M/s. The Standard Stores Co., Howrah V. A.C.I.T., Central Circle- XXIV, Kolkata,

ITA 2208/KOL/2007

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 48163 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 6 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-05-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 24-05-2010
• Assessment Year: 2003-2004
• Appeal Filed On: 13-11-2007
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: P K MISHRA
• Keywords: Business income; Business expenditure
• Section: 43B

Judgement Text

, A , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: KOL KATA ( ) BEFORE , /AND , . . !' ) [BEFORE HONBLE SRI MAHAVIR SINGH, JM & HONBLE SHR I C. D. RAO, AM] # # # # / I.T.A NO. 2208/KOL/2007 $% &' $% &' $% &' $% &'/ // / ASSESSMENT YEAR: 2003-04 M/S. THE STANDARD STORES CO. (PAN-AADFT 7888 A) ()* /APPELLANT ) VS ASSISTANT COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-XXIV, KOLKATA (+,)*/ RESPONDENT ) FOR THE APPELLANT: SHRI RAVI TULSIYAN FOR THE RESPONDENT: SHRI P. K. MISHRA !- / ORDER PER MAHAVIR SINGH, JM/ , : THIS APPEAL BY ASSESSEE IS ARISING OUT OF THE ORDER OF CIT(A), CENTRAL-III, KOLKATA IN APPEAL NO. 142/CC-XXIV/CIT(A), C-III/05-06 DATED 10.08.2007. THE ASSESSMENT WAS FRAMED BY ACIT, C.C-XXIV, KOLKATA U/S.143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR ASSESSME NT YEAR 2003-04 VIDE HIS ORDER DATED 16.08.2005. 2. THE FIRST ISSUE IN THIS APPEAL OF ASSESSEE BEFOR E US IS AGAINST THE TREATMENT OF LEASE RENTAL OF RS.1,08,000/- FROM M/S. ELEXIR TRAC OM LTD. AS INCOME FROM OTHER SOURCES AS AGAINST THE CLAIM OF THE ASSESSEE FOR IT S TREATMENT AS BUSINESS INCOME ON THE GROUND THAT THE PROPERTY WAS USED FOR THE PURPOSE O F BUSINESS. FOR THIS, THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: (1A) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, LD. C.L.T.(A) ERRED IN HAVING TREATED THE LEASE RENTAL OF RS.L,08,000/- AS INCOME FROM OTHER SOURCES WITHOUT ALLOWING ANY DEDUCTION IN SPITE OF THE FACT THAT HE HIMSELF HAS ADMITTED THE UNDISPUTED FACT THAT BUSINESS INCOME OF THE APP ELLANT INCLUDES RENTAL INCOME AND LEASE RENT FROM LAND GIVEN ON 99 YEARS LEASE T O M/S.ELEXIR TRACON LTD. (B) THAT THE LD. C.I.T.(A) HELD THE A.O.S TREATMEN T OF LEASE RENTAL OF RS. 1,08,000/- AS INCOME FROM HOUSE PROPERTY AS OBVIOUS LY INCORRECT AND THUS CLAIM OF DEDUCTION U/S.24 AS IRRELEVANT, WHEREAS HE HIMSE LF HAS ADMITTED THAT BUSINESS INCOME OF THE ASSESSEE INCLUDES LEASE RENTAL AND HE NCE HIS TREATING THE LEASE RENTAL AS INCOME FROM OTHER SOURCES IS CONTRADICTOR Y IN NATURE. ITA NO.2208/K/2007 THE STANDARD STORES CO. A.Y 03-04 2 3. WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES. WE FIND FACTS FROM RECORDS AS WELL A S FROM ARGUMENTS OF BOTH SIDES, THAT ASSESSEE HAS EARNED INCOME FROM LEASE R ENTALS FROM LAND ON WHICH GODOWNS WERE EXISTED. THIS FACT HAS NOT BEEN DENIE D BY REVENUE OR THE ASSESSEE. ONCE IT IS A FACT THAT THE ASSESSEE HAS EARNED LEAS E RENTALS FROM LAND ON WHICH GODOWNS EXISTED THE INCOME EARNED IS TO BE ASSESSED UNDER THE HEAD INCOME FROM HOUSE PROPERTY AS HELD BY VARIOUS JUDGMENTS O F HONBLE APEX COURT AND PARTICULARLY IN THE CASE OF CIT VS CHENNAI PROPERTI ES & INVESTMENT LTD. (2004) 266 ITR 685(MAD) AND SAMBHU INVESTMENT PVT. LTD. VS CIT (2003) 263 ITR 143 (SC). THE HONBLE APEX COURT IN THE CASE OF CHENNA I PROPERTIES & INVESTMENTS PVT LTD. (SUPRA) HELD AS UNDER: 1. TWO QUESTIONS HAVE BEEN REFERRED TO US AT THE I NSTANCE OF THE REVENUE. THE ASSESSMENT YEAR IS 1986-87. THE QUESTIONS ARE : '1. WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE TRIBUNAL WAS RIGHT IN LAW IN HOLDING THAT THE RENT RECEIPTS DERI VED BY THE ASSESSEE-COMPANY FROM LETTING OUT OF PROPERTIES SHOULD BE ASSESSED U NDER THE HEAD 'BUSINESS' THEREBY ALLOWING THE EXPENSES INCURRED FOR LETTING OUT THE PROPERTIES AS BUSINESS EXPENDITURE ? 2. WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE TRIBUNAL WAS RIGHT IN LAW IN NOT CONSIDERING THE APPLICABILITY O F THE PROVISIONS OF SECTION 43B FOR DISALLOWING THE DISPUTED URBAN LAND TAX IF THE INCOME IS TO BE ASSESSED UNDER 'BUSINESS' AND THE NON-DEDUCTIBILITY OF THE COST OF SUPPLYING DRINKING WATER FROM THE INCOME FROM PROPERTY?' 2. THE ASSESSEE IS AN INCORPORATED COMPANY. THE MAI N OBJECT OF THE ASSESSEE- COMPANY IS ACQUIRING CERTAIN PROPERTIES IN THE CITY OF MADRAS, TO LET OUT SUCH PROPERTIES TO MAKE ADVANCE ON THE SECURITY OF LAND AND BUILDING AND EARN INTEREST THEREON. THE ASSESSEE RENTED OUT A PROPERT Y OWNED BY IT AND THAT RENTAL INCOME WAS CLAIMED TO BE INCOME FROM BUSINESS. THOU GH THAT STAND, OF THE ASSESSEE HAD BEEN ACCEPTED BY THE ASSESSING AUTHORI TY IN EARLIER YEARS, FOR THIS ASSESSMENT YEAR, THE AO TOOK THE VIEW THAT THE RENT AL INCOME RECEIVED IS 'INCOME FROM PROPERTY' AND IS TO BE ASSESSED UNDER THAT HEA D AND NOT UNDER THE HEAD 'INCOME FROM BUSINESS'. ON APPEAL, THE CIT(A) AGREE D WITH THE AO. ON FURTHER APPEAL, THE TRIBUNAL ACCEPTED THE ASSESSEE'S CONTEN TION AND HELD THAT THE INCOME SHOULD BE TREATED AS 'BUSINESS INCOME'. 3. THE SUPREME COURT IN THE CASE OF EAST INDIA HOUSING AND LAND DEVELOPMENT TRUST LTD. V. CIT WHILE CONSIDERING THE HEAD UNDER WHICH THE RENTAL REALISED BY A COMPANY FORMED WITH THE OBJECT OF SETTING UP OF MAR KETS FROM THE SHOPS OWNED BY IT, SHOULD BE ASSESSED, OBSERVED, 'INCOME DERIVE D BY THE COMPANY FROM SHOPS AND STALLS WAS INCOME RECEIVED FROM PROPERTY AND FE LL UNDER THE SPECIFIC HEAD DESCRIBED IN SECTION 9. THE CHARACTER OF THAT INCOM E WAS NOT ALTERED BECAUSE IT WAS RECEIVED BY A COMPANY FORMED WITH, THE OBJECT O F DEVELOPING AND SETTING UP MARKETS.' SECTION 9 REFERRED TO THEREIN IS SECTION 9 OF THE IT ACT, 1922, WHICH CORRESPONDS TO SECTION 22 OF THE IT ACT, 1961. ITA NO.2208/K/2007 THE STANDARD STORES CO. A.Y 03-04 3 4. A CONSTITUTION BENCH OF THE SUPREME COURT CONSID ERED THE CLAIM OF AN ASSESSEE WHO HAD LET OUT A BUILDING FULLY EQUIPPED AND FURNI SHED FOR THE USE AS A HOTEL, THAT THE INCOME DERIVED THEREFROM, BY WAY OF RENTAL AS ALSO FOR THE HIRE OF FURNITURE AND FIXTURES SHOULD BE TREATED AS BUSINES S INCOME IN THE CASE OF SULTAN BROS. V. CIT . THE CONSTITUTION BENCH NEGATIVED THA T CLAIM OF THE ASSESSEE AND REFERRED WITH APPROVAL TO THE OBSERVATIONS MADE IN THE CASE OF EAST INDIA HOUSING AND LAND DEVELOPMENT TRUST LTD. V. CIT (SUPRA). 5. THE FACTS OF THE PRESENT CASE ARE SIMILAR TO THO SE CONSIDERED IN THE CASE OF EAST INDIA HOUSING AND LAND DEVELOPMENT. THE FACT THAT TH E ASSESSEE-COMPANY WAS FORMED WITH THE OBJECT OF ACQUIRING CERTAIN PROPERT IES IN THE CITY OF CHENNAI AND DERIVING INCOME BY LETTING THOSE PROPERTIES OUT, WO ULD NOT RENDER THAT INCOME BUSINESS INCOME. IT IS THE INCOME FROM THE PROPERTY AND IS TO BE ASSESSED UNDER THAT HEAD ONLY. THE FIRST QUESTION IS ANSWERED IN F AVOUR OF THE REVENUE AND AGAINST THE ASSESSEE. 4. AS THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE R EVENUE AND AGAINST THE ASSESSEE, WE HAVE NO HESITATION IN CONFIRMING T HE ORDERS OF THE LOWER AUTHORITIES. ACCORDINGLY, THIS ISSUE OF THE ASSESS EES APPEAL IS DISMISSED. HOWEVER, AS REQUESTED BY THE LD. COUNSEL FOR THE AS SESSEE THAT STANDARD DEDUCTION U/S. 24 IS TO BE ALLOWED, YES, WE ARE IN FULL AGREEMENT WITH THE ARGUMENT OF THE LD. COUNSEL FOR THE ASSESSEE THAT T HE ASSESSEE IS ENTITLED FOR DEDUCTION U/S. 24 OF THE ACT I.E. WHICH IS ONLY A COROLLARY. THE ASSESSING OFFICER WILL TAKE INTO CONSIDERATION THIS FACT WHIL E COMPUTING INCOME FROM HOUSE PROPERTY. 5. THE NEXT ISSUE IN THIS APPEAL OF THE ASSESSEE IS AGAINST THE ORDER OF CIT(A) CONFIRMING THE ACTION OF THE ASSESSING OFFIC ER IN TREATING RENTS RECEIVED FROM ASSETS AT RS.72,672/- AS INCOME FROM OTHER SOURCES. FOR THIS, THE ASSESSEE HAS RAISED THE FOLLOWING GROUND NOS. 2 (A) AND (B): (2A) THAT THE A.O. AND LD. C.I.T.(A) BOTH HAVE ERRE D IN TREATING THE RENT RECEIVED FROM VARIOUS PARTIES ON YEARLY BASIS OF RS.72,672/- AS INCOME FROM OTHER SOURCES WITHOUT ALLOWING ANY EXPENDITURE ON EARNING SUCH IN COME AND THUS DENYING THE ASSESSEES CLAIM FOR THE SAME A BUSINESS INCOME. (B) THAT THE A.O. AND THE LD. C.I.T.(A) BOTH HAVE A CTED ARBITRARILY IN NOT PROPERLY APPRECIATING THE HISTORY OF THE ACQUISITIO N OF LAND FROM WHICH LEASE RENT WAS DERIVED AND OFFERED AS BUSINESS INCOME AND INDI CATING THAT LEASING OUT OF LAND WAS A CONTINUATION OF THE BUSINESS ACTIVITY AN D HENCE DENIAL OF ASSESSEES CLAIM WAS UNCALLED FOR AND BAD IN LAW. 6. WE, AFTER HEARING BOTH SIDES, FIND THAT THE ASSE SSEE HAS LEASED OUT ASSETS ALONG WITH LEASED OUT PROPERTY I.E. GODOWNS. THE C ONCURRENT FINDING OF THE LOWER AUTHORITIES IS THAT THIS IS INCOME FROM OTHER SOURC ES AND TO THIS THE LD. COUNSEL FOR ITA NO.2208/K/2007 THE STANDARD STORES CO. A.Y 03-04 4 THE ASSESSEE COULD NOT CONTROVERT IN ANY WAY. ACCO RDINGLY, WE CONFIRM THE ORDERS OF THE LOWER AUTHORITIES AND THIS ISSUE OF THE ASSE SSEES APPEAL IS DISMISSED. 7. THE NEXT ISSUE IN THIS APPEAL OF THE ASSESSEE IS AS REGARDS TO DISALLOWANCE OF PARTNERS SALARY. FOR THIS, THE ASSESSEE HAS RA ISED THE FOLLOWING GROUND NO.3: (3) THAT THE LD. REVENUE AUTHORITIES WERE NOT JUST IFIED IN DISALLOWING THE PARTNERS SALARY PAID ON THE BASIS OF THE PARTNERSH IP DEED ON THE ALLEGED GROUND THAT NEITHER THERE WAS ANY BUSINESS NOR WORKING PAR TNER IN SPITE OF THE FACT THAT THE ASSESSEES PARTNERSHIP FIRM WAS IN EXISTENCE AN D ALL ITS INCOME & EXPENDITURE OUT OF BUSINESS ACTIVITIES WERE DULY ACCOUNTED FOR. 8. AT THE OUTSET, IT IS TO BE MENTIONED THAT LD. CO UNSEL FOR THE ASSESSEE HAS NOT ARGUED THIS ISSUE. HENCE, THE SAME IS DISMISSED AS NOT ARGUED. 9. THE NEXT ISSUE IN THIS APPEAL OF THE ASSESSEE IS THAT THE DEPARTMENT IS CONSISTENTLY ACCEPTING THE ASSESSEES INCOME AS BUS INESS INCOME. SINCE THE ISSUE IS COVERED BY HONBLE APEX COURT DECISION AS CITED ABOVE, WE CANNOT BY THIS ARGUMENT OF THE ASSESSEE. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DI SMISSED. ORDER IS PRONOUNCED IN THE OPEN COURT. SD/- SD/- . ., ,, , !' , , , , (C. D. RAO) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER ( (( ( ' ' ' ') )) ) DATED : 24 TH MAY, 2011 /0 $12 3 JD.(SR.P.S.) !- 4 +5 6!5&7- COPY OF THE ORDER FORWARDED TO: 1 . )* /APPELLANT - M/S. THE STANDARD STORES CO., 8, DUF FER STREET, STATION ROAD, LILUAH, HOWRAH-711 204. 2 +,)* / RESPONDENT ACIT, C.C-XXIV, KOLKATA 3 . -$ / THE CIT, KOLKATA 4 . -$ ( )/ THE CIT(A), KOLKATA. 5 . >? +$ / DR, KOLKATA BENCHES, KOLKATA ,5 +/ TRUE COPY, !-$@/ BY ORDER, 2 /ASSTT. REGISTRAR .