M/s The Commercial Motors Ltd., Lucknow V. Dy. Commissioner Of Income Tax, Lucknow

CO 3/LKW/2015

• Counselvise Citation: [2015] 123 COUNSELVISE.COM (IT) 1521 (ITAT-LUCKNOW)
• Duration Of Justice: 8 month(s) 18 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 29-10-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 07-09-2015
• Assessment Year: 2011-2012
• Appeal Filed On: 10-02-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: LALIT MAHAJAN
• Keywords: Business income; Valuation report

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH A, LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ITA NO.24/LKW/2015 ASSESSMENT YEAR 2011-12 M/S THE COMMERCIAL MOTORS LTD. 11, M.G. MARG, LUCKNOW PAN AACCT 7382 H VS DCIT, RANGE-6, LUCKNOW C.O. NO. 03/LKW/2015 (IN ITA NO.24/LKW/2015 ASSESSMENT YEAR 2011-12 DCIT, RANGE-6, LUCKNOW VS M/S THE COMMERCIAL MOTORS LTD. 11, M.G. MARG, LUCKNOW PAN AACCT 7382 H (RESPONDENT) (APPELLANT) SHRI AMIT NIGAM, DR APPELLANT BY SHRI LALIT MAHAJAN RESPONDENT BY 08/09/2015 DATE OF HEARING 29 /10/2015 DATE OF PRONOUNCEMENT O R D E R PER A. K. GARODIA, A.M. THIS IS REVENUES APPEAL AND THE CROSS OBJECTION IS FILED BY THE ASSESSEE AND THESE ARE DIRECTED AGAINST THE ORDER OF LD. CIT(A) II, LUCKNOW DATED 07.10.2014 FOR AY 2011-12. 2. THE GROUNDS RAISED BY THE REVENUE IN ITS APPEAL ARE AS UNDER: 1 THE COMMISSIONER OF INCOME TAX (APPEALS), LUCKN OW HAS ERRED IN LAW AND ON FACTS OF THE CASE BY TREATING THE INTERE ST INCOME OF 2 RS.64,45.020/- AS BUSINESS INCOME BY IGNORING THE F ACTS OF THE CASE THAT THE ASSESSEE COMPANY IS NEITHER A FINANCI AL INSTITUTE NOT A BANKING COMPANY. 2. THE COMMISSIONER OF INCOME TAX (APPEALS), LUCKNO W HAS ERRED IN LAW AND ON THE FACTS OF THE CASE IN DELETING THE AD DITION OF RS.13,24,106/- U/S 69 OF THE INCOME TAX ACT, 1961 M ADE ON ACCOUNT OF INVESTMENT FROM UNDISCLOSED SOURCE. THE CIT(A) FAILED TO APPRECIATE THAT THE AMOUNT OF RS.13,24,106/- WAS DIFFERENCE BETWEEN THE VALUE DETERMINED BY THE VALUER AND VALU E OF INVESTMENT DISCLOSED BY THE ASSESSEE. 3. THE COMMISSIONER OF INCOME TAX (APPEALS), LUC KNOW HAS ERRED IN LAW AND ON THE FACTS OF THE CASE IN DELETING THE AD DITION OF RS.3,00,000/- MADE OUT OF TRAVELING AND CONVEYANCE EXPENSES BEING NOT VERIFIABLE. 4. THE COMMISSIONER OF INCOME TAX (APPEALS), LUC KNOW HAS ERRED IN LAW AND ON THE FACTS OF THE CASE IN DELETING THE AD DITION OF RS.60,000/- MADE BY THE ASSESSING OFFICER OUT OF BR OKERAGE AND WELFARE EXPENSES AS THE SAME WERE NOT FULLY VERIFIA BLE. 5. THAT THE APPELLANT CRAVES LEAVE TO ADD OR AME ND ANY ONE OR MORE OF THE GROUNDS OF APPEALS, AS STATED ABOVE, AS AND WHEN NEED TO DO SO ARISES WITH THE PRIOR PERMISSION OF, THE COUR T. 3. THE GROUNDS RAISED BY THE ASSESSEE IN THE CO ARE AS UNDER: 1. THAT THE LEARNED COMMISSIONER OF INCOME TAX (A PPEALS) ERRED IN CONFIRMING DISALLOWANCE OF BROKERAGE EXPENDITURE OF RS. 50000/-. 