M/s. Allied Motors Ltd., New Delhi V. ITO, New Delhi

ITA 1053/DEL/2017

AI Insights

The case involves Allied Motors Ltd, which appealed against the orders of the CIT(A) for the assessment years 2009-10, 2010-11, and 2012-13. The primary issues revolved around the non-recognition of business activities by the Income Tax Officer (ITO) and the subsequent disallowance of related expenses and income assessments. The Tribunal considered previous rulings and the Supreme Court's decision, which reinstated the assessee's petrol pump license, to conclude that the assessee was indeed conducting business activities. Consequently, the Tribunal allowed the appeals, directing the ITO to recognize the business expenses and treat the income from the joint venture as business income.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 131042 (ITAT-DELHI)
• Duration Of Justice: 5 year(s) 10 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-12-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 16-10-2022
• Assessment Year: 2009-2010
• Appeal Filed On: 22-02-2017
• Other Referred Cases: ITA No. 169/Del/2010 for A.Y. 2006-07, ITA No. 3964/Del/2011 for A.Y. 2007-08
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Depreciation
• Section: 143(3)

Judgement Text

Page | 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘A’, NEW DELHI Before Dr. B. R. R. Kumar, Accountant Member Sh. Yogesh Kumar US, Judicial Member ITA No. 1053, 1054 & 1055/Del/2017 Asstt. Year: 2009-10, 2010-11 and 2012-13 Allied Motors ltd, 5, Scindia House, Connaught Place, New Delhi Vs ITO, Ward-1(3), New Delhi (APPELLANT) (RESPONDENT) PAN No. AAACA1522C Assessee by : Sh. Sumit Singh, CA & Sh. Praveen Goel, Adv. Revenue by : Sh. Kanav Bali, Sr. DR Date of Hearing: 17.10.2022 Date of Pronouncement: 28.12.2022 ORDER Per Dr. B. R. R. Kumar, Accountant Member: The present appeals have been filed by the assessee against the orders of the ld. CIT(A)-22, New Delhi dated 16.12.2016 for Assessment Year 2009-10, 19.12.2016 for Assessment Year 2010-11 and 2012-13. 2. The assessee has raised the following grounds of appeal in ITA No. 1053/Del/2017 for Assessment Year 2009-10: “1. That the Ld.CIT(A) erred on facts and in law in upholding the order of the Ld.AO recording a finding that the Petrol Pump was not in existence, ignoring the implications of the Hon’ble Supreme Court having held termination of Petrol Pump was illegal and as such there was only temporary suspension thereof and subsequently re-commenced by the appellant. Page | 2 2. That on the facts & circumstances of the case, Ld. CIT(A) and Ld AO erred in holding that in absence of any business activity, the expenses of Rs. 17,05,334/- attributable to Scindia House as Capital Expenses, and allowing only Rs. 1,33,500/- out of sum of Rs. 18,38,834/- claimed by the appellant. 3. That on the facts and in the circumstances of the Appellant’s case the Ld. CIT(A) erred in law in upholding the order of the Ld. AO treating sum of Rs.36,00,000/- being income from exploitation of commercial asset from joint venture with M/s Auto link (I) Pvt. Ltd., as “Income from other sources” instead of “Business income" as declared by the appellant. 4. That on the facts & circumstances of the case the Ld. CIT(A) erred in law in disallowing an sum of Rs.22,47,511/- out of total expenditure of Rs.46,28,812/- claimed by the appellant attributable to Najafgarh workshop. 5. That without prejudice to the above ground no 3 & 4 of appeal, alternatively on the facts and in the circumstances of the Appellant's case even if the income from exploitation of commercial asset with M/s Auto Link (I) Pvt. Ltd. is assessable as income from other source, the appellant is entitled and eligible to claim deduction of the depreciation and other related expense to the workshop u/s 57 of the Act.” 3. The assessee has raised the following grounds of appeal for Assessment Year 2012-13: “1. That the Ld.CIT(A) erred on facts and in law in upholding the order of the Ld.AO recording a finding that the Petrol Pump was not in existence, ignoring the implications of the Hon’ble Supreme Court having held termination of Petrol Pump was illegal and as such there was only temporary suspension thereof and subsequently re-commenced by the appellant. 2. That on the facts and in the circumstances of the Appellant company’s case the Ld. CIT(A) erred in law in confirming the addition of Rs. 24,51,383/- on account of Legal & Professional expenses made by the Ld. A.O. stating that no business activity has been carried on by the appellant company. Page | 3 3. That on the facts and in the circumstances of the Appellant company’s case the Ld. CIT(A) and Ld. A.O. erred in disallowing depreciation of Rs. 12,38,319/ on the assets maintained by the appellant company holding that no business activity has been carried on by the company.” 4. The issues being similar in nature, are being adjudicated by a common order. 5. The appellant company filed its return of income for the AY 2009-10 declaring the business loss of Rs. 28,51,930/- and for AY 2010-11 declared the loss of Rs.33,85,218/-. 6. The AO passed order u/s 143(3) of the Income tax Act, 1961 dated 16.12.2011 for the AY 2009- 10 and order dated 30.01.2013 for the AY 2010-11, disallowing amounts on account of business expenditure and assessing income received under JV as income from other sources. 7. The assessee claimed expenses of staff, operating & other, interest & finance charge and depreciation which have been disallowed owing to absence of business income. The ld. CIT(A) confirmed the order of the AO. 8. These issues have been dealt by the order of the Tribunal in ITA No. 169/Del/2010 for A.Y. 2006-07 and in ITA No. 3964/Del/2011 for A.Y. 2007-08 vide order dated 03.05.2013 where the matters have been set aside for considering the issues afresh. It was submitted that no further order has been passed by the revenue authorities in consequent to the order of the ITAT till now. Page | 4 9. Heard the arguments of both the parties and perused the material available on record. 10. Facts relevant to the adjudication of issue before us are that the assessee was conducting business of, (i) Purchase /sale of cars as dealers of Hindustan Motors & thereafter as Dealers of Maruti which was terminated by letter dated 04.09.2002 w.e.f. 03.03.2003 (AY 2003-04); (ii) Petrol Pump business at Preet Vihar, Vikas Marg, ND was terminated by BPCL on 16.05.2000 and Appellant disputed the termination (iii) Eventually Hon'ble Supreme Court held termination to be illegal and restored the license. (iv) The business of Petrol Pump re-commenced in A.Y. 2013-14 (v) Motor workshop business at Najafgarh, for repair of cars, buses, trucks etc. Appellant continued conduct of workshop business even after termination of Maruti Agency (4.9.2002) on its own till execution of the agreement with Auto Links on 6.11.2004. Disallowance of Expenses: 11. We find that the owing to the Hon’ble Apex Court order in Civil Appeal No. 11220 of 2011, BPCL restored the dealership of petrol pump vide letter dated 20.11.2012. Thus, it can be said that there was disruption in the business and the business has not been discontinued. The assessee has been fighting the legal matters in connection with the conducting of business and hence in the peculiar facts of the instant case, the expenses incurred for the Page | 5 purpose of business are to be allowed so as the depreciation. Income from JV: 12. That as per JV agreement, (i) appellant workshop is fully equipped for carrying on repair/ services of automobiles (ii) Auto Link approached appellant to enter into agreement for the facility of the workshop (iii) Appellant shall provide adequate number of managerial and admin staff (iv) Salary, PF, ESI of the staff deployed by appellant to be borne by appellant. 13. Hence the deployment of staff and facilities for service is clearly establish, appellant is carrying out business activity for over period of time and the receipts be treated as income from business. 14. In the result, the appeals of the assessee are allowed. Order Pronounced in the Open Court on 28/12/2022. Sd/- Sd/- (Yogesh Kumar US) (Dr. B. R. R. Kumar) Judicial Member Accountant Member Dated: 28/12/2022 *Subodh Kumar, Sr. PS* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR