B.D. FIBRE ASSOCIATES, MUMBAI V. ACIT 16(2), MUMBAI

ITA 1156/MUM/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 4988 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 7 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-09-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2004-2005
• Appeal Filed On: 08-02-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: SURESH TALATI IZRFKHZ DH LS
• Keywords: Business income; Maximum Marginal Rate
• Section: 263

Judgement Text

M/S. B.D. FIBRE ASSOCIATES - 1 - VK;DJ VIHYH; VF/KDJ.K TH U;K;IHB EQACBZ ESAA IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUM BAI JH JKTSUNZ FLAG YS[KK LNL; ,OA JH FOT; IKY JKO] YS[ KK LNL; DS LE{K BEFORE SHRI RAJENDRA SINGH ACCOUNTANT MEMBER AND SH RI VIJAY PAL RAO JUDICIAL MEMBER VK;DJ VIHY LA[;K /ITA NO. 1156/MUM/2011 FU/KKZJ.K O'KZ @ ASSESSMENT YEAR: - 2004-05 M/S. B.D. FIBRE ASSOCIATES 32, ASHIANA NAPEANSEA ROAD, MUMBAI 26 CUKE@ VS. ASST. COMMISSIONER OF INCOME-TAX 16(2), MUMBAI. PAN:- AAATB1773B VIHYKFKHZ @ APPELLANT IZR;FKHZ @ RESPONDENT VIHYKFKHZ DH VKSJ LS @ APPELLANT BY SHRI SURESH TALATI IZR;FKHZ DH VKSJ LS @ RESPONDENT BY SHRI K.C.P. PATNAIK VKNS'K@ VKNS'K@ VKNS'K@ VKNS'K@ ORDER PER RAJENDRA SINGH, AM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 15.11.2010 OF CIT(A) FOR THE ASSESSMENT YEARS 2004- 05. THE ONLY DISPUTE RAISED BY THE ASSESSEE IN THIS APPEAL IS AS TO WHETHER THE ASSESSEE TRUST WAS ENGAGED IN THE BUSINESS IN THE BUSINESS. 2. THE FACTS IN BRIEF ARE THAT THE ASSESSEE FOR THE RELEVANT YEAR HAD FILED RETURN OF INCOME IN THE STATUS OF AOP DECLARING NIL INCOME, THOUGH THE ASSESSEE HAD RECEIVED INTEREST INCOME OF RS. 37,06,653/- AND DIVIDEND INCOME OF RS. 3,360/-. THE ASSESSEE CLAIMED THAT THE INCOME WAS A SSESSABLE IN THE HANDS OF BENEFICIARIES. THE CLAIM OF THE ASSESSEE HAD BEEN A CCEPTED BY THE AO IN THE LQUOKBZ DH RKJH[K @ DATE OF HEARING 11-09-2013 ?KKS'K.KK DH RKJH[K @ DATE OF PRONOUNCEMENT 13-09-2013 M/S. B.D. FIBRE ASSOCIATES - 2 - ORIGINAL ASSESSMENT ORDER. BUT LATER, CIT(A) INITIA TED PROCEEDINGS U/S 263 AND MATTER WAS SET ASIDE TO THE AO FOR FRESH ORDER. THE AO IN THE FRESH PROCEEDINGS ASKED THE ASSESSEE TO EXPLAIN AS TO WHY THE INCOME DECLARED BY THE ASSESSEE SHOULD NOT BE ACCEPTED AS BUSINESS INCOME AND TAXED AT THE MAXIMUM MARGINAL RATE. THE ASSESSEE EXPLAINED THAT IT HAD M ADE NO FRESH BORROWINGS AND OLD LOANS AND ADVANCES WERE COMING FROM EARLIER YEARS. THE ASSESSEE HAD STOPPED THE BUSINESS ACTIVITY AND, THEREFORE, INCOM E COULD NOT BE ASSESSED AS BUSINESS INCOME. IT WAS ALSO SUBMITTED THAT SINCE I NCOME DID NOT INCLUDE ANY PROFIT AND GAINS OF BUSINESS AND PROFESSION, THERE WAS NO