GAUTAM PREMISES P.LTD, MUMBAI V. ITO WD 2(1)(4), MUMBAI

ITA 2748/MUM/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 2596 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-07-2016
• Appeal Filed By: Assessee
• Bench Allotted: G
• Next Hearing Date: 19-05-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 22-04-2014
• Court: TRIBUNAL
• Department Lawyers: K RAVIKIRAN
• Assessee Lawyers: DR K SHIVARAM
• Keywords: Business income; Revision of order; Depreciation; Additional evidence
• Section: 143(3); 263

Judgement Text

, , G , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES G, MUMBAI , , , BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER, AND SHRI ASHWANI TANEJA, ACCOUNTANT MEMBER ITA NO.2748/MUM/2014 ASSESSMENT YEAR: 2009-10 GAUTAM P REMISES P. LTD. NATWARLAL VEPARI & CO. CAS, ORICON HOUSE, 4 TH FLOOR, 12 K. DUBASH MARG, FORT MUMBAI-400023 / VS. ITO WD 2 (1)( 4 ) AAYAKAR BHAVAN, M.K. RD MUMBAI-400020 (ASSESSEE ) (REVENUE) P.A. NO. AABCG1676L APPELLANT BY DR. K. SHIVARAM (A R) RESPONDENT BY SHRI K. RAVI KIRAN (D R) / DATE OF HEARING: 25/05/2016 / DATE OF ORDER: 13/07/2016 / O R D E R PER ASHWANI TANEJA (ACCOUNTANT MEMBER): THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS) - 4, MUMBAI {(IN SHORT CIT(A)}, DATED 12.02.2014 PASSED AGAIN ST ASSESSMENT ORDER U/S 143(3) DATED 22.12.2011 FOR TH E ASSESSMENT YEAR 2009-10. GAUTAM PREMISES P.L. 2 2. DURING THE COURSE OF HEARING, THE LD. COUNSEL OF T HE ASSESSEE FILED REVISED GROUNDS OF APPEAL AND REQUES TED FOR SUBSTITUTING THE SAME WITH THE EARLIER GROUNDS. WIT H CONSENT OF BOTH PARTIES, THE REVISED GROUNDS WERE TAKEN ON RECORD WHICH READ AS UNDER: 1.THE LEARNED CIT(A) ERRED IN CONFIRMING DISALLOWA NCE OF ADMINISTRATIVE AND OPERATING EXPENSES OF RS. 5,30,260/- WITHOUT APPRECIATING THAT THE SAID EXPEN SES ARE INCURRED WHOLLY AND EXCLUSIVELY FOR BUSINESS PURPOSES AND ARE ALSO REQUIRED TO BE INCURRED FOR MAINTAINING THE CORPORATE ENTITY AS GOING CONCERN A ND HENCE, THE SAID EXPENSES MAY BE ALLOWED AS A DEDUCT ION. 2.THE LEARNED CIT(A) ERRED IN CONFIRMING DISALLOWANCE OF INTEREST OF RS.16,97,184/- WITHOUT APPRECIATING THAT THE INTEREST EXPENSES ARE INCURRE D FOR THE PURPOSES OF BUSINESS AND MAINTAIN THE CORPORATE ENT ITY AND HENCE, THE SAID INTEREST EXPENDITURE MAY BE ALL OWED AS A DEDUCTION. 3.THE LEARNED CIT(A) ERRED IN CONFIRMING DISALLOWANCE OF DEPRECIATION OF RS. 1,25,796/- WITH OUT APPRECIATING THAT DEPRECIATION IS CLAIMED ON BLOCK OF ASSETS AND THE ASSETS ARE PUT TO USE AND HENCE, DEPRECIATION MAY BE ALLOWED. 4.THE LEARNED CIT(A) ERRED IN CONFIRMING TREATMENT OF ASSESSING INTEREST OF RS.2,88,416/- UNDER THE HEAD INCOME FROM OTHER SOURCES THOUGH THE SAID INCOME IS TAXABLE UNDER THE HEAD BUSINESS INCOME. 3. DURING THE COURSE OF HEARING, ARGUMENTS WERE MADE B Y DR. K. SHIVARAM, (AR) ON BEHALF OF THE ASSESSEE AND BY SHRI K. RAVI KIRAN, DEPARTMENTAL REPRESENTATIVE (LD. DR) ON BEHALF OF THE REVENUE. GAUTAM PREMISES P.L. 3 4 . DURING THE COURSE OF HEARING LD. COUNSEL HAD FILE D BRIEF SYNOPSIS IN DETAIL AS WELL AS FACTS SHEET WITH RESP ECT TO ITS SUBMISSION ON REVISED GROUNDS. 5. GROUND NO. 1 & 3: THESE GROUNDS DEAL WITH THE DISALLOWANCE OF ADMINISTRATIVE AND OPERATING EXPENS ES OF RS. 5,30,260/- AND DEPRECIATION OF RS. 1,25,796/- CLAIMED ON BROUGHT FORWARD AMOUNT OF BLOCK OF ASSETS. THESE EXPENSES WERE DISALLOWED BY THE AO ON THE GROUND THAT THERE WAS NO INCOME DURING THE YEAR AND NO BUSINESS WAS CARRIED OUT AND THEREFORE, THESE EXPENSES COULD NOT HAVE BEEN ALLOW ED. DURING THE COURSE OF HEARING, IT WAS SUBMITTED BY T HE LD. COUNSEL THAT THOUGH THE ASSESSEE HAD EXITED FROM IT S PROJECT WHICH WAS TAKEN UP IN EARLIER YEARS IN JOINT VENTUR E AGREEMENT WITH M/S. RAS RESORTS AND APART HOTELS LT D. FOR DEVELOPMENT OF A PROPERTY AT GOA, BECAUSE THE SAME WAS FOUND TO BE NO MORE VIABLE ON COMMERCIAL TERMS, BUT THE ASSESSEE DID NOT COMPLETELY CAME OUT FROM ITS BUSIN ESS. IT COULD NOT BE SAID THAT ASSESSEE WAS NOT IN BUSINESS MERELY ON THE GROUND THAT NO BUSINESS INCOME WAS EARNED DURIN G THE YEAR UNDER CONSIDERATION. IT WAS FURTHER SUBMITTED BY THE LD. COUNSEL THAT IN ANY CASE THE ASSESSEE BEING A COMPA NY AND LEGAL JURISTIC PERSON WAS COMPULSORILY REQUIRED TO MAINTAIN ITS LEGAL STATUS AND EXISTENCE IN THE EYES OF LAW. ALL THESE EXPENSES WERE INCURRED IN THE NORMAL COURSE OF BUSI NESS WHICH WAS MANDATORY FOR SURVIVAL OF THE COMPANY IN THE EYES OF LAW AND THEREFORE THESE COULD NOT HAVE BEEN DISA LLOWED. IT WAS FURTHER SUBMITTED THAT THESE VERY EXPENSES WERE ALLOWED IN A.Y. 2008-09 U/S 143(3), ALTHOUGH A REVISION ORD ER WAS GAUTAM PREMISES P.L. 4 PASSED U/S 263, BUT THE SAME WAS SUBSEQUENTLY QUASH ED BY THE TRIBUNAL. RELIANCE WAS PLACED BY THE LD. COUNSE L IN THIS REGARD UPON THE JUDGMENT OF HONBLE SUPREME COURT I N THE CASE OF CIT V. EXCEL INDUSTRIES LTD. 358 ITR 295. F URTHER, RELIANCE WAS PLACED ON THE JUDGMENT OF HONBLE ALLA HABAD HIGH COURT IN THE CASE OF CIT V. RAMPUR TIMBER & TURNERY CO. LTD. 129 ITR 58 FOR THE PROPOSITION T HAT EXPENDITURE INCURRED FOR RETAINING THE STATUS OF TH E COMPANY WERE TO BE ALLOWED. PER CONTRA, LD. DR RELIED UPON THE ORDERS OF THE LOWER AUTHORITIES. 5.1. WE HAVE GONE THROUGH THE FACTS OF THIS CASE AND JUDGMENTS RELIED UPON BY THE LD. COUNSEL. IT IS NOT ED AT THE OUTSET BY US THAT IN A.Y. 2008-09 I.E. PRECEDING YE AR, SIMILAR EXPENSES WERE ALLOWED U/S 143(3) BY THE AO. THE LD. CIT(A) SUBSEQUENTLY REVISED THE ASSESSMENT ORDER U/S 263 O N THE GROUND THAT IN ABSENCE OF ANY BUSINESS THESE EXPENS ES WERE NOT ALLOWABLE. THE ASSESSEE TOOK THE MATTER BEFORE THE TRIBUNAL. IT WAS HELD BY THE TRIBUNAL THAT ASSESSME NT WAS ORIGINALLY COMPLETED U/S 143(3) OF THE ACT, AND AO ALLOWED THE CLAIM OF THE ASSESSEE WITH REGARD TO COMMENCEMENT O F BUSINESS AS WELL AS SET OFF OF THE OPERATIONAL AND OTHER EXPENSES AGAINST THE RENTAL INCOME OF THE ASSESSEE. IT WAS FURTHER HELD THAT AO HAD EXAMINED AND STUDIED THE A SPECT OF RUNNING OF THE BUSINESS AND THESE EXPENSES WERE ALL OWED BY THE AO AFTER PROPER APPLICATION OF MIND AND THE VIE W TAKEN BY THE AO COULD NOT BE HELD TO BE PERVERSE ON THE FACE OF IT. THUS, GAUTAM PREMISES P.L. 5 IN THIS BACKDROP, WE ARE REQUIRED TO DECIDE THE FAT E OF THESE EXPENSES IN A.Y. 2009-10 I.E. THE YEAR BEFORE US. 5.2. THE PERUSAL OF PROFIT AND LOSS ACCOUNT IN THE YEAR UNDER CONSIDERATION SHOWS THAT ASSESSEE HAS DEBITED OPERA TING AND ADMINISTRATIVE EXPENSES IN ITS BALANCE SHEET TO THE TUNE OF RS.6,89,907/- AND DEPRECIATION FOR RS.83,359/-. PER USAL OF FURTHER DETAILS OF THESE EXPENSES SHOWS THAT THESE EXPENSES HAVE BEEN INCURRED IN THE NORMAL COURSE OF BUSINESS WHICH IS MUST FOR SURVIVAL OF THE COMPANY. HOWEVER, WE ALSO FIND THAT BUSINESS PROMOTION EXPENSES TO THE TUNE OF RS.1,03, 458/- HAVE ALSO BEEN DEBITED. IN OUR CONSIDERED VIEW BUSI NESS PROMOTION EXPENSES CANNOT BE ALLOWED IN THE GIVEN F ACTS AND CIRCUMSTANCES OF THE CASE. THUS, WE SUSTAIN THE DIS ALLOWANCE OF RS.1,03,458/- AND DIRECT THE AO TO DELETE THE RE MAINING DISALLOWANCE. THE AO IS ALSO DIRECTED TO GRANT THE BENEFIT OF DEPRECIATION AS HAS BEEN CLAIMED BY THE ASSESSEE, A S IT HAS BEEN CLAIMED ON THE BROUGHT FORWARD AMOUNT OF WDV O F FIXED ASSETS. OUR VIEW FINDS SUPPORT FROM THE JUDGMENT OF HONBLE ALLAHABAD HIGH COURT IN THE CASE OF CIT V. RAMPUR T IMBER & TURNERY CO. LTD, (SUPRA) WHEREIN IT HAS BEEN HELD THAT EXPENDITURE INCURRED FOR RETAINING THE STATUS OF TH E COMPANY I.E. MISCELLANEOUS EXPENSES, SALARY, LEGAL EXPENSES AND TRAVELING EXPENSES, ETC. ARE EXPENSES INCURRED FOR KEEPING BUSINESS ALIVE AND PROFITABLE DISPOSAL OF THE ASSET S AND THEREFORE, THESE SHOULD BE ALLOWED. ACCORDINGLY THE SE GROUNDS ARE PARTLY ALLOWED AS INDICATED ABOVE. GAUTAM PREMISES P.L. 6 6. GROUND NO.2: THIS GROUND DEALS WITH THE DISALLOWANCE OF INTEREST OF RS.16,97,184/-. 6.1. IN THIS REGARD, LD. COUNSEL HAS FILED PETITION UND ER RULE 29 FOR FILING ADDITIONAL EVIDENCES SHOWING UTILIZAT ION OF THE BANK OVERDRAFT FOR THE PURPOSE OF BUSINESS OF THE A SSESSEE AND REQUESTED FOR SENDING THIS ISSUE BACK TO THE FI LE OF THE AO. THE ASSESSEE HAS ALSO FILED THE COPY OF THE CERTIFI ED COPY OF BANK STATEMENTS SHOWING UTILIZATION OF OVERDRAFT FO R THE PURPOSE OF BUSINESS OF THE ASSESSEE. IN OUR CONSIDE RED VIEW, THESE EVIDENCES ARE CRUCIAL AND GO TO THE ROOT OF T HE MATTER AND THESE EVIDENCES ARE GENERATED FROM THE BANK AND CANNOT BE IGNORED OR SIMPLY BRUSHED ASIDE, THEREFORE, IN A LL FAIRNESS AND TO MEET THE ENDSOF JUSTICE, WE ALLOWE PETITION FILED U/R 29 AND SEND THIS ISSUE TO THE FILE OF THE AO TO DECIDE IT AFRESH AFTER GIVING ADEQUATE OPPORTUNITY OF HEARING TO THE ASSESSEE. THE AO SHALL LOOK INTO THESE DETAILS AND EVIDENCES BEFORE DECIDING THIS ISSUE AFRESH. THIS GROUND MAY BE TREA TED AS ALLOWED FOR STATISTICAL PURPOSES. 7.GROUND NO.4: IN THIS GROUND, THE ASSESSEE HAS CONTENDED THAT INTEREST INCOME OF RS. 2,88,416/- SHOULD BE TREATED AS INCOME FROM BUSINESS AS AGAINST THE INCOME FROM OTH ER SOURCES AS WAS HELD BY THE AO. 7.1. IT IS NOTED BY US THAT ASSESSEE IS NOT IN THE BUSI NESS OF GIVING LOAN AND ADVANCES. THE ASSESSEE HAS NOT BEEN ABLE TO DEMONSTRATE ANY VALID REASON AS TO WHY THE INTEREST INCOME SHOULD BE SHOWN AS INCOME FROM BUSINESS. UNDER THES E GAUTAM PREMISES P.L. 7 CIRCUMSTANCES, WE UPHOLD THE ACTION OF LOWER AUTHOR ITIES IN TREATING THE INCOME AS INCOME FROM OTHER SOURCES AN D DISMISS THE GROUND RAISED BY THE ASSESSEE. 8. IN THE RESULT, THIS APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH JULY, 2016. SD/- (AMIT SHUKLA ) SD/- (ASHWANI TANEJA) ! / JUDICIAL MEMBER ' ! / ACCOUNTANT MEMBER MUMBAI; # DATED : 13 /07/2016 CTX? P.S/. .. #$%&'(')% / COPY OF THE ORDER FORWARDED TO : 1. % &' / THE APPELLANT 2. ()&' / THE RESPONDENT. 3. * * ( % ) / THE CIT, MUMBAI. 4. * * / CIT(A)- , MUMBAI 5. -. / (01 , * % 012 , / DR, ITAT, MUMBAI 6. / 34 5 / GUARD FILE. / BY ORDER, ) -% ( //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI