MATRU ASHISH CO.OOP. HSG. SOC.LTD, MUMBAI V. ITO RG 16(2)(1), MUMBAI

ITA 2721/MUM/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 8227 (ITAT-MUMBAI)
• Duration Of Justice: 10 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-02-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Assessment Year: 2005-2006
• Appeal Filed On: 08-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Business income; Capital receipt

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH: MUMBAI BEFORE SHIR PRAMOD KUMAR, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO.2721/MUM/2010 (ASSESSMENT YEAR: 2005-06) MATRU ASHISH CO-OP. HSG SOC. LTD., MATRU ASHISH-39, NEPEAN SEA, MALABAR HILL, MUMBAI -400 036 .... ASSESSEE VS INCOME TAX OFFICER 16(2)(1), MATRU MANDIR, NANA CHOWK, OPP. BANTHIA HOSPITAL, MUMBAI REVENUE PAN: AAAAM 2348 A ASSESSEE BY: SHRI SAMEER DALAL REVENUE BY: SHRI SUNIL KUMAR SINGH O R D E R PER R.S. PADVEKAR, JM IN THIS APPEAL THE ASSESSEE HAS CHALLENGED THE IMPU GNED ORDER OF THE LD. CIT (A) 27, MUMBAI DATED 15.1.2010 FOR THE A.Y. 2005-06. THE ASSESSEE HAS TAKEN THE FOLLOWING GROUNDS:- 1. THE HONBLE COMMISSIONER OF INCOME TAX (APPEAL S) 27, MUMBAI HAS ERRED IN CONFIRMING THAT THE RENT RECEIV ED FOR ALLOWING THE USE OF TERRACE AREA UNDER THE HEAD OF INCOME ITA 2721/M/2010 MATRU ASHISH CO-OP. HSG SOC. LTD. 2 FROM OTHER SOURCES INSTEAD OF UNDER THE HEAD OF I NCOME FROM HOUSE PROPERTY AND ACCORDINGLY DISALLOWED ` ` 2,01,00/- BEING 30% OF RENT RECEIVED AS EXPENSES U/S.24(A) OF THE INCOME TAX ACT, 1961. 2. THE HONBLE COMMISSIONER OF INCOME TAX (APPEALS) 27, MUMBAI HAS ERRED IN CONFIRMING THE ADDITION OF THE MISCELLANEOUS INCOME OF ` 68,189/-AS BUSINESS INCOME. THE INCOME INCLUDES1) CLEANING DEBRIS ` 33,189/- 2) SALE OF SCRAP ` 20,000/- 3) BHAVESH CONSTRUCTION PENALTY ` 15,000/- 3. SO FAR AS GROUND NO.1 IS CONCERNED, THE LD. COUN SEL SUBMITS THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY T HE DECISION OF THE TRIBUNAL IN ASSESSEEES OWN CASE IN THE IMMEDIATE P RECEDING YEAR. THE ASSESSEE HAS ALSO FILED, THE COPY OF THE TRIBUNAL O RDER WHICH PLACED ON RECORD. THE IDENTICAL ISSUE HAS BEEN CONSIDERED BY THE TRIBUNAL IN THE IMMEDIATE PRECEDING YEAR AND HELD AS UNDER:- 6. HAVING CAREFULLY HEARD THE SUBMISSION OF THE LD . DR AND PERUSING THE MATERIAL AVAILABLE ON RECORD WE FIND T HAT THE FACTS ARE NOT IN DISPUTE. WE FURTHER FIND THAT THE ISSUE IS COVERED AGAINST THE REVENUE AND IN FAVOUR OF THE AS SESSEE BY THE ORDERS OF THE TRIBUNAL. IN THE CASE OF SHARDA CHAMBER PREMISES VS. ITO IN ITA NO.1234/M/08 DATED 1.9.2009 FOR ASSESSMENT YEAR 2003-04 IN WHICH JM WAS ONE OF THE PARTY, ON THE SIMILAR FACTS, THE TRIBUNAL AFTER CONSIDERIN G THE DECISION IN ITO VS. CUFFE PARADE SAINARA PREMISES CO-OPERATI VE SOCIETY LTD. AND ALSO THE DECISION IN THE CASE OF S. SOHAN VS. ITO (1986) 16 ITD 272 SUPRA HAS HELD VIDE PARA 6 AND 7 OF ITS ORDER DATED 1.9.2009 AS UNDER : ITA 2721/M/2010 MATRU ASHISH CO-OP. HSG SOC. LTD. 3 6. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABL E ON RECORD. WE FIND MERIT IN THE PLEA OF THE LD. COUNS EL FOR THE ASSESSEE THAT IN THE CASE OF M/S. DALMAL HOUSE COMMERCIAL ECOMPLEX-PREMISES CO-OPERATIVE SOCIETY LTD., THE TRIBUNAL WHILE ADMITTING THE ADDITIONAL G ROUND BEING A LEGAL ISSUE HAS ALSO HELD THAT THE LETTING OUT OF THE TERRACE, ERECTION OF ANTENNA AND INCOME DERIVED FROM LETTING OUT HAS TO BE TAXED AS INCOME FROM HO USE PROPERTY AND NOT AS INCOME FROM OTHER SOURCES. THE TRIBUNAL WHILE DECIDING THE ISSUE HAS FOLLOWED THE ORDER OF THE TRIBUNAL IN THE CASE OF M/S. CUFFE PARADE SA INARA PREMISES CO-OP. SOCIEITY LTD. SUPRA. 7. IN THE ABSENCE OF ANY DISTINGUISHING FEATURE BROUGHT ON RECORD BY THE REVENUE WE, RESPECEFULLY FOLLOWING THE ORDER OF THE TRIBUNAL (SUPRA), AND KE EPING IN VIEW THE CONSISTENCY WHILE ADMITTING THE ADDITIO NAL GROUND TAKEN BY THE ASSESSEE HOLD THAT THE LETTING OUT OF TERRACE HAS TO BE ASSESSED UNDER THE HEAD INCOM E FROM HOUSE PROPERTY AS AGAINST INCOME FROM OTHER SOURCES ASSESSED BY THE ASSESSING OFFICER AND ALSO ALLOW DEDUCTION PROVIDED U/S.24 OF THE ACT AND ACCORDINGLY THE ADDITIONAL GROUND TAKEN BY THE ASSESSEE IS ALLOWED. RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL SU PRA, WE ARE OF THE VIEW THAT THE LETTING OUT OF THE TERRACE HAS TO BE ASSESSED UNDER THE HEAD INCOME FROM HOUSE PROPERTY SUBJECT TO DEDUCTIO N U/S.24 OF THE ACT AS AGAINST INCOME FROM OTHER SOURCES ASSESSED B Y THE ASSESSING ITA 2721/M/2010 MATRU ASHISH CO-OP. HSG SOC. LTD. 4 OFFICER. WE HOLD AND ORDER ACCORDINGLY. THE GROUN D TAKEN BY THE ASSESSEE IS, THEREFORE, ALLOWED. 4. WE, THEREFORE, FOLLOWING THE ORDER OF THE TRIBUN AL IN ASSESSEES OWN CASE ALLOW THE GROUND NO.1 AND DIRECT THE A.O. TO T REAT THE INCOME RECEIVED FOR ALLOWING TO USE THE TERRACE AREA AS IN COME FROM HOUSE PROPERTY AND ACCORDINGLY SAME IS DIRECTED TO BE ASS ESSED ALLOWING DEDUCTION UNDER SAID HEAD OF INCOME. 5. SO FAR AS GROUND NO.2 IS CONCERNED, THE A.O. HAS BROUGHT TO TAX THE FOLLOWING ITEMS:- 1) CLEANING DEBRIS ` 33,189/- 2) SALE OF SCRAP ` 20,000/- 3) BHAVESH CONSTRUCTION PENALTY ` 15,000/- 6. WE HAVE HEARD THE PARTIES. THE ASSESSEE IS CO-O PERATIVE HOSING SOCIETY. THE ASSESSEE HAS CREDITED MISCELLANEOUS I NCOME OF ` 1,46,844/-, WHICH CONSISTS OF THE RECEIPT ON THE SA LE OF THE DEBRIS AND SALE OF THE SCRAP OF `` 33,189/- AND `` 20,000/- RE SPECTIVELY AND ALSO THE AMOUNT OF THE PENALTY RECOVERED FROM M/S. BHAVESH C ONSTRUCTION ` 15,000/-, A CONTRACTOR. THE A.O. REJECTED THE CLAI M OF THE ASSESSEE IN RESPECT OF ABOVE RECEIPTS THAT SAME ARE EXEMPT ON T HE PRINCIPLES OF MUTUALITY AND MADE THE ADDITION TO THE TOTAL INCOME . THE LD. CIT (A) CONFIRMED THE ADDITION ACCEPTING THE VIEW TAKEN BY THE A.O. SO FAR AS THE RECEIPTS ON ACCOUNT OF SALE OF SCRAP AND DEBRIS IS CONCERNED, IN OUR OPINION, THE SAME ARE COVERED UNDER THE PRINCIPLES OF MUTUALITY, AS NOWHERE IT IS A CASE OF THE A.O. THAT THE ASSESSEE SOCIETY IS ENGAGED IN ANY COMMERCIAL ACTIVITY. THE PRINCIPLES OF MUTUALI TY HAS BEEN DISCUSSED AND PRINCIPLES ARE LAID DOWN BY THE HONBLE HIGH CO URT OF BOMBAY IN THE CASE OF SIND CO-OPERATIVE SOCIETY LTD. (SUPRA) WHIC H ARE SQUARELY APPLICABLE IN RESPECT OF THE INCOME FROM THE DEBRIS AND INCOME FROM SALE ITA 2721/M/2010 MATRU ASHISH CO-OP. HSG SOC. LTD. 5 OF THE SCRAP. WE, THEREFORE, DELETE THE ADDITION O N THESE TWO ITEMS ON THE PRINCIPLES OF THE MUTUALITY AND HOLD THAT THE SAME CANNOT BE TAXED IN THE HANDS OF THE ASSESSEE. SO FAR AS THIRD ADDITION OF ` 15,000/- IS CONCERNED, THE LD. COUNSEL ARGUED THAT IT IS RECOVE RED FROM THE CONTRACTOR FOR NOT COMPLETING THE WORK IN TIME AND HENCE, THE SAID AMOUNT PARTAKES THE CHARACTER OF THE CAPITAL RECEIP T AND HENCE, IT IS NOT TAXABLE. WE HAVE ALSO HEARD THE LD. D.R. 7. AS PER THE STATEMENT OF FACTS FILED BY BEFORE T HE LD. CIT (A), IT IS SEEN THAT THE PENALTY RECOVERED FROM M/S. BHAVESH C ONSTRUCTION WHO WAS ENTRUSTED WITH THE WORK OF FIXING BLOCKS IN THE SOCIETIES COMPOUND. THE WORK WAS UNREASONABLY DELAYED AND THE SAID CONT RACTOR ALSO DAMAGED THE ELECTRICAL WIRING, HENCE, THE SAID AMOU NT WAS RECOVERED FROM THE CONTRACTOR. IN OUR OPINION, THERE IS A FO RCE IN THE ARGUMENT OF LD. COUNSEL. THE ASSESSEE IS NOT ENGAGED IN ANY CO MMERCIAL ACTIVITY. MOREOVER, THE PENALTY IS RECEIVED BY WAY OF RECOVER Y AS WELL AS COMPENSATION FOR NOT CARRYING OUT THE WORK BY THE C ONTRACTOR. THE PENALTY HAS DIRECT NEXUS WITH THE CAPITAL ASSETS AN D HENCE IT IS A CAPITAL RECEIPT. OTHERWISE ALSO, ON THE PRINCIPLES OF MUTU ALITY, THE SAME IS TO BE ALLOWED. ACCORDINGLY, THE SAID ADDITION IS ALSO DE LETED. 8. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 2 5TH FEBRUARY 2011. SD/- SD/- ( PRAMOD KUMAR ) ACCOUNTANT MEMBER ( R.S. PADVEKAR ) JUDICIAL MEMBER MUMBAI, DATE: 25TH FEBRUARY 2011 ITA 2721/M/2010 MATRU ASHISH CO-OP. HSG SOC. LTD. 6 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) 27, MUMBAI. 4) THE CIT-CITY-XVI, MUMBAI. 5) THE D.R. F BENCH, MUMBAI. BY ORDER / / TRUE COPY / / ASSTT. REGISTRAR I.T.A.T., MUMBAI *CHAVAN ITA 2721/M/2010 MATRU ASHISH CO-OP. HSG SOC. LTD. 7 SR.N. EPISODE OF AN ORDER DATE INITIALS CONCERNED 1 DRAFT DICTATED ON 22.01.2011 SR.PS 2 DRAFT PLACED BEFORE AUTHOR 23.01.2011 SR.PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6 KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7 FILE SENT TO THE BENCH CLERK SR.PS/PS 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER