JNC INTERNATIONAL, MUMBAI V. ITO 14(3)(3), MUMBAI

ITA 2835/MUM/2010

• Counselvise Citation: 283519914 RSA 2010
• Duration Of Justice: 1 year(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-04-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I
• Assessment Year: 2005-2006
• Appeal Filed On: 09-04-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S K SINGH
• Assessee Lawyers: G P MEHTA
• Keywords: Business income; Depreciation; Rule of consistency; Period of limitation; Time period of passing order; Revised return

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH I MUMBAI BEFORE BEFORE BEFORE BEFORE SHRI SHRI SHRI SHRI R.K. PANDA R.K. PANDA R.K. PANDA R.K. PANDA ( (( (A AA AM) M)M) M) AND SMT ASHA VIJAYARAGHAVAN(JM) AND SMT ASHA VIJAYARAGHAVAN(JM) AND SMT ASHA VIJAYARAGHAVAN(JM) AND SMT ASHA VIJAYARAGHAVAN(JM) ITA NO.2835/MUM/2010 (ASSESSMENT YEAR- 2005-06) M/S. JNC INTERNATIONAL, C/O G.P. MEHTA CHAMBERS, 807, TULSIANI CHAMBERS, 212,NARIMAN POINT, MUMBAI-400 021 PAN-AACFJ 5518Q VS. THE ITO, WARD 13(3)(3), EARNEST HOUSE, 6 TH FLOOR, NARIMAN POINT, MUMBAI-400 021 (APPELLANT) (APPELLANT) (APPELLANT) (APPELLANT) (RESPONDENT) (RESPONDENT) (RESPONDENT) (RESPONDENT) APPELLANT BY: SHRI G.P. MEHTA RESPONDENT BY: SHRI S.K. SINGH O R D E R O R D E R O R D E R O R D E R PER PER PER PER R.K. PA R.K. PA R.K. PA R.K. PANDA(AM) NDA(AM) NDA(AM) NDA(AM) THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER DT. 17.2.2010 OF THE LD.CIT(A)-25 MUMBAI RELATING TO ASSESSMENT YEAR 2005- 06. 2. GROUNDS OF APPEAL NOS. 1,5 & 6 BEING GENERAL IN NATURE ARE DISMISSED. 3. GROUND OF APPEAL NO. 2 RAISED BY THE ASSESSEE RE ADS AS UNDER: THE ASSESSMENT ORDER PASSED IS AB-INITIO VOID, IN ASMUCH AS, NO NOTICE U/S. 143(2) OF THE I.T. ACT, 1 961 WAS ISSUED WITHIN 12 MONTHS TIME FROM THE END OF TH E MONTH IN WHICH RETURN OF INCOME WAS ORIGINALLY FILE D. ITA NO. 2835/M/2010 2 4. FACTS OF THE CASE IN BRIEF ARE THAT THE ORIGINAL RETURN OF INCOME WAS FILED ON 29.8.2005 DECLARING TOTAL INCOME OF `. 2,6 3,088/-. LATER ON THE ASSESSEE FILED REVISED RETURN OF INCOME ON 18 TH OCTOBER, 2006 DECLARING INCOME AT `. 5,40,281/-. THE ASSESSING OFFICER ISS UED NOTICES U/S. 143(2) DT. 26 TH OCTOBER, 2006 WHICH WAS DULY RECEIVED ON THE ASSES SEE ON 27.10.2006. ACCORDING TO THE ASSESSEE, THE ASSESSM ENT ORDER PASSED IS AB INITIO VOID BECAUSE NOTICE U/S. 143(2) OF THE I. T. ACT WAS NOT ISSUED AND SERVED WITHIN A PERIOD OF 12 MONTHS FROM THE END O F THE MONTH IN WHICH RETURN OF INCOME WAS FILED. 5. BEFORE THE LD. CIT(A) THE ASSESSEE ARGUED THAT I N ACCORDANCE WITH THE PROVISIONS OF SEC. 143(2) READ WITH THE PROVIS O, THE NOTICE UNDER THAT SECTION OUGHT TO HAVE BEEN ISSUED BEFORE THE EXPIR Y OF 12 MONTHS TIME I.E. ON OR BEFORE 31 ST AUGUST 2006 AND SINCE THE SAID NOTICE HAS BEEN ISSUED AND SERVED ONLY ON 27.10.2006, SAME IS CLEAR LY BARRED BY LIMITATION PERIOD. IT WAS SUBMITTED THAT ALTHOUGH THE ASSESSE E FIRM FILED REVISED RETURN OF INCOME ON 18.10.2005, THE SAME WAS FILED MERELY TO RECTIFY A MISTAKE CREPT IN , IN COMPUTING THE TOTAL INCOME I. E. DISALLOWANCE OF TDS CLAIMED AS AN EXPENDITURE IN THE P&L ACCOUNT. THUS, THERE WAS AN ERROR IN THE ORIGINAL RETURN OF INCOME, THEREFORE THE REVISE D RETURN FILED GOT MERGED WITH THE ORIGINAL RETURN, WHEREBY THE TIME L IMIT AVAILABLE FOR ISSUE OF NOTICE U/S. 143(2) WAS ONLY UPTO 31.8.2006. SINC E THE NOTICE U/S. 143(2) WAS ISSUED ON 26.10.2006 AND SERVED ON 27.10.2006, THEREFORE, THE SAME WAS CLEARLY BEYOND PERIOD OF 12 MONTHS TIME, HENCE VOID AB INITO AND CONSEQUENTLY ANY PROCEEDING EMANATING FROM THE SAI D NOTICE WOULD ALSO BE VOID AB INITIO. THE DECISION OF THE PUNJAB & HA RYANA HIGH COURT IN THE CASE OF CIT VS SOHAN LAL CHHAJAN MAL REPORTED IN 22 2 CTR 190 AND THE DECISION OF THE ITAT MUMABI BENCH IN THE CASE OF NI CHOLAS APPLEGATE, SOUTH EAST ASIA FUND LTD. VS ADIT 117 ITD 299 WERE BROUGHT TO THE NOTICE OF THE LD. CIT(A). HOWEVER THE LD. CIT(A) WAS NOT SATISFIED WITH THE EXPLANATION GIVEN BY THE ASSESSEE. DISTINGUISHING THE VARIOUS DECISIONS CITED BEFORE HIM, HE HELD THAT THE ASSESSING OFFICE R HAD VALIDLY ISSUED ITA NO. 2835/M/2010 3 NOTICE U/S 143(2) WHICH WAS SERVED ON THE ASSESSEE WITHIN THE STIPULATED PERIOD AND THEREFORE THE ASSESSMENT IS LEGAL AND NO TVOID AB INITIO. 6. AGGRIEVED WITH SUCH ORDER OF THE LD. CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US. 7. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SAME SUBMISSIONS AS MADE BEFORE THE LD. CIT(A) . HE ALSO RELIED ON THE FOLLOWING DECISIONS: 1) NICHOLAS APPLEGATE, SOUTH EAST ASIA FUND LTD. VS AD IT 117 ITD 299 2) ACIT VS SOHAN LAL CHHAJAN MAL 307 ITR 53 3) CIT VS SOHAN LAL CHHAJAN MAL 70 ITD 364 8. THE LD. COUNSEL FOR THE ASSESSEE REFERRING TO TH E PROVISION OF SEC. 143(2) SUBMITTED THAT THE SAID SECTION SPEAKS OF TH E PROVISIONS OF SEC. 139. THEREFORE IN VIEW OF THE DECISIONS CITED BEFO RE THE LD. CIT(A) AS WELL AS BEFORE THE TRIBUNAL, THE NOTICE ISSUED BY THE AS SESSING OFFICER U/S. 143(2) BEING BEYOND THE STATUTORY LIMIT, THE ASSESS MENT PROCEEDINGS ARE VOID AB INITIO. 9. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAND SUPPORTED THE ORDER OF THE LD. CIT(A). 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS MADE B Y BOTH THE SIDES AND CONSIDERED THE VARIOUS DECISIONS CITED BEFORE U S. THERE IS NO DISPUTE TO THE FACT THAT ORIGINAL RETURN DECLARING INCOME O F `. 2,63,088/- WAS FILED ON 29.8.2008. THERE IS ALSO NO DISPUTE TO THE FACT THAT THE ASSESSEE FILED REVISED RETURN ON 18.10.2006 DECLARING TOTAL INCOME OF `. 5,40,281/-. THEREFORE THE QUESTION THAT ARISES IS AS TO WHETHER THE PERIOD OF 12 MONTHS FOR ISSUE OF NOTICE U/S. 143(2) SHOULD START FROM THE END OF THE MONTH IN WHICH THE ORIGINAL RETURN WAS FILED OR FR OM THE END OF THE MONTH IN WHICH THE REVISED RETURN WAS FILED. IN OUR OPIN ION, THE PERIOD OF 12 MONTHS START FROM THE END OF THE MONTH IN WHICH TH E REVISED RETURN WAS FILED. THE VARIOUS DECISIONS RELIED ON BY THE LD. COUNSEL FOR THE ASSESSEE, IN OUR OPINION, ARE NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. IN THE ITA NO. 2835/M/2010 4 CASE OF ACIT VS SOHAN LAL CHHAJAN MAL 307 ITR 53 ( SUPRA) THE ISSUE WAS DEFECTIVE RETURN. SINCE THE DEFECT WAS REMOVED VID E LETTER DT. 3 RD JANUARY, 1992, THE TRIBUNAL HELD THAT THE PERIOD OF LIMITATI ON PRESCRIBED BY PROVISO TO SEC. 143(2) SHOULD BE COUNTED FROM THE DATE OF F ILING OF RETURN AND NOT FROM THE DATE OF REMOVAL OF DEFECTS. THE ABOVE DEC ISION OF THE TRIBUNAL WAS UPHELD BY THE HONBLE PUNJAB & HARYANA HIGH COU RT. SIMILARLY IN THE CASE OF NICHOLAS APPLEGATE, SOUTH EAST ASIA FUND LT D. VS ADIT 117 ITD 299 (SUPRA), THE ASSESSEE FILED RETURN OF INCOME OF FOUR CELLS SEPARATELY WITHIN THE TIME PRESCRIBED U/S. 139(1) CLAIMING CE RTAIN CAPITAL LOSS AND CLAIMING DIVIDEND INCOME AS EXEMPT U/S. 10(33). S UBSEQUENTLY, ON REALIZING THAT THE COMPANY BEING ONE AND ONE CONSO LIDATED RETURN WAS REQUIRED TO BE FILED, THE ASSESSEE FILED A REVISED RETURN CONSOLIDATING THE SHORT TERM CAPITAL LOSS AND DIVIDEND INCOME AS EXEM PT U/S. 10(33) FROM ALL THE FOUR CELLS WITH NO OTHER CHANGE WHATSOEVER. TH E ASSESSING OFFICER ON VERIFICATION FOUND IN ORDER THE SHORT TERM CAPITAL LOSS AND DIVIDEND INCOME AS CLAIMED. HOWEVER HE DISALLOWED THE CLAIM OF CARR Y FORWARD OF SHORT TERM CAPITAL LOSS INVOKING S. 80 R.W.S. 139(3) ON T HE GROUND THAT THE ORIGINAL FOUR RETURNS WERE INVALID, THE REVISED SI NGLE RETURN WAS TREATED BY HIM AS ORIGINAL RETURN AND THE SAME WAS NOT FIL ED WITHIN THE TIME PRESCRIBED U/S. 139(1). UNDER THESE CIRCUMSTANCES, THE TRIBUNAL HELD THAT DEFECT OR MISTAKE OF FILING 4 RETURNS IN PLACE OF O NE WAS IMMATERIAL IN THE LIGHT OF S. 292B AS THE EFFECT OF FOUR RETURNS TAK EN TOGETHER WAS REALLY THE SAME AS WOULD HAVE BEEN IF ONLY ONE RETURN WAS FILE D AND NO PREJUDICE WAS CAUSED TO THE REVENUE BECAUSE OF SUCH DEFECT OR MISTAKE. ACCORDINGLY IT WAS HELD THAT THE REVISED RETURN WOU LD RELATE BACK TO THE DATE OF FILING OF ORIGINAL RETURN. HOWEVER, IN THE INSTANT CASE, THERE IS A DIFFERENCE IN THE FIGURE OF INCOME IN THE ORIGINAL RETURN AND THE REVISED RETURN. THEREFORE, THE ABOVE DECISION IS NOT APPLIC ABLE TO THE FACTS OF THE PRESENT CASE. WE THEREFORE HOLD THAT THE PERIOD OF 12 MONTHS WILL COUNT FROM THE END OF THE MONTH IN WHICH THE REVISED RETU RN WAS FILED DECLARING HIGHER INCOME. SINCE THE NOTICE ISSUED BY THE ASSE SSING OFFICER U/S. 143(2) IS WITHIN THE PERIOD OF 12 MONTHS FROM THE D ATE OF FILING OF THE ITA NO. 2835/M/2010 5 REVISED RETURN, THEREFORE, THE SAME IS IN ORDER. A CCORDINGLY, THIS GROUND RAISED BY THE ASSESSEE IS DISMISSED. 11. GROUND OF APPEAL NO. 3 RAISED BY THE ASSESSEE READ S AS FOLLOWS: THE LD. LOWER AUTHORITIES HAVE GROSSLY ERRED IN HOLDING/CONFIRMING THAT LICENCE FEE RECEIVED ON LEA SE OF FACTORY PREMISES AT `. 185,504/- WAS INCOME FROM OTHER SOUR CES. REASONS ASSIGNED FOR DOING SO ARE WRONG AND CONTRARY TO THE PROVISIONS OF LAW READ WITH JUDICIAL PRONOUNCEMENTS. 12. THE FACTS OF THE CASE IN BRIEF ARE THAT THE ASS ESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOTED THAT THE ASSESSEE IN ITS COMPUTATION OF INCOME HAS SHOWN `. 5,40,280/- AS PR OFIT. IN THE PROFIT AND LOSS ACCOUNT. THE ASSESSEE HAS CREDITED RENT RECEIV ED AT `. 11,85,504/- AND INTEREST RECEIVED AT `. 8,73,493/-. AFTER DEBI TING VARIOUS EXPENSES TO P&L ACCOUNT, THE ASSESSEE HAS OFFERED `. 2,27,785/ - FOR TAXATION. THE ASSESSING OFFICER ASKED THE ASSESSEE TO EXPLAIN AS TO WHY THE RENTAL INCOME SHOWN BY THE ASSESSEE AT `. 11,85,504/- SHO ULD NOT BE TREATED AS INCOME FROM HOUSE PROPERTY AS AGAINST BUSINESS I NCOME DECLARED BY THE ASSESSEE SINCE THE FIRM DOES NOT APPEAR TO BE D OING ANY BUSINESS. IT WAS EXPLAINED BY THE ASSESSEE THAT THE ASSESSEE FIR M HAS SUB-LEASED OUT ITS COMMERCIAL PREMISES, WHICH WAS USED EARLIER FOR ITS BUSINESS ACTIVITIES. IT WAS SUBMITTED THAT EXPLOITATION OF A COMMERCIAL ASSET EITHER BY ASSESSEE HIMSELF OR THROUGH SOME OTHER PERSON BY LE ASING OUT CONSTITUTE THE BUSINESS ACTIVITY AND CONSEQUENTLY, INCOME DERI VED THEREFROM HAS TO BE CONSIDERED AS BUSINESS INCOME. THE DECISION OF T HE HONBLE SUPREME COURT IN THE CASE OF COMMISSIONER OF EXCESS PROFIT TAX VS SHRI LAXMI SILK MILLS LTD. REPORTED IN 20 ITR 451(SC) WAS RELIED UP ON. 13. HOWEVER, THE ASSESSING OFFICER REJECTED THE E XPLANATION GIVEN BY THE ASSESSEE. HE NOTED THAT THE NATURE OF BUSINESS OF THE PARTNERSHIP FIRM IS THAT OF DEALER IN YARN AND TEXTILE GOODS AND ALS O ACTING AS COMMISSION AGENTS AND BROKERS. THEREFORE THE ASSESSEES MAIN BUSINESS ACTIVITY IS DEALING IN TEXTILES AND COMMISSION AGENT IN TEXTILE MATERIALS. HOWEVER, ITA NO. 2835/M/2010 6 THE ASSESSEE SINCE A.Y. 2003-04 IS NOT SHOWING ANY INCOME THROUGH ITS TRADING ACTIVITY IN TEXTILES. THE ONLY INCOME FRO M A.Y. 2003-04 ONWARDS IS RENT AND INTEREST INCOME. HE NOTED FROM THE COPY O F DEED TO SUB-LEASE THAT THE ASSESSEE HAD SUB-LETTED ITS PREMISES TO M/ S. UNIQUE HEALTH CARE PRODUCTS SINCE 2.12.1993 AND GETTING RENT. HE ACCO RDINGLY TREATED THE RENTAL INCOME AS HOUSE PROPERTY INCOME. 14. IN APPEAL THE LD. CIT(A) CONSIDERED THE RENTAL INCOME DECLARED BY THE ASSESSEE AS INCOME FROM OTHER SOURCES. WHILE DOING SO, HE NOTED THAT THE FACTORY BUILDING CONSTRUCTED BY THE ASSES SEE WAS ON A LAND TAKEN ON LEASE AND THE ASSESSEE WAS ALSO NOT THE OWNER O F THE LAND AND FACTORY BUILDING AS WELL. THEREFORE, THE RENTAL INCOME FR OM THE SUB LEASING OF THE FACTORY BUILDING CANNOT BE HELD ASSESSABLE UNDER TH E HEAD INCOME FROM HOUSE PROPERTY. HE REJECTED THE CONTENTION OF THE ASSESSEE THAT AS PER CLAUSE 2 OF THE PARTNERSHIP DEED THE PARTNERS ARE A UTHORIZED TO CARRY OUT SUCH OTHER BUSINESS OR AS MAY BE AGREED UPON BY AN D BETWEEN THE PARTIES THERETO FROM TIME TO TIME AND THEREFORE TH E SUB-LEASING OF FACTORY BUILDING COULD BE HELD AS BUSINESS ACTIVITY OF THE ASSESSEE FIRM. HE NOTED THAT IN THE CASE OF S.G. MERCANTILE CORP. (P) LTD., THE ASSESSEE COMPANY WAS DEVELOPING LEASE HOLD PREMISES AND LETTING OUT A PORTION THEREOF AND THEREFORE IT WAS HELD BY THE HONBLE APEX COURT THA T SUCH LETTING OUT WAS EVIDENTLY PART OF ITS BUSINESS AUTHORIZED BY MEMORA NDUM OF ASSOCIATION AND THEREFORE INCOME FROM LEASE PROPERTY IS ASSESS ABLE U/S. 10 OF 1922 ACT. HOWEVER IN THE CASE OF THE ASSESSEE LETTING O UT OF PREMISES WAS NOT AT ALL A PART OF ITS BUSINESS AUTHORIZED BY THE PAR TNERSHIP DEED. SIMILARLY, THE DECISION OF THE HONBLE SUPREME COURT IN THE CA SE OF CIT VS SHAMBHU INV. PVT. LTD. 263 ITR 143 IS FOUND TO BE NOT APPLI CABLE TO THE FACTS OF THE ASSESSEE SINCE THE ASSESSEE IS NOT THE OWNER OF TH E PROPERTY. HE RELIED ON THE DECISION OF THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF CIT VS. T.P. SIDHVA 133 ITR 840 WHEREIN IT HAS BEEN HELD T HAT WHERE INCOME FROM LETTING OUT PROPERTY OF WHICH THE ASSESSEE WAS NOT THE OWNER WAS HELD ASSESSABLE AS INCOME FROM OTHER SOURCES. HE FURT HER HELD THAT THE CONTENTION OF THE ASSESSEE THAT THE RENTAL INCOME WAS DECLARED AS ITA NO. 2835/M/2010 7 BUSINESS INCOME AND WAS ALSO ACCEPTED AS SUCH BY TH E DEPARTMENT CANNOT BE ACCEPTED SINCE THERE WAS NO SCRUTINY ASS ESSMENT. THEREFORE THE PRINCIPLE OF CONSISTENCY WILL NOT BE APPLICABLE TO THE FACTS OF THE CASE. HE ACCORDINGLY TREATED THE RENTAL RECEIPTS AS INCO ME FROM OTHER SOURCES AND NOT AS BUSINESS INCOME AS DECLARED BY THE ASSES SEE. 15. AGGRIEVED WITH SUCH ORDER OF THE LD. CIT(A), TH E ASSESSEE IS IN APPEAL BEFORE US. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SAME SUBMISSIONS AS MADE BEFORE THE ASSESSING OFFICER AN D CIT(A). HE SUBMITTED THAT THE ASSESSEE FIRM EXPLOITED THE COMM ERCIAL ASSET BY SUB- LEASING A PART OF THE PREMISES. THEREFORE, THE LIC ENCEE FEE RECEIVED BY THE ASSESSEE ON SUB-LEASING OF THE PROPERTY SHOULD BE T REATED AS BUSINESS INCOME. HE ALSO RELIED ON THE DECISION OF THE HON BLE SUPREME COURT IN THE CASE OF S.G. MERCANTILE CORP. (P) LTD., 83 ITR 700. REFERRING TO THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F CIT VS COMMISSIONER OF EXCESS PROFIT TAX VS SHRI LAXMI SILK MILLS LTD. REPORTED IN 20 ITR 455 (SC), HE SUBMITTED THAT THE YIELD OF INCOME BY A CO MMERCIAL ASSET IS THE PROFIT OF THE BUSINESS IRRESPECTIVE OF THE MANNER I N WHICH THAT ASSET IS EXPLOITED BY THE OWNER OF THE BUSINESS. THEREFORE, THE INCOME DECLARED BY THE ASSESSEE ON ACCOUNT OF SUB-LETTING THE PROPE RTY SHOULD BE TREATED AS INCOME FROM BUSINESS. 16. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHE R HAND SUBMITTED THAT THE BUSINESS OF THE ASSESSEE HAS DISCONTINUED FOR WHICH THE ASSESSEE HAS SUB-LET A PART OF THE BUSINESS. THEREFORE IT HA S TO BE TREATED AS INCOME FROM HOUSE PROPERTY. REFERRING TO THE DEC ISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF GUJARAT GINNING A ND MANUFACTURING VS CIT REPORT IN 205 ITR 314, HE SUBMITTED THAT WHERE A BUILDING WAS USED BY THE COMPANY FOR THE PURPOSE OF ITS BUSINESS AND BUS INESS OF THE COMPANY WAS DISCONTINUED AND BY SUBSEQUENT CHANGE OF MEMORA NDUM OF ASSOCIATION AUTHORIZING DEALING IN PROPERTY THE BUI LDING WAS LET OUT, IT WAS HELD THAT THE INCOME FROM LETTING OUT OF BUILDING WAS ASSESSABLE AS INCOME FROM PROPERTY. HE ACCORDINGLY SUBMITTED THA T SINCE THE CIT(A) HAS ITA NO. 2835/M/2010 8 GIVEN A FINDING THAT THE PROPERTY DOES NOT BELONG T O ASSESSEE AND IT IS A LEASEHOLD PROPERTY AND A PART OF WHICH HAS BEEN SUB -LET BY ASSESSEE, THEREFORE THE SAME MAY BE CONSIDERED AS INCOME FRO M OTHER SOURCES. ALTERNATIVELY IN VIEW OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS SHAMBHU INV. PVT. LTD. 263 ITR 143 )SUPRA), THE SAM E HAS TO BE TREATED AS INCOME FROM HOUSE PROPERTY. 17. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS MADE B Y BOTH THE SIDES, PERUSED THE ORDER OF THE AO AND LD. CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. THERE IS NO DISPUTE TO THE FACT TH AT THE ASSESSEE FIRM HAS OBTAINED A PIECE OF LAND ON LEASE BEING INDUSTRIAL PLOT NO. 104, MASAT INDUSTRIAL ESTATE, SILVASSA, U.T. OF DADRA & NAGAR HAVELI IN 1985. THE ASSESSEE THEREAFTER HAS CONSTRUCTED THE FACTORY BUI LDING ON THE SAID PLOT WITH THE FINANCIAL ASSISTANCE FROM BANK OF MAHARASH TRA FROM WHERE THE ASSESSEE HAS CARRIED OUT SYNTHETIC YARN DYEING/PROC ESSING ACTIVITIES TILL THE ASSESSMENT YEAR 1989-90. THERE IS ALSO NO DISP UTE OF THE FACT THAT DUE TO DISCONTINUANCE OF ITS YARN PROCESSING ACTIVI TIES AND DUE TO A SUIT FILED BY THE RECOVERY OF THE DEBT FROM THE FINANCIA L ASSISTANCE, THE ASSESSEE LEASED OUT THE PREMISES TO M/S. UNIQUE HEA LTH CARE PRODUCTS, A FACT STATED BY THE ASSESSEE BEFORE THE LOWER AUTHOR ITIES. THE ASSESSEE TREATED THE RENTAL INCOME OF SUB-LETTING OF THE PRO PERTY AS BUSINESS INCOME WHICH HAS BEEN HELD AS INCOME FROM HOUSE P ROPERTY BY THE ASSESSING OFFICER AND AS INCOME FROM OTHER SOURCES BY THE LD. CIT(A). NOW THE QUESTION THAT ARISES IS TO WHETHER THE INCO ME FROM LETTING OUT OF THE PROPERTY HAS TO BE TREATED AS INCOME FROM HOUS E PROPERTY OR BUSINESS INCOME OR INCOME FROM OTHER SOURCES. 17.1 WE FIND THE LD. CIT(A) FOLLOWING THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. T.P. SIDHVA 133 ITR 840 (SUPRA) HAS HELD THAT SINCE THE ASSESSEE IS NOT THE OWNER OF THE PRO PERTY, THEREFORE THE INCOME FROM SUCH HOUSE PROPERTY IS TO BE TREATED AS INCOME FROM OTHER ITA NO. 2835/M/2010 9 SOURCES. HOWEVER, THE SAID DECISION, IN OUR OPINI ON, IS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. THE ASSESSEE AFTER TAKING THE PLOT OF LAND ON LEASE HAS CONSTRUCTED THE FACTORY BUILDING ON T HE SAID PLOT WITH THE FINANCIAL ASSISTANCE FROM BANK OF MAHARASHTRA, A FA CT BROUGHT ON RECORD BY THE LD. CIT(A) HIMSELF. THEREFORE, THE ASSESSEE IS THE OWNER OF THE PREMISES WHICH HAS BEEN GIVEN ON RENT TO M/S. UNIQ UE HEALTH CARE PRODUCTS. THE DECISION OF THE HONBLE SUPREME COUR T IN THE CASE OF CIT VS SHAMBHU INV. PVT. LTD. 263 ITR 143 (SUPRA), IS CLEA RLY APPLICABLE TO THE FACTS OF THE PRESENT CASE. THE RENTAL INCOME HAS T O BE TAXED UNDER THE HEAD INCOME FROM HOUSE PROPERTY AS HELD BY THE AS SESSING OFFICER. HOWEVER, SINCE THE CIT(A) HAS TREATED SUCH INCOME A S INCOME FROM OTHER SOURCES AND THE REVENUE IS NOT IN APPEAL, THEREFOR E, WE UPHOLD THE ORDER OF THE LD. CIT(A). THE ASSESSEE, HOWEVER, IS ENTIT LED TO DEDUCTION U/S. 57(III) FROM SUCH INCOME. WE THEREFORE RESTORE THE ISSUE TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO GIVE AN OPPOR TUNITY TO THE ASSESSEE TO SUBSTANTIATE WITH EVIDENCE TO HIS SATISFACTION THAT ONLY THE EXPENSES ATTRIBUTABLE TO EARNING SUCH INCOME CAN BE ALLOWED AS DEDUCTION. WE HOLD AND DIRECT ACCORDINGLY. THE GROUND OF APPEA L BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 18. IN GROUND OF APPEAL NO. 4 THE ASSESSEE HAS CHAL LENGED THE ORDER OF THE LD. CIT(A) IN CONFIRMING THE DISALLOWANCE OF W HOLE OF THE EXPENSES OF `. 907,569/- INCURRED ON PRESERVING THE ASSETS AND RUNNING OF DAY TODAY BUSINESS . 19. THE FACTS OF THE CASE IN BRIEF ARE THAT THE ASS ESSEE HAS DEBITED VARIOUS EXPENSES TO THE PROFIT AND LOSS ACCOUNT AGA INST THE RENT RECEIPT AT `. 11,85,504/- AND INTEREST INCOME OF `. 8,73,493/- . THE ASSESSING OFFICER, IN THE ASSESSMENT ORDER ALLOWED THE EXPENDITURE AMO UNTING TO `. 3,00,857/- OUT OF THE INTEREST INCOME OF `. 8,73,49 3/-., THE DETAILS OF WHICH ARE AS UNDER: ITA NO. 2835/M/2010 10 1) INTEREST PAID TO OTHERS `. 1,26,946/- 2) BANK COMMISSION `. 801/- 3) TELEPHONE EXPENSES `. 51,620/- 4) DEPRECIATION ON COMPUTER, FIXTURE `. 72,080/- & ON A/C 5) ELECTRICITY `. 49,410/- 19.1 HE HAS DETERMINED THE RENTAL INCOME AS INCOME FROM HOUSE PROPERTY. 19.2 BEFORE THE LD. CIT(A), THE ASSESSEE SUBMITTED THAT THE ENTIRE EXPENSES SHOULD HAVE BEEN ALLOWED. HOWEVER, THE LD . CIT(A) DECIDED THE GROUND AGAINST THE ASSESSEE ON THE GROUND THAT THE BUSINESS CARRIED OUT BY THE ASSESSEE HAS SINCE BEEN DISCONTINUED AND SIN CE THE ASSESSMENT YEAR 2003-04, THE ASSESSEE HAS NOT SHOWN ANY INCOME BY WAY OF TRADING ACTIVITY IN TEXTILES. THEREFORE THE ONLY DEDUCTION THAT CAN BE ALLOWED TO THE ASSESSEE IS AS PER PROVISIONS OF SEC. 57(III) O F THE I.T. ACT AGAINST INCOME FROM OTHER SOURCES. 20. THE LD. COUNSEL FOR THE ASSESSEE WHILE CHALLENG ING THE ORDER OF THE LD. CIT(A) SUBMITTED THAT THE CIT(A) SHOULD NOT HAV E CONFIRMED THE ACTION OF THE ASSESSING OFFICER RESTRICTING THE EXPENSES T O `. 3,08,057/- AS AGAINST `. 9,07,568/- CLAIMED BY THE ASSESSEE. HE SHOULD HAVE ALLOWED THE ENTIRE EXPENDITURE CLAIMED BY THE ASSESSEE. 21. THE LD. DR ON THE OTHER HAND SUPPORTED THE ORDE R OF THE LD. CIT(A). 22. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS MADE B Y BOTH THE SIDES, PERUSED THE ORDERS OF THE AO AND LD. CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. WE FIND THAT IN THE INSTANT CASE THE RENTAL INCOME HAS ALREADY BEEN HELD AS INCOME FROM OTHER SOURCES. TH E INTEREST INCOME HAS TO BE HELD AS INCOME FROM OTHER SOURCES SINCE MON EY LENDING IS NOT THE BUSINESS OF THE ASSESSEE. THE MAIN BUSINESS OF THE ASSESSEE WAS THAT OF ITA NO. 2835/M/2010 11 PROCESSING OF SYNTHETIC YARN WHICH HAS SINCE BEEN DISCONTINUED. THEREFORE, THE INTEREST INCOME HAS TO BE TREATED AS INCOME FROM OTHER SOURCES. SINCE THE RENTAL INCOME AND INTEREST INCOM E HAS BEEN HELD AS INCOME FROM OTHER SOURCES, THEREFORE, ONLY THE EXPE NSES ATTRIBUTABLE TO EARNING SUCH INCOME CAN BE ALLOWED U/S. 57(III) OF THE I.T. ACT. WE FIND THAT THE ASSESSING OFFICER IN THE ASSESSMENT ORDER HAS CONSIDERED AND ALLOWED THE CLAIM OF THE ASSESSEE ON ACCOUNT OF INT EREST PAID TO OTHERS, BACK COMMISSION, TELEPHONE EXPENSES, ELECTRICITY EX PENSES AND DEPRECIATION ON COMPUTER AND FIXTURES ETC. FROM THE INTEREST INCOME. THE VARIOUS OTHER EXPENSES DEBITED IN THE PROFIT AND LO SS ACCOUNT, IN OUR OPINION, ARE NOT RELATED TO EARNING OF SUCH INTERES T INCOME WHICH HAS BEEN HELD BY US AS INCOME FROM OTHER SOURCES. WE THER EFORE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A) AND UPHOLD THE ACTION OF THE ASSESSING OFFICER. THE GROUND RAISED BY THE ASSESS EE IS DISMISSED. 23. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THIS 27 TH DAY OF APRIL, 2011. SD/- SD/- (ASHA VIJAYARAGHAVAN) (R.K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED 27 TH APRIL, 2011. RJ COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT-CONCERNED 4. THE CIT(A)-CENTRAL - I CONCERNED 5. THE DR I BENCH TRUE COPY BY ORDER ASST. REGISTRAR, I.T.A.T, MUMBAI ITA NO. 2835/M/2010 12 DATE INITIALS 1 DRAFT DICTATED ON: 14.4.2011 SR. PS/PS 2. DRAFT PLACED BEFORE AUTHOR: 20.4.2011 ______ SR. PS/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 ON WHICH FILE GOES TO THE AR _________ ______ 10. DATE OF DISPATCH OF ORDER: