TaxTMI 
TaxTMI 
2019 (6) TMI 1415
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....ee is against the order of CIT(A) confirming the action of the AO in disallowing interest on bank loan for purchase of flat and also disallowance of depreciation on flat that was provided as residential accommodation to the Managing Director holding the same as non-business transaction. Facts and circumstances are exactly identical and also the issues are same in all the appeals. Hence, I will take the grounds from AY 2011-12 and decide the issue. For this assessee has raised the following three grounds in AY 2011-12: - "1. On the facts and in the circumstances of the case, Ld. CIT(Appeals) erred in confirming the conclusion of the Assessing Officer that the flat purchased for providing residential accommodation to its Managing Director is a "Non-Business Transaction" of the appellant. 2. On the facts and circumstances of the case, the Ld. CIT (Appeals) erred in confirming the disallowance of interest of Rs. 24,18,057/- on the Bank loan for purchase of the flat that was provided as residential accommodation to the Managing Director. 3. On the facts and circumstances of the case, the Ld. CIT (Appeals) erred in confirming the disallowance of depreciation of Rs. 31,24,834/- on t....
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....set, i.e. a residential house purely for his personal use. it is not meant for the common good of the other employees of the appellant company. it is definitely a transaction which cannot be termed as carried out for the "commercial expediency" of the appellant. Purchase of the flat by the appellant company has no business nexus with that of Dr. S. Nataranjan. Thus, it has been correctly held by the .4.0. that the flat purchased by the appellant has neither been exploited commercially for its own business nor it has any business nexus now in the present nor it can have in the future. The term for the purpose of business" in Section 37 of the I. T. Act explicitly means that it has to be meant for the purpose of the trade and business of the appellant. Cost of the flat as capitalized in the books of the appellant is purely meant for the personal use and benefit of the M.D., Dr. S. Natarajan. it is not meant at all for the general good or benefit of the other employees. It is also seen that the M.D. holds majority of the shareholding i.e. 99% of the company and, therefore, single handedly he does all the decision making. He is the person who is in control of the affairs and business o....
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....e Delhi High Court in the case of CIT vs. Modi Industries Ltd. (210 PR 1) and followed by Hon'ble Bombay High Court in re. Shukra Diamonds Ltd. case, held that the subject property constitutes business asset of the Appellant, and it is entitled to depreciation. The Appellant also relied on Board Circular Ref. F.No. 10/14/66-IT(AI) dated 12.12.1966, wherein it has been clarified as under: "On reconsideration therefore the Board have decided, in supersession of the instructions issued in their letter dt. the 29th February 1964, that fans, air-conditioners, refrigerators etc. Provided by the employer at the residence of the employees should be considered to have been used wholly for the purpose of the employer's business and full depreciation as may be admissible in accordance with the rules, should be allowed in the assessment of the employer. Where such assets have been installed on or before the 31 March 1965, development rebate may also be allowed in respect of these assets, if the rebate is otherwise admissible." 9.2 The Board Circular can be relied upon only, if, in the Appellant's case the subject premise is a business asset and so would qualify for depreciation....
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....9;s business." 5. I find that this issue of interest disallowance and deprecation disallowance is squarely covered by the decision of co-ordinate Bench of this Tribunal in assessee's own case in ITA No. 5325/Mum/2015 for AY 2010-11 vide order dated 24.10.2018, wherein Tribunal vide Para 4 allowed as under: - "4. Issue nos. 1 to 6 are inter-connected, therefore, are being taken up together for adjudication. Basically, the AO declined the claim of the assessee regarding purchase of the flat in sum of Rs. 3,47,20,373/- along with ancillary claim. The assessee is a private company and purchased the flat at Dadar bearing no.602 in the building namely Ornate Galaxy, located at L.T. Road, Dadar (E), Mumbai. The assessee took the loan in sum of Rs. 300 lacs and paying the installment along with interest. The assessee purchased the said residential premises for the residence of CMD of the assessee company. The AO declined the claim of the assessee in view of provision u/s 2(22)(e) of the I.T. Act, 1961. The AO declined the claim of the assessee on the ground of that there was no business nexus between the residential premises and the assessee company. Dr. S. Natarajan was having 99% shar....
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.... the bank loan to the tune of Rs. 300 lacs and by adding some more funds, purchased the flat bearing no.602, in the building namely Ornate Galaxy, located at L.T. Road, Dadar (E), Mumbai. It is purely the wish of the AO in which he desired that the Dr. S. Natarajan was having the flat at Wadala, therefore, the assessee company should not purchase the flat for CMD of the assessee company. The transaction is nowhere in contravention of the provision of any income tax act. The provision of Section 2(22)(e) of the Act is not applicable to the facts of the case. Moreover, there may be tax planning on the part of the assessee company but there is no violation of any provision of the Income Tax Act. The claim of the assessee is not liable to be declined. In this regard, we also find support of law settled in case titled as Union of India Vs. Azadi Bachao Andolan 263 ITR 706 (SC), Madras High Court in M.V. Vallipan Vs. CIT 170 ITR 238 & Bhoruka Engg. Ltd. Vs. DCIT 356 ITR 25. The assessee company neither transferred the funds outside the company nor to the director, therefore, the provision of Section 2(22)(e) of the Act is not applicable to the facts of the case. Accordingly, we set aside....