The ACIT, Circle-2, RAJKOT-GUJARAT V. The Agriculture Produce Market Committee, RAJKOT-GUJARAT

ITA 1035/RJT/2010

• Counselvise Citation: 103524914 RSA 2010
• Duration Of Justice: 1 year(s) 2 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-09-2011
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 07-09-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 01-07-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PREM PRAKASH
• Assessee Lawyers: NJ PATEL
• Keywords: Business income; Depreciation; Business expenditure; Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT BEFORE SHRI A.L. GEHLOT (AM) AND SHRI N.R.S. GANESA N (JM) I.T.A. NO.1035/RJT/2010 (ASSESSMENT YEAR 2007-08) ACIT, CIR.2 VS THE AGRICULTURE PRODUCE RAJKOT MARKET COMMITTEE SARDAR VALLABH PATEL MARKET YARD, NATIONAL HIGHWAY PEDAK ROAD, RAJKOT PAN : AAALT0247L (APPELLANT) (RESPONDENT) DATE OF HEARING : 07-09-2011 DATE OF PRONOUNCEMENT : 09-09-2011 APPELLANT BY : SHRI PREM PRAKASH RESPONDENT BY: SHRI NJ PATEL O R D E R PER AL GEHLOT, AM THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST THE ORDER OF CIT(A)-III, RAJKOT DATED 28-04-2010 PERTAINING TO ASSESSMENT YE AR 2007-08. 2. THE FOLLOWING GROUNDS ARE RAISED IN THE APPEAL: (1) THE CIT(A)-III, RAJKOT HAS ERRED IN LAW AND ON FACTS IN DIRECTING THE AO TO TREAT THE RENTAL INCOME OF RS.14,78,567/- RECEIVED AS THE BUSINESS INCOME. ITA NO.1035/RJT/2010 2 (II) THE CIT(A)-III, RAJKOT HAS ERRED IN LAW AND ON FACTS DELETING THE ADDITION OF RS.10,00,000/- MADE ON ACC OUNT OF DISALLOWING EXPENDITURE IN RESPECT OF RENTAL INC OME. (III) THE CIT(A)-III, RAJKOT HAS ERRED IN LAW AND O N FACTS IN DELETING THE ADDITION OF RS. 6,56,119/- MADE ON A/C . OF TREATING BUILDING REPAIRING EXPENSES AS CAPITAL IN NATURE. (IV) THE CIT(A)-III, RAJKOT HAS ERRED IN LAW AND ON FACTS IN DIRECTING THE AO TO ALLOW DEPRECIATION OF RS.98,78, 088/- . 3. DURING THE ASSESSMENT PROCEEDINGS THE AO NOTICED THAT THE ASSESSEE RECEIVED RENTAL INCOME FOR GODOWNS, POST O FFICE BUILDING, CANTEEN, ETC. THE ASSESSEE DECLARED THIS RENTAL IN COME AS BUSINESS INCOME. THE ASSESSING OFFICER ASSESSED THE SAME UN DER THE HEAD RENTAL INCOME. THE CIT(A) DIRECTED THE ASSESSING OFFICER TO TREAT THE SAID INCOME AS INCOME FROM BUSINESS. AT THE OUTSET, THE LD.AR SUBMITTED THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY T HE ORDER OF THE ITAT IN ASSESSEES OWN CASE IN ITA NO.1018 & 1019/RJT/2009 FOR ASSESSMENT YEARS 2005-06 AND 2006-07 ORDER DATED 28-06-2010. THE ITAT, VIDE PARAGRAPH NO.3 OF THEIR ORDER CONFIRMED THE ORDER O F CIT(A) WHEREIN THE INCOME WAS TREATED AS INCOME FROM BUSINESS. SINC E FACTS ARE IDENTICAL TO THE YEAR UNDER CONSIDERATION, WE, RESPECTFULLY F OLLOW THE ABOVE ORDER OF THE ITAT AND IN THAT LIGHT OF THE FACT THE ORDER OF CIT(A) ON THE ISSUE IS CONFIRMED. ITA NO.1035/RJT/2010 3 4. THE BRIEF FACTS OF THE SECOND GROUND ARE THAT TH E ASSESSEE CLAIMED BUSINESS EXPENSES OF RS.10 LAKHS ON ESTIMATE BASIS. THE ASSESSING OFFICER DISALLOWED THE SAME ON THE GROUND THAT THE EXPENSES DID NOT INCUR FOR EARNING THE RELATED INCOME. THE CIT(A) HELD TH AT SINCE THE RENTAL INCOME OF THE ASSESSEE HAS BEEN ASSESSED AS BUSINES S INCOME, THE RELATED EXPENSES ARE ALLOWABLE EXPENSES. THE ASSES SING OFFICER HAS DISALLOWED THE EXPENSES ARBITRARILY; THEREFORE, THE SAME WAS DELETED. THE LD.AR POINTED OUT THAT THIS ISSUE IS ALSO COVERED I N FAVOUR OF THE ASSESSEE BY THE ORDER OF ITAT (SUPRA) WHEREIN THE ITAT DISM ISSED THE REVENUES GROUND OBSERVING THAT SINCE THE RENTAL INCOME HAS B EEN ASSESSABLE UNDER THE HEAD INCOME FROM BUSINESS, THEREFORE, THE EXP ENDITURE INCURRED FOR THE PURPOSE OF BUSINESS ARE ALLOWABLE. SINCE FACTS ARE IDENTICAL TO THE YEAR UNDER CONSIDERATION WE, RESPECTFULLY FOLLOW THE ABO VE ORDER OF ITAT. IN THE LIGHT OF THAT THE ORDER OF CIT(A) IS CONFIRMED. 5. THE BRIEF FACTS OF THE THIRD GROUND ARE THAT DUR ING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS CLAIMED REPAIR AND MAINTENANCE EXPENDITURE OF RS. 6,56,119 AS BUSINESS EXPENDITURE. THE ASSESSING OFFICER TREATED THE SAM E AS CAPITAL EXPENDITURE. THE CIT(A) ALLOWED THE CLAIM OF THE A SSESSEE AS THE EXPENDITURES WERE PERTAINING TO CURRENT REPAIRS TRE ATING THE SAME AS BUSINESS EXPENDITURE. THE LD.AR POINTED OUT THAT T HIS ISSUE IS ALSO ITA NO.1035/RJT/2010 4 COVERED BY THE ORDER OF THE ITAT (SUPRA) IN FAVOUR OF THE ASSESSEE. THE ITAT, VIDE PARAGRAPH 7 OF ITS ORDER CONFIRMED THE O RDER OF THE CIT(A). SINCE FACTS ARE IDENTICAL, WE RESPECTFULLY FOLLOW T HE ABOVE ORDER OF THE ITAT AND IN THE LIGHT OF THAT THE ORDER OF CIT(A) IS CON FIRMED. 6. THE BRIEF FACTS OF THE FOURTH GROUND ARE THAT TH E ASSESSING OFFICER DISALLOWED THE DEPRECIATION CLAIM OF RS.1,28,84,691 ON THE GROUND THAT THE ASSESSEE HAS CLAIMED DEPRECIATION WHICH INCLUDED DE PRECIATION ON RENTED BUILDING WHICH HAS BEEN ALREADY DISALLOWED IN EARLI ER YEAR. THE CIT(A) DIRECTED THE ASSESSING OFFICER TO ALLOW DEPRECIATIO N OF RS.98,78,088 AFTER PROPERLY VERIFYING THE CORRECTNESS OF THE AMOUNT. THE LD.AR POINTED OUT THAT THIS ISSUE IS ALSO COVERED BY THE ABOVE ORDER OF ITAT. THE ITAT IN ASSESSMENT YEARS 2005-06 AND 2006-07 DECIDED THE IS SUE AS UNDER: 9. WE HAVE HEARD THE RIVAL CONTENTIONS. WE FIND TH AT THE