IDEAL APPLIANCES CO. P.LTD, MUMBAI V. DCIT CEN CIR 44, MUMBAI

ITA 179/MUM/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 3719 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2016
• Appeal Filed By: Assessee
• Bench Allotted: I
• Assessment Year: 2011-2012
• Appeal Filed On: 08-01-2015
• Court: TRIBUNAL
• Department Lawyers: B C S NAIK
• Assessee Lawyers: K SHIVRAMRAHUL HAKANI
• Keywords: Business income; Depreciation; Business expenditure
• Section: 143(3)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL I , BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM & SHRI PAWAN SINGH , JM ./ ITA NO. 178&179 / MUM/20 1 5 ( / ASSESSMENT YEAR : 2010 - 2011 & 2011 - 2012 ) M/S IDEAL APPLIANCES CO. PVT. LTD., 1117, MAKER CHAMBERS - V, 11 TH FLOOR, NARIMAN POINT, MUMBAI - 400021 VS. DCIT, CC - 44, MUMBAI ./ ./ PAN/ GIR NO. : A A A CI 0385 H ( / APPELLANT ) .. ( / RESPONDENT ) /ASSESSEE BY : SHRI K.SHIVRAM/RAHUL HAKANI /REVENUE BY : SHRI B.C.S.NAIK / DATE OF HEARING : 02 / 02 /201 6 / DATE OF PRONOUNCEMENT 29/04 /201 6 / O R D E R PER R.C.SHARMA (A.M) : TH ESE ARE THE APPEALS FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) - MUMBAI, FOR THE ASSESSMENT YEAR 20 10 - 2011 & 2011 - 2012 . ITA NO.178/MUM/2012(AY:2010 - 2011 ) 2. IN THIS APPEAL, GROUNDS NO.1 TO 4 RELATES TO REASSESSMENT OF INCOME U/S.143(3) R.W.S.153A WHEN NO INCRIMINATING DOCUMENT WAS FOUND DURING THE COURSE OF SEARCH. 3. WE HAVE CONSIDERED RIVAL CONTENTIONS AND FOUND THAT THERE WAS SEARCH AT THE ASSESSEES P REMISES. AFTER SEARCH, THE AO FRAMED ASSESSMENT FOR THE ASSESSMENT YEAR 2005 - 06 TO 2011 - 2012 . THE GROUND WITH REGARD TO ADDITION WHERE NO INCRIMINATING MATERIAL WAS FOUND HAS BEEN DEALT BY THE TRIBUNAL IN ITA NO. 178&179 /1 5 2 ASSESSEES OWN CASE VIDE ORDER DATED 31 - 12 - 2015, W HEREIN THE TRIBUNAL HELD THAT IN THE ASSESSMENT YEAR 2005 - 06 TO 2009 - 10, NO INCRIMINATING MATERIAL WAS FOUND, THEREFORE, ADDITION MADE IN THESE YEARS WERE NOT SUSTAINABLE. IT IS CLEAR THAT WHILE DECIDING THIS ISSUE VIDE ORDER DATED 31 - 12 - 2015, THE TRIBUNAL HAVE SEGREGATED THESE TWO YEARS I.E. ASSESSMENT YEAR 2010 - 11 AND 2011 - 12 ITSELF INDICATE THAT IN THESE YEARS INCRIMINATING MATERIAL WAS THERE. ACCORDINGLY, WE DO NOT FIND ANY MERIT IN THE GROUND NO.1 TO 4 TAKEN BY THE ASSESSEE. 4. ON MERIT OF THE ADDITION , ASSESSEE IS AGGRIEVED FOR TREATING INTEREST INCOME OF RS.90,01,966/ - AS INCOME FROM OTHER SOURCES, INSTEAD OF BUSINESS INCOME. THE ASSESSEE IS ALSO AGGRIEVED FOR TREATING SERVICE CHARGES AS INCOME FROM HOUSE PROPERTY. 5. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. FROM THE RECORD WE FOUND THAT SERVICE CHARGES RECEIVED BY THE ASSESSEE WAS OFFERED IN THE RETURN AS BUSINESS INCOME. HOWEVER, THE AO TREATED THE SAME AS INCOME FROM HOUSE PROPERTY. HOWEVER, THE CIT(A) TREATED SERVICE CHARGES AND INTERE ST INCOME AS INCOME FROM OTHER SOURCES AND ALLOWED 40% OF EXPENSES AS CLAIMED BY THE ASSESSEE AGAINST THE SAME. THE ASSESSEE IS AGGRIEVED FOR RESTRICTING THE CLAIM OF EXPENDITURE TO 40%. IT WAS CONTENDED BY LD. AR THAT FULL DETAILS OF EXPENDITURE WAS FILED , HOWEVER, THE AO FAILED TO APPRECIATE THAT THE EXPENSES INCURRED ARE NECESSARY FOR EARNING BUSINESS INCOME OF THE COMPANY. THE ASSESSEE IS A CORPORATE ENTITY, HENCE ALL EXPENSES ARE REQUIRED TO BE TREATED AS BUSINESS EXPENSES. HE FURTHER CONTENDED THAT I N EARLIER YEARS, SIMILAR EXPENSES WERE INCURRED AND ALLOWED AS BUSINESS EXPENSES IN THE ASSESSMENT COMPLETED U/S.143(3) FOR THE ASSESSMENT YEAR 2001 - 02 AND 2002 - 03. RELIANCE WAS PLACED ON THE DECISION OF MUMBAI TRIBUNAL IN PREMIUMS INVESTMENT AND FINANCE LTD. VS. DEN ITA N O. 4879/M/2012 DT. 13/5/2015 IN WHICH IT WAS HELD THAT EVEN IF NO ITA NO. 178&179 /1 5 3 BUSINESS IS CARRIED OUT, THEN EXPENSES INCURRED TO MAINTAIN THE CORPORATE ENTITY HAS TO BE ALLOWED AS A DEDUCTION . IN VIEW OF THE ABOVE IT WAS CONTENDED THAT IN THE FACTS OF THE PRESENT CASE WITHOUT INCURRING THE ADMINISTRATIVE EXPENSES, FINANCE EXPENSES, DEPRECIATION, IT IS NOT POSSIBLE FOR ASSESSEE COMPANY TO SURVIVE. RELIANCE WAS PLACED ON THE DECISION OF ALLAHABAD HIGH COURT IN CIT VS. RAMPUR TIMBER & TURNERY CO. LTD. ( 1981) 129 ITR 58 (AII.)(HC). 6. WE HAVE CONSIDERED RIVAL CONTENTIONS AND CAREFULLY GONE THROU GH THE ORDERS OF THE AUTHORITIES BELOW AND FOUND FROM THE RECORD THAT S ERVICE CHARGES OF RS. 9,00,000/ - WERE SHOWN AS INCOME FROM BUSINESS OR PROFESSION AS THE SAME WAS DERIVED FROM BUSINESS TRANSACTION. THE SERVICE CHARGES ARE RECEIVED FROM TRINITY ENGINEER PVT. LTD. FOR PROVIDING THE MANAGEMENT SERVICES SUCH AS TO DEAL WITH CUSTOMERS AND SUPPLIERS IN AREA OF MUMBAI, OPERATING BANKING TRANSACTIONS IN MUMBAI, REC EIVING NOTICES FROM GOVERNMENT DEPARTMENT AND ATTENDING THE GOVERNMENT DEPARTMENT, RENDER ALL ASSISTANCE TO CONDUCT ALL BUSINESS MEETINGS INCLUDING BOARD MEETINGS AND AGM, ANY OTHER SERVICES AS MAY BE DECIDED FROM TIME TO TIME AVAILING ALL ASSISTANCE TO CO NDUCT ALL BUSINESS MEETINGS, AVAILING OF ALL FACILITIES FOR THE GUEST OF THE COMPANY AND OTHER SERVICES AS MAY BE REQUIRED FROM TIME TO TIME. WE ALSO FOUND THAT TDS ON SERVICE CHARGES ARE DEDUCTED AS PROFESSIONAL FEES AND NOT AS RENT. HENCE, SERVICE CHA RGES WHICH ARE RECEIVED BY ASSESSEE EVERY YEAR DUE TO AN ORGANISED BUSINESS CANNOT BE ASSESSED AS INCOME FROM OTHER SOURCES AND THE SAME REQUIRES TO BE ASSESSED AS BUSINESS INCOME. 7. IN VIEW OF THE ABOVE, WE DIRECT THE AO TO TREAT THE SERVICE CHARGES AS BUSINESS INCOME AND THE EXPENSES INCURRED FOR THE SAME ARE REQUIRED TO BE ALLOWED AGAINST THIS INCOME. FOR ALLOWING THE EXPENDITURE, WE RESTORE THE MATTER BACK TO THE FILE OF AO TO VERIFY AND ALLOW THE SAME AS PER LAW. ITA NO. 178&179 /1 5 4 8. THE AO HAS ALSO T REAT ED INTEREST INCOME OF RS. 19,01,969/ - AS INCOME FROM OTHER SOURCES INSTEAD OF BUSINESS INCOME. THERE IS NO DISPUTE TO THE FACT THAT A SSESSEE IS CARRYING ON THE BUSINESS OF LENDING / FINANCING. INTEREST IS EARNED ON ACCOUNT OF BUSINESS SINCE SEVERAL YEARS. THERE IS NO CHANGE IN BUSINESS ACTIVITY. THE ASSESSEE COMPANY HAD REC EIVED INTEREST OF RS. 19,01,969/ - FROM THE SAID BUSINESS OF LENDING FUNDS. WE ALSO FOUND THAT THE A SSESSEE HAS GIV EN LOANS ON INTER E ST SINCE SEVERAL YEARS. THE CHART AT PAPER BOOK - II PG. NO. 117 PL ACED IN PAPER BOOK ALSO SHOWS INTEREST BEARING ADVANCES GIVEN BY ASSESSEE TO VARIOUS PARTI ES SINCE A.Y. 2001 - 2002. P&L ALC . OF VARIOUS YEARS SHOW INTEREST INCOME FROM LENDING IS EARNED FROM YEAR TO YEAR. THE INTEREST INCOME WAS ACCEPTED AS BUSINESS INCOME IN A.Y. 2001 - 02 AND A.Y. 2002 - 03 U/ S. 143(3) AFTER CALLING FOR ALL THE DETAILS WITH RESPECT TO SUCH INTEREST. AS THERE IS NO CHANGE IN FACTS IN THIS YEAR, HEAD OF INCOME CANNOT BE CHANGED AND CONSISTENCY OUGHT TO BE MAINTAINED. MUMBAI TRIBUNAL IN PREIMUSL NTERE ST AND FINANCE LTD. VS. DCIT IT A NO. 4879 /M /2011 DT. 13/5/2015 WHEREIN IT IS HELD THAT WHERE GIVING INTEREST BEARING ADVANCES IS A SYSTEMATIC AND ORGANISED ACTIVITY AND FURTHER WHERE INTEREST INCOME IS ASSESSED AS BUSINESS INCOME IN EARLIER YEARS TH EN INTEREST INCOME IS TO BE ASSESSED AS BUSINESS INCOME AND NOT INCOME FROM OTHER SOURCES. THERE IS NO NEED TO BE REGISTERED AS A NBFC . 9. FURTHERMORE, I N TAINWALA CHEMICALS & PLASTICS INDIA LTD. VS. ACIT (2011) 13 TAXMANN.COM 211 (MUM.)(TRIB.) IN THE CON TENT OF S. 36(2), IT WAS HELD THAT WHERE ASSESSEE WAS GIVING ICD REGULARLY, INTEREST ON SUCH ICD WAS ASSESSED AS BUSINESS INCOME IN EARLIER YEARS THEN SUCH INTEREST INCOME HAS TO BE ASSESSED AS BUSINESS INCOME EVEN IF ASSESSEE IS NOT A NBFC ETC. THE ITA NO. 178&179 /1 5 5 DECISI ON OF THE TRIBUNAL IS AFFIRMED BY BOMBAY HIGH COURT IN CIT VS. TAINWALA CHEMICALS & PLASTICS INDIA LTD. (2013) 34 TAXMANN.COM 159 (BOM.)(HC) . 10. IN VIEW OF THE ABOVE DISCUSSIONS, WE DIRECT THE AO TO ASSESS THE INTEREST INCOME AS INCOME FROM BUSINESS. WITH REGARD TO ALLOW ABILITY OF THE EXPENDITURE AGAINST THE SAME, MATTER IS RESTORED BACK TO THE FILE OF AO FOR DECIDING AFRESH CONSIDERING INCURRING OF EXPENDITURE FOR THE PURPOSE OF BUSINESS. 11. WITH REGARD TO CREDIT OF TDS AND ADVANCE TAX, WE DIRECT THE AO TO VERIFY THE SAME AND ALLOW NECESSARY CREDIT. ITA NO.179/MUM/2015 (AY : 2011 - 2012) 12. SIMILAR GROUNDS HAVE BEEN RAISED IN THIS YEAR ALSO. FOLLOWING THE REASONING GIVEN FOR THE ASSESSMENT YEAR 2010 - 2011, WE DIRECT THE AO TO TREAT BOTH SERVICE CHARGES IN COME AND INTEREST INCOME AS INCOME FROM BUSINESS. FOR ALLOWING EXPENSES AGAINST TH ESE INCOME, MATTER IS RESTORED BACK TO THE FILE OF AO FOR DECIDING AFRESH IN TERMS OF DIRECTION GIVEN HEREINABOVE. 13 . IN THE RESULT, BOTH APPEALS OF ASSESSEE ARE ALLOWED I N PART. O RDER PRONOUNCED IN THE OPEN COURT ON THIS 29/04 / 201 6 . SD/ - ( PAWAN SINGH ) SD/ - ( R.C.SHARMA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED 29/04 /201 6 . . /PKM , . / P S / COPY OF THE ORDER FORWARDED TO : / BY ORDER, / ( ASSTT. REGISTRAR) , / ITAT, M UMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A), MUMBAI. 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. //TRUE COPY//