2020 (7) TMI 468 - AT - Income Tax

Disallowance of repairs and maintenance - Disallowance made on account of repairs and maintenance by holding that assessee had already given flat deduction @30% of rental income towards repairs under head income from house property and no further deduction is eligible to the assessee - HELD THAT - We find that the rental income offered by the assessee in the sum of ₹ 57,500/- was only in respect of 100 sq.ft of premises let out for five months. Hence, the corresponding flat deduction @30% towards repairs under the head income from house property was also given only for a period of five months. No deduction for the remaining 7 months has been given, in terms of the provisions of Section 38(2) of the Act. We find that assessee is entitled for proportionate deduction for the remaining period of seven months of these repairs and maintenance in respect of 100 Sq.ft of property. TP Adjustment - Addition made on account of manning services fee being the arm s length price adjustment - HELD THAT - The facts relating to the disputed issue being identical in A.Y.2003-04, in our considered opinion, the decision taken by this Tribunal in assessee s own case for the A.Yrs. 2002-03, 2004-05 and 2005-06 would squarely apply to this assessment year also and accordingly, we dealt the addition made towards manning services fee on account of transfer pricing adjustment. We find that the ld. CIT(A) had already granted relief to the extent of ₹ 2,14,48,677/- in this regard and had confirmed only the remaining sum of ₹ 5,00,47,881/-. At the time of hearing, both the parties informed that no appeal was preferred by the revenue against such relief granted by the ld. CIT(A). Accordingly, the ground No.4 raised by the assessee is allowed.

Summary

Issues Involved:
1. Disallowance of repairs and maintenance.
2. Addition on account of manning services fee as arm’s length price adjustment.
3. Initiation of penalty proceedings under Section 271(1)(c) of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Disallowance of Repairs and Maintenance:
The assessee had let out 100 sq.ft of their 10,000 sq.ft office area for five months, deriving rental income of ?57,500/-. This income was offered under 'income from business,' but the AO treated it as 'income from house property,' granting a 30% deduction for repairs. The assessee's regular repairs and maintenance expenses of ?12,23,559/- claimed under 'income from business' were disallowed, along with ?1,40,53,158/- on account of depreciation. The CIT(A) granted full relief for depreciation, noting the 100 sq.ft was used for business for seven months, but sustained the repairs disallowance, citing the 30% deduction already given under 'income from house property.' The Tribunal found the assessee entitled to a proportionate deduction for the remaining seven months under Section 38(2) of the Act, thus partly allowing the ground.

2. Addition on Account of Manning Services Fee as Arm’s Length Price Adjustment:
The issue concerned the addition of ?6,82,62,238/- due to arm’s length price adjustment by the TPO. The Tribunal noted the issue was covered in the assessee’s favor for A.Y. 2002-03, 2004-05, and 2005-06. The TPO had determined the arm’s length price based on rates from Confidence Shipping Ltd., leading to an adjustment. The Tribunal, referencing its previous decisions, found the facts identical and upheld the assessee's pricing as arm’s length. The CIT(A) had already granted partial relief, and the Tribunal deleted the remaining confirmed addition of ?5,00,47,881/-, allowing the ground.

3. Initiation of Penalty Proceedings Under Section 271(1)(c):
The ground concerning the initiation of penalty proceedings under Section 271(1)(c) was deemed premature for adjudication at this stage, thus not addressed substantively.

General Ground:
The general ground raised by the assessee did not require specific adjudication.

Conclusion:
The appeal was partly allowed, providing proportionate deduction for repairs and maintenance for the remaining seven months and deleting the addition made on account of transfer pricing adjustment for manning services. The penalty proceedings issue was not adjudicated as it was premature.