ITO, CHITTORGARH V. Krishi Upaj Mandi Samiti, CHITTORGARH

ITA 113/JODH/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 9661 (ITAT-JODHPUR)
• Duration Of Justice: 2 year(s) 10 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-01-2017
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 21-12-2016
• Assessment Year: 2005-2006
• Appeal Filed On: 26-02-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: GAUTAM BAID
• Assessee Lawyers: A K DAS
• Keywords: Business income; Revised return; Capital expenditure
• Section: 143(3); 37(1); 12AA; 148; 11

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, JODHPUR BEFORE SHRI B.P JAIN ACCOUNTANT MEMBER AND SHRI PARTHA SARATHI CHAUDHURY JUDICIAL MEMBER ITA NO. 113 /JODH/201 4 ASSESSMENT YEAR: 2005 - 06 THE ITO VS. KRISHI UPAJ MANDI SAMITI WARD - 2 N IMBAHERA ROAD CHITTORGARH CHITTORGARH PAN NO. AAAPK1769M (APPELLANT) (RESPONDENT) A SSESSEE BY : SH. A.K. DAS DEPARTME NT BY : SH. GAUTAM BAID DATE OF HEARING : 2 1 /1 2 /2016 DATE OF PRONOUNCEMENT : 09/01/2017 ORDER PER PARTHA SARATHI CHAUDHURY , JM THIS APPEAL HAS BEEN PREFERRED BY THE REVENUE AGAINST THE ORDER OF THE LD. CIT(A), UDAIPUR DT. 20/12/2013 ON THE FOLLOWING GROUNDS OF APPEAL: 1. TREATING THE INCOME FROM HOUSE PROPERTY OF RS. 1,58,246/ - AS BUSINESS INCOME WITHOUT APPRECIATI NG THE FACTS THAT ASSESSEE HAS RECEIVED RENT ON REGULAR BASIS FROM THE HOUSE PROPERTY OWNED BY IT SHOWN AS INCOME FROM BUILDING RENT AND HENCE IN VIEW OF THESE FACTS SAID INCOME IS LIABLE TO BE TREATED AS INCOME FROM HOUSE PROPERTY AS PER THE PROVISIONS OF THE I.T. ACT. 2. DELETING THE DISALLOWANCE OF EXPENSES OF RS. 34,218/ - RELATED TO RENTAL INCOME WITHOUT APPRECIATING THE FACTS THAT THE ASSESSEE HAS ALREADY BEEN ALLOWED STATUTORY DEDUCTION OF RS. 79,122 FROM INCOME FROM HOUSE PROPERTY AS 2 PER THE PROVISIO NS OF SECTION 24 (A) OF THE I.T. ACT AND ALLOWANCE OF THE EXPENSES OF RS. 34,218/ - WILL TANTAMOUNT TO ALLOWANCE OF DOUBLE DEDUCTION TO THE ASSESSEE. 3. DELETING THE DISALLOWANCE OF CAPITAL EXPENDITURE AMOUNTING TO RS. 92,46,000/ - WITHOUT APPRECIATING THE F ACTS THAT THE SAID EXPENDITURE HAS BEEN INCURRED FOR CONSTRUCTION OF ROAD, BUILDING ETC. WHICH IS OBVIOUSLY IN THE NATURE OF CAPITAL EXPENDITURE AND NOT ALLOWABLE WITHIN THE MEANING OF PROVISIONS OF SECTION 37(1) OF THE I.T. ACT. 2. BRIEF FACTS APPEARING I N THE CASE ARE THAT THE A SSESSEE SUBMITTED ITS RETURN OF INCOME IN RESPONSE TO NOTICE U/S 142 OF THE INCOME TAX ACT, 1961 DT. 09/02/2005 DECLARING AN INCOME OF NIL AFTER ALLOWING EXEMPTION U/S 11(1) OF RS. 601522/ - ON DT. 29/04/2005. THE LD. A.O. ISSUED NO TICE U/S 148 ON DT. 10/07/2006. IN RESPONSE TO ABOVE NOTICE ASSESSEE SAMITI SUBMITTED THAT THE RETURN FILED ON 29/04/2005 MAY BE TREATED IN RESPONSE TO ABOVE NOTICE. THAT AT ASSESSMENT STAGE ASSESSEE SUBMITTED REVISED RETURN ON 10/04/2007 DECLARING AN INCO ME OF RS. NIL ALONGWITH AUDI T REPORT, PROFIT & LOSS ACCOUNT AND BALANCE SHEET ALSO. THE AO COMPLETED THE ASSESSMENT UNDER SECTION 143(3) / 147 OF THE ACT ON 20/12/2007 BY MAKING SEVERAL ADDITIONS AND EXEMPTION UNDER SECTION 11 AND 13 OF THE ACT W ERE REJECT ED AS THE ASSESSEE HAS NO REGISTRATION U/S 12AA OF THE ACT ISSUED BY THE CIT, UDAIPUR AS ITS INCOME CANNOT BE EXEMPTED FOR A.Y. 2004 - 05 AND 2005 - 06 AS RESULT OF REGISTRATION GRANTED, WHICH IN FACT WAS APPLICABLE FOR A.Y 2006 - 07. THAT THE LD. CIT(A) VIDE H IS ORDER IN A NO. 473 & 474/IT/UDR/2007 - 08 DATED 16/06/2010 DID NOT DECIDE THE ISSUE OF DISALLOWANCE /ADDITIONS MADE BY THE LD. AO ON MERITS BECAUSE HE TREATED THE INCOME OF THE ASSESSEE EXEMPT UNDER SECTION 11 & 13 OF THE ACT. AGGRIEVED WITH THE ORDER OF THE LD. CIT(A), THE 3 DEPARTMENT HAD FILED AN APPEAL BEFORE THE HONBLE ITAT, JODHPUR WHICH HAD ALLOWED THE DEPARTMENTAL APPEAL VIDE THEIR ORDER IN ITA NOS. 473/474/475/JODHPUR/2010 DATED 13/07/2012 AND SET ASIDE THE ORDER OF THE LD. CIT(A) BY HOLDING THAT T HE LD. CIT(A) HAS ERRED IN COMING TO THE CONCLUSION THAT THE ASSESSEE COULD NOT BE TREATED AS ARTIFICIAL JUDICIAL PERSON AND ITS INCOME CANNOT BE EXEMPTED FOR ASSESSMENT YEARS 2004 - 05 AND 2005 - 06 AS RESULT OF REGISTRATION GRANTED, WHICH IN FACT WAS APPLICAB LE FOR A.Y. 2006 - 07. FURTHER THE HONBLE ITAT HAD HELD THAT THE LD. CIT(A) DID NOT RENDER THE DECISION ON THE MERIT OF THE GROUNDS RAISED ON THE ADDITIONS / DISALLOWANCES MADE BY THE AO BUT DELETED THE SAME SUMMARILY. ACCORDINGLY, THE HONBLE ITAT REMITTED THE MATTER BACK TO THE LD. CIT( A) FOR RENDERING DECISION ON MERITS. 3. THAT REGARD TO THE FIRST GROUND OF APPEAL IN TREATING THE INCOME FROM HOUSE PROPERTY OF RS. 1,58,246/ - AS BUSINESS INCOME , I T WAS ARGUED BY THE ASSESSEE BEFORE THE LD. CIT(A) THAT THE AO HAS TAKE N THE RENTAL INCOME OF RS. 1,58,246/ - OUT OF BUSINESS INCOME AND TAXED UNDER THE HEAD OF HOUSE PROPERTY. THE ASSESSEE SAMITI HAVE GIVEN THE GODOWN TO VARIOUS BUSINESS CONCERN FOR STORAGE OF PRESCRIBED AGRICULTURE COMMODITIES AS MENTIONED BY THE SAMITI IN THE ALLOTMENT LETTER. THAT THEREFORE LETTING OUT OF PROPERTIES IS SUBSERVIENT AND INCIDENTAL TO THE BUSINESS THEREFORE THE RENTAL INCOME IS TO BE TAXED UNDER THE HEAD OF BUSINESS AND NOT IN THE HEAD OF HOUSE PROPERTY. 4 4. THE LD. CIT(A) HAD CALLED FOR THE REPORT FROM THE AO WHICH WAS SUBMITTED TO HIS OFFICE VIDE LETTER NO. ITO/W - 2/CHITTORGARH/2013 - 14/1094 DT. 17/12/2013 WHICH IS ON RECORD. THE LD. CIT(A) HELD AFTER CONSIDERING THE REPORT OF THE AO AND THE SUBMISSION OF THE ASSESSEE THAT HE AGREES W ITH THE CONTENTION OF THE ASSESSEE THAT THE ASSESSEE SAMITI HAVE GIVEN THE GODOWN TO VARIOUS BUSINESS CONCERN FOR STORAGE OF PRESCRIBED AGRICULTURE COMMODITIES AS MENTIONED BY THE SAMITI IN THE ALLOTMENT LETTER. THE LD. CIT(A) HELD FURTHER THEREFORE LETTIN G OUT OF PROPERTIES IS SUBSERVIENT AND INCIDENTAL TO THE BUSINESS THEREFORE THE RENTAL INCOME IS TO BE TAXED UNDER THE HEAD OF BUSINESS NOT IN THE HEAD OF HOUSE PROPERTY. THIS GROUND THEREFORE ALLOWED IN FAVOUR OF THE ASSESSEE BY THE LD. CIT(A) . 5. NEXT GR OUND RELATES TO THE DELETION OF DISALLOWANCE OF EXPENSES OF RS. 34,218/ - RELATED TO RENTAL INCOME. IT WAS CONTENDED BY THE ASSESSEE BEFORE THE LD. CIT(A) THAT THE AO HAS DISALLOWED THE EXPENDITURE CLAIM ED UNDER THE HEAD OF REPAIR OF RS. 1436/ - , LIGHT ARRAN GEMENT S OF RS. 204961/ - , WATER ARRANGEMENT S OF RS. 102484/ - , PAYMENT TO WATCHMAN OF RS. 281996/ - AND CLEANING FACILITY OF RS. 101357/ - ON THIS GROUND THAT ALL THESE EXPENSES INCURRED FOR MANDI PREMISES WHICH INCLUDES GODOWNS. THE ASSESSEE CONTENDED THESE E XPENSES WAS INCURRED FOR PROVIDING COMMON FACILITIES TO THE SAMITI PRA N GAN. THESE EXPENSES W ERE NOT RELATING TO THE INDIVIDUAL GODOWN. AS PER LEASE AGREEMENT IT IS CLEARLY MENTIONED THAT LIGHT, WATER & CLEANING EXPENSES OF THE INDIVIDUAL GODWON WILL 5 BE BOR NE BY THE TENANTS SEPARATELY. THE HEAD WISE EXPLANATIONS OF EXPENDITURE IS AS UNDER: 1. REPAIR EXPENSES: THE ASSESSEE INCURRED REPAIR EXPENSES MAINLY FOR CYCLE REPAIRING. 2. LIGHTING EXPENSES: THE ASSESSEE HAS INCURRED THE LIGHTING EXPENSES FOR ROAD LIGHTS OF MANDI PRA N GAN AND OFFICE. 3. WATER ARRANGEMENT: THE ASSESSEE HAS PAID THE SALARY TO MR. DEVI LAL RAGAR PANIWALA ON MONTHLY BASIS FOR WATER ARRANGEMENT IN MANDI PRA N GAN AND OFFICE. 4. WATCHMAN SALARY: THE ASSESSEE HAS PAID THE SALARY TO 3 WATCHMAN ON MO NTHLY BASIS. 5. CLEANING FACILITIES: THE ASSESSEE H AS PAID THE SALARY TO SMT. MANJU DEVI SWEEPER ON MONTHLY BASIS FOR CLEANING WORK. THE ASSESSEE SUBMITTED THAT ALL THESE EXPENSES WERE INCURRED FOR PROVIDING COMMON FACILITY IN THE MANDI PRA N GAN. THAT THE LD. CIT(A) ON HEARING THE CONTENTION OF THE ASSESSEE AND THE REPORT FILED BY THE AO DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE DELETING THE DISALLOWANCE ON GROUND OF THESE EXPENSES. 6. THAT THE NEXT GROUND OF APPEAL RELATES TO DELETION OF DISALLOWANCE OF CAPITAL EXPENDITURE AMOUNTING TO RS. 92,46,000/ - . T HE ASSESSEE SUBMITTED BEFORE THE LD. CIT(A) THAT THE SAMITI INCURRED THE EXPENDITURE FOR DEVELOPMENT OF LINK ROADS OF RS. 92,46,000/ - . THE OWNERSHIP TO THIS ROAD DOES NOT REMAIN WITH THE SOCIETY HENCE IT IS NOT CAPITAL EXPENDITURE. THE DEVELOPMENT OF LINK ROAD IS TO FACILITATE THE FARMERS FOR BRINGING THEIR CROPS TO MANDI YARD. THAT AS PER CLAUSE (J) THE MANDI SAMITI HAS TO UTILIZE ITS FUNDS FOR THE PURPOSE OF THE CONSTRUCTION AND 6 THE REPAIR OF THE ROADS W HICH IS ONE OF THE OBJECTS OF THE FORMATION OF SAMITIES. THE LD. CIT(A) HELD THAT IN CONSIDERATION OF VARIOUS CASE LAWS OF HIGHER APPEL LATE AUTHORITIES AND HONBLE COURTS HE IS INCLINED TO AGREE WITH THE CONTENTION OF THE ASSESSEE. 7. THAT THE AO IS NOT JU STIF IED IN MAKING THE ABOVE MENTIONED DISALLOWANCE ADDITION BECAUSE THE EXPENSES CLAIMED BY THE ASSESSEE HAVE BEEN CONSIDERED FOR THE BUSINESS PURPOSE AND ARE REVENUE IN NATURE ACCORDING TO THE FOLLOWING DECISIONS OF JURISDICTIONAL ITAT JODHPUR IN THE FOLL OWING CASES : 1. KRISHI UPAJ MANDI SAMITI, KAPASAN VS. INCOME TAX OFFICER WARDD II CHITTORGARH ITA NO. 782/JU/07, 2. ITO WARD - 3 JODHPUR VS. KRISHI UPAJ MANDI SAMITI JODHPUR ITA NO. 681 & 682/JU/07 & ITA NO. 688 & 689/JU/2007 3. KRISHI UPAJ MANDI SAMITI NIM BAHERA VS. INCOME TAX OFFICER WARD II CHITTORGARH APPEAL NO. 525 & 526 /IT/UDR/07 - 08. THAT ACCORDINGLY THIS ADDITION ON BUILDING CONSTRUCTION AND ROAD REPAIR WAS DELETED BY THE LD. CIT(A). 8. WE HAVE PERUSED THE RECORDS IN THIS CASE AND HEARD THE RIVAL CON TENTION OF THE PARTIES HEREIN AND HAVE CONSIDERED IN ENTIRETY THE FACTS AND CIRCUMSTANCES AS WELL. 7 9. THAT AT THE TIME OF HEARING THE LD. AR SUBMITTED BEFORE US A COPY OF JUDGMENT OF THE COORDINATE BENCH ITAT JODHPUR IN ITA NO. 396/JODHPUR/2012 IN THE ASS ESSEES OWN MATTER WHEREIN CERTAIN DIRECTIONS WERE ISSUED TO THE CIT AS PER THE SAID ORDER. THE LD. AR CONTENDED THAT THESE DIRECTIONS OF ITAT W ERE NOT FOLLOWED BY THE LD. CIT, THE RELEVANT PORTION OF THE ORDER OF THE COORDINATE BENCH OF ITAT JODHPUR IS AS UNDER: 6. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON RECORD IN THE PRESENT CASE, IT APPEARS THAT THE LATEST DECISION ON A SIMILAR ISSUE OF THE ITAT DATED 29/11/2013 IN I.T.A NOS. 77 & 78/JU/ 2009(SUPRA), WAS NOT AVAILABLE WITH THE LD. CIT WHILE DECIDING THE APPLICATION OF THE ASSESSEE. WE THEREFORE, DEEM IT APPRECIATE TO SET ASIDE THIS ISSUE BACK TO THE FILE OF THE LD. CIT TO BE DECIDED AFRESH BY KEEPING IN VIEW THE DECISION DATED 29/11/2013 R ENDERED IN THE AFORESAID REFERRED TO CASES OF KRISHI UPAJ MANDI SAMITI, DUNGARPUR & ANOTHER S. CIT, UDAIPUR IN ITA NOS. 77 & 78/JU/2009. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. THE LD. AR THEREFORE REQUESTED THAT THE MATTER BE SENT BACK TO LD. CIT(A) FOR DECIDING THE MATTER ON BASIS OF DIRECTIONS OF THE COORDINATE BENCH OF ITAT JODHPUR . WE THEREFORE SET ASIDE THE MATTER BACK TO THE FILE OF LD. CIT(A) TO DECIDE ALL THE ISSUES AFRESH IN TERMS OF THE DIRECTION S GIVEN BY T HE COORDINATE BENCH . THEREFORE ALL THE GROUNDS OF APPEAL HEREIN ARE SET ASIDE TO THE FILE OF THE LD. CIT(A). 10. IN THE RESULT APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT. 8 SD/ - SD/ - (B.P. JAIN) ( PARTHA SARATHI CHAUDHURY ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 09/01/2017 AG COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DEPARTMENTAL REPRESENTATIVE