BIRYAS FINANCE AND INVESTMENTS PVT. LTD., MUMBAI v. ITO -WD- 2(1)(2), MUMBAI

ITA 3141/MUM/2018 | 2014-2015
Pronouncement Date: 13-11-2019 | Result: Partly Allowed

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Appeal Details

RSA Number 314119914 RSA 2018
Assessee PAN MARCH2012H
Bench Mumbai
Appeal Number ITA 3141/MUM/2018
Duration Of Justice 1 year(s) 6 month(s) 2 day(s)
Appellant BIRYAS FINANCE AND INVESTMENTS PVT. LTD., MUMBAI
Respondent ITO -WD- 2(1)(2), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 13-11-2019
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted B
Tribunal Order Date 13-11-2019
Last Hearing Date 23-05-2019
First Hearing Date 23-05-2019
Assessment Year 2014-2015
Appeal Filed On 11-05-2018
Judgment Text
1 ITA NO.3141/MUM/2018 BIRYAS FINANCE & INVESTMENT P.LTD. ASSESSMENT YEAR-2014-15 IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH MUMBAI BEFORE SHRI SAKTIJIT DEY JM AND SHRI MANOJ KUMAR AGGARWAL AM /. I.T.A. NO.3141/MUM/2018 ( / ASSESSMENT YEAR:2014-15 ) BI R YAS FINANCE AND INVESTMENTS PVT. LIMITED C/O V.VAIDYANATHAN & CO. D-704 NEELKANTH BUSINESS PARK NATHANI ROAD VIDYAVIHAR (W) MUMBAI-400 086. / VS. INCOME TAX OFFICER - WARD - 2 (1 )(1) AAYKAR BHAVAN M.K. ROAD MUMBAI-400 020. :;<=> ./ > ./ PAN/GIR NO. AAACB - 4171 - G ( JK / APPELLANT ) : ( MNJK / RESPONDENT ) JKO / APPELLANT BY : SHRI V. VAIDYANATHAN - LD. AR MNJKO / RESPONDENT BY : MS. SAMATHA MULLAMUDI - LD.SR.DR / DATE OF HEARING : 30/09/2019 / DATE OF PRONOUNCEMENT : 13/11/2019 / O R D E R MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER):- 1. AFORESAID APPEAL BY ASSESSEE FOR ASSESSMENT YEAR [AY] 2014-15 CONTEST THE ORDER OF LD. COMMISSIONER OF INCOME-TAX (APPEALS)-4 MUMBAI 2 ITA NO.3141/MUM/2018 BIRYAS FINANCE & INVESTMENT P.LTD. ASSESSMENT YEAR-2014-15 [IN SHORT REFERRED TO AS CIT(A)] APPEAL NO. CIT(A)-4/E-FILING/102/ITO- 2(1)(1)/2016-17 DATED 15/03/2018 ON FOLLOWING GROUNDS OF APPEAL:- 1. FIRST GROUND OF APPEAL RELATES TO CONSIDERING THE SURPLUS ON SALE OF PROPERTY UNDER SECTION 50. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE LEARNED CIT (A)-4 WHILE PASSING THE APPELLATE ORDER DID NOT APPRECIAT E THE FACT THAT THE ASSESSEE HAS NOT AVAILED OF DEPRECIATION IN ANY OF THE YEARS INCLUDI NG THE YEAR OF ASSESSMENT WHICH IS PREREQUISITE CONDITION FOR CONSIDERING THE BLOCK OF ASSETS AS DEPRECIABLE AND HENCE CANNOT BE CONSIDERED U/S. 50. 