIGNATION OF THE EMPLO YEE EVEN THEN SAME HAS TO BE ALLOWED BECAUSE WHEN EMPLOYEES ARE G OING OUT IF THEY ARE NOT PAID PROPERLY THEN IT AFFECTS THE MORALE O F OTHER EXISTING/CONTINUING EMPLOYEES. HOWEVER IN THE INTE RESTS OF JUSTICE WE SET ASIDE THE ORDER OF THE LD. CIT(A) AND REMIT THE MATTER BACK TO THE FILE OF THE AO TO VERIFY WHETHER A PROVISION WAS AC TUALLY MADE FOR GRATUITY BECAUSE THAT ITSELF WOULD SHOW THAT GRATUI TY WAS PAYABLE BY ITA NO.2490/M/10 3 THE ASSESSEE. IF SUCH PROVISION WAS MADE THEN THE GRATUITY PAID DURING THE YEAR SHOULD BE ALLOWED. 7. ISSUE NO.2 : AFTER HEARING BOTH THE PARTIES WE FIND THAT DURI NG ASSESSMENT PROCEEDINGS AO NOTICED THAT ASSESSEE HAD DECLARED RENTAL RECEIPTS OF RS.2 02 O00/- AS PER THE FOLLOWING DETA ILS: DETAILS TENANTS NAME AREA [IN SQ.FT] AMOUNT [IN RS.] GALA NO.001 GALA NO.002 GALA NO.003 GALA NO.004 RATILAL BECHARALAL DIAMONDS PVT.LTD. 315 305 305 315 47 270 46 750 54 000 54 000 2 02 000 THE AO NOTICED THAT THIS TRANSACTION WAS ENTERED IN TO WITH AN ASSOCIATE CONCERN AND THEREFORE QUERIES WERE RAISED. IN RES PONSE TO SUCH QUERIES IT WAS SUBMITTED THAT RATEABLE VALUE AS PER EXCEL SMALL SCALE INDUSTRIES PREMISES CO-0P. SOCIETY LTD. THE RATEAB LE VALUE OF THESE GALAS WAS ONLY RS.51 416/-. HOWEVER AO FURTHER FOU ND THAT PREMISES TAKEN BY THE SAME TENANT FROM ANOTHER PERSON WERE T AKEN @ RS.14/- PER SQ. FT. IN MAY 2007 WHEREAS ASSESSEE HAD LET O UT THE PROPERTY FROM F.Y 2004-05 @ RS.10/- PER SQ. FT. HE ACCORDING LY ENHANCED THE RENT TO RS.14/- PER SQ.FT. AND DETERMINED THE INCOM E FROM HOUSE PROPERTY ACCORDINGLY. 8. ON APPEAL ASSESSEE COULD NOT SUCCEED BEFORE THE LD. CIT(A) AND HENCE IS IN THE APPEAL BEFORE US. 9. THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT R ENT RECEIVED BY THE ASSESSEE CANNOT BE COMPARED IF THE RENT PAID BY A TENANT TO ANOTHER LAND-LORD BECAUSE THOSE PREMISES HAVE BEEN LET OUT W.E.F. MAY 2007 WHEREAS THE ASSESSEE HAS LET OUT THE PRE MISES THREE YEARS ITA NO.2490/M/10 4 BEFORE THAT DATE AND THEREFORE THE RENT RECEIVED BY THE ASSESSEE WAS REASONABLE AND SHOULD HAVE BEEN ACCEPTED. 10. ON THE OTHER HAND LD. DR RELIED ON THE ORDER O F THE CIT(A). 11. AFTER CONSIDERING THE RIVAL SUBMISSIONS CAREFUL LY WE FIND THAT NO DOUBT AO HAS A RIGHT TO DETERMINE THE FAIR RENT U/S .23[1][A] IF HE IS OF THE VIEW THAT RENT HAS BEEN SUPPRESSED BY BRINGING OUT SOME MATERIAL ON RECORD. BUT IN THE CASE BEFORE US THE ONLY MATE RIAL BROUGHT ON RECORD IS THAT IN A SIMILAR LOCALITY THE TENANT HAS PAID HIGHER RENT @ RS.14/- PER SQ. FT. IN COMPARISON TO RENT RECEIVED BY THE ASSESSEE @ RS.10/- PER SQ.FT. BUT AO HAS FAILED TO NOTICE THAT HIGHER RENT PAID BY THE TENANT TO ANOTHER LAND-LORD WAS IN RESPECT OF T HE PREMISES WHICH WERE TAKEN ON LEASE ALMOST THREE YEARS AFTER THE LE ASE DEED SIGNED BY THE ASSESSEE. IT IS A COMMON KNOWLEDGE THAT RENTS A RE INCREASING FROM DAY-TO-DAY AND NATURALLY RENT MUST HAVE INCREASED O VER A PERIOD OF TIME. AT THE SAME TIME IT IS NOT EASY TO INCREASE THE RENT IN CASE OF THE OLD TENANTS BECAUSE SAME IS DETERMINED AS PER THE A GREEMENT. THEREFORE WE FIND NO JUSTIFICATION IN THE ADDITION AND ACCORDINGLY DELETE THE SAME. 12. IN THE RESULT APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 2 9/7/2011. SD/- SD/- (ASHA VIJAY RAGHAVAN) (T.R.SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI: 29/7/2011. P/-*