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

ITA 3979/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 49013 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-05-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 11-05-2011
• Assessment Year: 2001-2002
• Appeal Filed On: 17-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: L K AGRAWAL
• Assessee Lawyers: S K SOMANI
• Keywords: Business income; Depreciation; Rule of consistency
• Section: 143(3); 147; 148; 56; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, C, MUMBAI BEFORE S/SHRI D.K.AGARWAL (JM) AND RAJENDRA SINGH ( A.M ) ITA NO.3979/MUM/2010 (ASSESSMENT YEAR: 2001-02) PATEL ALUMINIUM PVT.LTD., PATEL VANIKA, WESTERN EXPRESS HIGHWAY, GOREGAON (EAST), MUMBAI-400063. PAN:AAACP2738F INCOME TAX OFFICER 9(2)(4), AAYAKAR BHAVAN, MUMBAI-400020 APPELLANT V/S RESPONDENT APPELLANT BY : SHRI S.K.SOMANI RESPONDENT BY : SHRI L.K.AGRAWAL O R D E R PER D.K.AGARWAL (JM) THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 22.4.2010 PASSED BY THE LEA RNED COMMISSIONER OF INCOME TAX (A) FOR THE ASSESSMENT Y EAR 2001-02. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE AS SESSEE- COMPANY IS ENGAGED IN THE MANUFACTURING AND SALE OF CAM INDEXERS/DYES AND TOOLS, FILED RETURN DECLARING TO TAL INCOME AT RS.NIL. THE ORIGINAL ASSESSMENT WAS COMPLETED U NDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (THE ACT ) ON 31.12.2003. SUBSEQUENTLY, THE AO ISSUED NOTICE U NDER SECTION 148 OF THE ACT FOR REASONS THAT COMPEN SATION OF USE OF MACHINERY OF RS.18,00,000/- AND RENT FOR P ORTION OF FACTORY PREMISES OF RS.1,80,000/- SHOULD BE ASSESS ED AS ITA NO.3979/MUM/2010 (ASSESSMENT YEAR: 2001-02) 2 INCOME FROM OTHER SOURCES AS AGAINST THE INCOME FROM BUSINESS AS CLAIMED BY THE ASSESSEE AND ASSESSED ORIGINALLY. ON BEING ASKED, IT WAS EXPLAINED BY TH E ASSESSEE THAT IT WAS A MANUFACTURING COMPANY AND HAD SOME O F ITS FIXED ASSETS UNUSED AND THESE IDEAL ASSETS WERE LE T OUT TO ITS SISTER CONCERN. IT CANNOT CHANGE ITS OBJECT C LAUSE FROM MANUFACTURING COMPANY TO A NON-MANUFACTURING COMPAN Y FOR THE PURPOSE. IT RECEIVED RS.18,00,000/- AS COMPEN SATION FOR THE USE OF MACHINERY AND RS.1,80,000/- FOR HIRE OF A PORTION OF PLANT DURING THE YEAR. IT HAD BEEN SHOWING SU CH INCOME AS BUSINESS INCOME FOR SEVERAL YEARS AND THE AO HA S ACCEPTED ALL ALONG AND NO CAUSE AROSE TO SUDDENLY A SSESS IT UNDER A DIFFERENT HEAD OF INCOME. HOWEVER, THE AO D ID NOT ACCEPT THE ASSESSEES SUBMISSIONS. THE AO WHILE O BSERVING THAT PRINCIPLE OF RES-JUDICATA WAS NOT APPLICABLE OBSERVED THAT IT WAS NOT THE OBJECT OF THE ASSESSEE TO CARRY ON THE BUSINESS OF LETTING OUT ITS FIXED ASSETS. THE COMP ENSATION OR HIRING CHARGES CLEARLY FELL WITHIN THE PURVIEW OF SECTION 56 OF THE ACT. THEREFORE, THE ASSESSEES CONTENTION T HAT THE RENTAL INCOME SHOULD BE ASSESSED AS BUSINESS INCOM E CANNOT BE ACCEPTED. THE AO WHILE RELYING ON THE OR DER OF THE LEARNED COMMISSIONER OF INCOME TAX (A) FOR THE ASSESSMENT YEAR 2003-04 AFFIRMING THE ASSESSMENT OF SAID INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES ASSESSED THE AGGREGATE SUM OF RS.19,80,000/- AS I NCOME ITA NO.3979/MUM/2010 (ASSESSMENT YEAR: 2001-02) 3 FROM OTHER SOURCES VIDE ORDER DATED 19.12.2008, PA SSED UNDER SECTION 143(3) OF THE ACT. 3. ON APPEAL, THE LEARNED COMMISSIONER OF INCOME TA X (A) WHILE CONCURRING WITH THE AO FOR THE REASONS GIVEN BY HIM UPHELD THE ACTION OF THE AO IN INITIATION OF P ROCEEDINGS UNDER SECTION 147 OF THE ACT AND ALSO UPHELD THE V IEW OF THE AO IN ASSESSING THE INCOME OF RS.19,80,000/- AS I NCOME FROM OTHER SOURCES 4. BEING AGGRIEVED BY THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (A), THE ASSESSEE IS IN APPEAL BEFORE US. 5. GROUND NOS.2 AND 3 ARE AGAINST THE ACTION OF THE AO IN TREATING THE INCOME OF RS.19,80,000/- AS INCOME FROM OTHER SOURCES AS AGAINST THE INCOME FROM BUSINESS 6. AT THE TIME OF HEARING, THE LEARNED COUNSEL FOR THE ASSESSEE, AT THE OUTSET, SUBMITS THAT THE ISSUE STA NDS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION O F THE TRIBUNAL IN ASSESSEES OWN CASE IN INCOME TAX OFF ICER V/S M/S. PATEL ALUMINIUM PVT. LTD. AND VICE-VERSA IN ITA NOS.5938 AND 6065/MUM/2006 FOR ASSESSMENT YEAR : 2003- 04 ORDER DATED 22.9.2010, WHEREIN ON THE SIMILAR ISSUE, THE TRIBUNAL HAS HELD THAT THE COMPENSATION FOR USE OF MACHINERY OF RS.18,00,000/- AND COMPENSATION FOR HIRING OF ITA NO.3979/MUM/2010 (ASSESSMENT YEAR: 2001-02) 4 PORTION OF PLANT OF RS.60,000/- AS INCOME FROM BUS INESS. HE, THEREFORE, SUBMITS THAT THE CLAIM MADE BY THE ASSESSEE BE ALLOWED. HE ALSO PLACED ON RECORD A COPY OF TH E SAID ORDER OF THE TRIBUNAL. 7. ON THE OTHER HAND, THE LEARNED DR SUPPORTS THE O RDER OF THE AO AND THE LEARNED COMMISSIONER OF INCOME T AX (A). 8. HAVING CAREFULLY HEARD THE SUBMISSIONS OF THE R IVAL PARTIES AND PERUSING THE MATERIAL AVAILABLE ON REC ORD, WE FIND MERITS IN THE PLEA OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE ISSUE STANDS COVERED IN FAVOUR O F THE ASSESSEE BY THE DECISION OF THE TRIBUNAL (SUPRA), WHEREIN THE TRIBUNAL VIDE PARAGRAPHS 16 OF ITS ORDER HAS H ELD AS UNDER : 16. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS O F THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THERE IS NO DISPUTE THAT THE P LANT AND MACHINERY AND SOME PORTION OF THE FACTORY HAS B EEN GIVEN BY THE ASSESSEE ON HIRE TO ITS SISTER CONCERN ON REGULAR BASIS TO EARN INCOME. THE INCOME THEREFROM HAS BEEN ASSESSED FROM THE ASSESSMENT YEAR 1981-82 TO 1999-2000 AS INCOME FROM BUSINESS. DURING THE YEAR UNDER CONSIDERATION IT WAS NOT ACCEPTED AS SUCH BY THE ASSESSING OFFICER ON THE GROUND THAT TO EARN RENTAL INCOME AS BUSINESS ACTIVITY IS NOT THE OBJECT OF TH E ASSESSEE COMPANY. SINCE THE ASSESSEE IS DERIVING TH E SAID INCOME FROM HIRING OUT ITS PREMISES ALONG WITH PLANT AND MACHINERY REGULARLY FROM EXPLOITATION OF BUSINE SS ASSETS AND TREATING THE SAME AS BUSINESS INCOME AND IT HAS ALSO BEEN ACCEPTED BY THE REVENUE IN THE AFORES AID ASSESSMENT YEARS AS BUSINESS INCOME EVEN IN THE SCRUTINY ASSESSMENTS, THEREFORE, KEEPING IN VIEW TH E RULE OF CONSISTENCY THE RENTAL INCOME DERIVED BY THE ASS ESSEE ITA NO.3979/MUM/2010 (ASSESSMENT YEAR: 2001-02) 5 DID NOT COME WITHIN THE HEAD INCOME FROM OTHER SOUR CES, BUT, THE SAME IS ASSESSABLE UNDER THE HEAD INCOME F ROM BUSINESS. THIS VIEW ALSO FINDS SUPPORT FROM THE REC ENT DECISION OF HONBLE PATNA HIGH COURT IN CIT VS. MIT HILA PROPERTIES PUBLICATION & CONTRACTOR ENTERPRISES (P. ) LTD. (2010) 192 TAXMAN 401(PAT.), WHEREIN IT HAS BEEN OBSERVED AND HELD THAT (PLACITUM 24, PAGE 410) : ..THE ASSESSEES AS OWNERS OF PREMISES WERE, IN RECEIPTS, FROM HIRING OUT THEIR PREMISES ALONG WITH VARIOUS OTHER MOVABLE FITTINGS AND AS SUCH ARE RECEIPTS OF AN ENTERPRISE, QUITE DISTINCT FROM THE ORDINARY RECEIPTS WHICH A LANDLORD DERIVES FROM LETTING OUT HIS PROPERTY. HENCE, IN MY OPINION, THE ASSESSES WERE CARRYING ON AN ADVENTURE OR CONCERN IN THE NATURE OF TRADE. ACCORDINGLY THE COMPENSATION FOR USE OF MACHINERY RS.18.00 LACS AND COMPENSATION FOR HIRING OF PORTIO N OF PLANT RS.60,000/- ARE TREATED AS INCOME FROM BUSINE SS. IN THE ABSENCE OF ANY DISTINGUISHING FEATURES BROUG HT ON RECORD BY THE REVENUE, WE RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL HOLD THAT THE COMPENSATION FOR US E OF MACHINERY OF RS.18,00,000/- AND RENT FOR PORTION O F FACTORY PREMISES OF RS.1,80,000/- ARE TO BE ASSESSED UNDER THE HEAD INCOME FROM BUSINESS AND ACCORDINGLY, THE AO AND LEARNED COMMISSIONER OF INCOME TAX (A) WERE NOT JU STIFIED IN TREATING THE SAME AS INCOME FROM OTHER SOURCES . THE GROUND NOS. 2 AND 3 TAKEN BY THE ASSESSEE ARE THERE FORE ALLOWED. 9. GROUND NO.1 IS AGAINST THE VALIDITY OF REOPENING OF THE ASSESSMENT UNDER SECTION 147 OF THE ACT AND GROUND NO.4 IS AGAINST THE REJECTION OF SET OFF OF UNABSORBED BRO UGHT ITA NO.3979/MUM/2010 (ASSESSMENT YEAR: 2001-02) 6 FORWARD DEPRECIATION AGAINST THE INCOME FROM OTHER SOURCES. 10. AT THE TIME OF HEARING, THE LEARNED COUNSEL FO R THE ASSESSEE SUBMITS THAT SINCE THE ISSUE HAS BEEN DE CIDED BY THE TRIBUNAL IN FAVOUR OF THE ASSESSEE IN ASSESSEE S OWN CASE (SUPRA), THEREFORE, HE DOES NOT WANT TO PRESS AFORESAID GROUNDS NO.1 AND 4 WHICH WAS NOT OBJECTED TO BY THE LEARNED DR . 11. THAT BEING SO AND IN THE ABSENCE OF ANY OTHER SUPPORTING MATERIALS PLACED ON RECORD BY THE LEARNE D COUNSEL FOR THE ASSESSEE, THE GROUNDS TAKEN BY THE ASSESSEE ARE THEREFORE, REJECTED BEING NOT PRESSED. 12. IN THE RESULT, ASSESSEES APPEAL STANDS ALLOWED AS INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 20TH MAY,20 11 SD SD (RAJENDRA SINGH ) (D.K.A GARWAL) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 20 TH MAY, 2011 SRL:13511 ITA NO.3979/MUM/2010 (ASSESSMENT YEAR: 2001-02) 7 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT CONCERNED 4. CIT(A) CONCERNED 5. DR CONCERNED BENCH 6. GUARD FILED. TRUE COPY BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI