The ITO, Ward-4(1), Baroda V. M/s Mani Market Creators Ltd., Baroda

ITA 1774/AHD/2009

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 9180 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-09-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 28-08-2009
• Assessment Year: 2006-2007
• Appeal Filed On: 28-05-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C K MISHRA
• Keywords: Set aside

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER AND SHRI D.C.AGRAWAL, ACCOUNTANT MEMBER DATE OF HEARING : 28/08/09 DRAFTED ON: 01/ 08/09 1. ITA NO.1774/AHD/2009 2. ITA NO.1775/AHD/2009 ASSESSMENT YEAR : 2006-07 1. THE ITO WARD-4(1) BARODA 2. DO- VS. 1. M/S.MANI MARKET CREATORS LTD. CREATIVE CASTLE 70, SAMPATRAO COLONY ALKA PURI, BARODA PAN : AABCM 3440 J 2. M/S.MARKET CREATORS LTD. CREATIVE CASTLE 70, SAMPATRAO COLONY, BARODA PAN:AABCM 3439 R (APPELLANT) .. (RESPONDENTS) ASSESSEES BY: MS. URVASHI SHODHAN, AR REVENUE BY: SHRI C.K.MISHRA, SR.DR O R D E R PER D.C.AGRAWAL , ACCOUNTANT MEMBER :- THESE ARE THE APPEALS FILED BY THE REVENUE AGAINS T THE ORDERS OF THE LEARNED CIT(APPEALS)-III, BARODA BOTH DATED 16/03/2009, BY RAISING FOLLOWING COMMON GROUNDS IN ITS APPEALS:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS IN DIRECTIN G THAT INCOME SHOWN BY THE ASSESSEE AS SHARE INCOME ITA NOS.177 4 & 1775/AHD/2009 ITO VS. M/S. MANI MARKET CREATORS LTD & MARKET CREATORS LTD. RESPECTIVELY ASST.YEAR -2006-07 - 2 - FROM THE AOP OF THE JOINT VENTURE FLOATED BY THE ASSESSEE COMPANY AND MONEY MARKET CREATORS LTD. BE ASSESSED AS SUCH AND BE COMPUTED AS PER PROVISIONS OF SECTION 67A AND 86 OF THE INCOME TAX ACT, 1961, AND THEREBY GIVING CONSEQUENTIAL RELIEF IN ALLOWING EXPE NSES DISALLOWED BY THE ASSESSING OFFICER. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ORDE R OF THE ASSESSING OFFICER. 3. THE APPELLANT CRAVES LEAVE TO ADD TO, AMEND OR ALTER THE ABOVE GROUNDS AS MAY BE DEEMED NECESSARY. RELIEF CLAIMED IN APPEAL(S) THE ORDER OF THE CIT(A) ON THE ISSUES RAISED IN THE AF ORESAID GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSES SEE IS A MEMBER OF JOINT VENTURE BETWEEN ITSELF I.E. M/S.MAN I MARKET CREATORS LTD. (IN SHORT MMCL) AND M/S.MARKET CRE ATORS LTD. (IN SHORT MCL). THE RETURN(S) OF INCOME WAS FI LED BY THEM IN THE STATUS OF AOP BEING JOINT VENTURE BETWEEN MCL & MMCL. THE INDIVIDUAL ASSESSEES WERE EARLIER ASSESSED AS A COMPANY. SEVERAL ADDITIONS WERE MADE WHILE COMPUTING THEIR TAXABLE INCOME. SUBSEQUENTLY, INDIVIDUAL ASSESSEES, MCL A ND MMCL CHANGED THE STATUS AS A MEMBER OF AOP. BUT THIS CH ANGE WAS NOT ACCEPTED BY THE DEPARTMENT AND THESE ASSESS EES ITA NOS.177 4 & 1775/AHD/2009 ITO VS. M/S. MANI MARKET CREATORS LTD & MARKET CREATORS LTD. RESPECTIVELY ASST.YEAR -2006-07 - 3 - WERE CONTINUED TO BE ASSESSED AS COMPANY AS INDEPEN DENT ENTITY. THE ASSESSING OFFICER NOTED THAT JOINT VEN TURE WAS CREATED ONLY TO SET OFF INCOME OF ONE COMPANY AGAIN ST LOSS OF ANOTHER. AS BOTH THE COMPANIES HAVE THEIR SEPARATE BUSINESSES, THE QUESTION OF HOLDING THAT THERE IS J OINT VENTURE COULD NOT ARISE. THUS, CREATION OF AOP, I.E. JOINT VENTURE WAS TREATED AS A COLOURABLE DEVICE WITH ULTERIOR MOTIVE OF PAYING NIL TAX. THE ASSESSING OFFICER TOOK THIS POSITION RIGHT FROM ASSESSMENT YEAR 1995-96 TILL THE ASSESSMENT YEAR 20 05-06 EXCEPT ASSESSMENT YEARS 1999-2000 & 2000-01 WHERE ASSESSEES RETURNS WERE ACCEPTED U/S.143(1) OF THE I.T. ACT, 1961. THE SIMPLE ISSUE IS NOW WHETHER THE ASSESSEE SHOULD BE ASSESSED AS A MEMBER OF AOP OR AS A COMPANY INDEPENDENTLY FUNCTIONING. 3. WE HAVE HEARD THE LD. DEPARTMENTAL REPRESENTATIV E AND LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESS EE(S). THE ISSUE HAD COME UP BEFORE THE ITAT BENCH D (BY WAY OF ITA NOS.2375 & 2376 & OTHERS ORDER DATED 30/0 9/2008) IN ASSESSEES OWN CASE FOR ASSESSMENT YEARS 1995-96 TO 1998-99 ITA NOS.177 4 & 1775/AHD/2009 ITO VS. M/S. MANI MARKET CREATORS LTD & MARKET CREATORS LTD. RESPECTIVELY ASST.YEAR -2006-07 - 4 - AND 2003-04 & 2004-05 AND ALSO IN ASSESSMENT YEAR 2005-06, WHEREIN THE CLAIM OF THE ASSESSEE AS A MEMBER OF J OINT VENTURE HAS BEEN ACCEPTED. FOR THE SAKE OF CONVEN IENCE, WE REPRODUCE THE RELEVANT PARAGRAPH NO.7 OF THE TRI BUNAL ORDER, AS UNDER:- 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL AV AILABLE ON RECORD. IT IS OBSERVED THAT THE ASSESSEE COMPANY HAS CLAIMED ITSELF TO BE A MEMBER OF AOP NAMELY JOINT V ENTURE OF MMCL AND MCL. THE A.O HAS NOT ACCEPTED THE STATU S OF AOP AND, THEREFORE, NOT ACCEPTED THE SHARE INCOME DISCLOSED BY THE ASSESSEE FROM THE SAID AOP BUT TRE ATED THE SAME AS SEPARATE INCOME OF THE ASSESSEE COMPANY AND IN COMPUTING THE SAID INCOME ALSO MADE DISALLOW ANCE OF CERTAIN EXPENDITURE. WE FIND THAT THIS TRIBUNAL, IN THE CASE OF AOP NAMELY JOINT VENTURE OF MMCL AND MCL, V IDE ORDER DATED 23.5.2008, IN THE APPEAL IN ITA NO.1953/AHD./2001, HAS ACCEPTED THE STATUS OF THE A OP. IN VIEW OF THIS, THE ORDER OF THE LD. CIT(A) DIRECT ING THE A.O TO NOT TO TAX THE INCOME FROM THE ACTIVITIES DO NE IN ITA NOS.177 4 & 1775/AHD/2009 ITO VS. M/S. MANI MARKET CREATORS LTD & MARKET CREATORS LTD. RESPECTIVELY ASST.YEAR -2006-07 - 5 - THE NAME OF AOP IN THE HANDS OF THE ASSESSEE COMPAN Y REQUIRES NO INTERFERENCE. THEREFORE, THIS GROUND OF APPEAL OF THE REVENUE IS REJECTED. 4. RESPECTFULLY FOLLOWING THE AFORESAID ORDER OF TH E TRIBUNAL, WE ALLOW THE ISSUE IN FAVOUR OF THE ASSESSEE AND D ISMISS THE GROUND OF REVENUES APPEAL(S). 5. THE NEXT GROUND IN APPEALS IS WITH REGARD TO A LLOWANCE OF EXPENSES. THIS ISSUE IS ALSO COVERED IN FAVO UR OF THE ASSESSEE AS PER FINDINGS CONTAINED IN PARAGRAPH NO. 11 OF THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR A SSESSMENT YEARS 1995-96 TO 1998-99 AND 2003-04 & 2004-05 AS U NDER: 11. A FTER HEARING THE RIVAL SUBMISSIONS AND ON PERUSAL OF THE ORDERS OF THE LOWER AUTHORITIES AND THE MATE RIAL AVAILABLE ON RECORD, WE FIND THAT THE DISALLOWANCES OF VARIOUS EXPENSES WAS MADE BY THE A.O ON THE GROUND THAT HE TREATED THE ACTIVITIES OF AOP AS THE ACTIVITIES OF THE ASSESSEE COMPANY AND, THEREFORE, THE INCOME AND EXPENDITURE OF THE AOP AS THE INCOME AND EXPENDITUR E OF ITA NOS.177 4 & 1775/AHD/2009 ITO VS. M/S. MANI MARKET CREATORS LTD & MARKET CREATORS LTD. RESPECTIVELY ASST.YEAR -2006-07 - 6 - THE ASSESSEE COMPANY. IN VIEW OF OUR DECISION IN RE SPECT OF GROUND NO.1 CITED SUPRA, THE INCOME AS WELL AS T HE EXPENDITURE IS TO BE CONSIDERED IN THE HANDS OF THE AOP. SINCE THE ASSESSEE COMPANY HAS NOT CLAIMED ANY EXPENDITURE OUT OF WHICH DISALLOWANCE IN QUESTION C OULD BE MADE, WE FIND NO INFIRMITY IN THE IN THE ORDER PASS ED BY THE LD. CIT(A) WHICH IS CONFIRMED. THIS GROUND OF A PPEAL IS, THUS, DISMISSED 6. RESPECTFULLY FOLLOWING THE AFORESAID ORDER OF T HE TRIBUNAL, WE ALLOW THE CLAIM OF THE ASSESSEE AND DI SMISS THE APPEAL OF THE REVENUE. 7. IN THE RESULT BOTH THE APPEALS OF THE REVENUE AR E DISMISSED. ORDER SIGNED, DATED AND PRONOUNCED IN THE COURT ON 04/09/2009. SD/- SD/- ( MAHAVIR SINGH ) ( D.C.AGRAWAL ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 04/ 09 /2009 T.C. NAIR ITA NOS.177 4 & 1775/AHD/2009 ITO VS. M/S. MANI MARKET CREATORS LTD & MARKET CREATORS LTD. RESPECTIVELY ASST.YEAR -2006-07 - 7 - COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS)-III, BARODA 5. THE DR, AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT.REGISTRAR), ITAT, AHMEDABAD