M/s Morgan Walker & Co. Ltd., Kolkata V. ACIT, CEN. CIR-2(1), KOLKATA, Kolkata

ITA 1108/KOL/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1699 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2017
• Appeal Filed By: Assessee
• Bench Allotted: SMC
• Next Hearing Date: 05-12-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 20-05-2016
• Court: TRIBUNAL
• Department Lawyers: MD GHYAS UDDIN JCIT LD
• Assessee Lawyers: SOUMITRA CHOUDHURY LD
• Keywords: Business income; Business expenditure; Rule of consistency; Earning of tax free income
• Section: 143(3); 37(1)

Judgement Text

1 ITA NO.1108/KOL/2016 M/S. MORGAN WALKER & CO. LTD IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH: KOL KATA BEFORE: SHRI S.S. VISWANETHRA RAVI, JUDICIAL MEMBER AND SHRI DR.ARJUN LAL SAINI, ACCOUNT ANT MEMBER I.T.A NO. 1108/KOL/2016 ASSESSMENT YEAR: 2008-09 M/S. MORGAN WALKER & VS. ASSISTANT COMMISSIONER CO.LTD. OF INCOME-TAX,CEN.CIR 2(1) PAN:AABCM7738H KOLKATA [ APPELLANT] [RESPONDENT] FOR THE APPELLANT : SHRI SOUMITRA CHOUDHURY, ADVO CATE, LD.AR FOR THE RESPONDENT : MD. GHYAS UDDIN, JCI T, LD.SR.DR DATE OF HEARING : 24-04-2017 DATE OF PRONOUNCEMENT : 31-05-2017 ORDER SHRI S.S.VISWANETHRA RAVI, JM: THIS APPEAL BY ASSESSEE IS AGAINST THE IMPUGNED ORD ER DT. 01-03- 2016 OF CIT(A), 18, KOLKATA FOR THE ASSESSMENT YEAR 2008-09. 2. THE ASSESSEE HAS RAISED AS MANY AS SEVEN GROUNDS , AMONGST WHICH, THE LD.AR SUBMITS THAT GROUND NOS. 1 AND 7 ARE GENE RAL IN NATURAL AND NEEDS NO ADJUDICATION. GROUND NOS. 2 TO 4 ARE RELAT ING TO THE INCOME DERIVED FROM JUTE TRADING AND INTEREST AND TREATING THE SAME AS INCOME FROM OTHER SOURCES INSTEAD OF BUSINESS INCOME AS C LAIMED BY THE ASSESSEE AND SUBMITTED CAN BE READ AND ADJUDICATED AS ONE ISSUE. GROUND NOS. 5 & 6 ARE RELATING TO DISALLOWANCE MADE ON ACCOUNT OF ADMINISTRATION EXPENSES TO AN EXTENT OF RS.9,36,484 /-. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A COMPANY AND ENGAGED IN THE BUSINESS OF LETTING OUT OF PROPERTIE S AND EARNS RENTAL INCOME. THE ASSESSEE ALSO EARNED INTEREST INCOME ON THE LOANS ADVANCED TO OTHER PARTIES. THE ASSESSEE ALSO DECLARED ITS TO TAL INCOME AT 2 ITA NO.1108/KOL/2016 M/S. MORGAN WALKER & CO. LTD RS.27,04,070/- AND THE ASSESSMENT WAS COMPLETED U/S EC. 143(3) OF THE ACT BY AN ORDER DT. 31-12-2010 DETERMINING THE INCO ME OF ASSESSEE AT RS.36,40,550/-. 4. GROUND NOS. 2 TO 4: DURING THE SCRUTINY PROCEED INGS THE AO FOUND THAT THE ASSESSEE PURCHASED JUTE AT RS.51,92,658/- AND SOLD THE SAME TO M/S. AUCKLAND INTERNATIONAL LTD FOR RS.52,14,222/-, THEREBY THE ASSESSEE EARNED A PROFIT OF RS.21,564/- AND THE AO TREATED T HE SAME AS INCOME FROM OTHER SOURCES FOR WHICH THE AO HAS GIVEN FOLL OWING REASONS:- (I) THE TRANSACTION PURCHASE & SALE OF JUTE WAS A S INGLE TRANSACTION IN ONE DAY AND IT IS NOT A REGULAR BUSINESS OF ASSESSEE. (II) THE ASSESSEE HAS NO TRADE LICENCE, SALES TAX A ND VAT REGISTRATION. (III) THE ASSESSEE DID NOT INCUR DIRECT EXPENDITURE I.E CARTAGE, LORRY HIRE CHARGES AND DELIVERY CHARGES. 5. LIKEWISE, THE AO TREATED THE INTEREST INCOME FRO M OTHER SOURCES. THE AO OBSERVED THAT LENDING LOANS IS NOT THE BUSIN ESS ACTIVITY OF ASSESSEE AND REJECTED THE CLAIM OF ASSESSEE IN TREA TING THE SAME AS BUSINESS INCOME. 6. BEFORE THE CIT-A THE ASSESSEE CONTENDED THAT TH E FINDING OF AO IS WRONG IN RESPECT OF THAT THE ASSESSEE HAD ONLY ONE TRANSACTION IN A DAY INVOLVING JUTE PURCHASE AND SALE. THE ASSESSEE ALSO CONTENDED THAT THE RESPONDENT REVENUE HAS BEEN ACCEPTING THE JUTE TRAN SACTION AND EARNING OF INTEREST INCOME AS BUSINESS INCOME IN EARLIER YE ARS I.E 2006-07 AND 2007-08 AND SUBMITTED THAT RULE OF CONSISTENCY MUST BE FOLLOWED. THE CIT-A RELIED ON THE DECISIONS OF HONBLE HIGH COURT OF KERALA IN THE CASE OF EQUITY INTELLIGENCE INDIA PVT. LTD VS. ACIT REPORTE D IN (2015) 376 ITR 321 AND IN THE CASE OF KESARDEO MORARKA VS. CIT OF HON BLE SUPREME COURT REPORTED IN 44 ITR 529 AND DISMISSED THE CONTENTION OF ASSESSEE AND CONFIRMED THE ORDER OF AO. THE RELEVANT PORTION OF FINDING OF CIT-A IS REPRODUCED HEREIN BELOW:- I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE AND THE SUBMISSIONS OF THE ASSESSEE. PERUSAL OF THE DOCUMENTS SUBMITTED BY THE ASSESSEE REVEALS THAT ASSESSEE HAD EARNED A MEAGER RS. 10,954/ - IN JUTE TRADING IN ASSMT. YEAR 2005-06, THEN THERE WAS NO TRADING IN JUTE IN THE ASSMT. YEAR 2006-07 & 2007- 08. AGAIN IN ASS MT. YEAR 2008-09 ASSESSEE HAS INDULGED IN JUTE TRADING AND HAS EARNED A PROFIT OF RS.21,564/- . THE FACTS BROUGHT OUT BY THE A.O. AND THE ASSESSEE'S ACTIVITIES IN THE PREVIOUS YEARS REVEAL S THAT ASSESSEE IS NOT SERIOUSLY INVOLVED IN THE 3 ITA NO.1108/KOL/2016 M/S. MORGAN WALKER & CO. LTD BUSINESS OF JUTE TRADING. RATHER IT HAS INDULGED IN A CONTROLLED BUSINESS TRANSACTIONS REGARDING JUTE TRADING BETWEEN ITS GROUP COMPANIES. ASSESSEE DOES NOT HAVE TRADE LICENSE OR SALES TAX / VAT REGISTRATION FOR CONDUCTING THE BUSINESS . HENC E IT IS APPARENT THAT ASSESSEE HAS NOT INDULGED IN ANY TRADING ACTIVITY IN JUTE. RATHER IT HAS TAKEN SMALL PROFIT ENTRIES FOR SOME OTHER PURPOSES. HENCE A.O. IS JUSTIFIED IN HOLDING THAT ASSESSEE H AS NOT INDULGED IN BUSINESS ACTIVITIES AND THE TRADING PROFIT IS IN THE NATURE OF INCOME F ROM OTHER SOURCES. NOW COMING TO THE QUESTION OF CONSISTENCY AND PRECEDENCE SET BY THE P REDECESSOR, IT IS SEEN THAT THE ASSESSMENT ORDERS FOR ASSMT. YEAR 06-07 & 07- 08 HAS BEEN PASS ED BY THE SAME A.O. IN THE SAME FINANCIAL YEAR ON 25.09.2008 & 12.03.2009 RESPECTIVELY. IN TH E CASE OF EQUITY INTELLIGENCE INDIA PVT. LTD. -VS ACIT [2015] 376 ITR 321, HON'BLE KERALA HIGH CO URT HAS HELD THAT 'THOUGH CONSISTENCIES IS DESIRABLE, THE DESIRABILITY OF CONSISTENCY CANNOT O PERATE AGAINST THE REVENUE IN COMPLETING ASSESSMENT OF SUBSEQUENT YEARS IN ACCORDANCE WITH L AW' . THEN IN THE CASE OF KESARDEO MORARKA -VS- CIT, 44 ITR 529, HON'BLE SUPREME COURT HAS HEL D THAT IN THE MATTER OF ASSESSMENT THE DECISIONS ARRIVED IN THE PREVIOUS YEAR CANNOT BE RE GARDED AS BINDING IN THE ASSESSMENT FOR THE SUBSEQUENT YEARS. HENCE A.O. IS JUSTIFIED IN TAKING A STAND ON THE BASIS OF THE FACTS OF THE CASE IN THE CURRENT YEAR. IN THE CASE OF TINSUKIA DEVELO PMENT CORPORATION LTD. -VS -CIT, WEST BENGAL II, 120 ITR 466, HON'BLE CALCUTTA HIGH COURT HAS HE LD THAT WHATEVER BE THE NATURE OF THE ACTIVITY OR THE NATURE OF INCOME, THE INCOME OF AN ASSESSEE HAS TO BE CLASSIFIED AND COMPUTED UNDER THE SPECIFIC HEADS U/S 14 OF THE IT ACT . EVE N IF SUCH INCOME AROSE IN THE COURSE OF ASSESSEE'S BUSINESS BUT THE SAME FELL CLEARLY UNDER , SOME OTHER HEAD OR SATISFIED THE TESTS OF ANY SPECIFIC HEAD, THEN SUCH INCOME HAS TO BE CLASS IFIED AND COMPUTED UNDER THAT HEAD. KEEPING IN MIND THE FACTS OF THE CASE AND THE DECIS IONS / OBSERVATIONS OF VARIOUS COURTS, AS DISCUSSED ABOVE, THE A.O. WAS JUSTIFIED IN HOLDING THAT THE INCOME IN JUTE TRADING AND INTEREST INCOME FALL UNDER THE HEAD INCOME FROM OTH ER SOURCES. HENCE THESE GROUNDS ARE DISMISSED. 7. BEFORE US THE LD.AR SUBMITS THAT JUTE TRADING AN D INTEREST INCOME AMOUNTING TO RS.21,564/- AND RS.16,71,322/- RESPEC TIVELY SHOWN BY THE ASSESSEE UNDER HEAD BUSINESS INCOME BUT THE AO HA S WRONGLY ASSESSED THE SAID INCOME AS INCOME FROM OTHER SOURCES. TH E ASSESSEE RAISED 42 BILLS ON JUTE TRANSACTIONS ON AUCKLAND JUTE MILLS L TD. THE FINDING OF AO IS WRONG THAT THE ASSESSEE HAD ONLY SINGLE TRANSACTION AND THEREFORE, IT CANNOT BE SAID AS INCOME FROM OTHER SOURCES. THE ASSESSEE HAS ALSO RECEIVED INTEREST ON LOAN FROM THREE PARTIES AND IN THE EARLIER ASSESSMENT YEARS THE SAID INCOME HAS BEEN ACCEPTED AS BUSINESS INCOME AND PLACED ON RECORD THE ASSESSMENT ORDERS FOR THE ASSESSMENT YEARS 2006-07 & 2007-08 AND SUBMITS THAT THE SAID INTEREST INCOME A S WELL AS JUTE TRADING INCOME HAS BEEN TREATED AS BUSINESS INCOME BY THE A.O IN THE ORDER PASSED U/S. 143(3) OF THE ACT AND ARGUED THAT IT CA NNOT BE SAID THIS IS OTHER SOURCE INCOME BUT IT IS A BUSINESS ACTIVITY OF THE ASSESSEE THEREFORE, IN THE PRESENT YEAR ALSO THE SAID INCOME SHOULD BE TREATED AS BUSINESS INCOME. 4 ITA NO.1108/KOL/2016 M/S. MORGAN WALKER & CO. LTD 8. THE LD.AR REFERRED TO PROFIT AND LOSS ACCOUNT EN DED ON 31-3-2008 RELEVANT TO THE YEAR UNDER CONSIDERATION AND ARGUED THAT THE PURCHASE AND SALE OF JUTE TRADING AND INTEREST INCOME HAVE B EEN SHOWN. HE ALSO REFERRED TO PAGES 28 TO 30 AND ARGUED THAT THE RESP ONDENT REVENUE ACCEPTED THE INTEREST INCOME AS BUSINESS INCOME UND ER SCRUTINY PROCEEDINGS. HE FURTHER REFERRED TO PAGES 31 TO 33 AND ARGUED THAT RESPONDENT REVENUE ACCEPTED THE INTEREST INCOME AS BUSINESS INCOME AND SUBMITS THAT THE RULE OF CONSISTENCY SHOULD BE FOLLOWED. FOR SUCH PROPOSITION, THE LD.AR RELIED ON A DECISION DT. 16- 09-2015 OF HONBLE SUPREME COURT IN THE CASE OF CIT VS DALMIA PROMOTER S & DEVELOPER PVT. LTD. 9. THE LD.DR SUBMITS THAT THE ASSESSEE DERIVES INCO ME FROM HOUSE PROPERTY AND OTHER SOURCES. THE LD.DR REFERRED TO P AGENO-14 AND ARGUED THAT THE INCOME FROM RENT IS MAJOR HEAD AND IT IS T HE MAIN BUSINESS OF ASSESSEE. THE INCOME FROM JUTE TRADING AND INCOME F ROM INTEREST IS NOT THE MAIN ACTIVITY OF THE ASSESSEE AND THAT IS WHY T HE AO TREATED THE SAID INCOME FROM OTHER SOURCES AND RELIED ON THE ORDERS OF CIT-A AND AO. FOR RULE OF CONSISTENCY, THE LD.DR ARGUED THAT THE CIT- A DEALT WITH THE ISSUE IN DETAIL AND REJECTED THE SUBMISSIONS OF ASSESSEE BY RELYING ON DECISIONS OF HONBLE HIGH COURT OF KERALA IN THE CASE OF EQUITY INTELLIGENCE INDIA PVT. LTD VS ACIT [2015] 376 ITR 321 AND HONBLE SUPREME COURT IN THE CASE OF DWARKADAS KESARDEO MORARKA REPORTED IN 44 ITR 529(S C). THE LD.DR URGED TO REMAND THE ISSUE TO THE AO FOR VERIFICATIO N. 10. HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIA L AVAILABLE ON RECORD. THE ASSESSEE DERIVES INCOME FROM HOUSE PRO PERTY AND FROM OTHER SOURCES AND IT IS CLEARLY EVIDENT FROM ASSESSMENT O RDER. THE CONTENTION OF THE LD.AR IS THAT THE AO ARBITRARILY DETERMINED THE INCOME FROM JUTE TRADING AND INTEREST INCOME FROM OTHER SOURCES AS A GAINST THE CLAIM OF INCOME FROM BUSINESS. FOR WHICH, THE LD.AR PLACED R EFERENCE TO EARLIER ASSESSMENT ORDER PASSED U/SEC. 143(3) OF THE ACT FO R A.Y 2006-07 AND 5 ITA NO.1108/KOL/2016 M/S. MORGAN WALKER & CO. LTD 2007-08 AND ARGUED THAT THE RULE OF CONSISTENCY SH ALL BE FOLLOWED. THE LD.AR PLACED RELIANCE ON THE DECISION DT: 16-09-201 5 OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. M/S. DALMIA PROMOTERS & DEVELOPER (P) LTD IN CIVIL APPEAL NO. 74/2007. ON CAREFUL EXAMINATION O F THE ASSESSMENT ORDERS FOR A.YS 2007-08 AND 2006-07, IT IS NOTICED THAT THERE WAS NO DISCUSSION IN RESPECT OF INCOME FROM JUTE TRADING B Y THE AO NOR REFLECTION OF THE SAME IN THE PROFIT & LOSS ACCOUNT ENDED ON 3 1-03-2007 AND 31-03- 2008, WHICH ARE PLACED AT PAGE NOS.28 TO 33. BUT HO WEVER, WE FIND THAT THE ASESSEE SOLD RAW JUTE AT RS.52,14,222/- AND COR RESPONDINGLY DEBITED RAW JUTE PURCHASE EXPENSES AT RS.51,92,658/-. THERE FORE THE ASSESSEE DID THE TRADING IN JUTE FOR THE FIRST TIME AND IT CAN B E ASSESSABLE UNDER THE HEAD INCOME FROM BUSINESS. THEREFORE, WE ARE NOT IN AGREEMENT WITH THE FINDING OF THE CIT-A AND AO IN THIS RESPECT AND WE HOLD THE INCOME FROM JUTE TRANSACTION IS AN INCOME FROM BUSINESS. 11. COMING TO THE TREATMENT OF INTEREST INCOME AS I NCOME FROM OTHER SOURCES, IT IS OBSERVED THAT THE ASSESSEE HAS SHOWN THE INCOME EARNED FROM INTEREST AS INCOME TO THE PROFIT & LOSS ACCOUN T FOR A.YS 2007-08 AND 2006-07, WHICH ARE PLACED AT PAGES 30 & 33 OF PAPER BOOK. THE AO CONSIDERED THE SAME AS INCOME FROM BUSINESS IN HIS ORDERS FOR SAID EARLIER YEARS WHICH IS EVIDENT FROM PAGE 28 AND 31 OF PAPER BOOK, WHERE HE FOUND THAT THE NET PROFIT AS PER PROFIT AND LOSS A CCOUNT BEFORE TAXATION AT RS.29,73,799/- AND RS. 20,91,194/- FOR A.YS 2007-08 AND 2006-07 RESPECTIVELY. IN VIEW OF THE SAME, THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE SUPRA IS CLEARLY APPLICABLE TO THE FACTS IN RESPECT OF INTEREST INCOME IS CONCERNED. THEREFORE, WE HOLD THE INCOME EARNED FROM INTEREST IS BUSINESS INCOME. ACCORDINGL Y, GROUND NOS. 2 TO 4 ARE ALLOWED. 12. GROUND NOS. 5 & 6 ARE RELATING TO DISALLOWANCE OF RAS.9,36,484/- MADE ON ACCOUNT OF EXPENDITURE. ACCORDING TO AO, TH E ASSESSEE CLAIMED DEDUCTION U/SEC. 24(1) OF THE ACT UNDER THE HEAD HO USE PROPERTY. THE 6 ITA NO.1108/KOL/2016 M/S. MORGAN WALKER & CO. LTD ASSESSEE ALSO CLAIMED EXPENDITURE RELATING TO HOUSE PROPERTY UNDER THE HEAD BUSINESS. THE AO WAS OF THE OPINION THAT THE SALARIES PAID TO M.C SINGHEE AND SARITA S. BHUTORIA WERE RELATING TO HOU SE PROPERTY INCOME AND INVESTMENT ACTIVITY. THE AO FOUND THAT NO TRANS ACTION TOOK PLACE IN EARNING EXEMPT INCOME ON BROUGHT FORWARD LOAN ADVAN CED, THEREBY, AO TREATED THE EXPENDITURE CLAIMED INCURRED DURING THE COURSE OF EARNING RENTAL INCOME WHICH WAS ALREADY GRANTED U/SEC 24(1) OF THE ACT AND THE FINDING OF WHICH IS REPRODUCED HEREUNDER: 4. EXPENSES CLAIMED: ON EXAMINATION OF PROFIT & LO SS ACCOUNT IT SEEN THAT ASSESSEE COMPANY EARNED INCOME BY WAY OF RENT AS IN EARLIER M LETTING OUT OF PROPERTY AND COMPUTED THE SAID INCOME UNDER THE HEAD HOUSE PROPE RTY AND CLAIMED DEDUCTION U/S.24 (1) OF THE ACT. THE EXPENSES INCURRED FOR MAINTENAN CE OF PROPERTY AND EARNING INCOME BY WAY OF RENT WAS NOT ADDED BACK, BUT IT CLAIMED THE SAID EXPENDITURE RELATED TO HOUSE PROPERTY UNDER THE HEAD BUSINESS. THUS, IT CLAIMED DEDUCTION UNDER TWO HEADS BY CLAIMING HOUSE PROPERTY INCOME RELATED EXPENDITURE UNDER THE HEAD BUSINESS AND STATUTORY DEDUCTION U/S.24 (1). ON