ARISTO LABORATORIES P. LTD, MUMBAI V. DCIT 8(1), MUMBAI

ITA 266/MUM/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 3878 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 1 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-02-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 15-07-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 11-01-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AMOL KAMAT
• Keywords: Business income; Business expenditure; Rule of consistency
• Section: 234B; 80IB; 37(1); 37; 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A , MUMBAI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND SHRI ASHWANI TANEJA , ACCOUNTANT MEMBER ITA NOS. 4848 & 4849/MUM/2010 : (A.Y S : 200 6 - 07 & 2007 - 08 ) M/S. ARISTO LABORATORIES PVT. LTD., GALA NO. 1, 23A SHAH IND. ESTATE, OFF VEERA DESAI ROAD, ANDHERI (W), MUMBAI 400 053 (APPELLANT) PAN : AAACA5129M VS ASST. COMMISSIONER OF INCOME TAX 8 ( 1 ), MUMBAI (RESPONDENT) ITA NO. 6990/MUM/2011 : (A.Y : 2008 - 09 ) M/S. ARISTO LABORATORIES PVT. LTD., GALA NO. 1, 23A SHAH IND. ESTATE, OFF VEERA DESAI ROAD, ANDHERI (W), MUMBAI 400 053 (APPELLANT) PAN : AAACA5129M VS DY. COMMISSIONER OF INCOME TAX - 8(1), MUMBAI (RESPONDENT) ITA NO. 266/MUM/2012 : (A.Y : 2009 - 10 ) M/S. ARISTO LABORATORIES PVT. LTD., GALA NO. 1, 23A SHAH IND. ESTATE, OFF VEERA DESAI ROAD, ANDHERI (W), MUMBAI 400 053 (APPELLANT) PAN : AAACA5129M VS DY. COMMISSIONER OF INCOME TAX - 8(1), MUMBAI (RESPONDENT) ITA NO. 5506/MUM/2013 : (A.Y : 2010 - 11 ) M/S. ARISTO LABORATORIES PVT. LTD., GALA NO. 1, 23A SHAH IND. ESTATE, OFF VEERA DESAI ROAD, ANDHERI (W), MUMBAI 400 053 (APPELLANT) PAN : AAACA5129M VS DY. COMMISSIONER OF INCOME TAX - 8(1), MUMBAI (RESPONDENT) ASSESSEE BY : SHRI AJAY KUMAR RASTOGI REVENUE BY : SHRI AMOL KAMAT , CIT - DR DATE OF HEARING : 27 /01/2016 DATE OF PRONOUNCEMENT : 17 /0 2 /2016 2 M/S. ARISTO LABORATORIES PVT. LTD. ITA NOS. 4848&4849/M/2010, 6990/M/2011, 266/M/2012, 5506/M/2013 O R D E R PER ASHWANI TANEJA , A M : THESE APPEALS PERTAIN TO THE SAME ASSESSEE FOR DIFFERENT YEARS INVOLVING IDENTICAL ISSUES, AND THEREFORE, THESE ARE BEING DISPOSED OF BY A COMMON ORDER. ITA NO. 4848/MUM/2010 FOR A.Y 2006 - 07 2. GROUND NOS. 1 TO 3 : IN THESE GROUNDS, THE ASSESSEE HAS CHALLENGED TH E ACTION OF THE LD. CIT(A) IN CONFIRMING THE ACTION OF THE AO IN TREATING THE INCOME ON ACCOUNT OF RENT OF RS. 11,74,680/ - AS INCOME FROM HOUSE PROPERTY AS AGAINST INCOME FROM BUSINESS AS WAS SHOWN BY THE ASSESSEE IN THE RETURN OF INCOME. 3. THE BRIEF FACTS ARE THAT THE ASSESSEE - COMPANY RECEIVED RENTAL INCOME WHICH WAS CLAIMED AS BUSINESS INCOME. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS , THE AO ASKED THE ASSESSEE TO EXPLAIN AS TO WHY THE RENTAL INCOME SHOULD NOT BE ASSESSED UNDER THE HEAD INCO ME FROM HOUSE PROPERTY. IN RESPONSE, THE ASSESSEE SUBMITTED THAT IT HAS BEEN CONSISTENTLY SHOWING THIS RENTAL INCOME UNDER THE HEAD BUSINESS INCOME SINCE LAST MANY YEARS. THE EXPLANATION OF THE ASSESSEE WAS NOT ACCEPTED BY THE AO AND HE ASSESSED THIS RE NTAL INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY. BEING AGGRIEVED, THE ASSESSEE CONTESTED THE MATTER IN APPEAL BEFORE THE LD. CIT(A). 4. IN THE APPEAL BEFORE THE LD. CIT(A) , IT WAS SUBMITTED THAT THE ASSESSEE HAS DERIVED THIS INCOME BY WAY OF EXPL OITING ITS BUSINESS ASSET AND THEREFORE 3 M/S. ARISTO LABORATORIES PVT. LTD. ITA NOS. 4848&4849/M/2010, 6990/M/2011, 266/M/2012, 5506/M/2013 THE INCOME DERIVED FROM SUCH EXERCISE SHOULD BE ASSESSED UNDER THE HEAD INCOME FROM BUSINESS. THE ASSESSEE MADE DETAILED SUBMISSIONS IN SUPPORT OF HIS ARGUMENTS BUT THE LD. CIT(A) WAS NOT SATISFIED WITH THE SUBMIS SIONS OF THE ASSESSEE AND RELYING UPON THE JUDGEMENT OF THE HONBLE SUPREME COURT IN THE CASE OF SHAMBHU INVESTMENT (P) LTD V. CIT, 263 ITR 143 (SC) REJECTED THE CLAIM OF THE ASSESSEE BY UPHOLDING THE ACTION OF THE AO IN ASSESSING THE RENTAL INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY. BEING AGGRIEVED, THE ASSESSEE HAS FILED AN APPEAL BEFORE THE TRIBUNAL. 5. DURING THE COURSE OF THE HEARING BEFORE US, IT HAS BEEN ARGUED BY THE LD. COUNSEL, INTER ALIA , THAT THE ASSESSEE HAS BEEN SHOWING THE IMPUGNED INCOME AS PART OF ITS BUSINESS INCOME SINCE LAST MANY YEARS. THE ASSESSMENT ORDER S IN THE EARLIER YEARS HAVE BEEN PASSED U/S 143(3). THE CLAIM OF THE ASSESSEE HAS ALWAYS BEEN ACCEPTED , BUT IN THIS YEAR THE AO WITHOUT MAKING ANY DISTINCTION ON FA CTS AND WITHOUT GIVING ANY PARTICULAR REASON HAD CHANGED HIS STAND AND ASSESSED THE IMPUGNED INCOME UNDER A DIFFERENT HEAD, I.E. INCOME FROM HOUSE PROPERTY. IT WAS SUBMITTED THAT THE AO HAD NEVER CHANGED THE HEAD OF INCOME IN THE PAST WITH REGARD TO THI S INCOME. IT WAS FURTHER SUBMITTED THAT THIS ARGUMENT WAS TAKEN BEFORE THE LD. CIT(A), BUT HE HAS ALSO NOT GIVEN ANY REASONING AS TO HOW VIOLATION OF THE PRINCIPLE OF CONSISTENCY WAS JUSTIFIED. 6. ON THE OTHER HAND, THE LD. DR HAS SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES. IT HAS BEEN ARGUED BY HIM THAT A PARTICULAR HEAD HAS BEEN PRESCRIBED UNDER THE ACT FOR ASSESSING INCOME FROM HOUSE PROPERTY AND, THEREFORE, IT HAS BEEN RIGHTLY ASSESSED UNDER THAT HEAD BY THE AO. 4 M/S. ARISTO LABORATORIES PVT. LTD. ITA NOS. 4848&4849/M/2010, 6990/M/2011, 266/M/2012, 5506/M/2013 7. WE HAVE GONE THROUGH THE ORDERS PASSED BY THE LOWER AUTHORITIES AND ALSO HEARD THE SUBMISSIONS MADE BY BOTH THE SIDES BEFORE US. IT HAS BEEN ARGUED BY THE LD. COUNSEL THAT THE ASSESSEE HAS BEEN SHOWING THIS INCOME UNDER THE HEAD INCOME FROM BUSINESS CON SISTENTLY SINCE MANY YEARS AND IT HAS BEEN ACCEPTED AS SUCH BY THE AO IN ALL THE YEARS. IT IS NOTED THAT NEITHER THE FACTS WITH REGARD TO ASSESSMENT OF EARLIER YEARS HAVE BEEN PROPERLY BROUGHT ON RECORD BY THE ASSESSEE BEFORE US NOR THE LOWER AUTHORITIES HAVE DEALT WITH THESE ARGUMENTS PROPERLY BEFORE REJECTING THE CLAIM OF THE ASSESSEE. THE AO HAS GIVEN NO REASONING AT ALL AS TO WHY HE HAD CHANGED THE HEAD OF INCOME IN THIS YEAR. NO DISTINCTION ON FACTS OR LAW HAS BEEN MADE BY HIM BEFORE TAKING A DIFFER ENT STAND. NO REASONING OR ANALYSIS HAS BEEN GIVEN IN THE ASSESSMENT ORDER. IT IS FURTHER NOTED THAT THE LD. CIT(A) HAS ALSO NOT EXAMINED THIS CRUCIAL ASPECT CAREFULLY. IT HAS BEEN HELD BY THE HONBLE SUPREME COURT IN THE CASE OF CIT V. EXCEL INDUSTRIES LTD., 358 ITR 295 (SC) THAT IF A PARTICULAR VIEW HAS BEEN ADOPTED OR ACCEPTED BY THE REVENUE CONSISTENTLY IN MANY YEARS, THEN, SUDDENLY IN A PARTICULAR YEAR IT SHOULD NOT CHANGE ITS VIEW OR STAND AS IT MAY CAUSE AVOIDABLE HARDSHIP TO THE TAX PAYER. IN VI EW OF THESE FACTS, WE FIND IT APPROPRIATE TO SEND THIS ISSUE BACK TO THE FILE OF THE AO TO EXAMINE THIS ASPECT PROPERLY. IF THIS INCOME HAS BEEN ASSESSED UNDER THE HEAD INCOME FROM BUSINESS IN ALL THE PAST YEARS, THEN, R EVENUE SHOULD NOT CHANGE THE HEAD OF INCOME UNLESS THE AO IS ABLE TO BRING OUT ON RECORD SOME MATERIAL POINTING OUT CHANGE IN FACTS OR LAW. FOR THIS PURPOSE, THE AO IS OBLIGED UNDER THE LAW TO GIVE A DETAILED REASONING IN THE ASSESSMENT ORDER IN CASE HE IS NOT ACCEPTING THE CLAIM OF THE ASSESSEE. IN THE ABSENCE OF THE SAME, THE AO IS NOT PERMITTED TO CHANGE THE HEAD OF INCOME AND SHOULD ACCEPT THE CLAIM OF THE ASSESSEE. THE ASSESSEE IS PERMITTED TO SUBMIT REQUISITE DETAILS AND DOCUMENTARY EVIDENCES, AS MAY BE REQUIRED BY THE AO, OR AS M AY BE CONSIDERED APPROPRIATE BY IT, AS PER LAW 5 M/S. ARISTO LABORATORIES PVT. LTD. ITA NOS. 4848&4849/M/2010, 6990/M/2011, 266/M/2012, 5506/M/2013 AND FACTS. THE AO SHALL GIVE ADEQUATE OPPORTUNITY OF HEARING TO THE ASSESSEE BEFORE DECIDING THIS ISSUE AFRESH. WITH TH ESE OBSERVATION S, THIS ISSUE IS SENT BACK TO THE FILE OF THE AO. THUS, GROUND NOS. 1 TO 3 ARE TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 8. GROUND NOS. 4 TO 12 : THESE GROUNDS DEAL WITH THE ACTION OF THE LD. CIT(A) IN CONFIRMING THE ACTION OF THE AO IN NOT GRANTING BENEFIT OF DEDUCTION U/S. 80IB OF INTEREST INCOME, RENTAL INCOME AND INCOME FROM OTHER SOURCES. THE BRIEF FACTS ARE THAT THE AO NOTICED THAT THE ASSESSEE HAS EARNED INTEREST INCOME AND THE SAME WAS INCLUDED IN THE PROFIT OF THE INDUSTRIAL UNDERTAKING AGAINST WHICH THE DEDUCTION U/S. 80IB HAS BEEN CLAIMED. HENCE, THE A SSESSEE COMPANY WAS ASKED TO EXPLAIN WHY THE INTEREST INCOME SHOULD NOT BE TREATED AS INCOME FROM OTHER SOURCES AND SHOULD NOT BE EXCLUDED WHILE WORKING OUT THE DEDUCTION U/S. 80IB OF THE I.T. ACT. IN REPLY TO THE ABOVE QUERY, THE ASSESSEE COMPANY SUBMITT ED THAT IT WAS MANUFACTURING VARIOUS PHARMACEUTICAL DRUGS AND HENCE ENTITLED TO 100% DEDUCTION ON ITS INCOME U/S. 80IB. HOWEVER, THE AO DID NOT ACCEPT THE ASSESSEES CONTENTION BECAUSE THE ASSESSEE HA D DEPOSITED THE SURPLUS FUND AVAILABLE IN FIXED DEPOSIT ACCOUNT AND HA D EARNED INTEREST THEREON. THE ASSESSEE BEING NOT IN THE BUSINESS OF GIVING LOANS AND ADVANCES , WHEN SURPLUS MONEY LYING IDLE WAS INVESTED IN THE BANK, THE INTEREST SO EARNED WAS NOT RECEIVED IN THE COURSE OF BUSINESS AS TO MAKE I T PART OF BUSINESS INCOME AND IT WAS TO BE ASSESSED UNDER THE HEAD INCOME FROM OTHER SOURCES. T HE AO RELIED UPON THE DECISION OF VARIOUS COURTS. THUS, THE AO WHILE COMPUTING THE DEDUCTION U/S. 80IB EXCLUDED THE INTEREST INCOME FROM THE PROFIT OF THE INDU STRIAL UNDERTAKING AND TAXED IT UNDER THE HEAD INCOME FROM OTHER SOURCES. 6 M/S. ARISTO LABORATORIES PVT. LTD. ITA NOS. 4848&4849/M/2010, 6990/M/2011, 266/M/2012, 5506/M/2013 9. BEING AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT(A), WHEREIN HE MADE DETAILED SUBMISSIONS. RELEVANT PORTION OF THE SUBMISSIONS FILED BY THE ASSESSEE BEFORE THE LD. CIT(A) IS REPRODUCED BELOW : IT IS RESPECTFULLY SUBMITTED THAT THE LANGUAGE USED IN SECTION 80IA AND 80IB IS 'WHERE THE GROSS TOTAL INCOME OF AN ASSESSEE INCLUDES ANY PROFITS AND GAINS DERIVED FROM ANY BUSINESS OF INDUSTRIAL UNDERTAKING' WHEREAS TH E LANGUAGE USED IN SECTIONS 80J, 80HH AND 80I, IS 'INCLUDES ANY PROFIT AND GAINS DERIVED FROM AN INDUSTRIAL UNDERTAKING'. THE DIFFERENCE IN THE LANGUAGE OF TWO SECTIONS WOULD CLEARLY ESTABLISH THAT THE INTENTION OF THE LEGISLATURE WAS TO GIVE A SEPARATE TR EATMENT FOR 'INCOME DERIVED FROM INDUSTRIAL UNDERTAKING' (80J, 80HH AND 80I) AND, 'PROFITS AND GAINS DERIVED FROM ANY BUSINESS OF INDUSTRIAL UNDERTAKING' (80IA/ 80 I B) AND, THEREFORE, THEIR APPLICABILITY WOULD ALSO BE TOTALLY DIFFERENT. EMPHASIS BE GIVEN ON THE WORDS 'IN PROFITS AND GAINS DERIVED FROM ANY BUSINESS OF AN INDUSTRIAL UNDERTAKING' AS DISTINGUISHED FROM 'ANY PROFIT AND GAINS DERIVED FROM AN INDUSTRIAL UNDERTAKING. AT THIS POINT WE PAUSE AND FIND OUT WHAT IS THE IMPORT OF THE WORDS 'ANY BUSINES S' USED IN THE STATUTE. THE WORD 'ANY' AS APPEARING IN BLACK'S LAW DICTIONARY IS 'SOME ONE OUT OF MANY'. THERE CAN BE VARIOUS ASPECTS ARISING OUT OF A BUSINESS OPERATION AND AS STATED ABOVE, THE APPELLANT IS AUTHORIZED TO INVEST AND DEAL WITH MONEY OF THE COMPANY NOT IMMEDIATELY REQUIRED FOR ACHIEVING THE MAIN OBJECTS AND INTEREST FROM FIXED DEPOSIT WITH THE BANK IS A PART OF BUSINESS OPERATIONS AUTHORIZED BY MOA AS OBJECTS INCIDENTAL OR ANCILLARY TO ATTAINMENT OF THE MAIN OBJECTS. IT IS CLEARLY SEEN THAT T HE LEGISLATURE CONSCIOUSLY WANTED TO GIVE A DIFFERENT INTERPRETATION OF SECTION 80IA/ 80IB AS DISTINGUISHED FROM THAT CONNECTED WITH SECTION 80 HH AND SIMILAR OTHER SECTIONS AND THERE IS NO AMBIGUITY ABOUT THIS. THE LD. CIT(A) WAS NOT SATISFIED WITH THE S UBMISSIONS OF THE ASSESSEE AND IT WAS HELD BY HIM THAT FOR CLAIMING DEDUCTION U/S. 80IB , THE INCOME SHOULD HAVE BEEN DERIVED FROM THE INDUSTRIAL UNDERTAKING. HE UPHELD THE ACTION OF THE AO IN NOT GRANTING THE BENEFIT OF DEDUCTION U/S. 80IB ON THE AMOUNT O F 7 M/S. ARISTO LABORATORIES PVT. LTD. ITA NOS. 4848&4849/M/2010, 6990/M/2011, 266/M/2012, 5506/M/2013 INTEREST AND OTHER RECEIPTS IN THE NATURE OF INCOME F ROM OTHER SOURCES BY MAKING FOLLOWING OBSERVATIONS: - THE DECISION RELIED ON BY THE ASSESSING OFFICER WAS SQUARELY APPLICABLE TO FACTS OF THE CASE WHERE IT IS HELD THAT INTEREST INCOME IS TO BE ASSES SED UNDER THE HEAD INCOME FROM OTHER SOURCES AND IS NOT ELIGIBLE FOR DEDUCTION U/S.80 I B. THE HON'BLE I.T.A.T., B - BENCH, MUMBAI VIDE ORDER ITA NO.6171/MUM/2007 DATED 12 TH MARCH 2009 IN CASE OF M / S. MIDAS - CARE PHARMACEUTICALS PVT. LTD. VS. ACIT FOR A.Y. 2003 - 04 RELYING ON THE DECISIONS OF THE HO N 'BLE SUPREME COURT IN THE CASE OF STERLING FOOD REPORTED IN 237 ITR 579, CAMBAY ELECTRIC SUPPLY INDUSTRIAL CO. LTD. V. CIT REPORTED IN 113 ITR 84 AND PANDIAN CHEMICALS LTD. VS. CIT REPORTED IN 262 ITR 278 HAS HELD AS UNDER: - .. HOWEVER, AS REGARDS THE INTEREST ON FIXED DEPOSITS WITH BANK AS WELL AS INTEREST ON GUARANTEE & MARGIN MONEY FROM BANK, WE ARE OF THE CONSIDERED OPINION THAT THE SAME CANNOT BE HELD AS 'INCOME DERIVED FROM THE INDUSTRIAL UNDERTAKING' AND CONSEQUENTLY NOT ELIGIBLE FOR DEDUCTION U/S. 80IB IN VIEW OF THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF PANDYAN CHEMICALS LTD. (SUPRA) WHEREIN IT IS HELD THAT INTEREST EARNED ON DEPOSIT WITH T.N. STATE ELECTRICITY BOARD IS, NOT DERIVED FROM THE INDUSTRIAL UNDERTAKING FOR THE PURPOSE OF SECTION 80HH. ' 4.5 KEEPING IN VIEW ALL THESE FACTS AND CIRCUMSTANCES, IT IS HELD THAT THE ASSESSING OFFICER HAS RIGHTLY TREATED INTEREST INCOME AS INCOME FROM OTHER SOURCES. THUS, THE GROUND OF APPEAL IS DIS MISSED. 10. DURING THE HEARING BEFORE US , THE LD. COUNSEL REITERATED THE SUBMISSIONS AS WERE MADE BY THE ASSESSEE BEFORE THE LD. CIT(A). ON THE OTHER HAND, THE LD. DR RELIED UPON THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF LIBERTY INDIA V. CIT, 317 ITR 218 (SC) . IN RESPONSE TO OUR QUERY WITH RESPECT TO APPLICABILITY OF THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF LIBERTY INDIA ( SUPRA ) , NO DISTINCTION COULD BE MADE BY THE LD. COUNSEL OF THE ASSESSEE ON FACTS OR ON LAW. 8 M/S. ARISTO LABORATORIES PVT. LTD. ITA NOS. 4848&4849/M/2010, 6990/M/2011, 266/M/2012, 5506/M/2013 11. WE HAVE GONE THROUGH THE ORDERS PASSED BY THE LOWER AUTHORITIES AND THE SUBMISSIONS OF THE ASSESSEE. WE HAVE ALSO GONE THROUGH THE JUDGEMENT OF THE HONBLE SUPREME COURT IN THE CASE OF LIBERTY INDIA 317 ITR 218 (SC) . WE FIND THAT THIS ISSUE IS SQUARELY COVERED AGAINST THE ASSESSEE WITH THE JUDGEMENT OF THE HONBLE SUPREME COURT IN THE CASE OF LIBERTY INDIA ( SUPRA ) WHEREIN IT HAS BEEN HELD BY THE HONBLE SUPREME COURT THAT FOR GRANTING BENEFIT OF DEDUCTION U/S. 80IB ONLY THE PROFIT AND GAINS WHICH ARE DERIVED FROM THE INDUSTRIAL UNDERTAKING WOULD BE ELIGIBLE TO BE CONSIDERED. THE LD. COUNSEL OF THE ASSESSEE WAS NOT ABLE TO SHOW THAT THE RECEIPTS ON ACCOUNT OF INTEREST AND RENTAL INCOME WERE IN ANY MANNER DERIVED FROM THE INDUSTRIAL UNDERTAKING. THUS, RESPECTFULLY FOLLOWING AFORESAID JUDGMENT OF THE HONBLE SUPREME COURT , THIS ISSUE IS DECIDED AGAINST THE ASSESSEE AND THEREFORE THESE GROUNDS ARE DISMISSED. 12. GROUND NO. 13 IS FOR CHALLENGING THE LEVY OF INTEREST U/S 234B AND 234C. THIS GROUND IS CONSEQUENTIAL AND THEREFORE DISMISSED. 13. GROUND NO. 14 IS GENERAL AND DOES NOT REQUIRE ANY SPECIFIC ADJUDICATION. 14. AS A RESULT, THE APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ITA NO. 4849 /MUM/2010 FOR A.Y 200 7 - 08 15. IT IS NOTED THAT THE GROUNDS RAISED IN THIS APPEAL ARE IDENTICAL TO THE GROUNDS RAISED BY THE ASSESSEE IN A.Y 2006 - 07, THEREFORE, THE AO IS DIRECTED TO FOLLOW OUR ORDER FOR A.Y 2006 - 07 WITH RESPECT TO THE GROUNDS RAISED IN 9 M/S. ARISTO LABORATORIES PVT. LTD. ITA NOS. 4848&4849/M/2010, 6990/M/2011, 266/M/2012, 5506/M/2013 THIS YEAR ALSO. AS A R ESULT, THE APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ITA NO. 6990/MUM/2011 FOR A.Y 2008 - 09 1 6 . IT IS NOTED THAT IN THIS YEAR ALSO THE GROUNDS RAISED BY THE ASSESSEE IN ITS APPEAL ARE IDENTICAL TO THE GROUNDS RAISED IN THE APPEAL FOR A.Y 2006 - 07, THEREFORE, THE AO IS DIRECTED TO FOLLOW OUR ORDER FOR A.Y 2006 - 07 WITH RESPECT TO THE GROUNDS RAISED IN THIS YEAR ALSO. AS A RESULT, THE APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ITA NO. 266 /MUM/201 2 FOR A.Y 200 9 - 10 1 7 . IN THIS APPEAL ALL THE GROUNDS, EXCEPT GROUND NO. 3, ARE IDENTICAL TO THE GROUNDS RAISED IN THE APPEAL FOR A.Y 2006 - 07 AND, THEREFORE, THE AO IS DIRECTED TO FOLLOW OUR ORDER FOR A.Y 2006 - 07. GR OUND NO. 3 IS DISPOSED AS UNDER : 18 . GROUND NO. 3 : IN THIS GROUND, THE ASSESSEE HAS CHALLENGED THE ACTION OF THE LD. CIT(A) IN CONFIRMING THE DISALLOWANCE OF RS. 15,75,215/ - BEING THE AMOUNT OF FEE PAID TO M/S. KANGA & CO., SOLICITORS ON THE GROUND THAT THE SAME CANNOT BE ALLOWED AS DEDUCTION AGAINST THE INCOME FROM HOUSE PROPERTY. 18.1. THE BRIEF FACTS ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO OBSERVED THAT THE DURING THE YEAR THE ASSESSEE HAS INCURRED PROFESSIONAL FEE AMOUNTING TO RS. 15,75,215/ - TO M/S. KANGA & CO. THE AO ASKED THE ASSESSEE TO SUBMIT THE DETAILS OF PROFESSIONAL SERVICES RENDERED BY 10 M/S. ARISTO LABORATORIES PVT. LTD. ITA NOS. 4848&4849/M/2010, 6990/M/2011, 266/M/2012, 5506/M/2013 THIS PARTY AND ALSO THE ALLOWBILITY OF THE SAME. IN REPLY, THE ASSESSEE SUBMITTED THAT ASSESSEE PAID FEES TO THE SOLICITORS ON ACCOUNT OF THEIR GROUND FLOOR ANDHERI O FFICE PREMISES WHICH WAS LET OUT TO ARISTO PHARMACEUTICALS P. LTD. THERE WAS A DISPUTE BY THE ASSESSEE WITH THE LAND LORD OF THE PROPERTY (M/S. BHARAT INSULATION CO. LTD). THE LAND LORD WAS FORCIBLY TRYING TO DEVELOP THE PROPERTY WITHOUT THE CONSENT OF THE ASSESSEE. THE ASSESSEE , TO PROTECT ITS PROPERTY , HAD TO FIGHT THE MATTER AT THE HIGH COURT AND ALSO IN CITY CIVIL COURT. THESE ARE LEGAL EXPENSES INCURRED BY THE ASSESSEE TO PROTECT THEIR ASSET AND THEREFORE IS AN EXPENDITURE OF A REVENUE NATURE AND ALLOW ABLE AS FULL DEDUCTION. THE AO HELD THAT IN THE ASSESSEE'S CASE , THE ASSESSEE HAS PAID THE LEGAL FEES TO STOP THE LAND LORD FROM DEVELOPING THE PROPERTY WHICH WAS LET OUT ON RENT. THEREFORE, THESE EXPENSES ARE TO BE ALLOWED UNDER THE HEAD INCOME FROM HOUSE PROPERTY AS THE EXPENSES WERE INCURRED IN CONNECTION WITH THE RENTED PROPERTY. THE AO FURTHER HELD THAT THE LITIGATION EXPENSES WERE NOT INCURRED FOR THE PURPOSE OF BUSINESS. AS PER THE PROVISIONS OF SECTION 37(1) OF THE ACT , THE LITIGATION FEES CAN BE AL LOWED AS DEDUCTION ONLY IF IT IS INCURRED TO PROTECT THE BUSINESS. IT WAS FURTHER HELD THAT IN THE ASSESSEES CASE , THE ASSESSEE HAS INCURRED THE EXPENSES TO STOP THE OWNER FROM DEVELOPING THE RENTED PROPERTY, WHICH WAS NOT AT ALL BUSINESS EXPENDITURE. ACC ORDINGLY, THE AO DISALLOWED PROFESSIONAL FEES OF RS.15,75,215/ - CLAIMED BY THE ASSESSEE. 19 . BEING AGGRIEVED, THE ASSESSEE FILED APPEAL BEFORE THE LD. CIT(A) WHEREIN IT WAS SUBMITTED BY IT THAT THE ASSESSEE HAS PAID A SUM OF RS.15,75,215/ - TO SOLICITORS N AMELY M/S KANGA & COMPANY FOR PROTECTING TENANCY RIGHT OF THE ASSESSEE IN THE OFFICE PREMISES AT GROUND FLOOR OF THE BUILDING WHICH HAS BEEN LET OUT TO IT BY M/S BHARAT INSULATION COMPANY LIMITED. THE GENUINENESS OF EXPENDITURE HAS NOT BEEN DISPUTED BY THE A.O. , 11 M/S. ARISTO LABORATORIES PVT. LTD. ITA NOS. 4848&4849/M/2010, 6990/M/2011, 266/M/2012, 5506/M/2013 NOR ANY EXPENDITURE WAS ATTRIBUTED AS PERSONAL IN NATURE. IT IS ALSO NOT THE CASE OF THE A.O. THAT THE EXPENDITURE INCURRED IS FOR INFRACTION OF ANY LAW. THE ASSESSEE FURTHER SUBMITTED THAT THE LD. AO HAS FAILED TO APPRECIATE THAT TENANCY RIGHT IS A VALUABLE RIGHT. THE EXPENDITURE HAS BEEN INCURRED FOR PROTECTING THE TENANCY RIGHT IN THE GROUND FLOOR OF A BUILDING WHICH IS USED FOR THE PURPOSES OF BUSINESS AND THEREFORE THE EXPENDITURE HAS BEEN INCURRED IS WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF B USINESS AND WAS REQUIRED TO BE ALLOWED IN FULL IN VIEW OF THE FOLLOWING JUDICIAL PRONOUNCEMENT : - 1. 23 ITR 427 (SC) - CIT VS. HIRJEE 2. 256 ITR 230 (GUJ) - GUJRAT AGRO OIL ENTERPRISES LTD. VS. CIT THE ASSESSEE FURTHER SUBMITTED THAT HERE THERE WOULD HA VE BEEN LOSS OF SOURCE OF INCOME TO THE ASSESSEE IN CASE IT WOULD NOT HAVE UNDERGONE A LEGAL BATTLE WITH THE LANDLORD FOR PROTECTING ITS TENANCY RIGHT OF THE OFFICE PREMISES. ANY AMOUNT SPENT FOR PROTECTING LOSS OF SOURCE OF INCOME IS A DEDUCTIBLE EXPENDI TURE U/S 37 OF THE I.T. ACT. HOWEVER, THE LD. CIT(A) WAS NOT SATISFIED WITH THE SUBMISSIONS OF THE ASSESSEE AND IT WAS HELD BY HIM THAT THE AMOUNT OF FEE PAID TO THE SOLICITORS WAS IN CONNECTION WITH PROTECTION OF TENANCY RIGHT OF THE ASSESSEE . IT WAS FURTHER HELD BY HIM THAT THE ASSESSEE S RENTAL INCOME WAS ASSESSED AS INCOME FROM HOUSE PROPERTY AS THE INCOME WAS PURELY FROM LETTING OUT OF THE PROPERTY AND NO OTHER ACTIVITY WAS CARRIED OUT. BEING AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFOR E THE TRIBUNAL . BOTH OF THE PARTIES MADE THEIR RESPECTIVE ARGUMENTS BEFORE US. 2 0 . WE HAVE GONE THROUGH THE SUBMISSIONS MADE BY BOTH THE SIDES AS WELL AS THE ORDER OF THE LOWER AUTHORITIES. IT IS NOTED THAT VIDE PARA 7 OF OUR ORDER, WE HAVE SENT THE ISSU E OF DETERMINATION OF HEAD OF TAXABILITY OF RENTAL INCOME BACK TO THE FILE OF THE AO. THE ISSUES RAISED THEREIN HAVE DIRECT BEARING ON THIS ISSUE. THUS, WE FIND IT APPROPRIATE TO SEND THIS ISSUE ALSO 12 M/S. ARISTO LABORATORIES PVT. LTD. ITA NOS. 4848&4849/M/2010, 6990/M/2011, 266/M/2012, 5506/M/2013 BACK TO THE FILE OF AO, TO BE DECIDED BY HIM AFRESH, A FTER GIVING ADEQUATE OPPORTUNITY OF HEARING TO THE ASSESSEE. THE ASSESSEE IS PERMITTED TO TAKE ALL LEGAL AND FACTUAL ISSUES BEFORE THE AO. THUS, THIS GROUND MAY BE TREATED AS ALLOWED FOR STATISTICAL PURPOSES. AS A RESULT, THE APPEAL IS PARTLY ALLOWED FO R STATISTICAL PURPOSES. ITA NO. 5506/MUM/2013 FOR A.Y 2010 - 11 21. IT IS NOTED THAT THE GROUNDS RAISED IN THIS APPEAL FILED BY THE ASSESSEE ARE IDENTICAL TO THE GROUNDS RAISED IN A.Y 2006 - 07 AND, THEREFORE, WE DIRECT THE AO TO FOLLOW OUR ORDER FOR A.Y 200 6 - 07. IN THE RESULT, THE APPEAL IS DISMISSED. 22. IN THE RESULT, APPEALS FOR THE A.YS 2006 - 07 TO 2009 - 10 STAND PARTLY ALLOWED FOR STATISTICAL PURPOSES AND THE APPEAL FOR A.Y 2010 - 11 STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 1 7 T H FEBRUARY , 2016. S D / - S D / - (SAKTIJIT DEY) JUDICIAL MEMBER (ASHWANI TANEJA) ACCOUNTANT MEMBER MUMBAI, DATE : 1 7 T H FEBRUARY , 2016 COPY TO : 1) THE APPELLANT 2) THE RESPONDENT 3) THE CIT(A) CONCERNED 4) THE CIT CONCERNED 13 M/S. ARISTO LABORATORIES PVT. LTD. ITA NOS. 4848&4849/M/2010, 6990/M/2011, 266/M/2012, 5506/M/2013 5) THE D.R, A BENCH, MUMBAI 6) GUARD FILE BY ORDER DY./ASSTT. REGISTRAR *SSL* I.T.A.T, MUMBAI