BSM Developers Pvt. Ltd. vs ACIT

“7. Decision

7.1

In the Assessment Order , Assessing Office r observed that the Assessee company has claimed loss of Rs.91 J 8,761.0 under the head ’Business & Pro fessio n*, which was requested to be re duced by Rs. L54A35/- on acco unt of le ase deed charges. The As sessing Office r also no ted that the Assessee company has declare d ho use prope rty income to the tune of Rs.62,01,210/- (afte r claiming deductio n) from three proper ties situated at different places. The Assessing Office r has distinguishe d the decision of the CT T(A) from the o rder fo r AY 201 Id2 in which it was he ld that the expenses claimed under the business head should be allowed in view o f the decision of the Hon’ble Supreme Court in the case of SA Builders vs. CIT (2007). The Assessing Office r has state d that the facts in the year under consideration arc diffe rent. Out of total income of Rs.91,54,878/-, R s.84,60,315/- is the rental income. Othe r income includes maintenance char ges, misce llaneous charges and sale from, building material. The Assessing Officer held that the Assessee has claimed the expenses not directly related to the business income. There was no business during the year as well as previo us years. Hence, the Assessing Officer has disallowed the fo llowing e xpense s:

1.

Employee Expense s Rs.12,23,296/-

2.

Establish Expense s Rs.10,18,681/-

3.

Finance Charges Rs.2,50,000/-

7.2

The Appellant has, inter alia, submitted that out o f the addition of Rs. 10,48,681/-, the addition of Rs. 1,70,765/- be de leted for the reaso n that it had already offe red for the disallo wance. The se expe nses include prope rty tax at Rs. 1,59,193/- and insur ance at Rs J. L572A. The Asse ssing Officer has computed the net assessable loss as per 1TR which is arrive d at after taking into account suo moto disallo wance of Rs. 1,70,765/- . Thus the claim under the head ’Other Expe nses' is Rs.8,97,916/-. The A ssessing Officer has himself allowe d expenses to the exte nt o f Rs.50,0000. To this, the Appellant has submitted the co py of computation of income showing loss of Rs.31,60,975/-and the computation of business income in which claim for the expense towards pro per ty tax and insurance amounting to Rs. L70.765A have been added back .

7.3

I find that this contention o f the Appe llant is correct in as much as the additio n of Rs. 1,70,765/-made in the computation o f income wilt re duce the claim of expe nse under establishment expenses. Hence, the addition of Rs. 1,70,765/- is de leted.

7.4

The Appellant has further submitte d that it was in the business of investments in re al estate for appreciation, sale, holding stock / inve ntory in addition to trading of building material. During the ye ar under conside ration, the re was no real e state investment or sale due to e xtreme downtrend in the marke t. It is claimed that the Assessee earned Rs.76,223/- from the trading o f building material.

7.5

It is claimed that the Assessee was in the business during the year under consideration by holding the stock of re al estate and trading o f building mate rial. The Assessing Officer was not j ustified in allowing Jump sum Rs.2,00,000/- and disallowing Rs. 12,23,2960 to wards employees bene fit expenses. It is furthe r claimed that the othe r expe nses include conveyance, stationary, audit fee, R OC fee, ve hicle running & maintenance, form land mainte nance , ele ctr icity, legal & professional and miscellaneous expenses.

7.6

I have given due consideratio n to the facts of the case and submission of the Appe llant The principle of res judicata is no t applicable to the income tax proceedings because the facts of each assessm ent ye ar are diffe rent It has been admitted by the Appellant that the re was no purchase & sale o f the real stock during the year under conside ration. The re was only small trading of building material givi ng profit of Rs.76,223/- where the purchase value was Rs.3,68,000/-. The Appellant has failed to substantiate running of the business of trading of building mate rial by giving necessary details. It see ms this income has been shown only to pro ve that the Assessee was engaged in the business dur ing the ye ar under reference. The amounts of purchase or sale are very small for the building material The Appellant has also failed to sho w as to which e xpenses were incurred for maintaining the buildings arid looking after the management which yie lded the re ntal income. He nc e I am in agreement with the Assessing Officer that the expenses incurred for rental income has been diverted towards business income because there is only standard deductio n available u/s 24 o f the Act. in respect of income from ho use property. Accordingly, I hold that the Assessing Officer was fully justified in allo wing certain par t of business expenses and holding that remaining expenses were related to the income from ho use prope rty.

7.7

To sum up, the Appellant ge ts the relie f of Rs.1,70,765/- out of the additio n of Rs.22,41,977/- . The addition of Rs.20,71,212/- is co nfirmed.

8.

In the result, the appeal is partly allo wed.”