The DCIT, Circle-1(1), Baroda V. M/s. Amigo Securities Pvt.Ltd., Baroda

ITA 1532/AHD/2009

• Counselvise Citation: 153220514 RSA 2009
• Duration Of Justice: 3 year(s) 4 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-09-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 12-07-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 14-05-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ROOP CHAND
• Keywords: Business income; Depreciation; Corroborative evidences; Commercial expediency
• Section: 143(3); 14A

Judgement Text

, , , , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD , .. , '# ' $ BEFORE SHRI MUKUL KR.SHRAWAT, JUDICIAL MEMBER AND SHRI T.R. MEENA, ACCOUNTANT MEMBER ./ I.T.A. NO.1532 AND 1533/AHD/2009 ( & ' & ' & ' & ' / / / / ASSESSMENT YEARS : 2005-06 & 2006-07 ) THE DCIT CIRCLE-1(1) BARODA & & & & / VS. AMIGO SECURITIES PVT.LTD. (NOW KNOWN AS JWEWL CONSUMER CARE PVT.LTD.) SUBHHAG B-15/16, RAMIN PARK OLD PADRA ROAD BARODA ( '# ./)* ./ PAN/GIR NO. : AAACB 8634 Q ( (+ / // / APPELLANT ) .. ( ,-(+ / RESPONDENT ) (+ . ' / APPELLANT BY : SHRI ROOPCHAND SR.D.R. ,-(+ / . ' / RESPONDENT BY : SHRI S.N.SOPARKAR, SR.ADV. WITH MS. URVASHI SHODHAN &0 / # / / / / DATE OF HEARING : 12/07/2012 12' / # / DATE OF PRONOUNCEMENT : 21/09/12 '3/ O R D E R PER SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER : THESE TWO APPEALS HAVE BEEN FILED BY THE REVENUE ARISING FROM TWO SEPARATE ORDERS OF LD.CIT(A)-VADODARA BOTH IDEN TICALLY DATED 09/02/2009. IN THESE TWO APPEALS, GROUNDS RAISED BY THE REVENUE ARE IDENTICAL ARISING FROM THE COMMON FACTS, HENCE, CON SOLIDATED AND HEREBY DECIDED BY THIS COMMON ORDER. ITA NOS.1532 & 1533/AHD/2009 DCIT VS. AMIGO SECURITIES PVT.LTD. ASST.YEARS - 2005-06 & 2006-07 - 2 - 2. GROUND NO.1(A) & 1 (B) IN BOTH THE APPEALS GROU NDS ARE IDENTICALLY WORDED, REPRODUCED FROM A.Y. 2005-06 AS UNDER:- 1(A) ON THE FACTS AND CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT(A) ERRED IN HOLDING THAT THE ASSESSEE H AD SUFFICIENT NON-INTEREST BEARING FUNDS OF ITS OWN TO FUND THE INVESTMENT IN EQUITY SHARES. 1(B) THE LEARNED CIT(A) FAILED TO APPRECIATE THAT T HE FACTS BEING IN THE SPECIAL KNOWLEDGE OF THE ASSESSEE, THE ONUS U/S.36(1)(III) BY VIRTUE OF SECTION 106 BY THE INDI AN EVIDENCE ACT, WAS ON THE ASSESSEE TO PROVE THAT ALL THE BORR OWINGS WERE USED FOR THE PURPOSE OF THE BUSINESS AND THAT THE PARKING OF INTEREST-FREE FUNDS WITH THE ASSOCIATE C ONCERN WAS FOR BUSINESS PURPOSE, AS SETTLED IN THE CASE OF CIT VS. ABHISHEK INDUSTRIES LTD. 286 ITR-01 (P&H). 2.1. FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDI NG ASSESSMENT ORDERS FOR A.YS. 2005-06 & 2006-07 BOTH PASSED U/S. 143(3) RESPECTIVELY DATED 20.12.2007 AND 4.12.2008 WERE THAT THE ASSESS EE IS IN THE BUSINESS OF NON-BANKING FINANCIAL ACTIVITIES. FOR A.Y. 2005 -06, THE ASSESSEE HAS CLAIMED INTEREST EXPENDITURE OF RS.9,87,358/- AND L IKEWISE IN A.Y. 2006- 07, THE CLAIM OF INTEREST EXPENDITURE WAS RS.21,15, 720/-. IN BRIEF, THE ISSUE WAS THAT THE ASSESSEE HAS ADVANCED ITS OWN IN TEREST-FREE FUNDS TOWARDS INTEREST FREE-LOANS OF RS.97,71,407/- TO IT S GROUP COMPANIES AND ALSO INVESTED FUNDS OF RS.7,57,50,210/- AS A LONG T ERM INVESTMENT IN EQUITY SHARES, AS NOTED IN A.Y. 2005-06 BY THE ASSE SSING OFFICER. THE OBJECTION OF THE ASSESSING OFFICER WAS THAT HAD THE ASSESSEE NOT DIVERTED ITS OWN INTEREST-FREE FUNDS, THEN THE ASSESSEE WOUL D NOT BE IN A NEED TO BORROW INTEREST-BEARING FUNDS. AFTER DISCUSSING FE W CASE LAWS, THE ASSESSING OFFICER HAS HELD THAT THE INTEREST EXPEND ITURE AS CLAIMED WAS NOT ALLOWABLE EXPENDITURE WITHIN THE MEANING OF PRO VISIONS OF SECTION ITA NOS.1532 & 1533/AHD/2009 DCIT VS. AMIGO SECURITIES PVT.LTD. ASST.YEARS - 2005-06 & 2006-07 - 3 - 36(1)(III) OF THE I.T.ACT. FOR A.Y. 2005-06 A DISA LLOWANCE OF RS.9,87,358/- WAS MADE. LIKEWISE FOR A.Y. 2006-07, THE ASSESSING OFFICER HAS MADE A DISALLOWANCE OF RS.11,66,452/-. BEING AGGRIEVED FOR BOTH THE YEARS, THE MATTER WAS CARRIED BEFORE T HE LD.CIT(A). 3. AFTER DETAILED DISCUSSION, LD.CIT(A) HAS HELD AS UNDER:- 3.3.1 IT IS, THEREFORE, TO BE SEEN WHETHER THE COMM ERCIAL INTEREST OF THE ASSESSEE WAS FURTHERED BY ADVANCING THE LOAN AS AFORESAID. IN SO FAR AS IT CONCERNS THE INTEREST-FREE ADVANCES TO THE GROUP COMPANIES, IT IS OBSERVED THAT THE APPELLANT-COMPAN Y IS AN INVESTOR IN THE SAID COMPANIES AND THAT THE ADVANCE S WERE FOR THE BUSINESS NEEDS OF THE SUCH COMPANIES, WHICH EVIDENT LY SUB-SERVES THE INTEREST OF THE ENTIRE GROUP INCLUDING THAT OF THE ASSESSEE, AND THE ELEMENT OF COMMERCIAL EXPEDIENCY CAN HENCE BE S AID TO BE PRESENT IN THE TRANSACTION. FOLLOWING THE RATIO OF THE SUPREME COURTS DECISION IN S.A.BUILDERS LTD., I AM OF THE OPINION THAT THE ADVANCES MADE BY THE ASSESSEE TO ITS GROUP COMPANIE S WERE FOR BUSINESS PURPOSE. REGARDING THE ALTERNATE GROUND O F THE ASSESSEE, IT IS SEEN THAT THE BALANCE OF THE SHARE CAPITAL AN D RESERVES AND INTEREST FREE DEPOSITS AND ADVANCES AVAILABLE WITH THE COMPANY WERE RS.1988.26 LACS. ON THE OTHER HAND, INTEREST- FREE ADVANCES TO GROUP CONCERNS WERE MERELY RS.97.71 LACS. FOLLO WING THE RATIO OF THE SUPREME COURTS DECISION IN MUNJAL SALES COR PORATION, I AM OF THE OPINION THAT IT CAN BE PRESUMED THAT THE INTEREST-FREE ADVANCE TO GROUP COMPANIES WAS MADE OUT OF ITS OWN FUNDS AND HENCE DISALLOWANCE OF INTEREST U/S.36(1)(III) IS NO T SUSTAINABLE. 3.3.2 AS TO WHETHER INVESTMENT IN SHARES COULD BE S AID TO BE FOR NON-BUSINESS PURPOSES, IT IS PERTINENT TO NOTE THAT THE OBJECTIVE OF INVESTMENT IS TO GENERATE INCOME. INVESTMENT IN EQ UITY SHARES BEING INCOME GENERATING ASSETS, CANNOT BE ANY STRET CH OF IMAGINATION BE CALLED DIVERSION OF FUNDS FOR NON-BU SINESS PURPOSE. THE ISSUE IS NOT WHETHER FUNDS WERE DIVERTED FOR NO N-BUSINESS PURPOSES, BUT WHETHER A DISALLOWANCE UNDER SECTION 14A WOULD BE JUSTIFIED. THE ITAT DELHI BENCH, IN THE CASE OF MA RUTI UDYOG LTD. V. DCIT, 92 ITD 119, HAS LAID DOWN THE PRINCIPLE TH AT WHERE ITA NOS.1532 & 1533/AHD/2009 DCIT VS. AMIGO SECURITIES PVT.LTD. ASST.YEARS - 2005-06 & 2006-07 - 4 - SUFFICIENT OWN FUNDS OF THE ASSESSEE WERE AVAILABLE FOR MAKING INVESTMENT, IT CANNOT BE ASSUMED THAT ANY PART OF T HE INVESTMENT PRODUCING THE TAX-FREE INCOME MUST HAVE BEEN MADE F ROM BORROWED FUNDS UNLESS THERE WAS EVIDENCE TO SHOW TH AT ANY SPECIFIC INVESTMENT HAD BEEN MADE FROM BORROWED FUN DS. SIMILAR VIEW HAS ALSO BEEN TAKEN IN ACIT V. EICHER LTD., 10 1 TTJ 369 (DELHI ITAT), WHEREIN IT WAS HELD THAT NO DISALLOWA NCE U/S.14A SHALL BE MADE WITHOUT PINPOINTING ANY EXPENDITURE O N THE BASIS OF MATERIAL AVAILABLE ON RECORD TO SHOW THAT SUCH EXPE NDITURE WAS DIRECTLY RELATABLE TO OR INCURRED IN EARNING THE TA X-FREE INCOME AND NOTHING COULD BE DISALLOWED U/S.14A ON AN ESTIMATED BASIS. SIMILARLY, THE MUMBAI TRIBUNAL IN THE CASE OF FAZE THREE EXPORTS LTD. VS. ADDL. CIT (ITA NOS.7701 AND 4677/MUM/2004 AND 2005, AFTER HAVING CONSIDERED THE DECISION OF THE SUPREME COURT IN MUNJAL SALES CORPN. V. CIT, 298 ITR 298, HAS HELD T HAT WHERE THE ASSESSEE WAS ABLE TO SHOW EARNINGS MORE THAN THE AM OUNT OF INVESTMENT MADE, THE AO WAS NOT JUSTIFIED IN HAVING DISALLOWED INTEREST U/S.14A. IN THE INSTANT CASE THE APPELLAN T HAD SUFFICIENT NON-INTEREST BEARING FUNDS OF ITS OWN TO FUND THE I NVESTMENT IN EQUITY SHARES. ACCORDINGLY, IT IS HELD THAT THE A. O WAS NOT JUSTIFIED IN MAKING DISALLOWANCE OF INTEREST ON ACCOUNT OF IN VESTMENT IN EQUITY SHARES, AND THE DISALLOWANCE OF RS.9,87,358/ - IS DIRECTED TO BE DELETED. 