2. THAT THE LEARNED COMMISSIONER OF INCOME TAX (AP PEALS) FAILED TO APPRECIATE THE WRITTEN SUBMISSION THAT THE BROKERAG E OF RS. 374400/- WAS PAID TO SUMAN BHATTACHARYA THROUGH CHEQUE AND T AX DEDUCTED U/S 194H WAS DEPOSITED IN THE GOVERNMENT ACCOUNT (G ROUND NO. 4 PAGE 6 OF CIT ORDER) 3. THAT THE BROKERAGE EXPENDITURE OF RS. 50000/- M AY KINDLY BE DELETED. 4. LD. DR OF THE REVENUE SUPPORTED THE ASSESSMENT O RDER, WHEREAS LD. AR OF THE ASSESSEE SUPPORTED THE ORDER OF LD. CIT(A) REGARDIN G THE ISSUES RAISED BY THE REVENUE IN ITS APPEAL. 3 5. REGARDING THE ISSUES RAISED BY THE ASSESSEE IN T HE CO, HE REITERATED THE SAME CONTENTIONS WHICH WERE RAISED BEFORE THE CIT(A). HE ALSO SUBMITTED THAT ON PAGES 1 TO 3 OF THE PAPER BOOK ARE THE WRITTEN SUBMISSION O F THE ASSESSEE, WHICH SHOULD BE CONSIDERED. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIN D THAT IN PARA 5 OF THE WRITTEN SUBMISSION APPEARING ON PAGES 2 AND 3 OF THE PAPER BOOK ARE THE SUBMISSIONS OF LD. AR REGARDING THE ISSUE RAISED BY THE REVENUE IN ITS APPEAL AND ALSO REGARDING THE ISSUES RAISED BY THE ASSESSEE IN ITS CO. THIS PARA IS REPRODUCED HEREIN BELOW FOR THE SAKE OF READY REFERENCE: 5) SUBMISSIONS WITH REGARD TO GROUND OF APPEAL GROUND NO. 1 THE DEPARTMENT IS NOT JUSTIFIED IN RAISING A NEW PO INT THAT ASSESSEE COMPANY IS NEITHER A FINANCIAL INSTITUTE NOR A BANK ING COMPANY. THE ASSESSING OFFICER HAD NEITHER CONSIDERED THIS ISSUE NOR THE FIRST APPELLATE AUTHORITY. THIS GROUND CANNOT BE TAKEN BEFORE THE H ONOURABLE TRIBUNAL. IN THIS REGARD PHOTOCOPY OF DECISION IN DR. (MRS.) CHA NDRAWATI VS. CIT 164TAXMAN 24 IS ENCLOSED. IT IS REQUESTED THAT THIS GROUND MAY NOT BE ENTERTAINED GROUND NO.2 THE VALUATION REPORT OF THE HOTEL PROJECT WAS MADE AT THE RATE APPLICABLE TO CPWD AND NOT UPPWD RATE AS PER ORDER OF THE ALLAHAB AD HIGH COURT . FURTHER U/S 69, THE EXPLANATION GIVEN FOR THE DIFFE RENCE IN VALUATION WAS NOT FOUND UNSATISFACTORY. FURTHER ADDITION WAS MADE SUB JECT TO RECTIFICATION U/S 154. ADHOC DISALLOWANCE WAS MADE BY THE ASSESSING OFFICE R WITHOUT POINTING OUT ANY UNVERIFIABLE ITEM (PARA 4 -PAGE 3 OF ORDER) GROUND NO 4 THE SUM OF RS.60000/-INCLUDES RS.50000/- OUT OF BRO KERAGE AND RS.10000/- OUT OF WELFARE EXPENSES. REGARDING BROKERAGE OF RS 50000/ 4 THE ASSESSES COMPANY PAID BROKERAGE OF RS. 374400/- TO SHRI SUMAN BHATTACHARYA THROUGH CHEQUE AND TAX DEDUCTED U/S 19 4H WAS DEPOSITED IN THE