2. SECOND GROUND OF APPEAL RELATES TO THE DISALLO WANCE OF EXPENSES RELATING TO THE PROPERTY INCURRED TO MAKE THE SAME ELIGIBLE FOR SALE. WITHOUT PREJUDICE TO THE FIRST GROUND ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT (APPEALS) -4 WHILE PASS ING THE APPELLATE ORDER DID NOT ALLOW THE EXPENSES INCURRED FOR RENOVATION CLEARANCE OF LIABILITY AGAINST THE PROPERTY TAX AND LEGAL EXPENSES PREPARING THE DOCUMENTS FOR SALE. 3. THIRD GROUND OF APPEAL RELATES TO THE DISALLOWANCE OF ADMINISTRATIVE EXPENSES INCURRED AGAINST THE INCOME ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE LEARNED CIT (A) - 4 WHILE PASSING THE APPELLATE ORDER DID NOT CONSIDER THE GENUINE OPERATING EXPENSES TO BE ALLOWED AGAINST THE INCOME. THE APPELLANT COMPANY THEREFORE PRAYS THE ORDER O F THE LEARNED ASSESSING OFFICER / CIT (APPEALS) BE AMENDED TO ALLOW DEDUCTIONS / RELI EFS CLAIMED ABOVE. THE APPELLANT COMPANY ALSO CRAVES LEAVE TO ADD TO ALTER AND / OR AMEND ANY OF THE FOREGOING GROUNDS IF AND WHEN NECESSARY. WE HAVE HEARD AND CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED RELEVANT MATERIAL ON RECORD INCLUDING DOCUMENTS PLACED IN TH E PAPER-BOOK. 2.1 FACTS ON RECORD WOULD REVEAL THAT THE ASSESSEE BEING RESIDENT CORPORATE ASSESSEE STATED TO BE ENGAGED IN INVESTME NT IN REAL ESTATE WAS ASSESSED FOR YEAR UNDER CONSIDERATION U/S 143(3) ON 27/12/2016 WHEREIN THE INCOME OF THE ASSESSEE WAS DETERMINED AT RS.90. 53 LACS AS AGAINST RETURNED INCOME OF RS.14.30 LACS E-FILED BY THE ASS ESSEE ON 30/09/2014. 2.2 DURING ASSESSMENT PROCEEDINGS IT TRANSPIRED TH AT THE ASSESSEE SOLD ONE IMMOVABLE PROPERTY FOR RS.170 LACS ON 30/10/201 3. THE ASSESSEE 3 ITA NO.3141/MUM/2018 BIRYAS FINANCE & INVESTMENT P.LTD. ASSESSMENT YEAR-2014-15 REFLECTED GAIN ON SALE FOR RS.37.33 LACS IN THE PRO FIT & LOSS ACCOUNT. THE PERUSAL OF BLOCK OF ASSET IN THE BALANCE SHEET REVE ALED THAT THE ASSESSEE WAS HAVING ONLY ONE PROPERTY UNDER THE BLOCK BUILDINGS. THE SAID ASSET WAS DEPRECIABLE ASSET AND THEREFORE SINCE THE ENTIRE B LOCK WAS EXHAUSTED THE PROVISIONS OF SEC. 50 WERE FOUND TO BE APPLICABLE T O THE FACTS OF THE CASE. ACCORDINGLY THE GAIN ON SALE OF PREMISES IN THE O PINION OF LD. AO WAS TO BE TAXED AS SHORT-TERM CAPITAL GAINS (STCG) AND EXP ENSES OF RS.70.40 LACS CLAIMED AGAINST SALE OF THE PROPERTY WERE TO B E DISALLOWED. THE ASSESSEE FURNISHED WORKING OF SHORT-TERM CAPITAL GA IN FOR RS.0.33 LACS WHICH HAS ALREADY BEEN EXTRACTED AT PARA 6.2 OF THE QUANTUM ASSESSMENT ORDER. THE COST OF THE PROPERTY NET OF DEPRECIATIO N WAS SHOWN BY THE ASSESSEE TO BE RS.99.25 LACS. THE ASSESSEE CLAIMED DIRECT EXPENDITURE & INDIRECT EXPENDITURE OF RS.33.41 LACS & RS.36.99 LA CS RESPECTIVELY AGAINST THE SALE OF THE PROPERTY AND SUBMITTED THAT THE ADM INISTRATIVE EXPENSES WERE TO BE CAPITALIZED WITH THE PROPERTY SOLD AND T HE SAME WERE ALLOWABLE EXPENDITURE. HOWEVER REJECTING THE SAME LD. AO OP INED THAT THE PROPERTY WAS HELD NOT AS AN INVESTMENT BUT AS A FIXED-ASSET AGAINST WHICH ADMINISTRATIVE EXPENDITURE DIRECTORS / EMPLOYEES REMUNERATION AGGREGATING TO RS.36.99 LACS COULD NOT