Jyoti Kachroo C/o. Fiberfill Interiors and Constructions, B-64, Sector-65 vs JCIT Range-36 New Delhi
March, 14th 2019
1 ITA No. 5739/Del/2015
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH: `F' NEW DELHI
BEFORE SHRI R. K. PANDA, ACCOUNTANT MEMBER
MS SUCHITRA KAMBLE, JUDICIAL MEMBER
ITA No. 5739/DEL/2015 ( A.Y 2011-12)
Jyoti Kachroo Vs JCIT
C/o. Fiberfill Interiors and Range-36
Constructions, New Delhi
Appellant by Sh. Dalip K. Kauli, FCA
Respondent by Sh. Surender Pal, Sr. DR
Date of Hearing 14.02.2019
Date of Pronouncement 13.03.2019
PER SUCHITRA KAMBLE, JM
This appeal is filed by the assessee against the order dated 14/8/2015
passed by CIT(A)-19, New Delhi for Assessment Year 2011-12.
2. The grounds of appeal are as under:-
1. "Disallowance of Rs.5,00,000/- out of depreciation on Building
Learned Commissioner of Income Tax (Appeals) has erred in law, facts and
circumstances of the case by sustaining the disallowance of Rs.5,00,000/-
out of depreciation on Building as depreciation on land made by learned
Assessing Officer. Learned CIT(A) has reversed the decision of his own court
by disagreeing with the view taken by the earlier CIT(A) in this case only for
the AY 2010-11. Further learned CIT(A) has relied upon the Income Tax Act of
1922 and Judicial Pronouncement which are irrelevant as on date.
2 ITA No. 5739/Del/2015
2. Disallowance of Rs.3,87,595/- out of depreciation on Building.
Learned Commissioner of Income Tax (Appeal) has further erred in law, facts
and circumstances of the case by confirming the disallowance of
Rs.3,87,5957- out of depreciation on Building.
3. Disallowance of Rs.1,97,723/- out of Vehicle maintenance, Vehicle
Depreciation and Telephone Expenses.
Learned Commissioner of Income Tax (Appeal) has again erred in law, facts
and circumstances of the case by enhancing disallowance from 5% to 10% of
Vehicle Repair, Vehicle Depreciation and Telephone Expense amounting to
Rs.1,97,725/-. The Disallowance is arbitrary and not based on evidences."
3. The assessee is engaged in the business of execution of work contract of
civil, interior, designer works for corporate and non corporate entities under the
name and style of Fibrefill Interiors and Constructions. Apart from business
income, the assessee is also deriving income from House Property, Salary from
Fibrefill Insulation (India) Pvt. Ltd. and income from other sources. The
assessee field return of income declaring a total income of Rs. 1,49,55,295/- on
23/3/2012. The return of income was processed u/s 143 (1) of the Income Tax
Act, 1961. The case was selected for scrutiny and notice u/s 143(2) of the Act
was issued and served to the assessee. Notice u/s 142(1) along with
questionnaire were also issued and served on 26/7/2013. In response to these
notices, Assessee's Representative appeared before the Assessing Officer and
furnished information/documents called for from time to time and the same
was examined and placed on record by the Assessing Officer. The business
performance of the assessee of the year under consideration and comparative
figures of last two years are summarized as follows:-
F.Y. Gross contract Gross Profit Net Profit Net Profit%
2009-10 16,04,80,168 2,43,61,859 80,63,858 5.02
2010-11 25,77,18,566 2,79,89,723 78,61,390 3.05
3 ITA No. 5739/Del/2015
Thus, the Assessing Officer observed that there was increase in the
turnover and gross profit rate over the last year, but the net profit rate has
marginally declined. The Assessing Officer made addition of Rs.5 lacs by
disallowing depreciation of value of land at 10% amounting to Rs. 5 lacs out of
total depreciation of Rs. 16,62,903/-. The Assessing Officer also made an
addition of Rs. 3,87,595/- out of the balance amount of depreciation claim of
Rs. 11,62,903/- which is 33.33% of the depreciation amounting to Rs.
3,87,595/-. The Assessing Officer also made addition of Rs.29,389/- on
account of interest on TDS. The Assessing Officer further made addition of Rs.
4,84,256/-as regards late payment of employees contribution of ESI u/s 2 (24)
(x) read with Section 36(1)(va) of the Act. The Assessing Officer lastly made
disallowance of Rs. 2,03,916/- in respect of expenses u/s 37(1) of the Act.
4. Being aggrieved by the assessment order, the assessee filed appeal before
the CIT(A). The CIT(A) partly allowed the appeal of the assessee.
5. As regards Ground No.1 relating to disallowance of Rs.5 lacs out of
depreciation on buildings, the Ld. AR submitted that the value of land was
bifurcated from the total consideration of Rs.25 lacs by Registrar, Noida only to
serve the purpose of determining the amount of stamp duty payable at the time
of sale cum transfer deed Proportionate disallowance on hypothetical value of
land is unjust and uncalled for. The Ld. AR further submitted that the assessee
paid Rs. 1,25,00,000/- for the Industrial build up factory as per the transfer
cum sale deed and not for land and building separately as assumed by the
Assessing Officer. Thus, there is no bifurcation of total consideration of
Rs.1,25,00,000/-. The Ld. AR pointed out that the assessee purchased the
fully constructed building i.e. Industrial built up factory and the design and lay
out of the structure of the building was best suitable to the business of the
assessee. All consideration for purchase were made only keeping in view the
suitability of building structure for assessee's business. The Ld. AR submitted
4 ITA No. 5739/Del/2015
that in earlier assessment year as well as in subsequent Assessment Years, the
same has been allowed on building by the Revenue Department and there is a
change of opinion/stand in this particular year as well as in Assessment Year
6. The Ld. DR relied upon the Assessment order and order of the CIT(A).
7. We have heard both the parties and perused the material available on
record. The Revenue Authorities continuously allowed depreciation on building
in earlier Assessment Years 2009-10, 2010-11, 2012-13 & 2014-15 but
specifically change its stand in this particular year as well as in Assessment
Year 2013-14 without giving proper reasoning towards the same. Thus,
following Rule of Consistency, Ground No.1 is allowed.
8. As regards Ground No.2 relating to disallowance of Rs. 3,87,595/- out of
depreciation on building pertaining to rental portion of buildings, the Ld. AR
submitted that the building is a separate block of asset for depreciation purpose
cannot be segregated for the purpose of disallowance of depreciation and hence,
the Ld. AR relied upon the decision of the Hon'ble Delhi High Court in case of
CIT vs. Oswal Agro Mills Pvt. Ltd. (Supra).
9. The Ld. DR relied upon the order of the Assessing Officer and order of the
10. We have heard both the parties and perused the material available on
record. In-fact, from the records it can be perused that the assessee purchased
the fully constructed building i.e. industrial built up factory and not the land.
Therefore, bifurcating the value of land by the Registrar does not specify the
value of land and building separately. Therefore, in light of the decision of the
Hon'ble Delhi High Court in case of Oswal Agro Mills Ltd. (2011) 197 Taxman
25 (Delhi) wherein it is held that it is difficult to maintain the details of each
5 ITA No. 5739/Del/2015
assets separately in respect of the land and building constructions and the
same will frustrate the very purpose of the provisions if it is done so. The
Hon'ble High Court further held that it is also essential to point that the
Revenue is not put to any loss by adopting such method and allowing
depreciation as the same forms part of the block of assets even when that
particular asset is not in use in the relevant Assessment Year. The assessee's
case is squarely covered by the decision of the Hon'ble Delhi High Court in case
of oswal Agro Mills Ltd. Hence, Ground No.2 is allowed.
11. As regards Ground No.3, relating to disallowance at 10% amounting to
Rs. 1,97,725/- out of Vehicle Maintenance, the same was enhanced by the
CIT(A) without assigning any reasons. The Ld. AR submits that the assessee
had produced all the detailed documents maintained by the assessee before the
Assessing Officer and nature and the business of the assessee justified the
quantum of expenditure under these heads of accounts. The assessee also
fulfils all the conditions laid down for allowability of expenditure of residual
nature u/s 37(1) of the Act. Thus, the Ld. AR submitted that the expenses are
incurred for the business of the assessee and directly spring from carrying out
the same and are not capital in nature.
12. The Ld. DR relied upon the orders of the Assessing Officer and the
13. We have heard both the parties and perused the material available on
record. The details of expenses were given to the Assessing Officer by the
assessee during the assessment proceedings which was not considered by the
Assessing Officer as well as CIT(A). Besides that the CIT(A) has enhanced 5% to
10% which is not as per the specific provision prescribed u/s 37(1) of the Act.
There is no basis for enhancing the expenses and first of all the expenses were
properly explained by the assessee during the assessment proceedings.
Therefore, we set aside the order of the CIT(A). Ground No.3 is allowed.
6 ITA No. 5739/Del/2015
14. In result, the appeal of the assessee is allowed.
Order pronounced in the Open Court on 13th March, 2019.
(R. K. PANDA) (SUCHITRA KAMBLE)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Copy forwarded to:
5. DR: ITAT
ITAT NEW DELHI
7 ITA No. 5739/Del/2015
Date of dictation 14.02.2019
Date on which the typed draft is placed before the 15.02.2019
Date on which the typed draft is placed before the
Date on which the approved draft comes to the Sr.
Date on which the fair order is placed before the
Dictating Member for pronouncement
Date on which the fair order comes back to the Sr. 13.03.2019
Date on which the final order is uploaded on the 13.03.2019
website of ITAT
Date on which the file goes to the Bench Clerk 13.03.2019
Date on which the file goes to the Head Clerk
The date on which the file goes to the Assistant
Registrar for signature on the order
Date of dispatch of the Order