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TMI Blog2012 (10) TMI 525X X X X Extracts X X X X X X X X Extracts X X X X ..... rent. - in favour of the assessee - I.T.A. No. 1249 & 1250/Mds/2010 - - - Dated:- 21-2-2012 - Shri N.S. Saini, And Shri George Mathan, JJ. Assessee by: Shri S. Sridhar Department by: Shri Shaji P. Jacob, Sr. DR O R D E R Per N.S. Saini, A.M. :- These appeals filed by the Revenue are directed against the orders passed by the CIT(A)-V, Chennai dated 10.05.2010 and 21.6.2010 for Assessment Years 2005-06 and 2006-07. 2. The ld. D.R. Shri Shaji P. Jacob submitted that both the appeals are filed by the Revenue and there are common grounds of appeal in both the appeals. The first common ground of appeal is that the ld. CIT(A) erred in deleting the addition of Rs. 56,05,558/- made u/s 40(A)(2) of the Act in respect of rent paid to a group concern. The other common ground of appeal is that the ld. CIT(A) erred in deleting the addition of Rs. 4,61,523/- on account of disallowance of interest on interest free deposits made to the group concern. He further submitted that both the grounds have been decided by the Tribunal in favour of the assessee in the earlier years and the ld. CIT(A) has followed those orders and allowed the appeals of the assessee. The grie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the course of assessment proceedings for the A.Y. 2002- 03. In the course of the said departmental enquiry proceeding so-called similar properties located at Mumbai and. Delhi were taken into account and various relevant factors were examined in relation to the rent paid in respect of those similar properties. In the assessment order the Addl. CIT has elaborately discussed the relevant issues before arriving at the reasonable rent which ought to have been paid by the . The Addl. CIT is found to have basically followed the stand taken by the A.O in the appellant's case in earlier assessment years. In respect of the rent paid by the appellant. In relation to the four Mumbai properties and one Delhi property, the Addl. CIT has observed that the properties located in Mumbai were governed by the provisions of the Rent Control Legislation. While dwelling upon the provisions of the Rent Control Legislation, Addl.CIT has placed reliance on the judgement of the Hon'ble Apex Court in the following cases for the purpose of determining the reasonable annual value of the properties governed by the said provisions:- (a) Dewan Daulat Rai Kapur Vs. New Delhi Municipal Corporation and another 12 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e basis of the standard rent fixed under the Rent Control Legislation. 4.1.2. In the course of the appellate proceeding the learned A.R. have vehemently rebutted the contentions raised by the Addl.CIT while working out the disallowances. At the very outset, he pointed out that the impugned let out properties did not come under the purview of the Rent Control Act, because the appellant company had equity share capital exceeding Rs. 1 crore. The written submissions filed by the learned A.R. in this regard are found to be identical with those filed in the course of the appellate proceedings for the A.Ys. 2001-02, 2002-03,2003-04 and 2004-2005. The learned A.R. have also furnished copies of relevant documents including the photographs of the premises taken on rent by the comparable companies in support of his rebuttal. On the basis of the evidences filed, the learned A.R. have sought to prove that no two properties can be compared with each other, unless they are identical in respect of the location, the facilities available and the period of tenancy, etc. He pointed out that the properties selected by the department in Mumbai and Delhi for the sake of comparison were not at all at p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ailed to furnish any evidence to show that the borrowed fund/ interest-bearing fund was not at all utilised by it for making the advance to M/s. TIPL. By relying on the judgement of the Hon'ble Kerala High Court in the case of CIT Vs. M/s. V.L. Baby Company 254 ITR 248 (Ker.) and that of Hon'ble Punjab and Haryana High Court in the case of CIT Vs. M/s. Abhish~k Industries Limited 286 ITR . 1 (P H), the JCIT opined that the borrowings made by the appellant from the bank was not for business purpose, because the same stood diverted to a sister concern without any actual benefit accruing to the appellant. In order to work out the interest attributable to the borrowed fund not utilised for business purpose, the JCIT had followed the method adopted by the A.O in the assessment proceeding for the A.Y. 2002-03. While doing so, the JCIT had again referred to the comparable cases of M/s. Hansa Vision Private Limited and M/s. A.M.D. Plast Private Limited in relation to the Mumbai and Delhi properties. By relying upon the figures of advances given by the Mumbai and Delhi-based comparable companies, the JCIT computed the excess interest-free deposit made by the appellant company with M/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t deposit has been adjudicated by my predecessor in great detail in the appellate proceedings for the A.Ys. 2001-02,2002-03 and 2003-2004. He had held that in respect of the properties at Colaba and Napean Sea Road, Mumbai, the rent paid and the corresponding deposits given to the group company were less compared to the prevalent market rate. Thus, he opined that in respect of the said properties no disallowance of interest on deposits was called for. I also find no reason in differing from the said view of my predecessor. In respect of the properties at Mahalakshmi, Fort (both in Mumbai) and Pusa Road, New Delhi, my predecessor had held that though rent paid by the appellant company in respect of these three properties were fair and reasonable, there was no necessity on its part to pay rental deposits to its group concern exceeding 12 months' rent. Accordingly, in the appellate proceedings for the AYs. 2001-02, 2002-03 and 2003-2004, my predecessor had worked out the excess rental deposits and computed the disallowable interest at the rate of 12% thereon. also find no infirmity in the said finding of my predecessor-in-office and accordingly, the excess rent deposits in respect o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtmental Representative and considered the relevant record. We note that the Commissioner (A) has followed the earlier orders for the assessment years 2001-02, 2002-03 2003-04 while deciding these issues. We further note that this Tribunal has considered and decided these two issues raised by the assessee as well as Revenue in assessee's own case for the assessment years 1996-97, 1997-98, 2001-02 2002-03 in ITA Nos.284/04, 965,2804/05, 392/06 which has been followed by this Tribunal in the subsequent case of the assessee for the assessment years 1998-99 to 2000-01 2003-04 in ITA Nos.1554 to 1556 2093/06 wherein this Tribunal has held in paragraph 2 3 of the order dated 30th Nov.2007 as under: 2. ITA Nos.1554,1555,1556 2093/Mds/06: In these appeals, the Assessee has taken the above common grounds. After hearing both the parties we find that identical issues have come up for consideration before this Tribunal in the case of the same Assessee in ITA Nos.283/Mds./04, 965,2804/Mds./05 392/06 and 438/04, 1810/05, 167 519/06 for the Asst. Years 1996-97, 2001-02, 2002-03 1997-98 and this Tribunal by its order dated 30th November 2007, has elaborately dealt with the iss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision regarding diversion of money could not be taken without the consent of the major partner and there is no reason to believe that such major partner would allow the Assessee company to pass on the benefit to its own relatives etc. In fact, the Department has no right to step into the shoes of the assessee and find the reasonableness of the business transaction from the point of view of the Department. It always has to be seen from the angle of the Assessee. 30. The chart given by the C.I.T. (Appeals) as Annexure-I reads as under:- Rent and Rate of Return Working April 2001 to March 2002 Sl.No. Property particulars Sq.ft occupied Rent per month Rent per annum Rent per month per sq. ft. Deposit amount 12 months rent per deposit Interest on excess deposit @ 12% Rent per sq.ft including interest on deposit Rent as per the market rates 1 TIPL (Anand Estates, Flat No.15,No.189 A,Sane Guruji Marg, Chinchpokli, Mumbai-13 Mahalakshmi 3525 213000 2556000 60 12000000 2556000 1133280 87 65-85 2. TIPL (Elphinstone ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the circumstances of the case. No businessman can be compelled to maximize his profits. In this case clearly deposits were made for taking the premises on rent which means that the same was for business expediency and are based on market rent. Hence, it cannot be said that excessive deposits were made by the Assessee. In view ,of this discussion, we are of the view that the CIT(Appeals) has correctly held that rent paid was reasonable and as far as the disallowance of interest on excessive deposit made by the Assessing Officer and part of which has been sustained by the CIT(Appeals) is concerned the same is not justified.' Therefore, we set aside the order of the CIT(Appeals) on this issue and delete the disallowance of interest " 3. We find that for the years before us also, the facts are identical. Therefore, respectfully following the order of the Tribunal cited supra, wherein the Tribunal has deleted the disallowance of interest, for these years also, we delete the disallowance of interest, holding that the deposits were made for taking the premises on rent which was necessitated by business expediency and' are based on marked rent. Hence, we decline to agree with the Fc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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