ACIT 12(3), MUMBAI V. SOPARIWALA EXPORTS, MUMBAI

ITA 164/MUM/2009

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 3829 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-11-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 07-01-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 09-01-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D SONGATE
• Assessee Lawyers: DR K SHIVARAM
• Keywords: Notional interest

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E : MUMBAI BEFORE SHRI D.K. AGARWAL, (JM) AND SHRI R.K. PAND A,(AM) ITA NO.164/MUM/2009 ASSESSMENT YEAR : 2005-06 ASSTT. COMMISSIONER OF INCOME TAX -12(3) ROOM NO.121, AAYAKAR BHAVAN M.K. ROAD MUMBAI-20. ..( APPELLANT ) VS. M/S. SOPARIWALA EXPORTS 21-A, NIRMAL NARIMAN POINT MUMBAI-21. ..( RESPONDENT ) P.A. NO. (AACFS 6325 E) C.O. NO.152/MUM/2009 ARISING OUT OF ITA NO.164/MUM/2009 ASSESSMENT YEAR : 2005-06 M/S. SOPARIWALA EXPORTS 21-A, NIRMAL NARIMAN POINT MUMBAI-21. ..( CROSS OBJECTOR) VS. ASSTT. COMMISSIONER OF INCOME TAX -12(3) ROOM NO.121, AAYAKAR BHAVAN M.K. ROAD MUMBAI-20. ..( RESPONDENT ) DEPARTMENT BY : SH RI D. SONGATE ASSESSEE BY : DR. K. SHIVARAM O R D E R PER D.K. AGARWAL (JM). THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER DATED 21.10.2008 PASSED BY THE LD. CIT(A) FOR T HE ASSESSMENT ITA NO.164 & CO 152/M/09 A.Y:05-06 2 YEAR 2005-06 AGAINST WHICH THE ASSESSEE HAS FILED CROSS OBJE CTION. THE REVENUES APPEAL AND ASSESSEE'S C.O. BOTH ARE DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE ASSESSEE F IRM IS ENGAGED IN THE BUSINESS OF EXPORT OF MANUFACTURED AND TRADING GOODS I.E. TOBACCO, SPICES AND OIL SHEETS ETC., FILED RETURN DE CLARING TOTAL INCOME AT RS.9,53,40,111/-. DURING THE COURSE OF ASSESSMEN T PROCEEDING IT WAS INTERALIA OBSERVED BY THE ASSESSING OFF ICER THAT THE ASSESSEE IS HAVING INCOME FROM HOUSE PROPERTY. THE PROPER TY LOCATED AT NEELAM CENTRE, WORLI, MUMBAI HAS BEEN GIVEN TO CR EST COMMUNICATION AND FROM VISHAL INFORMATION TECHNOLOGIES LTD. IN RESPECT OF SOLARIS PROPERTY AT SAKI NAKA. THE ASSESSEE ACCE PTED SECURITY DEPOSIT AMOUNTING TO RS.11,89,500/- AND RS.6,2 4,000/- IN RESPECT OF ABOVE PROPERTIES. DURING THE COURSE OF ASSESSMEN T PROCEEDING THE ASSESSEE'S REPRESENTATIVE WAS ASKED TO STATE A S TO WHY NOTATIONAL INTEREST IN RESPECT OF THE INTEREST FREE SECUR ITY DEPOSIT RECEIVED BY THE ASSESSEE SHOULD NOT BE WORKED OUT AND A DDED TO THE RENTAL INCOME IN VIEW OF THE PROVISIONS OF SEC.23(1)(A) OF THE INCOME TAX ACT, 1961(THE ACT). IN RESPONSE IT WAS SUBMITTED BY THE ASSESSEE THAT SINCE THE ASSESSEE HAS LET OUT THE AFORESAID PROPERTI ES, THEREFORE, THE ASSESSEE FALLS WITHIN THE AMBIT OF SEC.23(1)(B) OF TH E ACT AND NOT 23(1)(A) OF THE ACT. IT WAS FURTHER SUBMITTED THAT TH E SECURITY DEPOSIT IS DEPOSITED IN THE CURRENT DEPOSIT ACCOUNT WITH THE BAN K AND UTILISED FOR THE PURPOSE OF BUSINESS AND INCOME EARNED THEREFROM IS OFFERED FOR TAXATION. FURTHER NOWHERE UNDER THE ACT IT IS STATED THAT NOTIONAL INTEREST ON SECURITY DEPOSIT SHOULD BE TREATED AS INCOME A ND CHARGED TO TAX. THE ASSESSEE WHILE RELYING ON THE DECISIONS IN CIT VS. J.K. INVESTORS (BOMBAY) LTD. (2001) 248 ITR 723 AND THE OT HER DECISION OF ITA NO.164 & CO 152/M/09 A.Y:05-06 3 THE TRIBUNAL WHEREIN IT HAS BEEN HELD THAT NOTIONAL INTEREST ON INTEREST FREE DEPOSIT RECEIVED FROM LESSEE WOULD NOT FORM PART O F ACTUAL RENT U/S.23(1)(B) OF THE ACT SUBMITTED THAT NOTIONAL INTERE ST IS NOT LIABLE TO BE ADDED IN THE RENTAL INCOME OF THE ASSESSEE. HOWEVER, THE ASSESSING OFFICER DID NOT ACCEPT THE ASSESSEE'S EXPLANATION AN D HE ADDED NOTIONAL INTEREST @ 12% WHICH HE WORKED OUT TO RS.2,17,620/- AND ADDED TO THE RENTAL INCOME SHOWN BY THE ASSESSEE RS.2 5,23,300/- AND DETERMINED THE ALV OF THE HOUSE PROPERTY AT RS.27 ,40,920/- AND AFTER DEDUCTING REPAIRS RS.8,22,276/- WORKED OUT THE I NCOME FROM PROPERTY AT RS.19,18,644/-. BESIDES THIS, THE ASSESSING OF FICER ALSO OBSERVED THAT THE ASSESSEE HAS CLAIMED FOREIGN TRAVEL EXPE NSES AT RS.90,96,716/-. HE FURTHER OBSERVED THAT THE DETAILS F ILED BY THE ASSESSEE SHOW THAT THIS EXPENDITURE INCLUDES EXPENDITURE O N TRAVEL OF PARTNERS, THEIR MAJOR SONS AND SPOUSES AND RELATIVE OF P ARTNERS. IN THE ABSENCE OF ANY SUPPORTING DETAILS IN RESPECT OF STAY, FOOD AND OTHER EXPENSES AND THE NEXUS OF THE EXPENSES RS.56,43,551 /- OUT OF RS.90,96,716/-, THE ASSESSING OFFICER DISALLOWED 25% OF TH E SAME WHICH HE WORKED OUT TO RS.14,10,888/- AND ADDED TO TH E INCOME OF THE ASSESSEE. THE ASSESSING OFFICER AFTER MAKING SOME OTHER DISALLOWANCES COMPLETED THE ASSESSMENT AT AN INCOME OF RS.9,78,89,460/- VIDE ORDER DATED 14.12.2007 PASSED U/ S.143(3) OF THE ACT. ON APPEAL, THE LD. CIT(A) WITH REGARD TO THE ADDITION OF RS.2,17,620/- TO THE PROPERTY INCOME BEING NOTIONAL I NTEREST ON SECURITY DEPOSIT FOLLOWED THE DECISION IN CIT VS. J.K. IN VESTORS (BOMBAY) LTD. (2001) 248 ITR 723 (BOM.) AND DELETED THE ADDITION MADE BY THE ASSESSING OFFICER. WITH REGARD TO THE 25% D ISALLOWANCE RS.14,10,888/- OUT OF FOREIGN TRAVEL EXPENSE, THE LD. CIT(A) RESTRICTED THE DISALLOWANCE TO 12.5% OF RS.56,43,551/-. ITA NO.164 & CO 152/M/09 A.Y:05-06 4 3. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A) T HE REVENUE IS IN APPEAL BEFORE US. 4. GROUND NO.1 (A) AND (B) ARE AGAINST THE DELETION OF ADDITION OF RS.2,17,620/- MADE ON ACCOUNT OF NOTIONAL INTEREST ON SE CURITY DEPOSIT UNDER THE HEAD INCOME FROM HOUSE PROPERTY. 5. AT THE TIME OF HEARING THE LD. DR SUPPORTS THE OR DER OF THE ASSESSING OFFICER. 6. ON THE OTHER HAND THE LD. COUNSEL FOR THE ASSESSEE SUB MITS THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE EA RLIER ORDER OF THE LD. CIT(A) AND THE TRIBUNAL IN ASSESSEE'S OWN CASE. HE ALSO PLACED ON RECORD THE COPY OF THE SAID ORDERS APPEARING AT PAGE 59 TO 67, 78- 83 AND 92-96 OF THE ASSESSEES PAPER BOOK. HE FURTHER SUBM ITS THAT RECENTLY THE HON'BLE JURISDICTIONAL HIGH COURT IN ASSESSEE' S OWN CASE FOR ASSESSMENT YEAR 2002-03 IN CIT VS. SOPARIWALA EXPOR TS IN INCOME TAX APPEAL NO.613 OF 2009 DATED 19.6.2009 FOLLOWING THE JUDGMENT IN THE CASE OF J.K. INVESTORS (BOMBAY) LTD. (SUPRA), HAS DISM ISSED THE REVENUES APPEAL. HE THEREFORE, SUBMITS THAT THE ORDER PASSED BY THE LD. CIT(A) IN DELETING THE ADDITION BE UPHELD. 7. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RI VAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND MERIT IN THE PLEA OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE ISSUE IS COVER ED AGAINST THE REVENUE AND IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE TRIBUNAL WHEREIN THE TRIBUNAL AFTER RELYING UPON THE JUDGMEN T OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. J.K. IN VESTORS (BOMBAY) LTD. 248 ITR 723(BOM.), UPHELD BY THE HONBLE APEX C OURT, HAS DELETED THE ADDITION MADE BY THE ASSESSING OFFICER. THE HON'BLE JURISDICTIONAL HIGH COURT IN ASSESSEE'S OWN CASE FOR ASSESSMENT YEAR ITA NO.164 & CO 152/M/09 A.Y:05-06 5 2002-03 HAS ALSO UPHELD THE ORDER OF THE TRIBUNAL VID E JUDGMENT DATED 19.6.2009 SUPRA. IN THE ABSENCE OF ANY DISTINGUISHING FEATURE BROUGHT ON RECORD BY THE REVENUE WE RESPECTFULLY FOLLOWING THE CONSISTENT VIEW OF THE TRIBUNAL AND HON'BLE JURISDICTIONAL HIGH COURT D ECLINE TO INTERFERE WITH THE ORDER PASSED BY THE LD. CIT(A) IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER AND ACCORDINGLY THE GROUNDS TAKEN BY THE REVENUE ARE REJECTED. 8. GROUND NO.2 IS AGAINST THE DELETION OF DISALLOWANCE OUT OF FOREIGN TRAVEL EXPENSES. 9. AT THE TIME OF HEARING THE LD. DR SUBMITS THAT FOR THE REASONS AS MENTIONED IN THE ASSESSMENT ORDER THE LD. CIT(A) WAS NOT JUSTIFIED IN ALLOWING PART RELIEF TO THE ASSESSEE . 10. ON THE OTHER HAND THE LD. COUNSEL FOR THE ASSESSEE SU PPORTS THE ORDER OF THE LD. CIT(A). 11. HAVING CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RIVA L PARTIES AND PERUSING THE MATERIAL AVAILABLE ON RECORD AND ALSO IN THE ABSENCE OF ANY BASIS FOR RESTRICTING THE DISALLOWANCE AT 25% OF RS.56,43,551/- BY THE ASSESSING OFFICER WE ARE OF THE VIEW THAT THE LD. CIT(A) AFTER CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF T HE CASE HAS RESTRICTED THE DISALLOWANCE TO 12.5% OF RS.56,43,551/-. IN THE ABSENCE OF ANY CONTRARY MATERIAL PLACED ON RECORD BY THE REVENUE AGAINST THE FINDING OF THE LD. CIT(A) WE DO NOT FIN D ANY ERROR IN THE ORDER OF THE LD. CIT(A) ON THIS ACCOUNT AND ACCORDINGLY THE GROUND TAKEN BY THE REVENUE IS REJECTED. 12. GROUND NO.3 AND 4 ARE GENERAL IN NATURE AND IN THE ABSENCE OF ANY SPECIFIC PLEA THE SAME ARE THEREFORE, REJECTED. ITA NO.164 & CO 152/M/09 A.Y:05-06 6 C.O. NO.152/MUM/2009 (BY ASSESSEE): 13. GROUND NO.1 IS IN SUPPORT OF THE ORDER OF THE LD. CIT(A) IN DELETING THE ADDITION OF NOTIONAL INTEREST OF RS.2,17 ,620/- ADDED BY THE ASSESSING OFFICER TO THE INCOME FROM THE HOUSE PROPERTY, 14. GROUND NO.2 IS AGAINST THE SUSTENANCE OF DISALLOWANCE OF 12.5% OUT OF FOREIGN TRAVELLING EXPENSES, AND 15. GROUND NO.3 IS GENERAL IN NATURE. 16. AT THE TIME OF HEARING THE LD. COUNSEL FOR THE A SSESSEE SUBMITS THAT HE IS NOT PRESSING THE GROUND NO.2, THEREFORE, TH E ASSESSEE'S C.O. MAY BE DECIDED ACCORDINGLY WHICH WAS NOT OBJECTED TO BY THE LD. DR. 17. AFTER HEARING THE RIVAL PARTIES AND PERUSING THE MATERIAL AVAILABLE ON RECORD AND IN THE ABSENCE OF ANY SUPPORTIN G MATERIAL WE KEEPING IN VIEW OF OUR FINDING RECORDED IN REVENUES APPEAL HOLD THAT THE C.OS FILED BY THE ASSESSEE DO NOT REQUIRE ANY ADJU DICATION AND ACCORDINGLY THE SAME ARE REJECTED. 18. IN THE RESULT, THE REVENUES APPEAL AND ASSESSEE'S C. O. STAND DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 19.11.2010. SD/- SD/- (R.K. PANDA) ( D.K. AGARWAL ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 19.11.2010. JV. ITA NO.164 & CO 152/M/09 A.Y:05-06 7 COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.