ASSESSEE IS AN AGRICULTURAL PRODUCE MARKET COMMITTE E. THE ASSESSEE WA EXEMPT FROM INCOME-TAX U/S 10(20) TILL THE YEAR 2002-03. THE LD.AR SUBMITTED THAT AS PER THE DECIS ION OF THE RAJKOT BENCH IN THE CASE OF KANDLA PORT TRUST VS AC IT (2007) 104 ITD 1 (RAJKOT) WHEREIN A SIMILAR ISSUE HAD COME UP AND THE TRIBUNAL HELD THAT THE ASSESSEE PORT TRUST WERE EXEMPT FROM INCOME-TAX U/S 10(2) TILL 31 MARCH, 2002. BY VIRTUE OF AMENDMENT IN SECTION 10(20) BY FINANCE ACT, 2002, T HE INCOME OF THE ASSESSEE HAD BEEN TAXABLE FOR THE FIR ST TIME WEF 01-04-2002. THEREFORE, THE ASSESSEE HAS FILED A RE TURN FOR THE ASSESSMENT YEAR 2003-04. IN COMPUTATION OF TOTAL I NCOME THE ASSESSEE CLAIMED DEPRECIATION WHICH WAS COMPUTED ON ORIGINAL COST OF ASSETS, I.E. ASSESSEE HAD TAKEN WD V OF ASSETS AS ON 1-4-2002 AS ORIGINAL COST OF ASSETS. THE ASS ESSING ITA NO.1035/RJT/2010 5 OFFICER HAS ALLOWED THE DEPRECIATION ON BOOK VALUE OF ASSETS, WHICH WAS ARRIVED AT AFTER DEDUCTING FROM ORIGINAL COST OF ASSETS DEPRECIATION PROVIDED IN BOOKS TILL 31-3-20 02. THE TRIBUNAL HELD THAT THE WDV AS ON 1-4-2002 WOULD BE ORIGINAL COST OF ASSETS. IN THE LIGHT OF THE DECISION OF TH IS VERY BENCH OF THE TRIBUNAL, WE FIND THAT THE LD.CIT(A) WAS JUSTIF IED IN HOLDING THAT THE WDV AS ON 1-4-2002 WOULD BE THE ORIGINAL C OST OF ASSETS AS HAS BEEN CLAIMED BY THE ASSESSEE. THE OT HER OBJECTION OF THE DEPARTMENT THAT THE DEPRECIATION O N THE RENTED PROPERTY CANNOT BE ALLOWED BECAUSE THE INCOME FROM THAT PROPERTY HAS TO BE ASSESSED UNDER THE HEAD INCOME FROM HOUSE PROPERTY DOES NOT SURVIVE IN VIEW OF OUR DEC ISION THAT THE RENTAL INCOME EARNED BY THE ASSESSEE IS TO BE A SSESSED UNDER THE HEAD INCOME FROM BUSINESS OR PROFESSION . IN THIS VIEW OF THE MATTER WE DO NOT SEE ANY MERIT IN THE G ROUND RAISED BY THE REVENUE. GROUND 4 IN BOTH THE APPEAL S IS HEREBY REJECTED. 7. AFTER HEARING THE LD.DR, THE LIABILITY OF THE DE PRECIATION IS REQUIRED TO BE RECALCULATED IN THE LIGHT OF THE ABOVE ORDER OF THE ITAT. WE, THEREFORE, DIRECT THE ASSESSING OFFICER TO RECALCULATE THE DEP RECIATION CLAIM OF THE ASSESSEE IN ACCORDANCE WITH ABOVE ORDER OF THE ITAT , AFTER PROVIDING OPPORTUNITY OF HEARING TO THE ASSESSEE. 8. IN THE RESULT, APPEAL BY REVENUE IS PARTLY ALLOW ED, AS INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 09-09-2011. SD/- SD/- (N.R.S. GANESAN) (A.L. GEHLOT) JUDICIAL MEMBER ACCOUNTANT MEMBER RAJKOT, DT : 09 TH SEPTEMBER, 2011 PK/- ITA NO.1035/RJT/2010 6 COPY TO: 1. ASSESSEE 2. REVENUE 3. THE CIT(A)-III, RAJKOT 4. THE CIT-II, RAJKOT 5. THE DR, I.T.A.T., RAJKOT (TRUE COPY) BY ORDER ASSTT.REGISTRAR, ITAT, RAJKOT