BE ALLOWED S INCE THESE EXPENDITURES WERE NOT INCURRED WHOLLY AND EXCLUSIVE LY IN CONNECTION WITH TRANSFER OF ASSET. REGARDING DIRECT EXPENDITURE OF RS.33.41 LACS THE ASSESSEE COULD NOT SUBMIT CONCLUSIVE EVIDENCE TO SU PPORT HIS CLAIM AND ACCORDINGLY THE SAME WERE ALSO NOT ALLOWED TO THE ASSESSEE. THE PLEA THAT THE EFFORTS OF DIRECTORS TO SELL THE PROPERTY WERE COMPENSATED THROUGH A 4 ITA NO.3141/MUM/2018 BIRYAS FINANCE & INVESTMENT P.LTD. ASSESSMENT YEAR-2014-15 REMUNERATION OF RS.34.34 LACS WAS ALSO NOT FOUND TO BE ACCEPTABLE SINCE THERE WAS PRACTICALLY NO ACTIVITY IN THE COMPANY EX CEPT LEASING-OUT OF PROPERTY. FINALLY THE SHORT-TERM CAPITAL GAINS WER E COMPUTED AT RS.75.98 LACS BEING DIFFERENCE IN SALE VALUE OF RS.170 LACS AND WRITTEN DOWN VALUE OF THE PREMISES FOR RS.94.01 LACS AS ON 01/04 /2013. 2.3 THE ASSESSEE IN THE ALTERNATIVE CONTENDED THA T THE EXPENSES DISALLOWED IN WORKING OF STCG MAY BE ALLOWED AS BUS INESS LOSS WHICH WAS ALSO REJECTED IN VIEW OF THE FACT THAT THE ASSESSEE DID NOT CARRY OUT ANY BUSINESS ACTIVITY DURING THE YEAR BUT EARNED ONLY T HE RENTAL INCOME WHICH WAS NOT THE MAIN BUSINESS ACTIVITY OF THE ASSESSEE. FINALLY THE INCOME WAS DETERMINED AT RS.90.53 LACS WHICH INTER-ALIA COMPRISED-OFF OF INCOME FROM HOUSE PROPERTY FOR RS.15.69 LACS AND SHORT-TERM CAP ITAL GAINS FOR RS.75.98 LACS. THE BUSINESS LOSS OF RS.1.13 LACS WAS ALLOWED TO BE SET-OFF AGAINST THE SAME. 3. THE LD. CIT(A) UPON FURTHER APPEAL CONFIRMED T HE STAND OF LD. AO BY OBSERVING AS UNDER: - 7.2 THE APPELLANT IN ITS SUBMISSION HAS REFERRED AND R EPRODUCED THE PROVISION OF SECTION 50 AND 50A AND HAS ACCORDINGLY CONTENDED THAT PROVI SION OF SECTION 50 ARE APPLICABLE ONLY IN CASE DEPRECIATION WAS AVAILED IN RESPECT OF THESE ASSETS UNDER THE ACT. THE ASSESSEE CONTENDED THAT THEY HAVE DISCLOSED THE PRO PERTY AS PART OF THEFIXED ASSETS IN THEIR ACCOUNTS FOR A.Y. 2013-14 AND 2014-15. IT WAS FURTHER SUBMITTEDTHAT IN THE RETURN FROM A.Y. 2013-14 THE ASSESSEE HAD TAKEN THE RENT INCOME AS INCOME FROM HOUSE PROPERTY AND HAD ACCORDINGLY DISALLOWED THE DEPRECI ATION UNDER THE COMPANIES ACT AND HAD NOT CLAIMED THE DEPRECIATION AS PER THE INCOME- TAX ACT. IN THE CONSEQUENCES IT HAS BEEN CONTENDED THAT THE PROVISION OF SECTION 50 AND SECTION 50A WILL NOT BE APPLICABLE AND THE ASSET CANNOT BE CLASSIFIED AS DEPRECIABLE A SSET. 7.3 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE ORAL CONTENTIONS AND WRITTEN SUBMISSION OF THE ASSESSEE DISCUSSION OF THE AO IN THE ASSESSMENT ORDER AND MATERIAL AVAILABLE ON RECORD. IT IS SEEN FROM THE SUBMISSION MADE BEFORE THE ASSESSING OFFICER BY THE ASSESSEE VIDE THEIR LETTER DATED 25.04.2016 THAT THE QUESTIONED PROPERTY WHICH IS 5 ITA NO.3141/MUM/2018 BIRYAS FINANCE & INVESTMENT P.LTD. ASSESSMENT YEAR-2014-15 AT GROUND FLOOR OVAL HOUSE SITUATED AT BRITISH HO TEL LANE FORT MUMBAI -400023 WAS PURCHASED BY THE ASSESSEE ON 31.12.2010 FOR THE COS T OF RS.85 LACS. THE ASSESSEE IN THE SUBMISSION HAS REFERRED TO THE PROVISION OF SEC TION 50 AND 50A AND HAS CONTENDED THAT THE PROVISION OF SECTION 50 ARE APPLICABLE ONL Y IN THE CASE WHERE DEPRECIATION HAS BEEN AVAILED IN RESPECT OF THE ASSET UNDER THE ACT. IT IS FURTHER SUBMITTED BY THE ASSESSEE THAT THE SAID PROPERTY WAS DISCLOSED AS PA RT OF THE FIXED ASSETS IN HIS ACCOUNT FOR A.Y. 2013-14 AND 2014-15. HOWEVER WHAT HAS BEE N DONE AFTER 31.12.2010 TILL MARCH 2012 HAS NOT BEEN SUBMITTED BY THE ASSESSEE W ITH ANY DETAILS. IT IS FURTHER THE SUBMISSION MADE BY THE ASSESSEE BEFORE THE ASSESSIN G OFFICER THAT VARIOUS EXPENSES SUCH AS BROKERAGE ELECTRICAL WORK GROUND FLOOR WO RK EXPENSES INTEREST PARKING VALUE PROFESSIONAL CHARGES REGISTRATION CHARGES STAMP D UTY EXPENSES TOTALLING TO RS.19 46 547/- WERE CAPITALISED BY THEM IN THE BOOK S OF ACCOUNTS AND DULY CAPITALISED VALUE OF THE PROPERTY HAS BEEN REFLECTED AT RS.1 04 46 547/-. UNDER THESE FACTS AND CIRCUMSTANCES IT IS CLEAR THAT THE PROPERTY IS THE BUSINESS ASSET OF THE COMPANY AND MAY BE FOR THE REASONS THAT ONLY IN THE PERIOD RELA TING TO A.Y. 2013-14 WHEN IT WAS GIVEN ON RENT THE CORRESPONDING DEPRECIATION HAS B EEN DISALLOWED IN THE COMPUTATION OF INCOME AS THE INCOME FROM SAID PROPERTY WAS OFFERED UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY'. NO DETAILS WHATSOEVER HAVE BEEN G IVEN BY THE ASSESSES IN RESPECT OF THE PERIOD PRIOR TO THE ASSESSMENT YEAR 2013-14 AS WHAT STATUS THE PROPERTY HAD ETC. IT IS ALSO SEEN FROM NOTES FORMING PART OF FINANCIAL S TATEMENT THAT THE SAID ASSET HAS BEEN REFLECTED IN THE SCHEDULE OF FIXED ASSET AS BUILDIN G UNDER LEASE AND 5% DEPRECIATION HAS BEEN CLAIMED AND REFLECTED THEREIN FOR THE YEAR UND ER 31 ST MARCH 2013. NOTHING HAS BEEN MENTIONED FOR THE PERIOD ENDING 31 ST MARCH 2012 AND THE PERIOD ENDING 31 ST MARCH 2011 IN RESPECT OF THE SAID PROPERTY. UNDER T HESE FACTS AND CIRCUMSTANCES THE CONTENTION OF THE ASSESSEE THAT THE PROVISION OF SE CTION 50 CANNOT BE APPLIED IN THEIR CASE IS NOT FOUND TO BE ACCEPTABLE. ACCORDINGLY T HE APPLICATION OF SECTION 50 BY THE AO AND WORKING OUT OF THE SHORT TERM CAPITAL GAIN A FTER REDUCING THE WDV AS ON 01.04.2013 IS FOUND TO BE JUSTIFIABLEAND IS ACCORDI NGLY UPHELD.THIS GROUND OF APPEAL IS ACCORDINGLY DISMISSED. 8. GROUND NO. 3 : THIS GROUND RELATES TO DISALLOWANCE OF EXPENSES I NCURRED ON THE PROPERTY AND COST OF IMPROVEMENT THEREOF. 