GOVT. A/C. THIS SUBMISSION WAS MADE BEFORE T HE LEARNED CIT(A). THIS IS AVAILABLE ON PAGE 6 OF THE CIT(A) ORDER (GROUND NO-4 LAST THREE LINES) THE ASSESSEE COMPANY HAS FILED CROSS APPEAL (APPEAL NO. 3/LKO/2015) AND HAS REQUESTED THAT THE BROKERAGE EXPENSES SUSTAINED AT RS. 50000/- BY THE LEARNED CIT(APPEAL) MAY KINDLY BE DELETED. STAFF WE LFARE EXPENSES THE ASSESSING OFFICER MA.DE ADHOC ADDITION .OF RS. 2000 0/-(PARA 6 OF THE ASSESSMENT ORDER PAGE 3) 7. REGARDING GROUND NO.1 OF THE REVENUES APPEAL, W E FIND THAT RELIANCE HAS BEEN PLACED BY THE LD. AR OF THE ASSESSEE ON THE DECISIO N OF THE HONBLE ALLAHABAD HIGH COURT RENDERED IN THE CASE OF DR. (MRS.) CHANDRAWAT I VS. CIT 164 TAXMAN 24 (ALLD.). IN THIS CASE, IT WAS HELD BY THE HONBLE ALLAHABAD HIGH COURT THAT IF A NEW CLAIM IS BEFORE THE TRIBUNAL, WHICH WAS NOT RAISED BEFORE TH E AO OR CIT(A), THE TRIBUNAL WAS PERFECTLY JUSTIFIED TO REFUSE TO ENTERTAIN SUCH CLA IM. IN THE PRESENT CASE, IT IS NOT THE CASE THAT A NEW CLAIM HAS BEEN RAISED BY THE REVENU E BEFORE THE TRIBUNAL. IN FACT IN THE PRESENT CASE, THE AO HAS ASSESSED THE INTEREST INCOME OF RS.64,45,020/- AS INCOME FROM OTHER SOURCES BY FOLLOWING THE JUDGMENT OF THE HONBLE ALLAHABAD HIGH COURT RENDERED IN THE CASE OF CIT VS. INDO GULF FER TILISER AND CHEMICALS CORPORATION LTD. REPORTED IN 280 ITR 621 (ALL). THE LD. CIT(A) HAS HELD THAT THE AO WAS NOT JUSTIFIED IN TREATING THE INTEREST INCOME AS INCOME FROM OTHER SOURCES BECAUSE THE ASSESSEE HAS CORRECTLY CLAIMED AND SHOWN INTEREST I NCOME UNDER THE HEAD OF BUSINESS INCOME CONTINUOUSLY IN PAST YEARS. HENCE, IT IS SEE N THAT NO REASONING IS GIVEN BY LD. CIT(A) AS TO HOW THE JUDGMENT OF THE HONBLE ALLAHA BAD HIGH COURT RENDERED IN THE CASE OF INDO GULF FERTILISER AND CHEMICALS CORPORAT ION LTD. (SUPRA) FOLLOWED BY THE AO IS NOT APPLICABLE. AS PER THIS JUDGMENT OF THE HON BLE ALLAHABAD HIGH COURT FOLLOWED BY THE AO, IT WAS HELD THAT INTEREST INCOME IS TAXA BLE AS INCOME FROM OTHER SOURCES. WHILE HOLDING SO, THE HONBLE ALLAHABAD HIGH COURT HAS FOLLOWED A JUDGMENT OF THE HONBLE APEX COURT RENDERED IN THE CASE OF TURICORI N ALKALI CHEMICALS AND FERTILIZERS 5 LTD. VS. CIT REPORTED IN 227 ITR 172 AND IN THIS JU DGMENT, IT WAS HELD THAT SUCH INTEREST INCOME IS TAXABLE UNDER THE HEAD INCOME FR OM OTHER SOURCES. HENCE, IT IS SEEN THAT BY RAISING GROUND NO.1, THE REVENUE IS RAISING AN ADDITIONAL ARGUMENT IN SUPPORT OF THE ACTION OF THE AO TO TREAT THE INTEREST INCOM E AS INCOME FOR OTHER SOURCES BY SAYING THAT THE ASSESSEE COMPANY IS NEITHER A FINAN CIAL INSTITUTION NOR THE BANKING COMPANY. EVEN IF WE EXCLUDE THIS ARGUMENT THEN ALSO INTEREST INCOME HAS