NEELKANTH SYNTHETICS & CHEMICALS P. LTD, MUMBAI V. ITO 7(1)(1), MUMBAI

ITA 3430/MUM/2010

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8397 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 6 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-11-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: H
• Next Hearing Date: 06-11-2012
• Assessment Year: 1999-2000
• Appeal Filed On: 30-04-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: RAJKUMAR SITARAM SUREKHA
• Keywords: Business income; Business expenditure; Corroborative evidences

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH H, MUMBAI BEFORE SHRI I.P.BANSAL,JUDICIAL MEMBER & SHRI RAJENDRA, ACCOUNTANT MEMBER ITA NO.3430/MUM/2010 (A.Y.1999-2000) ITA NO.3431/MUM/2010(A.Y. 2001-2002) ITA NO.3432/MUM/2010(A.Y.1998-1999) ITA NO.3434/MUM/2010(A.Y.2002-2003) M/S. NEELKANTH SYNTHETICS & CHEMICALS PVT. LTD., 303, ABHAY STEEL HOUSE, 22 BARODA STREE, MASJID BUNDER, MUMBAI - 400 009 PAN: AABCN 3375P (APPELLANT) VS. THE INCOME TAX OFFICER 7(1)(1), AAYKAR BHAVAN, MK ROAD, MUMBAI - 20. (RESPONDENT) APPELLANT BY : SHRI RAJKUMAR SITARAM SUREKHA RESPONDENT BY : SHRI RAKESH RANJAN DATE OF HEARING : 06/11/2012 DATE OF PRONOUNCEMENT : 06 /11/2012 ORDER PER BENCH, ALL THESE APPEALS ARE FILED BY THE ASSESSEE. THEY ARE DIRECTED AGAINST FOUR SEPARATE ORDERS OUT OF WHICH TWO ARE DATED 01/ 12/2009 IN RESPECT OF ASSESSMENT YEARS 1998-99 AND 1999-2000 AND OTHER TWO ARE DATED 24/12/2009 IN RESPECT OF ASSESSMENT YEARS 2001-02 A ND 2002-03. THE GROUNDS OF APPEAL IN ALL THESE APPEALS ARE IDENTIC AL. FOR ASSESSMENT YEAR 1998-99 THE GROUNDS OF APPEAL READ AS UNDER: I. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LEARNED COMMISSIONER OF INCOME TAX (A) 13, MUMBAI (CIT(A)- DENYING THE CLAIM OF SOCIETY CHARGES WHILE COMPUTIN G INCOME FROM HOUSE PROPERTY AS INCOME FROM OTHER SOURCES. ERRED IN CONFIRMING THE ACTION OF AO FOR REJECTING CLAIM OF SOCIETY CHARGES AGAINST PROPERTY INCOME CONSIDER AS A INCOME FROM O THER SOURCES. ITA NO.3430/MUM/2010(A.Y.1999-2000) ITA NO.3431/MUM/2010(A.Y. 2001-2002) ITA NO.3432/MUM/2010(A.Y. 1998-1999) ITA NO.3434/MUM/2010(A.Y. 2002-2003) 2 II. THE APPELLANT PRAYS FOR APPROPRIATE RELIEF. III. THE APPELLANT CRAVES TO ADD, ALTER, DELETE OR MODIFY ANY OF THE ABOVE GROUNDS OF APPEAL AND REQUEST TO CONSIDER EACH OF T HE ABOVE GROUNDS WITHOUT PREJUDICE TO ONE ANOTHER. 