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TMI Blog2014 (5) TMI 1165X X X X Extracts X X X X X X X X Extracts X X X X ..... o interference from our side. Disallowance of expenditure on helicopter - CIT(A) following the decision of ITAT in assessee s own case for A.Y. 2005-06, has restricted the disallowance on helicopter expenditure to 1/7th - Held that:- It is true that the onus is on the assessee to substantiate the claim of the assesses. Considering the peculiar circumstances better known to the assessee, there is surrender of claim to the extent of 1/7th of the total claims ₹ 93,96,771/- (i.e. ₹ 66,04,980/- on account of depreciation of vehicles and ₹ 27,91,791/- on account of aviation expenses). At this point of time, in our opinion, the Onus has shifted to the revenue to demonstrate that the said surrender is incorrect and estimations made by the AO are fair within the meaning of section 38(2) of the Act. Fairness is an important factor in matters of quantification of the disallowances, when section 38(2) invoked. The revenue has not done any probe independently to demonstrate that assessee s offer is unfair and his estimations are fair. The estimations made by the AO, which are confirmed in case of the Cessna Aircraft and altered in case of Bell Helicopter are hereby set asid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... depreciation on helicopter to 1/7th instead of 1/5th of the depreciation claimed 5. The L'd CIT(A) erred in restricting the disallowance on account of depreciation on helipad building to 1/7th instead of 1/5th of the depreciation claimed. 6. The L'd Commissioner of Income-tax (Appeals) erred in deleting the addition made by the Assessing Officer under the head Income from House Property without appreciating that the rent shown by the assessee was far less than the reasonable rent which a similar property in the same area would fetch. 7. The appellant craves leave to add, alter or amend any or all the grounds of appeal. 2. The assessee is an individual, having two proprietary concerns (i) Amit Constructions and (ii) Swapnali Constructions Avinash Bhosale-Windmill and is also partner in Avinash Construction, Avi Construction and Sahastrajit Properties. As an individual, he is engaged in the business activity undertaking civil contracts, construction and power generations. The first issue is with regard to disallowance of ₹ 77,78,214/- computed u/R 8D of Income Tax Rules out of interest paid. The Assessing Officer made disallowance of ₹ 1,30,30,180/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 16,314/- in the partnership firm. The Assessing Officer, thus held that had the aforesaid sum of money utilized for investment in the wind mill business, the interest liability would have been decreased accordingly. The Assessing Officer noted that the assessee had cash available with it, which had been invested in partnership firm, shares and mutual funds whose income was not taxable and on the other hand, the assessee had taken interest bearing funds for investment in wind mill. The Assessing Officer noted that there was no difference between funds of assessee or proprietary business as per books of account maintained. The Assessing Officer, hence rejected the claim of assessee that the interest expenditure incurred by wind mill had no bearing on earning of exempt income and hence not been considered for Rule 8D(2)(ii) of I.T. Rules. The Assessing Officer further noticed while computing average value of investment, the assessee in its working of disallowance u/s.14A had considered the negative balance of ₹ 12,37,16,314/- as capital in partnership. The Assessing Officer held that section 14A and rule 8D includes investment made by the assessee and in a situation of negative ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 7,56,61,095/- on account of sale of power and has also shown profit of ₹ 4,77,10,734/- in Profit Loss Account from wind mill business. In this background, he observed that the aforesaid interest could not be held to be in any way to be related to the earning of exempt income either directly or indirectly. Therefore, disallowance made by the Assessing Officer u/s.14A r.w. Rule 8D(2)(ii) of ₹ 77,78,214/- was allowed out of 1,30,30,180/-. This reasoned finding of CIT(A) needs no interference from our side. We uphold the same. 3. The next issue is with regard to disallowance of 1/5th of total expenditure on helicopter instead of 1/7th. In appeal, the CIT(A) following the decision of ITAT in assessee s own case for A.Y. 2005-06, has restricted the disallowance on helicopter expenditure to 1/7th. The relevant portion of the order is reproduced as under: From the above, it is clear that special bench decision in the case of Gulathi Saree Centre (supra) or the decision in the case of Mayur Kothari (supra) are in the context of the personal cars; whereas the Pune bench decision in the case of M/s. Kirloskar Oil Engines Ltd (supra) relates to the aviation vehic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e not inclined to interfere with the finding of CIT(A), who has restricted the disallowance on helicopter expenditure to 1/7th. We uphold the same. 4. The next issue is with regard to estimation of annual value of let out property at Mumbai at 30,00,000/-. The Assessing Officer noted that the assessee has shown rent received from a house property at Walkeshwar, Mumbai at ₹ 80,500/-, after deduction of ₹ 34,500/- for repairs and collection charges from the total rent receipt of ₹ 1,15,000/-. The flat was 1169 sq. ft. in area and it was let out on rent to the associate concern M/s. Avinash Construction. The Assessing Officer observed that the property was purchased on 30.08.1999 and the total purchase price was at ₹ 2,44,70,031/-. Considering the locality of the property, very low rental income was shown from this related concern, and therefore, the annual value of the property was required to be determined u/s.23(1)(a) of the Act. The Assessing Officer cited information regarding rent available on the website www.realestatemumbai.com., according to which rent in Walkeshwarnagar area, Mumbai per month approximately was ₹ 2,50,000/- to ₹ 3,00,00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of Dr. Balbir Singh and others (supra) for the proposition that the ratable value determined by the municipal authority is binding unless the standard rent is higher. 11. In the light of the above legal position we have examined the facts of the instant case. The assessee has let out space to the sister concern, which is undisputed fact and is receiving ₹ 10,000/- per month from each sister concern. Therefore, the assessee's property is covered by provisions of clause (b) of section 23(1). This is a fact that assessee's actually rent received or receivable in respect of the said property is not in excess of the ALV computed under clause (a) of section 23(1). In the light of these facts, AO's decision to invoke a comparable case to the property covered under clause (b) is not in tune with the above referred legal position. Further, it is not also the case of the AO that assessee is covered by the exemptions provided in the Maharashtra Rent Control Act and, therefore, ALV of the property shall be determined on the basis of the comparable cases. In any case, the standard rent is upper limit for determination the ALV as held in the case of Makrupa Chemicals Pvt ..... X X X X Extracts X X X X X X X X Extracts X X X X
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