PATEL ALUMINIUM P. LTD, MUMBAI V. ITO 9(2)(4), MUMBAI

ITA 3014/MUM/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 7753 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2005-2006
• Appeal Filed On: 16-04-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SUM EET KUMAR
• Assessee Lawyers: S K SOMANI
• Keywords: Business income; Rule of consistency

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, C, MUMBAI BEFORE SHRI J SUDHAKAR REDDY, ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO, JUDICIAL MEMBER ITA NO. 3014/MUM/2010 (ASSESSMENT YEAR- 2005-06) PATEL ALUMINIUM PRIVATE LIMITED, PATEL VANIKA, WESTERN EXPRESS HIGHWAY, GOREGAON (E), MUMBAI-4000063 .APPELLANT VS INCOME TAX OFFICER WARD 9(2)(4), MUMBAI. .RESPONDENT ASSESSEE BY : SHRI S K SOMANI REVENUE BY : SHRI SUMEET KUMA R O R D E R PER VIJAY PAL RAO THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE CIT(A) DATED 19.02.2010 FOR THE ASSES SMENT YEAR 2005-06. 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS IN TH IS APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN CONSIDERING RS.18,00,000/-(RUPEES EIGHTEEN LACS) BEING THE AMOUNT OF COMPENSATION RECEIVED FOR USE OF MACHINES AS INCOME FROM OTHERS SOURCES IN PLACE OF INCOME FROM BUSINESS ITA NO. 3014/MUM/2010 (ASSESSMENT YEAR- 2003-04) 2 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN CONSIDERING HE INTERE ST RECEIVED ON SECURITY DEPOSITS WITH ELECTRICITY CO . RS.7150/- AND INTEREST ON SALES TAX REFUND OF RS.53085/- BOTH AGGREGATING TO RS.60,235/- AS INCOME FROM OTHER SOURCES IN PLACE OF INCOME FRO M BUSINESS 3. WE HAVE HEARD THE LEARNED AR AND THE LEARNED DR AND CONSIDERED THE RELEVANT RECORD. AT THE OUTSET, WE NOTE THAT THE IDENTICAL ISSUE HAD COME UP BEFORE THIS TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2003-04 . THIS TRIBUNAL VIDE ORDER DATED 22.9.2010 PASSED IN ITA NO.5938/MUM/2006 HAS DECIDED THE ISSUE VIDE PARAGRA PH 16 AS UNDER: 16. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THERE IS NO DISPU TE THAT THE PLANT AND MACHINERY AND SOME PORTION OF TH E FACTORY HAS BEEN GIVEN BY THE ASSESSEE ON HIRE TO I TS SISTER CONCERN ON REGULAR BASIS TO EARN INCOME. THE INCOME THEREFROM HAS BEEN ASSESSED FROM THE ASSESSMENT YEAR 1981-82 TO 1999-2000 AS INCOME FROM BUSINESS. DURING THE YEAR UNDER CONSIDERATION IT WAS NOT ACCEPTED AS SUCH BY THE ASSESSING OFFICE R ON THE GROUND THAT TO EARN RENTAL INCOME AS BUSINES S ACTIVITY IS NOT THE OBJECT OF THE ASSESSEE COMPANY. SINCE THE ASSESSEE IS DERIVING THE SAID INCOME FROM HIRING OUT ITS PREMISES ALONG WITH PLANT AND MACHINERY REGULARLY FROM EXPLOITATION OF BUSINESS ASSETS AND TREATING THE SAME AS BUSINESS INCOME AND IT HAS ALSO BEEN ACCEPTED BY THE REVENUE IN THE AFORESAID ASSESSMENT YEARS AS BUSINESS INCOME EVEN IN THE SCRUTINY ASSESSMENTS, THEREFORE, KEEPIN G IN VIEW THE RULE OF CONSISTENCY THE RENTAL INCOME DERIVED BY THE ASSESSEE DID NOT COME WITHIN THE HEAD INCOME FROM OTHER SOURCES, BUT, THE SAME IS ASSESSABLE UNDER THE HEAD INCOME FROM BUSINESS. THIS VIEW ALSO FINDS SUPPORT FROM THE RECENT DECISI ON ITA NO. 3014/MUM/2010 (ASSESSMENT YEAR- 2003-04) 3 OF HONBLE PATNA HIGH COURT IN CIT VS. MITHILA PROPERTIES PUBLICATION & CONTRACTOR ENTERPRISES (P. ) LTD. (2010) 192 TAXMAN 401(PAT.), WHEREIN IT HAS BEEN OBSERVED AND HELD THAT (PLACITUM 24, PAGE 410) : ..THE ASSESSEES AS OWNERS OF PREMISES WERE, IN RECEIPTS, FROM HIRING OUT THEIR PREMISES ALONG WITH VARIOUS OTHER MOVABLE FITTINGS AND AS SUCH ARE RECEIPTS OF AN ENTERPRISE, QUITE DISTINCT FROM THE ORDINARY RECEIPTS WHICH A LANDLORD DERIVES FROM LETTING OUT HIS PROPERTY. HENCE, IN MY OPINION, THE ASSESSES WERE CARRYING ON AN ADVENTURE OR CONCERN IN THE NATURE OF TRADE. ACCORDINGLY THE COMPENSATION FOR USE OF MACHINERY RS.18.00 LACS AND COMPENSATION FOR HIRING OF PORTIO N OF PLANT RS.60,000/- ARE TREATED AS INCOME FROM BUSINESS. 4. FOLLOWING THE EARLIER ORDER OF THIS TRIBUNAL, WE DECIDE THIS ISSUE IN FAVOUR OF THE ASSESSEE AND AGAINST TH E REVENUE. 5. GROUND NO.1 IS ALLOWED. 6. GROUNDS OF APPEAL NO.2 IS REGARDING INTEREST REC EIVED ON SECURITY DEPOSITS WITH ELECTRICITY CO.RS.7150/- AN D INTEREST ON SALES TAX REFUND OF RS.53085/-. 7. THIS TRIBUNAL HAS DECIDED THIS ISSUE VIDE ORDER (SUPRA) IN PARAGRAPH 17 AS UNDER : 17. AS REGARDS INTEREST INCOME OF RS.16,773/- AND INTEREST ON INCOME TAX REFUND RS.3,74,799/- THE PLE A OF THE ASSESSEE IS THAT THE ASSESSEE COMPANY HAD KEPT FDR OF RS.60.00 LACS WITH CANARA BANK TO TAKE CARE OF VRS AMOUNT TO ITS WORKERS AND IT HAD KEPT SECURITY DEPOSIT WITH ELECTRICITY BOARD. THE ASSESS EE HAS RECEIVED INTEREST RS.16,773/-. OUT OF THE FD OF ITA NO. 3014/MUM/2010 (ASSESSMENT YEAR- 2003-04) 4 RS.60.00 LACS, RS.30.00 LACS WAS ENCASHED ON 22.3.2003 FOR PAYMENT OF VRS TO ITS WORKERS. THUS, ACCORDING TO THE ASSESSEE THE FIXED DEPOSIT WAS KEP T AS A NECESSITY TO MEET THE URGENT REQUIREMENT OF VR S AMOUNT AND AS SECURITY DEPOSIT WITH ELECTRICITY BOA RD AND HENCE, INTEREST ON THE SAID FIXED DEPOSIT IS INCIDENTAL TO ITS BUSINESS. IN THE ABSENCE OF ANY CONTRARY MATERIAL PLACED ON RECORD BY THE REVENUE AGAINST THE ABOVE STATEMENT OF FACT STATED BY THE ASSESSEE WE ARE OF THE VIEW THAT THE ASSESSEE HAS PROVED THE NEXUS AND HENCE, THE INTEREST RECEIVED O F RS.16,773/- ON THE FDR IS ALSO TREATED AS INCOME FROM BUSINESS. HOWEVER, IN THE ABSENCE OF ANY MATERIAL TO SHOW THE NEXUS, THE INTEREST ON INCOME TAX REFUND RS.3,74,799/- IS TREATED AS INCOME FROM OTHE R SOURCES. THE GROUND TAKEN BY THE ASSESSEE IS, THEREFORE, PARTLY ALLOWED. 8. FOLLOWING THE ORDER OF THIS TRIBUNAL IN ASSESSEE S OWN CASE, WE DECIDE THE ISSUE OF INTEREST RECEIVED ON THE SECURITY DEPOSITS WITH ELECTRICITY CO. OF RS.7150/- IN FAVOU R OF THE ASSESSEE, WHEREAS THE INTEREST RECEIVED ON THE SALE S TAX REFUND OF RS.53085/- AGAINST THE ASSESSEE AND THE SAME IS TREATED AS INCOME FROM OTHER SOURCES 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 31ST MARCH, 2011 SD S D (J.SUDHAKAR REDDY) (V IJAY PAL RAO) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, ON THIS TH DAY OF MARCH 2011 SRL:29311 ITA NO. 3014/MUM/2010 (ASSESSMENT YEAR- 2003-04) 5 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT CONCERNED 4. CIT(A) CONCERNED 5. DR CONCERNED BENCH BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI