Madras Sheet Glass Works (P) Ltd., CHENNAI V. ITO, CHENNAI

ITA 442/CHNY/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 6421 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 5 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-08-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 05-06-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 29-02-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K RAVI
• Assessee Lawyers: D ANAND
• Keywords: Business income

Judgement Text

, , IN THE INCOME - TAX APPELLATE TRIBUNAL B BENCH, CHENNAI , . , BEFORE SHRI CHANDRA POOJARI , ACCOUNTANT MEMBER & SHRI DUVVURU RL REDDY , JUDIC IAL MEMBER ./ I.T.A.NO. 442/MDS/2016 / ASSESSMENT YEAR :20 11 - 12 M/S. MADRAS SHEET GLASS WORKS (P) LTD., NO. 67A, VILLAGE ROAD, THIRUVOTTIYUR, C HENNAI 600 0 19 . [PAN: A A A C M5340G ] VS. THE INCOME TAX OFFICER, CO MPANY WARD I V ( 1 ), 121, MAHATMA GANDHI ROAD, NUNGAMBAKKAM, CHENNAI 600 019. ( / APPELLANT ) ( / RESPONDENT ) / APPELLANT BY : SHRI D. ANAND, A DVOCATE / RESPONDENT BY : SHRI K. RAVI , JCIT / DATE OF H EARING : 0 6 . 0 6 .201 7 / DATE OF P RONOUNCEMENT : 21. 0 8 .201 7 / O R D E R PER DUVVURU RL REDDY , JUDICIAL MEMBER : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) 8 , C HENNAI DATED 05 . 11 .201 5 RELEVANT TO THE ASSESSMENT YEAR 20 11 - 12 . THE ASSESSEE HAS RAISED FOLLOWING GROUNDS IN ITS APPEAL: (I) THE CIT (A) ERRED IN NOT ACCEPTING THE APPELLANT'S CLAIM THAT IT WAS CARRYING ON TRADING BUSINESS IN GLASS SHEET, DURING THE ACCOUNTING PERIOD ALTHOUGH ON A SMALL SCALE. (II) THE CIT (A) OUGHT TO HAVE DIRECTED THE ASSESSING OFFICER TO COMPUTE THE LOSSES INCURRED BY THE ASSESSEE DURING THE YEAR (WITHOUT TAKING INTO ACCOUNT THE I.T.A. NO. 442/M/16 2 LEASE RENT RECEIVED AS SALE PROCEEDS OF LAND) AND SET OFF SAID LOSSES AGAINST THE INCOME FROM OTHER SOURCES INCLUDED IN THE COMPUTATION OF TOTAL INCOME. (III) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT (A) OUGHT TO HAVE ACCEPTED THE APPELLANT'S CONTENTION THAT THE LEASE RENT OF RS12,08,898/ - I S ASSESSABLE AS BUSINESS PROFITS. (IV) FOR THE GROUNDS STATED ABOVE AND SUCH OTHER GROUNDS WHICH MAY BE PERMITTED TO BE ADDUCED AT THE TIME OF HEARING THE APPEAL, THE APPELLANT COMPANY PRAYS FOR THE RELIEF AS STATED ABOVE. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HAS FILED ITS RETURN OF INCOME ON 21.09.2011 ADMITTING A GROSS TOTAL INCOME OF .39.02 LAKHS. THE RETURN OF INCOME WAS PROCESSED UNDER SECTION 143(10 OF THE INCOME TAX ACT, 1961 [ ACT IN SHORT] ON 10.01.2012. THEREAFTER, THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY BY USING NOTICE UNDER SECTION 143(2) OF THE ACT ON 25.092012. AFTER VERIFICATION OF THE DETAILS FILED BY THE ASSESSEE AND CONSIDERING THE SUBMISSIONS, THE ASSESSING OFFICER HAS COMPLETED THE ASSESSMENT UNDER SECTION 1 43(3) OF THE ACT ON 28.03.2014 DETERMINING THE TOTAL INCOME OF THE ASSESSEE AT .1,09,62,943/ - AFTER MAKING VARIOUS ADDITIONS. 3. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A). AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE LD. CIT(A) DISMISSED THE APPEAL FILED BY THE ASSESSEE. 4. ON BEING AGGRIEVED, T HE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE ASSESSEE HAS BEEN I.T.A. NO. 442/M/16 3 IN THE BUSINESS OF LETTING OUT THE PROPERTY AND LEASE RENTAL INCOME SHOULD BE ASSESSABLE AS BUSINESS PROFITS AND THEREFORE THE LOSS INCU RRED BY THE ASSESSEE DURING THE YEAR SHOULD BE SET OFF AGAINST THE BUSINESS INCOME AND MAINLY RELIED ON THE DECISION IN THE CASE OF CHENNAI PROPERTIES & INVESTMENTS LTD. V. CIT 373 ITR 673 (SC) . 5. ON THE OTHER HAND, THE LD. DR SUPPORTED THE ORDER PASSED BY THE LD. CIT(A). 6. WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. WITH REGARD TO RENTAL INCOME, BEFORE THE ASSESSING OFFICER, IT WAS THE SUBMISSIONS OF THE ASSESSEE THAT THE ASSE SSEE HAS BEEN IN THE HABIT OF LETTING OUT THE PROPERTY FROM 2005 ONWARDS. IN PRECEDING ASSESSMENT YEARS, THE ASSESSEE ALSO SOLD PART OF THE PROPERTY. THE OBJECT OF THE COMPANY WAS NOT TO TAKE ANY WAREHOUSE OPERATION. IT IS ONLY TO EXPLOIT THE PROPERTY BY W AY OF LETTING OUT THE SAME. ONCE I T I S NOT IN DISPUTE THAT ONE OF THE OBJECTS OF THE ASSESSEE WAS LETTING OUT THE PROPERTY WE ARE OF THE CONSIDERED OPINION THAT THE RESULTING RENTAL INCOME S HOULD BE ASSESSABLE TO TAX UNDER THE HEAD INCOME FROM BUSINESS I N VIEW OF THE RATIO LAID DOWN IN THE CASE OF CHENNAI PROPERTIES & INVESTMENTS LTD. V. CIT 373 ITR 673 (SC) AND RELEVANT FINDING OF THE HON BLE SUPREME COURT ARE REPRODUCED AS UNDER: 11. WE ARE CONSCIOUS OF THE AFORESAID DICTA LAID DOWN IN THE CONSTITUTIO N BENCH JUDGMENT. IT IS FOR THIS REASON, WE HAVE, AT THE BEGINNING OF THIS I.T.A. NO. 442/M/16 4 JUDGMENT, STATED THE CIRCUMSTANCES OF THE PRESENT CASE FROM WHICH WE ARRIVE AT IRRESISTIBLE CONCLUSION THAT IN THIS CASE, LETTING OF THE PROPERTIES IS IN FACT IS THE BUSINESS OF THE ASSESSEE. THE ASSESSEE THEREFORE, RIGHTLY DISCLOSED THE INCOME UNDER THE HEAD INCOME FROM BUSINESS. IT CANNOT BE TREATED AS 'INCOME FROM THE HOUSE PROPERTY'. WE, ACCORDINGLY, ALLOW THIS APPEAL AND SET ASIDE THE JUDGMENT OF THE HIGH COURT AND RESTORE THAT OF THE INCOME TAX APPELLATE TRIBUNAL. NO ORDERS AS TO COSTS. 6.1 FURTHER, WE FIND THAT THE DEPARTMENT COULD NOT PRODUCE ANY MATERIAL EVIDENCE TO SHOW THAT THE ASSESSEE COMPANY HAS BEEN LIQUIDATED EITHER VOLUNTARILY OR BY THE ORDER OF THE COURT OR UNDER SECTION 516 OF THE COMPANIES ACT, 1956 AND IN FACT, THE ASSESSING OFFICER HIMSELF NOTED IN THE ASSESSMENT ORDER THAT THE ASSESSEE HAD TRADE RECEIPT OF .42,166/ - OUT OF BUSINESS. THEREFORE, IT CANNOT BE SAID THAT ASSESSEE S BUSINESS HAS BEEN WINDED UP. 6.2 UNDER THE ABOVE FACTS AND CIRCUMSTANCES, WE DIRECT THE ASSESSING OFFICER TO COMPUTE THE LOSSES INCURRED BY THE ASSESSEE AGAINST THE BUSINESS INCOME I.E., RENTAL INCOME AND THUS, THE GROUND RAISED BY THE ASSESSEE IS ALLOWED. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED ON THE 21 ST AUGUST , 201 7 AT CHENNAI. SD/ - SD/ - ( CHANDRA POOJARI ) ACCOUNTANT MEMBER ( DUVVURU R L REDDY ) JUDICIAL MEMBER CHENNAI, DATED, THE 21 . 0 8 .201 7 VM/ - I.T.A. NO. 442/M/16 5 / COPY TO: 1. / APPELLANT , 2. / RESPONDENT , 3. ( ) / CIT(A) , 4. / CIT , 5. / DR & 6. / GF.