1992 (8) TMI 141 - AT - Income Tax

Tribunal Upholds Disallowances in Tax Case

The Tribunal upheld the disallowances made by the lower authorities in the case. It affirmed the disallowance of 50% of the rent claimed by the assessee ... Annual Value, Assessing Officer, House Property Issues Involved:1. Disallowance of rent paid by the assessee.2. Disallowance of part of makeup material, car maintenance, traveling and conveyance, telephone charges, publicity, electricity, etc.3. Disallowance of loss under the head 'Property.'4. Disallowance of interest of Rs. 40,300.Detailed Analysis:Common Issue No. 1: Disallowance of Rent Paid by the AssesseeDuring the relevant assessment years, the assessee rented a building for her residence and claimed the entire rent as a revenue deduction, arguing that the property was used for her profession as a cine artiste. The Assessing Officer disallowed 50% of the claim, attributing it to personal use. The first appellate authority upheld this decision. Upon hearing both sides, the Tribunal also declined to interfere, stating, 'even a cine artiste needs a home,' and dismissed the related ground.Common Issue No. 2: Disallowance of Part of Makeup Material, Car Maintenance, Traveling and Conveyance, Telephone Charges, Publicity, Electricity, etc.For both assessment years, the Assessing Officer disallowed 25% of these expenses, referencing a similar disallowance in a previous assessment year, on the grounds that the expenses were not entirely attributable to the assessee's profession. The first appellate authority reduced the disallowance to 20%. The Tribunal, upon hearing both sides, declined to interfere, noting that personal expenses are inevitable and not entirely connected to the profession. Thus, the related grounds were dismissed.Assessment Year 1985-86: Disallowance of Expenses in Film Production and DistributionThe assessee reported a loss under 'Film production and distribution,' with expenses supported by self-vouchers and some payments contravening section 40A(3) of the Act. The Assessing Officer disallowed Rs. 25,000, which the CIT(A) reduced to Rs. 20,000. The Tribunal found the disallowance reasonable and declined to interfere.Assessment Year 1986-87: Disallowance of Loss Under the Head 'Property' and Interest of Rs. 40,300The assessee purchased an old building and reconstructed it extensively. She claimed a loss of Rs. 66,969 under 'Income from property' and an additional interest deduction of Rs. 40,300 paid to Mardia. The Assessing Officer disallowed both claims, stating the property was under construction and no income could be computed from it. The first appellate authority upheld this decision.The Tribunal, upon reviewing the facts, noted that during the reconstruction, the assessee did not derive any benefit from the property, neither actual nor notional. The Tribunal highlighted that the property was incapable of being let and the assessee had to reside elsewhere during the reconstruction. Consequently, the Tribunal held that sections 22 and 23 of the Act did not apply, and there was no scope for invoking section 24. Thus, the disallowance of the loss and the interest paid to Mardia was justified.The Tribunal also addressed the assessee's arguments, including the non-demolition of the property, payment of property tax, and electricity bills. The Tribunal found these arguments irrelevant to the legal question of deriving benefit in the form of income during the reconstruction period. The Tribunal emphasized that the subject matter of taxation under income tax laws is the income derived from the property, not the property itself, and the measure of taxation is the annual value of the property.Conclusion:The Tribunal dismissed both of the assessee's appeals, upholding the disallowances made by the lower authorities on all grounds.