DCIT, CHENNAI V. M/s. Ramgosri Constructions P. Ltd., CHENNAI

ITA 2095/CHNY/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61307 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 7 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-07-2012
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 11-07-2012
• Assessment Year: 2000-2001
• Appeal Filed On: 09-12-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: VI KRAMADITYA
• Assessee Lawyers: S SRIDHAR
• Keywords: Business income; Business expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AND SHRI VIKAS AWASTHY, JUDICIAL MEMBER I.T.A. NOS. 2095 & 2096/MDS/2010 (ASSESSMENT YEARS : 2000-01 & 2001-02) THE DEPUTY COMMISSIONER OF INCOME TAX, COMPANY CIRCLE V(3), CHENNAI - 600 034 . (APPELLANT) V. M/S RAMGOSRI CONSTRUCTIONS PVT. LTD., 225, METTUKUPPAM, OKKIAM, THORAIPAKKAM, CHENNAI - 600 096. PAN : AABCR9988E (RESPONDENT) APPELLANT BY : SHRI VIKRAMADITYA, JCIT RESPONDENT BY : SHRI S. SRIDHAR, ADVOCATE DATE OF HEARING : 11.07.2012 DATE OF PRONOUNCEMENT : 19.07.2012 O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : THESE ARE APPEALS OF THE REVENUE FOR ASSESSMENT Y EARS 2000-01 AND 2001-02 AND DIRECTED AGAINST AN ORDER DATED 26 TH AUGUST, 2010 OF COMMISSIONER OF INCOME TAX (APPEALS)-V, CHENNAI. G ROUNDS TAKEN IN BOTH THE APPEALS ARE COMMON. GROUNDS 1 AND 4 ARE G ENERAL NEEDING NO ADJUDICATION. VIDE ITS GROUND NO.2, REVENUE ASSAIL S THE ORDER OF CIT(APPEALS) INSOFAR AS IT RELATED TO LOSS CLAIMED BY THE ASSESSEE ON 2 I.T.A. NOS. 2095 & 2096/MDS/10 ACCOUNT OF HIRING OF A CAR. VIDE ITS GROUND NO.3, REVENUE IS AGGRIEVED THAT CIT(APPEALS) ALLOWED THE BUSINESS LOSS DESPITE ASSESSEE NOT CARRYING ON ANY BUSINESS ACTIVITY. 2. WHEN THE MATTER CAME UP, LEARNED D.R. POINTED OU T THAT SIMILAR ISSUES HAD COME UP IN REVENUES APPEAL FOR ASSESSME NT YEAR 2003- 04IN ASSESSEE'S OWN CASE IN I.T.A. NO. 2047/MDS/201 0 AND THIS TRIBUNAL VIDE ITS ORDER DATED 25.2.2011, HELD IN FAVOUR OF R EVENUE. 3. PER CONTRA, LEARNED A.R. FAIRLY ADMITTED THAT TH E ISSUES STOOD IN FAVOUR OF REVENUE VIDE ORDER OF THIS TRIBUNAL MENTI ONED SUPRA. 4. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL SUBMISSIONS. THE CIT(APPEALS)S ORDER DATED 26.8.2010 AGAINST WH ICH REVENUE IS NOW IN APPEAL, IS A CONSOLIDATED ONE FOR ASSESSMENT YEAR 2000-01, 2001-02 AND 2003-04. REVENUE HAD FILED APPEAL IN I .T.A. NO. 2047/MDS/2010 AGAINST THIS ORDER OF THE CIT(APPEALS ) FOR 2003-04. SINCE IT WAS A CONSOLIDATED ORDER OF THE CIT(APPEAL S) ON SAME ISSUES FOR ALL THE THREE YEARS, THE FINDING OF THE TRIBUNA L IN ITS ORDER DATED 25.2.2011 ON REVENUES APPEAL FOR 2003-04 IS SQUARE LY APPLICABLE FOR IMPUGNED ASSESSMENT YEAR AS WELL. IN THE SAME FACT SITUATION, THE FINDINGS OF THE TRIBUNAL ON THE ISSUES RAISED BY TH E REVENUE ARE REPRODUCED HEREUNDER:- 3 I.T.A. NOS. 2095 & 2096/MDS/10 24. WE HAVE PERUSED THE ORDERS AND HEARD THE CONTENTI ONS OF THE LD.DR. TWO FACTS STAND OUT. FIRST IS THAT ASSESSEE WAS HAVING ONLY ONE CAR NAMELY A FORD ESCORT. SECOND IS THAT EXCEPT FOR A RECEIPT BOOK FOR RECEIPT OF CAR HIRE CHARGES, NOTHING WAS PRODUC ED BY ASSESSEE. THE QUESTION IS WHETHER ASSESSEE COULD BE CONSIDERE D AS RUNNING A BUSINESS OF HIRING OF CARS IN SUCH A SITUATION. AS ALREADY NOTED BY US IN PARA-14 ABOVE, IN RELATION TO APPEAL OF THE REVEN UE FOR AY 2006- 07, ASSESSEE ITSELF HAD SUBMITTED THAT IT WAS HAVING ONLY ONE ACTIVITY DURING AYS 2000-01 TO 2003-04, WHICH WAS THE BUSINESS OF LET TING OUT OF ITS CAR ON HIRE. IT WAS IN SUCH CIRCUMSTANCE S, THE TRIBUNAL DIRECTED THE AO TO VERIFY WHETHER ASSESSEE HAD ONLY TEMPORARILY SUSPENDED ITS EARLIER BUSINESS. THE ARGUMENT THAT T HERE WAS A TEMPORARY SUSPENSION OF EARLIER BUSINESS, AND THE H IRING OF CAR COULD BE CONSIDERED ONLY AS HIRING OF COMMERCIAL ASSETS D URING SUCH LULL, CANNOT BE ACCEPTED WHEN SUCH LULL EXCEEDED FOUR YEAR S. STOPPING THE BUSINESS ACTIVITIES FOR FOUR YEARS CONTINUOUSLY CAN NOT BE TERMED IN ANY WAY AS A LULL. INITIALLY FOR THE FIRST TWO YEAR S ASSESSEES CLAIM WAS THAT IT WAS CARRYING ON BUSINESS OF MANUFACTURING M OULDS, WHICH IS STATED IN ITS LETTER DATED 18-03-2008 FILED DURING THE COURSE OF HEARING FOR AY 2006-07. NAME OF THE ASSESSEE COMPANY ITS ELF IS M/S RAMGOSRI CONSTRUCTIONS P. LTD., AND ITS MAIN OB JECT COULD NEVER HAVE BEEN BUSINESS OF LETTING OUT CAR ON HIRE. IF I T WAS A COMMERCIAL HIRING OF A BUSINESS ASSET DURING A LULL IN ITS MAI N BUSINESS ACTIVITY, THIS ARGUMENT ALSO STANDS DISPELLED IN VIEW OF THE GAP OF FOUR YEARS. EVEN FOR THE AY 2006-07 ASSESSEE WAS UNABLE TO ESTABLIS H ANY BUSINESS TO HAVE COMMENCED. AS PER ASSESSEE, IT WAS LOOKING FOR NEW LINES LIKE MANUFACTURE OF WASTE WATER TREATMENT PLA NT. OR IN OTHER WORDS THERE WAS AN IMPLIED ACCEPTANCE OF NOT HAVING CARRIED ON ANY BUSINESS AS PER ITS MAIN OBJECT. IN THE FACE OF SU CH CIRCUMSTANCES AND HAVING NOT PRODUCED ANY PROOF TO SHOW THAT ITS BUSINESS WAS TEMPORARILY STOPPED, WE ARE OF THE OPINION THAT THE AO WAS JUSTIFIED IN REJECTING THE CLAIM OF THE ASSESSEE THAT IT HAD CARRIED A BUSINESS OF CAR HIRE AND INCURRED A LOSS IN SUCH BUSINESS.. CIT(A) WENT WRONG WHEN HE HELD THAT THE RECEIPTS FROM HIRING OF CAR C OULD BE CONSIDERED AS BUSINESS INCOME, JUST BECAUSE THE CAS H RECEIPTS WERE NOT FOUND TO BE NOT GENUINE. WE ARE OF THE OPINION THAT LD. CIT(A) FELL IN ERROR IN ALLOWING THE CLAIM OF THE ASSESSEE THAT IT WAS RUNNING A BUSINESS OF HIRING CAR. THIS VIEW OF CIT(A) IS SE T ASIDE. GROUND NO.2 OF THE REVENUE THEREFORE, STANDS ALLOWED. 4 I.T.A. NOS. 2095 & 2096/MDS/10 25. VIDE GROUND NO.3 GRIEVANCE OF THE REVENUE IS THAT CIT(A) ALLOWED THE CLAIM OF BUSINESS LOSS. AS ALREADY ELAB ORATED BY US AT PARA-24 ABOVE, ASSESSEES CLAIM OF TEMPORARY LULL OF BUSINESS WAS REJECTED BY THE AO. CONSEQUENTLY ITS CLAIM OF BUSI NESS LOSS WAS ALSO NOT ALLOWED. WE HAVE UPHELD THIS ACTION OF THE AO V IDE PARA-24 ABOVE. WHEN ASSESSEE WAS NOT HAVING ANY BUSINESS TH ERE WAS NO QUESTION OF ALLOWANCE OF ANY BUSINESS EXPENSES. WE A RE OF THE OPINION THAT CIT(A) FELL IN ERROR IN ALLOWING THE B USINESS LOSS CLAIMED BY ASSESSEE. FOR THE SAME REASONS AS MENTIONED BY U S AT PARA-24 ABOVE, DISALLOWANCE OF THE LOSS IS REINSTATED. WE A LLOW THIS GROUND RAISED BY THE REVENUE, AND REINSTATE THE DISALLOWAN CE MADE BY THE AO. 5. SINCE THE FACT SITUATION IS IDENTICAL, FOLLOWING THE DECISION OF THE TRIBUNAL MENTIONED SUPRA, WE ALLOW THE APPEALS OF T HE REVENUE. 6. IN THE RESULT, APPEALS OF THE REVENUE FOR BOTH T HE ASSESSMENT YEARS ARE ALLOWED. THE ORDER WAS PRONOUNCED IN THE COURT ON THURSDAY, THE 19 TH OF JULY, 2012, AT CHENNAI. SD/- SD/- (VIKAS AWASTHY) (ABRAHAM P. GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 19 TH JULY, 2012. KRI. COPY TO: (1) APPELLANT (2) RESPONDENT (3) CIT(A)-V, CHENNAI-34 (4) CIT, CHENNAI-III, CHENNAI (5) D.R. (6) GUARD FILE