LATE SHRI. RAMPRASAD RIA, MUMBAI V. DY.C.I.T. 3(1), MUMBAI

ITA 2933/MUM/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 1297 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-06-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 08-04-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 07-05-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: JI TENDRA YADAV
• Assessee Lawyers: PANKAJ TOPRANI
• Keywords: Business income; Salary income; Opportunity of being heard

Judgement Text

1 ITA NO.2933/MUM/2009 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH D MUMBAI BEFORE SHRI R S PADVEKAR, JM & SHRI B RAMAKOTAIAH, AM ITA NO. 2933/MUM/2009 (ASST YEAR 2005-06) LATE SHRI RAMPRASAD RUIA 901 MAKER CHAMBERS V NARIMAN POINT MUMBAI 21 VS THE DY COMMR OF INC OME TAX 3(1) MUMBAI (APPELLANT) (RESPONDENT) PAN AAAHR3142L ASSESSEE BY: SHRI PANKAJ TOPRANI REVENUE BY: SHRI JITENDRA YADAV O R D E R PER R S PADVEKAR: THE ASSESSEE HAS FILED THIS APPEAL CHALLENGING THE IMPUGNED ORDER OF THE LD CIT(A)/XXVII, MUMBAI FOR THE ASSESSMENT YEAR 2005-06 DATED 26.3.2009. 2 THE ASSESSEE HAS TAKEN THE FOLLOWING EFFECTIVE GR OUNDS: I) THE CIT(A) HAS ERRED IN CONFIRMING THE ORDER OF THE AO AND TAKING RS.32,97,600/- AS RENTAL INCOME UNDER THE HEAD INCO ME FROM HOUSE PROPERTY INSTEAD OF THE SAME BEING OFFERED BY THE A SSESSEE AS BUSINESS INCOME ON ACCOUNT OF THE RUNNING OF THE B USINESS CENTRE AS AGAINST THE ACTUAL BUSINESS CENTRE CHARGES RECEIVED BY THE ASSESSEE OF RS. 32,97,600/- IN RESPECT OF THE SUCH PREMISES AND ALSO NOT ALLOWING THE CORRESPONDING BUSINESS CENTRE CHARGES PAID IN RESPECT OF THE SAID PREMISES. IT IS THEREFORE, PRAYED THAT THE BUSINESS CENTRE CHARGES RECEIVED SHOULD BE TAXED AS INCOME FROM BUS INESS AND CORRESPONDING EXPENSES INCURRED SHOULD ALSO BE ALLO WED. II) THE CIT(A) HAS ERRED IN CONFIRMING ORDER OF THE AO AND NOT ALLOWING THE INTEREST EXPENSES OF RS. 16,85,186/- ON THE PRETEXT THAT THERE IS NO JUSTIFICATION OF CHARGING INTEREST ON LOANS EXTENDE D TO SISTER CONCERNS. FURTHER IT IS ALSO CONCLUDED THAT INTEREST IS CLAIM ED IN RELATION TO THE 2 ITA NO.2933/MUM/2009 INCOME CHARGEABLE UNDER THE HEAD INCOME FROM HOUSE PROPERTY AND ACCORDINGLY, ENTIRE INTEREST IS DISALLOWED WHICH IS CLAIMED AS REVENUE EXPENSES UNDER THE HEAD INCOME FROM BUSINES S. III) THE CIT(A) HAS ERRED IN CONFIRMING ORDER OF THE AO AND TAXING RS. 19,01,092/- AS RENTAL INCOME UNDER THE HEAD THE INC OME FROM OTHER SOURCES INSTEAD OF THE SAME BEING OFFERED BY THE AS SESSEE AS BUSINESS INCOME ON ACCOUNT OF THE RUNNING OF THE BU SINESS CENTRE IN RESPECT OF THE SAID PREMISES. IT IS THEREFORE PRAYE D THAT THE SAID BUSINESS CENTRE CHARGES INCOME SHOULD BE TAXED AS I NCOME FROM BUSINESS. IV) THE CIT(A) HAS ERRED IN CONFIRMING ORDER OF THE AO AND DISALLOWING THE RENT PAID TO THE EXTENT OF RS. 4,79,115/- AS WELL A S OUTGOING EXPENSES OF RS. 48,615/- ON THE PRETEXT THAT THE SA ME ARE PERTAINING TO INCOME TAXED UNDER THE HEAD INCOME FROM HOUSE PR OPERTY AND ACCORDINGLY NOT ALLOWABLE. IT IS HOWEVER PRAYED THA T RENT PAID AS WELL AS OUTGOING EXPENSES CLAIMED BY THE ASSESSEE S HOULD BE ALLOWED IN FULL. 3 WE HAVE HEARD THE PARTIES. THE ASSESSEE IS A DIRE CTOR OF M/S ALLSTATE FINANCE & LEASING CO P LTD (AFSL) AND M/S A B COLOR PVT LTD. THE ASSESSEE HAS SHOWN THE INCOME FROM SALARY AS DIRECTOR OF AFS L, INCOME FROM HOUSE PROPERTY AND BUSINESS INCOME. IT WAS CLAIMED BY THE ASSESSEE THAT THE INCOME RECEIVED FROM THE BUSINESS CENTRE IS TO BE A SSESSED AS BUSINESS INCOME. 