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TMI Blog2013 (8) TMI 820X X X X Extracts X X X X X X X X Extracts X X X X ..... e plant and machinery and the assessee is running an educational institution and is not engaged in the business of lending library – Held that:- There is force in the contentions of the assessee that due to fast changing technology around the globe, the reference books also become obsolete in a short span - Books were given to the students for which library charges were collected by the assessee-society. Therefore, as per para 9(ii) of the Schedule of Depreciation of the Income-tax Rules depreciation is to be allowed @ 100% - Decided against the Revenue. Reference under section 142A of the Act was made to the DVO for estimating the value of college building of the assessee-society without rejecting the books of account – Held that:- Reliance is placed upon the Apex court judgment in the case of Sargam Cinema vs. CIT [2009 (10) TMI 569 - Supreme Court of India ], wherein it was held that without rejecting the books of account, reference to the DVO cannot be made – In the present case, assessing Officer has not rejected the books of account of the assessee. The assessee's books of account are properly audited and no defect has been pointed out therein. There is no specific finding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... meeting and the balance sheet were filed before the ld. CIT(A). It was also contended that during the year no loan was taken from any financial institution. Therefore, question of payment of interest @ 12% per annum to any financial institution does not arise. It was also explained to the ld. CIT(A) that the society was floated by three IIT graduates with the main object of setting up an Engineering College at Kanpur, for which substantial funds were required and due to reluctance of the financial institutions in providing term loan to the society, the management committee has decided to finance the project partly from their own sources and partly from outside sources. Interest during the year under appeal was paid by the society on the borrowed funds @ 18% per annum at the prevailing market rate in accordance with the rising cost of funds because the rate of interest on personal loans of various banks was between the range of 18% to 24% per annum during that period. Besides, he has also placed reliance upon various judgments. 2.3 The ld. CIT(A) re-examined the issue in the light of assessee s contentions and being convinced with the same, the ld. CIT(A) deleted the addition aft ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter having observed that the payment of interest @ 18% per annum is reasonable, market related and not extraordinary and therefore no disallowance is called for. Accordingly, the order of the ld. CIT(A) on this issue is confirmed. 2.6 In assessment year 2008-09, the Assessing Officer made disallowance of excess payment of interest on the ground that higher rate of interest @ 21% per annum was paid by the assessee to the persons specified under section 40A(2)(b) of the Act. The ld. CIT(A) restricted the disallowance of interest to 18% per annum and directed the Assessing Officer accordingly. Therefore, in the light of foregoing discussions, no interference is called for in the order of the ld. CIT(A) on this issue. 2.7 In assessment year 2005-06 interest was paid @ 12% per annum which was also considered to be at higher side by the Assessing Officer while making disallowance of excess payment of interest paid. The ld. CIT(A) deleted the additions finding no merit in the addition. In the light of our observations in the foregoing paras, no disallowance can be made for interest paid @ 12% per annum on unsecured loan availed from the members and their relatives. Therefore, no inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consideration to the rival submissions and from a careful perusal of the orders of the lower authorities, we find that there is force in the contentions of the assessee that due to fast changing technology around the globe, the reference books also become obsolete in a short span. Moreover, it is also obvious from record that the books were given to the students for which library charges were collected by the assessee-society. Therefore, as per para 9(ii) of the Schedule of Depreciation of the Income-tax Rules depreciation is to be allowed @ 100%. We, therefore, find no infirmity in the order of the ld. CIT(A) in this regard and we accordingly confirm the same. 3.5 Similar is the position in other appeals also on this issue. We accordingly confirm the orders of the ld. CIT(A) on this issue in those appeals also. 4. Ground No.3 in all the appeals relates to the deletion of addition made on account of unexplained investment in construction of building by considering the report of the Departmental Valuation Officer (DVO). 4.1 In this regard, it is noticed that subsequent to survey under section 133A of the Act conducted at the premises of the assessee-society, reference under se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... VO has adopted C.P.W.D rates. The work is being done in U.P. As such he should adopt P.W.D rates. This has been held by Hon'ble High Court and also by various Appellate Commissioners. The U.P.P.W.D rates are 6% cheaper than C.P.W.D rates. c.) Total area of Ground Floor taken by DVO as 3544.23m2 is not correct Actual area of Ground Floor is 34 74.84 m2 d.) In the entire building considerable area is in the shape of big half. For hall type construction, valuation cell is allowing 35% deduction in plinth area rate for not providing internal walls, joinery work and fitting etc. As such in this case also 35% deduction in rate should be allowed wherever halls have been provided. Total floor wise area of halls is given below:- Area of Halls Ground Floor - 1431.26m2 First Floor - 1300.17m2 Second Floor - 1090.80m2 Canteen Portion Ground Floor - 153.71m2 First Floor - 263.56m2 e.) The DVO has adopted plinth area rates applicable for 6 storey RCC frame structure. The building under consideration is only 3 storey. There is a provision of increasing in plint ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) 202 CTR 506(ALL) it was held that where the report of DVO suffers from material defects and that the Revenue has not pointed out a single instance of unrecorded expenditure addition U/s 69B made only on the basis of DVO's report could not be sustained. In the case of Dy. CIT Vs. Rohtas Projects Ltd.(2006) 282 ITR(AT) 42, Lko, there was difference of opinion between the Members of the Bench and question was referred to the Third Member for his opinion. Hon'ble Vice President (Third Member) held that the assessee was maintaining the books of accounts in accordance with the provisions of Companies Act, 1956, which were duly audited. The AO had not pointed out any defects in the books of accounts which were duly supported with vouchers etc. The Revenue had also not brought anything on record to show that the books of accounts followed by the assessee are suffering any defect. The Department therefore could not be given a freshening in the absence of any material brought on record by the Departmental Authorities. In the case of CIT vs. Ashok Khetrapal (2007) 294 ITR 143 (Delhi) it was held by dismissing the appeal of the department, that no incriminating material whatsoever w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... als)-ll, Kanpur in various cases, some of them are mentioned below:- Ram Krishan Tripathi vs. ITO (Order Dtd. 24/10/1991) Smt. Vimla Devi vs. ITO (Order Dtd. 15/01/2002) Madan Lal vs. ITO (Order Dtd. 10/07/2002) Smt. Rama Gupta Vs A CIT (Order Dtd 18/03/2008) It is further submitted that in the case of I.T.O. vs Santosh Kumar Dalmia 208 ITR 337 (Cal), it was held that valuation is a matter of opinion and valuation differs from valuer to valuer and property to property, depending on facts and circumstances of each case. The valuer's report is a statistical hypothesis that leaves wide room for error on either side. In the light of above facts, addition of Rs.19,80,700/- made by the Ld. A.O. may kindly be deleted. 4.4 Finding force in the contentions of the assessee, the ld. CIT(A) deleted the additions. The relevant observations of the ld. CIT(A) are extracted hereunder for assessment year 2006-07:- 6.1 On perusal of the DVO report the Registered Valuer's report it is seen that the DVO has adopted the same rate of construction for the Halls as he has taken for the other portions. It is a commercial known fact and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the assessee is less than 10%, there will be no addition on account of undisclosed investment on this count. Reference in this regard is made to the following decisions: Bimla Singh V/s C1T [222 CTR 404 (Patna)] Ashish Agarwal V/s DCIT, Central-11, Kanpur (Lucknow Bench) 6.1.5. The addition is, therefore, deleted." 4.5 Aggrieved, the Revenue has preferred an appeal before the Tribunal and placed heavy reliance upon the order of the ld. CIT(A). 4.6 The ld. counsel for the assessee during the course of hearing has invited our attention to the judgment of the Hon'ble Apex Court in the case of Sargam Cinema vs. CIT [2010] 328 ITR 513 (SC) in which the Hon'ble Apex Court has held that without rejecting the books of account, reference to the DVO cannot be made. The ld. counsel for the assessee further invited our attention to the order of the lower authorities and submitted that the Assessing Officer has not rejected the books of account of the assessee. The assessee's books of account are properly audited and no defect has been pointed out therein. There is no specific finding of the Assessing Officer for rejection of the books of account. Therefore, refe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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