EVEREST ADVERRTISING PVT.LTD., MUMBAI V. ITO-1(1)(3), MUMBAI

ITA 1142/MUM/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 8239 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-03-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 01-03-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 18-02-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Bad and doubtful debts
• Section: 263; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, E, MUMBAI BEFORE SHRI R.S.SYAL, ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO, JUDICIAL MEMBER ITA NO. 1142/MUM/2009 (ASSESSMENT YEAR 2004-05) EVEREST ADVERTISING PVT LTD., KITAB MAHAL, 192, DR. D N ROAD, MUMBAI-400001, PAN: AAACE1603Q . APPELLANT VS INCOME TAX OFFICER 1(1)(1), AAYAKAR BHAVAN M K ROAD, MUMBAI-400020 RESPONDENT ITA NO. 1579/MUM/2009 (ASSESSMENT YEAR 2004-05) INCOME TAX OFFICER 1(1)(1), . APPELLANT VS EVEREST ADVERTISING PVT LTD. RESPONDENT ASSESSEE BY : SHRI MADHUR AGARWAL RESPONDENT BY : SHRI CHANDRAJ IT SINGH. O R D E R PER VIJAY PAL RAO ITA NO. 1142/MUM/2009 ITA NO. 1579/MUM/2009 2 THESE CROSS-APPEALS ARE DIRECTED AGAINST THE ORD ER DATED 19.12.2008 OF THE CIT(A) FOR THE ASSESSMENT YEAR 2004-05 ITA NO. 1579/MUM/2009 2. THE REVENUE RAISED THE FOLLOWING GROUNDS IN THI S APPEAL : 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AN DIN LAW THE CIT(A) ERRED IN DIRECTING THE AO TO ASSESSEE THE COMMISSION INCOME OF RS.3 LAKHS UNDER THE HEAD INCOME FROM BUSINESS AND PROFESSIONS AS AGAINST THE ASSESSING OFFICER IT UN DER THE HEAD INCOME FROM OTHER SOURCES 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE CIT(A) ERRED IN DIRECTING THE AO TO THAT THE INCIDENTAL INCOME RELATED TO DEVELOPMEN T OF A PROPERTY AS BUSINESS INCOME AS AGAINST THE AO ASSESSING IT ON INCOME FROM OTHER SOURCES WHEN ASSESSEE WAS NOT IN REGULAR BUSINESS OF PROPERTY DEVELOPMENT 3. GROUNDS OF APPEAL NO.1 IS REGARDING THE COMMISSI ON INCOME FROM THE BUSINESS AND PROFESSION. 4. WE HAVE HEARD THE LEARNED DR AS WELL AS THE LEAR NED AR AND CONSIDERED THE RELEVANT RECORD. AT THE OUTSET, WE FIND THAT THE ISSUE RAISED IN THIS GROUND STANDS COVERED BY T HE DECISION OF THIS TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO.1398/MUM/2006, ORDER DATED 29.12.2010 FOR THE ASSESSMENT YEAR 2000-01. THIS TRIBUNAL ADJUDICATED THE ISSUE IN PARAGRAPHS 7 TO 9 AS UNDER : ITA NO. 1142/MUM/2009 ITA NO. 1579/MUM/2009 3 7. THE LEARNED DR RELIED UPON THE ORDER PASSED BY THE ASSESSING OFFICER. 8. ON THE OTHER HAND, LEARNED COUNSEL, APPEARING ON BEHALF OF THE ASSESSEE, ADVERTED OUR ATTENTION TO T HE ORDER PASSED BY THE CIT(A) TO SUBMIT THAT THE ASSESSEE-COMPANY WAS CARRYING ON MARKET RESEARCH ACTIVITY BOTH BEFORE AND AFTER THE TRANSFER OF ADVERTISING BUSINESS AND EVEN IN THE YEAR UNDER CONSIDERATION THE APPELLANT COMPANY CARRIED ON THE MARKET RESEARCH BUSINESS AND THUS, PROFESSIONAL FEE S RECEIVED FROM MARKET RESEARCH IS ASSESSABLE TO TAX AS INCOME FROM BUSINESS. IN THIS REGARD, HE REFERRED TO PARA 4 OF THE ORDER OF THE LEARNED CIT(A). SIMILARL Y, WITH REGARD TO SHARE BADLA ACTIVITY UNDERTAKEN BY T HE ASSESSEE THE LEARNED CIT(A) OBSERVED, IN PARA 6.1 O F HIS ORDER, THAT ENORMOUS TRANSACTIONS HAD TAKEN PLA CE ON A DAILY BASIS AND THUS THE ACTIVITY FALLS WITH T HE CATEGORY OF FINANCING BUSINESS AND INCOME THEREFROM IS ASSESSABLE TO TAX AS BUSINESS INCOME. 9. LEARNED DR COULD NOT PLACE ANY FACTS ON RECORD T O CONTRADICT THE FINDINGS OF THE LEARNED CIT(A). 5. WE FURTHER NOTE THAT THE CIT(A) FOLLOWED THE E ARLIER ORDER OF THIS TRIBUNAL PASSED IN ASSESSEES OWN CA SE (SUPRA) FOR THE ASSESSMENT YEAR 2000-01. THEREFORE, FOLLOW ING THE DECISION OF THIS TRIBUNAL IN ASSESSEES OWN CASE, WE DECIDE THIS ISSUE IN FAVOUR OF THE ASSESSEE. 6. GROUNDS OF APPEAL NO.2 IS REGARDING THE INCOME F ROM AGRICULTURAL ACTIVITIES AS INCOME FROM OTHER SOURCE S INSTEAD OF INCOME FROM BUSINESS EARNED BY THE ASSESSEE. 7. WE HAVE HEARD THE LEARNED DR AS WELL AS THE LEAR NED AR AND CONSIDERED THE RELEVANT RECORD. THE AO TREATED THE ITA NO. 1142/MUM/2009 ITA NO. 1579/MUM/2009 4 INCOME FROM AGRICULTURAL ACTIVITY AS UNDER THE HEA D INCOME FROM OTHER SOURCES. IT IS PERTINENT TO NOTE THAT TH E ASSESSEE DID NOT CLAIM THE INCOME FROM AGRICULTURAL ACTIVITY AS EXEMPT U/S 10 OF THE ACT BUT HAS ADMITTED THAT THE SAID INCOME AS INCOME FROM BUSINESS OR PROFESSION. THE ASSESSEE C ONTENDED BEFORE THE AO THAT WHEN THE ASSESSEE COMPANY IS EN GAGED IN THE AGRICULTURAL ACTIVITIES AS PART OF THE PROPERT Y DEVELOPMENT BUSINESS, THEREFORE, THE INCOME FROM VARIOUS SEASO NAL CROPS WHICH WAS GROWN BY THE ASSESSEE SHALL BE TREATED AS INCOME FROM BUSINESS OF THE ASSESSEE. THE CIT(A) HAS ADJU DICATED THE ISSUE IN PARAGRAPH 4.3 AS UNDER : 4.3 I HAVE GONE THROUGH THE FACTS BROUGHT TO RECORD. FROM THE NATURE OF ACTIVITY AND THE PRODUCE COMING OUT OF IT, I FEEL, IN ISOLATION, THE INCOME WOULD HAVE QUALIFIED AS AGRICULTURAL INCOME. SO THE QUEST ION OF ASSESSING THE INCOME UNDER THE HEAD OTHER SOURCES DOES NOT ARISE. THE APPELLANTS CLAIM TH AT THE ENTIRE AGRICULTURAL OPERATIONS WERE AS THE PART OF BUSINESS OF DEVELOPING THE PROPERTY AS A RESORT, CARRIES WEIGHT. THE INCOME COMING OUT OF IT CAN O NLY BE TREATED AS AGRICULTURAL INCOME AND ALLOWED EXEMPTION FROM TAX. HOWEVER, THE APPELLANT HAS DISCLOSED THE RECEIPTS FROM AGRICULTURAL OPERATION S AND INCLUDED SUCH INCOME IN ITS TAXABLE INCOME AS T HE AGRICULTURAL ACTIVITY WAS UNDERTAKEN AS PART OF TH E BUSINESS OF DEVELOPING A RESORT. SO THERE IS NO REASON FOR THE AO ;TO TREAT THIS INCOME UNDER THE HEAD OTHER SOURCES. ACCORDINGLY THE INCOME SHOULD B E TREATED AS INCOME FROM BUSINESS AS CLAIMED BY THE APPELLANT. 8. IN VIEW OF THE PECULIAR FACTS OF THE CASE THAT THE ASSESSEE HAS NOT CLAIMED ANY INCOME FROM AGRICULTUR AL ACTIVITY AS EXEMPT FROM TAX U/S 10, THEREFORE, THE TREATMENT OF THE ITA NO. 1142/MUM/2009 ITA NO. 1579/MUM/2009 5 SAME BY AO AS INCOME FROM OTHER SOURCES IS NOT WARR ANTED. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD . CIT(A). 9. THE APPEAL FILED BY THE REVENUE IS DISMISSED ITA NO. 1142/MUM/2009 10. THE ONLY GROUND RAISED BY THE ASSESSEE READS AS UNDER : THE CIT(A) ERRED IN HOLDING THAT INCOME FROM DEAL ING IN MUTUAL FUNDS SHOULD BE TAKEN AS INCOME FROM OTHER SOURCES 10 WE HAVE HEARD THE LEARNED AR AND LD. DR AND CONSIDERED THE RELEVANT RECORD. THE ASSESSEE ADMITT ED THE INCOME FROM MUTUAL FUND AS BUSINESS INCOME WHEREAS THE AO TREATED THE SAID INCOME FROM OTHER SOURCES. 11. THE AO WHILE DECIDING THE ISSUE AS RELIED UPON THE ORDER PASSED U/S 263 FOR THE ASSESSMENT YEAR 2000- 01. WE NOTE THAT THIS TRIBUNAL IN ASSESSEES OWN CASE IN I TA NO.1398/MUM/ HAS CONSIDERED AND DECIDED THE ISSUE REGARDING THE INCOME FROM SHARE ACTIVITY UNDER TAKE N BY THE ASSESSEE AS BUSINESS INCOME. SINCE THE ISSUE OF B ADALA ACTIVITY HAS BEEN BANNED BY THE SEBI, THEREFORE TH E ASSESSEE STARTED PURCHASE AND SALE OF MUTUAL FUNDS UNITS. IN ANY CASE, THE AO HAS DECIDED THE ISSUE BY FOLLOWING THE ORDE R FOR THE ASSESSMENT YEAR 2000-01 WHICH HAS BEEN FINALLY DECI DED BY ITA NO. 1142/MUM/2009 ITA NO. 1579/MUM/2009 6 THIS TRIBUNAL IN FAVOUR OF THE ASSESSEE. THOUGH T HE CIT(A) HAS FOLLOWED THE ORDER OF THE CIT(A) FOR THE ASSES SMENT YEAR 2003-04. HOWEVER, DURING THE ASSESSMENT PROCEEDINGS FOR THE ASSESSMENT YEAR 2003-04, WE FIND THAT THE AO HAS N OT MADE ANY ADDITION ON THIS ACCOUNT. THE AO HAS DISCUSSED THIS ISSUE IN THE ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 200 3-04 AS UNDER : 3. TRADING IN SECURITIES (MUTUAL FUND) THIS ACTIVITY COMMENCED WITH THE INITIAL CORPUS SET APART FROM THAT ACTIVITY. THE OPERATIONS HAVE THEI R OWN ASSOCIATED BUSINESS RISKS AND APPRAISALS. THE ACTIVITY REQUIRES ANALYSIS AND MONITORING OF RIGHT FUNDS OF ACCEPTANCE NON-ACCEPTANCE. THE ACTIVITY ALSO INVOLVES MONITORING OF LIMITS APPLICABLE TO DIFFERE NT FUNDS AS ALSO THE FLOOR RATE OF RETURN. DURING THE YEAR UNDER ASSESSMENT. EVEREST HAS TRADED IN MUTUAL FUND UNITS DETAILS OF SUCH TRADING ARE ALREADY SUBMITTE D TO YOU. THE TOTAL AMOUNT OF UNITS HELD BY EVEREST AS AT 31 ST MARCH 2003 IS RS.1,00,00,000/-. THERE IS NO FURTHER EXPENDITURE ON MUTUAL FUND. . (IV) THE ASSESSEE HAS PURCHASED MUTUAL FUND DURING HE YEAR AND SHOWN THE SAME AS STOCK IN TRAD E. THE SAME WERE PURCHASED ON 21.09.2002 AND SHOWN AT THE END OF THE YEAR AS CLOSING STOCK. THERE WAS NO OTHER ACTIVITY RELATING TO THE SAME, BUT JUST A MER E PURCHASE ON A RESPECTIVE DATE, THEREFORE, THE SAME DOES NOT CONSTITUTE A BUSINESS ACTIVITY AND THE ASSESSEE HAS ALREADY STATED THAT NO EXPENSES ARE ATTRIBUTABLE TO THE SAME AS IT BEING A SINGLE DAY TRANSACTIONS. THEREFORE, THIS CLAIM OF THE ASSESSE E SO AS TO CONSIDER THE SAME AS BUSINESS ACTIVITY IS REJECTED AND AS THERE ARE NO EXPENSES ATTRIBUTABLE AS STATED BY THE ASSESSEE, SO THERE CANNOT BE BUSINES S LOSS TO THE ASSESSEE, AS THE STOCK IN TRADE EVEN I N VALUE REFLECTS THE ONLY COST OF PURCHASE DURING TH E YEAR. THEREFORE, ON ACCOUNT OF THE ABOVE PURCHASE OF MUTUAL FUND, NO LOSS AS CLAIMED BY THE ASSESSEE IN THE RETURN OF INCOME CAN BE ALLOWED ACCORDINGLY ITA NO. 1142/MUM/2009 ITA NO. 1579/MUM/2009 7 12. WE FURTHER NOTE THAT THE COMPUTATION OF INCOME THE AO WORKED OUT THE TOTAL INCOME AS UNDER : 7. IN VIEW OF THE ABOVE, THE INCOME OF THE ASSESSEE IS WORKED OUT AS UNDER : BAD DEBTS RECEIVED BY ASSESSEE U/S 41(4) RS.3,25,000 INCOME FROM OTHER SOURCES INTEREST RECEIVED CONSULTANCY INCOME 2,69,593 1,00,000 RS.3,69,593 REVISED TOTAL INCOME RS.6,94,593/- ROUNDED OFF TO RS.6,94,590/- 13. FROM THE WORKING OF THE AO FOR COMPUTING THE TOTAL INCOME OF THE ASSESSEE IT IS CLEAR THAT NO ADDITION WAS MADE ON THIS ACCOUNT FOR THE ASSESSMENT YEAR 2003-04 AN D THEREFORE THERE WAS NO OCCASION FOR THE ASSESSEE TO FURTHER CHALLENGE THE ORDER ON THIS ISSUE. EVEN OTHERWISE WHEN THE AO FOR THE ASSESSMENT YEAR UNDER CONSIDERATION HAS FOLLOWED THE ORDER FOR THE ASSESSMENT YEAR 2000-01 THEN IN V IEW OF THE DECISION OF THE TRIBUNAL ON THIS ISSUE, WE DECIDE T HIS ISSUE IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. ITA NO. 1142/MUM/2009 ITA NO. 1579/MUM/2009 8 14. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED AND THE APPEAL BY THE ASSESSEE IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 11 TH, MARCH 2011 SD SD (R.S.SYAL) (VIJ AY PAL RAO) ACCOUNTANT MEMBER JUDIC IAL MEMBER MUMBAI, ON THIS 11 TH DAY OF MARCH, 2011 SRL:8311 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT CONCERNED 4. CIT(A) CONCERNED 5. DR CONCERNED BENCH BY ORDER TRUE COPY ASSTT. REGISTRAR, ITAT, MUMBAI