Kitchen Express Overseas Ltd., Kalol V. The ACIT, Circle-7, now ITO, Ward-3(3)(2), Ahmedabad

ITA 2880/AHD/2017

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 7377 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 1 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 30-01-2020
• Assessment Year: 2007-2008
• Appeal Filed On: 19-12-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: UMESH KUMAR AGARWAL
• Assessee Lawyers: S N DIVATIA
• Keywords: Business income; Source of fund; Set aside
• Section: 143(3)

Judgement Text

, C IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER & SMT. MADHUMITA ROY, JUDICIAL MEMBER ./ I.T.A. NO. 2880/AHD/2017 ( ASSESSMENT YEAR : 2007-08) KITCHEN EXPRESS OVERSEAS LTD. 29-P, SANTEJ-VADSAR ROAD, SANTEJ, KALOL - 382721 / VS. ACIT CIRCLE-7 NOW ITO , WARD -3(3)(2), B-502, PRATYAKSH KAR BHAVAN, AMBAWADI, AHMEDABAD ./ ./ PAN/GIR NO. : AADCK1847R ( APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI S. N. DIVATIA, A.R. / RESPONDENT BY : SHRI UMESH KUMAR AGARWAL, SR. D.R. DATE OF HEARING 30/01/2020 !'# / DATE OF PRONOUNCEMENT 31/01/2020 / O R D E R PER PRADIP KUMAR KEDIA - AM: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF I NCOME TAX (APPEALS)-2, AHMEDABAD (CIT(A) IN SHORT), DATED 2 7.11.2017 ARISING IN THE ASSESSMENT ORDER DATED 23.12.2011 PA SSED BY THE ASSESSING OFFICER (AO) UNDER S. 143(3) R.W.S 147 OF THE INCOME TAX ACT, 1961 (THE ACT) CONCERNING AY 2007-08. ITA NO. 2880/AHD/17 [KITCHEN EXPRESS OVERSEAS LTD.] A.Y. 2007-08 - 2 - 2. AS PER GROUNDS OF APPEAL, THE ASSESSEE HAS CH ALLENGED THE ACTION OF THE REVENUE AUTHORITIES IN MAKING DISALLO WANCE OF EXPENSES TOWARDS PARTNERS REMUNERATION UNDER S.40( B) OF THE ACT ON ACCOUNT OF RENT INCOME RS.70,000/- ON LET OUT OF BU ILDING, INTEREST INCOME OF RS.5,87,344/- FROM ADVANCES GIVEN TO SIST ER CONCERN M/S. R. M. FOODS AND INTEREST ON FIXED DEPOSITS OF RS.1, 08,726/- FROM FDS. HOLDING SUCH SOURCE OF INCOME COME INCOME FRO M OTHER SOURCES. 3. WHEN THE MATTER WAS CALLED FOR HEARING, THE LEA RNED AR FOR THE ASSESSEE POINTED OUT THAT AS PER RETURN OF INCOME, ALL THE THREE SOURCES OF INCOME NAMELY; RENT INCOME, INTEREST ON ADVANCE AND INTEREST ON FIXED DEPOSITS HAVE BEEN DECLARED BY TH E ASSESSEE UNDER THE HEAD BUSINESS INCOME. IT WAS FURTHER POINTED OUT THAT RENT INCOME HAS BEEN DERIVED FROM LETTING OUT A PORTION OF EXISTING INFRASTRUCTURE ON TEMPORARY BASIS AND THEREFORE WAS AN EXTENSION OF THE BUSINESS. IT WAS FURTHER POINTED OUT THAT INTE REST EARNED ON ADVANCES GIVEN TO M/S. R. M. FOODS ARISES OUT OF BU SINESS NEXUS. IT WAS POINTED OUT THAT THE ASSESSEE HAS SHOWN SEVERAL TRADING TRANSACTIONS WITH M/S. R. M. FOODS, AND ADVANCES HA VE BEEN GIVEN ON INTEREST ALONGSIDE. IT WAS SIMILARLY SUBMITTED THAT INTEREST ON FIXED DEPOSITS HAS BEEN DERIVED BY THE ASSESSEE IN THE COURSE OF BUSINESS ACTIVITY. THE FIXED DEPOSITS HAVE BEEN PL ACED AS SECURITY FOR SANCTION OF TERM LOAN. THE LEARNED AR FURTHER POINTED OUT THAT IN THE LIGHT OF THE DECISION OF THE HONBLE CALCUTT A HIGH COURT IN MD. SERAJUDDIN & BROTHERS VS. CIT [2012] 210 TAXMAN 0084 (CAL.), IT IS NOT NECESSARY THAT PARTNERS REMUNERATION CAN BE DISTRIBUTED ONLY OUT OF INCOME FROM BUSINESS ALONE. 4. IN THE LIGHT OF THE DECISION OF THE HONBLE CALC UTTA HIGH COURT IN MD. SERAJUDDIN & BROTHERS (SUPRA) AND IN THE LIGHT OF THE FACTS ITA NO. 2880/AHD/17 [KITCHEN EXPRESS OVERSEAS LTD.] A.Y. 2007-08 - 3 - POINTED OUT ON BEHALF OF THE ASSESSEE, WE FIND MERI T IN THE PLEA OF THE ASSESSEE. THE ORDER OF THE CIT(A) IS ACCORDING LY SET ASIDE AND THE AO IS DIRECTED TO ALLOW PARTNERS REMUNERATION AFTER TAKING INTO ACCOUNT THE AFORESAID SOURCE OF INCOME. 5. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . SD/- SD/- (MADHUMITA ROY) (PRADIP KUMAR K EDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: DATED 31/01/2020 TRUE COPY S. K. SINHA !'#' / COPY OF ORDER FORWARDED TO:- &. / REVENUE 2. / ASSESSEE (. )*+ , / CONCERNED CIT 4. ,- / CIT (A) /. 012 33*+4 *+#4 56) / DR, ITAT, AHMEDABAD 7. 289 : / GUARD FILE. BY ORDER / 4 /5 *+#4 56) THIS ORDER PRONOUNCED IN OPEN COURT ON 31/01/2020