DESHMUKH WEAREHOUSING P. LTD, NAVI MUMBAI V. ITO 10(3)(4), MUMBAI

ITA 1210/MUM/2011

• Counselvise Citation: 121019914 RSA 2011
• Duration Of Justice: 3 year(s) 7 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-09-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 09-09-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 09-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P ITAMBAR DAS
• Assessee Lawyers: AJAY R SINGH
• Keywords: Business income; Opportunity of being heard
• Section: 143(3); 194C

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE HONBLE S/SHRI H.L. KARWA, PRESIDENT AND B. R.BASKARAN (AM) . . , . . , ./I.T.A. NO.1210/MUM/2011 ( / ASSESSMENT YEAR :2006-07) DESHMUKH WAREHOUSING PVT.LTD., 1404, G SQUARE BUSINESS PARK, PLOT NO.25 AND 26, SECTOR 30, OPP SANPADA STATION, VASHI (W), NAVI MUMBAI-400705. / VS. INCOME TAX OFFICER 10(3)(4), ROOM NO.453, 4 TH FLOOR, AAYAKAR BHAVAN, M.K.ROAD, MUMBAI-400020 ( / APPELLANT) .. ( !' / RESPONDENT) ./ $% ./ PAN/GIRNO.:AAACD4148F & / APPELLANT BY : SHRI AJAY R SINGH !' ' & /RESPONDENT BY : SHRI PITAMBAR DAS ( ) ' * + / DATE OF HEARING : 9.9.2014 ,- ' * + / DATE OF PRONOUNCEMENT : 17.9.2014 / O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 29- 11-2010 PASSED BY LD CIT(A)-22, MUMBAI AND IT RELAT ES TO THE ASSESSMENT YEAR 2006-07. 2. THE ISSUE URGED BEFORE US RELATES TO THE HEAD UN DER WHICH THE WAREHOUSING INCOME IS ASSESSABLE. 3. THE ASSESSEE IS A OWNER OF A WAREHOUSE AND IT HA S RECEIVED WAREHOUSING CHARGES FROM LETTING OF THE SPACES. TH E ASSESSEE DECLARED THE INCOME DERIVED THEREFROM UNDER THE HEAD INCOME FROM BUSINESS. HOWEVER, THE AO ASSESSED THE GROSS RECEIPTS UNDER THE HEAD INCO ME FROM BUSINESS. IN THIS I.T.A. NO.1210/MUM/2011 2 PROCESS, THE AO DID NOT ALLOW THE EXPENSES CLAIMED BY THE ASSESSEE. INSTEAD, HE ALLOWED THE STANDARD DEDUCTION OF 30% OF THE REN T U/S 24 OF THE ACT. THE AO PLACED RELIANCE ON THE DECISION RENDERED BY HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. INDIAN WAREHOUSING INDUSTRIES LTD ( 2002)(258 ITR 93). BEFORE LD CIT(A), THE ASSESSEE SUBMITTED THAT IT IS CARRYI NG ON WAREHOUSING BUSINESS SINCE PAST MANY YEARS AND THE SAID ACTIVITY IS AUTH ORIZED BY ITS MEMORANDUM OF ASSOCIATION. IT WAS FURTHER SUBMITTED THAT THE ASS ESSING OFFICER HAS BEEN MAINLY GUIDED BY THE TDS CERTIFICATES ISSUED BY THE PAYERS OF WAREHOUSE CHARGES, WHEREIN THEY HAVE DEDUCTED TAX AT SOURCE U/S 194I OF THE ACT, WHICH IS APPLICABLE FOR RENT. THE ASSESSEE ALSO SUBMITTED T HAT CERTAIN PERSONS HAVE DEDUCTED TAX AT SOURCE U/S 194C OF THE ACT ALSO. T HE ASSESSEE FURTHER SUBMITTED THAT THE TDS CERTIFICATES CANNOT BE TAKEN AS DETERM INATIVE FACTOR IN DECIDING THE ACTIVITY OF THE ASSESSEE. IT WAS FURTHER SUBMITTED THAT THE ASSESSEE IS CARRYING OUT MANY OTHER CONNECTED ACTIVITIES LIKE LOADING, U NLOADING, PROCURING OF TRANSPORT VEHICLES, RECEIPT AND DELIVERY OF MATERIALS AS PER CUSTOMERS INSTRUCTIONS, KEEPING RECORD OF MATERIALS ETC. THE ASSESSEE ALSO SUBMIT TED THAT THE DECISION RENDERED IN THE CASE OF INDIAN WAREHOUSING INDUSTRIES LTD (S UPRA) IS NOT APPLICABLE TO THE FACTS OF THE INSTANT CASE, SINCE THE ASSESSEE THERE IN HAD LET OUT THE ENTIRE BUILDING TO A SINGLE PARTY VIZ., FOOD CORPORATION O F INDIA LTD. 4. IN VIEW OF THE FRESH SUBMISSIONS MADE, THE L D CIT(A) CALLED FOR A REMAND REPORT FROM THE ASSESSING OFFICER. THE AO HOWEVER REITERATED HIS STAND IN THE REMAND REPORT ALSO. THE AO ALSO EXPRESSED THE VIEW THAT THE EXPENSES OF RS.42,34,000/- CLAIMED TO HAVE BEEN SPENT BY THE AS SESSEE IS DOUBTFUL, SINCE THE ASSESSEE HAS NOT FURNISHED ANY DETAIL OR EVIDENCE I N SUPPORT OF THE SAME. THE AO ALSO PLACED RELIANCE ON THE DECISION RENDERED BY PUNE BENCH OF TRIBUNAL IN THE CASE OF NUTAN WAREHOUSING CO. PVT LTD (2007)(10 6 TTJ 137). 5. THE LD CIT(A), HOWEVER, UPHELD THE VIEW TAKEN BY THE AO. AGGRIEVED, THE ASSESSEE HAS FILED THIS APPEAL BEFORE US. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERU SED THE RECORD. THE HONBLE BOMBAY HIGH COURT IN THE CASE OF NUTAN WAREHOUSING P LTD V DY CIT (2010) 326 ITR 94 (BOM.) HAS HELD THAT THE DETERMINATIVE F ACTOR, IN THIS TYPE OF CASES, IS THE DOMINANT PURPOSE. IT WAS FURTHER HELD THAT INC OME WOULD BE BUSINESS INCOME I.T.A. NO.1210/MUM/2011 3 IF DOMINANT OBJECT IS COMMERCIAL ACTIVITY AND IT WO ULD BE INCOME FROM HOUSE PROPERTY IF DOMINANT OBJECT WAS TO LEASE PROPERTY . IN THE INSTANT CASE, THE LD A.R SUBMITTED BEFORE US THAT THE ASSESSEE HAS BEEN CARRYING ON WAREHOUSING ACTIVITY ON COMMERCIAL BASIS FOR THE PAST SEVERAL Y EARS. HE ALSO SUBMITTED THAT THE ASSESSEE COMPANY WAS FORMED WITH THE OBJECTIVE OF CARRYING ON WAREHOUSING ACTIVITY ON COMMERCIAL BASIS. HE FURTHER SUBMITTED THAT THE ASSESSEE HAS BEEN DECLARING THE INCOME UNDER THE HEAD INCOME FROM BU SINESS ONLY AND THE SAME HAS BEEN ACCEPTED FROM AYS 1996-97 TO 2005-06 AND A LSO FROM 2007-08 TO 2012-13. HE SUBMITTED THAT THE ASSESSMENT RELATING TO AY 2008-09 (I.E. ONE OF THE SUBSEQUENT YEARS) WAS COMPLETED U/S 143(3) OF T HE ACT BY THE ASSESSING OFFICER BY ACCEPTING THE INCOME AS BUSINESS INCOME. HE FURTHER SUBMITTED THAT EVEN THOUGH THE ASSESSMENTS OF THE OTHER YEARS HAVE BEEN COMPLETED U/S 143(1)(A) OF THE ACT, SINCE THERE IS NO CHANGE IN T HE FACTS AND CIRCUMSTANCES OF THE CASE, THE AO WAS NOT JUSTIFIED IN NOT ACCEPTING THE ACTIVITY OF THE ASSESSEE AS BUSINESS ACTIVITY. ON THE CONTRARY, THE LD D.R PLA CED STRONG RELIANCE ON THE ORDER OF LD CIT(A) AND ALSO ON THE DECISION RENDERE D BY THE PUNE BENCH OF TRIBUNAL IN THE CASE OF NUTAN WAREHOUSING CO. P LTD (SUPRA). 7. HOWEVER, WE FIND SOME FORCE IN THE CONTENTIO NS OF THE ASSESSEE. THE ASSESSEES INCOME HAS BEEN ACCEPTED AS BUSINESS INC OME SINCE 1996-97 ONWARDS. EXCEPT FOR THE YEAR UNDER CONSIDERATION, IN ALL OTHER YEARS, THE INCOME DECLARED UNDER THE HEAD BUSINESS HAS NOT BEEN DISTU RBED. HENCE, WE DO NOT FIND ANY REASON FOR DEPARTING THEREFROM. FURTHER, THE CONTENTION OF THE ASSESSEE THAT IT HAS BEEN CARRYING ON WAREHOUSING ACTIVITY A S COMMERCIAL ACTIVITY HAS NOT BEEN DISPROVED. IN FACT, IN THE REMAND PROCEEDINGS , THE AO HAS ONLY STATED THAT THE ACTIVITIES CLAIMED BY THE ASSESSEE AND GENUINEN ESS OF EXPENDITURE CLAIM WERE NOT ESTABLISHED. IT IS NOT KNOWN AS TO WHETHE R THE ASSESSING OFFICER DID EXAMINE THE SAID CLAIMS DURING THE COURSE OF REMAND PROCEEDINGS. UNDER THESE CIRCUMSTANCES AND ON CONSIDERATION OF FACTS SURROUN DING THE INSTANT CASE, WE ARE UNABLE TO AGREE WITH THE VIEW EXPRESSED BY THE TAX AUTHORITIES. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD CIT(A) AND DIRECT THE ASS ESSING OFFICER TO ACCEPT THE WAREHOUSING ACTIVITY AS BUSINESS ACTIVITY OF THE AS SESSEE. I.T.A. NO.1210/MUM/2011 4 8. HOWEVER, THERE WAS NO OCCASION FOR THE AO TO EXAMINE THE EXPENDITURE CLAIMED BY THE ASSESSEE, SINCE HE HAD TREATED THE W AREHOUSING ACTIVITY AS RENTAL ACTIVITY. SINCE WE HAVE HELD IT TO BE BUSINESS ACT IVITY, IN OUR VIEW, THE AO IS REQUIRED TO EXAMINE THE EXPENDITURE CLAIMED BY THE ASSESSEE. ACCORDINGLY, FOR THE LIMITED PURPOSE OF EXAMINING THE EXPENDITURE CL AIMS, WE SET ASIDE THE MATTER TO THE FILE OF THE ASSESSING OFFICER, WHO IS DIRECT ED TO EXAMINE THE SAME AFTER AFFORDING NECESSARY OPPORTUNITY OF BEING HEARD TO T HE ASSESSEE. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSES SEE IS ALLOWED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 17TH SEPT, 2014 . ,- ( . /0 1 2 17TH SEPT , 2014 - ' 3) 4 SD SD ( . . / H.L. KARWA ) ( . . , / B.R. BASKARAN) / PRESIDENT / ACCOUNTANT MEMBER / ( ) MUMBAI : 17TH SEPT, 2014 . . . ./ SRL , SR. PS ! ' / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. !' / THE RESPONDENT. 3. ( 6* ( ) / THE CIT(A)- CONCERNED 4. ( 6* / CIT CONCERNED 5. 6. 78 3 !*9 , + 9 , / ( ) / DR, ITAT, MUMBAI CONCERNED 3 : ) / GUARD FILE. ; ( / BY ORDER, TRUE COPY < $ (ASSTT. REGISTRAR) + 9 , / ( ) /ITAT, MUMBAI