DCIT, Circle - 1, Kolkata, Kolkata V. M/s. Asha Mangal Portfolio Pvt. Ltd., Howrah

ITA 1978/KOL/2010

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 70496 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 1 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-12-2013
• Appeal Filed By: Department
• Bench Allotted: A
• Assessment Year: 2004-2005
• Appeal Filed On: 28-10-2010
• Court: TRIBUNAL
• Department Lawyers: R PRASAD SRDR
• Assessee Lawyers: B C JAIN
• Keywords: Capital asset; Business income; Depreciation; Business expenditure; Revenue expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH A KOLKATA BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER AND SHRI ABRAHAM P GEORGE, ACCOUNTANT MEMBER ITA NO. 1978 - 1979 / KOL / 2010 ASSESSMENT YEARS :2004-05 & 2005-06 DCIT, CIRCLE-1, KOLKATA 7 TH FLOOR, AAYAKAR BHAWAN, KOLKATA 700 069 V/S . M/S ASHA MANGAL PORTFOLIO PVT. LTD., 103/24/1, FORESHORE ROAD, SHIBPUR, HOWRAH 711 102 [ PAN NO.AABCA 3340 B ] / APPELLANT .. / RESPONDENT) /BY ASSESSEE SHRI B.C.JAIN, AR /BY REVENUE SHRI R PRASAD, SR-DR /DATE OF HEARING 29-11-2013 ! /DATE OF PRONOUNCEMENT 19-12-2013 ' ' ' ' / // / O R D E R PER MAHAVIR SINGH, JUDICIAL MEMBER:- THESE TWO APPEALS BY REVENUE ARE ARISING OUT OF DI FFERENT ORDERS OF COMMISSIONER OF INCOME-TAX (APPEALS)-I, KOLKATA IN APPEALS NO.777- 527/CIT(A)-I/CIR-1/07-08 OF EVEN DATED I.E., ON 10- 08-2010. ASSESSMENTS WERE FRAMED BY DCIT/ACIT, CIRCLE-1, KOLKATA U/S. 14 3(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) VI DE THEIR ORDERS DATED 21-12- 2006 &27-11-2007 FOR ASSESSMENT YEARS 2004-05 AND 2 005-06. 2. THE ONLY ISSUE IN THESE TWO APPEALS OF REVENUE I S WHETHER THE INCOME OF THE ASSESSEE SHOULD BE ASSESSED AS INCOME FROM BUSINESS OR INCOME ITA NO.1978-79/KL/2010 A.YS.04-05 & 05-06 DCIT CIR-1 KOL V. M/S. ASHA MANGAL PORTFOLIO PVT. L TD. PAGE 2 FROM HOUSE PROPERTY DESPITE THE FACT THAT INCOME E ARNED BY ASSESSEE IS FROM WAREHOUSE WERE HOUSING ACTIVITY IS DONE. FOR THIS, REVENUE RAISED COMMON GROUND IN BOTH YEARS AND RELEVANT GROUNDS RAISED IN AY 2004-05 READS AS UNDER:- 1, THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE L. CIT(APPEALS) HAS ERRED IN LAW TO HOLD THAT THE ASSE SSEE'S INCOME FROM WAREHOUSING ACTIVITIES TO BE ASSESSED UNDER THE HEA D INCOME FROM BUSINESS AND NOT UNDER THE HEAD INCOME FROM HOUSE PROPERTY AS THE ASSESSEE IS NOT THE LEGAL OWNER OF THE LAND, DESPIT E THE FACT THAT THE ASSESSEE IS BENEFICIAL OWNER OF THE LAND AND REAL OWNER OF THE SUPER STRUCTURE ON THE LAND AND EARNING THE INCOME FROM T HE TENANTS IN ITS OWN RIGHT. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, D. CIT(APPEALS) HAS ERRED IN DIRECTING TO ALLOW DIFFER ENT EXPENDITURES TOTALING AN AMOUNT OF RS.30,06,332/- AND DEPRECIATI ON OF RS.22,85,382/- AS BUSINESS EXPENDITURE WHEN THE INCOME IS REQUIRED TO BE ASSESSED UNDER THE HEAD INCOME FROM HOUSE PROPERTY AS THE ASSESSEE IS THE BENEFICIAL OWNER OF THE LAND AND REAL OWNER OF THE SUPER STRUCTURE ON THE LAND AND EARNING THE INCOME FROM THE TENANTS IN ITS OWN RIGHT AND WHEN THE ASSESSEE IS NOT ENTITLED TO ANY DEDUCTION EXCEP T THOSE AVAILABLE U/S 24 OF THE ACT. 3. THAT ON THE FACT AND IN THE CIRCUMSTANCES OF THE CASE, LD. CIT (APPEALS) HAS ERRED IN DIRECTING TO ALLOW INTEREST OF RS.5,92,681/- U/S.36(1)(III) WHICH WAS DISALLOWED U/S. 24(B) WHEN THE INTEREST AMOUNT IS NOT ATTRIBUTABLE TO THE BORROWED FUND UTILIZED F OR BUYING AND CREATING BUILDING STRUCTURE. 3. AT THE OUTSET, LD. COUNSEL FOR THE ASSESSEE FILE D COPY OF TRIBUNALS ORDER IN EARLIER ASSESSMENT YEARS, WHICH ARE AS UND ER:- ITA NO.2005/MUM/2005 ASSESSMENT YEAR 2001-02 ITA NO.6901/MUM/2005 ASSESSMENT YEAR 2002-03 ITA NO.4571/MUM/2006 ASSESSMENT YEAR 2000-01 ITA NO.4572/MUM/2006 ASSESSMENT YEAR 2003-04 HE STATED THAT THE TRIBUNAL IN THE ABOVE FOUR YEARS HAS ALLOWED THE ISSUE IN PARA-6.1 TO 6.4 BY HOLDING AS UNDER:- ITA NO.1978-79/KL/2010 A.YS.04-05 & 05-06 DCIT CIR-1 KOL V. M/S. ASHA MANGAL PORTFOLIO PVT. L TD. PAGE 3 6.1 THE CONSEQUENTIAL CLAIMS MADE BY THE ASSESSEE IN RESPECT OF THE DEPRECIATION AND EXPENDITURE ON ACCOUNT OF REPAIRS ETC. INCURRED BY THE ASSESSEE TO THE PROPERTY IN QUESTION ARE CONSIDERED . IT IS FOUND NOWHERE THAT THE DEPARTMENTAL AUTHORITIES HAVE DISP UTED THE QUANTUM OR THE NATURE OF THE EXPENDITURE CLAIMED BY THE ASS ESSEE. THEY HAVE SIMPLY FOUND THAT AS INCOME HAS BEEN TREATED AS INC OME FROM HOUSE PROPERTY, THESE ARE NOT ALLOWABLE AS DEDUCTION FROM INCOME FROM THAT PROPERTY. IN VIEW OF THE ABOVE FACTS IT IS FOUND TH AT THE INCOME OFFERED BY THE ASSESSEE IS TO BE ACCEPTED AS INCOME FROM BUSINESS AND IN THE ABSENCE OF ANY DISPUTE OF THE QUANTUM OR THE NATURE OF THE EXPENDITURE CLAIMED BY THE ASSESSEE, AND STATED TO HAVE BEEN IN CURRED FOR EARNING THE INCOME OFFERED FOR TAXATION AND ALSO THE DEPREC IATION ON THE INTANGIBLE ASSET CREATED BY THE ASSESSEE TO MEET TH E FORESEEN FUTURE CLAIM TO BE MADE OR TO BE CLAIMED BY THE KPT IN FUT URE AND TO COMBAT THAT THE ASSESSEE HAS CREATED INTANGIBLE ASSET ON WHICH THE DEPRECIATION IS ALLOWABLE AGAINST THE BUSINESS INCO ME OFFERED BY TH ASSESSEE FOR TAXATION IN ITS HANDS. TO SUPPORT THIS VIEW, WE FIND THAT THE DECISION OF THE VARIOUS JUDICIAL FORUMS RENDERED IN THE CASE OF CIT VS. SARABHAI P LTD., 263 ITR 197 WHEREIN IT WAS HELD THAT WHEN THE ASSESSEE WAS NOT ONLY RECEIVING THE WAREHOUSING CHA RGES FROM THE OCCUPIERS BUT ALSO RECEIVED THE AMOUNT TO THE SERVI CES RENDERED TO THE OCCUPIERS FOR THE SAID PURPOSE. THE ASSESSEE MAINTA INS STAFF AND MAKE INVESTMENTS IN VARIOUS ITEMS LIKE IRON CHEST, FURNI TURE AND FIXTURES ETC. SUCH AN ACTIVITY OF RENDERING SERVICES TO THE OCCUP IERS SHOULD BE TREATED AS BUSINESS INCOME AND AS SUCH ALL EXPENSES INCURRE D FOR THE PURPOSE OF RENDERING SUCH SERVICES SHOULD BE ALLOWED AS BUS INESS INCOME. 6.2 IN THE CASE OF F.S. GANDHI VS. CWT 184 ITR 36 (SC) , THE HONBLE APEX COURT HAS HELD THAT WHERE THE POSSESSION OF THE LAND ITSELF IS PRECARIOUS DUE TO THE PENDING DISPUTE, THE PROPERTY COULD NOT BE TREATED AS ONE IN WHICH THE ASSESSEE HAS VESTED INTEREST SO AS TO ASSESSEE THE INCOME DERIVED FROM THEM U/S.2(E)(2)(III) OF THE IT ACT. THE RATIO AND PROPOSITION IN THE CASE OF PODDAR CEMENT AND SHAMBU PROPERTIES RELIED ON BY THE DEPARTMENTAL AUTHORITIES ARE DISTINGUISHA BLE FROM THE FACTS OF THE CASE IN HAND AS THERE IS AGREEMENT TO ACQUIRE R IGHTS IN THE PROPERTIES IN THE CASE OF PODDAR CEMENTS WHEREAS IN THE PRESENT CASE THAT THE MATERIAL REQUIREMENT OF AGREEMENT OF ACQUI RING THE RIGHT IS VERY MUCH ABSENT. 6.3 IN THE CASE OF BINDALS DEVELOPERS (P) LTD. VS. ITO 292 ITR (AT)178 THE TRIBUNAL HAS HELD AFTER CONSIDERING THE CASE OF PODDAR CEMENT LTD. THAT THE ASSESSEE EARNING THE RENT FROM SUB-LETTIN G IT NOT HAVING THE OWNERSHIP RIGHT SUCH A RENT HAS TO BE ASSESSED AS I NCOME FROM OTHER SOURCES AND DEDUCTION OF EXPENDITURE EARNED ON SUCH INCOME IS ALLOWABLE. THE SAME VIEW IS TAKEN BY THE HONBLE MA DRAS HIGH COURT IN THE CASE OF CIT VS. AVK CONSTRUCTIONS P LTD., 292 ITR 512 . THE CLAIM ITA NO.1978-79/KL/2010 A.YS.04-05 & 05-06 DCIT CIR-1 KOL V. M/S. ASHA MANGAL PORTFOLIO PVT. L TD. PAGE 4 OF THE ASSESSEE FOR VARIOUS EXPENDITURE ARE TO BE T REATED AS REVENUE EXPENDITURE ONLY AS THE ASSESSEE HAS SPENT ON THE PROPERTY TO WHICH IT HAS NO RIGHT WHATSOEVER AND IN THE CASE OF ANY SITU ATION OF HANDING OVER TO THE ORIGINAL OWNER BEING THE KPT THE ASSESSEE HA S TO SURRENDER ALONG WITH THE IMPROVEMENTS MADE BY IT. SUCH AN EXP ENDITURE HAS TO BE TREATED AS REVENUE EXPENDITURE EVEN THOUGH RESULTIN G IN A CAPITAL ASSET. THIS IS THE RATIO LAID DOWN BY THE HONBLE APEX COU RT IN THE CASE OF CIT VS. MADRAS AUTO SERVICE (P) LTD. 233 ITR 468 (SC).SO ALSO THE HONBLE MARAS HIGH COURT HAS HELD IN THE CASE OF CIT V. KIS HANCHAND CHELLARAM 130 ITR 385 (MADRAS) THAT THE RIGHT OVER THE LAND ON WHICH CONSTRUCTION WAS PUT UP DID NOT BELONG TO THE ASSES SEE; BUILDING TO BECOME PROPERTY OF THE ORIGINAL OWNER OF THE LAND A ND HENCE THE EXPENSES INCURRED ON SUCH CONSTRUCTION ON THE LAND ARE DEDUCTIBLE AS REVENUE EXPENDITURE. HENCE IN THE LIGHT OF THE ABOVE DICTUMS OF VARIOUS JUDICIAL FORUMS, WE ARE OF THE CONSIDERED VIEW THAT THE CLAIMS OF THE ASSESSEE AS EXPENDITURE ARE ALLOWABLE, MORE SO THAT THE DEPARTMENT HAS NOT DISPUTED THEIR QUANTUM OR THE NATURE OF EXP ENDITURE CLAIMED BY THE ASSESSEE. ACCORDINGLY, WE ARE OF THE CONSIDERED VIEW THAT THE CLAIMS OF THE VARIOUS EXPENDITURE AS WELL AS DEPREC IATION CLAIMED BY THE ASSESSEE ARE ALLOWABLE AGAINST BUSINESS INCOME. ACC ORDINGLY THE DEPARTMENT IS DIRECTED TO ALLOW THE CLAIMS OF THE A SSESSEE. 6.4 THE ONLY ADDITIONAL ISSUE FOR THE AYR. 2000-01 RELATES TO THE REOPENING OF THE ASSESSMENT, IT IS FOUND FROM THE M ATERIAL MADE AVAILABLE WITH THE TRIBUNAL AS CULLED OUT FROM THE ORDERS PASSED BY THE DEPARTMENTAL AUTHORITIES, THE AO HAS REOPENED THE A SSESSMENT BASING ON THE ASSESSMENT MADE FOR THE NEXT FOLLOWING YEAR 2001-02 BUT NOT ANY OTHER INFORMATION THAT IS COMING TO HIS NOTICE OTHERWISE AND IN THE RE-ASSESSMENT PROCEEDINGS ALSO THE AO ONLY REVISED HIS PREVIOUS DECISION OF CONSIDERING OF INCOME OFFERED AS BUSINE SS INCOME, CHANGED TO THAT OF INCOME FROM HOUSE PROPERTY IN THE ABSENC E OF ANY MATERIAL THAT CAME TO HIS KNOWLEDGE AFTER THE COMPLETION OF ORIGINAL ASSESSMENT PROCEEDINGS. THIS CONTENTION OF THE ASSESSEE GAINS SUPPORT FROM THE DECISION OF THE HONBLE ALLAHABAD HIGH COURT IN THE CASE OF DASS FRIENDS BUILDERS (P) LTD. VS. DCIT 280 ITR 77 (ALL) AND FOR REOPENING OF THE ASSESSMENT CERTAIN DOCUMENTS WERE FOUND RELATIN G TO THE ASSESSEE AND SUCH PROCEEDINGS WERE MADE IN THE NAME OF M/S. BINANI METALS LTD. IF THAT IS THE CASE THE AO WHO HAS SEARCHED M/ S. BINANI METALS LTD. HAS TO SATISFY HIMSELF FIRST THAT THE PAPERS SEIZED DURING THE SEARCH BELONG TO THE THIRD PARTY AND ACCORDINGLY RECORD SA TISFACTION AND SEND THEM TO THE AO HAVING JURISDICTION OVER THAT THIRD PARTY TO BE CONSIDERED IN HIS HANDS FOR ASSESSMENT. IN VIEW OF THE SPECIAL PROVISIONS CONTAINED IN CHAPTER XIVB SUCH INFORMATION CANNOT BE MADE A BASIS FOR REOPENING THE ASSESSMENT HAS ALREADY CONCLUDED AND HENCE WE ARE OF THE CONSIDERED VIEW THAT THE REOPENING OF THE ASSES SMENT MADE BY THE AO FOR A.YS. 2000-01 IS VOID-AB-INITIO AND ACCORDIN GLY NON-EST. ITA NO.1978-79/KL/2010 A.YS.04-05 & 05-06 DCIT CIR-1 KOL V. M/S. ASHA MANGAL PORTFOLIO PVT. L TD. PAGE 5 WHEN THIS WAS CONFRONTED TO LD. SR-DR, HE FAIRLY CO NCEDED THAT THERE IS NO FACTUAL CHANGE IN THESE TWO ASSESSMENT YEARS FROM W HAT WERE IN THE EARLIER YEARS, AS DECIDED BY THE TRIBUNAL. BUT HE SUPPORTED THE ORDERS OF LOWER AUTHORITIES. 4. WE FIND THAT THE ISSUE IS SQUARELY COVERED IN AS SESSEE'S OWN CASE BY THE TRIBUNALS DECISION IN EARLIER YEARS AND TAKING A CONSISTENT VIEW, AS THERE IS NO FACTUAL DISTINCTION, WE DISMISS THESE APPEALS OF REVENUE. 5. IN THE RESULT, BOTH THE APPEALS OF REVENUE ARE DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT 19/12/ 2013 SD/- SD/- (ABRAHAM P GORGE) ( MAHAVIR SINGH) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) KOLKATA, *DKP #$%- 19 /12/2013 + ' ' ' ' ,,- ,,- ,,- ,,- .- .- .- .- / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT 2. / RESPONDENT 3. $0$,1 2 / CONCERNED CIT 4. 2- / CIT (A) 5. - 56 ,,,1, ,1!, / DR, ITAT, KOLKATA 6. 69: ;< / GUARD FILE. BY ORDER/ ' , =/> $ ,1!, +