Mayank Shelters Agro Private Limited(Formerly known as Mayak shelters Private Limited), Hyderabad V. Income Tax Officer, Ward-16(3), Hyderabad

ITA 325/Hyd/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 5792 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 11 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB-A
• Next Hearing Date: 27-11-2019
• Assessment Year: 2012-2013
• Appeal Filed On: 16-02-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KOMALI KRISHNA
• Assessee Lawyers: SANJAY KUMAR SHARDA
• Keywords: Business income; Depreciation; Business expenditure; Unabsorbed depreciation
• Section: 143(3); 115JB; 37(1); 72

Judgement Text

ITA NO 325 OF 2018 MAYANK SHELTERS AGRO P LTD HYDERABAD. PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A SMC BENCH, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER ITA NO.325/HYD/2018 ASSESSMENT YEAR: 2012-13 M/S. MAYANK SHELTERS AGRO PRIVATE LTD (FORMERLY MAYANK SHELTERS PRIVATE LIMITED) HYDERABAD PAN:AACCM9492R VS. INCOME TAX OFFICER WARD 16 (3) HYDERABAD (APPELLANT) (RESPONDENT) ASSESSEE BY: SRI SANJAY KUMAR SHARDA REVENUE BY : SMT. KOMALI KRISHNA, DR DATE OF HEARING: 27/11/2019 DATE OF PRONOUNCEMENT: 31/01/2020 ORDER THIS IS ASSESSEES APPEAL FOR THE A.Y 2012-13 AGAIN ST THE ORDER OF THE CIT (A)-4, HYDERABAD, DATED 15.11. 2017 CONFIRMING THE DISALLOWANCES MADE BY THE AO. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE CO MPANY ENGAGED IN THE BUSINESS OF REAL ESTATE, FILED ITS R ETURN OF INCOME ELECTRONICALLY ON 28.09.2012 DECLARING NIL TAXABL E INCOME UNDER NORMAL PROVISIONS AND RS.1,58,401/- U/S 115JB OF TH E I.T. ACT. DURING THE ASSESSMENT PROCEEDINGS U/S 143(3) PURSUA NT TO THE SELECTION OF THE SCRUTINY AS PER THE NORMS OF CASS, THE AO NOTICED THAT THE ASSESSEE HAS RECEIVED A TOTAL RENTAL INCOM E AMOUNTING TO RS.6,32,800/- DURING THE YEAR AGAINST WHICH CERTAIN EXPENDITURE BY WAY OF SALARIES AND INCENTIVES, BANK CHARGES, BA D DEBTS, SUNDRY BALANCES WRITTEN OFF AND OTHER MISCELLANEOUS EXPENSES AMOUNTING TO RS.1,58,409/- WAS DEBITED TO THE P&L A /C. THE AO ITA NO 325 OF 2018 MAYANK SHELTERS AGRO P LTD HYDERABAD. PAGE 2 OF 5 OBSERVED THAT THE ASSESSEE HAS SHOWN THE RENTAL INC OME AS INCOME FROM HOUSE PROPERTY AND A DEDUCTION U/S 24 O F THE I.T. ACT WAS CLAIMED THEREFROM. HE OBSERVED THAT THERE W AS NO BUSINESS INCOME AND ALL OTHER EXPENSES WERE CLAIMED AS BUSINESS EXPENSES, DUE TO WHICH THERE WAS LOSS UNDER THE HE AD INCOME FROM BUSINESS AND THE ASSESSEE HAS SET OFF THE BUS INESS LOSS AND OTHER EXPENDITURE FROM INCOME FROM HOUSE PROPERTY . THE AO OBSERVED THAT THE ASSESSEE HAS NOT CARRIED ON ANY B USINESS ACTIVITY AFTER IT HAS BEEN SET UP ON 23.09.2008 AND THEREFORE, THE EXPENDITURE CLAIMED AS BUSINESS EXPENDITURE IS NOT ALLOWABLE. FURTHER, HE ALSO OBSERVED THAT THE ASSESSEE HAS CLA IMED UNABSORBED DEPRECIATION TO BE SET OF AGAINST THE IN COME FROM HOUSE PROPERTY. HE OBSERVED THAT THE UNABSORBED DEP RECIATION OR INCOMES CAN BE SET OFF ONLY FROM INCOME FROM BUSIN ESS U/S 72 OF THE ACT AND THEREFORE, IT CANNOT BE SET OFF AGAINST THE INCOME FROM HOUSE PROPERTY. HE THEREFORE, DETERMINED THE INCOME FROM HOUSE PROPERTY AT RS.6,32,800/- AND BROUGHT IT TO T AX. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT (A) WHO CONFIRMED THE ORDER OF THE AO AND THE ASSESSEE IS IN SECOND A PPEAL BEFORE THE TRIBUNAL BY RAISING THE FOLLOWING GROUNDS OF AP PEAL: 1. IN COMPUTING THE TOTAL INCOME, THE LEARNED AO H AS ADDED THE FOLLOWING: A. DISALLOWANCE OF BUSINESS LOSS SET OFF AGAINST INCOM E FROM HOUSE PROPERTY TO THE EXTENT OF RS.4,36,573/-. B. DISALLOWANCE OF BROUGHT FORWARD UNABSORBED DEPRECIATION TO THE EXTENT OF RS.6,387/-. THE HON'BLE CIT(A)-4 HAS ERRED IN UPHOLDING THE SAM E. 2. FOR THAT, YOUR PETITIONER CRAVES THE RIGHT TO PU T ADDITIONAL GROUNDS AT THE TIME OF APPEAL. ITA NO 325 OF 2018 MAYANK SHELTERS AGRO P LTD HYDERABAD. PAGE 3 OF 5 3. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT THE ASSESSEE HAD INITIALLY BEEN SET UP FOR MANUFACT URE OF IRON AND STEEL AND SINCE IT HAS INCURRED LOSSES, THE SAID BU SINESS HAS BEEN CLOSED DOWN AND IN 2005, THE ASSESSEE HAS SET UP TH E BUSINESS OF REAL ESTATE. ADMITTEDLY, THE ASSESSEE HAS NOT ENTER ED INTO ANY TRANSACTION FOR DOING REAL ESTATE BUSINESS DURING T HE RELEVANT FINANCIAL YEAR, BUT TO CARRY ON THE AFFAIRS OF THE COMPANY, IT HAD TO ENGAGE THE EMPLOYEES AND THE EXPENDITURE WHICH HAS BEEN DEBITED TO THE P&L A/C IS ONLY FOR SUCH PURPOSES. H E SUBMITTED THAT SINCE THE ASSESSEE HAS SET UP ITS BUSINESS AND WAS READY TO COMMENCE ITS BUSINESS OPERATIONS, THE BUSINESS EXPE NDITURE WAS ALLOWABLE U/S 37(1) OF THE ACT. HE SUBMITTED THAT U /S 71 OF THE I.T. ACT, THE LOSS FROM ANY HEAD, OTHER THAN THE CA PITAL GAIN, CAN BE SET OFF AGAINST THE INCOME FROM ANY OTHER HEAD. THEREFORE, ACCORDING TO HIM, THE BUSINESS LOSS CAN BE SET OFF AGAINST THE INCOME FROM HOUSE PROPERTY, BUT THE AO AND THE CIT (A) HAVE ERRONEOUSLY HELD AGAINST THE ASSESSEE. IN SUPPORT O F HIS CONTENTION THAT ONCE THE BUSINESS HAS BEEN SET UP, THE BUSINESS EXPENDITURE OR LOSS HAS TO BE ALLOWED, HE PLACED RE LIANCE UPON THE DECISION OF THE B BENCH OF THE TRIBUNAL AT HYDERA BAD IN ITA NO.863/HYD/2014, DATED 30.11.2015 WHEREIN AFTER CON SIDERING VARIOUS DECISIONS OF THE HON'BLE COURTS, THE TRIBUN AL HAS HELD THAT IF THE BUSINESS HAS BEEN SET UP AND IT IS READ Y TO COMMENCE ITS OPERATIONS, THE BUSINESS EXPENDITURE IS ALLOWAB LE. THEREFORE, HE PRAYED FOR SET OFF OF THE BUSINESS LOSS AGAINST THE INCOME FROM HOUSE PROPERTY. 4. THE LEARNED DR WAS ALSO HEARD. ITA NO 325 OF 2018 MAYANK SHELTERS AGRO P LTD HYDERABAD. PAGE 4 OF 5 5. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE M ATERIAL ON RECORD, I FIND THAT THERE IS NO DISPUTE THAT THE ASSESSEE HAS SET UP ITS BUSINESS BUT HAS NOT BEEN ABLE TO ENTER INTO ANY TRANSACTION FOR DEVELOPMENT OF THE LAND OR FOR CARR YING ON ITS REAL ESTATE BUSINESS. AS HELD BY THE HON'BLE COURTS IN C ATENA OF DECISIONS, THE ASSESSEE IS ELIGIBLE FOR CLAIM OF BU SINESS EXPENDITURE IF IT HAS SET UP THE BUSINESS AND WAS R EADY TO CARRY ON ITS OPERATIONS. IN THE CASE BEFORE ME ALSO, THE ASSESSEE HAS SET UP REAL ESTATE BUSINESS BUT WAS UNABLE TO GET ANY C ONTRACTS FOR REAL ESTATE BUSINESS. IN SUCH CIRCUMSTANCES, THE EX PENDITURE INCURRED BY THE ASSESSEE TO MAINTAIN ITS BUSINESS P REMISES ITSELF IS ALLOWABLE AS BUSINESS EXPENDITURE. THEREFORE, I HOLD THAT THE BUSINESS EXPENDITURE IS AN ALLOWABLE EXPENDITURE U/ S 37(1) OF THE ACT. 6. THE SECOND ISSUE IS THE ALLOWABILITY OF THE SET OFF OF THE BUSINESS LOSS FROM THE INCOME FROM HOUSE PROPERTY. SECTION 71 OF THE I.T. ACT ALLOWS THE SET OFF OF THE LOSSES FROM ANY HEAD OTHER THAN CAPITAL GAIN FROM THE INCOME FROM ANY OTHER HE AD. THEREFORE, THE BUSINESS LOSS IS ALLOWABLE FROM THE INCOME FROM HOUSE PROPERTY. THE AO IS THEREFORE, DIRECTED TO ALLOW TH E SAME. GROUND OF APPEAL NO.1 IS ACCORDINGLY ALLOWED. 7. AS AGAINST THE DISALLOWANCE OF BROUGHT FORWARD BUSINESS LOSSES, I FIND THAT THE SAME IS NOT ALLOWA BLE AS SECTION 72 ALLOWS SET OFF OF CARRY FORWARD BUSINESS LOSS OR DEPRECIATION OR UNABSORBED DEPRECIATION ONLY FROM THE BUSINESS PROF ITS AND NOT FROM ANY OTHER HEAD. THEREFORE, I DO NOT SEE ANY RE ASON TO INTERFERE WITH THE ORDER OF THE AO AND THE CIT (A) ON THIS ISSUE. THUS, GROUND NO.1(B) IS REJECTED. ITA NO 325 OF 2018 MAYANK SHELTERS AGRO P LTD HYDERABAD. PAGE 5 OF 5 8. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOW ED. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST JANUARY, 2020. SD/- (P. MADHAVI DEVI) JUDICIAL MEMBER HYDERABAD, DATED 31 ST JANUARY, 2020. VINODAN/SPS COPY TO: 1 M/S. MAYANK SHELTERS AGRO PVT. LTD, A21 & A22, AP IE BALANAGAR, HYDERABAD, 500016 2 ITO WARD 16(3) HYDERABAD 3 CIT (A)-4, HYDERABAD 4 PR. CIT -4, HYDERABAD 5 THE DR, ITAT HYDERABAD 6 GUARD FILE BY ORDER