Case Law Details
Ideal Hitech Engineering Equipment (P) Ltd. Vs ITO (ITAT Delhi)
We find that the only issue in dispute is relating to addition made on account of the notional rent computed in respect of the property no. 17, Okhla Industrial Estate, Phase – III, New Delhi, 110 020 owned by the assessee company. The contention of the AO is that notional rent needs to be computed in respect of this property considering the same as vacant property. As against this, the contention of the assessee is that the notional rent cannot be computed as this is not a vacant property but a property occupied by the company as its registered office. Thus, the first issue is whether this contention of the assessee is correct or not.
On going through the facts, we note that this office is the sole office owned by the assessee company. All the regulatory compliances are being made from this premises. The assessee company does not have any other property. This fact has been submitted by the assessee company in various replies submitted to the AO and the submissions made before the Ld. CIT(A). All the official correspondence in the name of the company is to this office only. Various notices and Assessment Orders have also been issued and addressed on this property address as is evident from various notices issued under section 142(1) of the Act and 143(2) of the Act etc. placed in the Paper Book. This address is also stated on the return of income filed before the AO itself. The Tax registration of the company is also at this address.
The registered office of the company is also at this address. The company does not have any other office or address. In the light of these facts, it is established that this property is occupied by the assessee company for its own purpose. In these circumstances, it cannot be said that the property was vacant during the year. Both AO and Ld. CIT(A) have gone with the presumption that the property is vacant and hence, income on the basis of notional rent needs to be added under section 23(1)(c) of the Act. We are of the view that the company having occupied the property for its own purposes, no notional rent can be added. It may be germane to mention here that this is the only property owned and occupied by the assessee as its registered office. It is not the case of the AO that the assessee company was having some other premises to have its office. A company having been incorporated is legally required to have its registered office irrespective of the fact whether during the year it has carried on any activity or not.
There is a statutory requirement under the Companies Act to have a registered office. We are also in agreement with the contention of the Ld. AR for the assessee that the cost incurred by the company in order to comply with various statutory functions is allowable even in the absence of any business income. In case, a company does not have its own premises then such company will be required to take a premises on rent for its registered office and rent so paid being towards meeting statutory obligation will be allowable expenditure. As against this, a company which owns its own premises and uses such premises for its registered office, it cannot be said that such premises was vacant so as to charge notional rent as its income under section 23(1) of the Act.
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