ITO 8(1)3, MUMBAI V. ENDOVASCULAR THERAPEUTICS INDIA P. LTD, MUMBAI

ITA 41/MUM/2011

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 4294 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 11 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-01-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 20-10-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 04-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B S N RAJUDR
• Keywords: Business income; Bad and doubtful debts

Judgement Text

, ' INCOME TAX APPELLATE TRIBUNAL,MUMBAI- E,BENCH , , BEFORE S/SH. RAJENDRA,ACCOUNTANT ME MBER & SANJAY GARG,JUDICIAL MEMBER /.ITA NO.41/MUM/2011, /ASSESSMENT YEAR-2006-07 INCOME TAX OFFICER-8(1)3 ROOM NO.206, 2 ND FLOOR AAYAKAR BHAVAN, M.K. ROAD MUMBAI-400 020. VS M/S. ENDOVASCULAR THERAPEUTICS (I) PVT. LTD. 201, STEEL HOUSE, 24, MAHAL INDL. ESTATE, OFF MAHAKALI CAVES ROAD, ANDHERI (E),MUMBAI-400 093. PAN:AAACE 6945 R /ASSESSEE BY : SHRI BHUPENDRA SHAH (AR) / REVENUE BY : SHRI B.S.N. RAJU-(DR) / DATE OF HEARING : 09 - 11 -2015 / DATE OF PRONOUNCEMENT : 01.01.2016 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDER DATED 18.10.2010 THE ASSESSI NG OFFICER (AO) HAS FILED PRESENT APPEAL. ASSESSEE-COMPANY, ENGAGED IN THE BUSINESS OF RENTIN G OUT OFFICE PREMISES, FILED ITS RETURN OF INCOME ON 29.11.2006, DECLARING TOTAL LOSS OF RS.26 .60 LACS.THE AO COMPLETED THE ASSESSMENT U/S.143(3) OF THE ACT ON 28.11.2008 DETERMINING THE INCOME OF THE ASSESSEE AT RS.9.15 LACS. THE EFFECTIVE GROUND OF APPEAL IS ABOUT THE DIRECTION G IVEN TO THE AO TO ALLOW THE BUSINESS LOSS RS.36.50 LACS. 2. DURING THE ASSESSMENT PROCEEDINGS THE AO FOUND THAT THE ASSESSEE HAD SHOWN RECEIPT OF RS.9, 750/- AS SALE PROCEEDS,OTHER INCOME OF RS.13.61 LAC S; CONSISTING OF RENT RECEIPTS-RS.11.16 LACS, INTEREST RS.2,159/-, SALES TAX REFUND-RS.18,080/- AND RECOVERY OF BAD DEBTS OF RS.2.25 LACS. THE ASSESSEE HAD CLAIMED EXPENSES OF RS.44.51 LACS.VIDE HIS ORDER SHEET NOTING DATED 10.10.2008, AO ASKED THE ASSESSEE TO EXPLAIN WHY RENT RECEIPT S HOULD NOT BE TREATED AS INCOME FROM HOUSE PROPERTY AND THE EXPENDITURE CLAIMED IN P&L ACCOUN T SHOULD NOT BE DISALLOWED SINCE IT WAS NOT CARRYING OUT ANY BUSINESS. IN ITS REPLY, THE ASSESS EE FILED A REVISED COMPUTATION SHOWING RENTAL INCOME AS INCOME FROM HOUSE PROPERTY AND CLAIMED BU SINESS LOSS OF RS.36.54 LACS. AS PER THE AO ASSESSEE DID NOT FILE ANY EXPLANATION FOR FILING REVISED COMPUTATION. THE AO HELD THAT BUSINESS LOSS CLAIMED BY IT COULD NOT BE ACCEPTED, THAT IT WAS NOT CONDUCTING ANY BUSINESS ACTIVITY DURING THE YEAR UNDER CONSIDERATION, THAT IT HAD NOT SOLD ANY ITEM OR HAD MADE ANY PURCHASE DURING THE YEAR, THAT IT HAD CLAIMED VARIO US EXPENSES.HE AASESSED THE INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES. 3. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE PREF ERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY (FAA).AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE AND THE ASSESSMENT ORDER, HE HELD THAT THE INCOME RECEIVED BY THE ASSESSEE FROM LETTING OUT OF PROPERTY WAS TO BE TREATED AS INCOME FROM HOUSE PROPERTY, THAT SAME COULD NOT B E TREATED AS BUSINESS INCOME.RELYING UPON THE DECISIONS OF SHAMBHU INVESTMENT (266 ITR 143) A ND CHENNAI PROPERTY (266 ITR 685), THE FAA UPHELD THE ORDER OF THE AO. HE FURTHER HELD THA T THERE WAS A DISTINCTION BETWEEN A LULL IN 41/11ENDOVASCULAR 2 BUSINESS AND GOING OUT OF BUSINESS, THAT THE ASSESS EE HAD EVERY INTENTION TO CARRY ON ITS BUSINESS, THAT NO PRUDENT PERSON WOULD LIKE TO KEEP ITS STOCK WHICH WAS SO WELL SOLD IN THE IMMEDIATELY PREVIOUS YEAR, THAT IT HAD MAINTAINED ITS OFFICE AN D STAFF , THAT IT HAD INCURRED EXPENSES ON ALMOST ALL HEAD OF EXPENDITURE AS IN THE PREVIOUS YEAR, TH AT IT COULD NOT BE SAID THAT COMPANY WAS NOT INTENDING TO START ITS BUSINESS AFRESH, THAT THE AO HAD INCORRECTLY ASSUMED THAT ASSESSEES BUSINESS HAD CLOSED,THAT THE INCOME EARNED BY IT DU RING THE COURSE OF ITS BUSINESS (RECEIPT OF SALES-TAX REFUND AND RECEIPT OF BAD DEBTS) SHOULD B E TREATED AS INCOME FROM BUSINESS AND NOT INCOME FROM OTHER SOURCES.HE DIRECTED THE AO TO REC OMPUTE THE INCOME UNDER THE HEAD BUSINESS AND NOT UNDER THE HEAD INCOME FROM OTHE R SOURCES. 4. DURING THE COURSE OF HEARING BEFORE US, THE DEPARTM ENTAL REPRESENTATIVE (DR) FAIRLY CONCEDED THAT THE GROUND OF APPEAL RAISED BY THE AO WAS NOT ARISING OUT OF THE ORDER OF THE FAA, THAT THE FAA HAD UPHELD THE ORDER OF THE AO WITH REGARD TO INCOME FROM HOUSE PROPERTY, THAT HE HAD DIRECTED THE AO TO TREAT SALES TAX REFUND AND BAD D EBTS RECOVERY AS BUSINESS INCOME. WE FIND THAT THE FAA HAD HELD THAT RENTAL INCOME WAS TO BE ASSES SED UNDER THE HEAD INCOME FROM HOUSE PROPERTY.THEREFORE, IN OUR OPINION THE GROUNDS RAI SED BY THE AO ARE MISCONCEIVED AND DESERVE TO BE REJECTED.AS WE DO NOT SEE ANY INFIRMITY IN TH E ORDER OF THE FAA, SO WE CONFIRM HIS ORDER. AS A RESULT,APPEAL FILED BY THE AO STANDS DISMISS ED. . ORDER PRONOUNCED IN THE OPEN COURT ON 1 ST JANUARY, 2016. 1 , 2016 SD/- SD/- ( / SANJAY GARG) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER /MUMBAI, /DATE: 01.01.2016 . . . JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR E BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.