8.1. THE ASSESSEE HAS INCURRED DIRECT EXPENSES OF RS.33 41 029/- AND HAS CLAIMED THE SAME AS COST OF IMPROVEMENT TOWARDS PROPERTY SOLD B Y IT WHICH WAS THE ISSUE UNDER CONSIDERATION IN THE GROUND NO. 2OF THIS APPEAL. TH E AO HAS APPLIED PROVISION OF SECTION 50 OF THE ACT AND ACCORDINGLY HAS DISALLOWED THE AS SESSEE'S CLAIM OF DIRECT EXPENSES OF RS.33 41 029/-. 8.2. THE ASSESSEE HAS SUBMITTED THAT THE PROPERTY WAS ON LEASE FOR QUITE SOME TIME AND TENANT HAD TO BE VACATED. THERE WAS HEAVY DAMAGE AN D BROKERAGE TO THE PROPERTY WHICH WAS TO BE REPAIRED AND MADE SUITABLE BEFORE I T COULD BE SOLD. IT WAS FURTHER SUBMITTED THAT THERE WAS CERTAIN EXPENSES LIKE PROP ERTY TAX OF EARLIER YEARS LEGAL EXPENSES BEST DEPOSITS AND BROKERAGE INCURRED FOR THE PROPERTY AND THESE EXPENSES TOTALING TO RS.33 41 029/- WERE CLAIMED AGAINST THE SALE PROCEED. THE ASSESSEE HAS FURTHER RELIED UPON CERTAIN DECISION TO CONTEND THA T INCIDENTAL EXPENDITURE IS REQUIRED TO BE ALLOWED WHILE WORKING OUT THE CAPITAL GAIN. 6 ITA NO.3141/MUM/2018 BIRYAS FINANCE & INVESTMENT P.LTD. ASSESSMENT YEAR-2014-15 8.3. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE ORAL CONTENTIONS AND WRITTEN SUBMISSION OF THE ASSESSEE DISCUSSION OF THE AO IN THE ASSESSMENT ORDER AND MATERIAL AVAILABLE ON RECORD. WHILE ADJUDICATING THE GROUND OF APPEAL NO. 2 ABOVE THE APPLICATION OF SECTION 50 HAVE BEEN FOUND TO BE JUS TIFIABLE AND HAS BEEN UPHELD. ONCE THE PROVISION OF SECTION 50 ARE FOUND TO BE APPLICA BLE THERE IS NO REASON TO WORK OUTTHE COMPUTATION AS PER THE PROVISION OF SECTION 48 OF T HE ACT AND THEREBY ALLOWING THE INCIDENTAL EXPENSES WHICH ARE INCURRED IN RELATION TO THE PROPERTY TRANSFERRED. IT IS FURTHER NOTED HERE THAT THE ASSESSEE HAS CLAIMED PR OPERTY TAX OF EARLIER YEARS AS INCIDENTAL EXPENSES AT RS.10 45 779/-. WITHOUT PREJ UDICE TO THE FINDING THAT IN THE CASE OF THE ASSESSEE PROVISIONS OF SECTION 50 OF THE AC T ARE APPLICABLE IN RESPECT OF SUCH EXPENSES IT IS STATED THAT PROPERTY TAX OF EARLIER YEARS WOULD BE ALLOWABLE IN THE EARLIER YEARS EITHER AS BUSINESS EXPENSES IF BUSINESS WAS RUN BY THE ASSESSEE OR INCOME FROM HOUSE PROPERTY IF THE RESULTANT INCOME HAS BEEN SH OWN AS HOUSE PROPERTY BY THE ASSESSEE. ACCORDINGLY SUCH EXPENSES CLAIMED TO BE INCIDENTAL COST OF IMPROVEMENT OF THE PROPERTY FOR WORKING OUT THE CAPITAL GAIN U/S.4 8 IS NOT FOUND TO BE JUSTIFIABLE. THE ASSESSEE HAS CLAIMED REPAIR AND RENOVATION EXPENSES OF RS.14 37 500/-. AO IN THEASSESSMENT ORDER HAS CLEARLY OBSERVED THAT AT PA RA 6.4 THAT ASSESSEE HAS NOT SUBMITTED CONCLUSIVE EVIDENCE IN SUPPORT OF SUCH CL AIM OF EXPENDITURE. THE ASSESSEE FURTHER CLAIMED LEGAL EXPENSES OF RS.5 04 750/- AND BROKERAGE OF RS.3 40 000/- WITHOUT ANY EVIDENCES. THE AFORESAID FACTUAL OBSERVATIONS H AVE BEEN JUST MENTIONED HERE FOR THE SAKE OF CLARITY HOWEVER THEY DO NOT MERIT ANY CONSIDERATION AS THE ACTION OF THE AO IN RESPECT OF THE GAINS EARNED FROM THE PROPERTY SO LD HAVE BEEN HELD TO BE TAXABLEU/S.50 OF THE ACT. THIS GROUND OF APPEAL IS ACCORDINGLY DISMISSED. 