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TMI Blog2021 (2) TMI 1010X X X X Extracts X X X X X X X X Extracts X X X X ..... ddition of ₹ 33.60 lac made by the A.O towards deemed lettable value of the property in question, we uphold the order of the CIT(A) to the said extent. Grounds of appeal Nos. (i) (ii) are dismissed. Addition u/s 68 - credits in the respective accounts of the shareholders as an unexplained credit - HELD THAT:- On a perusal of the ledger accounts of the shareholders w.r.t payment of stamp duty and registration charges, it can safely be gathered that on 20.03.2012 the amount of stamp duty/charges was distributed amongst them on the basis of their respective shareholdings. Admittedly, the assessee instead of debiting the stamp duty expenses to the premises in the fixed assets a/c had wrongly debited the respective accounts of the shareholders. As observed by us hereinabove, as and when the respective amount of contributions were received vide account payee cheques from the shareholders, the same were credited to their respective accounts. As the aforesaid transaction was not only fully explained, but there was no reason for treating the duly substantiated credits in the respective accounts of the shareholders as an unexplained credit within the meaning of Sec. 68 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... present appeal filed by the revenue is directed against the order passed by the CIT(A)-5, Mumbai dated 09.03.2017, which in turn arises from the assessment order passed u/s 143(3) of the Income-tax Act, 1961 (for short Act ), dated 11.03.2015 for assessment year 2012-13. The revenue has assailed the impugned order on the following grounds of appeal before us : i) Whether on the facts and circumstances of the case and in law the Ld. CIT(A) was right in directing to delete the addition made on account of rent from basement without appreciating the fact that the assessee failed to show that the basement area was SOP used wholly and exclusively for business purpose. ii) Whether on the fuels and circumstances of the case and in taw the Ld. CIT(A) was right in directing lo delete the addition made on account of rent for basement without appreciating the fact that the assessee failed to prove with evidence that the liability of ₹ 66 Lakh shown in the balance sheet is not towards basement charges deposit. iii) Whether on the fads and circumstances of the case and in law the Ld. C1T(A) was right in directing lo delete the addition made on the account of unexplained stamp d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... basement property as house property income. (net addition) ₹ 33,60,000/- 2. Addition u/s 68 of registration stamp duty paid by the assessee w.r.t an agreement , dated 31.03.2012. ₹ 74,77,350/- 3. Addition u/s 41(1) of the BMC charges payable that were outstanding in the assessee s balance sheet since long i.e from F.Y 2005-06. ₹ 1,01,25,139/- 4. Disallowance of security, repairs and maintenance charges of property. ₹ 12,10,003/- 3. Aggrieved, the assessee assailed the assessment order before the CIT(A). Being persuaded to subscribe to the contentions advanced by the assessee, the CIT(A) except for sustaining 20% of the disallowance of security, repairs and maintenance charges of the property in question, vacated the remaining additions/disallowances made by the A.O and partly allowed the appeal. 4. The revenue being aggrieved with the order of the CIT(A) has carried the matter in appeal before us. As multiple issues are involved in the present appeal, we shal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the issue in hand. Elaborating on his aforesaid submission, it was submitted by the ld. A.R that the assessee had got its tenanted property developed through M/s West Avenues Realtors Pvt. Ltd. It was submitted by the ld. A.R that the cost of construction of ₹ 66 lac was directly paid on 15.03.2007 by one of the shareholder, viz. Mr. Ritesh Deshmukh on behalf of the assessee company to M/s West Avenues Pvt. Ltd. It was submitted by the ld. A.R that in the backdrop of the aforesaid facts the amount so paid by the shareholder, viz. Mr. Ritesh Deshmukh was credited to his account in the books of account of the assessee company. It was averred by the ld. A.R that the assessee had at no stage let out the basement property in question. It was, thus, submitted by the ld. A.R that the A.O had proceeded with on the basis of a misconceived fact that the assessee had let out the property by taking a deposit of ₹ 66 lac without any monthly rent. It was submitted by the ld. A.R that as the basement was used by the assessee for its own business thus, there remained no occasion for determining the deemed ALV of the same. 7. On a perusal of the order of the CIT(A), we find, that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on made by the AO of ₹ 33,60,000/- is deleted. This ground of appeal is allowed. We have deliberated at length on the issue under consideration in the backdrop of the contentions advanced by the ld. authorised representatives for both the parties. On a conjoint perusal of the ledger account of Mr. Ritesh Deshmukh and the ledger account of M/s West Avenue Realtors Pvt. Ltd. in the books of account of the assessee company; it can safely be gathered that the shareholder, viz. Mr. Ritesh Deshmukh had as on 15.03.2007 vide a Cheque No. 444954 drawn on ICICI Bank Ltd., Branch: Mahalaxmi, Mumbai paid an advance of ₹ 66 lac on behalf of the assessee company to M/s West Avenue Realtors Pvt. Ltd. On the basis of the aforesaid facts, it can safely be gathered that the A.O had proceeded with on the basis of a misconception that the assessee had received an amount of ₹ 66 lac as an interest free deposit from a tenant without any monthly rent. Insofar the contention of the ld. D.R that as the assessee had not shown any deemed lettable value of the property under consideration, the A.O, thus, had rightly determined the same as per the mandate of Sec. 23(1) of the Act is c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubsequently, as and when the amounts were received from the respective shareholders, their accounts in the books of accounts of the assessee were credited. A.O being of the view that the assessee could not satisfactorily explain the reason for transferring legitimate expense of stamp duty to personal account of shareholders had therein added the aforesaid amount of ₹ 74,77,350/- as an unexplained credit u/s 68 in the hands of the assessee. 9. On appeal, the CIT(A) concurring with the claim of the assessee that the A.O had proceeded with on the basis of misconceived facts, and also, that invocation of the provisions of Sec. 68 were even otherwise unwarranted, deleted the addition of ₹ 74,77,350/- made by the A.O. The CIT(A) in context of the issue in hand had observed as under: 5.3 I have considered the appellant's submission. AO noticed that appellant had paid registration charges of ₹ 74,77,350/- in respect of agreement dated 31.3.2012 with M/s West Avenue Realtors P. Ltd. through its bank account on 27.3.2012. AO is of the view that this registration charges which was collected from shareholders, appellant had transferred it into appellant's indiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act. This merely is a payment of stamp duty to Govt department through contribution of individual shareholder who are in the company from the beginning. Hence, in view of the above, AO s disallowance is deleted and this ground of appeal is allowed. 10. We have given a thoughtful consideration to the aforesaid issue in the backdrop of the contentions advanced by the authorised representatives for both the parties. Ld. D.R had relied on the order of the A.O. It was stated by the ld. D.R that as the assessee had failed to demonstrate the source and basis of credit in the respective accounts of the shareholders, the A.O, thus, had rightly added the same as an unexplained credit in the hands of the assessee company. On the contrary, the ld. A.R relied on the order of the CIT(A). Elaborating on the nature of the transaction leading to the credit in the respective accounts of the shareholders, it was averred by the ld. A.R that all the shareholders had contributed towards the stamp duty/registration amount of ₹ 74,77,350/- that was incurred by the assessee in respect of an agreement , dated 31.03.2012 with M/s West Avenue Realtors Pvt. Ltd. It was stated by the ld. A.R tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (iii) is dismissed. 12. We shall now deal with the claim of the revenue that the CIT(A) had erred in deleting the addition of ₹ 1.01 crore made by the A.O u/s 41(1) of the Act. The genesis of the controversy in hand lies in a narrow compass. Observing, that the assessee since F.Y 2005-06 had been reflecting a liability under the head BMC Charges Payable of ₹ 1,01,25,139/-, the A.O holding a conviction that the said amount was no more outstanding added the same u/s 41(1) of the Act. On appeal, it was submitted by the assessee that it had acquired tenancy rights from several tenants occupying BMC land. For transfer of the tenancy rights in its favour, the assessee had to pay certain amounts aggregating to ₹ 97,53,492/- to BMC in F.Y 2007-08. In order to facilitate the aforesaid payments the assessee had borrowed the requisite funds from its shareholders, as under: Sr. no. Name of the shareholder Date of receipt Amount (Rs) 1 Mrs. Kavita Pawaskar 07.04.2008 5,58,135/- 2 Mrs. Rashmi J. Jadhav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6.3 I have considered the appellant's submission. AO noticed there is an entry of ₹ 1,01,25,1397- in the Balance sheet of the appellant from F.Y. 2005-06. According to the AO this BMC charges need not be paid, hence it is ceased liability and hence AO added this amount u/s 41 of the Act. In the submission, appellant states that appellant had acquired tenancy rights from several tenants occupying BMC land. Appellant is required to pay certain amounts to BMC in F.Y. 2007-08 for transfer of such tenancy rights in favour of the appellant company. To pay this amount appellant had collected from the shareholders as under: Sr. no. Name of the shareholder Date of receipt Amount (Rs) 1 Mrs. Kavita Pawaskar 07.04.2008 5,58, 135/- 2_ Mrs. Rashmi J. Jadhav 23.06.2007 1,24,500/- 3 Saigal Seatrade Pvt. Ltd. 22.06.2007 22.06.2007 27.03.2008 11,15,000/- 20,00,000/- 38,50,000/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of remission or cessation thereof, the amount obtained by the successor in business or the value of benefit accruing to the successor in business shall be deemed to be profits and gins of the business or profession, and accordingly chargeable to income-tax as the income of that previous year. Here in Section 41(1) it is clear that appellant should have first claim in deduction or allowance in P L Account and if later from the deduction or allowance if he receives any benefit i.e. added as a deemed income to the total income of the appellant. In this case regarding the BMC charges, appellant had not claimed any expenditure or allowance .in the P L Account. This BMC charges is a simple amount contributed by shareholders and which is shown as liability from A.Y, 2007-08 and which was accepted in assessment proceedings in A.Yrs. 2008-09 and 2009-10 also. As here appellant had not claimed any expenditure or allowance, this does not come under the purview of section 41(1), Here it is only the payment by individual shareholders which is shown as liability as appellant has to pay to the BMC. AO further considers that it is a ceased liability. Here the liability has not ceased. Furth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed much the less was allowed any deduction of the BMC charges in question in assessment for any year, thus, the provisions of Sec. 41(1) could not have been invoked. Accordingly, finding no infirmity in the view taken by the CIT(A) in context of the issue under consideration, we uphold the same. Grounds of appeal Nos. (iv) to (vi) are dismissed. 14. We shall now deal with the grievance of the revenue that the CIT(A) had erred in sustaining 20% i.e ₹ 2,42,000/- out of the disallowance of security charges and repairs and maintenance charges of ₹ 12,10,003/- pertaining to the property given on rent. Facts in brief are that in the course of the assessment proceedings the A.O noticed that the assessee had debited an amount of ₹ 2,76,828/- as security charges and ₹ 9,33,175/- as repairs and maintenance charges. Holding a conviction that as the aforesaid expenditure related to a property that was let out by the assessee, the A.O being of the view that the deduction for the said expenses was subsumed in the 30% deduction that was claimed by the assessee under the head income from house property , thus, disallowed the entire claim of expenses of ₹ 12,10 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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