2. THE ASSESSEE OWNS CERTAIN PROPERTIES. ACCORDING TO ASSESSEE THE RENTAL INCOME RECEIVED BY IT IS IN THE NATURE OF B USINESS INCOME. AS AGAINST THAT CLAIM OF THE ASSESSEE IT HAS BEEN ASSESSED AS INCOME FROM OTHER SOURCES. BY TAKING THE SAID INCOME AS INCOME FROM OTHER SOURCES, ONE OF THE EXPENSES NAMELY SOCIETY CHARGES, WHICH COMPRISES OF MUNICIPAL TAXES AND INTEREST ON ARREARS, HAS BEEN DISALLOWED. THIS DIS ALLOWANCE IS SUBJECT MATTER OF DISPUTE IN THE PRESENT APPEALS. THE DETAILS OF SOCIETY CHARGES AS GIVEN IN THE ASSESSMENT ORDERS FOR THE RELEVANT ASSESSMENT YEARS ARE AS UNDER: A.Y. 1998-99: SR. NO. PREMISES PERIOD TOTAL AMOUNT MUNICIPAL TAXES INTEREST ON ARREARS 1. 308 APR.97 TO MAR 98 231,035 32,504 156,21 7 2. 307 -DO- 286,999 42,236 183,717 3. 303 OCT 97 TO MAR 98 8,164 3,648 - 526,198 78,388 339,934 A.Y. 1999-2000: SR. NO. PREMISES PERIOD TOTAL AMOUNT MUNICIPAL TAXES INTEREST ON ARREARS 1. 308 APR.98 TO MAR 99 285,076 36,254 206,47 8 2. 307 -DO- 363,541 47,108 255,357 3. G-10 -DO- 120,311 22,312 30,466 768,928 105,674 492,281 A.Y.2001-02: NO DETAIL HAS BEEN GIVEN IN ASSESSMENT ORDER AND OR DER OF LD. CIT(A). THE DISALLOWANCE IS AN AGGREGATE SUM OF RS. 11,83,887/- . ITA NO.3430/MUM/2010(A.Y.1999-2000) ITA NO.3431/MUM/2010(A.Y. 2001-2002) ITA NO.3432/MUM/2010(A.Y. 1998-1999) ITA NO.3434/MUM/2010(A.Y. 2002-2003) 3 A.Y. 2002-03: SR. NO. PREMISES PERIOD TOTAL AMOUNT MUNICIPAL TAXES INTEREST ON ARREARS 1. 307 APR. TO JUNE,2001 159,922 13,054 127,1 23 2. 308 -DO- 125,709 10,046 101,318 3. 10G -DO- 48,345 5,977 26,596 4. 10G JULY TO SEPT.2001 50,857 5,977 29,018 5. 10G OCT. TO DEC.2001 54,360 5,977 31,561 6. 10G JAN.TO MAR.2002 57,078 5,977 34,279 496,361 47,008 349,895 3. LD. CIT(A) REFERRING TO THE LEASE AGREEMENT DATE D 26/5/1993 HAS OBSERVED THAT THESE CHARGES COULD BE ALLOWED ONLY U /S. 57(III) OF THE ACT TO THE EXTENT OF RS.9,512/- AND RS.7,812/- PER QUARTE R IN UNIT NO.307 & 308 WHICH ARE LEASED OUT TO CANARA BANK AGAINST RENT RECEIVED AS INCOME FROM OTHER SOURCES. IN THIS MANNER THE CLAIM OF THE AS SESSEE HAS BEEN PARTLY ACCEPTED BY LD. CIT(A) AND ASSESSEE HAS RAISED AFOR EMENTIONED GROUNDS . THE FACTS IN ALL THESE YEARS ARE SAME. 4. IT IS THE CASE OF THE ASSESSEE THAT FOR ASSESSME NT YEAR 2000-01 THE LD. CIT(A) HAS PASSED AN ORDER DATED 17/11/2008 HOL DING THAT SOCIETY CHARGES IS AN ALLOWABLE CLAIM SINCE THEY WERE INC URRED AGAINST THE EARNING OF RENTAL INCOME. HOWEVER, HE DIRECTED THE AO TO SATISFY HIMSELF WITH SUPPORTING EVIDENCE IN THE FORM OF CHALLANS ETC. FO R INCURRING SUCH SOCIETY CHARGES AND ONCE HAVING DONE SO, HE IS DIRECTED TO ALLOW THE CLAIM AND TO THAT EXTENT ASSESSEE WILL GET THE RELIEF. IT WAS SUBMITTED THAT FOR A.Y 2000- 01 THE AO HAS PASSED ORDER DATED 22/11/2011 ALLOWIN G THE SOCIETY CHARGES AFTER DULY VERIFYING THE CHARGES OF RS.10,67,803/- . IT IS ALSO THE CASE OF THE ASSESSEE THAT FOR ASSESSMENT YEAR 1997-98 HONBLE H IGH COURT HAS UPHELD THE ORDER OF THE TRIBUNAL VIDE WHICH IT HAS BEEN HE LD THAT THE INTEREST EXPENSES OF RS. 17,08,511/- WAS ALLOWABLE UNDER SEC TION 36(1)(III) OF THE ACT, WHICH MEANS THAT THE RENTAL INCOME WAS ACCEPTED TO BE IN THE NATURE OF ITA NO.3430/MUM/2010(A.Y.1999-2000) ITA NO.3431/MUM/2010(A.Y. 2001-2002) ITA NO.3432/MUM/2010(A.Y. 1998-1999) ITA NO.3434/MUM/2010(A.Y. 2002-2003) 4 BUSINESS INCOME. IT IS ALSO THE CASE OF THE ASSES SEE THAT FOR ASSESSMENT YEAR 2003-04 THE TRIBUNAL VIDE ITS ORDER DATED 15/2 /2011 HAS REMITTED THE MATTER BACK TO THE FILE OF AO FOR DE-NOVO CONSIDERA TION IN RESPECT TO SOCIETY CHARGES. THUS IT WAS PLEADED BY LD. A.R THAT TRIBU NAL MAY PASS THE ORDER ACCORDINGLY. 5. ON THE OTHER HAND, LD. D.R RELIED ON THE ORDERS PASSED BY LD. CIT(A). 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS IN THE LIGHT OF THE MATERIAL PLACED BEFORE US. SO FAR AS IT RELATES TO AN ISSUE RAISED BY THE ASSESSEE IN THE PRESENT APPEALS, THE FACTS ARE IDEN TICAL WITH ASSESSMENT YEAR 2003-04. AFTER ANALYZING THE FACTS THE TRIBUNAL HA S REMITTED THE MATTER BACK TO THE FILE OF AO FOR DE-NOVO CONSIDERATION. THE FACTS ARE NOT DIFFERENT FROM THAT OF ASSESSMENT YEAR 2003-04 AND THERE IS AN ORDER PASSED BY THE TRIBUNAL, THEREFORE, WE CONSIDER IT JUST AND PROPE R TO RESTORE THESE YEARS ALSO TO THE FILE OF AO WITH SIMILAR DIRECTIONS FOR DE-NOVO CONSIDERATION. FOR THE SAKE OF COMPLETENESS THE RELEVANT PORTION OF TH E ORDER OF TRIBUNAL DATED 15/2/2011 IN RESPECT OF ASSESSMENT YEAR 2003-04 IS REPRODUCED BELOW: THIS APPEAL IS FILED BY THE ASSESSEE CHALLENGING THE IMPUGNED ORDER OF THE LD. CIT (A)-13 MUMBAI DATED 1.12.2009 FOR THE A.Y. 2003-04. THE FIRST GROUND OF THE APPEAL IS IN RESPECT OF THE DISALLOWA NCE OF THE SOCIETY CHARGES. THE ASSESSEE HAS TAKEN THE FOLLOWING GROUNDS:- ERRED IN CONFIRMING THE ACTION OF THE A. 0. FOR RE JECTING CLAIM OF SOCIETY CHARGES AGAINST PROPERTY INCOME CONSIDER AS A INCOME FROM OTHER SOURCES. 2. THE FACTS WHICH REVEAL FROM THE RECORD ARE AS UNDER. THE ASSESSEECOMPANY WAS EARLIER ENGAGED IN THE BUSINESS OF HR & CR COILS AND STEELS THE ASSESSEE HAS FILED THE RETURN OF INCOME FOR THE A Y 2002-03 DECLARING TOTAL LOSS OF RS. 76,790/-. THE ASSESSEE ADMITTED THAT NO BUSINESS WAS CARRIED OUT DURING THE FINANCIAL YEAR 2002-03 R ELEVANT TO ASSESSMENT YEAR 2003-04. THE ASSESSEE HAS DECLARED THE INTERES T INCOME AS HIS BUSINESS INCOME, BUT THE A.O. TREATED THE SAME AS INCOME FRO M OTHER SOURCES AND ACCORDINGLY MADE THE ASSESSMENT ITA NO.3430/MUM/2010(A.Y.1999-2000) ITA NO.3431/MUM/2010(A.Y. 2001-2002) ITA NO.3432/MUM/2010(A.Y. 1998-1999) ITA NO.3434/MUM/2010(A.Y. 2002-2003) 5 3. THE ASSESSEE HAS CLAIMED THE SOCIETY CHARGES OF RS. 2,85,315/-. IN THE SAID AMOUNT, THE ELEMENT OF MUNICIPAL TAXES IS TO THE EXTENT OF RS.23,908/- AND INTEREST ON ARREARS IS RS.1,67,119 /-. THE A.O. HAS NOTED THAT THE ASSESSEE HAS DEBITED THE SOCIETY CHARGES IN RESPECT OF PREMISES10G AND BILLS HAVE BEEN DRAWN OFF BY THE CO-OPERATIVE SOCIETY IN WHICH NAME OF M/S. NVR TRUST IS MENTIONED. THE A.O. WAS OF THE O PINION THAT THE EXPENSES ON ACCOUNT OF SOCIETY CHARGES ARE NOT ALLO WABLE AS EXPENSES U/S.57(III) OF THE ACT AS THERE IS NO DIRECT NEXUS BETWEEN THE SAID EXPENDITURE AND EARNING OF THE INTEREST WHICH IS ASSESSED UNDER THE HEAD INCOME FROM OTHER SOURCES. THE A.O. HAS ALSO NOTED THAT THE AS SESSEE HAS ONLY MADE THE PROVISION BUT THERE IS NO PAYMENT OF THE SAME. SO F AR AS OUTSTANDING MUNICIPAL TAXES ARE CONCERNED, WHICH ARE PROVIDED B Y THE ASSESSEE, THE A.O. WAS OF THE OPINION, THAT OTHERWISE THE SAME WAS NOT ALLOWABLE U/S.43B. THE MAJOR PORTION OF THE SOCIETY CHARGES PROVIDED WAS I N RESPECT OF THE INTEREST ON ARREARS. THE A.O. HAS ALSO OBSERVED THAT THE ASS ESSEE-COMPANY HAS NOT PAID SOCIETY CHARGES FOR NUMBER OF YEARS AND HENCE THE INTEREST IS CHARGED BY THE SOCIETY ON UNPAID AMOUNT. THE A.O. MADE THE DIS ALLOWANCE TREATED THE SAME AS NOT ALLOWABLE U/S.57(III) OF THE ACT. THE A SSESSEE CHALLENGED THE DISALLOWANCE - BEFORE THE LD. CIT (A). THE LD. CIT (A) ALLOWED THE SOCIETY MAINTENANCE CHARGES TO THE EXTENT OF RS. 9,512/- AND RS. 7,282/- WHICH- WERE IN RESPECT OF THE UNIT NO.307 AND 308 LET OUT TO THE CANARA BANK, AS IT WAS THE RESPONSIBILITY OF THE ASSESSEE TO PAY THE S AME. AS NOTED BY THE LD. CIT (A), FURTHER INCREASE IN THE MAINTENANCE CHARGE S IS TO BE BORNED BY THE BANK. 4. I HAVE HEARD THE PARTIES ON THIS ISSUE. THE DI RECTOR OF THE ASSESSEE COMPANY APPEARED IN PERSON AND SUBMITTED T HAT THE OBSERVATION OF THE LD. CIT (A) ARE NOT FACTUALLY CORRECT. HE SUBMI TS THAT THE EARLIER PREMISES WERE GIVEN ON RENT BASIS TO THE CANARA BANK BUT CAN ARA BANK VACATED THE SAME IN 2001. IT IS ARGUED THAT DURING THE FINANCIA L YEAR 2002-03, ALL THE PREMISES WERE VACANT AND NOT LET OUT. HE FURTHER SU BMITTED THAT DISPUTE IS GOING ON BETWEEN THE ASSESSEE-COMPANY AND TRUSTEES OF THE TRUST. BUT TRUST HAS PURCHASED THE SAME PROPERTY AT RAHEJA CENTRE AN D GAVE SAME ON LEASE TO THE ASSESSEE-COMPANY. IT IS ARGUED THAT THOUGH T HE PREMISES ARE IN THE NAME OF THE TRUST BUT ARE IN THE OCCUPATION OF THE ASSESSEE. HE, FURTHER, SUBMITS THAT IN EARLIER YEAR, RENTAL INCOME IS DEC LARED AND AGAINST THE RENTAL INCOME THE MAINTENANCE CHARGES WERE CLAIMED. HE, TH EREFORE, PLEADED THAT THE INTEREST INCOME ALSO MAY BE ALLOWED, UNDER THE HEAD INCOME FROM HOUSE PROPERTY EVEN IF THE PREMISES ARE VACANT. I HAVE ALSO HEARD THE LD. D.R. 5. ON THE PERUSAL OF THE ORDERS OF THE AUTHORITIES BELOW, I FIND THAT THE FACTS ARE NOT CLEAR IN BOTH THE ORDERS. AS PER THE FACTS MENTIONED BY THE A.O. IN THE ASSESSMENT ORDER, I FIND THAT THE A.O. HAS DISCUSSED THIS ISSUE IN THE CONTEXT OF WHETHER THE SAME IS TO BE ALLOWED AS BUSINESS EXPENDITURE OR NOT WHEN ADMITTEDLY THE ASSESSEE IS NOT- ACTUALLY C ARRIED OUT ANY BUSINESS ACTIVITY. THE OBSERVATION OF THE LD. CIT (A) ARE VE RY VAGUE. I, THEREFORE, CONSIDER IT FIT TO RESTORE THIS ISSUE TO THE FILE O F THE A.O. TO DECIDE THE SAME DE- NOVO AFTER BRINGING ALL THE RELEVANT FACTS ON RECORD. THE A.O HAS TO ALSO EXPLAIN WHETHER THE ASSESSEE HAS CLAIMED THE SAME E XPENDITURE AS BUSINESS ITA NO.3430/MUM/2010(A.Y.1999-2000) ITA NO.3431/MUM/2010(A.Y. 2001-2002) ITA NO.3432/MUM/2010(A.Y. 1998-1999) ITA NO.3434/MUM/2010(A.Y. 2002-2003) 6 EXPENDITURE OR EXPENDITURE UNDER THE HEAD INCOME F ROM HOUSE PROPERTY. ACCORDINGLY, GROUND NO.1 IS ALLOWED FOR THE STATISTICAL PURPOSES. 7. NEEDLESS TO OBSERVE THAT AO WILL GIVE THE ASSESS EE A REASONABLE OPPORTUNITY OF HEARING IN RESPECT OF ALL THE FOUR Y EARS AND AFTER GIVING SUCH OPPORTUNITY HE WILL DECIDE THE ISSUE DE-NOVO AS PER THE DIRECTIONS GIVEN IN RESPECT OF ASSESSMENT YEAR 2003-04. WE DIRECT ACCO RDINGLY. FOR STATISTICAL PURPOSES THE APPEALS FILED BY THE ASSESSEE SHALL BE CONSIDERED TO BE ALLOWED IN THE MANNER AFORESAID. 8. IN THE RESULT, ALL THESE APPEALS ARE TREATED AS ALLOWED FOR STATISTICAL PURPOSES IN THE MANNER AFORESAID. ORDER PRONOUNCED IN THE OPEN COURT ON TH E 6 TH DAY OF NOV. 2012 SD/- SD/- (RAJENDRA ) (I.P.BANSAL) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 6 TH NOV. 2012. COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CITY CONCERNED 4. THE CIT(A)- CONCERNED 5. THE D.R H BENCH. (TRUE COPY) BY ORDER ASST. REGISTRAR, I TAT, MUMBAI BENCHES MUMBAI. VM. ITA NO.3430/MUM/2010(A.Y.1999-2000) ITA NO.3431/MUM/2010(A.Y. 2001-2002) ITA NO.3432/MUM/2010(A.Y. 1998-1999) ITA NO.3434/MUM/2010(A.Y. 2002-2003) 7 DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 06/11/2012 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 06/11/2012 SR.PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7. FILE SENT TO THE BENCH CLERK SR.PS/PS 8 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER