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TMI Blog2012 (12) TMI 324X X X X Extracts X X X X X X X X Extracts X X X X ..... s Control Act, 1947 is not applicable in respect of Flat C of the Madhukunj property (hereinafter referred to as 'Flat C') and that the annual value of Flat C is to be determined on the basis of the rent which the flat might be expected to fetch in the market. * Computing the notional rent in respect of Flat C at Rs. 2,40,000 on the basis of data available with him of a flat in Worli which had been let out at Rs. 25,000 per month, alongwith an interest free deposit of Rs. 1,20,00,000/- and * Adding to the notional rent so computed, the proportionate notional interest of Rs. 17,28,000/- based on the security deposit of Rs. 1,20,00,000/- placed in relation to the Worli flat and applying a rate of interest of 18 percent per annum. 2. In confirming the disallowance of a deduction of Rs. 1,40,699/- made by the AO, being 10 per cent of the expenditure incurred in respect of telephone, telex, and fax charges. 3. In confirming the disallowance of a deduction of Rs. 3,00,000/- made by the AO, with respect of payment made to Ramabai Kokre as settlement amount in relation to a suit filed in the Small Causes Court in 1991. 4. in confirming the disallowance of a deduction of Rs. 1,1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s found to be Rs. 25,000/- per month alongwith an interest free deposit of Rs. 1,20,00,000/-. The AO accordingly computed the ALV of Madhukunj based on his finding/enquiry in respect of Worli flat. The rent so computed was at Rs. 8,45,658/- and the money value of interest free deposit was computed at Rs. 60,88,738/- , and computed the net house property income accordingly. The AO further disallowed a sum of Rs. 2,81,398/- out of expenses debited on account of telephone, telex and fax charges totaling to Rs. 14,06,991/- on the ground that personal use of telephone cannot be denied. The AO further disallowed a sum of Rs. 72,744/- out of total professional fees of Rs. 7,88,809/-. Claim of Rs. 1,56,995/- as licence fee for the use of software was also disallowed treating the same as capital expenditure and accordingly 25% of depreciation was allowed. The AO further disallowed a sum of Rs. 3,00,000/- out of the total claim of legal charges of Rs. 3,19,000/- being paid to Ramabai Mhadev Kokre as compensation. The AO found that a sum of Rs. 16,34,882/- has been debited on account of office repairs & maintenance. From the details submitted by the assessee, the AO disallowed a sum of Rs. 9, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rty came into the books of the firm of M/s. Premchand Roychand & Sons. To substantiate his claim, the Ld. Counsel drew our attention to the decision of the Tribunal in ITA No. 5752/B/86 for assessment year 1980-81 wherein the Tribunal had the occasion to decide on the levy of capital gain tax on Sushil Kishore Premchand for bringing Madhu Kunj property as its capital contribution. The Counsel pleaded that the decision of the Tribunal in ITA No. 5752/B/86 (supra) proves that the said Madhu Kunj property became the property of the firm from A.Y. 1980-81. The Ld. Counsel further submitted that since originally property was let out on 1st July, 1970 to FDC, provisions of Sec.7 of BRCA are clearly applicable. The Ld. Counsel further pointed out that the AO himself has accepted that as regards Flat No. A & B of Madhu Kunj property which are let out since 1.9.1972, the ALV submitted by the assessee is accepted as the provisions of BRCA is applicable. 6. The Ld. Departmental Representative relied upon the findings of lower authorities. 7. We have considered the rival submissions and perused the orders of lower authorities and the Paper book submitted by the Ld. Counsel for the assessee. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . This ground of the assessee is allowed for statistical purposes. 12. Ground No. 3 relates to disallowance of deduction of Rs. 3,00,000/- as settlement amount paid to Ms. Ramabai Kokare. 13. It is the contention of the assessee that payment of Rs. 3,00,000/- was made as settlement amount in relation to the suit filed in the Small Causes Court. The Ld. Counsel explained that the assessee had a driver who retired in 1990 and made certain claims for which the assessee sought legal action. In March, 1991, the said driver expired and his wife Ramabai Kokare continued the legal proceedings. The assessee, to avoid waste of time and efforts and to buy peace of mind, made a settlement with the wife of the deceased and paid Rs. 3,00,000/- and claimed as business expenditure. 14. The Ld. DR rebutted the submission of Ld. Counsel and stated that any compensation paid to the wife of the driver who retired in 1990 and expired in 1991 cannot have any bearing in the year under consideration. 15. We have heard the rival submissions and perused the orders of authorities below. We find that the assessee had filed a plea made to Small Causes Court stating that the settlement has been arrived betw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its under the head motor car expenses, the assessee has also shown credits in the form of recoveries from tenants which has resulted into a net gain of Rs. 9388/-. The AO is directed to verify the details as per the chart and if the net result is actually a gain, then no disallowance can be made under this head. Therefore, ground No. 5 raised by the assessee is allowed for statistical purposes. ITA No. 3463/Mum/2009 - A.Y. 1998-99 - Revenue's appeal 21. The Revenue has raised the following grounds of appeal: "1. On the facts and in the circumstances of the case, the Ld. CIT(A) erred in deleting the disallowances of Rs. 72,744/- out of Rs. 7,88,809/- being professional fees, incurred in connection with casual office work. 1.b) On the facts and in the circumstances of the case, the Ld. CIT(A) failed to appreciate the fact that the assessee failed to substantiate the claim of expenses to this extent. 2. On the facts and in the circumstances of the case, the Ld. CIT(A) erred in deleting the disallowances of Rs. 1,56,995/- being expenditure on computer software, considering the same as revenue expenditure. 2b) On the facts and in the circumstances of the case, the Ld. CIT(A) fail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p Computers for grant of license for use of software under the head 'Professional charges'. The same was treated as capital expenditure. The Ld. CIT(A) found that the payment of Rs. 1,56,995/- has been made for upgradation of MS Windows 95, MS Office Professional, MS Window Media etc. and held that looking into the nature of expenses, the same are to be treated as Revenue expenditure. 28. The Ld. DR argued that the expenses are of capital in nature as enduring benefit is obtained by the assessee. 29. The Ld. Counsel for the assessee argued that the expenses are very much of Revenue in nature and are nothing but license fees paid for upgradation of the software. 30. We have heard the rival submissions. We are of the view that new and improved version of the softwares are available which render the existing software obsolete. Therefore, it cannot be said that these softwares give any enduring benefit. Accordingly, we do not find any reason to interfere with the finding of Ld. CIT(A). This ground of the Revenue is accordingly dismissed. 31. In ground No. 3, Revenue has shown its grievance against the disallowance of Rs. 1,10,000/- only as capital expenditure out of the tota ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dismissed. ITA No. 2570/Mum/2005-A.Y. 2001-02 - Assessee's appeal 37. The first ground relates to determination of property income at Rs. 15,06,821/- against the property income declared at Rs. 95,343/-. This ground is identical with the issue raised in ground No. 1 in ITA No. 3408/M/02 for assessment year 1998-99 at paras 3 to 7. While deciding this ground in ITA No. 3408, we direct the AO to delete the addition of money value of interest free deposit. Accordingly, ground No. 1 with all its sub grounds are allowed. 38. Ground No. 2 relates to disallowance of Rs. 1,89,010/- being 10% of the expenditure incurred in respect of telephone, telex and fax charges. This ground is identical with the issue raised in ITA No. 3408/M/02 for assessment year 1998-99 at paras 8 to 11. This ground of the appeal is allowed for statistical purposes. 39. Ground No. 3 relates to disallowance of Rs. 11,530/- incurred for purchase of paintings. This ground is identical with the issue raised in ground No. 4 in ITA No. 3408/M/02 for assessment year 1998-99 at paras 16 to 18. While considering this issue in ITA No. 3408/M/02 we are of the view that painting on its wall is to be treated as business exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to disallowance of Rs. 1,56,586/- being 10% of the expenditure incurred in respect of telephone, telex and fax charges. This ground is identical with the issue raised in ground No. 2 ITA No. 3408/M/02 for assessment year 1998-99 at paras 3 to 7. This ground of the appeal is allowed for statistical purposes. 46. Ground No. 3 relates to disallowance of Rs.2,21,252/- being expenditure on computer software. This ground is identical with the issue raised in ground No. 2 in Revenue's appeal in ITA No. 3463/M/02 for assessment year 1998-99 at paras 27 to 30. While considering this issue in ITA No. 3463/M/02, we are of the view that these softwares do not given any enduring benefit therefore, this ground of the assessee is allowed. 47. Ground No. 4 relates to disallowance of Rs. 4,84,050/- incurred for purchase of paintings. This ground is identical with the issue raised in ground No. 4 in ITA No. 3408/M/02 for assessment year 1998-99 at paras 16 to 18. This ground of the assessee is accordingly allowed. 48. Ground No. 5 relates to disallowance of deduction of Rs. 1,09,580/- being 20% of the motor car expenses. This ground is identical with the issue raised in ground No. 5 in ITA No. 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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