9. GROUND NO. 4. : THE ASSESSEE BY THIS GROUND CONTENDS THAT IT IS C ARRYING OUT BUSINESS ACTIVITY OF PREPARING THE PROPERTY TO BE SUITABLE F OR DISPOSAL BY MAKING SUITABLE MODIFICATION ETC. 9.1 THE ASSESSING OFFICER IN THE ASSESSMENT ORDER HAS MENTIONED THAT ASSESSEEHAS CLAIMED EMPLOYEE BENEFIT EXPENSES OF RS.34 34 852/- ADMINISTRATIVE EXPENSES OF RS.2 64 676/- AND DIRECT EXPENSES RELATING TO THE S ALE OF PROPERTY AT RS.33 41 029/-. ALL THESE EXPENSES HAVE BEEN DEBITED AGAINST THE SALE P ROCEEDS OF RS.1.7 CRORE OF A PROPERTY SOLD BY THE ASSESSES DURING THE YEAR UNDER CONSIDERATION. THE AO IN THE ASSESSMENT ORDER HAS OBSERVED THAT THERE IS NO CONC LUSIVE EVIDENCE SUBMITTED FOR THEDIRECT EXPENSES OF RS.33 41 029/- AND THE EMPLOYEE BENEFIT EXPENSES ADMINOVERHEADS ARE ALSO NOT FULLY ALLOWABLE AS THE ASSESSEE DURING THE YEAR HAS NOTCARRIED OUT ANY BUSINESS ACTIVITY AND HAS ONLY L EASE RENTAL INCOME UNDER THE HEAD'REVENUE'. PORTION OF SUCH INCOME HAS BEEN SHOW N AS RENTAL INCOME UNDER THE HEADINCOME FROM HOUSE PROPERTY WHICH WERE INCIDENTA L TO THE BUSINESS INCOME OF THE ASSESSEE. THE ASSESSEE HAS ALSO SHOWN SALE OF PREMI SES UNDER THE HEAD 'INCOME IN PROFIT AND LOSS ACCOUNT' AND FROM THE WHOLE FACTS I T WAS EVIDENT THAT DURING THE YEAR ASSESSEE HAS NOT CARRIED OUT ANY BUSINESS ACTIVITY HOWEVER ASSESSEE WAS CLAIMING EXPENSES AS EMPLOYEE BENEFIT EXPENSES OF RS.34 34 8 52/- AND OTHER EXPENSES OF RS.5 11 261/- DESPITE NO BUSINESS ACTIVITY. TAKING A FAIR VIEW THE AO OBSERVED THAT CERTAIN EXPENSES WHICH ARE MANDATORY FOR RUNNING OF THE BUSINESS THAT IS LEGAL AND 7 ITA NO.3141/MUM/2018 BIRYAS FINANCE & INVESTMENT P.LTD. ASSESSMENT YEAR-2014-15 PROFESSIONAL FEE OF RS.57 500/- AND PAYMENT TO AUDI TORS OF RS.56 180/- TOTALING TO RS.1 13 680/- WAS ALLOWED AND THE REMAINING EXPENSE S OF RS.38 32 433/- DEBITED TO P/L ACCOUNT DISALLOWED. 9.2 THE ASSESSEE CONTENDED THAT IT WAS RUNNING THE BUSI NESS AND WAS ENTITLED TO CLAIM THE FULL LOSS AS DISCLOSED IN THE P&L ACCOUNT AND THAT THE DIRECTORS REMUNERATION HAVE BEEN DULY DISCLOSED IN THE RETURN OF INCOME OF THE DIRECTORS AND HAVE BEEN OFFERED TO TAX. 9.3 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE ORAL CONTENTIONS AND WRITTEN SUBMISSION OF THE ASSESSEE DISCUSSION OF THE AO IN THE ASSESSMENT ORDER AND MATERIAL AVAILABLE ON RECORD. IT IS SEEN FROM THE APPEAL THA T SUCH GROUND IS LIMITED TO THE ASPECT THAT THE APPELLANT WAS CARRYING ON BUSINESS ACTIVIT Y DURING THE YEAR. NOTHING MORE HAS BEEN SAID OR STATED OR RAISED AS A POINT OR A ISSUE IN THE GROUNDS OF APPEAL. IN THIS REGARD IT IS STATED THAT EVEN THE ASSESSING OFFICER HAS OBSERVED THAT THE ASSESSEE WAS THE MAINTAINING ENTITY AS A BUSINESS ENTITY AND FOR THAT PURPOSEEXPENSES LIKE 'LEGAL AND PROFESSIONAL FEE' AND 'AUDITORS FEE' HAVE BEEN ALLO WED BY THE AO. THERE WAS HARDLY ANY ACTIVITY DONE BY THE ASSESSEE EXCEPT THE SALE O F THE PROPERTY AND IN SUCH VIEW OF THE MATTER THERE CANNOT BE ANY EXPENSES LIKE EMPLOY EE BENEFIT EXPENSES THAT TO THE TUNE OF RS.34 34 852/-. THE CONTENTION OF THE ASSES SEE THAT THE DIRECTORS REMUNERATION HAVE BEEN OFFERED TO TAX IN THE HANDS OF THE DIRECT ORS DOES NOT LEND ANY SUPPORT TO THE CAUSE OF THE ASSESSEE AS FOR DEDUCTION OF SUCH EXP ENSES IN THE HANDS OF THE ASSESSEE THE SAME SHOULD BE WHOLLY AND EXCLUSIVELY INCURRED FOR THE PURPOSE OF BUSINESS CARRIED OUT BY THE ASSESSEE AND NOT FOR ANY OTHER REASON. T HERE IS NO SPECIFIC PREMISE GIVEN U/S.37 OF THE ACT THAT WHEN THE PAYMENT IS MADE TO THE DIRECTORS MAY NOT BE EVEN FOR THE PURPOSES OF BUSINESS AND ARE NOT INCURRED WHOLL Y AND EXCLUSIVELY FOR THE PURPOSES OF BUSINESS STILL THE SAME HAS TO BE ALLOWED. THE AO HAS ALLOWED AN AMOUNT OF RS.1 13 680/- OUT OF THE OTHER EXPENSES CLAIMED AT RS.5 11 261/- FOR KEEPING THE STATUS AFLOAT OF THE BUSINESS ENTITY OF THE APPELLANT. ACC ORDINGLY NO INTERFERENCE IS CONSIDERED CALLED FOR IN THE ACTION OF THE AO AND THEREFORE THE GROUND RAISED IS ACCORDINGLY DISMISSED. AGGRIEVED THE ASSESSEE IS UNDER APPEAL BEFORE US. 4. UPON DUE CONSIDERATION WE FIND THAT THE FACT TH AT THE IMMOVABLE PROPERTY WHICH WAS SOLD BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION WAS PART OF BLOCK OF ASSET BUILDING REMAIN UNCONTROVERTED BEFORE US. THE ASSESSEE DURING ASSESSMENT PROCEEDIN GS AS WELL AS APPELLATE PROCEEDINGS COULD NOT ESTABLISH THAT THE SAID PROPERTY WAS NOT PART OF BLOCK OF ASSET AND DEPRECIATION AGAINST THE SAME WAS NEVER CLAIMED 8 ITA NO.3141/MUM/2018 BIRYAS FINANCE & INVESTMENT P.LTD. ASSESSMENT YEAR-2014-15 IN EARLIER YEARS. AS RIGHTLY NOTED BY LEARNED FIRST APPELLATE AUTHORITY THE ASSESSEE COULD NOT BROUGHT ON RECORD THE FACTUAL PO SITION IN THIS REGARD FOR THE YEAR ENDING 31/03/2011 AS WELL AS FOR THE YEAR ENDING 31/03/2012. SIMILAR IS THE POSITION BEFORE US SINCE DESPITE BEI NG SPECIFICALLY DIRECTED THE ASSESSEE COULD NOT DEMONSTRATE THIS FACT AND BR ING ON RECORD SUFFICIENT MATERIAL TO DEMONSTRATE THAT DEPRECIATION WAS NEVER CLAIMED AGAINST THE SAID PROPERTY SINCE ITS ACQUISITION. THEREFORE WE FIND NO REASON TO DIFFER WITH LEARNED FIRST APPELLATE AUTHORITY ON THIS POIN T AND CONCUR WITH THE CONCLUSION THAT RESULTANT GAINS WERE RIGHTLY BROUGH T TO TAX AS SHORT-TERM CAPITAL GAINS U/S 50. GROUND NO.1 STAND DISMISSED. 