Shree Guru Realtors Pvt. Ltd., Kolkata V. ITO, WD-10(1), KOLKATA, Kolkata

ITA 1081/KOL/2015

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 3130 (ITAT-KOLKATA)
• Duration Of Justice: 6 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-02-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2008-2009
• Appeal Filed On: 10-08-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: VARSHA JALAN
• Keywords: Business income
• Section: 143(3)

Judgement Text

I.T.A. NO. 1081/KOL./2015 ASSESSMENT YEAR: 2008-2009 PAGE 1 OF 6 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA SMC BENCH, KOLKATA BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER I.T.A. NO. 1081/KOL/ 2015 ASSESSMENT YEAR: 2008-2009 SHREE GURU REALTORS PVT. LIMITED,.................. .......................APPELLANT FLAT-8E, FLOOR CASTLE, LAKE DISTRICT, 74, NARKELDANGA MAIN ROAD, KOLKATA-700 054 [PAN : AAKCS 2052 H] -VS.- INCOME TAX OFFICER,................................ ...............................RESPONDENT WARD-10(1), KOLKATA, P-7, CHOWRINGHEE SQUARE, AAYAKAR BHAWAN, KOLKATA-700 069 APPEARANCES BY: MISS VARSHA JALAN, ADVOCATE, FOR THE ASSESSEE SMT. SARBARI MUKJHERJEE, JCIT, SR. D.R., FOR THE DE PARTMENT DATE OF CONCLUDING THE HEARING : JANUARY 06, 2016 DATE OF PRONOUNCING THE ORDER : FEBRUARY 10, 2016 O R D E R THIS APPEAL IS PREFERRED BY THE ASSESSEE AGAINST TH E ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-4, KOLKATA DAT ED 10.06.2015 FOR THE ASSESSMENT YEAR 2008-09. 2. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY, W HICH FILED ITS RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION O N 20.01.2009 DECLARING A LOSS OF RS.3,62,442/-. DURING THE YEAR, THE ASSESSEE HAD LET OUT THE PROPERTY OWNED BY IT AND HAD EARNED RENTAL INCO ME OF RS.29,04,350/-, WHICH WAS COMPRISING OF LICENSE FEES OF RS.7,70,950 /- AND UTILITY FEES OF RS.21,33,400/-. THE SAID INCOME WAS DECLARED BY THE ASSESSEE IN ITS RETURN OF INCOME UNDER THE HEAD PROFITS AND GAINS FROM BUSINESS OR I.T.A. NO. 1081/KOL./2015 ASSESSMENT YEAR: 2008-2009 PAGE 2 OF 6 PROFESSION AND AFTER CLAIMING EXPENSES UNDER THE V ARIOUS HEADS, NET LOSS WAS DECLARED. IN THE ASSESSMENT COMPLETED UNDER SEC TION 143(3) VIDE AN ORDER DATED 31.12.2010, THE ENTIRE RENTAL INCOME WA S BROUGHT TO TAX BY THE ASSESSING OFFICER UNDER THE HEAD INCOME FROM H OUSE PROPERTY AND AFTER ALLOWING STANDARD DEDUCTION UNDER SECTION 24 AT 30% OF THE RENTAL INCOME AND INTEREST PAID ON BORROWED FUNDS AMOUNTIN G TO RS.11,77,036/- THE TOTAL INCOME OF THE ASSESSEE WAS DETERMINED BY HIM AT RS.8,56,009/-. 3. AGAINST THE ORDER PASSED BY THE ASSESSING OFFICE R UNDER SECTION 143(3), AN APPEAL WAS PREFERRED BY THE ASSESSEE BEF ORE THE LD. CIT(APPEALS) AND AFTER CONSIDERING THE SUBMISSIONS MADE BY THE ASSESSEE AND PERUSING THE RELEVANT MATERIAL ON RECORD, THE L D. CIT(APPEALS) UPHELD THE ACTION OF THE ASSESSING OFFICER IN BRINGING TO TAX THE RENTAL INCOME RECEIVED BY THE ASSESSEE IN ITS HANDS UNDER THE HEA D INCOME FROM HOUSE PROPERTY. HE, HOWEVER, HELD THAT THE ESTABLISHMENT AND ADMINISTRATIVE EXPENSES TO THE EXTENT OF RS.1,00,000/- WERE ALLOWA BLE UNDER THE HEAD BUSINESS INCOME ALONG WITH INTEREST PAID BY THE A SSESSEE ON UNSECURED LOAN TO THE EXTENT OF RS.1,60,000/-. HE ALSO HELD T HAT THE BUSINESS LOSS ARISING AS A RESULT OF DEDUCTION ON ACCOUNT OF THES E EXPENSES WAS LIABLE TO BE SET OFF AGAINST INCOME FROM HOUSE PROPERTY. THE APPEAL FILED BY THE ASSESSEE THUS WAS PARTLY ALLOWED BY THE LD. CIT(APP EALS) AND STILL AGGRIEVED BY THE ORDER OF THE LD. CIT(APPEALS), THE ASSESSEE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL ON THE FOLLOWING GR OUNDS:- 1. (A) FOR THAT ON THE FACTS AND IN THE CIRCUMSTANC ES OF THE CASE, THE LD. CIT(A) WAS NOT JUSTIFIED IN CONFIRMIN G THE ACTION OF THE A.O. IN TREATING THE LICENSE FEE AND UTILITY FEE EARNED BY THE ASSESSEE COMPANY AS INCOME FROM HOUSE PROPERTY INSTEAD OF BUSINESS INCOME. (B) FOR THAT THE LD. CIT(A) OUGHT TO HAVE CONSIDERE D THAT THE PROPERTIES OUT OF WHICH SUCH LICENCE FEES AND U TILITY FEES WERE EARNED WERE THE STOCK IN TRADE OF THE ASS ESSEE- COMPANY. 2. FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE LD. CIT(A) WAS NOT JUSTIFIED IN GIVING A PART RELIEF OF RS.1,00,000/- OUT OF THE TOTAL EXPENSES OF RS.11 ,28,449/- I.T.A. NO. 1081/KOL./2015 ASSESSMENT YEAR: 2008-2009 PAGE 3 OF 6 CLAIMED BY THE ASSESSEE UNDER THE HEAD ESTABLISHMEN T AND ADMINISTRATIVE EXPENSES. 3. WITHOUT PREJUDICE TO THE ABOVE GROUNDS, THE LD. CIT(A) OUGHT TO HAVE CONSIDERED THAT THE ASSESSEE-COMPANY HAS TO INCUR ESTABLISHMENT AND ADMINISTRATIVE EXPENDITURE IN ORDER TO COMPLY WITH THE STATUTORY OBLIGATIONS AND SUCH EXPENDITURE ARE TO BE ALLOWED AS BUSINESS DEDUCTION S EVEN IF THE COMPANY HAS PREDOMINANTLY INCOME FROM HOUSE PROPERTY. 4. (A) FOR THAT ON THE FACTS AND IN THE CIRCUMSTANC ES OF THE CASE, THE LD. CIT(A) ERRED IN GIVING A DIRECTION TO THE A.O. U/S. 150 FOR VERIFICATION OF SHARE CAPITAL AND SHAR E PREMIUM AMOUNT RAISED BY THE ASSESSEE IN THE RELEVA NT YEAR THOUGH THE SAME WAS NOT THE SUBJECT MATTER OF THE INSTANT APPEAL. (B) FOR THAT THE LD. CIT(A) OUGHT TO HAVE CONSIDERE D THE FACT THAT THE VERIFICATION IN RESPECT OF THE SHARE CAPITAL AND THE SHARE PREMIUM RAISED BY THE ASSESSEE-COMPAN Y WAS ALREADY MADE BY THE A.O. IN COURSE OF SCRUTINY PROCEEDINGS. 4. I HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. AS REGARDS T HE ISSUE INVOLVED IN GROUND NO. 1, I AGREE WITH THE LD. COUNSEL FOR THE ASSESSEE THAT THE ISSUE INVOLVED THEREIN IS SQUARELY COVERED IN FAVOUR OF T HE ASSESSEE IN PRINCIPLE BY THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CHENNAI PROPERTIES AND INVESTMENT LIMITED VS.- CIT REPORTE D IN 56 TAXMAN.COM 456, WHEREIN IT WAS HELD THAT THE LETTING OF THE PR OPERTIES BEING THE BUSINESS OF THE ASSESSEE AS PER THE MAIN OBJECTIVE CONTAINED IN THE MEMORANDUM OF ASSOCIATION, THE INCOME FROM LETTING OFF THE PROPERTY IS CHARGEABLE TO TAX AS BUSINESS INCOME. HOWEVER, KEEP ING IN VIEW THAT THIS ISSUE HAS NOT BEEN EXAMINED OR CONSIDERED BY THE AS SESSING OFFICER IN THE LIGHT OF PROPOSITION PROPOUNDED BY THE HONBLE SUPR EME COURT IN THE CASE OF CHENNAI PROPERTIES AND INVESTMENT LIMITED (SUPRA ) AS THE SAME WAS NOT AVAILABLE WHEN THE ISSUE WAS DECIDED BY THE ASS ESSING OFFICER AS WELL AS THE LD. CIT(APPEALS), I CONSIDER IT FAIR AND PRO PER AND IN THE INTEREST OF JUSTICE TO RESTORE THIS ISSUE TO THE FILE OF THE AS SESSING OFFICER FOR I.T.A. NO. 1081/KOL./2015 ASSESSMENT YEAR: 2008-2009 PAGE 4 OF 6 DECIDING THE SAME AFRESH IN THE LIGHT OF THE SAID D ECISION OF THE HONBLE APEX COURT AFTER VERIFYING ALL THE RELEVANT ASPECTS OF THE MATTER. GROUND NO. 1 IS ACCORDINGLY TREATED AS ALLOWED. 5. AS REGARDS GROUNDS NO. 2 & 3, IT IS OBSERVED THA T THE COMMON ISSUE INVOLVED THEREIN RELATING TO THE ASSESSEES CLAIM F OR DEDUCTION ON ACCOUNT OF ESTABLISHMENT AND ADMINISTRATIVE EXPENSES IS CON SEQUENTIAL TO THE MAIN ISSUE INVOLVED IN GROUND NO. 1. I ACCORDINGLY RESTORE THIS ISSUE ALSO TO THE FILE OF THE ASSESSING OFFICER FOR DECIDING T HE SAME FRESH DEPENDING ON THE OUTCOME OF FIRST ISSUE, WHICH IS ALSO RESTOR ED TO HIM. GROUNDS NO. 2 & 3 ARE ACCORDINGLY TREATED AS ALLOWED FOR STATISTI CAL PURPOSES. 6. AS REGARDS THE ISSUE INVOLVED IN GROUND NO. 4, I T IS OBSERVED THAT THE LD. CIT(APPEALS) DURING THE COURSE OF APPELLATE PROCEEDINGS FOUND THAT THE ISSUE RELATING TO INCREASE IN SHARE CAPITA L BY RS.13,20,000/- AND SHARE PREMIUM BY RS.52,81,600/- WAS NOT EXAMINED BY THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS . IN HIS OPINION, THIS ISSUE IN THE FACTS AND CIRCUMSTANCES OF THE CASE OU GHT TO HAVE BEEN EXAMINED BY THE ASSESSING OFFICER THOROUGHLY AND SI NCE THE SAME WAS NOT DONE BY THE ASSESSING OFFICER, HE DIRECTED THE ASSE SSING OFFICER TO REOPEN THE ASSESSMENT FOR THE YEAR UNDER CONSIDERATION AND EXAMINE THIS MATTER THOROUGHLY. AGGRIEVED BY THIS DIRECTION GIVEN BY TH E LD. CIT(APPEALS), THE ASSESSEE HAS RAISED THIS ISSUE IN GROUND NO. 4 OF I TS APPEAL. 7. I HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. IT IS WELL S ETTLED THAT THE FIRST APPELLATE AUTHORITY IS INVESTED WITH VERY WIDE POWE RS UNDER SECTION 251(1)(A) OF THE ACT AND ONCE AN ASSESSMENT ORDER I S BROUGHT BEFORE THE AUTHORITY, HIS COMPETENCE IS NOT RESTRICTED TO EXAM INE ONLY THOSE ASPECT OF THE ASSESSMENT ABOUT WHICH THE ASSESSEE MAKES GR IEVANCE BUT RANGES OVER THE WHOLE ASSESSMENT TO CORRECT THE ASSESSING OFFICER NOT ONLY WITH REGARD TO THE MATTER RAISED BY THE ASSESSEE IN APPE AL BUT ALSO WITH REGARD TO ANY OTHER MATTER, WHICH HAS BEEN CONSIDERED BY T HE ASSESSING OFFICER I.T.A. NO. 1081/KOL./2015 ASSESSMENT YEAR: 2008-2009 PAGE 5 OF 6 AND DETERMINED IN THE COURSE OF ASSESSMENT. HOWEVER , AS RIGHTLY CONTENDED BY THE LD. COUNSEL FOR THE ASSESSEE BY PL ACING RELIANCE ON THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CAS E OF CIT S.- SUNDARILAL & CO. REPORTED IN 120 TAXMAN 595 AND IN THE CASE OF CIT VS.- UNION TYRES REPORTED IN 107 TAXMAN 447, THERE IS A SOLITA RY BUT SPECIFIC SIGNIFICANT LIMITATION TO THE POWER OF THE FIRST AP PELLATE AUTHORITY THAT IT IS NOT OPEN TO THE SAID AUTHORITY TO INTRODUCE IN T HE ASSESSMENT A NEW SOURCE OF INCOME AND THE ASSESSMENT HAS TO BE CONFI NED TO THOSE ITEMS OF INCOME, WHICH WERE THE SUBJECT MATTER OF ORIGINAL A SSESSMENT. IN THE PRESENT CASE, THE ITEM OF SHARE CAPITAL AND SHARE P REMIUM RECEIVED BY THE ASSESSEE WAS NOT THE SUBJECT MATTER OF ORIGINAL ASS ESSMENT MADE BY THE ASSESSING OFFICER UNDER SECTION 143(3) AND THIS BEI NG SO, I AM OF THE VIEW THAT IT WAS BEYOND THE POWER OF THE LD. CIT(APPEALS ) AS GIVEN UNDER SECTION 251(1)(A) TO DIRECT THE ASSESSING OFFICER T O EXAMINE THE SAID ISSUE AND THAT TOO BY REOPENING THE ASSESSMENT UNDER SECT ION 147/ 148. IN THAT VIEW OF THE MATTER, I SET ASIDE THE DIRECTION GIVEN BY THE LD. CIT(APPEALS) ON THIS ISSUE AND ALLOW GROUND NO. 4 OF THE ASSESSE ES APPEAL. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS TRE ATED AS ALLOWED AS INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON FEBRUARY 10, 2016. SD/- (P.M. JAGTAP) ACCOUNTANT MEMBER KOLKATA, THE 10 TH DAY OF FEBRUARY, 2016 COPIES TO : (1) SHREE GURU REALTORS PVT. LIMITED,. FLAT-8E, FLOOR CASTLE, LAKE DISTRICT, 74, NARKELDANGA MAIN ROAD, KOLKATA-700 054 (2) INCOME TAX OFFICER, WARD-10(1), KOLKATA, P-7, CHOWRINGHEE SQUARE, AAYAKAR BHAWAN, KOLKATA-700 069 I.T.A. NO. 1081/KOL./2015 ASSESSMENT YEAR: 2008-2009 PAGE 6 OF 6 (3) COMMISSIONER OF INCOME-TAX (APPEALS)-4, KOLKATA (4) COMMISSIONER OF INCOME TAX, KOLKATA (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.