TO BE ASSESSED AS INCOME FOR OTHER SOURCES BECAUSE AS PER SECTION 56(1) OF THE ACT, IF IT IS NOT SHOWN BY THE ASSESSEE THAT INTEREST INCOME IS C HARGEABLE TO TAX UNDER ANY OTHER HEAD, IT IS TAXABLE UNDER THIS HEAD. THE ASSESSEE H AS NOT BROUGHT ANY MATERIAL TO SHOW THAT INTEREST INCOME IS TAXABLE UNDER ANY OTHE R HEAD EXCEPT INCOME FROM OTHER SOURCES AND THEREFORE, WE ARE OF THE CONSIDERED OPI NION THAT THE ORDER OF THE LD. CIT(A) IS NOT SUSTAINABLE BECAUSE INTEREST INCOME I S DEFINITELY TAXABLE UNDER THE HEAD INCOME FROM OTHER SOURCES, UNTIL AND UNLESS, IT IS SHOWN BY THE ASSESSEE THAT THIS INTEREST INCOME IS TAXABLE UNDER SOME OTHER HEAD AN D SINCE IN THE PRESENT CASE, THE ASSESSEE HAS NOT SO ESTABLISHED, WE HOLD THAT THE I NTEREST INCOME IN THE PRESENT CASE IS CORRECTLY ASSESSED BY THE AO UNDER THE HEAD INCO ME FROM OTHER SOURCES. HENCE, WE REVERSE THE ORDER OF THE LD. CIT(A) ON THIS ISSUE A ND RESTORE THAT OF THE AO. ACCORDINGLY, GROUND NO.1 OF THE REVENUE IS ALLOWED. 8. REGARDING GROUND NO.2 OF THE REVENUES APPEAL, W E FIND THAT ADDITION WAS MADE BY THE AO IS ON THE BASIS THAT AS PER THE REPO RT OF THE REGISTERED VALUER SUBMITTED FOR THE VALUE OF CAPITAL WORK IN PROGRESS REGARDING CONSTRUCTION OF HOTEL CHINA GATE, VALUE WAS DETERMINED BY THE VALUER AT R S.4,50,00,000/- AS ON 01.04.2011 AND THE AO OBSERVED THAT THERE IS STILL A DIFFERENC E OF RS.13,24,106/- BETWEEN INVESTMENT DECLARED BY THE ASSESSEE AND INVESTMENT ESTIMATED BY APPROVED VALUER. HENCE, IT IS SEEN THAT ADDITION IS NOT MADE BY THE AO ON ESTIMATE BASIS BUT THIS IS ON THE BASIS OF ACTUAL BASIS BETWEEN INVESTMENT DECLAR ED BY THE ASSESSEE AND VALUED BY THE REGISTERED VALUER AS PER THE VALUERS REPORT SUB MITTED BY THE ASSESSEE ITSELF. THIS ADDITION WAS DELETED BY THE CIT(A) ON THIS BASIS TH AT THE ADDITION WAS MADE BY THE AO 6 SUBJECT TO RECTIFICATION AS PER OUTCOME OF DVOS RE PORT. THIS IS NOT THE CASE OF THE LD. CIT(A) THAT DVO HAS DETERMINED THE VALUE OF THE PRO PERTY AT OR NEAR TO THE VALUE OF INVESTMENT SHOWN BY THE ASSESSEE. HENCE, WE ARE OF THE CONSIDERED OPINION THAT THE ORDER OF THE LD. CIT(A) ON THIS ISSUE IS ALSO NOT S USTAINABLE. WE, THEREFORE, REVERSE HIS ORDER ON THIS ISSUE ALSO AND RESTORE THAT OF THE AO . GROUND NO.2 OF THE REVENUE IS ALSO ALLOWED. 9. GROUND NO.3 OF THE REVENUES APPEAL AND ALL THE GROUNDS RAISED BY THE ASSESSEE IN THE CO ARE INTERCONNECTED. THE FACTS ARE THAT AS PER PARAS 5 & 6 OF THE ASSESSMENT ORDER, THE AO MADE DISALLOWANCE OF RS.1.00 LAKH OUT OF BROKERAGE EXPENDITURE OF RS.3,74,400/- AND RS.20,000/- OUT OF STAFF WELFARE EXPENSES OF RS.2,18,187/-. WHEN THE ASSESSEE CARRIED OUT THE MATTER IN APPEAL BEFOR E THE LD. CIT(A), THE LD. CIT(A) HELD THAT THE DISALLOWANCE OF RS.50,000/- IS REASON ABLE OUT OF COMMISSION EXPENDITURE AND DISALLOWANCE OF RS.10,000/- IS REASONABLE OUT O F STAFF WELFARE AND IN THIS MANNER, HE ALLOWED RELIEF OF RS.60,000/- NOW THE REVENUE IS IN APPEAL FOR THIS RELIEF OF RS.60,000/- ALLOWED BY THE CIT(A). THE ASSESSEE HAS RAISED THE CO AND DISPUTED THE DISALLOWANCE OF RS.50,000/- CONFIRMED BY THE LD. CI T(A) OUT OF BROKERAGE EXPENDITURE. LD. AR REITERATED THE SAME CONTENTIONS WHICH WERE R AISED BEFORE THE CIT(A) AND LD. DR OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER. 10. WE HAVE CONSIDERED THE RIVAL SUBMISSION. WE FIN D THAT THE DISALLOWANCE OF RS.100,000/- OUT OF COMMISSION EXPENDITURE OF RS.3, 74,400/- WAS MADE BY THE AO BY OBSERVING THAT SINCE NO REPORT WAS FILED, RS.1,00,0 00/- IS DISALLOWED. FOR MAKING DISALLOWANCE OF RS.20,000/- OUT OF STAFF WELFARE EX PENSES OF RS.2,18,187/-, IT IS OBSERVED BY THE AO THAT THESE EXPENSES ARE NOT FULL Y VERIFIABLE AND THEREFORE, A SUM OF RS.20,000/- IS DISALLOWED. 11. REGARDING DISALLOWANCE OF RS.10,000/- DELETED B Y THE LD. CIT(A) OUT OF STAFF WELFARE EXPENSES, WE ARE OF THE CONSIDERED OPINION THAT NO INTERFERENCE IS CALLED FOR IN THE ORDER OF LD. CIT(A) ON THIS ISSUE ALSO BECAUSE AO ESTIMATED RS.20,000/- AS 7 DISALLOWABLE FOR THE REASON THAT THE EXPENSES IS NO T FULLY VERIFIABLE AND AS AGAINST THIS, IT WAS ESTIMATED BY THE LD. CIT(A) THAT DISALLOWANC E OF RS.10,000/- OUT OF STAFF WELFARE EXPENSES IS REASONABLE. WE ARE OF THE CONSI DERED OPINION THAT IN THE FACTS OF THE PRESENT CASE, ESTIMATE BY LD. CIT(A) APPEARS TO BE REASONABLE AND HENCE, WE DECLINE TO INTERFERE IN THE SAME. 12. REGARDING DISALLOWANCE OF RS.1.00 LAKH OUT OF B ROKERAGE EXPENDITURE, WE FIND THAT NO COGENT REASONING IS GIVEN BY THE AO IN THE ASSESSMENT ORDER FOR MAKING THIS DISALLOWANCE AND THEREFORE, WE FEEL THAT THE ENTIRE DISALLOWANCE OUT OF BROKERAGE EXPENSES SHOULD HAVE BEEN DELETED BY THE LD. CIT(A) INSTEAD OF DELETING RS.50,000/- OUT OF RS.1.00 LAKH. WE DELETE THE ENTIRE DISALLOWA NCE OF RS.1.00 LAKH OUT OF BROKERAGE EXPENSES. ACCORDINGLY, GROUND NO.3 OF REV ENUE IS REJECTED WHEREAS GROUNDS RAISED BY THE ASSESSEE IN THE CO ARE ALLOWE D. 13. IN THE RESULT, APPEAL OF THE REVENUE IS PARTLY ALLOWED AND THE CO OF THE ASSESSEE IS ALLOWED. (ORDER WAS PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTION PAGE) SD/- SD/- (SUNIL KUMAR YADAV) (A.K . GARODIA ) JUDICIAL MEMBER ACCOUNTANT MEMBE R DATED: 29/10/2015 AKS COPY OF THE ORDER FORWARDED TO : 1.THE APPELLANT 2.THE RESPONDENT. 3.CONCERNED CIT 4.THE CIT(A) 5.D.R., I.T.A.T., LUCKNOW ASSTT. R EGISTRAR