ITO 2(3)(4), MUMBAI V. WALCHAND PEOPLE FIRST LTD, MUMBAI

ITA 3527/MUM/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 4194 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 8 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-02-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 09-11-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 06-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: V G GINDE
• Keywords: Business income; Depreciation; Transfer pricing; Business expenditure; International transaction; Earning of tax free income; Wholly owned subsidiary; Assessment record; Commercial expediency
• Section: 143(3); 14A; 56

Judgement Text

G IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ./ I.T.A. NO. 2543 /MUM/2013 ( / ASSESSMENT YEAR : 2009-10) WALCHAND PEOPLEFIRST LTD., 1, CONSTRUCTION HOUSE, 5, WALCHAND HIRACHAND MARG, BALLARD ESTATE, MUMBAI 400 001 / V. THE INCOME TAX OFFICER 2(3)(4), AAYAKAR BHAVAN, 5 TH FLOOR, M.K. ROAD, CHURCHGATE, MUMBAI 400 020. ./ PAN :AAACW 0364 J ( / APPELLANT ) .. ( / RESPONDENT ) ./ I.T.A. NO. 3527 /MUM/2013 ( / ASSESSMENT YEAR : 2009-10) THE INCOME TAX OFFICER 2(3)(4), AAYAKAR BHAVAN, 5 TH FLOOR, M.K. ROAD, CHURCHGATE, MUMBAI 400 020. / V. WALCHAND PEOPLEFIRST LTD., 1, CONSTRUCTION HOUSE, 5, WALCHAND HIRACHAND MARG, BALLARD ESTATE, MUMBAI 400 001 ./ PAN : AAACW 0364 J ( / APPELLANT ) .. ( / RESPONDENT ) CO NO.156/MUM/2014 (ARISING FROM APPEAL NO ITA 3527/MUM/2013) ( / ASSESSMENT YEAR : 2009-10) WALCHAND PEOPLEFIRST LTD., 1, CONSTRUCTION HOUSE, 5, WALCHAND HIRACHAND MARG, BALLARD ESTATE, / V. THE INCOME TAX OFFICER 2(3)(4), AAYAKAR BHAVAN, 5 TH FLOOR, M.K. ROAD, ITA 2543/M/13 & ITA NO. 3527/M/13 & C.O. 156/MUM/2014 2 MUMBAI 400 001. CHURCHGATE, MUMBAI 400 020. ./ PAN : AAACW 0364 J ( / APPELLANT ) .. ( / RESPONDENT ) ASSESSEE BY SHRI V .G. GINDE DEPARTMENT BY SHRI RAJESH OJHA / DATE OF HEARING : 9-11-2015 / DATE OF PRONOUNCEMENT : 04-02-2016 / O R D E R PER RAMIT KOCHAR, ACCOUNTANT MEMBER : THESE TWO APPEALS FILED BY THE ASSESSEE COMPANY AND THE REVENUE AND ALSO CROSS OBJECTION FILED BY THE ASSESSEE COMPANY ARISING OUT OF THE REVENUE APPEAL ARE DIRECTED AGAINST THE ORDERS OF THE LEAR NED COMMISSIONER OF INCOME TAX(APPEALS)-6, MUMBAI (HEREINAFTER CALLED THE CIT (A)) DATED 05-02-2013 PERTAINING TO THE ASSESSMENT YEAR 2009-10. THESE TW O APPEALS AND THE C.O. WERE HEARD TOGETHER AND ARE DISPOSED OF BY THIS COM MON ORDER FOR THE SAKE OF CONVENIENCE AND BREVITY. 2. FIRST, WE SHALL TAKE UP ASSESSEE COMPANYS APPEA L IN ITA NO. 2543/MUM/2013 WHEREIN THE FOLLOWING GROUNDS HAVE BE EN RAISED BY THE ASSESSEE COMPANY IN THE MEMO OF APPEAL FILED WITH T HE TRIBUNAL:- BEING AGGRIEVED BY THE ORDER DATED 05.02.2013 PASS ED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-6, MUMBAI [CIT (A)] U/S. 250 OF THE INCOME-TAX ACT, 1961 [' ACT'], YOUR APPELLANT PREFER S THIS APPEAL, AMONG OTHERS, ON THE FOLLOWING GROUNDS OF APPEAL, EA CH OF WHICH IS WITHOUT PREJUDICE TO, AND INDEPENDENT OF, THE OTHER: 1. DISALLOWANCE OF BUSINESS EXPENDITURE: 1.1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, AND ALSO IN LAW, THE LEARNED CIT(A) ) ERRED IN PARTIALLY CONFIR MING THE DISALLOWANCE ITA 2543/M/13 & ITA NO. 3527/M/13 & C.O. 156/MUM/2014 3 MADE BY THE LEARNED AO OF 74.82% OF ALL THE EXPENSES (INCLUDING DEPRECIATION) DEBITED TO THE PROFIT & LOSS ACCOUNT IN TH E RATIO OF NON- BUSINESS RECEIPTS TO THE TOTAL RECEIPTS CREDITED TO THE PRO FIT & LOSS ACCOUNT OF THE APPELLANT. 1.2 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, AND ALSO IN LAW, THE LEARNED CIT(A) FAILED TO APPRECIATE AND OUGH T TO HAVE HELD THAT THE AO HAVING ACCEPTED THAT THE APPELLANT CARRIED ON TH E BUSINESS DURING THE YEAR, THERE WAS NO MERIT IN DISALLOWING TH E EXPENSES ON PROPORTIONATE BASIS MERELY BECAUSE THE ACTIVITY WAS N EGLIGIBLE. 1.3 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, AND ALSO IN LAW, THE LEARNED CIT(A) FAILED TO APPRECIATE THAT THE APPELLANT INDIRECTLY CARRIED ON THE TRAINING BUSINESS IN A DIFFERENT MODE THROUGH ITS SUBSIDIARY COMPANY AND, THEREFORE, THE DISALLOWANCE OF EXPENSES WAS NOT JUSTIFIED. 1.4 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, AND ALSO IN LAW, THE LEARNED CIT(A) FAILED TO APPRECIATE THAT EVEN OTHERWISE THE EXPENSES REQUIRED TO MAINTAIN CORPORATE STATUS OF THE A PPELLANT OUGHT TO HAVE BEEN ALLOWED. IN VIEW OF ABOVE, YOUR APPELLANT PRAYS THAT THE DISALLO WANCE SUSTAINED BY THE LEARNED CIT(A) BE DELETED. 3. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS IN THE MEMO OF APPEAL FILED WITH THE TRIBUNAL:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT (A) HAS ERRED IN ALLOWING RELIEF TO THE ASSESSEE TO THE EXTENT IMPUGNED IN THE GROUNDS ENUMERATED BELOW: 1. THE ORDER OF THE CIT (A) IS OPPOSED TO LAW AND FA CTS OF THE CASE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING ADDITION OF NOTION AL RENTAL INCOME OF RS.50, 10,563/- HOLDING THAT THE PROPERTY HAS NOT BEEN ACTUALLY LET OUT WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAD ALLOW ED ITS SUBSIDIARY COMPANY TO USE THE PREMISES. 3. (A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING ADDITION RENTAL INC OME OF RS. 1,08,08,885/- RECEIVED FROM MS. WALCHAND & CO. PVT LTD., HOLDING THAT THE SAID COMPANY HAS FURTHER LET OUT THE PROPERTY TO VA RIOUS PARTIES AND THE RENTAL INCOME HAS BEEN ASSESSED IN THE HANDS OF MS. WALCHAND & CO PVT. LTD., THEREBY IGNORING THE PROVISION OF S EC 23(1)(A) OF THE I.T. ACT. ITA 2543/M/13 & ITA NO. 3527/M/13 & C.O. 156/MUM/2014 4 4. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING, THE DECISION OF THE CIT (A) MAY BE SET ASIDE AND THAT OF THE AO RESTORED. 4. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E COMPANYS ACTIVITIES DURING THE YEAR ARE TO INVEST, ACQUIRE, HOLD AND EX CHANGE SHARES, DEBENTURES, MUTUAL FUNDS AND BONDS. THE ASSESSEE COMPANY ALSO EARNS INCOME FROM RENTAL PROPERTIES. THE LEARNED ASSESSING OFFICER(H EREINAFTER CALLED THE AO ) OBSERVED THAT THE ASSESSEE COMPANY HAS EARNED THE F OLLOWING INCOMES DURING THE FINANCIAL YEAR UNDER CONSIDERATION:- I) DIVIDEND RS. 9,00,919/- II) INTEREST INCOME RS. 19,47,436/- III) PROFIT FROM SALE OF INVESTMENT RS. 34,356/- IV) INCOME FROM PROPERTY RS. 68,41,067/- V) MISC. INCOME RS. 3,30,741/- VI) INTEREST ON I.T. REFUND RS. 19,94,073/- VII) PRIOR PERIOD INCOME RS. 9,49,219/- VIII) PROVISION FOR EXPENSES W/BACK RS. 1,26,199/- IX) PROFIT ON SALE OF ASSETS RS. 1,84,852/- IN THE PROFIT AND LOSS ACCOUNT, THE ASSESSEE COMPAN Y HAS SHOWN NET PROFIT OF RS. 29,20,531/- AFTER CLAIMING THE FOLLOWING EXPENS ES AGAINST THE INCOME EARNED:- I) EMPLOYEES REMUNERATION & OTHER EXPENSES RS. 76,19, 053/- II) LOSS ON SALE OF INVESTMENTS RS. 3,59,065/- III) INTEREST RS. 4,49,207/- IV) DEPRECIATION, AMORTIZATION AND IMPAIRMENT RS. 19,60 ,006/- AS PER THE COMPUTATION OF TOTAL INCOME FILED BY THE ASSESSEE COMPANY WITH THE RETURN OF INCOME, THE ASSESSEE COMPANY HAS CLAI MED BUSINESS LOSS OF RS. 41,07,788/- AND DEPRECIATION LOSS OF RS. 20,30,368/ - AND SET OFF THE LOSSES AGAINST THE INCOME FROM HOUSE PROPERTY OF RS. 46,78 ,892/-. THE A.O. ASKED THE ASSESSEE COMPANY TO FURNISH THE ACTIVITY-WISE P ROFIT AND LOSS ACCOUNT. IN REPLY, THE ASSESSEE COMPANY SUBMITTED THAT IT IS NO T PRACTICAL TO ALLOCATE EXPENSES TO ALL THE THREE TYPES OF INCOME/ACTIVITIE S(INVESTMENT, RENTAL AND OTHER INCOME) AND HENCE IT IS DIFFICULT TO PREPARE ACTIVITY WISE PROFIT AND LOSS ITA 2543/M/13 & ITA NO. 3527/M/13 & C.O. 156/MUM/2014 5 ACCOUNT. THE ASSESSEE COMPANY SUBMITTED THAT MOST OF THE EXPENSES ARE COMMON IN NATURE AND THE DIRECT EXPENSES ATTRIBUTAB LE TO PROPERTY INCOME ARE IDENTIFIED AND DISALLOWED IN THE COMPUTATION OF INCOME FILED BY THE ASSESSEE COMPANY WITH RETURN OF INCOME FILED WITH T HE REVENUE. SIMILARLY, DISALLOWANCE OF THE EXPENDITURE WAS OFFERED U/S 14A OF THE ACT WHICH TAKES CARE OF INDIRECT EXPENSES ATTRIBUTABLE TO EXEMPT IN COME AS PER THE STATUTORY RULE. THE ASSESSEE COMPANY SUBMITTED THAT THE ASSES SEE COMPANY WAS THE HOLDING COMPANY OF THE THEN UNIFIED WALCHAND GROUP OF COMPANIES, WITH THRUST ON INVESTMENT AND FINANCING ACTIVITY. WITH T HE SPLIT OF WALCHAND GROUP OVER THE YEARS, THE ASSESSEE COMPANY FOCUSED MAINLY ON FINANCING BUSINESS, INCLUDING LEASING , HIRE PURCHASE, INTER-CORPORATE FINANCING AND INVESTMENT ACTIVITY. THE ASSESSEE COMPANY IN OCTOBER, 2003 DIV ERSIFIED INTO DALE CARNEGIE TRAINING BUSINESS(IN SHORT DC-BUSINESS )AS A MAJOR SEGMENT AND THE FINANCING BUSINESS TOOK BACK SEAT , DUE TO THE THEN PREVAILING DIFFICULT MARKET CONDITIONS AND THE ASSESSEE COMPANY GAVE UP ITS NBFC STATUS IN OCTOBER 2006. THE ASSESSEE COMPANY ALSO SUBMITTED T HAT UP TO THE ASSESSMENT YEAR 2008-09, THE ASSESSEES COMPANY BUS INESS CONSISTED OF TRAINING BUSINESS AND FINANCING BUSINESS. THE TRAI NING BUSINESS WAS TRANSFERRED TO THE SUBSIDIARY COMPANY IN THE FINANC IAL YEAR 2007-08, HOWEVER, THAT DID NOT HAVE ANY IMPACT ON THE FINANCING BUSIN ESS. THE ASSESSEE COMPANY HAVING APPOINTED MS. PALLAVI JHA AS MANAGI NG DIRECTOR AND MR. SANJAY JHA AS THE EXECUTIVE DIRECTOR OF THE ASSESSE E COMPANY FOR A TERM OF THREE YEARS W.E.F. 27 TH JULY, 2007 ON A MONTHLY SALARY OF RS.2,00,000 AND RS.1,80,000/- RESPECTIVELY WHICH WAS DULY APPROVED BY THE BOARD OF DIRECTORS AND THE SHAREHOLDERS OF THE ASSESSEE COMPANY. WHEN THE AFORE-STATED APPOINTMENTS WERE MADE , THE ASSESSEE COMPANY WAS I TSELF CARRYING ON THE BUSINESS OF DC-BUSINESS. AFTER OBTAINING THE SHARE HOLDERS APPROVAL, THE ASSESSEE COMPANY TRANSFERRED THE DC-BUSINESS TO A N EWLY FORMED SUBSIDIARY COMPANY VIZ. WALCHAND TALENTFIRST LTD.(IN SHORT WT FL) ON A GOING CONCERN BASIS W.E.F 24.10.2007 AND POST TRANSFER OF THE ASS ESSEEE COMPANY BUSINESS, ITA 2543/M/13 & ITA NO. 3527/M/13 & C.O. 156/MUM/2014 6 THE ASSESSEE COMPANY BECAME THE HOLDING COMPANY OF WTFL. THE ASSESSEE COMPANY SUBMITTED THAT BOTH THESE AFORE-STATED DIR ECTORS WERE THE PROMOTERS OF THE DC-BUSINESS WHICH WAS INITIALLY ES TABLISHED BY THE ASSESSEE COMPANY AND LATER TRANSFERRED TO WTFL, A 100% SUBSI DIARY COMPANY FOR CERTAIN STRATEGIC BUSINESS OBJECTIVES. AT THAT TIME , THE ASSESSEE COMPANY HAD A VERY AMBITIOUS BUSINESS PLAN OF SETTING UP FINISH ING SCHOOL IN BANGALORE AS PART OF ITS TRAINING BUSINESS WHICH NEEDED SUBSTANT IAL FUNDS AND IN ORDER TO PROCURE INVESTMENTS FOR THIS VENTURE, PRIVATE EQUIT Y WAS CONSIDERED AS THE MOST FAVOURED SOURCE OF FINANCE. FOR THIS PURPOSES, THE ASSESSEE COMPANY TOOK STRATEGIC DECISION TO TRANSFER THE DC-BUSINESS TO WTFL. HOWEVER, THE PROMOTERS CONTINUED TO SUPPORT THIS DC-BUSINESS WHI CH IS NOW CARRIED BY WTFL. HOWEVER, DUE TO CERTAIN UNFORESEEN CIRCUMSTAN CES, THE FINISHING SCHOOLS AMBITIOUS PROJECT IN BANGALORE COULD NOT M ATERIALIZE AND THE ENTIRE PURPOSE OF TRANSFERRING THE DC-BUSINESS TO THE SUBS IDIARY DID NOT YIELD THE EXPECTED RESULTS. ACCORDINGLY THE ASSESSEE COMPANY REVERSED ITS EARLIER DECISION AND MERGED WTFL WITH ITSELF W.E.F. 1-4-200 9 AND THUS BROUGHT BACK THE DC-BUSINESS INTO ITS OWN FOLD AS WAS BEING CARR IED ON PRIOR TO ITS TRANSFER TO WTFL FROM 24/10/2007 TO 31/03/2009 WHILE DURING THIS INTERVENING PERIOD THE BUSINESS WAS INDIRECTLY CARRIED ON BY TH E ASSESSEE COMPANY THROUGH THE SUBSIDIARY COMPANY WTFL FOR THE COMPELL ING BUSINESS REASONS. THE ASSESSEE COMPANY SUBMITTED THAT IN THE PREVIOUS YEAR 2008-09 RELEVANT TO THE ASSESSMENT YEAR 2009-10, THE DC-BUSINESS WAS CARRIED ON BY THE WTFL AND CONSEQUENT TO THIS BUSINESS RESTRUCTURING, THE DIRECTORS REMUNERATION WAS SUBSTANTIALLY REDUCED IN APRIL, 20 08 AND AFORESAID TWO DIRECTORS WERE ALSO APPOINTED AS THE WORKING DIRECT ORS IN WTFL, FROM WHERE ALSO THEY DREW REMUNERATION, APART FROM SOME REMUNE RATION FROM THE ASSESSEE COMPANY. THE REMUNERATION PAID TO THESE D IRECTORS DURING THE FINANCIAL YEAR 2008-09 FROM BOTH THESE COMPANIES WA S AS UNDER:- ITA 2543/M/13 & ITA NO. 3527/M/13 & C.O. 156/MUM/2014 7 NAME OF THE DIRECTOR DESIGNATION AMOUNT(RS. IN LACS) ASSESSEE COMPANY AMOUNT(RS. IN LACS) WTFL TOTAL (RS IN LACS) MS. PALLAVI JHA MANAGING DIRECTOR 14.59 21.58 36.12 MR. SANJAY JHA EXECUTIVE DIRECTOR 14.46 21.53 35.99 29.05 43.06 72.11 THE ASSESSEE COMPANY SUBMITTED THAT THE AGGREGATE R EMUNERATION DRAWN BY THESE TWO DIRECTORS FROM THE ASSESSEE COMPANY AND F ROM WTFL WAS ALMOST THE SAME AS IT WAS DRAWN DURING THE PRECEDING YEAR. THE ASSESSEE COMPANY SUBMITTED THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE COMPANY CARRIED ON THE FINANCING ACTIVITY BESIDES ACTING AS THE GROUP HOLDING COMPANY. THE ASSESSEE COMPANY HAS EARNED INTEREST INCOME OF RS. 19,47,436/- ON THE INTER-CORPORATE DEPOSITS AND OTHER LOANS, WHICH HAS ALWAYS BEEN ASSESSED AS BUSINESS INCOME IN THE PAST SEVERAL YEARS. IT WAS S UBMITTED THAT THE REMUNERATION PAID TO THESE DIRECTORS WAS FOR THE PU RPOSE OF BUSINESS, THE EXPENSES SHOULD BE ALLOWED DESPITE THE FACT THAT TH E DC-BUSINESS WAS TRANSFERRED TO THE SUBSIDIARY COMPANY WTFL. THE ASS ESSEE COMPANY SUBMITTED THAT THE ASSESSEE COMPANY HAS DEEP INTER EST IN ITS SUBSIDIARY COMPANY. IN SUPPORT, THE ASSESSEE COMPANY RELIED ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF S.A. BUILDERS LTD. V. CIT (2007) 288 ITR 1 (SC). IT WAS FURTHER SUBMITTED THAT THE ASSESSEE COMPANY IS A PUBLIC LIMITED COMPANY LISTED ON THE BOMBAY STOCK EXCHANGE, THE DI RECTORS HAD TO PERFORM CERTAIN MANAGEMENT FUNCTIONS UNDER VARIOUS STATUTES /REGULATIONS, LISTING REGULATIONS UNDER THE SEBI ACT AND THE MANDATORY CO RPORATE GOVERNANCE PROVISIONS ETC, EVEN THOUGH THE DC-BUSINESS WAS TRA NSFERRED TO THE SUBSIDIARY COMPANY. THE ASSESSEE COMPANY SUBMITTED THAT THE EXPENDITURE WERE INCURRED FOR THE PURPOSES OF THE BUSINESS THAT IS CARRIED ON BY THE ASSESSEE COMPANY. THE ASSESSEE COMPANY RELIED UPON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF RAJENDRA PRASAD MOODY 115 ITR 519(SC). ITA 2543/M/13 & ITA NO. 3527/M/13 & C.O. 156/MUM/2014 8 WITHOUT PREJUDICE, THE ASSESSEE COMPANY SUBMITTED T HAT DESPITE LULL IN THE BUSINESS OR NO BUSINESS ACTIVITY, STILL THE EXPENSE S THAT ARE NECESSARILY TO BE INCURRED IN ORDER TO MAINTAIN CORPORATE ENTITY ARE TO BE ALLOWED AS BUSINESS EXPENDITURE THE A.O. AFTER CONSIDERING THE SUBMISSI ONS OF THE ASSESSEE COMPANY HELD THAT THE ASSESSEE COMPANY DESPITE THE FACT THAT THE DC- BUSINESS WAS TRANSFERRED TO THE SUBSIDIARY COMPANY WTFL HAS NOT CORRELATED AND PROVIDED THE BREAKUP OF EXPENSES INCURRED AGAIN ST INCOME TAXABLE UNDER VARIOUS HEADS AND THE ASSESSEE COMPANY HAS JUSTIFIE D THE CLAIM OF EXPENSES INCURRED TO EARN INCOME TAXABLE UNDER VARIOUS HEADS . ON PERUSAL OF THE AUDITED ANNUAL ACCOUNTS OF THE ASSESSEE COMPANY , T HE A.O. OBSERVED THAT THE ASSESSEE COMPANY HAS EARNED INCOME TAXABLE UNDE R VARIOUS HEADS OF INCOME AS UNDER:- SR NO. PARTICULARS OF INCOME AMOUNT OF INCOME PERCENTAGE BUSINESS INCOME 1 INTEREST ON LOAN AND INTER-CORPORATE DEPOSITS 19,47,437/- 2 MISC. INCOME 3,30,741 3 PRIOR PERIOD INCOME 9,49,219/- 4 PROVISION FOR EXPENSES WRITTEN BACK 1,26,199/- TOTAL 33,53,596/- 25.18% 1 INCOME FROM PROPERTY 68,41,067/- INCOME FROM HOUSE PROPERTY 68,41,067/- 51.40% 1 PROFIT FROM SALE OF INVESTMENT 34,356/- 2 PROFIT FROM SALE OF ASSETS 1,84,851/- CAPITAL GAIN 2,19,207 1.65% 1 DIVIDENDS 9,00,919/- 2 INTEREST ON INCOME TAX REFUND 19,94,073 INCOME FROM OTHER SOURCES 28,94,992 21.75% THE A.O. HELD THAT THE RENTAL INCOME IS TO BE TAXED UNDER THE HEAD INCOME FROM HOUSE PROPERTY AND DEDUCTION AS PER SECTION 2 4 OF THE ACT IS ALLOWABLE. SIMILARLY, THE DIVIDEND INCOMES, INTEREST ON INCOME TAX REFUND ARE TO BE TAXED UNDER THE HEAD INCOME FROM OTHER SOURCES WHILE THE PROFIT ON SALE OF ASSETS ITA 2543/M/13 & ITA NO. 3527/M/13 & C.O. 156/MUM/2014 9 AND PROFIT FROM SALE OF INVESTMENT ARE IN THE NATUR E OF CAPITAL GAIN TAXABLE UNDER THE HEAD CAPITAL GAIN. ONLY THE INTEREST ON LOAN AND INTER-CORPORATE DEPOSIT, MISCELLANEOUS INCOME, PRIOR PERIOD INCOME AND PROVISION FOR EXPENSES WRITTEN BACK ARE TO BE TAXED UNDER THE HEA D BUSINESS INCOME WHICH SHOWS THAT THE ASSESSEE COMPANY IS NOT ACTIVE LY ENGAGED IN ANY BUSINESS ACTIVITY. IT WAS ALSO OBSERVED BY THE A.O . THAT FROM THE ASSESSEE COMPANYS PREMISES, WTFL (A RELATED PARTY) IS CARRY ING ON ITS BUSINESS AND HAVE SHOWN GROSS RECEIPTS OF NEARLY ABOUT RS. 12 CR ORES. THE A.O. FURTHER OBSERVED THAT THE ASSESSEE COMPANY HAS CLAIMED ALMO ST ALL EXPENSES UNDER THE HEAD BUSINESS INCOME EXCEPT DISALLOWING EXPENSE S RELATED TO PROPERTY OF RS. 1,18,422/- AND DISALLOWANCE OF EXPENSES OF RS. 1,15,621/- IN RELATION TO THE EXEMPT INCOME. THE ASSESSEE COMPANY HAS CLAIME D EXPENSES OF RS. 1,01,53,268/- UNDER THE HEAD BUSINESS , OUT OF TOTA L EXPENSES OF RS. 1,03,87,331/- AND THE SAME WORKS OUT TO 97.74% OF E XPENSES. SIMILARLY, THE ASSESSEE COMPANY HAS EARNED GROSS BUSINESS INCOME O F RS. 33,53,596/- WHICH WORKS OUT TO 25.18% OF TOTAL RECEIPTS. THE A. O. HELD THAT THE ASSESSEE COMPANY HAS OPTED TO CLAIM ALL EXPENSES IN RELATION TO VARIOUS HEADS OF INCOME UNDER THE HEAD BUSINESS ONLY WHICH HAS RESUL TED INTO HUGE AND DISPROPORTIONATE CLAIM OF EXPENSES UNDER THE HEAD B USINESS. THE ASSESSEE COMPANY HAS DISALLOWED A SUM OF RS. 1,18,422/- TOWA RDS PROPERTY EXPENSES AND CLAIMED A SUM OF RS. 20,05,239/- AS DEDUCTION U /S 24 OF THE ACT. ACCORDINGLY, THE A.O. CONCLUDED THAT THE ASSESSEE C OMPANYS CLAIM OF EXPENSES UNDER THE HEAD BUSINESS IS EXORBITANT, EXC ESSIVE AND UNJUSTIFIABLE AND THE EXPENSES WERE ALLOWED AMOUNTING TO RS. 26,1 5,530/- (25.18%) AGAINST THE BUSINESS INCOME OF RS. 33,53,596/- (25. 18%) AND THE REMAINING EXPENSES AMOUNTING TO RS. 77,71,800/- WERE DISALLOW ED AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE COMPANY VIDE ASSES SMENT ORDER DATED 29.12.2011 PASSED BY THE AO U/S 143(3) OF THE ACT. ITA 2543/M/13 & ITA NO. 3527/M/13 & C.O. 156/MUM/2014 10 5.AGGRIEVED BY THE ASSESSMENT ORDERS U/S 143(3) OF THE ACT DATED 29.12.2011 PASSED BY THE A.O., THE ASSESSEE COMPANY PREFERRED AN APPEAL BEFORE THE CIT(A). 6. BEFORE THE CIT(A), THE ASSESSEE COMPANY SUBMITTE D THAT THE A.O. HAS ACCEPTED THAT DURING THE RELEVANT YEAR THE ASSESSEE COMPANY HAS CARRIED ON BUSINESS THOUGH THE ACTIVITY WAS NOT SUBSTANTIAL AN D SIMILAR ISSUE HAD COME UP IN THE CASE OF THE ASSOCIATE COMPANY OF THE ASSE SSEE COMPANY M/S WALCHAND & CO. PVT. LTD. FOR THE ASSESSMENT YEAR 20 04-05 WHEREBY THE A.O. HAS MADE SIMILAR DISALLOWANCE OF EXPENSES PROPORTIO NATELY AND THE CIT(A) VIDE HIS ORDER DATED 22-12-2008 REJECTED THE A.O.S STAND AND ALLOWED THE EXPENSES EXCEPT DISALLOWANCES U/S 14A OF THE ACT AN D THE REVENUE DID NOT FILE THE SECOND APPEAL AND THUS ACCEPTED THE DECISI ON OF THE CIT(A). THE ASSESSEE COMPANY SUBMITTED THAT IT GAVE THE DETAILS OF THE BUSINESS BEING CARRIED OUT BY IT AND THE REMUNERATION PAID TO THE DIRECTORS WAS FOR THE PURPOSE OF BUSINESS. IN SUPPORT, THE ASSESSEE RELI ED UPON THE DECISION OF HONBLE APEX COURT IN THE CASE OF S.A. BUILDERS VS. CIT, 288 ITR 1 (SC). THE ASSESSEE COMPANY FURTHER SUBMITTED THAT THE ASSESSE E COMPANY IS CONTINUING DOING THE BUSINESS ACTIVITY AND HAS NOT CEASED TO D O BUSINESS UPON TRANSFER OF DC BUSINESS TO WTFL BY REFERRING TO VARIOUS JUDG MENTS. THE ASSESSEE COMPANY SUBMITTED THAT THE ASSESSEE COMPANY HAD ALR EADY DISALLOWED RS. 40,01,283/- AND 74.82% OF THE SAME I.E. RS. 29,93,7 59/- IS A DOUBLE DISALLOWANCE. THE CIT(A) AFTER CONSIDERING THE SUB MISSIONS MADE BY THE ASSESSEE COMPANY OBSERVED THAT THE ASSESSEE COMPAN Y HAS TRANSFERRED ITS DC-BUSINESS TO WTFL , ITS SUBSIDIARY IN OCTOBER, 20 07 AND THE BUSINESS ACTIVITY OF THE ASSESSEE COMPANY DURING THE YEAR W AS PRACTICALLY NEGLIGIBLE AND WAS LIMITED TO EARNING OF INTEREST INCOME ON IN TER-CORPORATE DEPOSIT WHICH HAS BEEN ASSESSED BY THE A.O. AS THE BUSINESS INCOME OF THE ASSESSEE COMPANY. FOR COMPUTING THE BUSINESS INCOME, THE EX PENDITURE WHOLLY AND EXCLUSIVELY INCURRED FOR THE PURPOSE OF BUSINESS IS ALLOWABLE AND MAJORITY OF ITA 2543/M/13 & ITA NO. 3527/M/13 & C.O. 156/MUM/2014 11 THE EXPENSES OF THE ASSESSEE COMPANY CANNOT BE TREA TED AS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE BUSINESS. A CCORDINGLY, THE CIT(A) HELD THAT THE ASSESSMENT ORDER PASSED U/S 143(3) OF THE ACT BY THE A.O. IS FOUND TO BE EXTREMELY REASONABLE AND VALID AND THE ACTION OF THE AO WAS CONFIRMED BY THE CIT(A) VIDE ORDERS DATED 05.02.2013. REGARDI NG THE ASSESSEE COMPANYS CONTENTION THAT IT HAS ITSELF DISALLOWED RS. 40,01,283/- AND 74.82% OF THE SAME I.E. RS. 29,93,759/- IS DOUBLE D ISALLOWANCE IS FOUND TO BE VALID FOR WHICH THE CIT(A) DIRECTED THE A.O. TO VE RIFY THE ASSESSMENT RECORD AND DELETE THE DOUBLE DISALLOWANCE VIDE ORDERS DATE D 05.02.2013. 7. AGGRIEVED BY THE ORDER DATED 05.02.2013 PASSED B Y THE CIT(A), THE ASSESSEE COMPANY IS IN APPEAL BEFORE THE TRIBUNAL. 8. THE LD. COUNSEL FOR THE ASSESSEE COMPANY SUBMIT TED THAT THE ASSESSEE COMPANY IS CARRYING ON THE BUSINESS WHICH IS CONTIN UING , ALTHOUGH NOW THE BUSINESS OF FINANCING IS MEAGER. THE LD. COUNSEL R EITERATED THE SUBMISSIONS AS MADE BEFORE THE AUTHORITIES BELOW WHICH ARE NOT REPEATED FOR THE SAKE OF BREVITY. THE LD. COUNSEL FOR THE ASSESSEE COMPANY S UBMITTED THAT THE A.O. HAS ALLOWED BUSINESS EXPENSES TO THE EXTENT OF 25.1 8% BASED UPON THE PROPORTION OF THE BUSINESS INCOME EARNED BY THE ASS ESSEE COMPANY IN COMPARISON TO THE TOTAL INCOME. THE LD. COUNSEL FO R THE ASSESSEE COMPANY DREW OUR ATTENTION TO THE ORDERS OF THE A.O. INTO T HE MANNER IN WHICH THE AO HAS APPORTIONED THE EXPENSES AND THE INCOME AS UNDE R:- SR NO. PARTICULARS OF INCOME AMOUNT OF INCOME PERCENTAGE BUSINESS INCOME 1 INTEREST ON LOAN AND INTER-CORPORATE DEPOSITS 19,47,437/- 2 MISC. INCOME 3,30,741 3 PRIOR PERIOD INCOME 9,49,219/- 4 PROVISION FOR EXPENSES WRITTEN BACK 1,26,199/- ITA 2543/M/13 & ITA NO. 3527/M/13 & C.O. 156/MUM/2014 12 TOTAL 33,53,596/- 25.18% 1 INCOME FROM PROPERTY 68,41,067/- INCOME FROM HOUSE PROPERTY 68,41,067/- 51.40% 1 PROFIT FROM SALE OF INVESTMENT 34,356/- 2 PROFIT FROM SALE OF ASSETS 1,84,851/- CAPITAL GAIN 2,19,207 1.65% 1 DIVIDENDS 9,00,919/- 2 INTEREST ON INCOME TAX REFUND 19,94,073 INCOME FROM OTHER SOURCES 28,94,992 21.75% SR. NO. PARTICULARS AMOUNT (RS) PERCENTAGE 1 TOTAL RECEIPTS 1,33,08,862/- - 2 BUSINESS RECEIPTS 33,53,596/- 25.18% 3 TOTAL EXPENSES 1,03,87,331/- 4 PROPORTIONATE ALLOWABLE BUSINESS EXPENSES 26,15,530/- 25.18% 5 DISALLOWANCE OF EXPENSES(4-3) 77,71,800/- 74.82% THE LD. COUNSEL ALSO DREW OUR ATTENTION TO THE FACT THAT THE SALARY EXPENSES DURING THE IMPUGNED ASSESSMENT YEAR WAS TO THE TUNE OF RS. 31.86 LACS WHILE IN THE IMMEDIATELY PRECEDING YEAR, THE SAME WAS RS. 365.88 LACS. THE LD. COUNSEL SUBMITTED THAT THE DC-BUSINESS WAS TRANSFER RED TO THE NEW SUBSIDIARY COMPANY WTFL AND HENCE THE EMPLOYEES HAV E BEEN SHIFTED TO THE SAID COMPANY AND SALARY MAINLY CONSTITUTED OF TWO D IRECTORS MS. PALLAVI JHA AND MR. SANJAY JHA, WHO WERE CONTINUED TO RENDER TH EIR SERVICES TO THE ASSESSEE COMPANY AS THE ASSESSEE COMPANY IS A LISTE D COMPANY AND SEVERAL FUNCTIONS HAVE TO BE PERFORMED UNDER VARIOUS STATUT ES/REGULATIONS, WHILE THEY WERE GETTING RS. 72.11 LACS IN AGGREGATE , OUT OF WHICH RS. 43.06 LACS HAS BEEN PAID BY WTF WHILE RS. 29.05 LACS WAS PAID BY T HE ASSESSEE COMPANY . THE TOTAL SALARY PAID TO DIRECTORS IS SAME AS IN TH E PRECEDING YEAR BUT DUE TO TRANSFER OF DC-BUSINESS, THE SALARY HAS BEEN TRANSF ERRED TO SUBSIDIARY COMPANY WTFL. THUS, THE ASSESSEE COMPANY CONTENDED THAT THESE EXPENSES SHOULD BE ALLOWED AS THE ASSESSEE COMPANY IS STILL CONTINUING THE BUSINESS AND BEING A LISTED COMPANY, IT HAS TO DO SEVERAL RE GULATORY AND CORPORATE ITA 2543/M/13 & ITA NO. 3527/M/13 & C.O. 156/MUM/2014 13 COMPLIANCES AND THE MANDATORY CORPORATE GOVERNANCE PROVISIONS ETC. THE LD. COUNSEL SUBMITTED THAT CONTROLLING THE SUBSIDIARY C OMPANYS FUNCTIONS IS THE MOST IMPORTANT ROLE FOR THE DIRECTORS OF THE COMPAN Y AND THOUGH THE DC- BUSINESS WAS TRANSFERRED, IT HAS NO IMPACT ON THE A SSESSEES CORPORATE ENTITY, AS A HOLDING COMPANY AND ITS EXISTENCE DID CONTINUE NOTWITHSTANDING THE TRANSFER OF THE DC BUSINESS. THERE IS NO DISPUTE BY THE A.O. THAT THE BUSINESS IS CONTINUING. THE ASSESSEE COMPANY RELIED UPON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF S A BUILDERS LIMITED(S UPRA) AND SUBMITTED THAT THE RATIO OF THE SAID DECISION IS DIRECTLY APPLICAB LE TO THE CASE OF THE ASSESSEE COMPANY AS THE ASSESSEE COMPANY HAS DEEP INTEREST I N THE SUBSIDIARY COMPANY AND INVESTMENTS ARE MADE BASED ON COMMERCIA L EXPEDIENCY. ACCORDINGLY, THE LD. COUNSEL FOR THE ASSESSEE COMPA NY PRAYED THAT THE EXPENSES SHOULD BE ALLOWED AS THE ASSESSEE COMPANY IS CARRYING ON ITS BUSINESS. 