Asstt. Commissioner of Income Tax-1, Kanpur V. M/s J.S Tower, Kanpur

ITA 114/LKW/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 83351 (ITAT-LUCKNOW)
• Duration Of Justice: 7 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-10-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 01-09-2014
• Assessment Year: 2010-2011
• Appeal Filed On: 26-02-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P K DEY
• Assessee Lawyers: S K JAIN SHRI SWARAN SINGH
• Keywords: Business income

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH B, LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ITA NO.114/LKW/2014 ASSESSMENT YEAR:2010 - 11 A.C.I.T. - 1, KANPUR. VS. M/S J. S. TOWER, 16/80 - 1, CIVIL LINES, KANPUR. (APPELLANT) (RESPONDENT) APPELLANT BY SHRI P. K. DEY, D. R. RESPONDENT BY SHRI S. K. JAIN, ADVOCATE SHRI SWARAN SINGH, CA DATE OF HEARING 01/09/2014 DATE OF PRONOUNCEMENT 1 5 /10/2014 O R D E R PER A. K. GARODIA, A.M. THIS IS REVENUES APPEAL DIRECTED AGAINST THE ORDER PASSED BY LEARNED CIT(A) - II, KANPUR, DATED 25/11/2013 FOR THE ASSESSMENT YEAR 2010 - 11. 2. IN THIS APPEAL, THE REVENUE HAS RAISED THE FOLLOWING GROUNDS: 1. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - II, KANPUR HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.1,50,000/ - MADE BY THE ASSESSING OFFICER ON ACCOUNT OF PARKING CHARGES WITHOUT APPRECIATING THE FACT THAT FOR PARKING CHARGES THE ASSESSEE IS FOLLOWING CASH SYSTEM OF ACCOUNT ING AND FOR REST OF ITS AFFAIRS IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING, WHICH IS NOT PERMISSIBLE UNDER THE INCOME TAX ACT 1961. 2. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - II, KANPUR HAS ERRED IN LAW AND ON FACTS IN RESTRICTING THE DISALLOWA NCE U/S 80IA U/S INCOME TAX ACT, 1961 TO RS.1,80,000/ - AGAINST TOTAL DISALLOWANCE OF RS.10,52,326/ - MADE BY THE ASSESSING OFFICER WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE FIRM IS NOT SET UP FOR THE GENERATION OF ELECTRICITY AND THE FACILITY OF ELECT RIC GENERATION WAS MADE ONLY TO FULFILL THE NEEDS OF THE TENANTS AND NOT OF GENERAL PUBLIC. 3. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - II, KANPUR HAS ERRED IN LAW AND ON FACTS IN IGNORING THE FACT 2 THAT DEDUCTION U/S 80IA U/S INCOME TAX ACT,1961 I S ADMISSIBLE ONLY WHEN THE BUSINESS IS SET UP AS AN UNDERTAKING IN INDIA FOR GENERATION OR GENERATION AND DISTRIBUTION OF POWER DURING 01.04.1993 TO 31.03.2011 AND STARTS TRANSMISSION OR DISTRIBUTION BY LAYING A NETWORK OF NEW TRANSMISSION OR DISTRIBUTION LINES DURING 01.04.1999 TO 31.03.2011, UNDERTAKES SUBSTANTIAL RENOVATION AND MODERNIZATION OF THE EXISTING NETWORK OF TRANSMISSION OR DISTRIBUTION LINES DURING 01.04.2004 TO 31.03.2011. 4. THAT THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX(APPEALS) - II, K ANPUR DATED 25.11.2013 NEEDS TO BE QUASHED AND THE ORDER DATED 15.02.2013 PASSED BY THE ASSESSING OFFICER BE RESTORED. 3. LEARNED D.R. OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER WHEREAS LEARNED AR OF THE ASSESSEE SUPPORTED THE ORDER OF CIT(A). HE ALSO SUBMITTED THAT THE AMOUNT OF RENTAL INCOME IN DISPUTE OF RS.1.50 LAC WAS NOT RECEIVED BY THE ASSESSEE IN THE PRESENT YEAR AND THE ASSESSEE IS FOLLOWING CASH SYSTEM OF ACCOUNTING. IN THIS REGARD, HE DRAWN OUR ATTENTION TO THE AGREEMENT AS APPEARING ON PAGES 31 & 32 OF THE PAPER BOOK AND IN PARTICULAR , HE DRAWN OUR ATTENTION TO PARA 3 ON PAGE NO. 32 AS PER WHICH THE ASSESSEE WAS TO RECEIVE THE RENTAL INCOME OF RS.1.50 LAC AFTER THE END OF THE FINANCIAL YEAR. HE ALSO PLACED RELIANCE ON A TRIBUNAL DECISI ON IN THE CASE OF JMD REALTORS (P) LTD. VS. DY. C.I.T. [2012] 135 ITD 337 (DELHI) IN SUPPORT OF THE CONTENTION THAT INCOME ON ACCOUNT OF RENT IS TAXABLE UNDER THE HEAD INCOME FROM OTHER SOURCES. HE ALSO SUBMITTED THAT WHEN THE INCOME IS TAXABLE UNDER THE HEAD INCOME FROM OTHER SOURCES, THE ASSESSEE CAN VERY MUCH FOLLOW THE METHOD OF ACCOUNTING AS CASH METHOD OF ACCOUNTING AND THEREFORE, NO ADDITION IS JUSTIFIED IN THE PRESENT YEAR. AS AN ALTERNATIVE SUBMISSION, HE SUBMITTED THAT EVEN IF IT IS HELD THAT T HE INCOME OF THE ASSESSEE IS TAXABLE IN THE PRESENT YEAR THEN PROPER DIRECTION SHOULD BE GIVEN THAT THE SAME SHOULD NOT BE TAXED AGAIN IN THE YEAR OF RECEIPT WHEN THE ASSESSEE HAS INCLUDED THIS INCOME IN ITS TAXABLE INCOME ON THE BASIS OF CASH SYSTEM OF AC COUNTING BEING FOLLOWED BY THE ASSESSEE FOR THIS SOURCE OF INCOME . 3 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. IN FACT THE ASSESSING OFFICER HAS ALREADY ASSESSED THE INCOME OF THE ASSESSEE UNDER THE HEAD INCOME FROM OTHER SOURCES AND NOT AS INCOME FROM HOUSE PROPERTY AND THEREFORE, THIS JUDGMENT IS NOT RELEVANT IN THE PRESENT CASE. THE DISPUTE IS AS TO WHETHER THE ASSESSEE CAN FOLLOW THE SYSTEM OF ACCOUNTING AS CASH SYSTEM FOR THIS PARTICULAR SOURCE OF INCOME WHILE FOLLOWING MERCANTILE SYSTEM OF ACCOUNTI NG IN RESPECT OF OTHER INCOME S. THE ASSESSING OFFICER HAS OBSERVED THAT THE ASSESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING AND THEREFORE, THE ASSESSEE CANNOT ADOPT HYBRID SYSTEM OF ACCOUNTING BY FOLLOWING CASH SYSTEM FOR ONE RECEIPT AND MERCANTILE SYSTEM FOR REMAINING RECEIPTS. IN OUR CONSIDERED OPINION, IT CANNOT BE APPROVED THAT THE ASSESSEE CAN FOLLOW CASH SYSTEM OF ACCOUNTING IN RESPECT OF RENTAL INCOME TO BE TAXED UNDER THE HEAD INCOME FROM OTHER SOURCES AND MERCANTILE SYSTEM IN RESPECT OF BUSINESS INCOME. THE CIT(A) HAS FOLLOWED THE JUDGMENT OF HON'BLE BOMBAY HIGH COURT RENDERED IN THE CASE OF COMMISSIONER OF INCOME - TAX VS VIMLA D. SONWANE (SMT.) [1995] 212 ITR 489 (BOM) . BUT IN OUR CONSIDERED OPINION, THIS JUDGMENT IS NOT APPLICABLE IN T HE PRESENT CASE BECAUSE THIS JUDGMENT WAS RENDERED ON 15/01/1992 AND THERE IS AMENDMENT IN THE PROVISIONS OF SECTION 145(1) OF THE ACT WITH EFFECT FROM 01/04/97 AND AS PER THE AMENDED PROVISION S OF SECTION 145(1), INCOME CHARGEABLE UNDER THE HEAD PROFITS & GAINS OF BUSINESS OR PROFESSION OR INCOME FROM OTHER SOURCES SHALL BE COMPUTED IN ACCORDANCE WITH EITHER CASH OR MERCANTILE SYSTEM OF ACCOUNTING REGULARLY EMPLOYED BY THE ASSESSEE. THIS IS ADMITTED POSITION THAT IN THE PRESENT CASE, THE ASSESSEE IS FOLLO WING MERCANTILE SYSTEM OF ACCOUNTING FOR DECL ARING ITS INCOME FROM BUSINESS . HENCE, AFTER THIS AMENDMENT IN THE PROVISIONS OF SECTION 145(1), THE ASSESSEE CANNOT BE PERMITTED TO FOLLOW A DIFFERENT SYSTEM OF ACCOUNTING FOR INCOME FROM OTHER SOURCES. HENCE , ON THIS ISSUE , WE REVERSE THE ORDER OF CIT(A) AND RESTORE THAT OF THE ASSESSING OFFICER BUT WE FIND FORCE IN THIS ALTERNATIVE SUBMISSION OF THE LEARNED A.R. OF THE 4 ASSESSEE THAT THE INCOME SHOULD NOT BE TAXED TWICE, ONCE IN THIS YEAR ON ACCRUAL BASIS AND AGAIN IN THE YEAR OF RECEIPT AND HENCE, WE DIRECT THE ASSESSING OFFICER THAT IF THE ASSESSE E HAS OFFERED THIS INCOME AS TAXABLE INCOME IN THE YEAR OF RECEIPT, THEN IN THAT YEAR, SUCH INCOME SHOULD BE EXCLUDED BECAUSE IT IS BEING TAXED IN THE PRESENT YEAR FOR THE REASON THAT NO INCOME CAN BE TAXED TWICE. WITH THESE OBSERVATIONS, GROUND NO. 1 IS ALLOWED. 5. REGARDING GROUND NO. 2 & 3, LEARNED D.R. OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER WHEREAS IT IS SUBMITTED BY LEARNED A.R. OF THE ASSESSEE THAT THIS ISSUE IS COVERED BY THE TRIBUNAL DECISION IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2006 - 07 TO 2 009 - 2010 IN I.T.A. NO.342 & 343/LKW/2011 AND 563 & 564/LKW/2012 DATED 07/08/2014. HE SUBMITTED COPY OF THIS TRIBUNAL ORDER. 6. WE HAVE CONSIDERED THE RIVAL S UBMISSIONS. WE FIND THAT IN ASSESSMENT YEAR 2006 - 07 TO 2009 - 10 IN ASSESSEES OWN CASE, IT WAS HELD BY THE TRIBUNAL THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S 80IA IN RESPECT OF GENERATION OF POWER FOR CAPTIVE CONSUMPTION. ACCORDINGLY, IN THE PRESENT YEAR ALSO, THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE. GROUND NO. 2 AND 3 ARE REJECTED. 7. IN THE RESULT, THE APPEAL OF THE REVENUE STANDS PARTLY ALLOWED. (ORDER WAS PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTION PAGE) SD/. SD/. (SUNIL KUMAR YADAV) ( A. K. GARODIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 1 5 /10 /2014. *C.L.SINGH COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. CONCERNED CIT 4. THE CIT(A) 5. D.R., I.T.A.T., LUCKNOW ASSTT. REGISTRAR