EXAMINATION OF DETAILS IT SEEN THAT ASSESSEE COMPANY IS PAYING SALARY TO M.C. SINGHEE FOR OVERALL MATTERS OF RS.4 ,02,500/- AND SARITA S. BHUTORIA AS ASSISTANT ACCOUNTANT OF RS.2,18,500/-. BOTH THESE E MPLOYEES LOOK AFTER THE PROPERTY & INVESTMENT MATTERS, MAINTENANCE OF ACCOUNTS FOR RAI SING & COLLECTION OF RENTAL BILLS, MAINTAINING INVESTMENT PORTFOLIO ETC. SO SALARY PA YMENT BY ASSESSEE COMPANY IS FULLY RELATED TO HOUSE PROPERTY INCOME & INVESTMENT ACTIV ITY TO EARN EXEMPT INCOME BECAUSE FOR EARNING OF INTEREST ON BROUGHT FORWARD LOAN ADV ANCED, NO TRANSACTION ACTIVITY TOOK PLACE. SIMILARLY, FOR JUTE TRANSACTION 'AMONGST THE GROUP IT IS SEEN THAT NO EXPENDITURE WAS INCURRED BY ASSESSEE COMPANY. THE OTHER EXPENDITURE INCURRED VIZ: PRINTING & STATIONERY, STAFF WELFARE, CONVEYANCE, MISC EXPENSES, TELEPHONE , LEGAL FEE & LISTING FEE WERE ALSO INCURRED IN COURSE OF EARNING RENTAL INCOME. SO ENT IRE EXPENDITURE CLAIMED UNDER THE BUSINESS HEAD RELATES TO EARNING OF INCOME BY WAY O F RENT & INVESTMENT. 4.1. THUS, THESE AFOREMENTIONED EXPENSES ARE NOT A LLOWABLE UNDER THE HEAD BUSINESS AND THEREBY DISALLOWED AS NO BUSINESS ACTI VITY WAS CARRIED OUT BY ASSESSEE. THE EXPENSES CLAIMED LIKE DEMAT CHARGES, FILING FEES, A UDIT FEES, AND MISCELLANEOUS EXPENSES AMOUNTING TO A TOTAL OF RS.1,03,264/- ARE ALLOWED. IT IS SEEN THAT THE ASSESSEE HAS ALREADY ADDED BACK AN AMOUNT OF RS.10,38,410/- IN ITS COMPU TATION OF INCOME WHICH ALSO TANTAMOUNT TO ASSESSEE CONCURRING WITH THE LINE OF ADDITION MADE. THE BALANCE AMOUNT (2078158 LESS 1038410 LESS 103264) WHICH IS RS.9,36 ,484/- IS DISALLOWED. 13. IN FIRST APPEAL, THE CIT-A OPINED THAT THE ASSE SSEE COULD NOT SHOW THE DIRECT NEXUS WITH THE INCOME EARNED AND CONFIRM ED THE ADDITION MADE BY THE AO BY OBSERVING AS UNDER:- AS A.O. HAS HELD THAT INCOME IN JUTE TRADING, INTER EST INCOME AND OTHER INCOME FALL UNDER THE HEAD INCOME FROM OTHER SOURCES, EXPENSES CLAIME D AGAINST THESE INCOME WERE DISALLOWED, EXCEPT FOR RS.1,03,264/ -. THIS AMOUNT OF RS.1,03,264/ - WAS ALLOWED TOWARDS DEMAT CHARGES, FILING FEES, AUDIT FEES AND MISC. EX PENSES. IN THE APPEAL PROCEEDINGS ASSESSEE HAS SUBMITTED THAT MAJOR PART OF THE EXPEN SES ARE IN NATURE OF SALARY EXPENSES OF MR. M.C.SINGHI AMOUNTING TO RSA,02,500/ - AND SR I S.S.BHUTORIA AMOUNTING TO RS.2, 18,500/-. THESE PERSONS HAVE BEEN WORKING IN THE CO MPANY SINCE 1969 AND 1998 RESPECTIVELY. IT IS FURTHER MENTIONED THAT ASSESSEE HAS ALREADY DISALLOWED RS.92,513/- BEING GRATUITY NOT PAID AND THE BALANCE EXPENDITURE OF RS.2,22,971/- RELATED TO PRINTING AND STATIONARY, OFFICE RENT, TRAVELLING AND CONVEYA NCE, LEGAL AND PROFESSIONAL CHARGES, TELEPHONE EXPENSES ETC. 7 ITA NO.1108/KOL/2016 M/S. MORGAN WALKER & CO. LTD I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE A ND THE SUBMISSIONS OF THE ASSESSEE. IT IS SEEN THAT A.O!' HAS ALREADY ALLOWED RS.1,03,264/- T OWARDS THE VARIOUS NECESSARY EXPENSES IN CONDUCTING THE OPERATIONS OF THE COMPANY. AS THE INCOME FROM JUTE TRADING AND INTEREST INCOME HAS BEEN HELD AS INCOME FROM OTHER SOURCES E XPENSES U/S 57 ARE ALLOWABLE, BUT THESE EXPENSES SHOULD BEAR A DIRECT NEXUS WITH THE INCOME EARNED. AS ASSESSEE HAS NOT ABLE TO DEMONSTRATE AS TO HOW THESE EXPENSES ARE RE LATED TO EARNING OF INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES, ASSESSEE'S CONTENTI ONS CANNOT BE ACCEPTED. HENCE THESE GROUNDS OF APPEAL ARE DISMISSED. 14. BEFORE US, LD.AR SUBMITS THAT THE DISALLOWANCE INCLUDES THE SALARIES. THE LD.AR ARGUED THAT THE SIMILAR EXPENDITURES WERE ALLOWED IN EARLIER ASSESSMENT YEARS I.E A.Y 2007-08 AND 2006-07 AND RE FERRED TO PAGE NOS. 30 & 33 AND SUBMITS THAT THE EXPENDITURE CLAIMED UN DER THE HEAD ADMINISTRATION AND OTHER EXPENSES WERE CONSIDERED AND ALLOWED BY THE RESPONDENT REVENUE. THE LD. AR ARGUED THAT THE REVE NUE MUST FOLLOW RULE OF CONSISTENCY TO THE YEAR UNDER CONSIDERATION . 15. THE LD.DR SUBMITS THAT THE MAIN BUSINESS OF THE ASSESSEE IS INCOME FROM HOUSE PROPERTY. THE ASSESSEE CLAIMED DEDUCTION FROM INCOME FROM HOUSE PROPERTY, WHICH IS AUTOMATIC U/SEC. 24(1) OF THE ACT. AGAIN THE ASSESSEE CLAIMING DEDUCTION UNDER THE HEAD ADMINIS TRATION AND OTHER EXPENSES WHICH IS NOT PERMISSIBLE AS THE EXPENDITUR E CLAIMED AS RIGHTLY POINTED OUT BY THE AO INCURRED IN THE COURSE OF REN TAL INCOME WHICH WAS ALREADY GRANTED U/SEC 24(1) OF THE ACT. THE LD.DR A RGUED THAT THE ASSESSEE IS CLAIMING DOUBLE EXPENDITURE AND IF THE DEDUCTION IS GRANTED AS CLAIMED BY THE ASSESSEE AND IT AMOUNTS TO DOUBLE DE DUCTION. IT IS AGAINST THE PROVISIONS CONTEMPLATED U/SEC. 37(1) OF THE AC T AND REFERRED TO PAGE 25 OF PAPER BOOK AND ARGUED THAT THE ASSESSEE HAS S HOWN GROSS ANNUAL VALUE FROM HOUSE PROPERTY AND CLAIMED STANDARD DEDU CTION U/SEC. 23 & 24 OF THE ACT. THE LD.DR URGED TO REMAND THE ISSUE TO AO TO FIND OUT TO WHICH HEAD AND HOW ASSESSEE DETERMINED AN AMOUNT OF RS.33 ,47,445/- SHOWN BY THE ASSESSEE AS NET PROFIT AS PER PROFIT AND LO SS ACCOUNT . 16. HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIA L AVAILABLE ON RECORD. WE FIND THAT THE ASSESSEE CLAIMED EXPENDITU RE OF RS.20,78,158/- UNDER THE HEAD ADMINISTRATION AND OTHER EXPENSES AS PER STATEMENT 8 ITA NO.1108/KOL/2016 M/S. MORGAN WALKER & CO. LTD PREPARED AS ON 31-08-2008, PLACED AT PAGE NO. 27 OF PAPER BOOK. ON PERUSAL OF THE SAME, THE ASSESSEE ON ITS OWN ADDED AN AMOUNT OF RS.10,38,410/- TO ITS BUSINESS INCOME. THE AO FURTH ER ALLOWED AN AMOUNT OF RS.1,03,263/- BEING FILING FEE, DEMAT CHARGES, A UDITS REMUNERATION AND MISCELLANEOUS EXPENSES TOTALING TO RS.11,41,674/-. WE FIND THAT THE AO OPINED THAT THE ASSESSEE HAS ALREADY GOT STATUTORY DEDUCTION U/SEC. 24(1) AND ASSESSEE DID NOT CLAIM ANY OTHER EXPENDITURE FO R JUTE TRADING AS IT WAS ASSESSED UNDER THE HEAD INCOME FROM OTHER SOURC ES. THE CIT-A WAS OF THE OPINION THAT THE ASSESSEE DID NOT SHOW ANY N EXUS BETWEEN IMPUGNED DISALLOWANCE AND EXPENSES INCURRED FOR EAR NING INCOME FROM OTHER SOURCES. THE FACTS REMAIN ADMITTED THAT THERE WAS NO EVIDENCE TO SHOW THAT THE SAID EXPENDITURE WAS INCURRED IN EARN ING THE INCOME FROM OTHER SOURCES BY THE ASSESSEE EXCEPT STATING THAT T HE MAJOR PORTION OF IMPUGNED DISALLOWANCE CONTAINS SALARY & BONUS OF RS.6,40,500/- FOR WHICH AO FOUND THAT HAS ALREADY BEEN CONSIDERED IN THE STANDARD DEDUCTION U/SEC. 24(1) OF THE ACT RELATING TO HOUSE PROPERTY INCOME. BUT, HOWEVER, IT IS OBSERVED THAT FROM THE PROFIT & LOSS ACCOUNT PERTAINING TO A.YS. 2007-08 AND 2006-07 THE SAME KIND OF EXPENDIT URES WERE CLAIMED UNDER THE HEAD ADMINISTRATION AND OTHER EXPENSES AND THE RESPONDENT REVENUE ALLOWED SUCH EXPENDITURE UNDER THE HEAD ADM INISTRATION & OTHER EXPENSES. THE RULE OF CONSISTENCY DEMANDS THAT THER E BEING NO CHANGE IN CIRCUMSTANCES, BUT, HOWEVER, IN THE PRESENT CASE, T HE ASSESSEE CLAIMED MUNICIPAL TAX UNDER THE HEAD INCOME FROM HOUSE PROP ERTY. BUT, AS A MATTER OF ACCOUNTING POLICY BEING FOLLOWED BY THE A SSESSEE CONSISTENTLY. THE ASSESSEE DEBITS THE MUNICIPAL TAX IN ITS PROFIT AND LOSS ACCOUNT. BUT IN THE COMPUTATION OF TOTAL INCOME THE ASSESSEE SUO-MOTO DISALLOWED THE MUNICIPAL TAX WHICH IS EVIDENT FROM AT PAGE NO-25 O F PAPER BOOK. THEREFORE, THE ASSESSEE NEVER CLAIMED MUNICIPAL TAX AS ITS BUSINESS EXPENSES, THEREFORE THE ARGUMENTS OF LD.DR THAT THE ASSESSEE CLAIMS MUNICIPAL TAX IN ITS BUSINESS INCOME AS DOUBLE DEDU CTION IS WRONG THEREFORE, WE DELETE THE DISALLOWANCE MADE BY THE A O AND CONFIRMED BY THE CIT-A. THUS, GROUND NOS. 5 & 6 RAISED BY THE AS SESSEE ARE ALLOWED. 9 ITA NO.1108/KOL/2016 M/S. MORGAN WALKER & CO. LTD 17. IN THE RESULT, THE APPEAL OF THE ASSESSEE I S PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 31 -05-2017 SD/- SD/- DR.ARJUN LAL SAINI S.S. VISWANETHRA RAVI ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 31-05-2 017 PP(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1 . APPELLANT M/S. MORGAN WALKER & CO. LTD 5 MIDDLETO N STREET, KOLKATA- 71. 2 RESPONDENT ACIT, CENT. CIR 2(1), KOLKATA 110 SHAN TI PALLI, KOLKATA-107. 3 . THE CIT(A), KOLKATA 4. THE CIT KOLKATA 5.DR,ITAT,KOL 6 . GUARD FILE TRUE COPY BY ORDER SR.PS, H.O.O ITAT KOLKATA