QUESTION OF CHARGING THE INCOME AT MAXIMUM MARGIN RATE U/S 161(1A). AO H OWEVER DID NOT ACCEPT THE EXPLANATION GIVEN. IT WAS OBSERVED BY HIM THAT THERE WAS VARIATION IN THE AMOUNTS OF LOANS TAKEN FROM THE BANK. THE PERSON FR OM WHOM THE LOANS WERE TAKEN AND THE AMOUNTS CHARGED HAD ALSO UNDERGONE SU BSTANTIAL CHANGES AND THE PARTIES HAD ALSO CHANGED. IT WAS, THEREFORE, CL EAR THAT THERE WAS A CONTINUOUS PROCESS OR ACTIVITY. THE QUANTUM OF INTE REST ALSO KEPT ON CHANGING. INITIALLY THE CORPUS OF THE TRUST HAD BEEN CREATED WITH A MEAGRE SUM BUT WITH PASSAGE OF TIME, CORPUS INCREASED AND FUNDS WERE AL SO BORROWED AND AMOUNTS WERE GIVEN AS LOANS AND ADVANCES ON WHICH INTEREST WAS EARNED. AO, THEREFORE, CONCLUDED THAT THERE WAS AN ORGANIZED AND CONTINUOU S ACTIVITY AND INCOME, THEREFORE, HAD TO BE ASSESSED AS BUSINESS INCOME. I N APPEAL CIT(A) NOTED THAT IN THE ASSESSMENT YEAR 1998-99, INCOME OF THE ASSES SEE HAD BEEN ASSESSED AS BUSINESS INCOME WHICH WAS UPHELD BY CIT(A) AND ALSO BY INCOME-TAX APPELLATE TRIBUNAL. CIT(A), THEREFORE, FOLLOWING THE DECISION OF TRIBUNAL (SUPRA) UPHELD THE ORDER OF AO ASSESSING THE INCOME AS BUSINESS IN COME. AGGRIEVED BY THE DECISION OF CIT(A) THE ASSESSEE IS IN APPEAL BEFORE TRIBUNAL. 3. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE RECO RDS AND CONSIDERED THE MATTER CAREFULLY. THE DISPUTE IS REGARDING NATURE O F INCOME EARNED BY THE ASSESSEE FROM LOANS AND ADVANCES GIVEN TO DIFFERENT PARTIES OUT OF FUNDS MOSTLY BORROWED. WE FIND THAT THE SAME ISSUE HAD COME UP F OR CONSIDERATION BEFORE THE TRIBUNAL IN ASSESSMENT YEAR 1998-99 AND THE TRI BUNAL IN THE ORDER DATED 4.12.2006 IN ITA 3598/MUM/03 NOTED THAT THE INTERES T INCOME EARNED BY THE ASSESSEE WAS NO OUT OF INVESTMENTS AND DEPLOYMENT O F SURPLUS FUNDS BUT OUT OF THE INVESTMENT MADE FROM LOANS AND ADVANCES. THE AS SESSEE WAS BORROWING M/S. B.D. FIBRE ASSOCIATES - 3 - MONEY FROM OTHERS AND LENDING THE SAME TO SOME OTHE R PERSONS FOR MARGIN. THEREFORE, THE AUTHORITIES BELOW HAD RIGHTLY ASSESS ED THE INCOME AS BUSINESS INCOME. THE FACTS IN THE PRESENT CASE ARE IDENTICAL . THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF TRIBUNAL IN ASSESSMENT YE AR 1998-99 (SUPRA), WE SEE NO INFIRMITY IN THE ORDER OF CIT(A) ASSESSING THE I NCOME AS BUSINESS INCOME. THE ORDER OF CIT(A) IS ACCORDINGLY UPHELD. 4. IN THE RESULT APPEAL OF THE ASSESSEE IS DISMISSE D. ORDER PRONOUNCED ON 13-9-2013 SD/- SD/- (VIJAY PAL RAO) (RAJENDRA SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER SKS SR. P.S, MUMBAI DATED 13.9.2013 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR, G BENCH, ITAT, MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI