P PRAMOD JAIN, CHENNAI V. JCIT RANGE VI (NOW DCIT NON CORPORATE CIRCLE 9 ), CHENNAI

ITA 1480/CHNY/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 1020 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 4 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-09-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2011-2012
• Appeal Filed On: 02-05-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: R HELEN RU JESINDHA JCIT
• Assessee Lawyers: T N SEETHARAMAN
• Keywords: Business income; Charitable institution; Rule of consistency
• Section: 143(3); 56(2)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, C BENCH : CHENNAI , . , [BEFORE SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY , JUDICIAL MEMBER ] !' ./I.T.A. NO.1480/CHNY/2018. #$% &$ / ASSESSMENT YEAR : 2011-2012 SHRI. P. PRAMOD JAIN, NO170, TRIPLICANE HIGH ROAD, CHENNAI 600 005. VS. THE JOINT COMMISSIONER OF INCOME TAX, RANGE VII (NOW DEPUTY COMMISSIONER OF INCOME TAX, NON CORPORATE CIRCLE 9) CHENNAI. [PAN ALGPP 6786R] ( / APPELLANT) ( /RESPONDENT) !' '( ) * / APPELLANT BY : SHRI. T.N. SEETHARAMAN, ADV +,'( ) * /RESPONDENT BY : MS. R. HELEN RUBY JESINDHA, JCIT. # - ) . /DATE OF HEARING : 04-09-2019 /0&% ) . /DATE OF PRONOUNCEMENT : 10-09-2019 / O R D E R PER INTURI RAMA RAO, ACCOUNTANT MEMBER THIS IS AN APPEAL FILED BY THE ASSESSEE DIRECTED AG AINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEAL S)-10, CHENNAI (CIT(A) FOR SHORT) DATED 30.01.2018 FOR THE ASSES SMENT YEAR (AY) 2011-2012. ITA NO1480/2018 :- 2 -: 2. THE ASSESSEE RAISED THE FOLLOWING GROUNDS OF APPEAL : 1. THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER TREA TING THE INTEREST INCOME EARNED BY THE APPELLANT AS INCOME FROM OTHER SOURCES INSTEAD OF BUSINESS. 2. THE COMMISSIONER (APPEALS) IS NOT RIGHT IN HOLDI NG THAT ADVANCING OF MONIES TO RELATED PARTIES AND EARNING INTEREST INCOME THEREFROM DOES NOT CONSTITUTE BUSINESS ACTIV ITY AND THE INCOME SO EARNED IS NOT BUSINESS INCOME BUT WOU LD BE INTEREST FROM OTHER SOURCES. 3. THE COMMISSIONER (APPEALS) FAILED TO APPRECIATE THAT IN THE SCRUTINY ASSESSMENTS IN THE APPELLANTS CASE FO R THE PRIOR ASSESSMENT YEAR 2009-10 THE NATURE OF BUSINESS (IN COME) HAS BEEN HELD BY THE ASSESSING OFFICER TO BE INVES TMENTS AND FINANCIAL ACTIVITIES AND THERE BEING NO DIFFERENCE /CHANGE IN FACTS FROM THAT YEAR THERE WAS NO JUSTIFICATION FOR THE PRESENT INCUMBENT ASSESSING OFFICER / COMMISSIONER (APPEALS ) TO TAKE A CONTRARY / INCONSISTENT VIEW IN THE IMPUGNED ASSE SSMENT YEAR. 4. THE COMMISSIONER (APPEALS) ERRED IN INCORRECTLY INTERPRETING THE PROVISIONS OF SECTION 56(2) (SIC) AND HOLDING THAT INTEREST INCOME IS TO BE CHARGED PRIMARILY UND ER THE HEAD INCOME FROM OTHER SOURCES AND, ALTERNATELY, UNDER THE HEAD BUSINESS; THE APPELLANT IS ADVISED TO RESP ECTFULLY SUBMIT THAT THE COMMISSIONER (APPEALS) REASONING IN THIS REGARD IS AGAINST THE SCHEME OF THE ACT AND IS FLAW ED. 5. THE COMMISSIONER (APPEALS) ERRED IN UPHOLDING TH E ASSESSING OFFICERS ACTION IN DENYING THE DEDUCTION CLAIMED U/S 35(1)(II) AND 35AC OF THE ACT FOR THE REASON TH AT THE APPELLANT DOES NOT SATISFY THE REQUIREMENT OF HAVIN G INCOME UNDER THE HEAD BUSINESS. 6. THE APPELLANT SUBMITS THAT CONSEQUENT UPON HIS CONTENTION THAT THE INTEREST INCOME DERIVED BY HIM IS ASSESSABLE UNDER THE HEAD BUSINESS HE IS ELIGIBLE FOR THE DEDUCTION U/S 35(1)(II) AND 35AC OF THE ACT AS CLAI MED. 7. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING THE APPELLANT PRAYS THAT THE HONBL E TRIBUNAL BE PLEASED TO ALLOW THE APPEAL AND RENDER JUSTICE . ITA NO1480/2018 :- 3 -: 3. THE BRIEF FACTS OF THE CASE ARE AS UNDER: THE APPELLANT IS AN INDIVIDUAL DERIVING INCOME UND ER THE HEADS INCOME FROM HOUSE PROPERTY AND INCOME FROM OTHE R SOURCES. THE RETURN OF INCOME FOR THE AY 2011-12 WAS FILED ON 30 .09.2011 DISCLOSING TOTAL INCOME OF RS. 65,25,970/-. AGAINST THE SAID RETURN OF INCOME, THE ASSESSMENT WAS COMPLETED BY THE JOINT COMMISSIONER OF INCOME TAX, RANGE-VII, CHENNAI VIDE ORDER DATED 31.03.2014 PAS SED U/S. 143(3) OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT) D ECLARING TOTAL INCOME OF RS.76,44,130/-. WHILE DOING SO, INTEREST INCOME EARNED FROM LENDING MONEY WAS ASSESSED TO TAX UNDER THE HEAD IN COME FROM OTHER SOURCES AS AGAINST CLAIM OF THE ASSESSEE THAT IT IS BUSINESS INCOME. FURTHER, ASSESSING OFFICER ALSO THE DISALLOWED THE CLAIM FOR DEDUCTION U/S.35AC OF THE ACT IN RESPECT OF CONTRIBUTION MADE TO SINGHVI CHARITABLE TRUST ON THE GROUND THAT ASSESSEE HAD NO T DERIVED ANY INCOME UNDER THE HEAD BUSINESS. 4. BEING AGGRIEVED BY THE ABOVE ADDITIONS, AN APPEAL W AS PREFERRED BEFORE LD. CIT(A), WHO VIDE IMPUGNED ORDE R CONFIRMED THE ACTION OF THE ASSESSING OFFICER. HOWEVER, DIRECT ED THE ASSESSING OFFICER TO EXAMINE THE ELIGIBILITY OF DEDUCTION U/ S.80GGA OF THE ACT AGAINST THE CLAIM OF THE ASSESSEE U/S.35AC OF THE A CT. 5. BEING AGGRIEVED BY THE ORDER OF THE CIT(A), THE AP PELLANT IS IN APPEAL BEFORE US IN THE PRESENT APPEAL. IT IS S UBMITTED THAT INCOME ITA NO1480/2018 :- 4 -: HAD BEEN ASSESSED TO TAX IN THE EARLIER YEARS UNDE R THE HEAD INCOME FROM BUSINESS AND THERE IS NO CHANGE OF FACTS FROM THE EARLIER YEARS AND THEREFORE FOLLOWING THE PRINCIPLE OF CONSISTENC Y, INTEREST INCOME EARNED SHOULD BE ASSESSED UNDER THE HEAD INCOME FR OM BUSINESS, HE PLACED RELIANCE ON THE DECISION OF CO-ORDINATE BENC H OF THE TRIBUNAL IN THE CASE OF ACIT VS. S. VINODH KUMAR IN ITA NO.25 27/CHNY/2017, DATED 05.04.2018 FOR ASSESSMENT YEAR 2011-2012 WHER E IDENTICAL FACTS WERE INVOLVED. 6. ON THE OTHER HAND, THE LD. SR. DEPARTMENTAL REPRESE NTATIVE PLACED RELIANCE ON THE ORDERS OF LOWER AUTHORITIES. 7. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATE RIAL ON RECORD. THE GROUNDS OF APPEAL NO.1 TO 4 RELATES WH ETHER INTEREST INCOME EARNED SHOULD BE ASSESSED UNDER THE HEAD INCOME FROM BUSINESS OR INCOME FROM OTHER SOURCES. ADMI TTEDLY, INTEREST INCOME WAS EARNED BY THE ASSESSEE FROM THE FOLLOWIN G PARTIES. SL. NO INTEREST RECEIVED FROM AMOUNT (IN J) 1 S. PRASANCHAND JAIN 9,48,856/- 2 N.SUGALCHAND JAIN 25,176/- 3 SIYAT HOLDINGS PVT. LTD 52,99,084/- 4 BOB SB A/C. 2,292/- 5 HDFC 1,177/- TOTAL 62,76,585/- THE QUESTION THAT ARISES FOR CONSIDERATION IS WHET HER INTEREST INCOME EARNED SHOULD BE ASSESSED UNDER THE HEAD INCOME FROM BUSINESS OR ITA NO1480/2018 :- 5 -: UNDER THE HEAD INCOME FROM OTHER SOURCES. ADMI TTEDLY, INTEREST INCOME WAS EARNED FROM THE RELATED PARTIES EXCEPT F ROM THE SB ACCOUNT. IN ORDER TO CONSTITUTE BUSINESS THERE MU ST BE ACTIVITY CARRIED ON CONTINUOUSLY AND SYSTEMATICALLY BY A PERSON BY APPLICATION OF LABOUR AND SKILL WITH A VIEW TO EARN INCOME. RELIAN CE CAN BE PLACED ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE O F BARENDRA PRASAD RAY AND OTHERS VS. ITO (1981) 129 ITR 295 . IN THE PRESENT CASE, IT IS EVIDENT THAT THERE IS NO CONTINUOUS ACTIVITY OF LE NDING AND IN FACT THE MONEY WERE ADVANCED TO RELATED PARTIES PROBABLY NO T WITH MOTIVE OF EARNING INTEREST INCOME. NOTHING WAS BROUGHT ON RE CORD SHOWING THAT ASSESSEE IS GRANTED LICENSE OF MONEY LENDING BUSINE SS. THERE IS NO ORGANIZED ACTIVITY CARRIED ON BY THE ASSESSEE. RAT IO OF THE DECISION OF THE CO-ORDINATE IN THE CASE OF S. VINDOH KUMAR (SUP RA) CANNOT BE APPLIED TO THE FACTS OF THE PRESENT CASE AS THE DEC ISION OF THE SAID CASE IS BASED ON PREVAIL THAT IN EARLIER YEARS INTEREST WAS ASSESSED UNDER THE HEAD INCOME FROM BUSINESS, FOLLOWING PRINCI PLE OF CONSISTENCY, THE CO-ORDINATE BENCH HELD THAT INTEREST INCOME SHO ULD BE ASSESSED UNDER THE HEAD BUSINESS INCOME. WHEREAS IN THE PRESENT CASE, PRINCIPLE OF CONSISTENCY HAS NO APPLICATION. THERE IS NOTHING ON RECORD TO DEMONSTRATE THAT IN THE EARLIER YEARS INTEREST I NCOME WAS ASSESSED UNDER THE HEAD FROM INCOME FROM BUSINESS. THU S, GROUNDS OF APPEAL NO. 1 TO 4 OF THE ASSESSEE STAND DISMISSED. ITA NO1480/2018 :- 6 -: 8. GROUNDS 5 & 6 CHALLENGES DISALLOWANCE OF CLAIM FOR DEDUCTION U/S.35AC OF THE ACT. IN THE PRECEDING PA RA, WE HELD THAT INTEREST INCOME IS ASSESSABLE UNDER THE HEAD INC OME FROM OTHER SOURCES AND IN THE ABSENCE OF ANY INCOME FROM BUS INESS, CLAIM FOR DEDUCTION U/S.35AC OF THE ACT CANNOT BE ALLOWED. THUS, GROUNDS OF APPEAL NO. 5 & 6 OF THE ASSESSEE ALSO STAND DISMI SSED. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS D ISMISSED. ORDER PRONOUNCED ON 10TH DAY OF SEPTEMBER, 2019, AT CHENNAI. SD/- SD/- ( . ! ) (DUVVURU RL REDDY) ' # /JUDICIAL MEMBER ( ) (INTURI RAMA RAO) /ACCOUNTANT MEMBER 1 #- / CHENNAI 2# / DATED:10 TH SEPTEMBER, 2019. KV 3 ) +.4 5' !6 5&. / COPY TO: 1 . !' '( / APPELLANT 3. 7. (!' ) / CIT(A) 5. 5 :; +.#< / DR 2. +,'( / RESPONDENT 4. 7. / CIT 6. ;$ =- / GF