Case Law Details
M/s. Chandri Papers and Allied Products Pvt. Ltd. Vs ACIT (ITAT Mumbai)
We find that assessee had taken property on lease for the purpose of its business. The said property is situated at Lonavala. The said property belongs to the wife of director of the assessee company. The property has been taken on lease based on a registered lease agreement entered into with the wife of director of the assessee company. We find that Smt. Shweta Rasiwasia had retained some portion of the property for her personal use and had leased out the remaining portion to the assessee company and had derived lease rental income thereon. The said property had been taken on lease by the assessee for housing its staff and business guests who visit Lonavala and which inturn had increased the morale of the employees and assessee was benefitted with good business relations with the customers of the assessee company. Hence, the business nexus of taking that property on lease and using it for the purpose of utilisation by its staff and customers of the assessee had been proved and hence cannot be held to be for non-business purposes. However, the ld. AR before us agreed for an adhoc disallowance of 20% that could be made for the purpose of personal usage in view of common facilities that could be attributed for both personal as well as business purposes. Accordingly, we deem it fit to disallow only 20% of Rs.28,89,000/- on account of rent.
We have already held that the said Bungalow situated at Lonavala owned by wife of director had been taken on lease by the assessee company for the purpose of its business. Hence, it is quite normal to pay security deposit for the said property to the landlord. This payment of security deposit cannot be treated as ‘meant for non-business purposes’. Hence, there is no question of making any proportionate disallowance of interest u/s.36(1)(iii) of the Act. Hence, we direct the ld. AO to delete the disallowance made on account of interest amounting of Rs.10,98,000/-.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
These appeals in ITA No.7902/Mum/2019 & 7903/Mum/2019 for A.Yrs.2014-15 & 2015-16 arise out of the order by the ld. Commissioner of Income Tax (Appeals)-8, Mumbai in appeal No.CIT(A)-8/IT-481/16-17, CIT(A)-8/IT-82/17-18 dated 23/10/2019 (ld. CIT(A) in short) against the order of assessment passed u/s.143(3) of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 30/11/2017 by the ld. Asst. Commissioner of Income Tax 3(1)(2), Mumbai (hereinafter referred to as ld. AO).
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