9. THE LD. D.R., ON THE OTHER HAND, SUBMITTED THAT THE ASSESSEE COMPANY IS NOT CARRYING ON ANY BUSINESS AND BUSINESS IS BEI NG CARRIED ON BY THE SUBSIDIARY COMPANY AS THE PREMISES ARE SAME AND THE EMPLOYEES MUST ALSO BE SAME. THE ASSESSEE COMPANY HAS EARNED MEAGER INC OME OF RS. 33.53 LACS AND THE A.O. HAS RIGHTLY DISALLOWED THE EXPENSES PR OPORTIONATELY. 10. IN THE REJOINDER, THE LD. COUNSEL FOR THE ASSES SEE DREW OUR ATTENTION TO THE ASSESSEE COMPANYS PAPER BOOK FILED WITH THE T RIBUNAL PAGE 112 & 113 WHEREIN THE LIST OF THE EMPLOYEES OF THE ASSESSEE C OMPANY AND OF WTFL WERE GIVEN , TO SHOW THAT THE EMPLOYEES ARE DIFFERENT FO R BOTH THE ASSESSEE COMPANY AND WTFL. 11. WE HAVE CONSIDERED THE RIVAL CONTENTION AND ALS O PERUSED THE MATERIAL AVAILABLE ON RECORD. WE HAVE OBSERVED THAT THE ASSE SSEE COMPANY WAS EARLIER CARRYING ON THE BUSINESS OF TRAINING AND FINANCING WHILE THE BUSINESS OF ITA 2543/M/13 & ITA NO. 3527/M/13 & C.O. 156/MUM/2014 14 TRAINING WAS TRANSFERRED TO THE SUBSIDIARY COMPANY NAMELY WTFL W.E.F. 24.10.2007 , WHICH WAS LATER RE-TRANSFERRED TO THE ASSESSEE COMPANY W.E.F 01- 04-2009 . THE EMPLOYEES OF THE ASSESSEE COMPANY WE RE ALSO SHIFTED AND THE BUSINESS WAS ALSO SHIFTED TO THE SUBSIDIARY COMPANY WTFL BUT THE ASSESSEE COMPANY CONTINUED CARRYING ON THE BUSINESS OF FINAN CING. THE AO HAS ACCEPTED THAT THE ASSESSEE COMPANY IS CARRYING ON B USINESS DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 2009- 10. THE ASSESSEE COMPANY HAS VOLUNTARILY DISALLOWED THE EXPENSES WHI CH ARE DIRECTLY RELATABLE TO INCOME FROM HOUSE PROPERTY AND ALSO EXEMPT INCOM E U/S 14A OF THE ACT. THE EMPLOYEES HAVE ALSO BEEN SHIFTED TO THE NEW COM PANY AND THE SALARY EXPENSES HAVE ALSO COME DOWN TO THE TUNE OF RS. 31. 86 LACS FOR THE YEAR ENDING 31-03-2009, AGAINST RS. 365.88 LACS FOR THE YEAR ENDING 31-3-2008. WE HAVE OBSERVED THAT THE ASSESSEE COMPANY IS A LIS TED COMPANY AND THE ASSESSEE COMPANY HAD TO PERFORM CERTAIN CORPORATE , REGULATORY , MANAGEMENT AND COMPLIANCE FUNCTIONS UNDER VARIOUS S TATUTES/REGULATIONS LIKE COMPANIES ACT, LISTING REGULATIONS UNDER THE S EBI ACT , STOCK EXCHANGE COMPLIANCES AND THE MANDATORY CORPORATE GOVERNANCE PROVISIONS ETC. FOR WHICH THE SERVICES OF THE STAFF IS RETAINED AND FOR DOING OTHER BUSINESS WHICH IS CARRIED ON BY THE ASSESSEE COMPANY. THE ASSESSE E COMPANY HAS STATED TO HAVE INVESTED IN THE SUBSIDIARY COMPANY WTFL KEEPIN G IN VIEW THE COMMERCIAL EXPEDIENCY. THUS, IT CANNOT BE SAID THAT THE ASSESSEE COMPANY IS NOT ENGAGED IN CARRYING ON THE BUSINESS. IT HAS VOL UNTARILY DISALLOWED EXPENSES DIRECTLY RELATABLE TO THE PROPERTY INCOME AND EXEMPT INCOME U/S 14A OF THE ACT . THE AO HAS DISALLOWED THE EXPENSES IN PROPORTION TO VARIOUS STREAMS OF INCOME EARNED BY THE ASSESSEE COMPANY CO NSIDERING THE EXPENSES AS COMMON EXPENSES. IN OUR CONSIDERED VIEW , THE E XPENSES CANNOT BE DISALLOWED IN THE MANNER AS WAS DONE BY THE AO UNLE SS THE AO BRING ON RECORD COGENT MATERIAL AND EVIDENCE TO SUBSTANTIATE THAT THE EXPENSES CLAIMED BY THE ASSESSEE COMPANY ARE NOT ATTRIBUTABL E TO THE BUSINESS CARRIED ON BY THE ASSESSEE COMPANY AND THE DISALLOWANCE CAR RIED ON BY THE ASSESSEE ITA 2543/M/13 & ITA NO. 3527/M/13 & C.O. 156/MUM/2014 15 COMPANY ARE NOT CORRECT . THE APPEAL OF THE ASSESSE E COMPANY TO THIS EXTENT IS ACCEPTED AND ALLOWED AND WE ORDER DELETION OF AD DITION OF RS.77,71,800/- AS MADE BY THE AO AND CONFIRMED BY THE CIT(A). WE O RDER ACCORDINGLY. 12. IN THE RESULT, APPEAL OF THE ASSESSEE COMPANY I S ALLOWED. ITA NO. 3527/MUM/2013 (REVENUES APPEAL) 13 THE BRIEF FACTS RELATING TO THE ISSUE INVOLVED I N THIS APPEAL ARE THAT THE A.O. ON PERUSAL OF THE SCHEDULE ACCOUNTING POLI CIES AND NOTES FORMING PART OF THE ACCOUNTS FOR THE YEAR ENDED 31-03-2009 OBSER VED THAT NOTE NO. 4(D)(XIX) MENTIONED THAT THE PREMISES WAS GIVEN FOR USE TO WTFL WITHOUT CHARGING RENT FOR NEXT FEW YEARS. THE ASSESSEE COM PANY WAS ASKED TO EXPLAIN AS TO WHY NO RENT WAS CHARGED FROM WTFL . THE ASSES SE COMPANY SUBMITTED THAT WTFL IS A WHOLLY OWNED SUBSIDIARY COMPANY OF T HE ASSESSEE COMPANY AND THE ASSESSEE COMPANY DID NOT PROVIDE AN EAR MAR KED AREA TO THIS SUBSIDIARY COMPANY. THE ASSESSEE COMPANY HAS ALLOW ED THE SUBSIDIARY COMPANY TO SHARE COMMON OFFICE FACILITIES/INFRASTRU CTURE FOR WHICH NO SERVICE CHARGES WERE CHARGED OUT OF COMMERCIAL EXPEDIENCY B Y THE ASSESSEE COMPANY FROM WTFL AS THE SAME WAS AT NASCENT STAGE OF ITS O PERATIONS. IT WAS OBSERVED BY THE A.O. THAT THE ASSESSEE COMPANY HAS OCCUPIED THE AREA OF 4343 SQ. FT. FOR ITS OWN BUSINESS AND THE SUBSIDIAR Y COMPANY IN THE BUILDING NAMELY CONSTRUCTION HOUSE AT 1 ST FLOOR. THE A.O. REJECTED THE CONTENTION OF THE ASSESSEE COMPANY BY REFERRING TO SECTION 22 OF THE ACT AND HELD THAT ANY PORTION OF THE PROPERTY LET OUT TO ANYONE , THEN SA ID PROPERTY IS CHARGEABLE TO TAX UNDER THE INCOME TAX ACT,1961(HEREINAFTER CALLE D THE ACT) IN THE ASSESSEE COMPANY 'S CASE, THE ASSESSEE COMPANY HAS LET OUT THE PREMISES TO SUBSIDIARY COMPANY WITHOUT CHARGING ANY RENT, THERE FORE SECTION 22 OF ACT GETS ATTRACTED IN ASSESSEE COMPANY'S CASE. THE A.O. OBSERVED THAT THE ASSESSEE COMPANY IS NOT ACTIVELY ENGAGED IN ANY BUS INESS ACTIVITY AND WTFL ITA 2543/M/13 & ITA NO. 3527/M/13 & C.O. 156/MUM/2014 16 IS ACTIVELY ENGAGED IN THE TRAINING BUSINESS. THE A SSESSEE COMPANY SUBMITTED THAT IT DID NOT PROVIDE ANY EARMARKED AREA TO WTFL. THE A.O. ALSO REFERRED TO SECTION 23(1) OF THE ACT WHICH PROVIDES THAT FOR TH E PURPOSE OF SECTION 22 OF THE ACT, THE ANNUAL VALUE OF ANY PROPERTY SHALL BE DEEMED TO BE THE SUM FOR WHICH THE PROPERTY MIGHT REASONABLY BE EXPECTED TO BE LET FROM YEAR TO YEAR. THE ASSESSEE COMPANY HAS NOT FURNISHED THE DETAILS OF AREA ALLOTTED TO WTFL FOR ITS BUSINESS ACTIVITY BY STATING THAT NO EAR MA RKED AREA HAS BEEN PROVIDED. THE A.O. OBSERVED THAT THE SUBSIDIARY COMPANY IS AC TIVELY ENGAGED IN BUSINESS ACTIVITY OF PROVIDING TRAINING WHEREAS THE ASSESSEE COMPANY IS NOT ACTIVELY ENGAGED IN ANY BUSINESS ACTIVITY OTHER THA N INVESTMENT ACTIVITY AND EARNING MISCELLANEOUS INCOME. THE SUMMARY OF THE FI NANCIAL ACTIVITY OF THE ASSESSEE COMPANY AND THE SUBSIDIARY COMPANY AS PER THEIR FINANCIAL IS AS UNDER:- SR. NO. NAME OF THE COMPANY GROSS INCOME (IN LACS) SALARY EXPENSES (IN LACS) TOTAL EXPENSES (IN LACS) 1 M/S WALCHAND PEOPLEFIRST LTD. 133.08 31.86 103.87 2 M/S WALCHAND TALENTFIRST LTD. 1213.51 602.06 1540.84 3 TOTAL 1346.59 633.92 1644.71 SINCE THE ASSESSEE COMPANY HAS NOT PROVIDED THE INF ORMATION ABOUT THE AREA PROVIDED AND AVAILABLE TO WTFL, THE A.O. HAS TAKEN THE AREA OCCUPIED BASED ON THE AVERAGE OF PERCENTAGE OF GROSS INCOME, SALAR Y EXPENSES AND TOTAL EXPENSES AS BELOW: SR.NO. NAME OF THE COMPANY GROSS INCOME IN % SALARY EXPENSES IN % TOTAL EXPENSES % AVERAGE% 1 M/S WALCHAND PEOPLEFIRST LTD. 9.88 5.02 6.31 7.07 2 M/S WALCHAND TALENTFIRST LTD. 90.12 94.98 93.69 92.93 BASED UPON THE ABOVE, 7,07% OF AREA FOR 4343.40 SQU ARE FEET WORKS OUT TO 307.07 SQUARE FEET AND 92.93% WORKS OUT TO 4036.33 SQUARE FEET WHEREBY THE ITA 2543/M/13 & ITA NO. 3527/M/13 & C.O. 156/MUM/2014 17 A.O. HELD THAT WTFL HAS OCCUPIED 4036.33 SQ. FT. OF CONSTRUCTION BUILDING, 1 ST FLOOR. THE A.O. ACCORDINGLY WORKED OUT THE DEEMED RENTAL INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY AMOUNTING TO RS . 71,57,947/- BASED ON THE AVERAGE RENTAL RATES ON WHICH SIMILAR PREMISES WERE GIVEN ON RENT IN THE BUILDING CONSTRUCTION HOUSE AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE COMPANY. THE A.O. HAS ALLOWED STANDARD DE DUCTION OF 30% U/S 24 OF THE ACT AND THE TOTAL ADDITION OF RS. 50,10,563/ - WAS MADE VIDE ASSESSMENT ORDERS DATED 29.12.2011 PASSED U/S 143(3 ) OF THE ACT. 14. AGGRIEVED BY THE ASSESSMENT ORDERS DATED 29.12. 2011 PASSED BY THE AO U/S 143(3) OF THE ACT, THE ASSESSEE COMPANY CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). 15. BEFORE THE CIT(A), THE ASSESSEE COMPANY SUBMITT ED THAT IT OCCUPIES FIRST FLOOR PREMISES AT CONSTRUCTION HOUSE FOR ITS BUSI NESS SINCE MANY DECADES AND THE AREA OCCUPIED BY THE ASSESSEE COMPANY IS 43 43 SQ.FT. WHERE ITS REGISTERED OFFICE IS SITUATED. THE ASSESSEE COMPANY SUBMITTED THAT WTFL WAS NOT PROVIDED WITH ANY EARMARKED AREA WITHIN THE OFF ICE PREMISES OCCUPIED BY THE ASSESSEE COMPANY, BUT WAS ONLY ALLOWED TO USE C OMMON OFFICE/INFRASTRUCTURE FACILITY AND THERE WAS THUS N O LETTING OUT OF ANY PREMISES PER-SE BY THE ASSESSEE COMPANY AND THE ENTIRE PREMI SES WERE ALWAYS IN THE OCCUPATION AND POSSESSION OF THE ASSESSEE COMPANY. THE ASSESSEE COMPANY FURTHER SUBMITTED THAT 'THE ANNUAL VALUE' OF A HOUS E PROPERTY U/S 23 OF THE ACT IS DETERMINED ON THE BASIS OF THE SUM FOR WHICH THE PROPERTY MIGHT REASONABLY BE EXPECTED TO LET FROM YEAR TO YEAR AND THE AO ERRED IN NOT APPRECIATING THIS VITAL AND FUNDAMENTAL DIFFERENCE BETWEEN LETTING OF PREMISES PER-SE AND SHARING OF COMMON OFFICE FACILITIES BY T WO OR MORE PERSONS. THE ASSESSEE COMPANY FURTHER SUBMITTED THAT THE AO ALSO ERRED IN TAKING THE AVERAGE RENT RECEIVED BY THE ASSESSEE COMPANY FROM OTHER PREMISES IN THE SAME BUILDING WITHOUT APPRECIATING THAT THOSE PREMI SES WERE LET OUT TO THE ITA 2543/M/13 & ITA NO. 3527/M/13 & C.O. 156/MUM/2014 18 CONCERNED PARTIES ENJOYING EXCLUSIVE POSSESSION. IT WAS SUBMITTED THAT ASSESSMENT OF NOTIONAL RENT OF RS. 50,10,563/- U/S 22 OF THE ACT IS WHOLLY ILLEGAL AND REQUIRES TO BE DELETED. THE ASSESSEE CO MPANY FURTHER SUBMITTED THAT NO CONSIDERATION WAS CHARGED TO WTFL FOR USE O F THE OFFICE PREMISES, BECAUSE IT WAS AT THE NASCENT STAGE OF ITS BUSINESS . IT IS THE CARDINAL PRINCIPLE OF INCOME-TAX THAT TAX IS TO BE LEVIED ON INCOME TH AT HAS BEEN ACTUALLY EARNED BY THE TAXPAYER AND NOT ON WHAT THE TAXPAYER COULD HAVE EARNED. THERE IS NO PROVISION IN LAW NOR IS IT PERMISSIBLE FOR THE DEPA RTMENT TO TAX NOTIONAL/ALLEGED INCOME, WHICH ADMITTEDLY HAS NOT B EEN EARNED BY A TAXPAYER, ON THE GROUND THAT THE TAXPAYER COULD HAV E, ALTHOUGH IN FACT IT HAS NOT, EARNED SUCH INCOME. THE ASSESSEE COMPANY RELIE D ON THE DECISION OF HONBLE SUPREME COURT IN THE CASES OF CIT V. A RAMA N & CO. [1968) 67 ITR 11 AND CIT V. CALCUTTA DISCOUNT CO. LTD. [1973) 91 ITR 8. THE ASSESSEE COMPANY PARTICULARLY REFERRED TO THE DECISION OF HO NBLE SUPREME COURT IN THE CASE OF A. RAMAN & CO. (SUPRA) WHEREIN IT HAS BEEN HELD THAT BUT THE LAW DOES NOT OBLIGE A TRADER TO MAKE THE MAXIMUM PROFIT THAT HE CAN OUT OF HIS TRADING TRANSACTIONS. INCOME WHICH ACCRUES TO A TRA DER IS TAXABLE IN HIS HANDS: INCOME WHICH HE COULD HAVE, BUT HAS NOT EARN ED, IS NOT MADE TAXABLE AS INCOME ACCRUED TO HIM THEREFORE, THE ASSESSEE C OMPANY CONTENDED THAT THE AO WAS NOT JUSTIFIED IN ASSESSING NOTIONAL INCO ME, I.E. RENT IN THE HANDS OF THE ASSESSEE COMPANY. THE CIT(A) AFTER CONSIDERIN G THE SUBMISSION OF THE ASSESSEE COMPANY AND THE ASSESSMENT ORDER OBSERVED THAT THE ASSESSEE COMPANY HAS NOT LET OUT THE PROPERTY TO ITS WHOLLY OWN SUBSIDIARY COMPANY BUT HAS ALLOWED ITS PREMISES TO BE USED BY THE SUBS IDIARY COMPANY. WHEN THE PROPERTY HAS NOT BEEN LET OUT, THE QUESTION OF NOTI ONAL RENT, DOES NOT ARISE. FURTHER, THE ASSESSEE COMPANY SHOULD HAVE CHARGED C ERTAIN AMOUNT FOR ALLOWING ITS INFRASTRUCTURE TO BE USED BY THE SUBSI DIARY COMPANY AS BOTH THE COMPANIES ARE SEPARATE AND DISTINCT ENTITIES. BUT A S THE ASSESSEE COMPANY HAS NOT CHARGED ANY AMOUNT FROM ITS SUBSIDIARY COMP ANY THE NOTIONAL INCOME CANNOT BE ASSESSED AS THERE IS NO CONCEPT OF NOTIONAL INCOME UNDER ITA 2543/M/13 & ITA NO. 3527/M/13 & C.O. 156/MUM/2014 19 ANY OTHER HEAD OF INCOME BARRING INCOME FROM HOUSE PROPERTY. THE CIT(A) HELD THAT THE SUBSIDIARY COMPANY MERGED WITH THE AS SESSEE COMPANY ON 1ST APRIL 2009 I.E. IMMEDIATELY AFTER THE END OF THE PR EVIOUS YEAR. THE CIT(A) HELD THAT IT IS FOR THE ASSESSEE COMPANY TO DECIDE HOW I T WOULD CONDUCT ITS BUSINESS AND A.O CAN QUESTION THE MANNER OF CONDUCT ING ITS BUSINESS ONLY WHERE THERE ARE SPECIFIC PROVISIONS EMPOWERING HIM TO DO SO, LIKE AS PER SECTION 40A(2) OF THE ACT RELATING TO CLAIM OF EXPE NDITURE TO THE RELATED PARTIES OR NON-ARMS LENGTH INTERNATIONAL TRANSACTION ETC. THE CIT(A) ACCORDINGLY HELD THE A.O.S ACTION TO ESTIMATE THE NOTIONAL RENT AS INVALID AND DELETED THE ADDITIONS OF RS.50,10,563/- MADE BY THE CIT(A) VIDE ORDERS DATED 05.02.2013. 16.AGGRIEVED BY THE ORDERS DATED 05.02.2013 OF THE CIT(A), THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 17. THE LD. D.R. SUBMITTED THAT THERE IS A COMPLEX CALLED CONSTRUCTION HOUSE IN WHICH THE ASSESSEE COMPANY IS HAVING ITS OWN OFFICE. THE LD. D.R. SUBMITTED THAT THE ASSESSEE COMPANY HAS ALLOWED ITS SUBSIDIARY COMPANY TO UTILIZE ITS OFFICE AND THE ANNUAL LETTING VALUE HAS TO BE BROUGHT TO TAX U/S 22 & 23 OF THE ACT. THE LD. D.R. RELIED UPON THE ORDE RS OF THE A.O.. THE LD. D.R. SUBMITTED THAT THE ASSESSEE COMPANYS SUBSIDIARY CO MPANY WTFL IS CARRYING ON THE BUSINESS OF TRAINING AND SUBSTANTIAL TURNOVE R IS ACHIEVED BY WTFL. THE ASSESSEE COMPANY HAS TRANSFERRED ITS TRAINING B USINESS TO THE SAID SUBSIDIARY COMPANY WTFL AND MAJOR PORTION OF THE OF FICE IS BEING USED BY THE SAID SUBSIDIARY COMPANY AND THE EMPLOYEES WERE ALSO SHIFTED (AS PER DETAILS OF WHICH ARE PLACED IN PAPER BOOK PAGE NO. 112 & 11 3). THE LD. DR ALSO SUBMITTED THAT THE A.O. HAS RIGHTLY BROUGHT TO TAX THE ANNUAL LETTING VALUE OF THE SAID PROPERTY. THE LD. DR SUBMITTED THAT THE AO HAS CALCULATED RENT BASED ON THE PREVAILING RENTAL IN THE SAME BUILDING GIVEN ON RENT BY THE ASSOCIATES OF THE ASSESSEE COMPANY. ITA 2543/M/13 & ITA NO. 3527/M/13 & C.O. 156/MUM/2014 20 18. THE LD. COUNSEL FOR THE ASSESSEE COMPANY SUBMIT TED THAT THERE IS NO LET OUT OF THE AREA TO THE SUBSIDIARY COMPANY. THE ASS ESSEE COMPANY HAS ONLY ALLOWED THE SUBSIDIARY COMPANY TO USE THE OFFICE SP ACE FOR WHICH NO SERVICE CHARGES HAVE BEEN CHARGED FROM THE SUBSIDIARY COMPA NY, THENCE, THE SAME CANNOT BE BROUGHT TO TAX AS THERE IS NO PROVISION U NDER THE ACT TO BRING THE SAME TO CHARGEABILITY TO TAX UNDER THE ACT. THE LD. COUNSEL OF THE ASSESSEE COMPANY REITERATED ITS SUBMISSIONS AS MADE BEFORE T HE AUTHORITIES BELOW WHICH ARE NOT REPEATED FOR THE SAKE OF BREVITY. 