SONKHAR INDUSTRIAL SALT WORK .LTD, THANE V. CIT II, THANE

ITA 4337/MUM/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75293 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-01-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 16-01-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 25-06-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GIRIJA DAYAL
• Assessee Lawyers: JITENDRA SINGH; K GOAPAL
• Keywords: Business income; Depreciation; Business expenditure
• Section: 143(3); 56; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH E, MUMBAI BEFORE SHRI R. C. SHARMA, ACCOUNTANT MEMBER AND DR. S.T.M. PAVALAN, JUDICIAL MEMBER ITA NO. 4337/MUM/2012 ASSESSMENT YEAR: 2008-09 M/S. SONKHAR INDUSTRIAL SALT WORKS PVT. LTD. BHAWE HOUSE, OPP. GADKARI RANGAYATAN, DR. MOSSE ROAD, THANE (W) VS. CIT-II THANE (APPELLANT) (RESPONDENT) PERMANENT ACCOUNT NO. :- AACCS 4444D APPELLANT BY : SHRI K. GOAPAL & SHRI JITENDRA SINGH RESPONDENT BY : SHRI GIRIJA DAYAL DATE OF HEARING : 16.01.2014 DATE OF PRONOUNCEMENT : 24.01.2014 O R D E R PER DR. S.T.M. PAVALAN, JM: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF THE LD.CIT- II, THANE, DATED 10.05.2012 PASSED U/S 263 OF INCOM E TAX ACT FOR THE ASSESSMENT YEAR 2008-09. 2. BRIEFLY STATE, THE ASSESSEE FILED THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2008-09 DECLARING A TOTAL INCOME OF RS.60,92,330/- AND THE ASSESSMENT WAS COMPLETED U/S 143(3) WHICH RESULTED IN ASSESSING TH E INCOME OF THE ASSESSEE AT RS.62,11,148/-. SUBSEQUENT TO THE SAID ASSESSMENT, THE LD.CIT ON PERUSAL OF THE CASE RECORDS, FOUND THAT THE BUSINESS OF THE ASSESS EE COMPANY WAS STATED TO BE TRADING IN SHARES/SECURITIES AND INVESTMENT IN MUTU AL FUNDS. HOWEVER, FROM THE P&L ACCOUNT, NO TRADING ACTIVITY AS SUCH WAS DONE BY TH E ASSESSEE. THE ONLY INCOME EARNED BY THE ASSESSEE WAS ON ACCOUNT OF INTEREST A ND DIVIDEND FROM MUTUAL FUNDS. ITA NO. 4337/MUM/2012 M/S. SONKHAR INDUSTRIAL SALT WORKS PVT LTD. ASSESSMENT YEAR: 2008-09 2 ACCORDING TO THE LD.CIT, THE INCOME EARNED BY THE A SSESSEE WAS NOT A BUSINESS INCOME BUT ASSESSABLE UNDER THE HEAD INCOME FROM OTHER SOURCES WHEREAS THE ASSESSEE HAD OFFERED THE SAME AS BUSINESS INCOME WHICH WAS ACCEPTED BY THE AO AS SUCH. SINCE THE INCOME WAS ASSESSABLE U/S 56 OF THE ACT UNDER THE HEAD INCOME FROM OTHER SOURCES, DEDUCTION OF EXPENSES COULD BE ALLOWED AGAINST THIS INCOME IF SUCH EXPENDITURE WAS INCURRED WHOLLY AND EXCLUSIVEL Y FOR THE PURPOSE OF EARNING THAT INCOME. ACCORDINGLY, THE LD.CIT HELD THAT THE AO HA D NOT ONLY ASSESSED THE INCOME UNDER THE WRONG HEAD BUT ALSO ALLOWED EXPENSES AGAI NST SUCH INCOME WITHOUT VERIFYING WHETHER THESE EXPENSES WERE INCURRED WHOL LY AND EXCLUSIVELY FOR THE PURPOSE OF EARNING THE INCOME ASSESSABLE UNDER THE HEAD INCOME FROM OTHER SOURCES. THEREFORE, THE ORDER PASSED BY THE AO WAS ERRONEOUS IN SO FAR AS THE SAME WAS PREJUDICIAL TO THE INTEREST OF THE REVENUE AND ACCORDINGLY THE LD.CIT PASSED THE ORDER U/S263 OF THE ACT. IN THE SAID ORDER, THE LD. CIT SET ASIDE THE ASSESSMENT ORDER PASSED BY THE AO U/S 143(3) AND THE AO WAS DIRECTED TO PASS A FRESH ORDER WHEREIN THE INCOME FROM INTEREST AND DIVIDEND WOULD BE ASSE SSED UNDER THE HEAD INCOME FROM OTHER SOURCES. THE LD.CIT FURTHER DIRECTED TH E AO TO VERIFY THE EXPENDITURE CLAIMED AS DEDUCTION AND ONLY THOSE EXPENSES WHICH HAD BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF EARNING THE INCOME B EING ASSESSED UNDER THE HEAD INCOME FROM OTHER SOURCES, WOULD BE ALLOWED AS DE DUCTION WHILE COMPLETING THE ASSESSMENT. AGGRIEVED BY THE IMPUGNED ORDER, THE AS SESSEE IS IN APPEAL BEFORE US. 3. HAVING HEARD BOTH THE SIDES AND PERUSED THE MATE RIAL ON RECORD, IT IS EXPLAINED THAT THE ASSESSEE IS TRADING IN SHARES AN D SECURITIES AND DUE TO CONDITIONS PREVAILING IN THE STOCK MARKET IN THE YEAR 2007-08, THE ASSESSEE HAS AVOIDED TAKING FRESH POSITION IN THE STOCK MARKET AND THE SURPLUS FUNDS HAVE BEEN DEPLOYED IN EARNING INCOME BY WAY OF INTEREST AND DIVIDEND AGAI NST WHICH NOMINAL BUSINESS EXPENSES HAS BEEN INCURRED. ACCORDING T THE ASSESSE E, THESE EXPENSES ARE ALLOWABLE AS DEDUCTION AGAINST THE INCOME EARNED. THE REASON PROVIDED BY THE LD.CIT THAT THE ASSESSEE HAS EARLIER BEEN ENGAGED IN THE BUSINESS O F SALT WORK AND THE LANDS WHICH ARE USED FOR THE MANUFACTURING OF SALT HAVE BEEN TR ANSFERRED BY THE ASSESSEE FOR WHICH A COMPENSATION HAS BEEN RECEIVED AND THE SAME HAS BEEN INVESTED BY THE ASSESSEE IN VARIOUS MUTUAL FUNDS AND GIVING LOANS O N WHICH INTEREST INCOME HAS ITA NO. 4337/MUM/2012 M/S. SONKHAR INDUSTRIAL SALT WORKS PVT LTD. ASSESSMENT YEAR: 2008-09 3 BEEN EARNED, IN OUR VIEW CANNOT BE A GROUND FOR DIS BELIEVING THE EXPLANATION OF THE ASSESSEE AFOREMENTIONED. THE MERE FACT THAT THE ASS ESSEE HAS NOT ENGAGED IN TRADING IN SHARES AND SECURITIES FOR A SINGLE YEAR CANNOT RESULT IN THE PRESUMPTION THAT THE ASSESSEE HAS COMPLETELY ABANDONED THE SAID BUSINESS. IT IS NOTED THAT THE ASSESSEE HAS EARNED DIVIDEND INCOME OF RS.56,10,261 /- AND INTEREST INCOME OF RS.75,68,086/- AGAINST WHICH THE ASSESSEE HAS DEBIT ED EXPENSES SUCH AS SALARY AND WAGES, WORKMEN AND STAFF WELFARE EXPENSES, TRAVELLI NG EXPENSES, CONVEYANCE EXPENSES, OTHER EXPENSES, INTEREST DEPRECIATION ETC . THE PERUSAL OF THE ALTERNATE WORKING SUBMITTED BY THE ASSESSEE ON THE ASSUMPTION THAT INTEREST INCOME IS TO BE CONSIDERED UNDER THE HEAD INCOME FROM OTHER SOURCE S AS OBSERVED BY THE LD.CIT, INDICATES THAT THE ASSESSMENT ORDER PASSED BY THE A O IS NOT PREJUDICIAL TO THE INTEREST OF THE REVENUE FOR THE PURPOSE OF SECTION 263 OF THE ACT. IN VIEW OF THE AFOREMENTIONED DISCUSSION, WE ARE OF THE CONSIDERED VIEW THAT THE LD.CIT IS NOT JUSTIFIED IN CONCLUDING THAT THE ORDER PASSED BY TH E AO IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. THEREFORE, THE IMPU GNED ORDER OF THE LD.CIT DATED 10.05.2012 PASSED U/S 263 OF INCOME TAX ACT IS QUAS HED. 4. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 24 TH DAY OF JANUARY, 2014. SD/- SD/- (R. C. SHARMA) (DR. S.T.M. PAVALAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 24.01.2014. *SRIVASTAVA COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR E BENCH //TRUE COPY// BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.