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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 ..... ecting 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 Rs. 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 duly of Rs. 74,77,350/- as although the identity of a corporate entity stands established because of its incorporation, the creditworthiness of the contributors and genuineness of the transactions have not been proved. iv) Whether on the facts and circumstances of the case and in law the Ld. CIT(A) was right in directing lo delete the addition made on the grounds of outstanding liability since F. Y. 2005-06 without appreciating the fact that the assessee failed H\ clearly show the nature of liability and since this liability is appearing in assessee's books since so long accounts to cessation of liability taxable u/s. 41 of I.T.Act.. v) 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A) has carried the matter in appeal before us. As multiple issues are involved in the present appeal, we shall, therefore, hereinafter take up the same in a chronological manner in the backdrop of the respective contentions advanced by the authorised representative for both the parties. 5. On a perusal of the orders of the lower authorities, we find, that the A.O had made an addition of Rs. 33,60,000/- (net addition) towards the deemed rental of the basement property (admeasuring 3,980.62 sq. feet) owned by the assessee. The genesis of the issue leading to the controversy in hand lies in a narrow compass. Observing, that though the assessee had shown a liability of Rs. 66 lacs towards "basement charges deposit" in its balance sheet, it was noticed by the A.O that the assessee had however not disclosed any correlating rental income. In the backdrop of the quantum of deposits that were taken by the assessee while letting out certain other properties, the A.O worked out the average deposit rate at Rs. 450/- per sq. feet. On the basis of his aforesaid observation the A.O was of the view that an amount of Rs. 18 lac (i.e 3,980.62 sq. feet @ Rs. 450/- per sq. feet) could safely be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7. On a perusal of the order of the CIT(A), we find, that finding favour with the contentions advanced by the assessee the said first appellate authority had vacated the addition that was made by the A.O towards the deemed lettable value of Rs. 33.60 lac (net). The CIT(A) in context of the issue in hand had observed as under: "3.3. I have considered the appellant's submissions. AO noticed that there was a liability shown forRs. 66,00,000/- towards Basement charges deposit. AO treated that this basement charges deposit was received by the appellant from a tenant for giving rent of a basement. Based on the rental value received from other two properties, AO had computed rental income at Rs. 48,00,000/-. After giving credit for 1/3rd of the amount for maintenance, AO had added to the total income Rs. 33,60,000/-(. In the submissions appellant states that appellant got its tenanted property developed through M/s West Avenue Realtors Pvt.Ltd. A part of such cost of construction was directly paid by one of the shareholders, Mr. Ritesh Deshmukh to M/s West Avenue Realtors Pvt.Ltd. on behalf of the appellant company . Later through a journal entry this Rs. 66,00,000/- was credited in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act is concerned, we find that the same being devoid and bereft of any force cannot be sustained. As observed by us hereinabove, it is the claim of the ld. A.R that as the property in question was being used by the assessee for its own business and had not been let out thus, the issue of determining the deemed annual lettable value of the same does not arise. In our considered view, in the absence of any material which would support the claim of the A.O that the assessee had let out the property in question, the same cannot be summarily accepted. Accordingly, finding no infirmity in the well reasoned deletion of the addition of Rs. 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. The Grounds of appeal Nos. (i) & (ii) are dismissed. 8. We shall now deal with the claim of the revenue that the CIT(A) had erred in vacating the addition of Rs. 75,07,350/- made by the A.O u/s 68 of the Act. Briefly stated, the assessee had paid stamp duty & registration charges of Rs. 74,77,350/- in respect of an 'agreement', dated 31.03.2012 with M/s West Avenue Realtors Pvt. Ltd. All the shareholders of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stration of property in respect of agreement dt. 31.3.2012 with M/s Esst Avenue Realtors P. Ltd. This stamp duty was contributed by respective share holders, details of which are as under : I Saigal Sea Trade P. Ltd. (share of stamp duty) 53,94,031.00 li Shankar Jadhav (share of stamp duty) 1,68,915.00 hi Rashmi Jadhav(share of stamp duty fit Regn.) 4,23,415.00 Iv Indo Allied Protin Foods Pvt. Ltd. (stamp duty a Regn.) 3,41,584.00 V R.V. Deshmukh (stamp duty fr Regn.) 6,20,858.00 Vi Mr. Kiran Pavaskar (stamp duty & Regn.) 5,58,547.00 Each shareholder had contributed for payment of stamp duty. These were credited to individual shareholder account. AO is of the view that as this stamp duty was not shown as expenditure, hence this is undisclosed income u/s 68 of the Act. When we examine the details, this stamp duty is not at all an expenditure pf the appellant. This stamp duty is paid for registration of property, so it is a capital expenditure. So this is not to be shown as expenditure. Further the stamp duty was contributed by each shareholder. All these shareholders are there in the company from the beginning and they are acting as shareholder. Their identity wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was averred by the ld. A.R that not only the transaction in question was fully explained but in fact there was no justification on the part of the A.O to have dubbed the credits appearing in the ledger accounts of the respective shareholders as unexplained credits within the meaning of Sec. 68 of the Act. 11. We have heard the ld. authorised representatives for both the parties, perused the orders of the lower authorities and the material available on record in context of the issue under consideration. 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 of Rs. 74,77,350/- 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 wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 1,01,25,139/- In order to substantiate the fact that the payments were made by the aforementioned respective shareholders, the assessee had placed on record the copy of the pass book of the assessee for the period April, 2007 to March, 2008, alongwith the ledger accounts of the respective shareholders. Before the CIT(A), it was the inter alia claim of the assessee that as the aforesaid amount paid to BMC in the year 2007-08 was never claimed as a deduction, the same, thus, by no means could have been added as the income of the assessee u/s 41(1) of the Act. Finding favour with the said claim of the assessee the CIT(A) vacated the addition of Rs. 1,01,25,139/-, observing as under : "6.3 I have considered the appellant's submission. AO noticed there is an entry of Rs. 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 su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the first mentioned person or some benefit in respect of the trading liability referred to in clause (a) by way 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 appellan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ........" In our considered view, the CIT(A) had rightly observed that as the assessee had at no stage claimed 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 Rs. 2,42,000/- out of the disallowance of security charges and repairs and maintenance charges of Rs. 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 Rs. 2,76,828/- as security charges and Rs. 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 'in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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