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TMI Blog2015 (2) TMI 168X X X X Extracts X X X X X X X X Extracts X X X X ..... sits for the purpose of ALV amounts to double taxation. - Decided in favour of the assessee. Deduction representing the maintenance expenses paid to the societies - Held that:- On perusal of the decision of the Tribunal in the case of Aloo Bejan Daver (2011 (4) TMI 1277 - ITAT MUMBAI) we find it is categorically mentioned that the "maintenance charges" are to be deducted from the gross rent to arrive at the ALV of the property. For this proposition, the Tribunal relied on the decision of the Coordinate Bench in the case of Varma Family Trust ( 1983 (10) TMI 79 - ITAT BOMBAY-A) as well as the decision of the ITAT in the case of Sharmilla Tagore vs. JCIT (2004 (6) TMI 591 - ITAT MUMBAI). This order of the Tribunal has referred to the jurisdictional High Court judgment in the case of J.K. Investors (Bombay) Ltd [ 2000 (6) TMI 9 - BOMBAY High Court]. The said judgment of Hon’ble High Court is relevant for exclusion of outgoings, being liabilities of the assessee in view of section 23(1)(b) of the Act. -Decided in faaour of assessee. Applicability of the provisions of section 145A to the unutilized MODVAT - Held that:- The word "inventory" shall include opening stock as well as c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raised the following grounds which read as under: 1. The Ld CIT (A) erred in confirming the action of the Assessing Officer in assessing the income from house property at ₹ 18,28,310/- instead of ₹ 2,16,776/- as returned by the appellant. He erred in confirming the action of the Assessing Officer in including the national interest on the interest free security deposit received from the licencee of the house property in computing the annual value of the property. He further erred in not allowing the claim of the appellant for deducting an amount of ₹ 2,30,320/- representing maintenance expenses paid to the housing society in computing income from house property. 2. The Ld CIT (A) erred in not deleting the addition to the closing stock on account of unutilized Modvat credit under section 145A of the Act. He erred in not accepting the method prescribed under the guidance note issued by the Institute of Chartered Accounts of India relating to adjustments under section 145A of the Act. He further erred in directing the Assessing Officer to find out whether the unutilized Modvat credit to be availed as shown under the head assets ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ictional High Court judgment in the case of CIT vs. J.K. Investors (Bombay) Ltd (248 ITR 723) and distinguished the same before confirming the order of the Assessing Officer. Aggrieved with the said decision of the CIT (A), assessee is in appeal before the Tribunal. 4. During the proceedings before us, Ld Counsel for the assessee made elaborate discussion on the applicability of the said judgment of the Bombay High Court in the case of J.K. Investors (supra). Further, he submitted the actual rent receivable on the property constitutes the reasonable rent. There is no incriminating evidence before the Assessing Officer that the assessee has deflated the rent by invoking the extraneous consideration. For this proposition he relied on another judgment of the jurisdictional High Court in the case of CIT vs. Tip Top Typography (48 Taxmann.com 191) (Bom.) as well as the decision of the ITAT, Delhi Bench in the case of CIT vs. Moni Kumar Subba (10 Taxmann.com 195) (Delhi) (FB). Further, he mentioned that the rent received @ ₹ 45,000/- per month is much higher than the municipal rateable value. He also reasoned that the security deposit of ₹ 1.8 Crs received by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said security deposits deposited with the banks the same is offered to tax, the inclusion of such interest on the said deposits for the purpose of ALV amounts to double taxation. Considering the factual matrix of the present case, we are of the considered opinion that the issue raised by the assessee has to be decided in favour of the assessee. We order accordingly. 7. The second issue relates to the claim of deduction of ₹ 2,30,320/- representing the maintenance expenses paid to the societies. Relevant facts are that as per the lease agreement in connection with the property referred above, assessee has to bear maintenance, parking and watering charges. Assessee considered the said amount of ₹ 2,30,320/- is deductible at the stage of computing the ALV for the purpose of 23 of the Act. Such expenses are not to be considered for claim of deduction u/s 24 of the Act considering the absence of enabling provisions in section 24 of the Act. In support of his claim of the said expenses u/s 23 of the Act, he relied on various decisions of the Tribunal and mentioned that the same constitutes a valid claim. The list of decisions is as under: 1. Aloo Bejan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... intenance charges paid to housing society have to deducted even while computing annual letting value. Similar view has been taken in various other decisions relied on by the Ld Counsel for the assessee. The decisions relied on by the Ld CIT (A), in our opinion, are distinguishable and not applicable to the facts of the present case. 8. We find the Mumbai Bench of the Tribunal in the case of Gopichand P. Godhwani (supra), after considering the decision of the Hon ble Bombay High Court in the case of J.K. Investors (Bombay) Ltd (2001) 168 CTR (Bom) 189 has held that for the purpose f determining annual value of the property all taxes, cesses and outgoings being liabilities of the assessee, have to be excluded from assessable income in view of section 23(1)(b). So far as the decision of the Tribunal in the case of Barodawala Properties Ltd (supra) is concerned, we find that the Tribunal in subsequent judgments have held that while calculating annual value of the let out property, maintenance charges paid to the society by the assessee is admissible deduction from the annual let out value u/s 23(1)(b). In view of the series of decisions relied on by the Ld Counsel for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , purchases as well as sales. These decisions are Hawkins Cookers Ltd vs. ITO [ITA No.505/Mum/2004 dated 11.8.2008]; Gandhar Oil Refinery [ITA No.856/Mum/03 dated 23.3.2006]; Metal Twice P Ltd [ITA No.3857/Mum/05, dated 5.11.2008. Further, the Hon ble Delhi High Court n the case of CIT vs. Mahavir Aluminum Ltd 297 ITR 77 (Del) has held that adjustment has to be made not only with reference t closing stock but also with reference to opening stock section 145A itself provided that adjustment has to be made with respect to purchase and sales as well as inventories. The word inventory shall include opening stock as well as closing stock. Therefore, following the aforesaid decisions, the issue is decided in favour of the assessee The orders of the Ld CIT (A) for both the years are set aside on this issue and consequently, the Assessing Officer is directed to recomputed the profits after making adjustments with reference to opening stock, closing stock, purchases as well as sales. 12. From the above, it is evident that the above cited decisions are relevant for the proposition in support of making the adjustments to all the inventories including opening stock as well as the closing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the termination of the lease agreement. The said para 14 of the Third Member decision is extracted as under: 14. In the present case also looking into the terms of lease deed which have been discussed above, it has to be held that the ownership of leased assets was always with the lessor. The lessor in the normal course of its business had leased out these assets to the assessee. Therefore, the lessor being owner of the assets and also used those assets in the business of leasing and was entitled to depreciation. Consequently, the assessee being lessee is entitled for lease rent paid by it which is in the nature of revenue expenditure. Accordingly, Question no.2 is answered in favour of the assessee. 16. Considering the above, despite few adjustments to the leased agreement relevant for the AY under consideration, the essential facts relating to the ownership of the vehicle i.e., the ownership remains the lessor and therefore, the lease in question constitutes operating lease. Therefore, the lease rentals paid by the assessee constitutes an allowable expenditure. Accordingly, ground no.3 raised by the assessee is allowed in favour of the assessee. 17. In the res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5,66,830/- on the ground that the lease agreements were financial arrangements entered into by the appellant and the financer. (b) He further erred in observing that at the end of the lease period the assets would become the property of the appellant and on this basis therefore the rentals were nothing but a financial agreement. (c) He further erred in making the following observations which are contrary to the facts of the case. The Assessing Officer has further noted that the assessee has claimed depreciation on these vehicles. If these vehicles have been leased out, how the assessee is claiming depreciation is not known. 19. In this appeal, assessee raised the similar issues raised in its appeal for the AY 2004-2005, which is adjudicated by us in the above paragraphs of this order. Since, the issues raised in the present appeal are identical to that of the ones raised by the assessee for the AY 2004-2005, therefore, our finding of the said issues squarely applies to the issues raised in grounds of this appeal too. Considering the same, ground no.1, 2 and 6 are allowed in favour of the assessee and ground nos.3, 4 and 5 which relate to MODVAT c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 31.7.2008. In this appeal, Revenue raised the following grounds which read as under: 1. On the facts and in the circumstances of the case, the Ld CIT (A) erred in deleting the disallowance of employees contribution to PF amounting to ₹ 3,08,303/- and to ESI amounting to ₹ 4,932/- relying upon Madras High Court decision in the case of Salem Cooperative Spinning Mills Ltd 258 ITR 360 even though these payments were made beyond the grace period and were taxable in view of section 2(24)(x) r.w.s. 36(1)(va) of the Act. 2. On the facts and in the circumstances of the case, the Ld CIT (A) erred in directing the Assessing Officer to allow depreciation on vehicles taken by the assessee on lease even though the assessee was not the owner of these vehicles during the relevant previous year. 25. Ground no.1 relates to the deletion of disallowance with regard to the employees contribution to PF and ESIC. Briefly stated relevant facts are that during the year assessee made payments towards employees contribution to PF and ESIC and claimed deduction u/s 36(1)(va) of the Act on the ground that the same are paid before the due date of filing of return. Dur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee made the payments within the said grace period prior to the due date filing of the return of income. Therefore, we find no infirmity in the decision of the CIT (A) in allowing the assessee s appeal. In our opinion, the order of the CIT (A) on this issue is fair and reasonable and it does not call for any interference. Accordingly, ground no.1 raised by the Revenue is dismissed. 31. Ground no.2 relates to the allowablility of depreciation on vehicles taken by the assessee on lease. This ground is connected to the ground no.3 raised by the assessee for the AY 2004-2005 in appeal ITA No. 2733/M/2008. On the said ground, we have given our adjudication on this issue and held that the lease of vehicles in question constitutes operating lease and the lease rentals paid by the assessee constitutes an allowable expenditure. The decision of the CIT (A) vide para 7.3 of his order is fair and reasonable and the same does not call for any interference. Accordingly, ground no.2 raised by the Revenue is dismissed. 32. In the result, appeal of the Revenue is dismissed. ITA NO.2332/M/2010 (AY 2006-2007) (Assessee s appeal) 33. This appeal filed by the assessee on 24. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sequential adjustment on account of unutilized Modvat credit to the value of opening stock of subsequent assessment year 2006-2007. 5. The Ld CIT (A) erred in not directing the Assessing Officer to make the adjustment on account of unutilized Modvat credit to the opening stock of the current assessment year consequent to the addition made to the closing stock of earlier AY 2005-2006. 6. (a) The Ld CIT (A) erred in confirming the disallowance of lease rent of ₹ 2,33,055/- on the ground that the lease agreements were financial arrangements entered into by the appellant and the financer. (b) the Ld CIT (A) erred in relying upon the CIT (A) order passed for the assessment year 2004-2005, wherein the CIT (A) has held that the lease transactions are noting but financial transactions. 34. In this appeal, assessee raised the similar issues to that of the issues (the issues include (i) Considering notional interest for ALV purposes; (ii) exclusion of maintenance expenses paid to societies; (iii) applicability of section 145A and (iv) allowability of lease rent) raised in its appeal for the AY 2004-2005, which is adjudicated by us in the above par ..... X X X X Extracts X X X X X X X X Extracts X X X X
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