TIRUPATI MAHALAXMI CO.OP HSG. SOC. LTD, MUMBAI V. ITO 16(2)(4), MUMBAI

ITA 3846/MUM/2010

• Counselvise Citation: 384619914 RSA 2010
• Duration Of Justice: 1 year(s) 3 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Assessment Year: 2000-2001
• Appeal Filed On: 12-05-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: G P TRIVEDI
• Assessee Lawyers: BHUPENDRA SHAH
• Keywords: Business income
• Section: 143(3); 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH EMUMBAI BEFORE SHRIR.S. SYAL (AM) AND SMT. ASHA VIJAYARAGHAVAN (JM) ITA NO.3846/MUM/2010 ASSESSMENT YEAR 2000-01 TIRUPATI MAHALAXMI CO. OP. HSG. SOC. LTD., ASHISH, TIRUPATI APARTMENT, BHULABHAI DESAI ROAD, MUMBAI-400 026 PAN-AAAAT 4093R VS. THE ITO 16(2)(4), MATRU MANDIR, TARDEO, MUMBAI (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI BHUPENDRA SHAH RESPONDENT BY: SHRI G.P. TRIVEDI DATE OF HEARING :11.8.2011 DATE OF PRONOUNCEMENT:30.8.2011 O R D E R PER ASHA VIJAYARAGHAVAN (JM) THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED A GAINST THE ORDER DATED 2.2.2010 PASSED BY THE LD. CIT(A)-27FOR THE A SSESSMENT YEAR 2000-01. 2. SURVEY WAS CONDUCTED U/S. 133A OF THE I.T. ACT. NOTICE U/S. 148 OF THE I.T. ACT DT. 29.3.2007 WAS ISSUED AND SERVED ON THE SAME DAY. IN RESPONSE TO THE NOTICE, THE SOCIETY FILED RETURN OF INCOME ON 6.6.2007 CLAIMED A LOSS OF RS. 6,87,673/-. NOTICE U/S. 143(2) AND 1 42(1) ALONGWITH QUESTIONNAIRE SERVED ON THE ASSESSEE CALLING FOR TH E INFORMATION TO COMPLETE THE ASSESSMENT PROCEEDINGS. THE ASSESSMENT WAS COM PLETED U/S. 143(3) R.W.S 147 OF THE I.T. ACT. ITA NO.3846/M/2010 2 3. WHILE COMPLETING THE ASSESSMENT, THE ASSESSING O FFICER MADE CERTAIN ADDITIONS/DISALLOWANCES WHICH WERE CONTESTED TO IN THE APPEAL BEFORE THE LD. CIT(A). THE ASSESSEE SOCIETY HAS ALLOWED HOARDING TO BE PUT UP ON THE BUILDINGS AND THE SOCIETY HAD CLAIMED THAT ON ACCOU NT OF PRINCIPLE OF MUTUALITY THERE CANNOT BE INCOME IF THE SAME IS SET OFF AGAIN ST EXPENDITURE INCURRED BY THE SOCIETY. FURTHER, THE ASSESSEE CLAIMED THE INC OME FROM HOARDING HAS TO BE ASSESSED UNDER INCOME FROM HOUSE PROPERTY. 4. THE ASSESSING OFFICER HELD THAT HOARDING CHARGES RECEIVED ON ACCOUNT OF ALLOWING ADVERTISEMENTS PUT UP ON THE BUILDINGS HAS TO BE TAXED UNDER INCOME FROM BUSINESS. 5. THE LD. CIT(A) HELD AS FOLLOWS: I HAVE GONE THROUGH THE SUBMISSIONS MADE BY THE AP PELLANT. IT IS SEEN THAT THE INCOME FROM ADVERTISEMENTS ALLOW ED TO BE PUT UP ON THE WALL AND THE ROOF OF THE APPELLANTS BUILDINGS CANNOT BE BY ANY STRETCH OF IMAGINATIO9N MAY TO BE HELD EXEMPT UNDER THE PRINCIPLE OF MUTUALITY. AS UNDER THE PRINCIPLE OF MUTUALITY ONL Y THAT INCOME IS EXEMPT WHICH IS RECEIVED FROM THE MEMBER AND SPENT UPON THE MEMBER. THIS INCOME HAS BEEN RECEIVED FROM COMMERC IAL ACTIVITY OF LETTING OUT SPACE FOR ADVERTISEMENT. HENCE IT IS B USINESS INCOME OR INCOME FROM OTHER SOURCES AND NOT INCOME FROM HOUSE PROPERTY AS THEY HAVE LET NOT OUT ANY PORTION OF THE BUILDING O N RENT. PRINCIPLE OF MUTUALITY DOES NOT APPLY AS IT IS NOT RECEIVED FROM THE MEMBERS OF THE SOCIETY. THE APPELLANTS PLEAS THE EXPENDITURE INC URRED ON THE MAINTENANCE OF PROVIDING FACILITIES FOR MEMBERS CAN NOT BE ALLOWED AS DEDUCTION AS ANY INCOME FROM BUSINESS OR INCOME FRO M OTHER SOURCE, AS ONLY THAT EXPENDITURE WHICH IS INCURRED FOR EARN ING THAT INCOME IS TO BE ALLOWED AS A DEDUCTION. HENCE, THE APPELLANTS CONTENTIONS AND PLEASE ARE NOT ACCEPTED AND AOS ACTION IN TAXING T HIS AMOUNT AS INCOME FROM BUSINESS IS UPHELD AND THIS GROUND OF A PPEAL STANDS DISMISSED. 6. AGGRIEVED, ASSESSEE IS IN APPEAL BEFORE US AND H AS RAISED THE GROUND THAT THE LD. CIT(A) ERRED IN UPHOLDING THE AOS ORD ER OF ADDING THE INCOME OF RS. 4,20,000/- ON ACCOUNT OF HOARDING CHARGES AS INC OME FROM OTHER SOURCES INSTEAD OF PROPERTY INCOME. ITA NO.3846/M/2010 3 7. THE ITAT MUMBAI BENCH IN THE CASE OF SATYAM SHIV AM SUNDARAM WHEREIN IT HAS BEEN HELD AS FOLLOWS: 8. THE DECISION OF THE MUMBAI BENCH IN THE CASE OF M/S.JAI IN ITA NO 99/M/01 DATED 06.07.2004 WAS BROUGHT TO OUR NOTI CE. IN THAT CASE, THE ASSESSEE THEREIN WAS RECEIVING MONTHLY SU MS FOR PERMITTING BPL COMMUNICATION LIMITED FOR INSTALLATION OF ANTEN A ON THE SOCIETY BUILDING. 9. IT IS FURTHER HELD IN PARA 13 & 14 AS FOLLOWS : THE LD. COUNSEL FOR THE ASSESSEE HAS ALSO BROUGHT T O THE NOTICE THE DECISION REPORTED IN AIR 1966 SC 1998 IN THE CASE OF GHANSHIAM DAS VS DEBI PRASAD AND ANOTHER. IN THAT CASE THE SUPREME COURT HAS HELD THAT THE WORD BUILDING HAS NOT BEEN DEFINED IN U.P.ZAMINDARI ABOLITION AND LAND REFORMS ACT. HE HAS BEEN USED IN THE ORDINARY GRAMMATICAL SENSE UN LESS THERE IS SOMETHING IN THE CONTEXT OR OBJECT OF THE STATUTE T O SHOW THAT IT US USED IN A SPECIAL SENSE DIFFERENT FROM ITS ORDINARY GRAMMATICAL SENSE. SO CONSTRUED ACCORDING TO THE DICTIONARY ME ANING, THE EXISTENCE OF A ROOF IS NOT ALWAYS NECESSARY FOR A S TRUCTURE TO BE REGARDED AS A BUILDING. A LARGE STADIUM OR AN OPE N AIR SWIMMING POOL CONSTRUCTED AT A CONSIDERABLE EXPENSE WOULD BE A BUILDING AS IT IS A PERMANENT STRUCTURE AND DESIGNE D FOR USEFUL PURPOSE. IN VIEW OF THE ABOVE SAID DECISION, WE ARE OF THE O PINION THAT THE INCOME RECEIVED FROM LETTING OUT OF TERRAC E SPACE FOR INSTALLATION OF NEON-SIGN WOULD CONSTITUTE INCOME F ROM HOUSE PROPERTY IN THE HANDS OF THE ASSESSEE. 10. RESPECTFULLY FOLLOWING THE DECISION OF THE CO ORDINATE BENCH OF THE MUMBAI TRIBUNAL TO WHICH ONE OF US (I.E. JUDICIAL MEMBER) IS PARTY WHEREIN IT HAS BEEN HELD THAT THE HOARDING CHARGES ARE TO BE TREATED AS INCOME FROM HOUSE PROPERTY AND NOT INCOME FROM OTHER SOURCES, T HEREFORE WE ALLOW THIS GROUND RAISED BY THE ASSESSEE. ITA NO.3846/M/2010 4 11. THE NEXT GROUND IS WITH RESPECT TO THE ADDITION OF THE AMOUNT PAYABLE TO SUNDRY CREDITORS OF RS. 3,70,000/- TO INCOME WHI CH WAS WRITTEN BACK IN INCOME AND EXPENDITURE ACCOUNT. 12. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED BEFO RE THE LD. CIT(A) THAT THIS CREDIT WAS REVERSAL OF PROVISIONS FOR EXPENSES OF RS. 3,70,000/- MADE IN EARLIER YEAR AND NOT CLAIMED AS DEDUCTION BEING ONL Y A PROVISIONS AND HENCE THE REVERSAL OF PROVISION IN INCOME AND EXPENDITURE ACCOUNT WAS NOT TAXABLE. 13. THE LD. CIT(A) HELD AS FOLLOWS: IN THIS YEAR, THE PROVISIONS WAS REVERSED AND THE AO CANNOT ADD BACK THIS RS. 3,70,000/- AS THIS AMOUNT CAN ONL Y BE TAXED U/S. 41(1) AND THIS SECTION WOULD ONLY APPLY IF THE PROVISION HAD BEEN MADE IN THE EARLIER YEAR AND IT IS ALLOWED AS A DEDUCTION IN THAT YEAR AND THE AMOUNT CEASED TO BE PAYABLE IN TH IS YEAR AND THIS SINCE THIS WAS FIRST OF THE RETURN FILED, THER E WAS NO QUESTION OF DEDUCTION IN AN EARLIER YEAR. THIS CONTENTION O F THE APPELLANT CANNOT BE ACCEPTED BECAUSE THEY HAVE NOT FILED ANY RETURN IN THE PREVIOUS YEAR BUT THEY MUST BE HAVING TAXABLE I NCOME FROM ADVERTISEMENTS AND HOARDING FROM WHICH THIS PROVISI ON MUST HAVE BEEN MADE FOR WHICH NO RETURN HAS BEEN FILED B Y THE APPELLANT, EVEN THOUGH THEY HAVE HAD TAXABLE INCOME . HENCE THE BENEFIT OF SEC. 41(1) WOULD NOT BE APPLICABLE T O THEM AND SINCE THE AMOUNT HAS BEEN WRITTEN OFF MADE AVAILABL E IN THE P&L ACCOUNT OF THIS YEAR WILL BECOME INCOME OF THE YEAR , SO THE ADDITION MADE BY THE AO IS CONFIRMED. THIS POINT O F APPEAL IS DISMISSED. 14. THE LD. COUNSEL FOR THE ASSESSEE SHRI BHUPENDRA SHAH STATED THAT PROVISIONS OF SEC. 41(1) ARE APPLICABLE ONLY WHEN T HE INCOME OF THE ASSESSEE IS TAXABLE AS BUSINESS INCOME AND NOT IN THE CASE W HERE IT IS INCOME FROM HOUSE PROPERTY, WHERE NO DEDUCTIONS ARE ALLOWED FOR SUCH EXPENDITURE. 15. WE HEARD BOTH THE PARTIES. PROVISIONS OF SEC 41 (1) COME INTO PLAY IN RESPECT OF EXPENDITURE OR LIABILITY IN RESPECT OF W HICH AN ALLOWANCE OR DEDUCTION HAS BEEN MADE IN THE ASSESSMENT FOR ANY E ARLIER YEARS. THE AMOUNT IN RESPECT OF WHICH THE LIABILITY HAS BEEN C REATED, SHOULD HAVE BEEN ITA NO.3846/M/2010 5 ACTUALLY ALLOWED IN COMPUTING THE TAXABLE INCOME OF THE ASSESSEE IN EARLIER ASSESSMENT YEAR. ONLY THEN THE BENEFIT ACCRUING FRO M REMISSION OR CESSATION OF THE LIABILITY WOULD BE SUBJECT TO TAX U/S 41(1). THE ALLOWANCE OR DEDUCTION SHOULD BE ACTUAL IN THE ASSESSMENT AND NOT NOTIONAL . OBVIOUSLY THEN, IF THE ASSESSEE HAD NOT FILED ANY RETURN AND HE HAS NOT BE EN ASSESSED TO TAX ON ANY PARTICULAR YEAR, THE PROVISION FOR LIABILITY CANNOT BE SAID TO HAVE BEEN ALLOWED IN THE ASSESSMENT MADE FOR THAT YEAR. IN SUCH CASES THE PROVISIONS OF SEC 41(1) CANNOT BE INVOKED IN THE YEAR OF REMISSION OR CESSATION OF THAT LIABILITY ON A NOTIONAL BASIS. WE FIND THAT THE AO HAS NOT GI VEN ANY FINDING OF THIS ISSUE. IN THESE CIRCUMSTANCES, WE DEEM IT FIT TO S ET ASIDE THIS ISSUE TO THE FILE OF THE AO AND HE SHALL AFTER CONSIDERING THE FACT W HETHER THE EXPENDITURE IN RESPECT OF WHICH THE PROVISIONS HAS BEEN MADE, HAS IN FACT BEEN ACTUALLY ALLOWED IN THE COMPUTATION OF TAXABLE INCOME (OR LO SS) OF THE ASSESSEE IN THE YEAR IN WHICH THE PROVISION WAS MADE AND AFTER GIVI NG A REASONABLE OPPORTUNITY TO THE ASSESSEE DECIDE THE ISSUE IN ACC ORDANCE WITH LAW. 16. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THIS 30 TH DAY OF AUGUST, 2011 SD/- SD/- (R.S. SYAL) ASHA VIJAYARAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 30 TH AUGUST, 2011 RJ COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT-CONCERNED 4. THE CIT(A)-CONCERNED 5. THE DR E BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR, I.T.A.T, MUMBAI ITA NO.3846/M/2010 6 DATE INITIALS 1. DRAFT DICTATED ON: 24.8.2011 SR. PS/PS 2. DRAFT PLACED BEFORE AUTHOR: 26.08.2011 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. ORDER PRONOUNCED ON: SR. PS/PS 7. FILE SENT TO THE BENCH CLERK: 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK: SR. PS/PS 9. DATE ON WHICH FILE GOES TO AR 10. DATE OF DISPATCH OF ORDER: