DCIT, Circle - 9, Kolkata, Kolkata V. M/s. Kothari Global Pvt. Ltd., Kolkata

ITA 2179/KOL/2009

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 54633 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 9 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-10-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 13-07-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 31-12-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NIHAR DUTTA GUPTA
• Assessee Lawyers: S M SURANA
• Keywords: Business income; Depreciation; Business expenditure; Charitable institution; Rule of consistency
• Section: 143(3)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: KOL KATA () BEFORE , /AND , . ! . '# ) [BEFORE SRI MAHAVIR SINGH, JM & SHRI C. D. RAO, AM] $ $ $ $ / I.T.A NO. 2179/KOL/2009 %& '( %& '( %& '( %& '(/ // / ASSESSMENT YEAR: 2006-07 DEPUTY COMMISSIONER OF INCOME-TAX, VS M/S. KOTHAR I GLOBAL PVT. LTD CIRCLE-9, KOLKATA PAN: AABCK 4312P (*+ /APPELLANT ) (,-*+/ RESPONDENT ) DATE OF HEARING : 27.10.2011 DATE OF PRONOUNCEMENT: 28.10.2011 FOR THE APPELLANT: SHRI NIHAR DUTTA GUPTA FOR THE RESPONDENT: SHRI S.M. SURANA '. / ORDER PER MAHAVIR SINGH, JM ( , , , , ) THIS APPEAL BY REVENUE IS ARISING OUT OF ORDER OF C IT(A)-VIII, KOLKATA IN APPEAL NO. 211/CIT(A)-VIII/KOL/08-09 DATED 23.10.2009. ASSESSM ENT WAS FRAMED BY ACIT, CIRCLE-9, KOLKATA U/S. 143(3) OF THE INCOME-TAX ACT, 1961(HER EINAFTER REFERRED TO AS THE ACT) FOR ASSESSMENT YEAR 2006-07 VIDE HIS ORDER DATED 27.11. 2008. 2. THE FIRST TWO INTER-CONNECTED ISSUES IN THIS APP EAL OF REVENUE IS AGAINST THE ORDER OF CIT(A) TREATING THE INCOME FROM LETTING OUT AN INT EREST INCOME AS BUSINESS INCOME AS CLAIMED BY ASSESSEE AS AGAINST ASSESSED BY ASSESSING OFFICE R AS INCOME FROM OTHER SOURCES. FOR THIS REVENUE HAS RAISED FOLLOWING GROUND NOS. 1 & 2:- 1. FOR THAT ON THE FACTS AND CIRCUMSTANCES OF THE C ASE, WHETHER THE LD. CIT(A)-VIII IS CORRECT IN TREATING INCOME FROM LET TING OUT AS BUSINESS INCOME. 2. FOR THAT ON THE FACTS AND CIRCUMSTANCES OF THE C ASE, WHETHER THE LD. CIT(A)-VIII IS CORRECT IN TREATING INTEREST FROM F IXED DEPOSIT AS BUSINESS INCOME. 3. WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. THE BRIEF FACTS ARE THAT ASSESSEE HAVE BEEN O PERATING AS AN OIL MANUFACTURING UNIT SOYA OIL AND OTHER DIFFERENT TYPE OF OILS AND WAS TREATE D AS INDUSTRIAL UNDERTAKING AND IT CARRIED GOOD BUSINESS TILL ASSESSMENT YEAR 1999-00. HOWEVER, DUE TO SLUMP IN OIL MARKET AND CONTINUED RECESSION, ASSESSEES FINANCIAL POSITION WEEKEND AND ULTIMATELY ASSESSEE COMPANY WAS 2 ITA 2179/K/20 0 9 KOTHARI GLOBAL (P) LTD.. A.Y. 06-07 REFERRED TO BIFR AND BIFR DECLARED IT AS SICK VIDE ITS CASE NO 130/99(11) DATED 30.8.2001. AFTERWARDS BIFR PASSED AN ORDER ON 19.6.2003 DIRECT ING CHANGE IN MANAGEMENT OF COMPANY. ASSESSEE FILED WRIT PETITION TO HONBLE HIGH COURT OF CALCUTTA AGAINST THE SAID ORDER AND HONBLE H.C ISSUED STAY OF THE OPERATION OF THE SAI D ORDER. VARIOUS CASES WERE FILED BY SECURED LOAN CREDITORS AND ASSESSEE HAVING BEEN NEGOTIATING WITH SUCH CREDITORS FOR ONE TIMES SETTLEMENT, BUT TO RESTART OF MANUFACTURING BUSINES S. THE COMPANY IS NOW HOPEFUL THAT ALL THE CREDITORS WILL BE SETTLED AND THE COMPANY WILL RESU ME ITS OPERATING VERY SOON. IN THE COURSE OF ITS BUSINESS THE ASSESSEE ACQUIRED AND/OR CONSTRUCT ED GODOWNS FOR STORING OF ITS RAW MATERIALS AND FINISHED PRODUCTS. HOWEVER, AFTER REFERENCE TO BIFR, THE ASSESSEE AS A PRUDENT BUSINESS MAN TOOK A DECISION TO COMMERCIAL ACTIVITIES AND GO DOWNS WERE LET OUT FROM ASSESSMENT YEAR 2002-03 ITSELF AND THE INCOME FROM THE GODOWNS WAS DECLARED AS INCOME FROM BUSINESS. ACCORDINGLY, CHARGED DEPRECIATION ON GODOWNS AND ST ATUTORY DEDUCTIONS ALLOWABLE ON THE INCOME FROM HOUSE PROPERTY WAS NEVER CLAIMED. IN F ACT ASSESSEE HAS NOT BEEN CLAIMING DEPRECIATION ON THE PLANT AND MACHINERY, BUT INADVE RTENTLY IN ASSESSMENT YEAR 2002-03 DEPRECIATION WAS CLAIMED ON THE PLANT AND MACHINERY ALSO ALONG WITH THE DEPRECIATION ON THE GODOWNS. ASSESSMENT WAS REOPENED FOR A.Y 2002-03 ON THE BASIS OF THE OBJECTION OF AUDIT BY ISSUING NOTICE U/S.148 HOLDING THE VIEW THAT DEPREC IATION ON PLANT AND MACHINERY WAS WRONGLY CHARGED. THE ASSESSMENT WAS REOPENED AND DEPRECIATI ON ON PLANT AND MACHINERY WAS WITHDRAWN BUT DEPRECIATION ON BUILDING/GODOWN WAS A LLOWED. SUCH TREATMENT WAS BEING GIVEN IN ALL THE YEARS. SIMILARLY, IN RESPECT TO INTERES T EARNED ON FD, THE FACTS ARE THAT ASSETS OF THE COMPANY AS ON THE YEAR ENDING 31.3.2006 WERE TO THE EXTENT OF RS.13.15 CRORES. ASSESSEE HAD BEEN FIGHTING FOR ITS REVIVAL IN VARIOUS COURTS AS WELL AS WITH THE SECURED LOAN CREDITORS FOR WHICH EXPENSES WERE INCURRED. THE ASSESSEE MADE F.D AGAINST SECURED LOANS IN THE COURSE OF BUSINESS CARRYING ON OIL AND SUCH AMOUNT OF FD WAS TRANSFERRED FROM THE BANK OVER DRAFT A/C OF SECURED LOAN. THE FD MADE WAS OUT OF SECURED LOAN A ND WAS DIRECTLY CONNECTED WITH THE FINANCES RECEIVED FROM THE OVER DRAFT ACCOUNT AND W AS IN THE COURSE OF BUSINESS. 4. DESPITE THESE FACTS, THE AO TREATED THE INCOME F ROM LETTING OF GO DOWNS AND INTEREST AS INCOME FROM OTHER SOURCES, BUT CIT(A) AFTER GOING T HROUGH THE FACTS OF THE CASE, DELETED THE ADDITIONS ON BOTH COUNTS. AGGRIEVED, NOW THE REVEN UE IS IN APPEAL BEFORE US. 5. WE HAVE GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. THE LD. COUNSEL FOR THE ASSESSEE DEMONSTRATED BEFORE US THAT REVENUE ALL AL ONG HAS BEEN TREATING THESE TWO INCOMES I.E. INCOME FROM LETTING OF GODOWNS AND INTEREST INCOME AS INCOME FROM BUSINESS AND HE REFERRED TO ASSESSMENT ORDERS FOR THE A.YS 2001-02, 2002-03, 2003-04, 2004-05 AND EVEN RECENTLY IN 3 ITA 2179/K/20 0 9 KOTHARI GLOBAL (P) LTD.. A.Y. 06-07 2008-09, BOTH THE INCOMES WERE TREATED AS BUSINESS INCOME. HE STATED THAT THIS CAN BE VERIFIED FROM ASSESSEES PAPER BOOK PAGES 1 TO 24, WHEREIN A SSESSEE HAS ENCLOSED COPIES OF ACCOUNTS FOR THE RELEVANT ASSESSMENT YEARS, ASSESSMENT ORDERS AN D COMPUTATION OF INCOME. THE LD. COUNSEL FOR THE ASSESSEE HEAVILY RELIED ON THE PRINCIPLE OF CONSISTENCY AND STATED THAT ONCE REVENUE IS ASSESSING THE INCOME AS BUSINESS INCOME ON BOTH THE COUNTS, NOW REVENUE CANNOT CHANGE ITS STAND, SINCE THE ASSESSEE HAS ADOPTED THE METHOD CO NSISTENTLY AND ALSO ADJUSTED ACCOUNTS ACCORDINGLY. WE FIND FROM THE ABOVE THAT THE ASSESS EES PLEA IS CORRECT IN VIEW OF RECORDS BEFORE US. WE FIND THAT IN THE CASE OF CONSISTENC Y, AS ARGUED BY LD. COUNSEL AND REFERRED THE CASE LAW OF THE HONBLE APEX COURT IN THE CASE OF C IT VS. J.K. CHARITABLE TRUST (2009) 308 ITR 161(SC), WHEREIN HONBLE APEX COURT HELD AS UND ER: IN C. K. GANGADHARANS CASE [2008] 304 ITR 61 T HIS COURT HELD THAT WHERE DIFFERENT HIGH COURTS HAVE TAKEN DIFFERENT VIEWS AND SOME OF THE HIGH COURTS HAVE DECIDED IN FAVOUR OF THE REVENUE, THE SAME IS A JUST CAUSE FOR THE R EVENUE TO PREFER AN APPEAL. IF THE ASSESSEE TAKES THE STAND THAT THE REVENUE AC TED MALA FIDE IN NOT PREFERRING APPEAL IN ONE CASE AND FILING THE APPEAL IN OTHER CASE, IT HA S TO ESTABLISH MALA FIDES. AS A MATTER OF FACT, AS RIGHTLY CONTENDED BY THE LEARNED COUNSEL FOR THE REVENUE, THERE MAY BE CERTAIN CASES WHERE BECAUSE OF THE SMALL AMOUNT OF REVENUE INVOLVED, NO APPEAL IS FILED. POLICY DECISIONS HAVE BEEN TAKEN NOT TO PREFER APPEAL WHER E THE REVENUE INVOLVED IS BELOW A CERTAIN AMOUNT. SIMILARLY, WHERE THE EFFECT OF THE DECISION IS REVENUE NEUTRAL THERE MAY NOT BE ANY NEED FOR PREFERRING THE APPEAL. ALL THESE CE RTAINLY PROVIDE THE FOUNDATION FOR MAKING A DEPARTURE. IN C. K. GANGADHARANS CASE [2008] 304 ITR 61 ( SC) IT WAS HELD THAT MERELY BECAUSE IN SOME CASES THE REVENUE HAS NOT PREFERRED AN APPEAL THAT DOES NOT OPERATE AS A BAR FOR THE REVENUE TO PREFER AN APPEAL IN ANOTHER CASE WHERE T HERE IS JUST CAUSE FOR DOING SO OR IT IS IN PUBLIC INTEREST TO DO SO OR FOR A PRONOUNCEMENT BY THE HIGHER COURT WHEN DIVERGENT VIEWS ARE EXPRESSED BY THE DIFFERENT HIGH COURTS. IN THIS CASE, IT IS ACCEPTED BY THE LEARNED COUNSEL FOR THE APPELLANT-REVENUE THAT THE FACT SITUATION I N ALL THE ASSESSMENT YEARS IS THE SAME. ACCORDING TO HIM, IF THE FACT SITUATION CHANGES THE N THE REVENUE CAN CERTAINLY PREFER AN APPEAL NOTWITHSTANDING THE FACT THAT FOR SOME YEARS NO APPEAL WAS PREFERRED. THIS QUESTION IS OF ACADEMIC INTEREST IN THE PRESENT APPEALS AS U NDISPUTEDLY THE FACT SITUATION IS THE SAME. 6. WE FIND FROM THE ABOVE THAT THE FACTS SITUATION IN THE PRESENT YEAR IS EXACTLY SIMILAR WHAT WAS IN ALL THE OTHER ASSESSMENT YEARS AND IF T HE REVENUE HAS NOT CHALLENGED THE DECISIONS FOR EARLIER YEARS, ITS APPEAL FOR THIS YEAR IS LIAB LE FOR DISMISSAL. ACCORDINGLY, THIS INTER- CONNECTED ISSUE OF REVENUES APPEAL IS DISMISSED. 7. THE NEXT ISSUE IN THE APPEAL OF REVENUE IS AGAIN ST THE ORDER OF CIT(A) DELETING THE DISALLOWANCE OF BUSINESS EXPENSES. FOR THIS REVENUE HAS RAISED FOLLOWING GROUND NO.3. 3. FOR THAT ON THE FACTS AND CIRCUMSTANCES OF THE C ASE, WHETHER THE LD.CIT(A)-VIII IS CORRECT IN ALLOWING EXPENSES AS BUSINESS EXPENSES. 4 ITA 2179/K/20 0 9 KOTHARI GLOBAL (P) LTD.. A.Y. 06-07 8. WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT ONCE INCOME FROM LETTING OF GODO WNS AND INTEREST INCOME IS ASSESSED AS BUSINESS INCOME, CONSEQUENTIAL EXPENSES QUO THOSE I NCOMES WILL BE ALLOWED. EVEN OTHERWISE, THE REVENUE HAS NOT DOUBTED THE GAMINESS OF THESE E XPENSES AND DISALLOWED ONLY ON THE PREMISE THAT THESE ARE NOT BUSINESS EXPENSES AND RELATED TO INCOME FROM LETTING OF GODOWNS AND INTEREST INCOME. THE CIT(A) HAS RIGHTLY ALLOWED THE CLAIM OF ASSESSEE AFTER GOING THROUGH FACTS AND CIRCUMSTANCES AND WE CONFIRM THE SAME. THIS ISSUE O F THE REVENUES APPEAL IS DISMISSED. 9. IN THE RESULT, APPEAL OF REVENUE IS DISMISSED. 10. ORDER PRONOUNCED IN THE OPEN COURT ON 28.10.201 1. SD/- SD/- . ! ! ! ! . '# , (C. D. RAO) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER ( !# !# !# !#) )) ) DATED : 28TH OCTOBER, 2011 /0 %12 3 JD.(SR.P.S.) '. 4 ,5 6'5'7- COPY OF THE ORDER FORWARDED TO: 1 . *+ / APPELLANT DCIT, CIRCLE-9, KOLKATA. 2 ,-*+ / RESPONDENT M/S. KOTHARI GLOBAL (P) LTD., 207, M AHARSHI DEBENDRA ROAD, KOLKATA-700 007. 3 . .% ( )/ THE CIT(A), KOLKATA 4. 5. .% / CIT KOLKATA 5=> ,% / DR, KOLKATA BENCHES, KOLKATA -5 ,/ TRUE COPY, '.%?/ BY ORDER, 2 /ASSTT. REGISTRAR .