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

ITA 3467/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 48632 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-04-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2000-2001
• Appeal Filed On: 03-05-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SU RENDRA KUMAR
• Assessee Lawyers: S K SOMANI
• Keywords: Business income; Business expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI C BENCH BEFORE SHRI D.K.AGARWAL, JUDICIAL MEMBER & SHRI T.R.SOOD, ACCOUNTANT MEMBER I.T.A.NO.3467/MUM/2010 A.Y 2000-01 PATEL ALUMINIUM PRIVATE LIMITED, PATEL VANIKA, WESTERN EXPRESS HIGHWAY, GOREGAON (EAST), MUMBAI 400 063. PAN: AAACP 2738 F VS. INCOME TAX OFFICER 9 (2)(4), MUMBAI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI S.K.SOMANI. RESPONDENT BY : SHRI SURENDRA KUMAR, SR. DR O R D E R PER T.R.SOOD, AM: IN THIS APPEAL VARIOUS GROUNDS HAVE BEEN RAISED OU T OF WHICH GROUNDS NOS.1 & 6 WERE NOT PRESSED AND, THEREFORE, SAME ARE DISMISSED AS NOT PRESSED. THE OTHER GROUNDS ARE AS UNDER: 2. IN THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT[A] ERRED IN CONSIDERING ` `` ` .30,00,000/- [THIRTY LACS] BEING THE AMOUNT OF COMPENSATION RECEIVED FOR USE O F MACHINES AS INCOME FROM OTHER SOURCES IN PLACE OF INCOME FROM BUSINESS. 3. IN THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT[A] ERRED IN CONSIDERING ` `` ` .1,80,000/- [ONE LAC EIGHTY THOUSAND] BEING THE AMOUNT OF COMPENSATION RECEIVED FOR USE OF A PORTION OF FACTORY PREMISES AS INCOME FROM OT HER SOURCES IN PLACE OF INCOME FROM BUSINESS. 4. IN THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT[A] ERRED IN CONSIDERING THE INTEREST RECEIV ED ON SECURITY DEPOSIT WITH BSES LTD. ` `` ` .7150/- AND INTEREST ON SALES TAX REFUND ` `` ` .10185/- AND INTEREST FROM CUSTOMERS ON DELAYED PAYMENTS ` `` ` .39644/- AGGREGATING TO ` `` ` .56979/- AS INCOME FROM OTHER SOURCES IN PLACE OF INCOME FROM BUSINESS. 2 5. IN THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT[A] ERRED IN CONSIDERING ` `` ` .147622/- BEING THE REFUND RECEIVED FROM BMC OF EXCESS PROPERTY TAX PAID AND C LAIMED AS BUSINESS EXPENDITURE IN EARLIER YEARS AS INCOME FR OM OTHER SOURCES IN PLACE OF INCOME FROM BUSINESS. 2. THE LD. COUNSEL OF THE ASSESSEE FILED A COPY OF THE ORDER OF THE TRIBUNAL IN I.T.A.NO.5938/MUM/2006 IN ASSESSEES OW N CASE FOR A.Y 2003-04. HE SUBMITTED THAT ALL THE ISSUES RAISED IN THE GROUNDS OF APPEAL ARE COVERED BY THE EARLIER ORDER. THEREFORE, SAME MAY BE DECIDED ACCORDINGLY. 3. ON THE OTHER HAND, LD. DR SUPPORTED THE ORDER OF THE CIT[A]. 4. GROUND NOS.2 & 3 : AFTER HEARING BOTH THE PARTIES, WE FIND THAT THIS ISSUE WAS DECIDED BY THE TRIBUNAL VIDE PARA-16 WHICH IS AS UNDER: THE BRIEF FACTS OF THE ABOVE ISSUE ARE THAT IT WAS OBSERVED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAS DECLARED IN COME OF RS.22,61,570 WHICH INCLUDES INCOME FROM THE FOLLOWI NG SOURCES : JOB WORK RS. 10,000/- INTEREST RECEIVED RS. 16,773/- INTEREST ON INCOME TAX REFUND RS. 3,74,799/- COMPENSATION FOR USE OF MACHINERY RS.18,00,000/- COMPENSATION FOR HIRE OF PORTION OF PLANT RS. 60,0 00/- ------- ------------- TOTAL RS. 21,61,5 72/- ======== ==== THE ASSESSEE WAS ASKED TO EXPLAIN AS TO WHY THE COM PENSATION FOR USE OF MACHINERY OF RS.18,00,000/- AND FOR HIRE OF PORT ION OF PLANT OF RS.60,000/- SHOULD NOT BE ASSESSED UNDER THE HEAD INCOME FROM OTHER SOURCES. ASSESSEE VIDE LETTER DATED 27.1.2006 EXPL AINED AS UNDER:- THE ASSESSEE COMPANY HAS RECEIVED HIRE CHARGES ON MACHINERY AND RENT FROM FACTORY PREMISES. THE MACHINE WAS NOT IN USE WITH US AND WAS GIVEN ON HIRE AND THE INCOME WAS GENERATED. THE MACHINE WHICH WAS USED IN THE BUSINESS AND ASSETS OF BUSINESS WAS GIVEN ONE HIRE, THEREFORE, THE INCOME EARNED ON IT SHOULD BE TREATE D AS BUSINESS INCOME. LIKEWISE THE VACANT SPACE OF THE FACTORY P REMISES WAS GIVEN ON RENT AND THEREFORE IT SHOULD ALSO FORM PART OF B USINESS INCOME. THE ASSESSEE HAS BEEN RECEIVING THESE INCOME FOR LAST S O MANY YEARS, AND 3 THE DEPARTMENT HAS ALWAYS TREATED IT AS INCOME FROM BUSINESS AND THEREFORE IT SHOULD BE TREATED AS BUSINESS INCOME . FOLLOWING THE ABOVE, WE DECIDE GROUND NOS.2 & 3 IN FAVOUR OF THE ASSESSEE. 5. GROUND NO. 4: AFTER HEARING BOTH THE PARTIES, WE FIND THAT THI S ISSUE WAS DECIDED IN THE EARLIER YEAR VIDE PARA-17 WHICH IS AS UNDER: 17. AS REGARDS INTEREST INCOME OF RS.16,773/- AND INTEREST ON INCOME TAX REFUND RS.3,74,799/- THE PLEA OF THE ASSESSEE I S THAT THE ASSESSEE COMPANY HAD KEPT FDR OF RS.60.00 LACS WITH CANARA B ANK TO TAKE CARE OF VRS AMOUNT TO ITS WORKERS AND IT HAD KEPT S ECURITY DEPOSIT WITH ELECTRICITY BOARD. THE ASSESSEE HAS RECEIVED I NTEREST RS.16,773/-. OUT OF THE FD OF RS.60.00 LACS, RS.30.00 LACS WAS E NCASHED ON 22.3.2003 FOR PAYMENT OF VRS TO ITS WORKERS. THUS, ACCORDING TO THE ASSESSEE THE FIXED DEPOSIT WAS KEPT AS A NECESSITY TO MEET THE URGENT REQUIREMENT OF VRS AMOUNT AND AS SECURITY DEPOSIT W ITH ELECTRICITY BOARD AND HENCE, INTEREST ON THE SAID FIXED DEPOSIT IS INCIDENTAL TO ITS BUSINESS. IN THE ABSENCE OF ANY CONTRARY MATERIAL P LACED ON RECORD BY THE REVENUE AGAINST THE ABOVE STATEMENT OF FACT STA TED BY THE ASSESSEE WE ARE OF THE VIEW THAT THE ASSESSEE HAS P ROVED THE NEXUS AND HENCE, THE INTEREST RECEIVED OF RS.16,773/- ON THE FDR IS ALSO TREATED AS INCOME FROM BUSINESS. HOWEVER, IN THE AB SENCE OF ANY MATERIAL TO SHOW THE NEXUS, THE INTEREST ON INCOME TAX REFUND RS.3,74,799/- IS TREATED AS INCOME FROM OTHER SOURC ES. THE GROUND TAKEN BY THE ASSESSEE IS, THEREFORE, PARTLY ALLOWED . FOLLOWING THE SAME WE HOLD THAT INTEREST ON SECURIT Y DEPOSITS WITH BSES AND INTEREST FROM CUSTOMERS ON DELAYED PAYMENT S SHOULD BE TREATED AS INCOME FROM BUSINESS. HOWEVER, AS FAR AS INTEREST ON SALES TAX REFUND IS CONCERNED, IN THE EARLIER YEAR ALSO I NTEREST ON INCOME TAX REFUND HAS BEEN HELD TO BE INCOME FROM OTHER SOURCE S AND SINCE INTEREST FROM SALES TAX REFUND IS OF IDENTICAL NATU RE, THE SAME IS ALSO SHOULD BE TREATED AS INCOME FROM OTHER SOURCES. THE REFORE, THIS GROUND IS PARTLY ALLOWED. 6. GROUND NO.5 : AFTER HEARING BOTH THE PARTIES, WE FIND THAT ASSESSEE HAS GOT A REFUND OF ` `` ` .1,57,622/- ON ACCOUNT OF MUNICIPAL 4 TAXES WHICH WERE CLAIMED AS BUSINESS INCOME. HOWEVE R, SAME WAS TREATED AS INCOME FROM OTHER SOURCES BY THE REVENUE . IT WAS POINTED OUT THAT WHEN TAXES ARE PAID, SAME WERE CLAIMED AND ALLOWED AS BUSINESS EXPENDITURE. THEREFORE, AT THE TIME OF REF UND, SAME SHOULD BE TREATED AS BUSINESS INCOME. PRINCIPALLY THE SUBMISS ION OF THE LD. COUNSEL OF THE ASSESSEE IS CORRECT, THEREFORE, WE S ET ASIDE THE ORDER OF THE LD. CIT[A] AND REMIT THE MATTER BACK TO THE FIL E OF THE AO WITH A DIRECTION TO VERIFY WHETHER ALL THE MUNICIPAL TAXES WERE PAID AND WHETHER SAME WERE TREATED AS BUSINESS EXPENDITURE, IN THAT CASE THE REFUND SHOULD BE TREATED AS BUSINESS INCOME OTHERWI SE AO MAY DECIDE THE ISSUE IN ACCORDANCE WITH THE LAW. 7. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOW ED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 2 7/4/2011. SD/- SD/- (D.K.AGARWAL) (T.R.SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI: 27/4/2011. P/-*