3.1 THE AO TREATED THE ENTIRE RENT AS ASSESSABLE UN DER THE HEAD INCOME FROM HOUSE PROPERTY. HE ALSO DISALLOWED THE INTERES T CLAIMED BY THE ASSESSEE. THE AO ALSO DISALLOWED THE DEDUCTION TOW ARDS MUNICIPAL TAXES AND GROUND RENT PAID BY THE ASSESSEE AS WELL AS DED UCTION U/S 24 AT 30% OF THE TOTAL RENT WHILE DETERMINING THE INCOME UNDER T HE HEAD INCOME FROM HOUSE PROPERTY. THE AO HAS ALSO MADE DISALLOWANCE WHILE COMPUTING THE INCOME UNDER THE HEAD BUSINESS INCOME IN RESPECT OF THE RENT PAID, INTEREST AND OUTGOING EXPENSES. HE ALSO ASSESSED 1/3 RD SHARES OF THE INCOME FROM 3 ITA NO.2933/MUM/2009 ASFL & M/S INDUSTRIAL REFRIGERATION INCOME FROM OTH ER SOURCES. THE ASSESSEE CHALLENGED THE ASSESSMENT ORDER BEFORE THE LD CIT(A). 4 SO FAR AS THE ISSUE IN RESPECT OF INCOME FROM BUS INESS CENTRE IS CONCERNED, THE LD CIT(A) CONCURRED WITH THE VIEW TAKEN BY THE AO THAT THE ENTIRE AMOUNT OF RENT RECEIVED IN RESPECT OF THE PR EMISES AS WELL AS FIXTURES AND FITTINGS AND SERVICES OF AMENITIES IS TO BE TAX ED UNDER THE HEAD INCOME FROM HOUSE PROPERTY. THE LD CIT(A) RELIED ON HIS DE CISION IN THE CASE OF SMT SATYAVATI RUIA WIFE OF THE ASSESSEE FOR THE AY 2005-06 FOR WHICH R EFERENCE HAS GIVEN IN PARA 2.11 OF HIS ORDER. 4.1 IN RESPECT OF OTHER ISSUES I.E. DISALLOWANCE OF THE INTEREST, TAXING RENTAL INCOME UNDER THE HEAD INCOME FROM OTHER SOU RCES, DISALLOWANCE OF RENT PAID AS WELL AS OUTGOING EXPENSES, THE LD CIT( A) CONFIRMED THE ORDER OF THE AO EXCEPT TO THE LIMITED EXTENT THAT THERE WA S DOUBLE DISALLOWANCE IN RESPECT OF THE EXPENSES. HE, THEREFORE, DIRECTED THE AO TO LOOK INTO THE MATTER AND DO RECTIFICATION. 5 THE LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT TH E LD CIT(A) HAS DECIDED THE ASSESSEES APPEAL ON THE BASIS OF THE O RDER PASSED IN THE CASE OF SMT SATYAVATI RUIA, AND IN THE CASE OF SMT SATYAVATI RUIA, WIFE OF THE ASSESSEE. THE TRIBUNAL HAS SET ASIDE THE ORDER OF THE LD CIT (A) AND RESTORE THE MATTER TO HIS FILE FOR DECIDING THE ISSUE AFRES H. THE LD COUNSEL OF THE ASSESSEE FILED A COPY OF THE ORDER OF THE TRIBUNAL PASSED IN ITA NO. 1213/MUM/2009 DATED 21.5.2010. 6 ADMITTEDLY, IN THE PRESENT CASE, THE LD CIT(A) HA S RELIED ON HIS DECISION IN THE CASE OF SMT SATYAVATI RUIA THE WIFE OF THE ASSESSEE. THE TRIBUNAL HAS ALREADY SET ASIDE THE ORDER IN THE CAS E OF SMT SATYAVATI RUIA 4 ITA NO.2933/MUM/2009 WIFE OF THE ASSESSEE. IN OUR OPINION, THIS MATTER ALSO NEEDS TO BE SET ASIDE ON THE SAME DIRECTION TO THE FILE OF THE LD CIT(A). ACCORDINGLY, THE ORDER OF THE LD CIT(A) IS SET AIDE AND THE MATTER IS RESTORE D TO HIS FILE FOR FRESH ADJUDICATION AS PER PROVISIONS OF LAW AND AFTER GIV ING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 7 IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE I S ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED ON THE 25 TH , DAY OF JUNE 2010. SD/- SD/- ( B RAMAKOTAIAH ) ACCOUNTANT MEMBER (R S PADVEKAR ) JUDICIAL MEMBER PLACE: MUMBAI : DATED: 25 TH , JUNE 2010 RAJ* COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI