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

ITA 3433/MUM/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 8501 (ITAT-MUMBAI)
• Duration Of Justice: 9 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-02-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2003-2004
• Appeal Filed On: 30-04-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MALTHI R SRIDHARAN
• Assessee Lawyers: KSHITIJ SUREKA
• Keywords: Business income; Depreciation; Business expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH: MUMBAI BEFORE SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO.3433/MUM/2010 (ASSESSMENT YEAR: 2003-04) M/S. NEELKANTH SYNTHETICS AND CHEMICALS PVT. LTD., 303, ABHAY STEEL HOUSE, 22 BARODA STREET, MASJID BUNDER, MUMBAI -400 009 ASSESSEE VS ITO-9(3)(2), ROOM NO.227, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI -400 020 ....REVENUE PAN: AABCN 3375 P ASSESSEE BY: SHRI KSHITIJ SUREKA REVENUE BY: SMT MALTHI R. SRIDHARAN O R D E R THIS APPEAL IS FILED BY THE ASSESSEE CHALLENGING TH E IMPUGNED ORDER OF THE LD. CIT (A)-13 MUMBAI DATED 1.12.2009 FOR TH E A.Y. 2003-04. THE FIRST GROUND OF THE APPEAL IS IN RESPECT OF THE DIS ALLOWANCE OF THE SOCIETY CHARGES. THE ASSESSEE HAS TAKEN THE FOLLOWING GROU NDS:- ERRED IN CONFIRMING THE ACTION OF THE A.O. FOR REJ ECTING CLAIM OF SOCIETY CHARGES AGAINST PROPERTY INCOME CONSIDER AS A INCOME FROM OTHER SOURCES. ITA 3433/M/2010 M/S. NEELKANTH SYNTHETICS AND CHEMICALS PVT. LTD 2 2. THE FACTS WHICH REVEAL FROM THE RECORD ARE AS UN DER. THE ASSESSEE- COMPANY WAS EARLIER ENGAGED IN THE BUSINESS OF HR & CR COILS AND STEELS. THE ASSESSEE HAS FILED THE RETURN OF INCOM E FOR THE A.Y. 2002-03 DECLARING TOTAL LOSS OF ` 76,790/-. THE ASSESSEE ADMITTED THAT NO BUSINESS WAS CARRIED OUT DURING THE FINANCIAL YEAR 2002-03 RELEVANT TO ASSESSMENT YEAR 2003-04. THE ASSESSEE HAS DECLARED THE INTEREST INCOME AS HIS BUSINESS INCOME, BUT THE A.O. TREATED THE SAME AS INCOME FROM OTHER SOURCES AND ACCORDINGLY MADE THE ASSESSM ENT. 3. THE ASSESSEE HAS CLAIMED THE SOCIETY CHARGES OF ` 2,85,315/-. IN THE SAID AMOUNT, THE ELEMENT OF MUNICIPAL TAXES IS TO THE EXTENT OF ` 23,908/- AND INTEREST ON ARREARS IS ` 1,67,119/-. THE A.O. HAS NOTED THAT THE ASSESSEE HAS DEBITED THE SOCIETY CHARGES I N RESPECT OF PREMISES 10G AND BILLS HAVE BEEN DRAWN OFF BY THE CO-OPERATI VE SOCIETY IN WHICH NAME OF M/S. NVR TRUST IS MENTIONED. THE A.O. WAS OF THE OPINION THAT THE EXPENSES ON ACCOUNT OF SOCIETY CHARGES ARE NOT ALLOWABLE 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 AS SESSED UNDER THE HEAD INCOME FROM OTHER SOURCES. THE A.O. HAS ALSO NOT ED THAT THE ASSESSEE HAS ONLY MADE THE PROVISION BUT THERE IS NO PAYMENT OF THE SAME. SO FAR AS OUTSTANDING MUNICIPAL TAXES ARE CONCERNED, WHICH ARE PROVIDED BY THE ASSESSEE, THE A.O. WAS OF THE OPINION, THAT OTHERWI SE THE SAME WAS NOT ALLOWABLE U/S.43B. THE MAJOR PORTION OF THE SOCIET Y CHARGES PROVIDED WAS IN RESPECT OF THE INTEREST ON ARREARS. THE A.O . HAS ALSO OBSERVED THAT THE ASSESSEE-COMPANY HAS NOT PAID SOCIETY CHAR GES FOR NUMBER OF YEARS AND HENCE THE INTEREST IS CHARGED BY THE SOCI ETY ON UNPAID AMOUNT. THE A.O. MADE THE DISALLOWANCE TREATED THE SAME AS NOT ALLOWABLE U/S.57(III) OF THE ACT. THE ASSESSEE CHA LLENGED THE DISALLOWANCE BEFORE THE LD. CIT (A). THE LD. CIT (A) ALLOWED TH E SOCIETY MAINTENANCE ITA 3433/M/2010 M/S. NEELKANTH SYNTHETICS AND CHEMICALS PVT. LTD 3 CHARGES TO THE EXTENT OF ` 9,512/- AND ` 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 SAME. AS NOTED BY THE LD. CIT (A), FURTHER INCREASE IN THE MAINTENANCE CHARGES IS TO BE BORNED BY THE BANK. 4. I HAVE HEARD THE PARTIES ON THIS ISSUE. THE DIR ECTOR OF THE ASSESSEE COMPANY APPEARED IN PERSON AND SUBMITTED THAT THE O BSERVATION OF THE LD. CIT (A) ARE NOT FACTUALLY CORRECT. HE SUBMITS T HAT 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 FIN ANCIAL YEAR 2002-03, ALL THE PREMISES WERE VACANT AND NOT LET OUT. HE FURTH ER SUBMITTED THAT DISPUTE IS GOING ON BETWEEN THE ASSESSEE-COMPANY AN D TRUSTEES OF THE TRUST. BUT TRUST HAS PURCHASED THE SAME PROPERTY A T RAHEJA CENTRE AND GAVE SAME ON LEASE TO THE ASSESSEE-COMPANY. IT IS ARGUED THAT THOUGH THE PREMISES ARE IN THE NAME OF THE TRUST BUT ARE I N THE OCCUPATION OF THE ASSESSEE. HE, FURTHER, SUBMITS THAT IN EARLIER YEAR, RENTAL INCOME IS DECLARED AND AGAINST THE RENTAL INCOME THE MAINTENA NCE CHARGES WERE CLAIMED. HE, THEREFORE, PLEADED THAT THE INTEREST INCOME ALSO MAY BE ALLOWED, UNDER THE HEAD INCOME FROM HOUSE PROPERT Y 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 A LLOWED AS BUSINESS EXPENDITURE OR NOT WHEN ADMITTEDLY THE ASSESSEE IS NOT ACTUALLY CARRIED OUT ANY BUSINESS ACTIVITY. THE OBSERVATION OF THE LD. CIT (A) ARE VERY VAGUE. I, THEREFORE, CONSIDER IT FIT TO RESTORE TH IS ISSUE TO THE FILE OF THE A.O. TO DECIDE THE SAME DE NOVO AFTER BRINGING ALL THE RELEVANT FACTS ON ITA 3433/M/2010 M/S. NEELKANTH SYNTHETICS AND CHEMICALS PVT. LTD 4 RECORD. THE A.O. HAS TO ALSO EXPLAIN WHETHER THE A SSESSEE HAS CLAIMED THE SAME EXPENDITURE AS BUSINESS EXPENDITURE OR EXP ENDITURE UNDER THE HEAD INCOME FROM HOUSE PROPERTY. ACCORDINGLY, GR OUND NO.1 IS ALLOWED FOR THE STATISTICAL PURPOSES. 6. GROUND NO.2 IS IN RESPECT OF DISALLOWANCE OF THE DEPRECIATION. THE ASSESSEE HAS CLAIMED THE DEPRECIATION OF ` 1,93,912/- ON THE OFFICE PREMISES, FURNITURE AND FIXTURE, MOTOR-CAR AND COMP UTER. 7. THE A.O. MADE DISALLOWANCE ON THE REASON THAT TH E ASSESSEE HAS NOT CARRIED OUT ANY BUSINESS. THE DIRECTOR APPEARI NG BEFORE US CONCEDED THAT FOR LAST MANY YEARS THE ASSESSEE IS NOT CARRYI NG OUT ANY BUSINESS ACTIVITIES AND EARLIER TWO PREMISES, OUT OF THREE W ERE LET OUT TO THE CANARA BANK. IN MY OPINION, THE A.O. HAS RIGHTLY M ADE THE DISALLOWANCE OF THE BUSINESS DEPRECIATION CLAIMED BY THE ASSESSE E AS ADMITTEDLY NOTHING IS THERE ON THE RECORD TO SHOW THAT THE ASS ETS WERE USED FOR THE PURPOSE OF THE ASSESSEES BUSINESS. I, ACCORDINGLY , CONFIRM THE SAID DISALLOWANCE AND GROUND NO.2 IS DISMISSED. 8. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOW ED FOR THE STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 1 5TH FEBRUARY 2011. SD/- ( R.S. PADVEKAR ) JUDICIAL MEMBER MUMBAI, DATE: 15TH FEBRUARY 2011 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) 13, MUMBAI. ITA 3433/M/2010 M/S. NEELKANTH SYNTHETICS AND CHEMICALS PVT. LTD 5 4) THE CIT 7, MUMBAI. 5) THE D.R. SMC BENCH, MUMBAI. BY ORDER / / TRUE COPY / / ASSTT. REGISTRAR I.T.A.T., MUMBAI *CHAVAN ITA 3433/M/2010 M/S. NEELKANTH SYNTHETICS AND CHEMICALS PVT. LTD 6 SR.N. EPISODE OF AN ORDER DATE INITIALS CONCERNED 1 DRAFT DICTATED ON 09.02.2011 SR.PS 2 DRAFT PLACED BEFORE AUTHOR 09.02.2011 SR.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 FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER