DCIT - 10(3)(2), MUMBAI V. PHOTOPHONE PVT. LTD., MUMBAI

ITA 4187/MUM/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 0438 (ITAT-MUMBAI)
• Duration Of Justice: 8 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-02-2018
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2008-2009
• Appeal Filed On: 07-06-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: N HEMALATHA
• Assessee Lawyers: V C SHAH
• Keywords: Business income; Business expenditure; Retrospective amendment; Tax effect

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI SMC BENCHES , MUMBAI , BEFORE SHRI JOGINDER SINGH, J UDICIAL M EMBER ITA NO . 4187 /MUM/20 17 ASSESSMENT YEAR: 200 8 - 0 9 DCIT, CIRCLE - 10(3)(2), MUMBAI. / VS. M/S. PHOTOPHONE PVT. LTD., 7, EXCOM HOUSE, SAKI VIHAR ROAD, ANDHERI (EAST), MUMBAI 400 072. ( /ASSESSEE) ( / REVENUE) P.A. NO. AA A C P 6792 P / ASSESSEE BY SHRI V.C. SHAH AR / REVENUE BY MS. N. HEMALATHA - DR / DATE OF HEARING : 13 /02 /201 8 / DATE OF ORDER : 13 /0 2 /201 8 / O R D E R THE REVENUE IS AGGRIEVED BY THE IMPUGNED ORDER DATED 2 0/03 /201 7 OF THE LD. FIRST APPELL ATE AUTHORITY, MUMBAI . THE FIRST GROUND RAISED BY THE REVEN UE PERTAINS TO TREAT MENT OF INTEREST INCOME OF RS. 12,43,017/ - AS INCOME FROM OTHER ITA NO. 4187/MUM/2017 M/S. PHOTOPHONE PVT. LTD. 2 SOURCES WITHOUT APPRECIATING THAT FOR ASSESSMENT YEAR 2007 - 08 THE TRIBUNAL ALLOWED THE APPEAL OF THE ASSESSEE FO R STATISTICAL PURPOSES. THE LD. DR MS. N. HEMALATHA INVITED MY ATTENTION TO PAGE 8 & 9 OF THE PAPER BOOK . IT WAS CONTENDED THAT THE ISSUE MAY BE SENT TO THE FILE OF THE LD. ASSESSING OFFICER . ON THE OTHER HAND, LD. COUNSEL FOR THE ASSESSEE SHRI V.C. S HA H DEFENDED THE IMPUGNED ORDER. A QUERY WAS RAISED BY THE BENCH WHETHER ANY ORDER HAS BEEN PASSED BY THE LD.ASSESSING OFFICER PURSUANT TO THE DIRECTION IN ASSESSMENT YEAR 2007 - 08, THE LD. COUNSEL CONTENDED THAT NO ORDER HAS BEEN PASSED. 2. CONSIDERIN G THE ARGUMENTS FROM BOTH SIDES , I FIND THAT THE TRIBUNAL VIDE ORDER DATED 17/05/2016 (ITA NO. 5816/MUM/2016 & ITA NO S . 4672 & 586 /MUM/ 2014 PASSED THE FOLLOWING ORDER: - THE ASSESSEE AS WELL AS THE REVENUE ARE IN APPEAL AGAINST THE RESPECTIVE ORDERS OF TH E LD. FIRST APPELLATE AUTHORITY FOR THE RESPECTIVE ASSESSMENT YEARS. THE ASSESSEE HAS ALSO PREFERRED CROSS - OBJECTIONS FOR A.Y. 2007 - 08. 