19. WE HAVE HEARD THE RIVAL CONTENTIONS AND ALSO PE RUSED THE MATERIAL AVAILABLE ON RECORD. WE HAVE OBSERVED THAT THE ASS ESSEE COMPANY WAS CARRYING ON THE BUSINESS OF FINANCING DURING THE IM PUGNED ASSESSMENT YEAR, APART FROM HAVING INCOME FROM HOUSE PROPERTY, DIVID END INCOME, INCOME FROM SALE OF INVESTMENT AND MISCELLANEOUS INCOME. THE A SSESSEE COMPANY HAS TRANSFERRED ITS BUSINESS OF TRAINING TO THE SUBSIDI ARY COMPANY WTFL W.E.F. 24.10.2007. THE ASSESSEE COMPANY IS STATED TO HAVE DEEP INTEREST IN THE SUBSIDIARY COMPANY. THE ASSESSEE COMPANY HAS TRANS FERRED ITS EMPLOYEES ALONG WITH THE BUSINESS OF TRAINING ETC. TO THE SUB SIDIARY COMPANY AND HAS ALLOWED THE SUBSIDIARY COMPANY TO USE ITS OFFICE. AS PER THE FACTS AS EMERGING FROM THE RECORDS, NO TENANCY RIGHTS OR LEASE IS CRE ATED BY THE ASSESSEE COMPANY IN RESPECT OF THE OFFICE PREMISES OWNED BY IT IN FAVOUR OF THE SAID SUBSIDIARY COMPANY. SECTION 22 & 23 OF THE ACT STI PULATES THAT THE ANNUAL VALUE OF ANY PROPERTY SHALL BE DEEMED TO BE THE SUM FOR WHICH THE PROPERTY MIGHT REASONABLY BE EXPECTED TO BE LET FROM YEAR TO YEAR. THUS SECTION 22 AND 23 OF THE ACT WARRANTS THAT THE INCOME FROM HO USE PROPERTY UNDER THE HEAD INCOME FROM HOUSE PROPERTY WHICH SHALL BE TH E ANNUAL LETTING VALUE FROM YEAR TO YEAR FOR ANY PART OF THE PROPERTY WHIC H IS LET , THEN SUM FOR WHICH THE PROPERTY MIGHT REASONABLY BE EXPECTED TO BE LET FROM YEAR TO YEAR IN THE HANDS OF THE OWNER U/S 22 AND 23 OF THE ACT SH ALL BE BROUGHT TO TAX BUT IN THE INSTANT CASE THE ASSESSEE COMPANY HAS MERELY ALLOWED THE USAGE OF THE ITA 2543/M/13 & ITA NO. 3527/M/13 & C.O. 156/MUM/2014 21 AREA/SPACE TO WTFL WITHOUT EARMARKING ANY SPECIFIC AREA , HENCE, THE SAME CANNOT BE CHARGED TO TAX UNDER THE HEAD INCOME FROM HOUSE PROPERTY AS IT COULD NOT BE SAID THAT THE SAID PREMISES ARE LET OR IS AVAILABLE FOR LETTING AS IN- FACT THE SAID PREMISES IS OCCUPIED BY THE ASSESSEE COMPANY FOR ITS BUSINESS USAGE WHILE AT THE SAME TIME THE PREMISES IS ALLOWE D TO BE USED BY THE SUBSIDIARY COMPANY ONLY WITHOUT GRANTING ANY BENEFI TS OF TENANCY SUCH AS RIGHT OF POSSESSION AND ENJOYMENT OF THE PROPERTY A S TENANT . NO TENANCY RIGHTS HAS BEEN CREATED IN FAVOUR OF THE SUBSIDIARY COMPANY, THE ADDITION OF RS. 50,10,563/- BEING NOTIONAL RENT ON ACCOUNT OF A LLOWING SUBSIDIARY COMPANY TO USE ITS OFFICE SPACE ADDED IN THE MANNER BY THE LD. AO CANNOT BE SUSTAINED IN THE HANDS OF THE ASSESSEE COMPANY WHIC H IS ORDERED TO BE DELETED AND THE ORDER OF CIT(A) IS CONFIRMED/SUSTAI NED IN WHICH WE HAVE FOUND NO INFIRMITY. WE ORDER ACCORDINGLY. 20. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. 21. NOW COMING TO THE NEXT ISSUE, IT WAS OBSERVED B Y THE A.O. THAT THE ASSESSEE COMPANY HAS LET OUT THE PROPERTY TO M/S WA LCHAND & CO. PVT. LTD. (RELATED PARTY) AND RECEIVED NOMINAL RENT, THE DETA ILS OF WHICH ARE AS UNDER:- SR.NO. NAME OF THE PARTY AREA IN SQ. FT. PERIOD RENT (AMT. IN RS.) 1 M/S WALCHAND & COMPANY PVT. LTD. 4,343.40 01/04/2008 TO 31/03/2009 17,725/- 2 M/S WALCHAND & COMPANY PVT. LTD. 4,343.40 01/04/2008 TO 31/03/2009 17,725/- 3 M/S WALCHAND & COMPANY PVT. LTD. 3,690.00 01/04/2008 TO 31/03/2009 15,055/- TOTAL 50,505/- IT WAS ALSO SEEN BY THE A.O. THAT THE RELATED PARTY OF THE ASSESSEE COMPANY I.E. WALCHAND & COMPANY PVT. LTD. HAS FURTHER LET O UT THESE PREMISES ON EXORBITANT RENT TO THIRD PARTIES, THE DETAILS OF WH ICH ARE AS UNDER:- ITA 2543/M/13 & ITA NO. 3527/M/13 & C.O. 156/MUM/2014 22 SR.NO. NAME OF THE PARTY AREA IN SQ. FT. PERIOD RENT (AMT. IN RS.) 1 M/S CANARA ROBECO ASSET MANAGEMENT CO. LTD. 4,343.40 4,343.40 01/04/2008 TO 31/03/2009 90,22,510/- 2 M/S KHAITAN AND CO. 4,343.40 01/04/2008 TO 31/03/2009 64,18,755/- TOTAL 1,54,41,265/- THUS , IT WAS OBSERVED BY THE A.O. THAT THE ASSESSE E COMPANY HAS RECEIVED NOMINAL RENT FROM M/S WALCHAND & COMPANY PVT. LTD. OF RS. 35,450/- AND THE SAID PREMISES HAVE BEEN LET OUT BY M/S WALCHAND & COMPANY PVT. LTD. TO M/S CANARA ROBECO ASSET MANAGEMENT FOR RENT OF RS. 90,22,510/-. SIMILARLY, THE ASSESSEE COMPANY HAS RECEIVED RENT FROM M/S WAL CHAND & COMPANY PVT. LTD. OF RS. 15,055/- AND THE SAID PREMISES WAS LET OUT BY M/S WALCHAND & COMPANY PVT. LTD. TO M/S KHAITAN AND CO. AND RECEIV ED RENT OF RS. 64,18,755/-. THE ASSESSEE COMPANY WAS ASKED TO FUR NISH THE COPIES OF RENT AGREEMENT ENTERED INTO WITH M/S WALCHAND & COMPANY PVT. LTD. IN RESPONSE, THE ASSESSEE COMPANY SUBMITTED THE DETAILS IN TAPAL . THE A.O. OBSERVED THAT THE ASSESSEE COMPANY HAS NOT FURNISHED THE COPIES O F RENT AGREEMENT BUT SUBMITTED A LETTER DATED 15/01/2009 ADDRESSED TO M/ S WALCHAND & COMPANY PVT. LTD. WHEREBY THE ASSESSEE COMPANY HAS AGREED TO RENEW THE LEASE AGREEMENTS FOR A PERIOD OF 11 YEARS AND 11 MO NTHS. THE ASSESSEE COMPANY SUBMITTED THAT THE RENT RECEIVED FROM M/S W ALCHAND & CO. PVT. LTD. OUGHT TO BE ASSESSED AS INCOME FROM OTHER SOURCES U /S 56 OF THE ACT AND NOT AS INCOME FROM HOUSE PROPERTY U/S 22 OF THE ACT IN THE HANDS OF THE ASSESSEE COMPANY. THE ASSESSEE COMPANY SUBMITTED THAT INCOM E FROM HOUSE PROPERTY CAN BE CHARGED TO TAX IN THE HANDS OF THE OWNER AND ONCE THE ANNUAL VALUE OF HOUSE PROPERTY HAS BEEN ASSESSED IN THE HANDS OF ON E TAXPAYER AS THE OWNER, THE SAME CANNOT BE ASSESSED IN THE HANDS OF ANOTHER TAXPAYER AGAIN AS THE OWNER BECAUSE THERE CANNOT BE TWO OWNERS IN RESPEC T OF THE SAME PROPERTY AT THE SAME TIME , OTHERWISE IT WOULD AMOUNT TO ASSESS MENT OF THE SAME INCOME TWICE, WHICH IS NOT PERMISSIBLE IN LAW. THE ASSESSE E COMPANY SUBMITTED THAT ITA 2543/M/13 & ITA NO. 3527/M/13 & C.O. 156/MUM/2014 23 THE RENTAL INCOME EARNED BY M/S WALCHAND & CO. PVT. LTD. FROM THE PORTIONS LEASED TO THEM HAS BEEN ASSESSED AS INCOME FROM HOU SE PROPERTY U/S 22 OF THE ACT IN THEIR ASSESSMENT CONSISTENTLY FROM THE A SSESSMENT YEAR 2004-05 AND ONWARDS AND THE SAME HAS ATTAINED FINALITY. THE ASSESSEE COMPANY RELIED ON THE JUDGMENT OF HONBLE SUPREME COURT IN THE CAS E OF R.B. JODHA MAL KUTHIALA V. CIT (1971) 82 ITR 570 (SC) AND CIT V. P ODAR CEMENT (P) LTD. (1997) 226 ITR 625 (SC) WHEREBY THE HONBLE APEX CO URT HAS HELD THAT THE OWNER FOR THE PURPOSE OF SECTION 22 OF THE ACT IS THE PERSONS WHO IS THE BENEFICIAL OWNER OF THE PROPERTY, WHO EARNS THE INC OME FROM THE HOUSE PROPERTY IN HIS OWN RIGHT. THE ASSESSEE COMPANY REF ERS TO CLAUSE 2(D) OF THE AGREEMENT TO LEASE EXECUTED WITH M/S WALCHAND & CO. PVT. LTD. WHICH READS AS UNDER:- '(D) THE LESSEE SHALL HAVE THE RIGHT AND SHALL BE E NTITLED TO FURTHER SUB- LET, OR GIVE ON LEAVE AND LICENCE BASIS OR ON SUCH OTHER BASIS AS THE LESSEE MAY IN ITS ABSOLUTE DISCRETION THINK FIT AND PROPER TO ANY PERSON OR PARTY OF ITS CHOICE AT SUCH COMPENSATION AND ON SUCH TERMS AND CONDITIONS AS THE LESSEE MAY IN ITS ABSOLUTE DISCRE TION THINK FIT AND PROPER. IN THE LIGHT OF ABOVE, THE ASSESSEE COMPANY SUBMITT ED THAT THE ASSESSEE COMPANY IS THE LEGAL OWNER OF THESE PREMISES LEASED TO M/S WALCHAND & CO. PVT. LTD. BUT FOR THE PURPOSES OF SECTION 22 OF THE ACT, IT IS M/S WALCHAND & CO. PVT. LTD. WHO IS THE OWNER OF THE PROPERTY LEAS ED TO THEM AND THE RENTAL INCOME EARNED BY M/S WALCHAND & CO. PRIVATE LIMITED FROM THESE PREMISES WAS OFFERED TO TAX BY THEM UNDER THE HEAD INCOME F ROM HOUSE PROPERTY WHICH IS ASSESSED ACCORDINGLY BY THE REVENUE CONSIS TENTLY YEAR AFTER YEAR, HENCE, THE RENT RECEIVED BY THE ASSESSEE COMPANY FR OM M/S WALCHAND & CO. PVT. LTD. AGGREGATING TO RS. 50,505/- SHOULD BE ASS ESSED U/S 56 OF THE ACT AS INCOME FROM OTHER SOURCES AND SECTION 56 OF THE ACT STIPULATE CHARGING OF ACTUAL INCOME THAT IS EARNED BY THE ASSESSEE COMPAN Y TO BE ASSESSED TO TAX AND THERE IS NO SCOPE OF ANY NOTIONAL OR HYPOTHETIC AL INCOME BEING ASSESSED ON THE GROUND OF ALLEGED FAIR MARKET RENT ETC.. TH E A.O. HELD THAT THE ITA 2543/M/13 & ITA NO. 3527/M/13 & C.O. 156/MUM/2014 24 ASSESSEE COMPANY, ITSELF MENTIONED IN ITS SUBMISSIO N THAT THEY ARE THE LEGAL OWNER OF THE PREMISES LEASED TO WALCHAND & COMPANY PRIVATE LIMITED. SECTION 23 OF THE ACT PROVIDES THAT FOR THE PURPOSE OF SECTION 22 OF THE ACT, ANNUAL VALUE OF ANY PROPERTY SHALL BE DEEMED TO BE: A. THE SUM FOR WHICH THE PROPERTY MIGHT REASONABLY BE EXPECTED TO LET FROM YEAR TO YEAR. B. WHERE THE PROPERTY OR ANY PART OF THE PROPERTY I S LET OUT AND THE ACTUAL RENT RECEIVED OR RECEIVABLE BY THE OWNER IN RESPECT THEREOF IS IN EXCESS OF SUM REFERRED TO IN CLAUSE(A), THE AMOUNT SO RECEIVED OR RECEIVABLE SHALL BE THE ANNUAL VALUE FOR THE PURPOS E OF DETERMINATION OF INCOME FROM HOUSE PROPERTY. THE AO HELD THAT THE WORD USED IN SECTION 23 OF THE ACT IS THE PROPERTY MIGHT REASONABLY BE EXPECTED TO LET FROM YEAR TO YEAR. IN THE ASSESSEE COMPANY'S CASE, THE ASSESSEE COMPANY'S PROPERTY WAS LET OUT O N EXORBITANT HIGHER YEARLY RENT I.E. RS.1.54 CRORES BY ITS RELATED PARTY WHO A RE TENANTS BUT THE ASSESSEE COMPANY HAS LET OUT THE SAME PROPERTIES TO RELATED PARTY AND SHOWN YEAR RENTAL INCOME OF MEAGER SUM OF ONLY RS.50,505/-. IT SEEMS THAT THE EXPECTED RENT IN THIS CASE IS RS. 1.54 CRORES AND NOT RS.50, 505/- AS SHOWN BY THE ASSESSEE COMPANY. IT MAY BE NOTED THAT THE ASSESSEE COMPANY ITSELF HAS OFFERED RENTAL INCOME OF RS.50,505/- EARNED FROM WA LCHAND & CO. PVT. LTD. UNDER THE HEAD INCOME FROM HOUSE PROPERTY. AS THE ASSESSEE COMPANY IS THE OWNER OF THE CONSTRUCTION HOUSE AND ENTITLED TO R ECEIVE RENT ON ITS OWN RIGHT, INCOME FROM LETTING OUT THE SAME IS TAXABLE UNDER THE HEAD INCOME FROM HOUSE PROPERTY AS PROVIDED U/S.22 OF ACT. IT MAY BE NOTED THAT THE ASSESSEE COMPANY HAS PLACED RELIANCE ON PODAR CEMEN T LTD.(SUPRA) THAT RENTAL INCOME MAY BE TAXED UNDER THE HEAD INCOME F ROM OTHER SOURCES. THE ASSESSEE COMPANY'S CONTENTION IS NOT ACCEPTABLE AS THE HON'BLE SUPREME COURT IN THE CASE OF PODAR CEMENT LTD.(SUPRA) WAS D EALING WITH THE QUESTION THAT WHETHER THERE IS ANY REQUIREMENT OF A REGISTER ED DEED OF CONVEYANCE FOR A PERSON TO BE TREATED AS AN OWNER FOR THE PURPOSE OF SECTION 22 OF THE ACT. THE ITA 2543/M/13 & ITA NO. 3527/M/13 & C.O. 156/MUM/2014 25 A.O. HELD THAT IN THIS CASE, THERE IS NO SUCH QUEST ION OF REGISTERED DEED OF CONVEYANCE. AND THERE IS NO DISPUTE THAT THE ASSESS EE COMPANY IS THE OWNER OF THE PREMISES AND IS ENTITLED TO RECEIVE INCOME F ROM PROPERTY IN ITS OWN RIGHT. THE A.O. RELIED UPON THE DECISION OF THE HON 'BLE BOMBAY HIGH COURT IN THE CASE OF PALLONJI M. MISTRY V. CIT (2009) 178TAX MANN 341(BOM.) WHEREBY IT WAS HELD THAT OWNER IS A PERSON WHO IS ENTITLED TO RECEIVE INCOME FROM THE PROPERTY IN HIS OWN RIGHT AND IN VIEW OF THE ABOVE LEGAL POSITION THE RENTAL INCOME EARNED FROM THE LETTING OUT OF THE CONSTRUC TION HOUSE TO M/S WALCHAND AND COMPANY PRIVATE LIMITED IS TAXED UNDER THE HEAD INCOME FROM HOUSE PROPERTY AND THE ASSESSEE COMPANY HIMSELF HA S OFFERED THE SAID RENTAL INCOME CORRECTLY UNDER THE HEAD INCOME FROM HOUSE PROPERTY WHICH IS ACCEPTED BY THE REVENUE. THE A.O. ACCORDINGLY HELD THAT THE PROPERTY HAD BEEN SUB-LET BY TENANT WHO IS A RELATED PARTY FOR R S. 1,54,41,265/- AND THE ASSESSEE COMPANY HAS NOT CHARGED RENT WHICH THE PRO PERTY IS REASONABLY EXPECTED TO LET FROM YEAR TO YEAR AND THE SAME IS T REATED AS ANNUAL VALUE FOR THE ASSESSEE COMPANY AND THE SAME IS BROUGHT TO TAX AS THE AMOUNT OF RS.1,54,41,265/- IS ADOPTED AS MARKET RENT OF THE P REMISES LET OUT TO RELATED PARTY M/S WALCHAND AND COMPANY PRIVATE LIMITED WITH OUT RENEWAL OF AGREEMENTS , VIDE ASSESSMENT ORDERS PASSED U/S 143( 3) OF THE ACT DATED 29.12.2011. 22. AGGRIEVED BY THE ASSESSMENT ORDERS DATED 29.12. 2011 PASSED BY THE AO U/S 143(3) OF THE ACT, THE ASSESSEE COMPANY HAS PRE FERRED AN APPEAL BEFORE THE CIT(A). 23. BEFORE THE CIT(A) , THE ASSESSEE COMPANY SUBMIT TED THAT M/S WALCHAND & COMPANY PVT. LTD. HAS ALREADY BEEN ASSESSED TO TA X UNDER THE HEAD INCOME FROM HOUSE PROPERTY IN RESPECT OF THE RENT RECEIVED BY IT U/S 22 OF THE ACT , SINCE THE ASSESSMENT YEAR 2004-05. THE A SSESSEE COMPANY RELIED UPON THE DECISION OF HONBLE JURISDICTIONAL HIGH CO URT IN THE CASE OF M/S ITA 2543/M/13 & ITA NO. 3527/M/13 & C.O. 156/MUM/2014 26 SAHNEY KIRKWOOD PRIVATE LIMITED V. ADDL. CIT IN ITA NO. 1501,1509,1515,1516 AND 1517 OF 2007, WHEREIN IT W AS HELD BY HONBLE BOMBAY HIGH COURT THAT THE RENT RECEIVED BY THE TEN ANT BY LETTING OUT THE PREMISES HAS BEEN TAXED , THEN TAXING THE VERY SAME AMOUNT ONCE AGAIN IN THE HANDS OF THE OWNER WOULD AMOUNT TO TAXING AN IN COME TWICE WHICH IS NOT PERMISSIBLE IN LAW. THE ASSESSEE COMPANY ALSO REL IED UPON THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CI T V. AKSHAY TEXTILES & AGENCIES P. LTD. (2008) 304 ITR 401(BOM.) WHEREIN T HE HONBLE COURT HELD THAT IN THE ABSENCE OF ANY COGENT EVIDENCE TO SHOW THAT TRANSACTION WAS NOT GENUINE, THE AMOUNT RECEIVED BY AN INTERMEDIARY CAN NOT BE ASSESSED IN THE HANDS OF THE TAXPAYER. THE ASSESSEE COMPANY CONTEN DED THAT THE A.O. HAS NOT CHALLENGED OR DOUBTED THE GENUINENESS OF THE LE ASE AGREEMENTS BETWEEN THE ASSESSEE COMPANY AND M/S WALCHAND & COMPANY PVT . LTD. THAT THE AGREEMENT WAS EITHER SHAM OR BOGUS. THE ASSESSEE COMPANY CONTENDED THAT THE LEASE AGREEMENT WITH M/S WALCHAND & COMPANY PVT . LTD. HAS BEEN THERE FOR THE PAST SEVERAL YEARS AND THE RENT RECEIVED BY M/S WALCHAND & CO. PVT. LTD. HAS BEEN ASSESSED TO TAX IN ITS HANDS IN THE P AST WITHOUT ANY DOUBT OR QUESTION BY THE REVENUE. THE CIT(A) AFTER CONSIDER ING THE SUBMISSION OF THE ASSESSEE COMPANY AND THE A.O. HELD THAT ASSESSEE CO MPANYS CONTENTION THAT IT IS A CASE OF TAXING THE SAME INCOME IN THE HAND OF THE ASSESSEE COMPANY AND ALSO IN THE HANDS OF M/S WALCHAND & CO. PVT. LT D. AND THE SAME INCOME CANNOT BE TAXED TWICE IS FOUND TO BE VALID. ACCORDI NGLY THE CIT(A) DIRECTED THE A.O. TO DELETE THE INCOME TAXED FOR THE SECOND TIME IN THE HANDS OF THE ASSESSEE COMPANY AFTER VERIFICATION, VIDE ORDERS DA TED 05.02.2013. 24. AGGRIEVED BY THE ORDERS DATED 05.02.2013 OF THE CIT(A), THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 25. THE LD. D.R. RELIED UPON THE ORDER OF A.O. AND SUBMITTED THAT THE ASSESSEE COMPANY HAS CHARGED NOMINAL RENT FROM M/S WALCHAND AND ITA 2543/M/13 & ITA NO. 3527/M/13 & C.O. 156/MUM/2014 27 COMPANY PRIVATE LIMITED OF RS.50,505/- WHILE THE SA ID M/S WALCHAND AND COMPANY PRIVATE LIMITED HAS CHARGED RENT OF RS.1,54 ,41,265/- FROM SUB- LETTING OF THE SAME PREMISES. THE AO HAS RIGHTLY BR OUGHT TO TAX IN THE HANDS OF THE ASSESSEE COMPANY, THE SAME RENTAL VALUE AS S UB-LET BY M/S WALCHAND AND COMPANY PRIVATE LIMITED AS THE SAME REPRESENTED THE MARKET RENTAL VALUE OF THE SAID PREMISES WHICH NEED TO BE BROUGH T TO TAX IN THE HANDS OF THE ASSESSEE COMPANY AS PER PROVISIONS OF SECTION 2 2 AND 23 OF THE ACT. WHEREAS THE LD. COUNSEL FOR THE ASSESSEE COMPANY SU BMITTED THAT THIS BUILDING WAS CONSTRUCTED IN THE YEAR 1930 BY THE WA LCHAND GROUP. IT IS SIX STOREY BUILDING. PORTION OF THIS BUILDING IS OCCUP IED BY THE CENTRAL EXCISE DEPARTMENT, DEPARTMENT OF REVENUE, GOVERNMENT OF IN DIA SINCE 1939 AND THEY ARE ALSO PAYING NOMINAL RENT OF RS.10,452/- PE R ANNUM FOR AREA OF 2979 SQUARE FEET OCCUPIED BY THEM WHICH SHOULD BE TAKEN AS BENCH MARK FOR COMPUTING RENTAL INCOME IN THE HANDS OF THE ASSESSE E COMPANY. THE ASSESSEE COMPANY HAS GIVEN PORTION OF THIS PREMISES ON FOURT H FLOOR TO M/S WALCHAND & CO. PVT. LIMITED VIDE AGREEMENT DATED 12-10-1994 FOR A PERIOD OF 11 YEARS 11 MONTHS . THIS LEASE AGREEMENT HAD EXPIRED ON 11- 09-2006 AND A LETTER WAS ISSUED BY THE ASSESSEE COMPANY ON 15-01-2009 AG REEING TO RENEW THE LEASE FOR A FURTHER PERIOD OF 11 YEARS AND 11 MONTH S IN RESPONSE TO LETTER OF THE LESSEE DATED 05-01-2009 THAT THE RENEWAL SHALL BE EXECUTED IN DUE COURSE. THE LD. COUNSEL ALSO SUBMITTED THAT PORTION OF THE FOURTH FLOOR AREA WAS ALSO LEASED TO VIKHROLI METAL FABRICATORS LTD. VIDE AGRE EMENT DATED 12-10-1994 FOR A PERIOD OF 11 YEARS AND 11 MONTHS AND SUBSEQUENTLY VIKHROLI METAL FABRICATORS LTD. WAS MERGED WITH M/S WALCHAND & CO. PVT. LTD. AND SIMILAR INTENTION WAS EXPRESSED BY THE ASSESSEE COMPANY TO RENEW THE LEASE FURTHER FOR A PERIOD OF 11 YEARS AND 11 MONTHS. SIMILARLY, THERE WAS ANOTHER AGREEMENT DATED 09-10-1997 WHICH EXPIRED ON 31-07-2 006 FOR PORTION ON GROUND FLOOR OF CONSTRUCTION HOUSE WHICH IS TO BE R ENEWED. THE TENANT IS SUBLETTING THE SAME TO OUTSIDE PARTIES AND CHARGING HIGHER RENT WHILE THE ASSESSEE COMPANY IS GETTING NOMINAL RENT AS PER AGR EEMENT WHICH IS NOT A ITA 2543/M/13 & ITA NO. 3527/M/13 & C.O. 156/MUM/2014 28 SHAM TRANSACTION AS THE AO HAS NOT DOUBTED THE GENU INENESS OF THE LEASE AGREEMENTS WITH WALCHAND AND COMPANY PRIVATE LIMITE D. THE LD. COUNSEL SUBMITTED THAT THE REVENUE HAS TREATED THE LESSEE A S OWNER OF THE PROPERTY AND THE ASSESSED THE RENTAL INCOME IN THE HANDS OF THE LESSEE AS INCOME FROM HOUSE PROPERTY AND AGAIN CHARGED TO TAX THE INCOME AS INCOME FROM HOUSE PROPERTY IN THE HANDS OF THE ASSESSEE COMPANY AS O WNER OF THE PROPERTY WHICH IS NOT PERMISSIBLE IN LAW. THE LD. COUNSEL CO NTENDED THAT THE TAXING THE AMOUNT ONCE AGAIN IN THE HANDS OF THE ASSESSEE COMP ANY WOULD AMOUNT TO TAXING THE SAME INCOME TWICE WHICH IS NOT PERMISSIB LE UNDER THE ACT. THE LD. COUNSEL SUBMITTED THAT THE ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 2008- 09 IN RESPECT OF M/S WALCHAND & CO. PVT. LTD., COPY OF WHICH IS ENCLOSED VIDE PAPER BOOK PAGE 74-77, WHEREBY THE REVENUE HAS BROU GHT TO TAX IN THE HANDS OF M/S WALCHAND & CO. P. LTD , THE RENTAL INCOME AS INCOME FROM HOUSE PROPERTY. THE LD. COUNSEL SUBMITTED THAT THE CIT(A ) HAS RIGHTLY DELETED THE ADDITION BY RELYING UPON THE DECISION OF HONBLE JU RISDICTIONAL HIGH COURT IN THE CASES OF M/S SAHNEY KIRKWOOD PRIVATE LIMITED & AKSHAY TEXTILES & AGENCIES P. LTD. (SUPRA) 26. WE HAVE CONSIDERED THE RIVAL CONTENTION AND ALS O PERUSED THE MATERIAL ON RECORD. WE HAVE OBSERVED THAT THE ASSESSEE COMPA NY HAS GIVEN ON RENT THE PROPERTY CONSTRUCTION HOUSE 4 TH FLOOR TO M/S WALCHAND & CO. PVT. LTD. WHEREBY THE TOTAL RENT RECEIVED IS RS. 50,505/- AND THE SAID M/S WALCHAND & CO. PVT. LTD. HAS GIVEN THE SAID PROPERTY ON RENT T O M/S CANARA ROBECO ASSET MANAGEMENT CO. LTD. AND M/S KHAITAN AND CO. , WHERE BY TOTAL RENT RECEIVED FROM THESE PARTIES WERE AGGREGATING TO RS. 1,54,41, 265/-. THE PROPERTY WAS GIVEN ON RENT SINCE 1994 AND THE PERIOD AS PER LEAS E AGREEMENT WAS 11 YEARS 11 MONTHS AND THE SAME WAS NOT RENEWED, ALTHOUGH TH E ASSESSEE COMPANY HAS EXPRESSED THE INTENTION TO RENEW THE SAID AGREE MENT VIDE LETTER DATED 15- 01-2009 IN RESPONSE TO THE LESSEE LETTER DATED 05-0 1-2009. M/S WALCHAND & CO. PVT. LTD. HAS DULY PAID THE TAX ON THE ACTUAL R ENT OF RS. 1,54,41,265/- ITA 2543/M/13 & ITA NO. 3527/M/13 & C.O. 156/MUM/2014 29 RECEIVED UNDER THE HEAD INCOME FROM HOUSE PROPERTY FOR WHICH NECESSARY SUPPORTING MATERIAL WAS BROUGHT ON RECORD (PAPER BO OK PAGE 74 TO 84) AND THE SAME HAS BEEN ACCEPTED BY THE REVENUE IN THE CA SE OF WALCHAND & COMPANY PRIVATE LIMITED AND ACCORDINGLY FRAMED THE ASSESSMENT ORDER U/S 143(3) OF THE ACT, FURTHER INCOME TAX RETURN OF THE ASSESSMENT YEAR 2009-10 ALONG WITH THE INTIMATION U/S 143(1) OF THE ACT IN THE CASE OF M/S WALCHAND AND COMPANY PRIVATE LIMITED HAS ALSO BEEN PLACED ON RECORD IN PAPER BOOK AT PAGE 78-86 . AS COULD BE SEEN FROM THE DOCUMENTS FI LED, THE RENT RECEIVED BY M/S WALCHAND & CO. PVT. LTD. HAS BEEN DULY SUBJECTE D TO TAX AND THAT TOO UNDER THE HEAD INCOME FROM HOUSE PROPERTY WHILE T HE ASSESSEE COMPANY HAS RECEIVED NOMINAL RENT FROM M/S WALCHAND & CO. PVT. LTD. WHICH IS OFFERED TO TAX UNDER THE HEAD INCOME FROM HOUSE PROPERTY IN THE RETURN OF INCOME FILED WITH THE REVENUE. 27. SECTION 27(III)(B) OF THE ACT READS AS UNDER:- OWNER OF HOUSE PROPERTY', 'ANNUAL CHARGE', ETC., DE FINED. SECTION 27 FOR THE PURPOSES OF SECTIONS 22 TO 26 ( IIIB ) A PERSON WHO ACQUIRES ANY RIGHTS (EXCLUDING ANY RIG HTS BY WAY OF A LEASE FROM MONTH TO MONTH OR FOR A PERIOD NOT EXCEEDING O NE YEAR) IN OR WITH RESPECT TO ANY BUILDING OR PART THEREOF, BY VIRTUE OF ANY SUCH TRAN SACTION AS IS REFERRED TO IN CLAUSE ( F ) OF SECTION 269UA , SHALL BE DEEMED TO BE THE OWNER OF THAT BUILDING OR PART THEREOF;] SEE MORE ABOUT THIS SECTION ! SECTION 269UA(F) READS AS UNDER:- 269UA. DEFINITIONS. IN THIS CHAPTER, UNLESS THE CONTEXT OTHERWISE REQUI RES, -- (A) AGREEMENT FOR TRANSFER MEANS AN AGREEMENT, WHETHER REGISTERED UNDER THE REGISTRATION ACT, 1908 (16 OF 1908), OR NOT, FOR TH E TRANSFER OF ANY IMMOVABLE PROPERTY; ITA 2543/M/13 & ITA NO. 3527/M/13 & C.O. 156/MUM/2014 30 ...... ...... (F) TRANSFER , -- (I) IN RELATION TO ANY IMMOVABLE PROPERTY REFERRED TO IN SUB-CLAUSE (I) OF CLAUSE (D), MEANS TRANSFER OF SUCH PROPERTY BY WAY OF SALE OR E XCHANGE OR LEASE FOR A TERM OF NOT LESS THAN TWELVE YEARS, AND INCLUDES ALLOWING T HE POSSESSION OF SUCH PROPERTY TO BE TAKEN OR RETAINED IN PART PERFORMANCE OF A CO NTRACT OF THE NATURE REFERRED TO IN SECTION 53A OF THE TRANSFER OF PROPERTY ACT, 188 2 (4 OF 1882). EXPLANATION : FOR THE PURPOSES OF THIS SUB-CLAUSE, A LEASE WHICH PROVIDES FOR THE EXTENSION OF THE TERM THEREOF BY A FURTHER TERM OR TERMS SHALL BE DEEMED TO BE A LEASE FOR A TERM OF NOT LESS THAN TWELVE YEARS, IF THE AGGREGATE OF THE TERM FOR WHICH SUCH LEASE IS TO BE GRANTED AND THE FURTHER T ERM OR TERMS FOR WHICH IT CAN BE SO EXTENDED IS NOT LESS THAN TWELVE YEARS; SECTION 269UA(F) STIPULATES THAT TRANSFER OF PROPER TY BY WAY OF SALE OR EXCHANGE OR LEASE FOR A TERM OF NOT LESS THAN TWELV E YEARS AND INCLUDES ALLOWING THE POSSESSION OF SUCH PROPERTY TO BE TAKE N OR RETAINED IN PART PERFORMANCE OF A CONTRACT OF THE NATURE REFERRED T O IN SECTION 53A OF THE TRANSFER OF PROPERTY ACT, 1882 AND SHALL BE DEEMED TO BE THE OWNER OF THE PROPERTY U/S 27(III)(B) OF THE ACT FOR THE PURPOSES OF COMPUTING UNDER THE HEAD INCOME FROM HOUSE PROPERTY . WE HAVE OBSERV ED THAT THE ASSESSEE COMPANY HAS BEEN GRANTED LEASE W.E.F. 12 TH OCTOBER, 1994 FOR A PERIOD OF 11 YEARS 11 MONTHS, HOWEVER, IT IS STIPULATED IN THE A GREEMENT THAT THE LESSEE IS OCCUPYING THE SAME SINCE LAST SEVERAL YEARS. FURTH ER THE RIGHT OF SUB-LETTING HAS ALSO BEEN PROVIDED TO THE LESSEE. THE ASSESSEE COMPANY HAS EXPRESSED ITS DESIRE TO RENEW THE SAME FOR FURTHER PERIOD OF 11 YEARS AND 11 MONTHS N RESPONSE TO THE REQUEST OF THE LESSEE. M/S WALCHAND & CO. PVT. LTD. SUB- LETTED THE SAID PREMISES WHICH HAS BEEN OFFERED TO TAX THE ACTUAL RENT OF RS. ITA 2543/M/13 & ITA NO. 3527/M/13 & C.O. 156/MUM/2014 31 1,54,41,265/- UNDER THE HEAD INCOME FROM HOUSE PR OPERTY WHICH HAS BEEN ACCEPTED BY THE REVENUE. THE RENTAL RECEIVED OF RS . 1,54,41,265/- BY WALCHAND AND COMPANY PRIVATE LIMITED, THE LESSEE IS ASSESSED TO TAX AND REVENUE HAS GOT THE DUE TAXES AND NOW TO AGAIN TAX THE SAME RENTAL ON NOTIONAL BASIS IN THE HANDS OF THE ASSESSEE COMPANY WILL LEAD TO DOUBLE TAXATION OF THE SAME INCOME , WHICH IS NOT PERMITTE D UNDER THE ACT. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) A ND WE UPHOLD THE SAME AND CONFIRM THE DELETION OF THE ADDITION MADE BY THE AO OF THE NOTIONAL RENT IN THE HAND OF THE ASSESSEE COMPANY WHICH IS SUBJECT TO VE RIFICATION BY THE AO THAT THE SAME RENT HAS SUFFERED TAXATION IN THE HANDS OF THE WALCHAND AND COMPANY PRIVATE LIMITED WHICH WAS ALSO STIPULATED B Y THE CIT(A) IN HIS ORDERS DATED 05.02.2013 WHICH WE CONFIRM.WE ORDER A CCORDINGLY. 28. IN THE RESULT, APPEAL FILED BY THE REVENUE IS D ISMISSED 29. WITH RESPECT TO THE C.O. FILED BY THE ASSESSEE COMPANY, WE HAVE DISMISSED THE APPEAL FILED BY THE REVENUE AND, HEN CE, THE C.O. FILED BY THE ASSESSEE COMPANY HAS BECOME ACADEMIC AND IS DISMISS ED. 30. IN THE RESULT, APPEAL FILED BY THE ASSESSEE COM PANY IN ITA NO. 2543/MUM/13 IS ALLOWED WHEREAS APPEAL FILED BY THE REVENUE IN ITA NO. 3527/MUM/13 IS DISMISSED. THE C.O. NO. 156/MUM/2014 FILED BY THE ASSESSEE IS DISMISSED DUE TO REASONS AS STATED ABOV E. ORDER PRONOUNCED IN THE OPEN COURT ON 4 TH FEBRUARY, 2016. # $% &' ( ) SD/- SD/- (AMIT SHUKLA) (RAMIT KOCHAR) JUDICIAL MEMBER ACCOUNTANT MEMBER $ MUMBAI ; & DATED 4-2-2016 ITA 2543/M/13 & ITA NO. 3527/M/13 & C.O. 156/MUM/2014 32 [ .9../ R.K. R.K. R.K. R.K. , EX. SR. PS !'#$%&%# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. : ( ) / THE CIT(A)- CONCERNED, MUMBAI 4. : / CIT- CONCERNED, MUMBAI 5. =>( 99?@ , ?@ , $ / DR, ITAT, MUMBAI H BENCH 6. (BC D / GUARD FILE. / BY ORDER, = 9 //TRUE COPY// / ( DY./ASSTT. REGISTRAR) , $ / ITAT, MUMBAI