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INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “B” NEW DELHI
ITA no. 2376/Del/2015 Asstt. Yr: 2010-11
DLF Infocity Developers (Chandigarh) Ltd (Appellant) Vs. DCIT (Respondent)
Date of Judgment: 02-02-2016
ORDER
PER S.V. MEHROTRA, A.M:
This is assessee’s appeal against the order dated 9.2.2015 passed by the ld. CIT(A)-1, Gurgaon in appeal no. 256/12-13, relating to A.Y. 2010- 11.
2. Brief facts of the case are that the assessee had filed return of income declaring nil income. The assessment was completed at a total income of Rs. 4,75,333/-. Ld. CIT(A), while partly allowing the assessee’s appeal, confirmed the disallowances. Being aggrieved, the assessee is in appeal before us and has taken following grounds of appeal:
“1. That on the facts and in the circumstances of the case, the impugned order passed by the learned CIT (Appeals) is bad in law and wrong on facts.
3. That on the facts and in the circumstances of the case; the learned CIT (Appeals) has erred in law in up-holding the Order of the Ld Assessing Officer, in allocating proportionate expenses out of statutory audit fees, tax audit fees, misc expenses and rates & taxes amounting to Rs. 250,243 related to retail division on wholly erroneous, illegal and untenable grounds.
3. That the appellant craves leave to add, alter, amend, substitute. withdraw and/or vary any grounds of appeal at or before the time of hearing.
3. In course of assessment proceedings the AO noticed that assessee owned a building complex at Chandigarh. Part of the complex housed an IT park, income from which had been shown as business income and another part had been let out to retail merchants, income from which was declared as income from house property. The AO held that expenses attributable to retail part were not allowable as business income, as letting out of retail part was not part of business of the assessee and deduction u/s 24(a) had already been claimed on those receipts. He, therefore, required the assessee to establish that no expenses attributable to the retail division were claimed as deductible. After considering the assessee’s submissions the AO observed that no explanation was offered regarding statutory audit fee, tax audit fee misc. expenses and rates and taxes debited to P&L account, which were common to I.T. Division and retail division. He computed the expenses attributable to retail division on the basis of ratio of area of retail division to the total area of the building complex and, accordingly, made a disallowance of Rs. 2,50,243/- being 22% of Rs. 11,36,981/-, the expenses incurred in respect of various items noted above.
4. Ld. CIT(A) dismissed the assessee’s appeal on various counts.
5. We have considered the submissions of both the parties and have perused the record of the case. Ld. counsel for the assessee submitted that audit fee is to be allowed being statutory obligation of company. For other two items viz. misc. expenses and rates & taxes, ld. counsel submitted that they did not pertain to retail division and hence could not be disallowed.
6. We are in agreement with ld. counsel that, in any view of the matter, audit fee paid by assessee company has to be allowed because that is for the existence of company. However, rates and taxes and misc. expenses cannot be allowed if they pertain to retail division. The AO has allocated the expenses on the basis of ratio of area of retail division to the total area of the building complex. If rates and taxes specifically pertained only to the area housing IT park, then no part of the same can be disallowed. However, if the rates and taxes are for the entire building then AO’s method of allocation is proper. We, therefore, restore this matter to the file of AO to record a specific finding whether any part of rates and taxes pertained to retail division or not and then compute the disallowance accordingly in terms of our observations made earlier. Similarly, AO shall also examine, whether any part of the misc. expenses pertained to the retail division or not because in this regard AO has observed that no explanation was offered by assessee.
7. In the result, assessee’s appeal is partly allowed for statistical purposes.
Order pronouncement in open court on 02/02/2016.
(SUCHITRA KAMBLE ) (S.V. MEHROTRA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Audit fee of the company can-not be apportioned between business income and income from rent because it is for the very existence of company ITAT | 04-02-2016 |