5. SO FAR AS THE CLAIM OF DIRECT EXPENDITURE OF RS. 33.41 LACS IS CONCERNED THE SAME CONSIST OF FOLLOWING ITEMS: - NO. DESCRIPTION OF EXPENSES AMOUNT (RS.) 1. PROPERTY TAX- EARLIER YEARS 10 45 779/- 2. REPAIRS & RENOVATION 14 37 500/- 3. LEGAL EXPENSES 5 04 750/- 4. BROKERAGE 3 40 000/- 5. BEST DEPOSIT 13 000/- TOTAL 33 41 029/- THE PROPERTY TAX AS WELL AS BEST DEPOSIT AS RIGHTL Y HELD BY FIRST APPELLATE AUTHORITY COULD NOT BE HELD TO BE PART OF COST OF ACQUISITION OF THE PROPERTY. THE SAME COULD ALSO NOT BE TERMED AS COST OF IMPROV EMENT OR EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY IN CONNECTION WITH TRANSFER OF PROPERTY. THEREFORE THE SAME HAS RIGHTLY BEEN DISALLOWED. SO FAR AS THE OTHER EXPENDITURE IS CONCERNED WE FIND THAT THE ASSESSEE FAILED TO ADDUCE SUFFICIENT DOCUMENTARY EVIDENCES TO SUBSTANTIATE TH E SAME. KEEPING IN VIEW 9 ITA NO.3141/MUM/2018 BIRYAS FINANCE & INVESTMENT P.LTD. ASSESSMENT YEAR-2014-15 THE PRINCIPAL OF NATURAL JUSTICE WE DEEM IT FIT TO PROVIDE ANOTHER OPPORTUNITY TO THE ASSESSEE TO SUBSTANTIATE HIS CLAIM WITH DOCU MENTARY EVIDENCES BEFORE LD. AO. THEREFORE FOR THE SAID LIMITED PURP OSE THE MATTER STAND RESTORED BACK TO THE FILE OF LD. AO WITH A DIRECTIO N TO THE ASSESSEE TO SUBSTANTIATE THAT EXPENDITURE IN THE NATURE OF LEGA L EXPENSES BROKERAGE REPAIRS &RENOVATION QUALIFIED FOR DEDUCTION FROM SA LE OF PROPERTY. GROUND NO. 2 STAND PARTLY ALLOWED FOR STATISTICAL PURPOSES . 6. THE LAST GROUND PERTAINS TO ALLOWANCE OF INDIREC T EXPENDITURE OF RS.36 99 728/- WHICH CONSIST OF EMPLOYEES BENEFIT EXPENSES OF RS.34.34 LACS AND ADMINISTRATIVE OVERHEADS OF RS.2.64 LACS AS BUSINESS EXPENDITURE U/S 37(1). AS RIGHTLY HELD BY LOWER AUT HORITIES THESE EXPENDITURES COULD NOT BE ALLOWED FROM SALE OF PROP ERTY UNDER THE HEAD CAPITAL GAINS SINCE THESE COSTS COULD NOT BE TERMED EITHER AS COST OF ACQUISITION / IMPROVEMENT OR EXPENDITURE INCURRED W HOLLY AND EXCLUSIVELY IN CONNECTION WITH TRANSFER OF PROPERTY. HOWEVER IT I S NOTED THAT THE ASSESSEE WAS A CORPORATE ENTITY AND IT HAS TO INCUR BARE MIN IMUM EXPENDITURE TO MAINTAIN ITS CORPORATE PERSONALITY DESPITE THE FACT THAT NO BUSINESS ACTIVITY WAS BEING CARRIED OUT BY THE ASSESSEE. THEREFORE O N FACTUAL MATRIX WE DEEM IT FIT TO RESTORE THE MATTER BACK TO LD.AO TO RECONSIDER THE ALLOWABILITY OF THESE EXPENDITURES WITH A DIRECTION TO THE ASSES SEE TO SUBSTANTIATE THE FACT THAT THE SAME FULFILLED THE CONDITIONS OF SECT ION 37(1). GROUND NO.3 STAND PARTLY ALLOWED FOR STATISTICAL PURPOSES. 7. IN THE RESULT THE APPEAL STANDS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 10 ITA NO.3141/MUM/2018 BIRYAS FINANCE & INVESTMENT P.LTD. ASSESSMENT YEAR-2014-15 ORDER PRONOUNCED IN THE OPEN COURT ON 13TH NOVEMBER 2019. SD/- SD/- (SAKTIJIT DEY) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 13/11/2019 SR.PS:-JAISY VARGHESE O