M/s Romsons Scientific & Surgical Ind. (P) Ltd., Agra V. DCIT, Agra

CO 14/AGR/2010

• Counselvise Citation: [2011] 122 COUNSELVISE.COM (IT) 5830 (ITAT-AGRA)
• Duration Of Justice: 1 year(s) 3 month(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 21-04-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 30-03-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 21-01-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A K SHARMA
• Keywords: Business income; Rule of consistency
• Section: 80HHC; 147; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, AGRA BENCH, AGRA BEFORE SHRI P.K. BANSAL, ACCOUNTANT MEMBER AND SHRI H.S. SIDHU, JUDICIAL MEMBER ITA NO. 275/AGRA/2009 ASSTT. YEAR : 2004-05 DEPUTY C.I.T., VS. M/S. ROMSONS SCIENTIFIC & SUR GICAL IND. (P) LTD., 4(1), AGRA. 63, INDUSTRIAL ESTATE, NUNHAI, AGRA . (PAN : AAACR 5839 H) C.O. NO. 14/AGRA/2010 (IN ITA NO. 275/AGRA/2009) ASSTT. YEAR : 2004-05 M/S. ROMSONS SCIENTIFIC & SURGICAL IND. (P) LTD., VS. DEPUTY C.I.T., 63, INDUSTRIAL ESTATE, NUNHAI, AGRA. 4(1), AGR A. (APPELLANT) (RESPONDENT) FOR REVENUE : SHRI A.K. SHARMA, JR. D.R. FOR RESPONDENT : SHRI SAHIB P. SATSANGEE, C.A. ORDER PER P.K. BANSAL, A.M. : THE APPEAL AND THE CROSS OBJECTION HAVE BEEN FILE D AGAINST THE ORDER DATED 26.03.2009 OF CIT(A) BY TAKING THE FOLLOWING GROUNDS : GROUND OF APPEAL : 1. THAT THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN HOLDING TAT THE INTEREST INCOME ON FDRS IN ASSESSEES CASE IS TO BE ASSESSED AS BUSINESS INCOME AND NOT AS INCOME OF OTHER SOURCES AS HELD BY THE A O AND ALSO THAT THE INTEREST INCOME FALLS UNDER EXPLANATION (BAA) OF SECTION 80H HC OF THE I.T. ACT, 1961 AND 90% THEREOF IS TO BE EXCLUDED FOR THE PURPOSE OF AL LOWING DEDUCTION U/S. 80HHC, WITHOUT PROPERLY APPRECIATING THE FACTS & CIRCUMSTA NCES OF THE CASE AS WELL AS OBSERVATIONS & FINDINGS OF THE AO MADE IN THE ASSES SMENT ORDER IGNORING HIS OWN FINDINGS GIVEN IN VARIOUS CASE SUCH AS TEJ ENTERPRI SES, JEONI MANDI, AGRA, TEJ SHOE FACTORY, JEONI MANDI, AGRA & M/S. DIVYA JEWELL ERS PVT. LTD., 22/77, NORTH VIJAY NAGAR, COLONY, AGRA FOR A.Y. 2003-04 WHEREIN AOS ACTION ON THE SAME ISSUE HAS BEEN CONFIRMED BY HIM. 2 GROUNDS OF CROSS-OBJECTION: 1. BECAUSE THE LEARNED AUTHORITIES BELOW HAVE ERRE D ON FACTS AND IN LAW IN TREATING LEASE CHARGES EARNED AMOUNTING TO RS.1,38, 000/- AS INCOME FROM HOUSE PROPERTY INSTEAD OF INCOME FROM BUSINESS AS SHOWN B Y THE ASSESSEE. 2. BECAUSE THE LEANED ASSESSING OFFICER HAS ERRED O N FACTS AND IN LAW IN IGNORING THAT FDRS HAVE NOT BEEN PURCHASED OUT OF S URPLUS FUNDS AND THEY HAVE A DIRECT NEXUS WITH THE BUSINESS OF THE ASSESSEE. 2. THE GROUND NO.1 IN REVENUES APPEAL AND GROUND N O. 2 IN CROSS-OBJECTION RELATE TO THE CHARGING OF INTEREST INCOME UNDER THE HEAD INCOME FROM BUSINESS. THE BRIEF FACTS RELATING TO THESE GROUNDS ARE THAT THE ASSESSEE HAS SHOWN THE I NTEREST ON FDRS TO BE THE INCOME FROM BUSINESS, BUT THE ASSESSING OFFICER HAS ASSESSED IT AS INCOME FROM OTHER SOURCES. THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A) AND THE CIT(A) DIR ECTED THAT THE INTEREST ON FDRS BE ASSESSED AS INCOME FROM BUSINESS AND THE ASSESSING OFFICER T O RECOMPUTED THE DEDUCTION U/S. 80HHC BY EXCLUDING 90% UNDER EXPLANATION (BAA) OF SECTION 80 HHC. 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULL Y AND CONSIDERED THE SAME. IN OUR OPINION, THIS ISSUE IS NO MORE RES INTEGRA IN VIEW OF THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF PANDIAN CHEMICALS VS. CIT, 262 ITR 278(SC) IN WHICH THE HONBLE SUPREME COURT HAS HELD AS UNDER: THE WORDS DERIVED FROM IN SECTION 80HH OF THE IN COME-TAX ACT, 1961, MUST BE UNDERSTOOD AS SOMETHING WHICH HAS A DIRECT OR IMMEDIATE NEXUS WITH THE ASSESSEES INDUSTRIAL UNDERTAKING. ALTHOUGH ELECTRI CITY MAY BE REQUIRED FOR THE PURPOSES OF THE INDUSTRIAL UNDERTAKING, THE DEPOSIT REQUIRED FOR ITS SUPPLY IS A STEP REMOVED FROM THE BUSINESS OF THE INDUSTRIAL UNDERTA KING. HELD ACCORDINGLY, THAT INTEREST DERIVED BY THE IND USTRIAL UNDERTAKING OF THE ASSESSEE ON DEPOSITS MADE WITH THE ELECTRICITY BOAR D FOR THE SUPPLY OF ELECTRICITY FOR RUNNING THE INDUSTRIAL UNDERTAKING COULD NOT BE SAID TO FLOW DIRECTLY FROM THE INDUSTRIAL UNDERTAKING ITSELF AND WAS NOT PROFITS O R GAINS DERIVED BY THE UNDERTAKING FOR THE PURPOSE OF THE SPECIAL DEDUCTIO N UNDER SECTION 80HH. 3 4. THE IMMEDIATE SOURCE OF THE INTEREST INCOME IS T HE FIXED DEPOSITS RECEIPTS. MAKING THE FIXED DEPOSIT RECEIPTS IN THE BANK IS NOT THE BUSIN ESS OF THE ASSESSEE. THEREFORE, IN OUR OPINION, THE INTEREST RECEIVED ON THE FDRS CAN BE ASSESSED O NLY UNDER THE HEAD INCOME FROM OTHER SOURCES. ONCE THE INTEREST INCOME WILL BE ASSESSED UNDER THE HEAD INCOME FROM OTHER SOURCES, NO QUESTION OF ALLOWING DEDUCTION U/S. 80HHC WILL A RISE. WE, ACCORDINGLY, SET ASIDE THE ORDER OF CIT(A) ON THIS ISSUE AND RESTORE THE ORDER OF ASSES SING OFFICER. ACCORDINGLY, GROUND NO.1 OF REVENUES APPEAL STANDS ALLOWED AND GROUND NO. 2 OF CROSS OBJECTION, WHICH IS SUPPORTIVE OF THE ORDER OF CIT(A), STANDS DISMISSED. 5. GROUND NO.1 IN ASSESSEES CROSS OBJECTION RELATE S TO ASSESSING OF THE LEASE CHARGES AMOUNTING TO RS.1,38,000/- UNDER THE HEAD INCOME F ROM HOUSE PROPERTY OR INCOME FROM BUSINESS. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HAS SUBMITTED THE RETURN SHOWING LEASE CHARGES UNDER THE HEAD INCOME FROM BUSINESS WHILE THE ASSESSING OFFICER HAS ASSESSED THE SAME UNDER THE HEAD INCOME FROM HOUSE PROPERTY. W HEN THE MATTER WENT BEFORE THE CIT(A), THE CIT(A) CONFIRMED THE ACTION OF THE ASSESSING OF FICER BY OBSERVING AS UNDER : 5.3. I HAVE CAREFULLY EXAMINED THE SUBMISSIONS OF THE AR. IN MY OPINION THERE IS SUBSTANTIAL MERIT IN THE AOS STAND. SINCE THE PART OF THE PROPERTY HAS BEEN LEASED OUT BY THE ASSESSEE, THE LESE RENT RECE IVED WAS ON ACCOUNT OF INCOME FROM HOUSE PROPERTY OF THE APPELLANT. THE APPELLANT IS NOT IN THE BUSINESS OF LEASING OUT PROPERTIES AND THEREFORE, THIS INCOME C ANNOT FORM PART OF HIS BUSINESS INCOME AT ALL. THE GROUND, THEREFORE, IS REJECTED A ND THE ADDITION OF RS.1,38,000/- IS CONFIRMED. 6. THE LEARNED AR BEFORE US VEHEMENTLY CONTENDED TH AT THE ASSESSEE HAS LEASED OUT THE PART OF THE PROPERTY SITUATED AT 11, KEWAL INDUSTRIAL ES TATE, SENAPATI BAPAT MARG, LOWER PAREL, MUMBAI TO M/S. ROSH MEDICAL SUPPLIES. THE SAID PROP ERTY WAS ACQUIRED BY THE ASSESSEE DURING THE FINANCIAL YEAR 2000-01 AND PART OF IT HAS BEEN LEASED OUT. SINCE THEN, IN THE REMAINING PART, 4 THE ASSESSEE IS RUNNING HIS OFFICE. OUR ATTENTION W AS DRAWN TO THE COPY OF THE LEASE AGREEMENT AVAILABLE AT PAGE 13 TO 20 OF THE PAPER BOOK. IT WA S POINTED OUT THAT IN THE ASSESSMENT YEARS 2001-02, 2002-03 AND 2003-04, THE ASSESSING OFFICER ACCEPTED THE INCOME FROM LEASING OUT AS INCOME FROM BUSINESS WHILE PROCESSING THE RETURN U/ S. 143(1), BUT DURING THE ASSESSMENT YEAR 2006-07, THE ASSESSING OFFICER ACCEPTED THE LEASE R ENT AS INCOME FROM HOUSE PROPERTY IN THE ASSESSMENT FRAMED U/S. 143(3). THE ASSESSEE HAS LEA SED OUT THE PROPERTY FOR BETTER EXPLOITATION OF THE COMMERCIAL ASSET, THAT TOO TO THE CONSIGNMENT A GENT. THE OFFICE AREA IS BEING USED BY THE ASSESSEE FOR THE PURPOSE OF HIS BUSINESS, AS HE IS HAVING A BRANCH IN THE SAID PREMISES. THE DIRECTORS AS WELL AS STAFF AND OTHER OFFICIALS REGU LARLY VISIT THIS OFFICE AND AFFAIRS OF THE COMPANY IN CONNECTION WITH THE CLEARING, MARKETING DEVELOPM ENT OF THE PRODUCE ETC. IS UNDERTAKEN. THUS, IT WAS CONTENDED THAT THE LEASE RENT SO RECEIVED FO RMS PART OF THE BUSINESS INCOME OF THE ASSESSEE. 7. THE LEANED DR, ON THE OTHER HAND, RELIED ON THE ORDERS OF THE AUTHORITIES BELOW. 8. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS ALONGWITH THE ORDER OF THE TAX AUTHORITIES BELOW AS WELL AS THE ASSESSMENT ORDERS FOR THE SUBSEQUENT ASSESSMENT YEAR AND THE PRECEDING ASSESSMENT YEAR, THE COMPARATIVE DETAILS OF WHICH WERE FILED BEFORE US. THE UNDISPUTED FACT IS THAT THE ASSESSEE HAS LET OUT PA RT OF THE PREMISES TO THE CONSIGNMENT AGENT ON LEAVE AND LICENSE BASIS FOR THE BETTER EXPLOITATION OF THE COMMERCIAL ASSET TEMPORARILY. THE REVENUE HAS ACCEPTED SUCH INCOME IN THE ASSESSMENT YEAR 2006-07 AS INCOME UNDER THE HEAD INCOME FROM BUSINESS. EVEN IN THE ASSESSMENT YEAR 2001-02 TO 2003-04 ALSO, THE SAME RENTAL INCOME HAS BEEN ACCEPTED UNDER THE HEAD INCOME FRO M BUSINESS, BUT NO ACTION U/S. 147 OR U/S. 263 HAS BEEN TAKEN. THERE IS NO CHANGE IN THE FACTS OF THE CASE AS COMPARED TO THIS YEAR WITH THAT OF SUBSEQUENT OR PRECEDING ASSESSMENT YEARS AND IN ALL THE PRECEDING AND SUBSEQUENT ASSESSMENT 5 YEARS, AS PER DETAILS FILED AT PAGE 1 OF THE PAPER BOOK, THE REVENUE HAS DULY ACCEPTED THE RENTAL INCOME UNDER THE HEAD INCOME FROM BUSINESS. IN OU R OPINION, THE RULE OF CONSISTENCY HAS TO BE FOLLOWED. IN VIEW OF THIS FACT, WE SET ASIDE THE OR DER OF THE CIT(A) AND DIRECT THE ASSESSING OFFICER TO ASSESS THE INCOME FROM RENT UNDER THE HE AD INCOME FROM BUSINESS. THUS, THIS GROUND OF CROSS OBJECTION IS ALLOWED. 9. IN THE RESULT, THE APPEAL OF THE REVENUE STANDS ALLOWED AND THE CROSS OBJECTION OF ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 21.4.11. SD/- SD/- (H.S. SIDHU) (P.K. BANSAL) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 21 ST APRIL, 2011 *AKS/- COPY OF THE ORDER FORWARDED TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A) BY ORDER 4. CIT, CONCERNED 5. DR, ITAT, AGRA 6. GUARD FILE ASSISTANT REGISTRAR TRUE COPY