Rajesh Kumar, Gurgaon v. ITO, Gurgaon

I.T.A. NO. 4441 /DEL/2009 1/5 IN THE INCOME TAX APPELLATE TRIBUNAL NEW DELHI BENCH F BEFORE SHRI K D RANJAN ACCOUTANT MEMBER AND SHRI GEORGE MATHAN JUDICIAL MEMBER ITA NO. 4441 /DEL/2009 (ASSESSMENT YEAR 2006-07) RAJESH KUMAR VS. ITO WARD 5 PROP. R K FINISHING GURGAON 83-D UDOG VIHAR PHASE VI GURGAON (APPELLANTS) (RESPONDENTS) PAN / GIR NO. AARPK9348L APPELLANT BY: SHRI RAJINDER MITTAL CA & SHRI ROHIT GUPTA CA RESPONDENT BY: SHRI H K LAL SR. DR ORDER PER GEORGE MATHAN JM: 1. THIS APPEAL BY THE ASSESSEE HAS BEEN PREFERRED A GAINST THE ORDER OF LD. CIT(A) PANCHKULA IN APPEAL NOL78/GGN/2008-09 DATED 16.09.2009 FOR THE ASSESSMENT YEAR 2006-07. SHRI RAJINDER MITTAL AND SHRI ROHIT GUPTA CA REPRESENTED FOR THE ASSESSEE A ND SHRI H K LAL SR. DR REPRESENTED FOR THE REVENUE. 2. IN THIS APPEAL IN GROUNDS NO.1(A) AND 2(A) THE ASSESSEE HAS CHALLENGED THE ACTION OF LD. CIT(A) IN UPHOLDIN G THE DISALLOWANCE OF DEPRECIATION ON THE INDUSTRIAL SHED I.T.A. NO. 4441 /DEL/2009 2/5 ON THE ASSUMPTION THAT 90% OF THE COST OF SHED REPRESENTING THE COST OF LAND. IT WAS THE SUBMISSI ON BY THE LD. A.R. THAT THE ASSESSEE HAD PURCHASED AN INDUSTRIAL SHED FORM M/S. HSIDC FOR A COST OF RS.21 54 829/- DURING THE ASSESSMENT YEAR 2002-03. THE ASSESSEE HAD CLAIMED DEPRECIATION THEREON. THE A.O. HAD DEMARCATED THE COST OF THE INDUSTRIAL SHED AND THE LAND ON WHICH THE SHED WAS BUILT. THE A.O. HAS DEMARCATED THE COST OF LAND TO THE 90% AND THE SHED FOR ONLY A VALUE OF 10% OF THE COST. CONSEQUENTLY THE A.O. HAD DISALLOWED THE DEPRECIATION IN RESPECT OF 905 OF THE INDUSTRIAL SHED AS CLAIMED BY THE ASSESSEE. IT WAS THE SUBMISSION BY THE LD. A.R. THAT AFTER DENYING T HE DEPRECIATION IN RESPECT OF 90% OF THE VALUE HOLDING THE SAME TO BE IN RELATION TO THE LAND AND WDV HAD BEEN REWORKED YEAR-WISE AND FOR THE RELEVANT ASSESSMENT YEAR THE A.O. HAD REWORKED THE DEPRECIATION AND THE LD. CIT(A) HAS UPHELD SUCH DISALLOWANCE OF CLAIM OF DEPRECIATION AS MADE BY THE ASSESSEE AND HAD UPHELD THE DEPRECIATION AS COMPUTED BY THE A.O. IN RESPECT OF THE INDUSTRIAL SHED ALONE. IT WAS AGREED BY THE LD. A. R. THAT THE INDUSTRIAL SHED PURCHASED FROM HSIDC INCLUDED T HE COST OF THE LAND. IT WAS ALSO AGREED BY THE LD. A. R. THAT THE ASSESSEE HAD UNDER THE BONA FIDE IMPRESSION CLA IMED THE PURCHASE PRICE AS THE COST OF INDUSTRIAL SHED AS THE I.T.A. NO. 4441 /DEL/2009 3/5 INDUSTRIAL SHED COULD NOT HAVE SURVIVED WITHOUT THE LAND. IT WAS THE SUBMISSION THAT DUE TO THIS BONA FIDE BELIEF THE ASSESSEE HAD CLAIMED DEPRECIATION BY TA KING THE TOTAL COST AS PAID BY THE ASSESSEE TO BE IN REL ATION TO THE INDUSTRIAL SHED. IT WAS FAIRLY AGREED BY THE L D. A.R. THAT THE GUIDELINE VALUE OF THE LAND WAS LIABLE TO BE EXCLUDED FROM THE PURCHASE PRICE AND ONLY THE BALAN CE COULD BE HELD TO BE THE COST OF THE INDUSTRIAL SHED . ON THIS PROPOSITION THE LD. D.R. DID NOT HAVE ANY OBJECTION. IT WAS THE SUBMISSION OF THE LD. D.R. T HAT THE ASSESSMENT YEAR INVOLVED IN THE APPEAL BEFORE U S WAS THE ASSESSMENT YEAR 2006-07 AND THATS CORRECTI ON IF ANY WOULD HAVE TO TAKE PLACE IN THE ASSESSMENT Y EAR 2002-03. HERE IT WAS THE SUBMISSION BY THE LD. A. R. THAT FOR THE YEAR IN WHICH THE INDUSTRIAL SHED WAS PURCHASED AND THE DEPRECIATION CLAIMED WAS ALSO IN APPEAL BEFORE THE LD. CIT(A) AND THE SAME WAS PENDI NG DISPOSAL. IT WAS THE SUBMISSION THAT HE HAD NO OBJ ECTION IF THE DIRECTION WAS GIVEN TO ASSESS THE VALUE OF T HE LAND ON WHICH THE INDUSTRIAL SHED WAS CONSTRUCTED AND WH ICH WAS PURCHASED BY THE ASSESSEE BY APPLYING THE GUIDELINE VALUE IN VIEW OF THE BONA FIDE BELIEF OF THE ASSESSEE. 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. A PERU SAL OF THE ASSESSMENT ORDER CLEARLY SHOWS THAT THE A.O. HA S I.T.A. NO. 4441 /DEL/2009 4/5 REWORKED THE DEPRECIATION ON THE INDUSTRIAL SHED BY TAKING INTO CONSIDERATION THE WDV. HOWEVER IT IS AL SO NOTICED THAT THE A.O. HAS TAKEN THE COST OF LAND AT 90% OF THE PURCHASE PRICE PAID BY THE ASSESSEE IN RESPE CT OF THE INDUSTRIAL SHED PURCHASED FROM HSIDC. THERE IS NO BASIS FOR TAKING THE COST OF THE LAND ON WHICH THE INDUSTRIAL SHED IS SITUATED @ 90% OF THE PURCHASE P RICE. IN THESE CIRCUMSTANCES THIS ISSUE IS RESTORED TO T HE FILE OF THE A.O. FOR RE-ADJUDICATION AND RECOMPILATION. IN THIS RECOMPILATION THE A.O. SHALL TAKE INTO CONSIDERATION THE CLAIM OF THE ASSESSEE THAT THE CO ST OF THE LAND IN RESPECT OF THE INDUSTRIAL SHED IS TO BE TAKEN AT THE GUIDELINE VALUE AS FIXED BY THE GOVERNMENT FOR THE PURPOSE OF REGISTRATION OF THE LAND IN THAT AREA. IN THESE CIRCUMSTANCES THIS ISSUE IS RESTORED TO THE FILE OF THE A.O. FOR RE-ADJUDICATION. THIS CORRECTION WOULD HA VE TO BE DONE RIGHT FROM THE YEAR IN WHICH THE INDUSTRIAL SHAD HAS BEEN PURCHASED BY THE ASSESSEE AND PUT TO USE. 4. IN GROUNDS NO. 1(B) & 1(B) THE ASSESSEE HAS CHAL LENGED THE ACTION OF LD. CIT(A) IN UPHOLDING THE AD HOC DISALLOWANCE OF 1/6 TH OF THE TELEPHONE AND VEHICLE EXPENSES ON THE ASSUMPTION OF PERSONAL USE BY THE ASSESSEE AND HIS FAMILY MEMBERS. IT WAS FAIRLY AGR EED BY BOTH THE SIDES THAT AD-HOC DISALLOWANCE SHOULD B E I.T.A. NO. 4441 /DEL/2009 5/5 RESTRICTED TO 1/10 TH CONSIDERING THE FACT THAT THERE IS NO SPECIFIC IDENTIFICATION OF PERSONAL USE OF THE VEHI CLE AS ALSO THE FACT THAT THERE IS NO LOG BOOK MAINTAINED IN RESPECT OF THE VEHICLE AND SIMILAR REGISTER IN RESP ECT OF THE TELEPHONE. IN THESE CIRCUMSTANCES CONSIDERING THE SUBMISSION OF THE LD. A.R. AND THE LD. D.R. THE DISALLOWANCE OUT OF THE VEHICLE AND TELEPHONE EXPEN SES IS RESTRICTED TO 1/10 TH . IN THESE CIRCUMSTANCES THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL P URPOSES. SD./- SD./- (K. D. RANJAN) (GEORGE MATHAN) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED:29 TH JAN. 2010 SP. COPY FORWARDED TO 1. APPELLANT 2. RESPONDENT 3. CIT TRUE COPY: BY ORDER 4. CIT(A) 5. DR DY. REGISTRAR ITAT NEW DELHI