ITO 6(1)(3), MUMBAI V. ARK INDUSTRIES P. LTD, MUMBAI

ITA 2788/MUM/2011

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 8262 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 8 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-12-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 04-12-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 08-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J PREMANAND
• Assessee Lawyers: ASHOK J PATIL
• Keywords: Business income
• Section: 143(3)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL A , BENCH MUMBAI , BEFORE SHRI R.C.SHARMA , A M & SHRI SANJAY GARG , J M ITA N O. 2788 / MUM/20 1 1 ( ASSESSMENT YEAR : 20 0 7 - 20 08 ) ITO 6(1)(3), MUMBAI - 20 VS. M/S ARK INDUSTRIES PVT. LTD., 103, STEEL CENTRE, 1 ST FLOOR, AHMEDABAD STREET, MASJID (E), MUMBAI - 400 020 PAN/GIR NO. : A AECA 8885 E ( APPELLANT ) .. ( RESPONDENT ) /REVENUE BY : SHRI J.PREMANAND /ASSESSEE BY : SHRI ASHOK J. PATIL DATE OF HEARING : 4 TH DECEMBER , 201 4 DATE OF PRONOUNCEMENT 1 2 TH DECEMBER , 201 4 O R D E R PER R.C.SHARMA (A.M) : TH IS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A) DATED 28 - 2 - 2011 FOR THE ASSESSMENT YEAR 200 7 - 08 , IN THE MATTER OF ORDER PASSED U/S. 143(3) OF THE ACT . 2. THE ONLY GRI EVANCE OF THE REVENUE RELATES TO CIT(A)S DIRECTION FOR TREATING INCOME FROM WAREHOUSING AS INCOME FROM BUSINESS IN PLACE OF AOS ACTION TREATING THE SAME AS INCOME FROM HOUSE PROPERTY. 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. FACTS IN BRIEF ARE THAT THE ASSESSEE COMPANY HAS FILED ITS RETURN OF INCOME ON 30.10.2009 DECLARING TOTAL INCOME AT RS.1,11,068/ - . THE CASE WAS ITA NO. 2788 / 1 1 2 SELECTED FOR SCRUTINY. DURING THE ASSESSMENT PROCEEDINGS, THE AO NOTICED THAT A SSESSEE IS A REGISTERED PRIVATE LIMITED COMPANY INCORPORATED IN THE YEAR 2004 AND IS CARRYING ON THE BUSINESS OF STEEL PROCESSING AND ALSO EARNS INCOME FROM WAREHOUSING. IN THE CONCERNED ASSESSMENT YEAR THE ASSESSEE HAD ENTERED INTO CONTRACT WITH ESSAR STEELS LIMITED FOR S TORAGE AND MATERIAL HAN DLING. THE ESSAR STEELS LIMITED HAS APPOINTED AS SESSEE AS STOCKYARD FOR HR/CR, COILS, SHEETS, PACKET AND FOR THAT ASSESSEE WILL HAVE TO PERFORM ACTIVITIES LIKE SAFE STORAGE MATERIAL UNDER COVERED SHADE WITH PROPER FLOORING , DUST FREE ENVIRONMENT SAFE UNLO ADING/LOADING ACTIVITIES FROM TRUCK/TRAILER WITH THE HELP OF EOT CRANE. THE ASSESSEE EARNED INCOME FROM WAREHOUSING AMOUNTING TO RS.31,82,646/ - , WHICH WAS OFFERED AS BUSINESS INCOME AFTER CLAIM OF EXPENDITURE INCURRED THEREON. THE AO TREATED SUCH INCOME AS INCOME FROM HOUSE PROPERTY. 4. BY THE IMPUGNED ORDER, CIT(A) HELD THAT INCOME EARNED BY THE ASSESSEE WAS ASSESSABLE UNDER THE HEAD BUSINESS INCOME AFTER HAVING THE FOLLOWING OBSERVATIONS : - TO EARN THE SAID INCOME ASSESSEE HAS SPENT RS. 17,81,783/- DURI NG THE PERIOD TO EARN THE WAREHOUSING INCOME. THE OTHER EXPENSES INCURRED DURING THE YEAR TO THE TUNE OF RS. 42,92,997/ - WAS CAPITALIZED TO CAPITAL WORK IN PROGRESS AND WAS ADDED TO THE ASSETS. ONLY THE RELEVANT EXPENSES WERE CLAIMED AS EXPENSES TO EARN TH E SAID WAREHOUSING INCOME. THE WAREHOUSING INCOME WOULDN'T HAVE ACCRUED WITHOUT SPENDING THE EXPENSES. THIS CLEARLY SUGGEST THAT THE ASSESSEE HAS CARRIED OUT BUSINESS ACTIVITIES AND HAS NOT EARNED INCOME FROM HOUSE PROPERTY R IGHTS. THE ABOVE FACT CLEARLY S UGGEST THAT THE INTENTION OF THE ASSESSEE WAS TO EARN THE PROFITS AND SAME CANNOT BE EARNED WITHOUT PROVIDING THE REQUIRED SE RVICES LISTED IN THE AGREEMENT. 5 . WE HAVE CONSIDERED RIVAL CONTENTIONS AND FOUND FROM THE RECORD THAT ASSESSEE HAD CARRIED OUT W AREHOUSING ACTIVITY FOR WHICH HE EARNED GROSS RECEIPTS OF RS. 31,82,646/ - . FOR CARRYING OUT THE WAREHOUSING ITA NO. 2788 / 1 1 3 ACTIVITY, THE ASSESSEE HAS UNDERTAKEN ACTIVITY OF RECEIPT HANDLING & DISPATCH OF MATERIALS, MAINTENANCE OF STOCK REGISTER, DESCRIPTION OF MATERIAL RE CEIVED, TRUCK NO./TRAILER NO., INVOICE NO., GRR NO. & DATE. THE ASSESSEE ALSO CARRIED OUT ACTIVITY OF STOCK RECONCILIATION, PHYSICAL STOCK VERIFICATION AND STOCK VERIFICATION. THE WAREHOUSING INCOME HAS BEEN EARNED FROM THE BUSINESS VOLUME ACHIEVED AFTER P ROVIDING THE DESIRED ACTIVITIES AS LISTED IN THE CONTRACT. TO EARN THE SAID INCOME ASSESSEE HAS SPENT RS. 17,81,783/- DURING THE PERIOD . THE OTHER EXPENSES INCURRED DURING THE YEAR TO THE TUNE OF RS. 42,92,997/ - WAS CAPITALIZED TO CAPITAL WORK IN PROGRESS AND WAS ADDED TO THE ASSETS. ONLY THE RELEVANT EXPENSES WERE CLAIMED AS EXPENSES TO EARN THE SAID WAREHOUSING INCOME. THE WAREHOUSING INCOME WOULDN'T HAVE ACCRUED WITH O UT CARRYING ALL THE ABOVE ACTIVITIES . THIS CLEARLY SUGGEST THAT THE ASSESSEE HAS CARRIED OUT BUSINESS ACTIVITIES AND HAS NOT EARNED INCOME FROM HOUSE PROPERTY RIGHTS OR OTHER SOURCES . THE ABOVE FACT CLEARLY SUGGESTS THAT THE INTENTION OF THE ASSESSEE WAS TO EARN THE BUSINESS PROFITS AND SAME CANNOT BE EARNED WITHOUT PROVIDING THE REQUIRED SER VICES LISTED IN THE AGREEMENT. 6. THE DETAILED FINDING RECORDED BY THE CIT(A) WITH REGARD TO THE SERVICES RENDERED BY ASSESSEE AT PARA 6 HAS NOT BEEN CONTROVERED BY THE DEPARTMENT BY BRINING ANY POSITIVE MATERIAL ON RECORD. ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) FOR TREATING THE WAREHOUSING INCOME AS INCOME FROM BUSINESS. 7 . IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 12 /12 / 201 4 . ITA NO. 2788 / 1 1 4 12 /12 / 2014 SD/ - SD/ - ( ) ( SANJAY GARG ) ( ) ( R.C.SHARMA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED 12 /12 /2014 /PKM , PS COPY OF THE ORDER FORWARDED TO : / BY ORDER, ( ASSTT. REGISTRAR) / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / THE CIT(A), MUMBAI. 4. / CIT 5. / DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//