4. EVEN WHILE DECIDING APPEAL FOR A.Y. 2006-07 THE ADDITION WAS DELETED IN THE FOLLOWING MANNER:- 3.2 I HAVE CONSIDERED THE SUBMISSIONS OF THE LD.A. R. AND THE FACTS OF THE CASE. INVESTMENT IN EQUITY SHARES BEI NG INCOME GENERATING ASSETS, CANNOT BY ANY STRETCH OF IMAGINA TION BE CALLED DIVERSION OF FUNDS FOR NON-BUSINESS PURPOSE. THE I SSUE IS NOT WHETHER FUNDS WERE DIVERTED FOR NON-BUSINESS PURPOS ES, BUT WHETHER A DISALLOWANCE UNDER SECTION 14A WOULD BE J USTIFIED. THE ITAT DELHI BENCH, IN THE CASE OF MARTUI UDYOG LTD. V. DCIT, 92 ITD 119, HAS LID DOWN THE PRINCIPLE THAT WHERE SUFF ICIENT OWN FUNDS OF THE ASSESSEE WERE AVAILABLE FOR MAKING INV ESTMENT, IT CANNOT BE ASSUMED THAT ANY PART OF THE INVESTMENT P RODUCING THE TAX-FREE INCOME MUST HAVE BEEN MADE FROM BORROWED F UNDS UNLESS THERE WAS EVIDENCE TO SHOW THAT ANY SPECIFIC INVEST MENT HAD BEEN MADE FROM BORROWED FUNDS. SIMILAR VIEW HAS ALSO BE EN TAKEN IN ITA NOS.1532 & 1533/AHD/2009 DCIT VS. AMIGO SECURITIES PVT.LTD. ASST.YEARS - 2005-06 & 2006-07 - 5 - ACIT V. EICHER LTD. 101 TTJ 369 (DELHI ITAT), WHERE IN IT WAS HELD THAT NO DISALLOWANCE U/S 14A SHALL BE MADE WITHOUT PINPOINTING ANY EXPENDITURE ON THE BASIS OF MATERIAL AVAILABLE ON RECORD TO SHOW THAT SUCH EXPENDITURE WAS DIRECTLY RELATABLE T O OR INCURRED IN EARNING THE TAX-FREE INCOME AND NOTHING COULD BE DI SALLOWED U/S14A ON AN ESTIMATED BASIS. SIMILARLY, THE MUMBA I TRIBUNAL IN THE CASE OF FAZE THREE EXPORTS LTD. V. ADDL.CIT (IT A NOS.7701 AND 4677/MUM/2004 AND 2005, AFTER HAVING CONSIDERED THE DECISION OF THE HON.SUPREME COURT IN MUNJAL SALES CORPN. V. CIT 298 ITR 298, HAS HELD THAT WHERE THE ASSESSEE WAS ABLE TO S HOW EARNINGS MORE THAN THE AMOUNT OF INVESTMENT MADE, THE AO WAS NOT JUSTIFIED IN HAVING DISALLOWED INTEREST U/S14A. FURTHER, RUL E 8D, WHICH IS RELIED UPON THE AO, WAS INTRODUCED ONLY IN PURSUANC E TO THE INTRODUCTION OF SUB-SECTIONS (2) AND (3) TO SECTION 14A BY THE FINANCE ACT, 2006 WITH EFFECT FROM AY 2007-08. TH E SAID PROVISIONS WERE ENACTED WITH PROSPECTIVE EFFECT. H ENCE, THE RELIANCE PLACED BY THE AO ON THE SAID RULE FOR MAK ING DISALLOWANCE IS MISPLACED AS THE SAID RULE WOULD BE EFFECTIVE ONLY FROM AY 2007-08 AND WO0ULD HAVE NO APPLICATION IN T HE PRESENT CASE, WHICH PERTAINS TO AY 2006-07. FURTHER, IN T HE INSTANT CASE THE APPELLANT HAD SUFFICIENT NON-INTEREST BEARING F UNDS OF ITS OWN TO FUND THE INVESTMENT IN EQUITY SHARES. ACCORDINGLY, IT IS HELD THAT THE A.O WAS NOT JUSTIFIED IN MAKING DISALLOWANCE OF INTERST ON ACCOUNT OF INVESTMENT IN EQUITY SHARES, AND THE DIS ALLOWANCE OF INTEREST OF RS.11,66,452/- IS DIRECTED TO BE DELETE D. 5. WE HAVE HEARD BOTH THE SIDES AT SOME LENGTH. WE HAVE ALSO PERUSED THE CASE-LAWS CITED AND THE CONNECTED FACTS WITH SUPPORTING EVIDENCES AS PLACED IN A SHORT COMPILATION BEFORE U S. BEFORE US, A DECISION OF ITAT B BENCH AHMEDABAD IN ITA NO.1241 /AHD/2006 (A.Y. 2002-03) TILTED AS ASST.CIT VS. GMM PFAULDER LTD.) VIDE ORDER DATED 11/2/11 IS CITED, WHEREIN ALMOST IN IDENTICA L CIRCUMSTANCES THE TRIBUNAL HAS HELD AS UNDER:- 14. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND P ERUSED THE MATERIAL 'ON RECORD. IN OUR CONSIDERED VIEW, THE MA TTER WOULD GO TO THE ITA NOS.1532 & 1533/AHD/2009 DCIT VS. AMIGO SECURITIES PVT.LTD. ASST.YEARS - 2005-06 & 2006-07 - 6 - FILE OF AO AS PER THE DECISION OF HON. BOMBAY HIGH COURT IN THE CASE OF GODREJ BOYCE MFG. CO. LTD. (SUPRA) ONLY WHEN IT IS HELD THAT SOME AMOUNT IS REQUIRED TO DISALLOWED AS THERE IS A NEXU S BETWEEN THE EXEMPTED INCOME C AND INVESTMENT, I.E. IF REVENUE I S ABLE TO SHOW THAT INTEREST BEARING CAPITAL HAS BEEN INVESTED IN SHARE S BUT WHERE NO SUCH NEXUS IS ESTABLISHED THE QUESTION OF DETERMINING AN Y DISALLOWANCE DOES NOT ARISE AND, THEREFORE, MATTER NEED NOT BE SENT T O THE FILE OF AO AS NO DETERMINATION OF ANY DISALLOWANCE WOULD BE NECESSAR Y. IN THE PRESENT CASE WE NOTICE THAT LOAN FUNDS HAVE DECREASED THIS YEAR AS COMPARED TO EARLIER YEARS. EVEN THOUGH INVESTMENTS HAVE INCREAS ED FROM RS.940.32 LACS TO RS.1008.51 LACS BUT SUCH INCREASE IN INVEST MENT CANNOT BE LINKED TO ANY BORROWED FUNDS THIS YEAR AS ASSESSEE HAS IN FACT NOT BORROWED ANY ADDITIONAL FUND THIS YEAR. PRIOR TO THE DECISIO N OF HON. SUPREME COURT IN THE CASE OF HON'BLE SUPREME COURT IN S.A. BUILDERS VS. CIT 288 ITR 1(SC) ONUS WAS CONSIDERED ON THE ASSESSEE T O SHOW THE NEXUS BETWEEN THE INTEREST FREE FUNDS AND INVESTMENT ON W HICH NO INCOME IS EARNED. AFTER S.A. BUILDER'S CASE (SUPRA) ONUS IS C ONSIDERED SHIFTED TO THE REVENUE AND AO HAS TO SHOW THAT INTEREST BEARIN G CAPITAL ALONE WERE INVESTED IN INVESTMENT ON WHICH NO INCOME WAS EARNED. HON. SUPREME COURT IN THE CASE OF MUNJAL SALES CORPORATI ON VS. CIT (2008) 298 ITR 298 (SC) HELD WHERE ASSESSEE HAD SUFFICIENT PROFITS IN THE CURRENT YEAR THEN INTEREST FREE ADVANCES CAN BE CON SIDERED TO BE FLOWING FROM SUCH PROFITS. HON'BLE BOMBAY HIGH COURT IN CIT VS. RELIANCE UTILITIES & POWER LTD. (2009) 313 ITR 340 (BOM) HEL D THAT IF THERE ARE FUND AVAILABLE BOTH INTEREST FREE AND INTEREST BEAR ING, THEN A PRESUMPTION ARISE THAT INVESTMENT WERE OUT OF INTER EST FREE FUNDS GENERATED OR AVAILABLE WITH THE ASSESSEE. IF THE IN TEREST FREE FUNDS WERE SUFFICIENT TO MEET THE INVESTMENT NO DISALLOWANCE O F INTEREST PAID ON BORROWED FUNDS WOULD BE NECESSARY. ONCE SUCH PRESUM PTION IS ESTABLISHED CLAIM OF INTEREST WAS ALLOWABLE. 15. THERE IS ANOTHER ASPECT OF THE MATTER. IF THE ASSESSEE HAS MADE INVESTMENT IN SUBSIDIARIES OUT OF MIXED FUNDS AND F OR COMMERCIAL EXPEDIENCY THEN NO INTEREST OUT OF PAYMENT MADE ON BORROWED FUNDS CAN BE DISALLOWED AS HELD IN S. A. BUILDERS LTD. VS. CI T (2007) 288 ITR 1 (SC). HON'BLE PUNJAB & HARYANA HIGH COURT IN CIT VS . HERO CYCLES LTD. (2010) 323 ITR 518 (P & H) HELD THAT NO DISALL OWANCE OUT OF INTEREST PAYMENT IS PERMISSIBLE IF AO DOES NOT ESTA BLISH NEXUS BETWEEN THE EXPENDITURE INCURRED AND INCOME GENERATED. 6. IN THE LIGHT OF THE ABOVE DISCUSSION, WE ARE OF THE VIEW THAT SINCE THE ASSESSEE HAS DEMONSTRATED THAT THERE WAS SUFFIC IENT RESERVES, SHARE ITA NOS.1532 & 1533/AHD/2009 DCIT VS. AMIGO SECURITIES PVT.LTD. ASST.YEARS - 2005-06 & 2006-07 - 7 - CAPITAL AND INTEREST-FREE ADVANCES STATED TO BE TO THE TUNE OF RS.1988.26 LACS IN A.Y. 2005-06 AND RS.1827.39 LACS FOR A.Y. 2 006-07, THEN THE DECISION OF THE CIT VS. RELIANCE UTILITIES AND POWE R LTD. 313 ITR 340 (BOM.) IS TO BE APPLIED ON THESE FACTS. RESULTANTL Y, WE HEREBY CONFIRM THE FINDINGS OF THE LD.CIT(A) AND DISMISS THESE GRO UNDS OF THE REVENUE FOR BOTH THE YEARS. 7. NEXT GROUNDS OF THE REVENUE ARE ALSO IDENTICALLY WORDED FOR BOTH THE YEARS; REPRODUCED FROM A.Y. 2005-06 AS UNDER:- 2(A) ON THE ACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN H9OLDING THAT THE INCOME AS SESSABLE UNDER THE HEAD BUSINESS AND PROFESSION AS AGAINST INCOME FROM HOUSE PROPERTY AS HELD BY THE AO, WITHOUT APPR ECIATING THE FACT THAT THE OWNER OF THE HOUSE PROPERTY WHO A LLOWS THE USE OF HIS PROPERTY TO AN OUTSIDER AND IN TURN WAS PAID ANY AMOUNT IS CHARGEABLE UNDER THE HEAD INCOME FROM HO USE PROPERTY. (B) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) IGNORED THE DECISION OF THE HON.APEX COURT IN THE CASE OF MC DOWELL AND CO.LTD. VS. CTO 154 IT R 148, 171 (SC) WHICH IS REITERATED IN THE CASE OF UNION O F INDIA VS. AZADI BACHAO ADOLANA 263 ITR 706 (SC) ARE THE OUTCO ME TO DETER THE ARTFUL AND NIMBLE LOGICS OF THE ASSESSEES MAKING DEVICES TO DECEIVE THE INTEREST OF THE REVENUE. 8. THE ASSESSING OFFICER HAS NOTED THAT IN RESPECT OF PROPERTY; NAMELY SUBHAAG, B-15/16 RAMIN PARK, OLD PADRA ROA D, THE ASSESSEE HAS SHOWN THE INCOME AS BUSINESS INCOME. HOWEVER, THE ASSESSING OFFICER HAS TAKEN A VIEW THAT THE INCOME FROM THE S AID PROPERTY WAS TO BE ASSESSED UNDER THE HEAD INCOME FROM HOUSE PROPERTY . IN THIS REGARD, ITA NOS.1532 & 1533/AHD/2009 DCIT VS. AMIGO SECURITIES PVT.LTD. ASST.YEARS - 2005-06 & 2006-07 - 8 - THE EXPLANATION OF THE ASSESSEE WAS THAT THE ASSES SEE-COMPANY HAS PROVIDED OFFICE SPACE WITH SUPPORTING SERVICES, SUC H AS, FURNITURE & FIXTURE, GAS & ELECTRICITY, COMMON INFORMATION TECH NOLOGY, INTERIOR DECORATION, ETC. THE ASSESSEE HAS ALSO FURNISHED A GREEMENTS AND EXPLAINED THAT THE ASSESSEE HAS ACTED AS AN OFFICE SPACE PROVIDER AND FOR THAT HE HAS CHARGED OFFICE SPACE SERVICE CHARGES. HOWEVER, THE ASSESSING OFFICER WAS NOT CONVINCED AND TAXED THE AMOUNT UNDE R THE HEAD HOUSE PROPERTY INCOME AFTER ALLOWING ONLY ADMISSIBLE DED UCTIONS. FOR BOTH THE YEARS, THE MATTER WAS CARRIED BEFORE THE LD.CIT (A) WHO HAS GIVEN HIS VERDICT IN FAVOUR OF THE ASSESSEE IN THE FOLLOWING MANNER:- 4.2. I HAVE CONSIDERED THE SUBMISSIONS OF THE LD.A .R. AND THE FACTS OF THE CASE. I FIND THAT ISSUE REGARDING TAXABILITY O F COMPOSITE CHARGES HAS BEEN EXAMINED IN DETAIL BY THE ITAT, CALCUTTA BENCH IN PFH MALL & RETAIL MANAGEMENT LTD. VS ITO, 16 SOT 83. THE TRIB UNAL REFERRED TO THE DECISION OF GUJARAT HIGH COURT IN THE CASE OF A CIT VS SAPTARSHI SERVICES LTD, 265 ITR 379, WHEREIN IT WAS HELD THAT WHERE THE ASSESSEE PROVIDES COMPOSITE SERVICES BY WAY OF OFFICE SPACE, EPABX, LIFT, SECRETARIAL SERVICES, DATA PROCESSING, CONFERENCE R OOM, COMMERCIAL SECURITY, ETC., THE ASSESSEE IN REALITY PROVIDES A WORKING PLACE FOR DOING BUSINESS WITH THE ATTENDANT FACILITIES, AND THEREFO RE WHAT THE APPELLANT EARNS THEREBY WOULD BE INCOME ASSESSABLE UNDER THE HEAD BUSINESS AND PROFESSION. ALONG THE SAME LINE, THE CALCUTTA ITAT BENCH HAS HELD AS UNDER:- AFTER CAREFULLY ANALYZING THE FACTS OF THE INSTANT CASE, AND FOLLOWING THE CONSENSUS OF JUDICIAL OPINION ON THE ISSUE, OUR CONSIDERED VIEW IS THAT, THE MERE FACT THAT THE INCOME IS ATTACHED TO IMMOVABLE PROPERTY, CANNOT BE THE SOLE CRITERION FOR ASSESSMENT OF SUCH INCOME AS INCOME FROM HOUSE PROPERTY. IT IS NECESSARY TO DIG FURTHE R TO FIND OUT WHAT IS THE PRIMARY OBJECT OF THE ASSESSEE WHILE EXPLOITING THE PROPERTY. IF IT IS FOUND, THAT THE MAIN INTENTION IS FOR SIMPLY LETTIN G OUT OF PROPERTY OR ANY PORTION THEREOF, THE RESULTANT INCOME MUST BE ASSES SED AS INCOME FROM HOUSE PROPERTY. IF, ON THE OTHER HAND, THE MAIN IN TENTION IS FOUND TO BE THE EXPLOITATION OF THE IMMOVABLE PROPERTY BY WAY O F COMMERCIAL ACTIVITIES, THEN THE RESULTANT INCOME MUST BE HELD AS BUSINESS INCOME. ITA NOS.1532 & 1533/AHD/2009 DCIT VS. AMIGO SECURITIES PVT.LTD. ASST.YEARS - 2005-06 & 2006-07 - 9 - IN THE INSTANT CASE, WE FOUND THAT SERVICES RENDERE D BY THE ASSESSEE WERE THE RESULT OF ITS ACTIVITIES CARRIED ON CONTIN UOUSLY IN AN ORGANIZED MANNER WITH A SET PURPOSE AND WITH A VIEW TO EARN P ROFIT. HENCE, ALL THESE ACTIVITIES ARE IN THE NATURE OF COMMERCIAL AC TIVITIES. ACCORDINGLY WE HOLD THAT THE INCOME DERIVED BY THE ASSESSEE FRO M SHOPPING MALLS/BUSINESS CENTRES IS TO BE ASSESSED AS BUSINES S INCOME AND NOT AS INCOME FROM HOUSE PROPERTY. 4.3. THE FACTS IN THE INSTANT CASE ARE IDENTICAL TO THOSE CONSIDERED BY THE ITAT IN PFH MALL & RETAIL MANAGEMENT LTD., AND BY THE GUJARAT HIGH COURT IN THE SAPTARSHI SERVICES LTD. HERE TOO THE ASSESSEE IS PROVIDING COMPOSITE SERVICES BY WAY OF OFFICE SPACE , EPABX, LIFT, SECRETARIAL SERVICES, DATA PROCESSING CONFERENCE RO OM, COMMERCIAL SECURITY, HOUSEKEEPING, ETC. HENCE, FOLLOWING THE DECISIONS OF THE GUJARAT HIGH COURT AND THE ITAT, CALCUTTA BENCH IN THE CASES CITED ABOVE, IT IS HELD THAT THE INCOME OF RS.27,06,000/- WAS ASSESSABLE AS BUSINESS INCOME AND NOT HOUSE PROPERTY INCOME. THE AO IS DIRECTED TO RE-COMPUTE THE INCOME OF THE ASSESSEE ACCORDINGLY. 9. HAVING HEARD THE SUBMISSIONS OF BOTH THE SIDES A ND CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE , SINCE THE ASSESSEE HAS ESTABLISHED THAT THE PROPERTY WAS NOT HIRED OUT TO EARN RENT SIMPLICITOR BUT CHARGES WERE RECEIVED TOWARDS COMPOSITE SERVICES PR OVIDED FROM THE LESSEE AND LESSEE COMPANY IS STATED TO BE RUNNING A CORPORATE OFFICE FROM THE SAID PREMISES UTILIZING THE FACILITY OF INFRAST RUCTURE, AIR-CONDITIONER, OFFICE FURNITURE, INFORMATION TECHNOLOGY, LIFT, ETC . AS PROVIDED BY THIS ASSESSEE, THEREFORE, WE HEREBY CONFIRM THE VIEW OF LD.CIT(A) THAT THE INCOME IN QUESTION WAS TO BE ASSESSED AS BUSINESS INCOME. RESULTANTLY, GROUNDS RAISED BY THE REVENUE ARE HERE BY DISMISSED FOR BOTH THE YEARS. 10. FOR BOTH THE YEARS, REVENUE HAS RAISED A RESIDU ARY GROUND; REPRODUCED BELOW (FROM A.Y. 2005-06):- 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LEARNED CIT(A) HELD THAT THE INCOME TO BE BUSINESS INCOME ITA NOS.1532 & 1533/AHD/2009 DCIT VS. AMIGO SECURITIES PVT.LTD. ASST.YEARS - 2005-06 & 2006-07 - 10 - AS AGAINST INCOME FROM HOUSE PROPERTY AND ACCORDING LY ALLOWED DEPRECIATION OF RS.49,05,491/- AND OTHER E XPENSES OF RS.13,41,742/- WITHOUT APPRECIATING THE FACTS TH AT THE ASSESSEE WAS NOT ELIGIBLE FOR CLAIM OF EXPENDITURE AS WELL AS DEPRECIATION. 10.1. SINCE A VIEW HAS ALREADY BEEN TAKEN IN FAV OUR OF THE ASSESSEE, THEREFORE IN CONSEQUENCE THEREOF, THIS GROUND OF TH E REVENUE DO NOT SURVIVE, HENCE DISMISSED. 11. IN THE RESULT, BOTH THE APPEALS ARE DISMISSED. SD/- SD/- ( .. ) ( ) '# ( T.R. MEENA ) ( MUKUL KR. SHRAWAT ) ACCOUNTANT MEMBER JUDICIAL ME MBER AHMEDABAD; DATED 21/ 09 /2012 ..&, .&../ T.C. NAIR, SR. PS '3 / ,4 5'4' '3 / ,4 5'4' '3 / ,4 5'4' '3 / ,4 5'4'/ COPY OF THE ORDER FORWARDED TO : 1. (+ / THE APPELLANT 2. ,-(+ / THE RESPONDENT. 3. 6 / CONCERNED CIT 4. 6() / THE CIT(A)-I, BARODA 5. 49: ,& , , / DR, ITAT, AHMEDABAD 6. :; <0 / GUARD FILE. '3& '3& '3& '3& / BY ORDER, -4 , //TRUE COPY// = == =/ // / ) ) ) ) ( DY./ASSTT.REGISTRAR) , , , , / ITAT, AHMEDABAD