Tribunal directs AO to reexamine disallowances & additions for AY 2016-17, remits issues for AY 2017-18.

The appeal for the assessment year 2016-17 was partly allowed, with the Tribunal directing the Assessing Officer to reexamine various disallowances and additions. The disallowance of Repair and Maintenance expenses was remitted for further evidence evaluation, notional rent additions were to be verified, fair market value considerations were to be revised, and disallowance under Section 14A read with Rule 8D was to be recomputed. For the assessment year 2017-18, the Tribunal remitted issues regarding notional rent and depreciation on fixed assets back to the AO for verification and fresh consideration, respectively.

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Issues Involved:
1. Disallowance of expenses towards Repair and Maintenance.
2. Addition of notional rent on self-occupied units.
3. Addition under section 56(2)(viia) of the Income-tax Act.
4. Disallowance under section 14A read with Rule 8D.
5. Disallowance of depreciation on fixed assets.

Summary:

1. Disallowance of Expenses towards Repair and Maintenance:
The assessee contested the disallowance of Rs. 4,38,87,662/- claimed as Repair and Maintenance expenses. The AO capitalized part of the expenses and disallowed Rs. 49,16,804/- due to lack of supporting vouchers. The Tribunal observed that the AO did not specifically refer to the unsupported amount and remitted the matter back to the AO to allow the assessee to provide the necessary evidence. If the evidence is satisfactory, the amount should be capitalized and depreciated; otherwise, the disallowance is to be confirmed.

2. Addition of Notional Rent on Self-Occupied Units:
The AO added Rs. 1,15,13,136/- as notional rent for vacant units. The Tribunal noted that the 7th floor was let out in previous years and remained vacant during the year under consideration. The Tribunal remitted the matter back to the AO to verify the assessee's claim that the 7th floor was previously let out. If verified, no notional rent should be added. For the 5th floor, which was never let out, the Tribunal directed the AO to recompute the annual letting value as per the Bombay High Court's decision in Smt. Kokilaben D. Ambani vs. CIT.

3. Addition under Section 56(2)(viia):
The AO added Rs. 3,00,87,960/- under section 56(2)(viia) for shares acquired at a lower price from a related concern. The Tribunal noted that the fair market value should be determined as per Rule 11UA and not based on the purchase price from different parties. The matter was remitted back to the AO to compute the fair market value as per Rule 11UA and then consider the applicability of section 56(2)(viia).

4. Disallowance under Section 14A read with Rule 8D:
The AO disallowed Rs. 1,52,29,448/- under section 14A read with Rule 8D. The Tribunal directed the AO to recompute the disallowance by considering only those investments that yielded exempt income during the year, excluding investments in shares of Diana that did not yield exempt income.

5. Disallowance of Depreciation on Fixed Assets:
The issue of disallowance of depreciation on fixed assets purchased in earlier years was remitted back to the AO for fresh consideration in line with the Tribunal's directions for earlier years.

For A.Y. 2017-18:
The Tribunal remitted the issue of notional rent for a vacant unit on the 10th floor back to the AO for verification, similar to the directions for A.Y. 2016-17. The issue of disallowance of depreciation on fixed assets was also sent back to the AO for fresh consideration.

Conclusion:
The appeal for A.Y. 2016-17 was partly allowed, and the appeal for A.Y. 2017-18 was allowed for statistical purposes.

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