2. FIRST WE SHALL TAKE UP THE APPEAL IN ITA NO.4672/MUM/2013 FOR A.Y. 2007 - 08, APPEAL FILED BY THE ITA NO. 4187/MUM/2017 M/S. PHOTOPHONE PVT. LTD. 3 REVENUE, WHEREIN A T THE OUTSET THE LEARNED COUNSEL FOR THE ASSESSEE SHRI V C SHAH POINTED OUT THAT THE TAX EFFECT IN THE IMPUGNED APPEAL IS BELOW PRESCRIBED MONETARY LIMIT. THIS FACTUAL MATRIX WAS CONSENTED TO BE CORRECT BY THE LEARNED DR. 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN VIEW OF THE ABOVE, IT IS NOTED THAT THE TAX EFFECT IN THE PRESENT APPEAL IS BELOW PRESCRIBED LIMIT OF RS.10 LAKH FOR FILING THE APPEAL BEFORE THE TRIBUNAL, AS CONTAINED IN CBDT INSTRUCTION NO.21 OF 2015, DATED 10/12/2015 (F NO.279/MISC./142/2007 - IT(PT), APPLICABLE WITH RETROSPECTIVE EFFECT, WHEREIN, THE DEPARTMENT WAS ADVISED/DIRECTED BY THE BOARD NOT TO FILE APPEAL IN THE CASES WHERE THE TAX EFFECT DOES NOT EXCEED THE FOLLOWING MONETARY LIMIT.: - SL. NO. APPEALS IN INCOME TAX MATTERS MONETARY LIMIT (IN RS.) 1. BEFORE ITAT 10,00,000/ - 2. U/S 260 A BEFORE HONBLE HIGH COURT 20,00,000/ - 3. BEFORE HONBLE SUPREME COURT 25,00,000/ - IN VIEW OF THE ABOVE INSTRUCTION, SINCE, THE TAX EFFECT IS LES S THAN RS.10,00,000/ - , CONSEQUENTLY, THE APPEAL OF THE REVENUE IS NOT MAINTAINABLE, THEREFORE, DISMISSED. 4. FINALLY, THE APPEAL OF THE REVENUE IS DISMISSED AS NOT MAINTAINABLE. 5. SO FAR AS THE CROSS - OBJECTION NO.130/MUM/2015 (ARISING OUT OF ITA NO.4672/ MUM/2013) IS CONCERNED, IT WAS NOT PRESSED BY THE LEARNED COUNSEL FOR THE ASSESSEE, THEREFORE, THE CROSS - OBJECTION OF THE ASSESSEE IS ALSO DISMISSED AS NOT PRESSED. 6. NOW WE SHALL TAKE UP THE APPEAL IN ITA NO. 586/MUM/2014 WHEREIN FIRST GROUND RAISED BY THE REVENUE PERTAINS TO HOLDING THAT RENTAL INCOME EARNED BY THE ASSESSEE COMPANY WAS A BUSINESS INCOME WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE DID NOT CARRY OUT ITA NO. 4187/MUM/2017 M/S. PHOTOPHONE PVT. LTD. 4 ANY BUSINESS OPERATION AND LET OUT ITS PROPERTY IN THE YEAR 2000, DUE TO ADVERSE MARKE T CONDITIONS. 6.1 THE CRUX OF THE ARGUMENTS ADVANCED ON BEHALF OF THE REVENUE IS IDENTICAL TO THE GROUND RAISED. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE ASSESSEE CONTENDED THAT ON IDENTICAL FACT, IN EARLIER ASSESSMENT YEAR, THE CLAIM OF THE ASSESS EE WAS ACCEPTED AND NO APPEAL WAS FILED BY THE DEPARTMENT. THIS FACTUAL ASSERTION OF THE ASSESSEE WAS NOT CONTROVERTED BY THE REVENUE. 6.2 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE ISSUE UNDE R HAND HAS BEEN DISCUSSED IN DETAIL BY THE LEARNED CIT(A) IN PARA 2.1.1 OF THE IMPUGNED ORDER WHEREIN THE FACTUAL MATRIX HAS BEEN DULY CONSIDERED ALONG WITH THE OBSERVATION MADE IN THE ASSESSMENT ORDER WHEREIN THE ASSESSING OFFICER ASSESSED THE INCOME FROM HOUSE PROPERTY AND DISALLOWED THE EXPENDITURE. ADMITTEDLY, SIMILAR ISSUE AROSE FOR CONSIDERATION AS HAS BEEN REPRODUCED IN PARA 2.3.1, WHEREIN THE INCOME FROM INTEREST WAS TREATED AS INCOME FROM OTHER SOURCES. SINCE NO APPEAL WAS FILED BY THE DEPARTMENT THEREFORE, ON THE PRINCIPLE OF PARITY AND IN THE ABSENCE OF CONTRARY FACTS, THIS GROUND OF THE ASSESSEE IS ALLOWED. 7. THE NEXT GROUND RAISED BY THE REVENUE PERTAINS TO ALLOWING REPAIR EXPENSES OF RS.35,57,404/ - , AS BUSINESS EXPENSES WITHOUT APPRECIATIN G THE FACT THAT RENTAL INCOME IS ASSESSABLE UNDER THE HEAD INCOME FROM HOUSE PROPERTY AND THEREBY NO ALLOWABLE U/S. 24(A) OF THE ACT. CONSIDERING THE TOTALITY OF FACTS AND THE FACTUAL FINDING RECORDED IN THE IMPUGNED ORDER, WE ARE OF THE VIEW THAT SINCE THE ASSESSING OFFICER HAS NOT DOUBTED THE EXPENSES ON ACCOUNT OF REPAIR AND MAINTENANCE; THIS GROUND OF THE REVENUE IS HAVING NO MERIT, CONSEQUENTLY, DISMISSED. 8. NOW WE SHALL TAKE UP ITA NO.5816/MUM/2014 WHEREIN FIRST GROUND RAISED BY THE ASSESSEE PER TAINS TO SUSTAINING THE DISALLOWANCE OF EXPENSES AMOUNTING TO RS.5,16,625/ - , WHICH WERE INCURRED WHOLLY AND ITA NO. 4187/MUM/2017 M/S. PHOTOPHONE PVT. LTD. 5 EXCLUSIVELY FOR BUSINESS PURPOSES. THE STAND OF THE ASSESSEE IS THAT IT IS AN ALLOWABLE DEDUCTION. IT WAS EXPLAINED THAT THE ASSESSEE IS ENGAGED I N MANUFACTURING, SUPPLY, INSTALLATION AND MAINTENANCE OF THEATRE EQUIPMENTS. THE ASSESSEE INCURRED EXPENSES OF RS.5,16,625/ - AND SHOWED THE SAME IN PROFIT & LOSS ACCOUNT (PAGE 6 OF THE PAPER - BOOK). THE CRUX OF THE ARGUMENT IS THAT THE ENTIRE EXPENSES WER E INCURRED FOR MANAGING THE AFFAIRS OF THE COMPANY AND TO MEET OUT THE OBLIGATIONS AND THE EXPENSES WERE INCURRED FOR BUSINESS PURPOSES. IT WAS ASSERTED BY THE LEARNED COUNSEL THAT IN A.Y. 2007 - 08 LIKE EXPENSES WERE ACCEPTED BY THE DEPARTMENT FOR WHICH OU R ATTENTION WAS INVITED TO THE DETAILS OF EXPENSES MENTIONED AT PAGE 2 OF THE ASSESSMENT ORDER. IT WAS EXPLAINED THAT LEGAL EXPENSES WERE INCURRED FOR CONTESTING EXCISE AND SALES TAX CASES. THE CRUX OF THE ARGUMENT THAT FROM A.YS. 1994 - 95 TO 2007 - 08, THE DEPARTMENT HAD BEEN ACCEPTING SUCH EXPENSES. THIS FACTUAL MATRIX WAS NOT CONTROVERTED BY THE REVENUE. 8.1 CONSIDERING THE FACTUAL MATRIX AND THE SUBMISSIONS OF THE ASSESSEE THERE IS NO DISPUTE TO THE FACT THAT THE IMPUGNED EXPENSES WERE INCURRED BY TH E ASSESSEE AS LEGAL AND OF PROFESSIONAL FEES (RS.3,28,946/ - ), PRINTING AND STATIONERY (RS.6,623/ - ), TRAVELLING AND CONVEYANCE EXPENSES (RS.54,136/),MISCELLANEOUS EXPENSES (RS.39,711/ - ), AUDIT FEES (RS.27,575/ - ) ETC., IN OUR VIEW ARE ALLOWABLE EXPENSES. EV EN OTHERWISE, AS CLAIMED BY THE ASSESSEE, THE DEPARTMENT HAD BEEN ACCEPTING SUCH EXPENSES, THEREFORE, IN THE ABSENCE ANY CONTRARY FACTS SUCH EXPENSES HAVE TO BE ALLOWED. THIS GROUND OF THE ASSESSEE IS, THEREFORE, ALLOWED. 9. THE NEXT GROUND PERTAINS TO CO NFIRMING THE INTEREST EARNED AMOUNTING TO RS.6,80,534/ - AS INCOME FROM OTHER SOURCES AND NOT INCOME FROM BUSINESS. THE STAND OF THE ASSESSEE IS IDENTICAL TO THE GROUND RAISED. ON THE OTHER HAND, THE LEARNED DR DEFENDED CONCLUSION ARRIVED AT IN THE IMPUGN ED ORDER. 9.1. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. FROM THE PROFIT ITA NO. 4187/MUM/2017 M/S. PHOTOPHONE PVT. LTD. 6 & LOSS ACCOUNT, FILED BY THE ASSESSEE IT WAS OBSERVED BY THE LEARNED ASSESSING OFFICER THAT THE ASSESSEE HAS CREDITED A SUM OF RS.9,51, 738/ - AS OTHER INCOME. OUT OF THIS IMPUGNED AMOUNT IT WAS NOTICED THAT RS.84,816/ - IS RENTAL INCOME AND THE REMAINING AMOUNT OF RS.6,54,961/ - IS INTEREST FROM DEPOSITS. THE CONTENTION OF THE ASSESSEE WAS CONSIDERED AND THE ASSESSING OFFICER TREATED THE I NCOME OF RS.6,54,961/ - AS INCOME FROM OTHER SOURCES. ON APPEAL, BEFORE THE COMMISSIONER OF INCOME TAX (APPEAL), THE CONTENTION OF THE ASSESSEE WAS CONSIDERED. IN PARA 2.3.2, THERE IS CONCLUSION BY THE COMMISSIONER OF INCOME TAX (APPEAL) THAT THE ASSESSEE ITSELF AGREED THE AMOUNT TO BE TAXED AS INCOME FROM OTHER SOURCES AND THUS THIS GROUND OF THE ASSESSEE WAS DISMISSED. 9.2. IF THE OBSERVATION MADE IN THE ASSESSMENT ORDER, LEADING TO ADDITION MADE TO THE TOTAL INCOME, CONCLUSION DRAWN IN THE IMPUGNED ORD ER, MATERIAL AVAILABLE ON RECORD, ASSERTIONS MADE BY THE LD. RESPECTIVE COUNSEL, IF KEPT IN JUXTAPOSITION AND ANALYZED, THE CLAIM OF THE ASSESSEE, BEFORE US, IS THAT THE ASSESSEE HAD BEEN CONSISTENTLY CARRYING ON THE ACTIVITY OF INVESTING AND EARNED INTERE ST ON INTER - CORPORATE DEPOSITS AND THUS THE INCOME WAS OFFERED AS BUSINESS INCOME AND WAS ACCEPTED AS SUCH IN EARLIER YEARS, LIKE, ASSESSMENT YEARS 1990 - 91, 1992 - 93, 1994 - 95, 1995 - 96 AND 2001 - 02. IN TURN, THE LD. DR ASSERTED FOR ASSESSMENT YEAR 2009 - 10, T HE ISSUE WAS NOT CONTESTED BY THE ASSESSEE BY INVITING OUR ATTENTION TO PARA 2.3.2 OF THE IMPUGNED ORDER. THE ASSESSEE EXPLAINED THAT DUE TO TAX EFFECT, IT WAS NOT CONTESTED. CONSIDERING THE TOTALITY OF FACTS, WE REMAND THIS ISSUE TO THE FILE OF THE LD. A SSESSING OFFICER TO EXAMINE WHETHER IDENTICALLY SUCH INCOME WAS ACCEPTED BY THE DEPARTMENT AND ALSO WHETHER THE FACTS IN EARLIER YEARS AS WELL AS IN THE PRESENT YEAR ARE IDENTICAL AND IF FOUND TO BE IDENTICAL, WHY NOT ACCEPTED IN THE PRESENT ASSESSMENT YEA R. AFTER EXAMINING THE FACTS, THE LD. ASSESSING OFFICER IS DIRECTED TO DECIDE IN ACCORDANCE WITH LAW. THE ASSESSEE BE GIVEN OPPORTUNITY, THUS, THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSES, CONSEQUENTLY, THIS APPEAL IS PARTLY ALLOWED FOR STATISTICAL PUR POSES. ITA NO. 4187/MUM/2017 M/S. PHOTOPHONE PVT. LTD. 7 FINALLY, ITA NO.4672/MUM/2013, THE APPEAL OF THE REVENUE, IS DISMISSED AS NOT MAINTAINABLE ON LOW TAX EFFECT C.O. NO.130/MUM/2015 OF THE ASSESSEE IS DISMISSED AS NOT PRESSED. ITA NO.586/MUM/2014, THE APPEAL OF THE REVENUE IS PARTLY ALLOWED. ITA NO .5816/MUM/2014 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 3 CONSIDERING THE AFORESAID ORDER OF THE TRIBUNAL DATED 17/05/2016 , I REMAND THE PRESENT ISSUE TO THE FILE OF THE LD.ASSESSING OFFICER TO EXAMINE AFRESH AND DECIDE IN ACCORDANCE WITH LAW. 4 SO F AR AS DISALLOWANCE OF RS. 55,13,538/ - BEING VARIOUS EXPENSES CLAIMED UNDER SECTION 57 (III) OF THE ACT WITHOUT APPRECIATING NATURE OF THE EXPENSES . THE LD. DR ADVANCED ARGUMENTS WHICH IS IDENTICAL TO THE GROUND RAISED. THE LD. COUNSEL FOR THE ASSESSEE DE FENDED THE IMPUGNED ORDER BY CONTENDING THAT THE ASSESSEE HAS NOT CLAIMED DEDUCTION UNDER SECTION 36 OF THE ACT . CONSIDERING THE ABOVE ORDER, WE REMAND THIS ISSUE ALSO TO THE FILE OF THE LD. ASSESSING OFFICER TO EXAMINE THE CLAIM OF THE ASSESSEE AND DECID E IN ACCORDANCE WITH LAW. THE ASSESSEE BE GIVEN OPPORTUNITY OF ITA NO. 4187/MUM/2017 M/S. PHOTOPHONE PVT. LTD. 8 BEING HEARD TO SUBSTANTIATE ITS CLAIM. THE APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. FINALLY, THE APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. T HIS ORDER WA S PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVES FRO M BOTH SIDES AT T H E CONCLUSION OF THE HEARING ON 13/02 /201 8 . S D/ - (JOGINDER SINGH) / JUDICIAL MEMBER MUMBAI; DATED : 13 /02 /201 8 VR , P.S/. . . / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT, MUMB AI. 4. / CIT(A) - , MUMBAI 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. / BY ORDER, //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI