DAGA CONTAINERS PVT.LTD., MUMBAI V. ITO 4(1)(4), MUMBAI

ITA 3195/MUM/2011

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 4171 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 11 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-04-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 16-04-2015
• Assessment Year: 2004-2005
• Appeal Filed On: 21-04-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: UDAY B JAKKE
• Keywords: Business income; Opportunity of being heard

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL D, BENCH MUM BAI BEFORE SHRI B.R.BASKARAN, AM & SHRI SANDEEP GOSAIN, JM ./ ITA NO.3195/MUM/2011 ( / ASSESSMENT YEAR: 2004-2005) M/S DAGA CONTAINERS PVT. LTD., 18/22, SHEIKH MEMON STREET, KALVADEVI, MUMBAI- 400002 VS. ITO-4(1)(4), MUMBAI ./ ./PAN/GIR NO. : AAACD 3992 R ( /APPELLANT ) .. ( / RESPONDENT ) ! /ASSESSEE BY : SHRI VIMAL PUNMIYA & SHRI HIMANSHU GANDHI ! /REVENUE BY : SHRI UDAY B JAKKE ! / DATE OF HEARING : 02/12/2015 '#$% ! /DATE OF PRONOUNCEMENT 06/04/2016 #$ / O R D E R PER SANDEEP GOSAIN,(JM) THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE O RDER DATED 10-3- 2011, PASSED BY THE CIT(A)-8, MUMBAI, FOR THE ASSES SMENT YEAR 2004- 2005, ON THE FOLLOWING GROUNDS :- 1. THE LOSS INCURRED ON BREEDING OF HORSE IS NOT TO BE TREATED AS LOSS INCURRED ON RUNNING AND MAINTENANCE OF HORSE A S PER PROVISIONS OF SECTION 74A OF THE INCOME TAX ACT, 19 61. 2. DISALLOWANCE OF INTEREST OF RS.1,00,409/- 3. DISALLOWANCE OF PROVISION FOR BONUS AND LEAVE S ALARY OF RS.7,410/- THE ASSESSEE ALSO FILED AN ADDITIONAL GROUND, WHICH READS AS UNDER:- 4. WITHOUT PREJUDICE TO EARLIER GROUND THE LD. AO E RRED IN NOT ALLOWING SET OFF OF RS.4,10,622/- CLAIMED BY THE AS SESSEE AS WRITTEN OFF OF BALANCE OF CENTURY BLOOD STOCK AGAIN ST THE LOSS FROM HORSE BREEDING IS COMPUTED BY THE LD. AO. 5. WITHOUT PREJUDICE TO EARLIER GROUND, THE LD. AO ERRED IN NOT EXCLUDING THE AMOUNT OF RS.4,10,622/- CLAIMED BY TH E ASSESSEE AS WRITTEN OFF OF BALANCE OF CENTURY BLOOD STOCK IN RETURN OF ITA NO.3195/11 2 INCOME AND THE SAME IS TREATED BY THE ASSESSING OFF ICER AS INCOME OF EARLIER YEAR. 2. FACTS IN BRIEF ARE THAT THE ASSESSEE, BEING ENGA GED IN DEALING IN BREEDING RACE HORSES, ELECTRICAL GOODS, ETC., FILED ITS RETURN OF INCOME SHOWING LOSS OF RS.89,707/-. THE CASE OF THE ASSESS EE WAS SELECTED FOR SCRUTINY. THEREAFTER THE ASSESSMENT WAS FRAMED BY T HE AO MAKING FOLLOWING DISALLOWANCES:- I) DISALLOWANCE U/S.74A (3) OF THE ACT; II) DISALLOWANCE OF INTEREST INCOME OF RS.1,00,409/ -; AND III) DISALLOWANCE OF PROVISION FOR BONUS AND LEAVE SALARY OF RS.7,410/- IN APPEAL, THE CIT(A) WENT WITH THE VIEW OF THE ASS ESSING OFFICER. NOW, THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 3. LD. AR OF THE ASSESSEE SUBMITTED THAT IN REGARD TO GROUND NO.1, THE TRIBUNAL HAS DECIDED THE SIMILAR ISSUE IN FAVOUR OF THE ASSESSEE IN THE CASE OF FIVE STARS SHIPPING CO. PVT. LTD., ITA NO.2 151/MUM/2012, THEREFORE, THE PRESENT ISSUE IS COVERED BY THE DECI SION OF THE TRIBUNAL IN AFORESAID CASE. IN REGARD TO DISALLOWANCE OF INTERE ST INCOME, LD. AR SUBMITTED THAT THE ASSESSEE IS NOT IN THE BUSINESS OF HORSE RACING THEN QUESTION OF UTILIZATION OF FUNDS FOR HORSE RACING B USINESS WOULD NOT ARISE AT ALL. IN THIS REGARD, LD. AR RELIED ON THE DECISION IN THE CASE OF HOTEL SAVERA, 239 ITR 795 AND APOLLO HOSPITALS ENTERPRISE S LTD., 139 ITD 594. WITH REGARD TO DISALLOWANCE OF BONUS AND LEAVE SALA RY AMOUNT, LD. AR SUBMITTED THAT THE ASSESSEE MADE THE PROVISIONS FOR LEAVE SALARY AND THE SAME IS PAID ON 10-9-2004 BEFORE FILING OF RETURN A ND PROVISION MADE FOR ITA NO.3195/11 3 BONUS, WHICH IS A CONTRACTUAL LIABILITY AS PER THE NORMAL BUSINESS PRACTICE. THEREFORE, THE SAME IS NOT COVERED U/S.43B. 4. ON THE OTHER HAND, LD. DR RELIED ON THE ORDER OF TAX AUTHORITIES BELOW. 5. WE HAVE HEARD RIVAL PARTIES AND PERUSED THE RECO RD CAREFULLY. THE FIRST ISSUE BEFORE US IS AS TO WHETHER THE LOSS INC URRED ON BREEDING OF HORSE IS NOT TO BE TREATED AS LOSS INCURRED ON RUNN ING AND MAINTENANCE OF HORSE AS PER PROVISIONS OF SECTION 74A OF THE ACT. THE VERY SAME ISSUE HAS BEEN DECIDED BY THE TRIBUNAL IN THE CASE OF FIV E STARS SHIPPING CO. PVT. LTD., ITA NO.2151/MUM/2012, WHEREIN THE TRIBUN AL HAS HELD THAT HORSE BREEDING BUSINESS AND MAINTENANCE OF RACE HOR SES ARE SEPARATE, THEREFORE, HORSE BREEDING BUSINESS IS NOT COVERED U /S.74(3) OF THE ACT. BUT IN THE PRESENT CASE, THE APPELLANT HAS MADE SUBMISS IONS THAT THE SITUATION IN THE PRESENT YEAR IS DIFFERENT FROM THE EARLIER Y EARS AS THE ASSESSEE HAD SEVERED ALL THE CONNECTIONS WITH MAINTENANCE OF RAC E HORSES FOR THE YEAR UNDER CONSIDERATION AND THE ASSESSEE IS INVOLVED ON LY IN HORSE BREEDING BUSINESS. SINCE, THIS ISSUE REQUIRES VERIFICATION, THEREFORE, WE RESTORE THIS GROUND OF APPEAL TO THE FILE OF THE AO TO VERIFY TH E FACTUAL POSITION AND ON VERIFICATION IF IT IS FOUND THAT THE ASSESSEE IS IN VOLVED ONLY IN HORSE BREEDING BUSINESS, THEN, THE AO IS DIRECTED TO FOLL OW THE FINDINGS RENDERED BY THE HONBLE ITAT MUMBAI BENCHES IN FIVE STAR SHI PPING COMPANY PVT. LTD. VS CIT [ITA NO.2151/MUM/2012. IN REGARD TO DISALLOWANCE OF INTEREST INCOME ON ACCOUNT OF BORROWED FUNDS WERE U TILIZED OTHERWISE THAN FOR BUSINESS PURPOSE, WE FIND THAT THE ASSESSE E BEFORE BOTH THE ITA NO.3195/11 4 LOWER AUTHORITIES COULD NOT PRODUCE ANY MATERIAL TO SUBSTANTIATE ITS CLAIM THAT NO INTEREST BEARING LOANS WERE UTILIZED FOR GI VING INTEREST FEE LOAN, NEITHER THE ASSESSEE FURNISHED CASH FLOW STATEMENT DEPICTING RECEIPT OF INTEREST BEARING LOAN NOR PAYMENT OF INTEREST FREE ADVANCE. THEREFORE, IN THE INTEREST OF JUSTICE, WE RESTORE THIS GROUND TO THE FILE OF AO TO DECIDE AFRESH AFTER CONSIDERING THE MATERIAL EVIDENCE TO B E FILED BY THE ASSESSEE IN THIS REGARD AFTER PROVIDING DUE OPPORTUNITY OF B EING HEARD TO THE ASSESSEE. COMING TO THE THIRD GROUND, WE FIND THAT THE ASSESSEE HAS MADE THE PROVISIONS FOR LEAVE SALARY AND THE SAME WAS PAID ON 10-9- 2004 BEFORE FILING OF RETURN I.E. 1-11-2004. AS PER FIRST PROVISO TO SECTION 43B, IF THE AMOUNT IS PAID BEFORE FILING OF THE RET URN, THEN THE AMOUNT WILL NOT BE DISALLOWED. SINCE, THIS FACT NEEDS VERIFICAT ION, THEREFORE, THIS GROUND IS ALSO RESTORED TO THE FILE OF THE AO TO VE RIFY THE FACT AND IN CASE IT IS FOUND THAT THE LEAVE SALARY AND BONUS WAS PAID O N 10-09-2004 I.E. BEFORE FILING OF THE RETURN, THEN THE AO IS DIRECTE D TO DELETE THE SAID ADDITIONS. THE ASSESSEE FURTHER MADE PROVISIONS ON ACCOUNT OF BONUS, WHICH IS A CONTRACTUAL LIABILITY AS PER NORMAL BUSI NESS PRACTICE. ACCORDINGLY, WE DELETE THE SAME. 6. IN REGARD TO ADDITIONAL GROUND, WE FIND THAT THE ASSESSEE HAD INCURRED RS.5,64,411/- ON ACCOUNT OF HORSE BREEDING EXPENSES. AFTER CLAIMING THE INCOME OF RS.15000/- ON ACCOUNT OF LIV ESTOCK & RS.4,10,622/- ON ACCOUNT OF WRITTEN OFF OF BALANCE OF CENTURY BLO OD STOCK, NET AMOUNT OF RS.1,53,790/- WAS CLAIMED BY THE ASSESSEE. THE AO V IDE PARA 7.5.12 STATED THAT RS.4,10,622/- IS INCOME ON EARLIER YEAR S. THEREFORE, THE SAME ITA NO.3195/11 5 BE EXCLUDED FROM THE NORMAL BUSINESS INCOME. SINCE, THIS ADDITIONAL GROUND IS RELATED TO THE FIRST GROUND OF APPEAL, AC CORDINGLY, WE RESTORE THE SAME TO THE FILE OF THE AO TO DECIDE AFRESH AFTER G IVING SUFFICIENT OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. WE ORDE R ACCORDINGLY. 7. IN THE RESULT, APPEAL OF ASSESSEE IS PARTLY ALLO WED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 06/04/20 16. SD/- ( B.R.BASKARAN ) SD/- ( SANDEEP GOSAIN ) %!#& / ACCOUNTANT MEMBER !#& / JUDICIAL MEMBER & ' MUMBAI ; () DATED 06/04/2016 . .+&/PKM , . / PS/ LK DEKA LK DEKA LK DEKA LK DEKA #$ '()* +*( / COPY OF THE ORDER FORWARDED TO : #$ ! / BY ORDER, , / !- . ( ASSTT. REGISTRAR) , & ' / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. 0 ( ) / THE CIT(A), MUMBAI. 4. 0 / CIT 5. 123 4 , ! 4% , & ' / DR, ITAT, MUMBAI 6. 35 6 / GUARD FILE. 1 //TRUE COPY//