DCIT, Kota V. M/S ALLEN CAREER INSTITUTE, Kota

ITA 185/JPR/2012

• Counselvise Citation: 18523114 RSA 2012
• Duration Of Justice: 2 year(s) 5 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 29-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUBHASH CHANDRA
• Assessee Lawyers: MAHENDRA GARGIA
• Keywords: Business income; Opportunity of being heard; Advance ruling
• Section: 28

Judgement Text

IN THE INCOMETAX APPELLATE TRIBUNAL JAIPUR BENCH: JAIPUR (BEFORE SHRI R.P. TOLANI AND SHRI T.R. MEENA) I.T.A. NO. 185/JP/2012 ASSTT. YEAR- 2008-09 PAN NO. AAEFA 3972 B THE D.C.I.T., M/S ALLEN CAREER INSTITUTE, CIRCLE-2, KOTA. VRS. C-210/2, TALWANDI, KOTA. (APPELLANT) (RESPONDENT) DEPARTMENT BY :- SHRI SUBHASH CHANDRA. ASSESSEE BY :- SHRI MAHENDRA GARGIA. DATE OF HEARING : 13/08/2014 DATE OF PRONOUNCEMENT : 28/08/2014 O R D E R PER: T.R. MEENA, A.M. THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER DATED 20/12/2011 OF THE LEARNED C.I.T.(A), KOTA FOR THE A. Y. 2008-09. 2. THE SOLE GROUND OF APPEAL IS AGAINST DELETING THE DISALLOWANCE OF RS. 2,30,00,796/- MADE U/S 40B(V)(2) OF THE INCOME TAX A CT, 1961 (HEREINAFTER REFERRED AS THE ACT). THE LEARNED ASSESSING OFFICER OBSERVED THAT THE ASSESSEE FIRM HAD SHOWN INTEREST FROM BANK FDRS AND OTHERS AT RS. 5,87,58,434/-. THE ASSESSEE HAD ALSO CLAIMED REMUNE RATION TO PARTNERS FOR RS. 7,68,45,920/-. THE REMUNERATION TO PARTNERS WAS DETE RMINED AS PER THE BOOK PROFIT SHOWN IN PROFIT AND LOSS ACCOUNT INCLUDING IN TEREST FROM BANK FDRS AND INCOME FROM OTHER SOURCES. THE LEARNED ASSESSING OFF ICER GAVE REASONABLE ITA NO. 185/JP/2012 DCIT VS. M/S ALLEN CAREER INSTITUTE. 2 OPPORTUNITY OF BEING HEARD ON BOOK PROFIT CLAIMED B Y THE ASSESSEE FOR REMUNERATION PURPOSES, WHICH WAS AVAILED BY THE ASSES SEE. AFTER CONSIDERING THE ASSESSEES REPLY, THE LEARNED ASSESSING OFFICER HAS NOT CONVENIENCE WITH THE SUBMISSION MADE BY THE APPELLANT, IT HAS BEEN H ELD BY THE ASSESSING OFFICER THAT INCOME FROM BANK FDRS HAD BEEN SHOWN BY THE APPELLANT AS A BUSINESS INCOME AND ACCORDINGLY, PARTNERS REMUNERA TION WAS CLAIMED ON BOOK PROFIT. HE FURTHER OBSERVED THAT IN PRECEDING YEARS I.E. A.YS. 2002-03, 2003- 04, 2004-05 AND 2005-06, THE ASSESSING OFFICER HAD EXAMINED THIS ISSUE AND AFTER DETAILED REASONING, TREATED THE INCOME FROM B ANK FDRS AS INCOME FROM OTHER SOURCES AND EXCESS REMUNERATION CLAIMED BY TH E ASSESSEE WAS ACCORDINGLY DISALLOWED. SUCH FINDINGS HAD ALSO BEEN CONFIRMED BY THE LEARNED CIT(A), KOTA WHILE DECIDING THE ASSESSEES APPEAL FO R A.YS. 2002-03 TO 2004- 05. THE HONBLE ITAT, JAIPUR BENCH, JAIPUR WHILE DECID ING THE ASSESSEES APPEAL FOR A.YS. 2002-03 TO 2004-05 VIDE ITA NO. 60 7-608 & 161/JP/2008 DATED 31/7/2008 HAD ALSO REJECTED THE ASSESSEES GR OUND AND THE ORDERS OF THE ASSESSING OFFICER/CIT(A) WERE CONFIRMED. IT IS F URTHER CLARIFIED THAT M/S ALLEN CARRIER INSTITUTE WAS ADMITTEDLY ENGAGED IN TH E PRIMARY BUSINESS OF IMPARTING COACHING FOR COMPETITIVE EXAMS LIKE CPMT, RPMT AND OTHER STATE PMTS. THE EARNING OF INTEREST FROM BANK FDRS ETC. HAD NEVER BE A PART OF BUSINESS OF THE ASSESSEE AS THE ASSESSEE WAS NOT ENG AGED IN THE BUSINESS OF LENDING OR BORROWING MONEY AND EARNING INTEREST THER EON. THE FDRS WERE NOT MADE AS A BUSINESS NECESSITY WITHOUT WHICH THE BUSINE SS OF THE ASSESSEE ITA NO. 185/JP/2012 DCIT VS. M/S ALLEN CAREER INSTITUTE. 3 COULD NOT BEEN RUN AND IN FACT THESE FDRS ARE MADE OUT OF SURPLUS FUND AVAILABLE WITH ASSESSEE AS EARNED THROUGH PRIMARY BU SINESS OF IMPARTING COACHING TO THE ASPIRANTS. THE LEARNED ASSESSING OFF ICER RELIED UPON THE FOLLOWING DECISIONS: I. MADHYA PRADESH STATE INDUSTRIES CORPORATION LIMITED VS. CIT (1968) 69 ITR 824 (MP) II. SHAMAS TABREZ VANTI (IN RE) (2005) 273 ITR 299 THE AU THORITY OF ADVANCE RULING. III. MURLI INVESTMENT COMPANY VS. CIT, 167 ITR 368 (RAJ.). IV. CIT VS. RAJASTHAN LAND DEVELOPMENT CORPORATION 211 I TR 597 (RAJ.). V. CIT VS. MONARCH TOOLS PVT. LTD. (2002) 260 ITR 258. THE ASSESSING OFFICER FURTHER OBSERVED THAT THE APPE AL FOR A.YS. 2002-03, 2003-04 AND 2004-05 HAD BEEN DECIDED BY THE HONBLE ITAT IN FAVOUR OF THE ASSESSEE ON THIS GROUND OF APPEAL. IN A.YS. 2005-06 AND 2006-07, THE APPELLANT HAD FILED M.A. BEFORE THE HONBLE ITAT, WHI CH WAS ALLOWED AND THE HONBLE ITAT AFTER RECALLING ITS ORDER, HAD DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE, BUT THE MATTER IS PENDING BEFORE THE HON BLE HIGH COURT. THEREFORE, HE REDUCED INTEREST INCOME AT RS. 5,87,58,434/- FRO M THE TOTAL BUSINESS INCOME TO DETERMINE THE BOOK PROFIT U/S 40B(V)(1) O F THE ACT AND FINALLY HE MADE ADDITION OF RS. 2,30,00796/- IN THE INCOME OF THE APPELLANT FIRM. 3. BEING AGGRIEVED BY THE ORDER OF THE LEARNED ASSE SSING OFFICER, THE ASSESSEE CARRIED THE MATTER TO THE LEARNED CIT(A), WHO HAD ALLOWED THE APPEAL BY OBSERVING THAT:- ITA NO. 185/JP/2012 DCIT VS. M/S ALLEN CAREER INSTITUTE. 4 I HAVE GONE THROUGH THE ASSESSEES SUBMISSION AND A.OS FINDINGS AND ALSO THE JUDGMENT GIVEN BY THE HONBLE ITAT A BENCH, JAIPUR FOR A.Y. 2005-06 (ITA NO. 414/JP/2009). IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE A.O. N OTICED THAT THE ASSESSEE HAS SHOWN INTEREST ON BANK FDRS AMOUNTING TO RS. 5,72,23,513/- AND OTHER INTEREST OF RS. 15,34,921/- AND REMUNERATION OF PARTNERS HAS BEEN CALCULATED ON THE BASIS OF BOOK PROFIT INCLUDING INTEREST ON BANK FDRS AND OTHER IN TEREST. TREATING THE INTEREST FROM BANK FDRS AND OTHER INTE REST AS INCOME FROM OTHER SOURCES, THE A.O. RECOMPUTED THE BOOK PR OFITS AND THE ALLOWABLE REMUNERATION TO PARTNERS WAS DETERMINED A T RS. 5,38,45,124/- AND DISALLOWED THE EXCESS CLAIM OF PA RTNERS REMUNERATION OF RS. 2,30,00,796/-. THE HONBLE ITAT FOLLOWING ITS DECISION IN THE CASE OF S.P. EQUIPMENT 33 DTR 265 (JP.) DIRECTED THE A.O. TO COMPUTE THE B OOK PROFIT INCLUDING THE INTEREST INCOME ON FDR ETC. AS CLAIME D AND THE DISALLOWANCE UNDER SECTION 40(B) OF THE ACT WAS DIR ECTED TO BE DELETED. 4. NOW THE REVENUE IS IN APPEAL BEFORE US. 5. THE LEARNED CIT D.R. VEHEMENTLY SUPPORTED THE ORDE R OF THE ASSESSING OFFICER AND ARGUED THAT INTEREST ON FDRS DOES NOT P ART OF BUSINESS INCOME, DEFINED IN SECTION 40B(V)(1) OF THE ACT. PARTICULAR LY HE DRAWN OUR ATTENTION ON DEFINITION OF BOOK PROFIT IN EXPLANATION-3 OF SECTI ON 40B(V)(1) OF THE ACT WHEREIN HOW TO COMPUTE BOOK PROFIT HAS BEEN DEFINED I .E. BOOK PROFIT MEANS THE NET PROFIT, HAS SHOWN IN THE PROFIT AND LOSS ACC OUNT FOR THE RELEVANT PREVIOUS YEAR COMPUTED IN THE MANNER LAID DOWN IN CH APTER IV-D AS INCREASED ITA NO. 185/JP/2012 DCIT VS. M/S ALLEN CAREER INSTITUTE. 5 BY THE AGGREGATE AMOUNT OF REMUNERATION PAID OR PAY ABLE TO ALL THE PARTNERS OF THE FIRM. IF SUCH AMOUNT HAS BEEN DEDUCTED WHILE COMPUTING THE NET PROFIT. HE FURTHER ARGUED THAT AS PER CHAPTER IV-D , WHICH INCLUDES SECTION 28 TO SECTION 44DB OF THE ACT, NO WHERE THIS INTEREST I NCOME HAD NOT BEEN TAKEN INTO COMPUTING THE PROFIT AND GAIN OF THE BUSINESS OR PROFESSION. AS PER SECTION 28 OF THE ACT ALSO, THE LEGISLATURE HAD PRO VIDED LIST OF ITEMS OF INCOME IS TO BE TAKEN FOR BUSINESS AND PROFESSION WHERE ALS O THIS INTEREST INCOME HAS NOT BEEN TAKEN AS BUSINESS INCOME. THEREFORE, HE REQ UESTED TO REVERSE THE ORDER OF THE LEARNED CIT(A) AND CONFIRM THE ORDER TH E LEARNED ASSESSING OFFICER. 6. AT THE OUTSET, THE LEARNED A.R. FOR THE ASSESSEE CONTENDED THAT IN ASSESSEES OWN CASE FOR A.Y. 2005-06 IN ITA NO. 414/ JP/2009 ORDER DATED 26/2/2010 HAD DECIDED THIS ISSUE IN FAVOUR OF THE A SSESSEE, WHICH WAS ORIGINALLY DECIDED AGAINST THE ASSESSEE. THE COORDIN ATE BENCH ALLOWED THE M.A. PETITION FILED BY THE ASSESSEE AND RECALLED TH E ASSESSEES ORIGINAL ORDER WHEREIN THE ASSESSEES APPEAL WAS DISMISSED. FINALLY, THE COORDINATE BENCH HAD ALLOWED THE ASSESSEES APPEAL. LEARNED A.R. FURT HER ARGUED THAT NOW THIS GROUND OF APPEAL IS COVERED BY THE DECISION OF HON BLE ITAT BENCH FOR A.YS. 2002-03, 2004-05 AND 2005-06. IT IS FURTHER ARGUED THAT THE HONBLE ITAT HAS CONSIDERED VARIOUS DECISIONS ON THIS ISSUE, WHICH IS REPRODUCED FOR SAKE FOR CONVENIENCE: I. ACIT VS. SETH BROTHERS (2006) 99 TTJ 189 (RAJKOT) . ITA NO. 185/JP/2012 DCIT VS. M/S ALLEN CAREER INSTITUTE. 6 II. HONDA CELL POWER PRODUCT LTD. VS. CIT (2007), 29 5 ITR 466 (SC). III. S.P. EQUIPMENT & SERVICES VS. ACIT (2010) 33 DTR 265 (JP) (TRIB) IV. CIT VS. HYCRON INDIA LTD. (2008) 308 ITR 251 (R AJ). THEREFORE, THE LEARNED A.R. PRAYED TO CONFIRM THE OR DER OF THE LEARNED CIT(A). 7. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. IT IS FACT THAT I NTEREST ON FDRS COMES UNDER THE HEAD INCOME FROM OTHER SOURCES AND NEVER HAS BEEN PART OF BOOK PROFIT AS THE INCOME COMPUTED IN CHAPTER IV-D EXCEPT THAT THE ASSESSEE IS IN MONEY LENDING BUSINESS, INTEREST INCOME HAS NOT BEEN MADE PART OF ITEM OF INCOME TAKEN U/S. 28 OF THE ACT. THE COORDINATE BENCH HAS D ECIDED THIS ISSUE BY OBSERVING AS UNDER: FOLLOWING DECISION OF THIS BENCH IN CASE OF S.P. EQU IPMENTS (SUPRA), WE DIRECT THE ASSESSING OFFICER TO COMPUTE THE BOOK PR OFIT INCLUDING INTEREST INCOME ON FDRS ETC. AS CLAIMED. THE IMPUGNED DISALLO WANCE OF RS. 69,47,476/- MADE U/S 40(B) OF THE ACT IS DIRECTED T O BE DELETED. HENCE THIS GROUND IS DECIDED IN FAVOUR OF THE ASSESSEE. C ONSEQUENTLY, THE GROUND IS ALLOWED. BEING A PRECEDENCE, WE FOLLOW THE COORDINATE BENCH DE CISION ON THIS ISSUE. THUS, THE REVENUE APPEAL IS DISMISSED. 8. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 28/08/2014. SD/- SD/- (R.P. TOLANI) (T.R. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER JAIPUR, DATED : 28 TH AUGUST, 2014 * RANJAN ITA NO. 185/JP/2012 DCIT VS. M/S ALLEN CAREER INSTITUTE. 7 COPY FORWARDED TO :- 1. THE DCIT, CIRCLE-2, KOTA 2. M/S ALLEN CAREER INSTITUTE, TALWANDI, KOTA. 3. THE CIT (A) 4. THE CIT 5. THE D/R GUARD FILE (I.T.A. NO. 185/JP/2012) BY ORDER, AR ITAT JAIPUR.