NEW ERA FABRICS LTD, MUMBAI V. DCIT CIR 7(1), MUMBAI

ITA 1788/MUM/2009

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 79046 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 2 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-06-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 10-06-2014
• Assessment Year: 2002-2003
• Appeal Filed On: 19-03-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PITAMBAR DAS
• Assessee Lawyers: VISHWAL V MEHENDALE
• Keywords: Business income; Business expenditure; Opportunity of being heard
• Section: 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH B BENCH, MUMBAI BEFORE SHRI SANJAY ARORA, ACCOUNTANT MEMBER AND DR. S.T.M.PAVALAN, JUDICIAL MEMBER ITA NO.1788/MUM/2009 (ASSESSMENT YEAR: 2002-03) NEW ERA FABRICS LTD. NEW ERA HOUSE, MOGUL LANE, MATUNGA (W) MUMBAI-400 016 VS. DCIT CIR 7(1) AAYAKAR BHAVAN, MUMBAI PAN : AAACN4337Q ( APPELLAN T) ( RESPONDENT ) ITA NO.1598/MUM/2009 (ASSESSMENT YEAR: 2002-03) DCIT CIR 7(1) AAYAKAR BHAVAN, MUMBAI VS. NEW ERA FABRICS LTD. NEW ERA HOUSE, MOGUL LANE, MATUNGA (W) MUMBAI-400 016 PAN : AEGPJ2393M ( APPELLAN T) ( RESPONDENT ) ASSESSEE BY : SHRI VISHWAL V. MEHENDALE REVENUE BY : SHRI PITAMBAR DAS DATE OF HEARING : 10.06.2014 DATE OF PRONOUNCEMENT : 10.06.2014 O R D E R PER DR. S.T.M. PAVALAN, JM: THESE CROSS APPEALS FILED BY THE ASSESSEE AND THE R EVENUE ARE DIRECTED AGAINST THE ORDER OF THE LD.CIT(A)-VII, MUMBAI DATED 13.12. 2008 FOR THE ASSESSMENT YEAR 2002-03. BOTH THE APPEALS ARE HEARD TOGETHER AND DI SPOSED OFF BY THIS COMMON ORDER. 2. THE COMMON ISSUE INVOLVED IN BOTH THE APPEALS RE LATES TO THE ALLOWBILITY OF VARIOUS EXPENSES CLAIMED BY THE ASSESSEE UNDER THE HEAD BUSINESS INCOME. THE ITA NOS.1788&1598/M/2009 NEW ERA FABRICS LTD. ASSESSMENT YEAR 2002-03 2 RELEVANT FACTS ARE THAT THE ASSESSEE, A COMPANY ENG AGED IN THE BUSINESS OF TEXTILE MANUFACTURING HAD INCLUDED THE RENTAL INCOME FROM HOUSE PROPERTY UNDER THE HEAD BUSINESS INCOME AND FURTHER CLAIMED VARIOUS EXPEN SES AS BUSINESS EXPENDITURE. HOWEVER, IN THE ASSESSMENT FRAMED UNDER SECTION 143 (3) READ WITH SECTION 147 OF THE INCOME TAX ACT, THE AO REDISTRIBUTED THE EXPENSES B ETWEEN THE HEADS INCOME FROM HOUSE PROPERTY AND BUSINESS INCOME AND THEREBY W ORKED OUT THE DISALLOWANCE OF THE EXPENSES CLAIMED BY THE ASSESSEE. ON APPEAL, THE LD .CIT(A), WHILE PARTLY ALLOWING THE APPEAL OF THE ASSESSEE HAS GIVEN RELIEF IN RESPECT OF CERTAIN EXPENSES CLAIMED BY THE ASSESSEE AND SUSTAINED SOME OF THE DISALLOWANCES MA DE BY THE AO. AGGRIEVED BY THE IMPUGNED ORDER, BOTH THE ASSESSEE AND THE REVENUE A RE IN CROSS APPEALS BEFORE US. 3. HAVING HEARD BOTH THE SIDES AND PERUSED THE MATE RIAL ON RECORD, IT IS PERTINENT TO MENTION THAT THE ASSESSEE TENANTED THE PORTION O F THE BUSINESS PREMISE TO TWO PARTIES NAMELY MAGNET MALL AND CNBC. THE ASSESSEE, WHILE INCLUDING THE RENTAL INCOME UNDER THE HEAD BUSINESS INCOME HAS CLAIMED THE EXPENSES INCURRED IN RELATION TO THE BUSINESS INCOME AND INCOME FROM HOU SE PROPERTY. IN THIS CONNECTION, IT IS NOTED THAT THE AO IN THE ASSESSMENT ORDER HAS SE GREGATED THE EXPENSES ON ACCOUNT OF POWER, FUEL AND WATER CHARGES, RENT RATES AND TA XES, SECURITY CHARGES, REPAIRS TO BUILDING & OTHER CHARGES AND MISCELLANEOUS EXPENSES BY DISALLOWING 2/3 OF THE EXPENSES FROM BUSINESS INCOME AND ACCORDINGLY MAD E THE DISALLOWANCES/ADDITIONS. AS REGARDS THE EXPENSES ON ACCOUNT OF EMPLOYEES COS T, LEGAL AND PROFESSIONAL CHARGES, TRAVELING CONVEYANCE AND VEHICLE EXPENSES, THE AO DISTRIBUTED THE EXPENSES BETWEEN BUSINESS INCOME AND HOUSE PROPERTY INCOM E IN THE RATIO OF INCOME RECEIPTS FROM THE RESPECTIVE HEADS. DURING THE FIRST APPELLA TE PROCEEDINGS, THE LD. CIT(A) HAS GIVEN PARTIAL RELIEF IN RESPECT OF VARIOUS DISALLOW ANCES MADE BY THE AO. THE PERUSAL OF THE ORDERS OF THE AUTHORITIES BELOW INDICATES THAT THE LEASE AGREEMENT HAS NOT BEEN PRODUCED BY THE ASSESSEE BEFORE THE LOWER AUTHORITI ES WHICH CAN BE THE BASIS FOR ASCERTAINING THE EXPENSES WHICH ARE LIABLE TO BE IN CURRED BY THE ASSESSEE FOR THE PURPOSE OF EXCLUDING THE SAME WHILE CALCULATING THE BUSINESS EXPENDITURE OF THE ASSESSEE. ALSO, THE AUTHORITIES BELOW HAVE NOT BROU GHT ANYTHING ON RECORD TO ESTABLISH WHETHER THE EXPENDITURE INCURRED FOR THE RENTAL INC OME IS INCLUDED IN THE BUSINESS ITA NOS.1788&1598/M/2009 NEW ERA FABRICS LTD. ASSESSMENT YEAR 2002-03 3 EXPENDITURE. IN VIEW OF THAT MATTER, WE ARE OF THE CONSIDERED OPINION THAT IT IS JUST AND PROPER TO REMIT THE ENTIRE MATTER BACK TO THE F ILE OF THE AO FOR PASSING A FRESH ASSESSMENT ORDER VERIFYING ALL THE DETAILS OF EXPEN DITURE CONSIDERING THE TERMS AND CONDITIONS OF THE LEASE DEED AFTER AFFORDING A REAS ONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. WE DIRECT AND ORDER ACCORDINGLY. 4. IN THE RESULT, THE CROSS APPEALS FILED BY THE RE VENUE & ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 10 TH DAY OF JUNE 2014. SD/- SD/- (SANJAY ARORA) (S.T.M.PAVALAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; DATED: 13.06.2014 A.K.PATEL , PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - MUMBAI CONCERNED 4. CIT MUMBAI CONCERNED 5. DR, ITAT, MUMBAI B BENCH 6. GUARD FILE . //TRUE COPY// BY ORDER, (DY./ASSTT. REGISTRAR) ITAT, MUMBAI