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TMI Blog2016 (2) TMI 419X X X X Extracts X X X X X X X X Extracts X X X X ..... in holding that the rent of Rs. 1,69,29,770/- received from Shoppers' Stop Ltd. and Marine Times was assessee's income from business and not 'Income from House Property' as assessed by the Assessing Officer without appreciating that the assessee was neither engaged in any business activity nor handed over any running business to its tenant but simply received rent from its tenants for the portion of building let out of which assessee was the owner. 2. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in directing to allow the entire claim of depreciation on building by holding that the rental income was 'Income from Business' and not 'Income from House Properties' as assessed in the assessment order. 3. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in directing to allow property tax of Rs. 35,91,302/- and interest on borrowed capital of Rs. 2,22,11,463/- under the head 'Business Income' without appreciating that assessee was not engaged in any business activity but had simply let out the House Property. 4. On the facts and in the circumstances of the case and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ness income of the assessee. The assessee is accordingly eligible to claim depreciation on the asset and other business expenditure. Therefore we do not find any infirmity in the order of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] in relation to the ground Nos.1 to 3 and the same are accordingly dismissed being covered by the decision of the Tribunal in A.Y. 2003-04. Ground No.4 6. Vide ground No.4, the Revenue has agitated the action of the Ld. CIT(A) in treating the collection of maintenance charges and miscellaneous income under business head. As observed above, since we have already held that the activity of the assessee is a commercial activity of letting of the property and providing services, hence this income has also nexus with the assessee's business activity and the same accordingly is to be assessed as business income of the assessee. We do not find any infirmity in the order of the Ld. CIT(A) in this respect also. 7. Grounds No. 5 & 6 are general in nature and do not require any adjudication. 8. Now we come to the cross objection of the assessee bearing CO No.118/M/2011 for A.Y. 2004-05 against ITA No.5520/M/2010. CO No.118/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y. As against this assessee has charged the entire cost to the work in progress and to cost of sale. Thus the assessee has over stated the cost of sale. The cost of sale is therefore, worked out as under: Direct cost as per details given Rs. 15,13,14,320 Average cost per sq.ft. on area of 12,130 sq. ft. Rs. 12,474 Average cost of common amenities per sq.ft. 1088 Rs. 1,088 Total cost of sale per sq. ft. Rs. 13,562 Cost of Sale of 1282 Sq. ft (104 +1178) x Rs. 13,562 = Rs. 1,73,86,484 5.2 In view of the reasons stated above the book results declared by the assessee in respect of the cost of sales can not be accepted. Hence, the profit & loss of the assessee is modified to the extent stated above. Rs. Sale as per P&L A/c 97,37,000 Less: Cost as worked out above 1,73,86,484 Loss as admissible 76,49,484 The assessee has show a sale consideration of Rs. 97,37,000/- and the cost of sale at Rs. 2,32,98,837/- Thus, there is a loss of Rs. 1,35,61,837/- from this transaction. The excess cost booked in the account resulted in this loss. The excess loss amounting to Rs. 59,12,353/- (Rs. 1,35,61,837 - Rs. 576,49,484/-) is to be disallowed and reduced ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee has come in appeal before us. 15. We have heard the Ld. Representatives of both the parties and have also gone through the records on this issue. It may be observed that in the case of Godrej & Boyce Manufacturing Co. Ltd. (supra) the Hon'ble Bombay High Court has held that Rule 8D r.w.s. 14A(2) is not arbitrary or unreasonable but can be applied only if the assessee's method is not satisfactory. It has been further held that Rule 8D is not retrospective and applies from A.Y. 2008-09. For the years for which Rule 8D is not applicable and in the event of that the AO is not satisfied with the explanation/working given by the assessee, disallowance under section 14A has to be made on a reasonable basis. Almost similar view has been expressed by Hon'ble Delhi High Court in the case of 'Maxopp Investment Ltd. & Others' vs. CIT (247 ITR 162). 16. It may be further observed that it is not a case where no exempt income was received by the assessee despite making investments for earning exempt income. It is also not the case of the Revenue that the exempt income earned by the assessee was very less or not in proportion to the investments made by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vity in the year under consideration and the income for the year under consideration was assessed under the head 'Income from House Property'. 5. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in directing to treat collection for maintenance of Rs. 27,74,676/-, miscellaneous income of Rs. 62,234/-, parking charges of Rs. 20,69,780/-, tea sale vendor Rs. 20,974/- and promotional income of Rs. 5,21,435/- as 'Income from Business' as against Income from Other Sources without appreciating that assessee was not engaged in any business activity but had simply let out the House Property. 6. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition made of Rs. 1,82,52,106/- as Long Term Capital Gain holding Movie Times as a business asset hence depreciable asset without appreciating that Movie Times was not business asset as income from the same was assessed under the head 'Income from House Property'. 7. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in directing the Assessing Officer to allow carry forward of business loss of earlier year with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... artment and as such the revised return filed by the assessee has been accepted by the Department. 22. The Ld. CIT(A), after considering the submissions and the documents relied upon by the assessee, held that the assessee ceased to be the owner of the said property from February, 2003 therefore there was no question of assessing deemed rental income in the hands of the assessee in this respect. 23. The Ld. D.R. could not point out any defect in the well reasoned finding of the Ld. CIT(A) arrived at after going through the evidences produced by the assessee in this respect. We, therefore, do not find any infirmity in the order of the Ld. CIT(A) in this respect and the same is accordingly upheld. Ground Nos.3, 4 & 5 24. Ground Nos.3, 4 & 5 are identical to the ground No.1 to 3 of the Revenue's appeal for A.Y. 2004-05. In view of our findings given above, we do not find any merit in the above grounds and the same are accordingly dismissed. Ground No.6 25. Ground No.6 is in relation to the computation of income of long term capital gains from the sale of M/s. Movie Times. The AO observed that the assessee during the year had sold 2980 sq. feet of the property to M/s. Movie Time ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce of notice under section 148 of the Act and that the AO had mentioned that the notice under section 148 was wrongly issued for A.Y. 2003-04. Therefore, the reassessment proceedings were not processed/continued in respect of revised return filed by the assessee for A.Y. 2003-04 in response to notice under section 148 of the Act. He therefore observed that the verification and correctness of the assessee's claims i.e. cost of property, sale consideration and working of profit/loss on such sale remained unexamined by the Department in the AY 2003-04. In view of the above, he deemed it fit to consider the sale transaction as assessable in the year under consideration. After holding so, he held that the sold property was a business asset and therefore was a depreciable asset. Consequently, the provisions of section 50 of the Act were applicable as the same being the provision for computation of capital gain in case of depreciable assets. He, therefore, held that any capital gains arrived from the sale of depreciable assets were to be assessed as short term capital gains. He further held that where the sold asset was forming part of block assets and as per the provisions of section 43( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion/transfer in A.Y. 2005-06. It was open to the Revenue Authorities to take note of the revised return filed by the assessee for A.Y. 2003-04 in response to notice under section 148 of the Act and take appropriate action to verify the correctness of the claim by way of invoking relevant provisions of the Act. However, the said income cannot be assessed in the year under consideration. However, we agree with the contention of the Ld. D.R. that since it has been contended by the assessee itself that the transfer has taken place in A.Y. 2003-04 and which contention of the assessee has been accepted by the Ld. CIT(A) also hence, in the circumstances, we direct that the proceeds of the sale transaction are to be reduced from the WDV of the block of the assets in A.Y. 2003-04 itself and the assessee will not be entitled to claim of depreciation on the sold part of the asset from the date of sale of the property in A.Y. 2003-04. 28. So far as the application of provisions of section 50C is concerned, the Ld. A.R. of the assessee has relied upon the decision of the co-ordinate bench of the Tribunal in the case of "Bhaidas Cursondas & Co. vs. ACIT" in ITA No.5019/M/2012 & another decided ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the assessee had debited an amount of Rs. 3,40,31,832/- as interest on loans. He noted that the said amount had been disallowed in the computation of income but deduction had been claimed by way of notes. He held that no such deduction can be allowed in view of the decision of the Hon'ble Supreme Court in the case of "Goetze India Ltd. vs. CIT" 284 ITR 323. He further observed that without prejudice to the above, the claim of the assessee was not allowable even otherwise. He observed that the assessee during the year had given substantial funds to sister concern and there were multiple movements and cross movements of funds between the group concerns of the assessee. He therefore disallowed the deduction for interest payment on borrowed funds for the year under consideration. 34. In appeal before the Ld. CIT(A), it was explained by the assessee that the assessee had paid interest to HDFC. The said loans were utilized for the acquisition and the construction of the property. Apart from the payment of interest to HDFC, the assessee had not paid any interest on funds borrowed from other parties. The assessee had not paid any interest of unsecured loans amounting to Rs. 2.60 crore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on'ble High Courts, has held that even if a claim is not made before the AO it can be made before the appellate authorities. The jurisdiction of the appellate authorities to entertain such a claim is not barred. The Hon'ble Bombay High Court while relying upon the decision of the Hon'ble Supreme Court in the case of 'Jute Corporation of India Limited vs. CIT' 1991 Supp (2) SCC 744 = (1991) 187 ITR 688 has observed that the power of the Appellate Commissioner is coterminous with that of the Income Tax Officer and an appellate authority while hearing appeal against the order of the subordinate authority, has all the powers which the original authority may have in deciding the questions before it, subject to the restrictions or limitations, if any, prescribed by statutory provisions. In the absence of any statutory provision, the appellate authority is vested with all the plenary powers which the subordinate authority may have in the matter. An assessee is entitled to raise not merely additional legal submissions before the appellate authorities but is also entitled to raise additional claims before them. The appellate authorities have the discretion whether or not to permit such addi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -ordinate bench of the Tribunal in the own case of the assessee for A.Y. 2003-04, these grounds are accordingly decided in favour of the assessee and the finding of the Ld. CIT(A) in this respect is upheld. Ground No.4 42. Ground No.4 is in relation to the disallowance of interest on loan amounting to Rs. 4,76,01,958/- under section 36(1)(iii). The Ld. CIT(A) has discussed this issue in para 3(c) of the impugned order for A.Y. 2006-07. The AO observed that interest on borrowed capital did not pertain to commercial complex under consideration and that the said interest payment was pertaining to the loans taken for acquisition of the business and payment of outstanding liabilities by the new shareholders/directors. 43. Before the Ld. CIT(A), the assessee explained that the interest expenditure was incurred by the assessee on additional funds raised to pay off the then existing liabilities of the acquired business. It was explained that it was a business venture and that the entire transaction was carried out in systematic and organized manner with a view to earn profit. The Ld. CIT(A), after considering the submissions of the assessee, held that the interest expenditure was allow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 2007-08 and applying the same ratio, this ground of the appeal is also dismissed. 52. Now coming to the assessee's appeal for A.Y. 2008-09 bearing ITA No.5492/M/2011. ITA No.5492/M/2011 for A.Y. 2008-09 53. The Ld. A.R. of the assessee has stated that the appeal is time barred by 22 days. An application for condonation of delay has been moved which is accompanied by affidavit of the Managing Director of the assessee. Considering the circumstances explained therein, we condone the short delay of 22 days in this appeal. 54. The assessee, in this appeal, has agitated the action of the Ld. CIT(A) in confirming the disallowance of share issue expenses of Rs. 3,18,200/-, land tax of Rs. 35,286/- and interest on borrowed capital of Rs. 42,86,679/-. The Ld. A.R. of the assessee has stated at Bar that he does not press issue relating to disallowance of share issue expenses and land tax due to smallness of amount. However, in respect of the interest on borrowed capital, the Ld. A.R. has stated that the assessee had own sufficient funds and that as per the law laid down by the Hon'ble Bombay High Court in the case of "CIT vs. Reliance Utilities and Power Ltd." (2009) 313 ITR 340 (Bom) ..... X X X X Extracts X X X X X X X X Extracts X X X X
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