M/S. SRIPAN LAND DEVELOPMENT PVT. LTD, MUMBAI v. THE ITO 8(3)(2), MUMBAI

ITA 4251/MUM/2006 | 2003-2004
Pronouncement Date: 16-03-2011 | Result: Partly Allowed

Appeal Details

RSA Number 425119914 RSA 2006
Bench Mumbai
Appeal Number ITA 4251/MUM/2006
Duration Of Justice 4 year(s) 7 month(s) 28 day(s)
Appellant M/S. SRIPAN LAND DEVELOPMENT PVT. LTD, MUMBAI
Respondent THE ITO 8(3)(2), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 16-03-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted I
Tribunal Order Date 16-03-2011
Date Of Final Hearing 16-02-2011
Next Hearing Date 16-02-2011
Assessment Year 2003-2004
Appeal Filed On 19-07-2006
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH I MUMBAI BEFORE SHRI R.K. PANDA (AM) AND SMT. ASHA VIJAYARAG HAVAN (JM) ITA NO. 4251/MUM/2006 ASSESSMENT YEAR-2003-04 M/S. SRIPAN LAND DEVELOPMENT PVT. LTD. FLAT NO. 31 3 RD FLOOR CHITRAKUT CO. OP. HOS. SOC. LTD. ALTAMOUNT ROAD MUMBAI-400 026 PAN-AAECS 9686H VS. THE ITO 8(3)(2) AAYAKAR BHAVAN MUMBAI-400 020 (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI PRAKASH JOTWANI RESPONDENT BY: SHRI CHANDRAJIT SINGH O R D E R PER ASHA VIJAYARAGHAVAN (JM) THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED A GAINST THE ORDER DATED 12.5.2006 PASSED BY THE LD. CIT(A)-XXIX FOR T HE ASSESSMENT YEAR 2003-04. 2. THE ASSESSEE FILED RETURN OF INCOME DECLARING A LOSS OF RS. 15 91 075/- ON 26.9.2003. THE RETURN WAS PROCESSED U/S. 143(1) ON 19.8.2004. THE RETURN WAS SELECTED FOR SCRUTINY ON 19.11.2003 AND THE ASSESSMENT THEREAFTER WAS COMPLETED VIDE ORDER DT. 30.9.2005. 3. THE ASSESSEE IS IN THE BUSINESS OF LAND DEVELOPM ENT. THE MAIN OBJECT OF THE COMPANY IS TO DEAL IN HIRE LEASE AN D TRADE IN LAND AND BUILDING. AS A COROLLARY INCOME FROM LETTING OUT O F PROPERTY HAS BEEN ITA NO. 4251/M/06 2 OFFERED AS BUSINESS INCOME AND NOT FROM INCOME F ROM HOUSE PROPERTY. THE ASSESSEE HAD ACQUIRED A FLAT BEING FLAT NO. 31 ON THE 3 RD FLOOR OF CHITRAKUT CO. OP. HSG. SOC. LTD. SITUATED AT ALTAMO UNT ROAD MUMBAI. THIS PROPERTY HAD BEEN LET OUT TO CITI BANK FOR A P ERIOD OF 33 MONTHS UNDER A LEAVE AND LICENCE AGREEMENT. THE ASSESSEE HAS RECEIVED LICENCE FEE AT RS. 20 000/- P.M. UNDER THE AFORESAID AGREEM ENT THE ASSESSEE ALSO RECEIVED AN INTEREST FREE SECURITY DEPOSIT OF RS. 1 90 00 000/- AS DUE SECURITY FOR THE PERFORMANCE OF THE AGREEMENT FOR THE RECEIPT OF THE LICENCE FEE AND FOR HANDING OVER QUITE AND VACANT P OSSESSION BY THE LICENSEE AT THE END OF THE TERM OF THE AGREEMENT. T HE ASSESSEE HAS TREATED THIS INCOME AS INCOME FROM BUSINESS BY RELY ING ON THE DECISION IN THE CASE OF DCIT VS MANMIT ARCADE PVT. LTD. (BAN GALORE)-TAXMAN 25. 4. THE ASSESSING OFFICER HOWEVER TREATED THE ENTIR E INCOME AS INCOME FROM HOUSE PROPERTY. HE FURTHER COMPUTED THE NOTIO NAL INCOME AT THE RATE OF 6% OF RS. 1 90 00 000/- I.E. RS. 11 40 000/ - AS NOTIONAL INTEREST. HE THEREFORE ARRIVED AT THE ANNUAL VALUE OF THE TAX ABLE INCOME UNDER HOUSE PROPERTY AS UNDER: LICENCE FEE RS. 2 40 000/- NOTIONAL INTEREST RS.11 40 000/- -------------------- ANNUAL VALUE AS ABOVE RS. 13 80 000/- LESS:MUNICIPAL TAXES RS. 3 624/- ------------------- RS. 13 76 376/- LESS:DEDUCTION U/S 24 RS. 4 12 913/- -------------------- TAXABLE INCOME FROM HOUSE PROPERTY RS. 9 63 463/- ITA NO. 4251/M/06 3 5. THE ASSESSEE HAD ALSO EARNED INTEREST OF RS. 1 1 5 050/- AND OFFERED IT AS BUSINESS INCOME. THE AO HOWEVER TREA TED THE SAME AS INCOME FROM OTHER SOURCES. 6. THE AO DISALLOWED THE ENTIRE EXPENSES OF RS. 2 1 3 413/- AND ALSO DISALLOWED THE AMOUNT WRITTEN OFF OF RS. 7250/- WIT HOUT GIVING ANY REASON. THE LD. AO FURTHER DISALLOWED THE DEPRECIA TION CLAIMED AT RS. 17 32 713/- WITHOUT GIVING ANY REASON. HE FURTHER DID NOT STATE WHETHER HE HAS ALLOWED THE CARRY FORWARD OF UNABSORBED DEPR ECIATION OF RS. 15 91 075/-. 7. AGGRIEVED BY THE ORDER OF THE AO ASSESSEE PREFE RRED AN APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) CONFIRMED TH AT A SUM OF RS. 2 40 000/- OUGHT TO BE TREATED AS INCOME FROM HOUSE PROPERTY AS AGAINST BUSINESS INCOME OFFERED BY THE ASSESSEE. 8. THE LD. CIT(A) HELD AS FOLLOWS: CONTENTION OF APPELLANT THAT IT IS IN THE BUSINESS OF LAND DEVELOPMENT AND MAIN OBJECT OF THE COMPANY IS TO DE AL IN HIRE LEASE AND TRADE IN LAND AND BUILDING AND THE REFORE RENTAL INCOME IS BUSINESS INCOME IN MY OPINION IS NOT TENABLE. NO DOUBT AS PER MEMORANDUM OF ASSOCIATIO N OF APPELLANT COMPANY ONE OF THE OBJECTS IS TO PURCHAS E TAKE ON LEASE OR IN EXCHANGE HIRE OR OTHERWISE ACQUIRE TR ANSFER AND DEAL IN ANY LANDS AND BUILDINGS AND ANY ESTATE OR I NTEREST AND ANY RIGHTS CONNECTED WITH ANY SUCH LANDS AND BU ILDINGS AND TO DEVELOP AND TO TURN TO ACCOUNT ANY SUCH LOAN D BUILDING ESTATE OR ANY INTEREST AND RIGHTS THEREIN OR IN WHICH THE COMPANY IS INTERESTED AND IN PARTICULARLY BY LA YING OUT AND PREPARING THE SAME FOR BUILDING PURPOSES AND A LSO TO CARRY ON THE TRADE OR BUSINESS OF DEALING IN LANDS BUILDINGS FACTORIES HOUSES FLATS SHOPS ETC. BUT SOME IN M Y OPINION CANNOT BE A GROUND TO HOLD THAT AFORESAID RENTAL IN COME IS APPELLANTS BUSINESS INCOME. IN THE MEMORANDUM OF ASSOCIATION APPELLANT HAS GIVEN MANY OBJECTS COVER ING ALMOST ALL THE KINDS OF ACTIVITIES. MERELY BECAUSE AMONG OTHERS MAIN ITA NO. 4251/M/06 4 OBJECTS ONE OF THE OBJECT IS TO CARRY ON THE TRADE OR BUSINESS OF DEALING IN LANDS BUILDINGS FACTORIES ETC. RENTAL INCOME CANNOT BE HELD AS BUSINESS INCOME. OTHER ATTENDANT CIRCUM STANCES CLEARLY POINT TO THE FACT THAT RENTAL INCOME IS NOT BUSINESS INCOME BUT IS INCOME FROM HOUSE PROPERTY. AS AL READY SAID APPELLANT IS THE OWNER OF FLAT AT ALTAMOUNT ROAD M UMBAI WHICH HAS BEEN GIVEN ON RENT. AR OF APPELLANT SHR I VIJAY KAKWANI ADVOCATE VIDE ORDER SHEET ENTRY DT. 4.5.2 006 HAS ADMITTED THAT NO OTHER PROPERTY HAS BEEN PURCHASED OR SOLD OR OTHERWISE DEALT WITH EXCEPT THE ABOVE FLAT BY THE A PPELLANT. IT IS THEREFORE SEEN THAT APPELLANT HAS ACQUIRED ONLY ONE FLAT WHICH HAS BEEN GIVEN ON RENT. IN THE PROFIT & LOSS ACCOUNT APPELLANT HAS SHOWN INCOME FROM INTEREST AND RENT R ECEIVED. NO OTHER ACTIVITY HAS BEEN SHOWN. IT THEREFORE A PPEARS THAT THOUGH IN THE OBJECTS AS GIVEN IN MEMORANDUM OF ASS OCIATION APPELLANT IS IN THE BUSINESS OF DEALING IN LANDS B UILDINGS FACTORIES ETC. YET FOR ALL PRACTICAL PURPOSES AND I N REALITY APPELLANT IS NOT CARRYING ON A REGULAR CONSISTENT AND SUSTAINED BUSINESS ACTIVITY OF PURCHASE AND SALE H IRE LEASE AND TRADE IN LANDS AND BUILDINGS. 9. WE ARE IN CONFORMITY WITH THE ORDER OF THE LD. C IT(A) IN TREATING THE RENTAL INCOME UNDER THE HEAD INCOME FROM HOUSE PRO PERTY INSTEAD OF TREATING IT AS BUSINESS RECEIPT RELYING ON THE DEC ISION IN THE CASE OF SHAMBHU INVESTMENT P. LTD. V. COMMISSIONER OF INCOM E-TAX 263 ITR 143. THIS GROUND OF THE ASSESSEE IS DISMISSED. 10. THE SECOND GROUND RAISED BY THE ASSESSEE READ A S FOLLOWS: A) THE LD. CIT(A) ERRED IN CONFIRMING THE COMPUTAT ION AND ADDITION OF NOTIONAL INCOME OF RS. 11 40 000/- (BEI NG 6% OF THE INTEREST FREE SECURITY DEPOSIT OF RS. 1 90 0 0 000/- FOR THE FULL YEAR) UNDER THE HEAD INCOME FROM HOUS E PROPERTY B) THE LD. CIT(A) ERRED IN NOT APPRECIATING THAT TH E SUM OF RS. 2 40 000 WAS HIGHER THAN THE FAIR RENT. 11. THE LD. DEPARTMENTAL REPRESENTATIVE SHRI CHANDR AJIT SINGH RELIED ON VARIOUS DECISIONS (1) ITO VS CHEM MECH (P) LTD. (2)TIVOLI ITA NO. 4251/M/06 5 INVESTMENT & TRDG CO. (P) LTD VS ACIT. FIZZ DRINKS LTD. VS DCIT AND 3 RD MEMBER BENCH IN THE CASE OF ITO VS BAKER TECHNICAL SERVICES (P) LTD. 12. THIS ISSUE HAS NOW BEEN DECIDED BY THE MUMBAI T RIBUNAL IN THE CASE OF M/S. ADVACADO PROPERTIES & TRDG. (I) PVT. LTD. IN ITA NOS. 2347 & 2348/M/2010 VIDE ORDER DT. 25 TH FEBRUARY 2011 WHEREIN THE TRIBUNAL HAS FOLLOWED THE ORDER IN THE CASE OF M/S . EVEREST KANTO INVESTMENT & FINANCE LTD. WHICH IS REPRODUCED AS UN DER: AS ALREADY MENTIONED THE A.O. AS WELL AS THE LD. C IT(A) HAS RELIED ON THE PROVISIONS OF SECTION 23(1)(A) TO TAK E THE ANNUAL VALUE OF THE ASSESSEES PROPERTY AT A HIGHER AMOUNT THAN THE RENT ACTUALLY RECEIVED BY THE ASSESSEE HOLDING THAT THE SAME REPRESENTED THE SUM FOR WHICH THE PROPERTY OF THE ASSESSEE MIGHT REASONABLY BE EXPECTED TO LET FROM YEAR TO YE AR. IT IS PERTINENT TO NOTE HERE THAT AS PER THE RELEVANT PRO VISIONS OF SECTION 23(1) AS APPLICABLE UP TO A.Y. 1975-76 THE SUM FOR WHICH THE PROPERTY MIGHT REASONABLY BE EXPECTED TO LET FROM YEAR TO YEAR ALONE REPRESENTED ACTUAL VALUE OF THE PROPERTY FOR THE PURPOSE OF COMPUTING INCOME UNDER THE HEAD INC OME FROM HOUSE PROPERTY. THEREAFTER AMENDMENT WAS MADE AND AS PER THE AMENDED PROVISIONS OF SECTION 23(1)(B) MADE APP LICABLE FROM A.Y. 1976-77 THE ACTUAL RENT RECEIVED WAS TREATED TO REPRESENT THE ANNUAL VALUE PROVIDED IT EXCEEDS THE SUM FOR WH ICH THE PROPERTY MIGHT REASONABLY BE EXPECTED TO LET FROM Y EAR TO YEAR. THE LEGISLATIVE INTENTION OF THE SAID AMENDMENT WAS EXPLAINED BY CBDT IN CIRCULAR NO. 204 DTD. 24.7.76 AND AFTER TAKING NOTE OF THE SAID CIRCULAR AND AFTER REPRODUCING THE RELE VANT PORTION THEREOF IN ITS ORDER PASSED IN THE CASE OF RECLAMAT ION REALTY INDIA P. LTD. (SUPRA) THE TRIBUNAL HELD THAT THE P OSITION OF LAW PRIOR TO INTRODUCTION OF SECTION 23(1)(B) AS CLARIF IED BY THE BOARD ITSELF WAS THAT THE ANNUAL VALUE WAS EQUAL TO THE M UNICIPAL VALUATION OF THE PROPERTY. THE TRIBUNAL HELD THAT THIS IS HOW THE BOARD SOUGHT TO INTERPRET THE EXPRESSION THE SUM F OR WHICH THE PROPERTY MIGHT REASONABLY BE EXPECTED TO LET FROM Y EAR TO YEAR USED IN SECTION 23(1)(A). 12. THE TRIBUNAL ALSO TOOK NOTE OF THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF DIWAN DAULAT KAPOOR VS . NEW DELHI MUNICIPAL COMMITTEE 122 ITR 700 (SC) WHEREIN THE QUESTION THAT HAD ARISEN FOR CONSIDERATION WAS AS T O WHAT ITA NO. 4251/M/06 6 SHOULD BE THE BASIS OF DETERMINING THE ANNUAL VALUE FOR THE PURPOSE OF LEVY OF PROPERTY TAX. THE EXPRESSION AN NUAL VALUE AS DEFINED IN THE DELHI MUNICIPAL CORPORATION ACT 1 957 AND PUNJAB MUNICIPAL ACT 1911 WAS GROSS ANNUAL RENT AT WHICH SUCH HOUSE OF BUILDING MIGHT REASONABLY BE EXPECTED TO LET FROM YEAR TO YEAR. THE HONBLE SUPREME COURT HELD THAT THE ANNUAL VALUE IS ALWAYS RENT REALIZABLE BY LANDLORD AND THA T ACTUAL RENT IS ONLY AN INDICATOR WHAT THE LANDLORD MIGHT REASON ABLY EXPECT TO GET FROM A HYPOTHETICAL TENANT. THE HONBLE SUPR EME COURT FURTHER HELD THAT WHERE TENANCY IS SUBJECT TO RENT CONTROL LEGISLATION STANDARD RENT WOULD BE A PROPER MEASUR E AND IN ANY EVENT ANNUAL VALUE CANNOT EXCEED SUCH STANDARD RENT. 13. THE TRIBUNAL IN ITS ORDER PASSED IN THE CASE OF RECLAMATION REALTY INDIA P. LTD. ALSO TOOK NOTE OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF MRS. SHEILA KAUSHISH V S. CIT 131 ITR 435 (SC) WHEREIN THE QUESTION AROSE IN THE CON TEXT OF PROVISIONS OF SECTION 23 OF THE INCOME TAX ACT AND IT WAS HELD BY THE HONBLE SUPREME COURT THAT THE RATIO OF ITS DECISION IN THE CASE OF DEWAN DAULAT RAI KAPOOR (SUPRA) WOULD BE EQ UALLY APPLICABLE IN INTERPRETING THE DEFINITION OF ANNUA L VALUE GIVEN IN SECTION 23(1) OF THE INCOME TAX ACT. IT WAS HELD THAT THESE DEFINITIONS ARE GIVEN IN IDENTICAL TERMS AND IT WAS IMPOSSIBLE TO DISTINGUISH THE DEFINITION OF ANNUAL VALUE GIVEN IN SECTION 23(1) OF THE INCOME TAX ACT FROM THE DEFINITION OF THAT T ERM GIVEN IN THE DELHI MUNICIPAL CORPORATION ACT 1957 AND THE PU NJAB MUNICIPAL ACT 1911. IT WAS THEREFORE HELD ADOPTING IDENTICAL LINE OF REASONING THAT EVEN IF THE STANDARD RENT OF A BUILDING HAS NOT BEEN FIXED BY THE CONTROLLER THE ANNUAL VALUE OF THE BUILDING AS PER SECTION 23(1) OF THE INCOME TAX ACT MUST BE HELD TO BE A STANDARD RENT DETERMINABLE UNDER THE PROVISIONS OF THE RENT CONTROL ACT AND NOT THE ACTUAL RENT RECEIVED BY THE LANDLORD FROM THE TENANT. THE HONBLE APEX COURT ALSO OBSERVED TH AT THIS INTERPRETATION WHICH WAS BEING PLACED ON THE LANGUA GE OF SECTION 23(1) OF THE INCOME TAX ACT CAN BE SAID TO HAVE RECEIVED LEGISLATIVE APPROVAL BY THE AMENDMENT MADE IN THE SAID PROVISIONS WHEREBY IT WAS PROVIDED IN SECTION 23(1) (B) THAT WHERE THE PROPERTY IS LET AND THE ANNUAL RENT RECEI VED OR RECEIVABLE BY THE OWNER IN RESPECT THEREOF IS IN EX CESS OF THE SUM FOR WHICH THE PROPERTY MIGHT REASONABLY BE EXPE CTED TO LET FROM YEAR TO YEAR THE AMOUNT SO RECEIVED OR RECEIV ABLE SHALL BE DEEMED TO THE ANNUAL VALUE OF THE PROPERTY. 14. THE TRIBUNAL IN ITS ORDER PASSED IN THE CASE OF RECLAMATION REALTY INDIA P. LTD. (SUPRA) THEN WENT ON TO REFER TO THE DECISION OF HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. PRABHABATI ITA NO. 4251/M/06 7 BANSALI 141 ITR 419 WHEREIN IT WAS HELD THAT RELYI NG ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F DEWAN DAULAT RAI KAPOOR (SUPRA) AND MRS. SHEILA KAUSHISH (SUPRA) WHILE DECIDING THE ISSUE RELATING TO DETERMINATION OF ACTUAL VALUE OF THE ASSESSEES PROPERTY IN MUMBAI THE INCO ME FROM HOUSE PROPERTY MUST BE COMPUTED ON THE BASIS OF THE SUM WHICH MIGHT REASONABLY BE EXPECTED TO LET FROM YEAR TO YE AR AND WITH THE ANNUAL MUNICIPAL VALUE PROVIDED SUCH A VALUE IS NOT ABOVE THE STANDARD RENT RECEIVABLE AND THE SAME COULD BE ADOPTED AS THE SAFEST GUIDE FOR THIS PURPOSE. AS MENTIONED BY THE TRIBUNAL IN ITS ORDER PASSED IN THE CASE OF RECLAMATION REAL TY INDIA P. LTD. (SUPRA) THE SAID DECISION WAS RENDERED BY THE HONBLE CALCUTTA HIGH COURT AFTER TAKING INTO CONSIDERATION THE PROVISIONS OF SECTION 154 OF THE BOMBAY MUNICIPAL C ORPORATION ACT WHEREIN THE MANNER OF DETERMINATION OF RATABLE VALUE WAS LAID DOWN WHICH WAS BASED ON THE ANNUAL RENT FOR WH ICH THE PROPERTY MIGHTY REASONABLY BE EXPECTED TO LET FROM YEAR TO YEAR. THE HONBLE CALCUTTA HIGH COURT HELD THAT THE MUNIC IPAL VALUATION AND ANNUAL VALUE U/S 23(1)(A) OF THE INCO ME TAX ACT THUS ARE ONE AND SAME. AS NOTED BY THE TRIBUNAL IN ITS ORDER PASSED IN THE CASE OF RECLAMATION REALTY INDIA P. L TD. (SUPRA) THE SAID DECISION OF THE HONBLE CALCUTTA HIGH COUR T IN THE CASE OF PRABHABATI BANSALI (SUPRA) HAS BEEN SUBSEQUENTLY FOLLOWED BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF M.V . SONAVALA VS. CIT 177 ITR 246 (BOM) WHEREIN THE QUESTION POSE D TO THEIR LORDSHIPS WAS WHETHER THE ACTUAL COMPENSATION RECEI VED COULD BE TAKEN AS ANNUAL VALUE OF THE PROPERTY AS AGAINST THE MUNICIPAL RATABLE VALUE AND THE SAME WAS ANSWERED B Y THE HONBLE BOMBAY HIGH COURT IN THE NEGATIVE THAT IS A GAINST THE DEPARTMENT AND IN FAVOUR OF THE ASSESSEE. 15. IN OUR OPINION THE ISSUE INVOLVED IN THE PRES ENT CASE THUS IS SQUARELY COVERED BY THE DECISION OF CO-ORDINATE BEN CH OF THIS TRIBUNAL IN THE CASE OF RECLAMATION REALTY INDIA P. LTD. (SUPRA) WHICH IN TURN HAS RELIED ON AND FOLLOWED THE JUDGME NTS OF HONBLE APEX COURT AND JURISDICTIONAL HIGH COURT ON A SIMIL AR ISSUE AND RESPECTFULLY FOLLOWING THE SAID JUDICIAL PRONOUNCEM ENTS WE REVERSE THE IMPUGNED ORDER OF THE LD. CIT(A) ON THIS ISSUE AND DIRECT THE A.O. TO ADOPT THE RENT ACTUALLY RECEIVED BY THE ASSESSEE DURING A.Y. 2003-04 TO 2006-07 AS ANNUAL VALUE OF THE PROPERTY BEING MORE THAN THE MUNICIPAL RATABLE VALUE. THE ADDITIONS MADE BY THE A.O. AND CONFIRMED BY THE LD. CIT(A) ON THIS ISSUE ARE ACCOR DINGLY DELETED ALLOWING GROUND NO. 2 OF THE ASSESSEES APPEALS FOR A.Y. 2003-04 TO 2006-07. ITA NO. 4251/M/06 8 13. THEREFORE WE DELETE THE ADDITION MADE BY THE AO AND CONFIRMED BY THE LD. CIT(A) ON ACCOUNT OF NOTIONAL INTEREST ON S ECURITY DEPOSIT FOR COMPUTING THE ANNUAL VALUE OF THE PROPERTY. THIS GR OUND RAISED BY THE ASSESSEE IS ALLOWED. 14. THIRD GROUND RAISED BY THE ASSESSEE IS CONSEQUE NTIAL TO GROUND NO. 2 DECIDED BY US (SUPRA). THIS GROUND RAISED BY THE ASSESSEE IS ALLOWED. 15. THE 4 TH GROUND RAISED BY THE ASSESSEE READS AS FOLLOWS: THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWANC E OF EXPENSES OF RS. 2 13 413/- AND THE AMOUNT WRITTEN O FF OF RS. 7250/-. THE LD. CIT(A) FAILED TO APPRECIATE THAT T HESE ARE BASIC MINIMUM EXPENSES THAT ARE NECESSARY TO KEEP T HE LEGAL ENTITY ALIVE. 16. THE ASSESSEE STATED BEFORE THE LD. CIT(A) THAT THE AO HAD DISALLOWED THE ENTIRE EXPENSES OF RS. 2 13 413/- WI THOUT ANY REASONS IN HIS ORDER AND THE AO HAS ALSO DISALLOWED AN AMOUNT WRITTEN OFF OF RS. 7250/- WITHOUT GIVING ANY REASON. THE LD. CIT(A) H ELD THAT NO DETAILS OR EVIDENCES ARE MADE AVAILABLE AND SINCE THE AO HAS S TATED THE INCOME AS HOUSE PROPERTY THE AO IS RIGHT IN DISALLOWING THE EXPENSES. 17. AGGRIEVED ASSESSEE IS IN APPEAL BEFORE US. TH E LD. COUNSEL FOR THE ASSESSEE SHRI PRAKASH JOTWANI BROUGHT TO OUR NOTICE AT PAGE 8 OF THE PAPER BOOK CONTAINING THE PROFIT & LOSS ACCOUNT WHE RE THE EXPENSES WERE LISTED OUT AS FOLLOWS: PREVIOUS YEAR EXPENDITURE CURRENT YEAR 872.00 TO POSTAGE & TELEPHONE 422.00 1288.00 TO PRINTING & STATIONERY 450.00 5000.00 TO AUDITORS REMUNERATION 5000.00 ITA NO. 4251/M/06 9 2500.00 TO FILING FEES 2000.00 10000.00 TO PROFESSIONAL CHARGES 0.00 2380.00 TO MISCELLANEOUS EXPENSES 600.00 13875.00 TO CONVEYANCE AND TRAVELLING 500.00 4712.00 TO BANK CHARGES AND INTEREST 4050.0 0 187221.00 TO REPAIR & MAINT. CHARGES 189100.00 11290.00 TO PRELIMINARY EXPENSES 11290.00 0.0 TO DEPRECIATION 1823905.00 202402.00 TO NET PROFIT 0.00 18. THE LD. COUNSEL FOR THE ASSESSEE ARGUED THAT CE RTAIN EXPENSES ARE TO BE DISALLOWED SUCH AS DIRECTORS REMUNERATION B ANK CHARGES FILING FEES POSTAGE AND TELEPHONE PRINTING & STATIONERY ETC. SINCE THE AO HAS NOT GIVEN ANY REASON WE REMIT THE ISSUE TO THE FIL E OF THE AO TO RE- EXAMINE AND DECIDE IN ACCORDANCE WITH LAW. 19. THE FIFTH GROUND RAISED BY THE ASSESSEE READS A S FOLLOWS: THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWANC E OF CLAIM OF DEPRECIATION OF RS. 17 32 713/-. 20. BOTH THE AO AND THE LD. CIT(A) HAVE CONFIRMED THE DISALLOWANCE ON THE GROUND THAT THE DEPRECIATION IS NOT ALLOWABL E ON THE FLAT INCOME OF WHICH HAS BEEN ASSESSED AS INCOME FROM HOUSE PRO PERTY. WE ARE IN CONFORMITY WITH THE ORDER OF THE LD. CIT(A) SINCE W E HAVE HELD THE RENTAL INCOME IS TO BE ASSESSED AS INCOME FROM HOUSE PROP ERTY WHILE DECIDING GROUND NO. 1 AT PARA -9 THIS GROUND OF THE ASSESSE E IS DISMISSED. 21. THE SIXTH GROUND RAISED BY THE ASSESSEE READS A S FOLLOWS: THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWANC E OF CARRY FORWARD OF UNABSORBED DEPRECIATION OF RS. 15 91 075 /-. ITA NO. 4251/M/06 10 22. SINCE THE ASSESSEE IS NOT CARRYING ON ANY BUSIN ESS AND DEPRECIATION ALSO APPEARS ONLY IN RESPECT OF FLAT R ENTED OUT AND NO DEDUCTION OF DEPRECIATION OR UNABSORBED DEPRECIATIO N CAN BE ALLOWED SINCE DEPRECIATION IS NOT ALLOWABLE WHILE ASSESSING INCOME FROM HOUSE PROPERTY THIS GROUND OF THE ASSESSEE IS DISMISSED . 23. THE LAST GROUND RAISED BY THE ASSESSEE IS WITH RESPECT TO INTEREST U/S. 234B & 234D IS CONSEQUENTIAL IN NATURE AND THE AO IS DIRECTED TO CHARGE INTEREST IN ACCORDANCE WITH LAW. 24. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON THIS 16 TH DAY OF MARCH 2011 SD/- SD/- (R.K. PANDA) (ASHA VIJAYARAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI DATED 16 TH MARCH 2011 RJ COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT-CONCERNED 4. THE CIT(A)-CONCERNED 5. THE DR I BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR I.T.A.T MUMBAI ITA NO. 4251/M/06 11 DATE INITIALS 1 DRAFT DICTATED ON: 9 . 0 3 .201 1 SR. PS/PS 2. DRAFT PLACED BEFORE AUTHOR: 14 .0 3 .2011 ______ SR. PS/PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER: _________ ______ JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER: _________ ______ JM/AM 5. APPROVED DRAFT COMES TO THE SR. PS/PS: _________ ______ SR. PS/PS 6. KEPT FOR PRONOUNCEMENT ON: _________ ______ SR. PS/PS 7. FILE SENT TO THE BENCH CLERK: _________ ______ SR. PS/PS 8. 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK: DATE ON WHICH FILE GOES TO AR _________ ______ 10 . DATE OF DISPATCH OF ORDER: _________ ______