Leo Edibles & Fats Limited , Hyderabad V. Asst. Commissioner of Income Tax, Circle-16(1), Hyderabad

ITA 1225/Hyd/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 2396 (ITAT-HYDERABAD)
• Duration Of Justice: 7 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-03-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB-B
• Next Hearing Date: 28-01-2020
• Assessment Year: 2016-2017
• Appeal Filed On: 06-08-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R.S. ARVIND DAKSHAN
• Keywords: Business income; Business expenditure; Revenue expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B : HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER I.T.A. NO. 1225/HYD/2019 ASSESSMENT YEAR: 2016-17 M/S.LEO EDIBLES & FATS LIMITED, HYDERABAD [PAN: AAACL4123E] VS ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-16(1), HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI A.V.RAGHU RAM, AR FOR REVENUE : SHRI R.S.ARVIND DAKSHAN, DR DATE OF HEARING : 28-01-2020 DATE OF PRONOUNCEMENT : 18-03-2020 O R D E R PER SMT. P. MADHAVI DEVI, J.M. : THIS IS ASSESSEES APPEAL FOR THE AY.2016-17, DIREC TED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-4, HYDERABAD, DATED 17-06-2019. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE-COMPAN Y, WHICH IS ENGAGED IN THE BUSINESS OF TRADING IN EDIBL E OILS, FILED ITS RETURN OF INCOME ON 22-09-2016, ADMITTING TOTAL INCOM E OF RS.59,31,120/- AND BOOK PROFIT OF RS.58,73,828/- U/S .115JB OF THE INCOME TAX ACT [ACT]. 3. DURING THE ASSESSMENT PROCEEDINGS U/S.143(3) OF TH E ACT, THE ASSESSING OFFICER (AO) OBSERVED THAT THERE WAS NO BUSINESS ACTIVITY CARRIED OUT BY THE ASSESSEE DURING THE ITA NO. 1225/HYD/2019 :- 2 -: RELEVANT PREVIOUS YEAR AND THAT IT HAS ADMITTED INTEREST IN COME OF RS.69,24,427/- AND RENTAL INCOME OF RS.9,93,750/- AND AGAINST THE INTEREST INCOME, THE ASSESSEE HAS CLAIMED B USINESS EXPENDITURE OF RS.16,72,191/- AND COMPUTED BUSINESS INCOME OF RS.52,52,236/-. THE AO OBSERVED THAT THE INTEREST INCOME IS TO BE TREATED AS INCOME FROM OTHER SOURCES AND THE REFORE DID NOT ALLOW THE SET-OFF OF BUSINESS EXPENDITURE AND BROUGHT THE INTEREST INCOME TO TAX. 3.1. AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A), WHO CONFIRMED THE ORDER OF AO, AGAINST WHICH, THE ASS ESSEE IS IN SECOND APPEAL BEFORE US, BY RAISING THE FOLLOWING GROUNDS: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-4, HYDERABAD, IS ERRONEOUS AND UNSUSTAINABLE IN LAW. 2. THE COMMISSIONER (APPEALS) ERRED IN UPHOLDING TH E ACTION OF THE AO IN TREATING THE INTEREST INCOME OF RS.69,24,427 AS INCOME UNDER THE HEAD 'INCOME FROM OTHER SOURCES' RATHER THAN BU SINESS INCOME. 3. THE AUTHORITIES BELOW FAILED TO APPRECIATE THAT THE APPELLANT INEVITABLY MAINTAIN TERM DEPOSITS WITH BANKS ON ACC OUNT OF BUSINESS EXIGENCY AND THE INTEREST EARNED ON SUCH TERM DEPOS ITS BEING DIRECTLY CONNECTED TO THE BUSINESS OPERATIONS SHOULD HAVE BE EN TREATED AS BUSINESS INCOME. 4. WITHOUT PREJUDICE TO THE ABOVE GROUNDS, THE AUTH ORITIES BELOW OUGHT NOT TO HAVE IGNORED THE EXPENDITURE OF RS.16, 72,191 INCURRED FOR THE BUSINESS PURPOSE AND WHICH IS REVENUE IN NA TURE. THE AUTHORITIES BELOW OUGHT TO HAVE ARRIVED AT BUSINESS LOSS AND SHOULD HAVE GIVEN SET OFF OF SUCH LOSS AGAINST THE INTERES T INCOME ASSESSED UNDER THE HEAD 'INCOME FROM OTHER SOURCES'. 4. LD.COUNSEL FOR THE ASSESSEE WHILE REITERATING THE SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES, SUBMITT ED THAT EVEN IF THE INTEREST INCOME IS TO BE TREATED AS INCOME F ROM OTHER SOURCES; THE BUSINESS LOSS WHICH HAS BEEN ARRI VED AT ITA NO. 1225/HYD/2019 :- 3 -: HAS TO BE SET-OFF AGAINST THE INCOME FROM OTHER SOURCES , AS PROVIDED U/S.71 OF THE ACT AS INTRA-HEAD ADJUSTMENTS AR E ALLOWED UNDER THE ACT. 5. THE LEARNED DR, ON THE OTHER HAND, SUPPORTED THE ORD ERS OF THE AUTHORITIES BELOW. 6. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE MATERI AL ON RECORD, WE FIND THAT THE ASSESSEE HAS INCURRED THE EXPENDITURE OF FINANCE COST, AUDITORS REMUNERATION, L EGAL AND PROFESSIONAL CHARGES, BANK COMMISSION & CHARGES, BU ILDING MAINTENANCE AND OTHER EXPENSES. THUS, IT CAN BE SEEN TH AT THESE EXPENSES ARE REQUIRED BY THE ASSESSEE FOR MAIN TAINING ITS STATUS AS A COMPANY AND THEREFORE, THEY ARE ALLOWABLE AS REVENUE EXPENDITURE. BY TAKING INTO CONSIDERATION THESE EXPENSES, THE BUSINESS INCOME OF THE ASSESSEE WOULD B E LOSS AND U/S 71 OF THE I.T. ACT, THE LOSS UNDER ONE HEAD CA N BE SET OFF AGAINST THE INCOME FROM ANOTHER HEAD OTHER THAN CAPI TAL GAINS. THEREFORE, WE DIRECT THE AO TO COMPUTE THE BUSINE SS INCOME OF THE ASSESSEE AND ALLOW TO SET OFF THE SAME FR OM THE INCOME FROM OTHER SOURCES. 7. IN THE RESULT, THE APPEAL OF ASSESSEE IS TREATED AS P ARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 18 TH MARCH, 2020 SD/- SD/ - ( A. MOHAN ALANKAMONY ) ( P. MADHAVI DEVI ) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED: 18-03-2020 TNMM ITA NO. 1225/HYD/2019 :- 4 -: COPY TO : 1. M/S.LEO EDIBLES & FATS LIMITED, FLAT NO.203, DIA MOND HOUSE, PANJAGUTTA, KHAIRATABAD, HYDERABAD. 2. THE ASST. COMMISSIONER OF INCOME TAX, CIRCLE-16( 1), HYDERABAD. 3. CIT(APPEALS)-4, HYDERABAD. 4. THE PR.CIT-4, HYDERABAD. 5. D.R. ITAT, HYDERABAD. 6. GUARD FILE.