SHRI SARDARMAL JAIN, Indore V. THE ITO-2(2), Indore

ITA 180/IND/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 5961 (ITAT-INDORE)
• Duration Of Justice: 3 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-06-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 20-06-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 01-03-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: MOHD JAVED
• Assessee Lawyers: S S DESHPANDE
• Keywords: Business income
• Section: 142(1); 80IB; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE (SINGLE MEMBER CASE) BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER I.T.A.NO. 180/IND/2016 A.Y. : 2006-07 SHRI SARDARMAL JAIN, ITO, PROP.ADINATH WAREHOUSING CORPN., 221, TELEPHONE NAGAR, INDORE VS 2(2), INDORE APPELLANT RESPONDENT PAN NO. AGQPB0864K APPELLANT BY : SHRI S.S.DESHPANDE, C. A. RESPONDENT BY : SHRI MOHD.JAVED, DR O R D E R THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF CIT(A)-I, INDORE, DATED 02.11.2015 FOR TH E ASSESSMENT YEAR 2006-07. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE H AS SHOWN RENTAL INCOME. IN RESPONSE TO QUERY THAT WHY THE DATE OF HEARING : 20.062016 DATE OF PRONOUNCEMENT : 20.06.2016 SHRI SARDARMAL JAIN, INDORE VS. ITO, 2(2), INDORE I.T.A.NO. 180/IND/2016 - A.Y. 2006-07 2 2 WAREHOUSING BUSINESS INCOME SHOULD NOT BE TREATED A S INCOME FROM HOUSE PROPERTY IT WAS SUBMITTED BY THE ASSESSEE THAT THE REAL TERM OF THE INCOME SHOWN IN ACCOUNT IS HIRE CHARGES INSTEAD OF RENTAL INCOME. THE INCOM E SHOWN IN THIS ACCOUNT IS HIRE CHARGES RECEIVED FROM PERSO NS, THOSE WHO HAD AVAILED THE FACILITY OF WAREHOUSE. THE AMOU NT CHARGED WAS AS AGAINST PROVIDING FACILITY TO STORE THE AGRICULTURE PRODUCE AT WAREHOUSE ONLY. THERE WERE AGRICULTURISTS WHO HAD DEPOSITED THEIR PRODUCE IN T HE WAREHOUSE. AT THE TIME OF DEPOSITING GOODS ASSESSEE HAS ISSUED A RECEIPT AND MAINTAINED A SEPARATE REGISTER FOR THE SAME. THE SUBMISSION OF THE ASSESSEE WAS NOT ACCEPT ABLE. ON GOING THROUGH THE RETURN, IT WAS SEEN THAT THE A SSESSEE HAD SHOWN RENTAL INCOME OF RS.9,50,300/- IN THE P&L ACCOUNT AND AFTER DEDUCTING EXPENSES NET BUSINESS I NCOME FROM WAREHOUSING IS WORKED OUT BY HIM AT RS.2,95,78 7/- MOREOVER, THERE WAS NO OTHER ACTIVITY OF THE ASSESS EE WHICH COULD BE TREATED AS BUSINESS ACTIVITY OTHER THAN GI VING THE GODOWNS ON RENT. THE INCOME BY WAY OF RENT WAS DERI VED BY LETTING OUT OF GODOWNS AND EVIDENTLY THE GODOWNS BE LONGED TO THE ASSESSEE. THEREFORE, THE IMPUGNED RENTAL INC OME IS SHRI SARDARMAL JAIN, INDORE VS. ITO, 2(2), INDORE I.T.A.NO. 180/IND/2016 - A.Y. 2006-07 3 3 HELD TO BE INCOME FROM HOUSE PROPERTY AND NOT AS BU SINESS INCOME AS SHOWN BY THE ASSESSEE IN THE RETURN OF IN COME. THE SAME SHALL BE TREATED AS INCOME FROM HOUSE PROP ERTY, ASSESSEE HAS ALSO SHOWN THIS INCOME AS RENTAL INCOM E IN THE P&L ACCOUNT FILED ALONGWITH THE RETURN. HENCE, THE SAME INCOME IS TREATED AS INCOME FROM HOUSE PROPERTY AND DEDUCTION U/S 24 AS PER INCOME TAX ACT, 1961 IS ALLOWED ACCORDINGLY. 3. THE MATTER CARRIED TO THE LD. CIT(A) AND THE LD. CI T(A) HAS DISMISSED THE APPEAL BY OBSERVING AS UNDER :- 6.2 THE APPELLANT HAS CONTENDED THAT AS THE RECEIPTS CO NSTITUTED INCOME FROM BUSINESS AND PROFESSION THESE WERE ELIG IBLE FOR DEDUCTION U/S 80IB(11A). IN SUPPORT OF THE ABOVE CO NTENTION THE APPELLANT HAS PLACED RELIANCE ON THE JUDGMENT OF TH E ITAT AGRA BENCH, IN THE CASE OF ITO VS. AMBIKA SHEET GRAH P. LTD. AND OTHERS, 13 ITJ 161 (2009). THE ABOVE CONTENTION OF THE APPELLANT IS HOWEVER WITHOUT TAKING INTO CONSIDERATION THE PR OVISIONS OF SECTION 80IB(LLA) ACCORDING TO WHICH THE DEDUCTION U/S 80IB(LLA) IS AVAILABLE TO A UNDERTAKING DERIVING PROFIT FROM THE INTEGRATED BUSINESS OF HANDING STORAGE AND TRANSPORTATION OF F OOD GRAINS. FROM THE MATERIAL WHICH IS PLACED ON RECORD IT IS N OT EVIDENT THAT THE APPELLANT HAS INVOLVED HIMSELF IN THE INTEGRATE D BUSINESS OF HANDING STORAGE AND TRANSPORTATION OF FOOD GRAINS. ON THE SHRI SARDARMAL JAIN, INDORE VS. ITO, 2(2), INDORE I.T.A.NO. 180/IND/2016 - A.Y. 2006-07 4 4 CONTRARY IT IS AN ADMITTED POSITION THAT NO TRANSPO RTATION ACTIVITY WAS CARRIED OUT BY THE APPELLANT. THE RELIANCE PLAC ED BY THE APPELLANT ON THE DECISION OF THE ITAT AGRA BENCH IS ALSO OF NO HELP TO THE APPELLANT AS THE SAID DECISION IS GIVEN IN THE CONTEXT OF SECTION 80IB(11) AND IN SAID DECISION ITSELF THE ITAT HAS DISTINGUISHED THE PROVISIONS OF SECTION 80IB(11) & SECTION 80IB(11A) AND HAS HELD THAT U/S 80IB(11) INTEGRATED BUSINESS OF COLD STORAGE AND COLD TRANSPORTATION IS NOT ENVISAG ED AS DISTINGUISHED FROM SECTION 80IB(LLA) WHERE SUCH INT EGRATED BUSINESS IS VISUALIZED. IN VIEW OF THE ABOVE, THE C ITED DECISION IS DISTINGUISHED ON FACTS AND IS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. IN VIEW OF THE ABOVE THE CLAIM OF THE APPELLANT THAT DEDUCTION U/S 80(IB)(LLA) MAY BE ALLOWED IN HIS CAS E CANNOT BE UPHELD AND THEREFORE THE AO WAS RIGHT IN DENYING SU CH CLAIM. 4. THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE HAS SUBMITTED THAT THE ASSESSEE IS A REGULAR ASSESS EE FILING HIS RETURN OF INCOME SINCE MORE THAN 10 YEARS WITH THE ITO WARD 2(2), INDORE. DURING THE YEAR UNDER CONSIDERAT ION, THE ASSESSEE FILED HIS RETURN OF INCOME ON 20.09.2006. A FORMAL NOTICE U/S 143(2) WAS ISSUED ON 25-09-2007. 5. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THERE WAS A NOTICE U/S 142(1) DATED 1-10-2008, THE AO HA S CALLED FOR VARIOUS DETAILS OF EXPENSES RELATED TO THE BUSI NESS SHRI SARDARMAL JAIN, INDORE VS. ITO, 2(2), INDORE I.T.A.NO. 180/IND/2016 - A.Y. 2006-07 5 5 ACTIVITY OF ASSESSEE. THERE WAS A SPECIFIC QUERY AS TO WHY THIS INCOME FROM WAREHOUSING SHOULD NOT BE TREATED AS INCOME FROM HOUSE PROPERTY ? IN RESPONSE TO THE NOT ICE U/S 142(1) ASSESSEE HAS FILED WRITTEN SUBMISSION AND CO NTENDED THAT THERE IS DAY TO DAY WAREHOUSING BUSINESS ACTIV ITY PERFORMED BY ASSESSEE FOR STORING FOOD GRAINS OF CU LTIVATORS AND MAINTAINING RECORDS/ BILLS/ REGISTER AND ACCOUN T BOOKS ETC. IN SUPPORT OF THIS ACTIVITY THE ASSESSEE HAS F ILED COPY OF DOCUMENTS/RECORDS BEFORE THE ITO AND ALSO CONTENDE D THAT THIS ACTIVITY IS COVERED UNDER THE HEAD OF INCOME F ROM BUSINESS UNDER SECTION 28 OF THE INCOME TAX ACT, 19 61. IN THE COMPUTATION OF TOTAL INCOME FILED WITH THE RETU RN OF INCOME THE ASSESSEE HAS ALSO CLAIMED DEDUCTION UNDE R SECTION 80IB OF THE INCOME TAX ACT, 1961. DEDUCTION UNDER SECTION 80IB IS ALLOWED BENEFIT IN RESPECT OF PROFI T & GAINS FROM CERTAIN INDUSTRIAL UNDERTAKINGS OTHER THAN INFRASTRUCTURE DEVELOPMENT UNDERTAKINGS. DEDUCTION UNDER SECTION 80IB IS AVAILABLE TO INTEGRATED HANDLING, S TORAGE AND TRANSPORTATION OF FOOD GRAINS UNITS. THE ITO ERRONE OUSLY CONSIDERED THAT THE ASSESSEE WAS RECEIVING RENTAL I NCOME NOT FROM BUSINESS ACTIVITY OF WAREHOUSING BUT LETTI NG THE SHRI SARDARMAL JAIN, INDORE VS. ITO, 2(2), INDORE I.T.A.NO. 180/IND/2016 - A.Y. 2006-07 6 6 GODOWN AND THE SAME IS CHARGEABLE TO TAX UNDER THE HEAD INCOME FROM HOUSE PROPERTY. THE ITO IS ALSO SILENT ABOUT EXPENSES INCURRED RELATED TO WAREHOUSING BUSINESS O F THE ASSESSEE. DETAILS WERE CALLED FOR AND ASSESSEE HAS FILED COMPLETE DETAILS THEREOF. THE LD. AUTHORIZED REPRES ENTATIVE FOR THE ASSESSEE SUBMITTED THAT THE VERY BASIS FOR CHARGING WAREHOUSING INCOME AS RENTAL INCOME IS NOT CORRECT AND THE ITO HAS NOT VISUALIZED THE BUSINESS ACTIVITY OF FOO D GRAIN WAREHOUSING WHICH IS SO POPULAR IN INDORE AND SURRO UNDING AREAS. IN FACT, FOOD GRAIN WAREHOUSING IS ONE POPUL AR BUSINESS ACTIVITY IN MADHYA PRADESH AND LARGE NUMBE R OF FOOD GRAIN WAREHOUSES ARE WORKING HERE AND ARE INCO ME TAX ASSESSEE. AS SUCH TREATMENT OF INCOME NEEDS TO BE CORRECTED FROM RENTAL TO WAREHOUSING. THE ASSESSEE SUBMITTED BOOKS OF ACCOUNTS ; REGISTERS OF INWARDS AND OUTWARDS ; WAREHOUSING RECEIPTS ISSUED TO THE CULTI VATORS AND OTHER RELEVANT DOCUMENTS TO ESTABLISH THE EXIST ENCE OF WAREHOUSING BUSINESS BUT THE SAME WAS NOT CONSIDERE D BY THE ITO. FURTHER, TREATMENT OF TAX LIABILITY IS ALS O BASED ON INCORRECT FOOTING. TAX LIABILITY IS COMPUTED CONSID ERING ENTIRE WAREHOUSING INCOME AS RENTAL INCOME FROM HOU SE SHRI SARDARMAL JAIN, INDORE VS. ITO, 2(2), INDORE I.T.A.NO. 180/IND/2016 - A.Y. 2006-07 7 7 PROPERTY U/S 24 WHICH IS ERRATIC. A FOOD GRAIN WARE HOUSE IS PROVIDING SPACE TO THE CULTIVATORS FOR STORAGE OF F OOD GRAIN UNDER SCIENTIFIC CONDITIONS FOR A LIMITED PERIOD. T HE STOCKS ARE VACATED AFTER SOME TIME AND REPLENISHED BY THE SAME OR SOME OTHER CULTIVATOR. THIS INCOME IS PRIMARILY INC OME FOR PRESERVATION OF FOOD GRAIN AND IS EXEMPTED FOR A BL OCK OF 10 YEARS UNDER SECTION 80IB OF IT ACT 1961 AS UNDER: (I) 100%FOR FIRST 5 YEARS AND (II) 25%FOR NEXT 15 YEARS. THE ASSESSEE COMMENCED BUSINESS OPERATIONS OF WARE HOUSING AFTER RECEIPT OF WAREHOUSING LICENSE FROM M P STATE WAREHOUSING AND LOGISTICS CORPORATION, BHOPAL ON 06.01.2006 AND THEREFORE THE TAX EXEMPTION IS ASSUM ED TO OPERATE FROM 06.01.2006 FOR A BLOCK OF 10 YEARS AS DETAILED ABOVE. THE ASSESSEE HAS RIGHTLY CLAIMED EXEMPTION U /S 80IB (11A) FOR INTEGRATED BUSINESS OF WAREHOUSING O N TOTAL INCOME AS HE IS ENTITLED TO 100% EXEMPTION. 6. THE LD. DEPARTMENTAL REPRESENTATIVE RELIED UPON TH E ORDERS OF THE AUTHORITIES BELOW. SHRI SARDARMAL JAIN, INDORE VS. ITO, 2(2), INDORE I.T.A.NO. 180/IND/2016 - A.Y. 2006-07 8 8 7. I HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PART IES. I FIND THAT IT IS AN ADMITTED POSITION THAT NO TRANSPORTATION ACTIVITY WAS CARRIED OUT BY THE ASSESSEE. THE RELIANCE PLACED BY THE ASSESSEE ON THE DECISION OF THE ITAT AGRA BENCH WAS ALSO OF NO HELP TO THE ASSESSEE AS THE SAID DECISION WAS GIVE N IN THE CONTEXT OF SECTION 80IB(11) AND IN SAID DECISION ITSELF THE ITAT HAS DISTINGUISHED THE PROVISIONS OF SECTION 80IB(11) AND HAS HELD THAT U/ S 80IB(11) INTEGRATED BUSINESS OF COLD STORAGE AND COLD TRANSPORTATION IS NOT ENVISAGED AS DISTINGUISHED FROM SECTION 80IB(LLA) WHERE SUCH INTEGRATED BUSINESS IS VISUALIZED. I CONCUR WITH TH E VIEW OF THE LD. CIT(A) THAT THE CITED DECISION IS DISTINGUISHED ON FACTS AND IS NOT APPLICABLE TO THE FACTS OF THE INSTANT CASE. I UPHOLD THE ACTION OF T HE LD. CIT(A) IN DISALLOWING THE CLAIM OF DEDUCTION U/ S 80(IB)(LLA). THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE COULD NOT BRING ANYTHING CONTRARY TO CONTROVERT THE FINDING OF THE LD. CIT(A). SHRI SARDARMAL JAIN, INDORE VS. ITO, 2(2), INDORE I.T.A.NO. 180/IND/2016 - A.Y. 2006-07 9 9 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMIS SED. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 20 TH JUNE, 2016. SD/- ( D.T.GARASIA) JUDICIAL MEMBER DATED : 20 TH JUNE, 2016. CPU*