GULU MAHTANEY HUF, MUMBAI V. DCIT WD 12(3), MUMBAI

ITA 4581/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 101158 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 3 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-09-2015
• Appeal Filed By: Assessee
• Bench Allotted: G
• Next Hearing Date: 02-06-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 10-06-2013
• Court: TRIBUNAL
• Department Lawyers: A K KARDA M
• Assessee Lawyers: ANIL J SATHE
• Keywords: Business income; Business expenditure; Condonation of delay
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER I.T.A. NO. 4581/M/2013 (AY: 2008 - 2009 ) M/S. GULU MAHATANY (HUF), C/O. NITIN MEHTA CHARTERED ACCOUNTANT, 12, ALAKNANDA, GULMOHAR CROSS ROAD NO.10, JUHU SCHEME, MUMBAI - 400049. / VS. DCIT - 12(3) , MUMBAI. ./ PAN : AAACP6449F ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : SHRI ANIL J. SATHE, AR / RESPONDENT BY : SHRI A.K. KARDAM, DR / DATE OF HEARING : 30 .07.2015 / DATE OF PRONOUNCEMENT : 23 .09.2015 / O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE ASSESSEE ON 10.6.2013 IS AGAINST THE ORDER OF THE CIT (A) - 23, DATED 24.8.2011 FOR THE ASSESSMENT YEAR 2008 - 2009. IN THIS APPEAL, ASSESSEE RAISED THE FOLLOWING GROUNDS WHICH READ AS UNDER: 1. THE LD CIT (A) ERRED IN CONFIRMING THE ACT OF THE AO TR EATING THE BUSINESS INCOME EARNED OF RS. 14,00,000/ - FROM RUNNING A BUSINESS SERVICES CENTRE AS INCOME FROM HOUSE PROPERTY. 2. THE LD CIT (A) ERRED IN TREATING AN AGREEMENT OF BUSINESS SERVICE CENTRE AS AGREEMENT OF LEAVE AND LICENSE AND FAILED TO APPR ECIATE THAT THE SERVICE TAX REGISTRATION WAS OBTAINED WITH THE INTENTION OF PROVIDING BUSINESS AUXILIARY SERVICES. 3. THE LD CIT (A) ERRED IN HOLDING THAT THE MAIN INTENTION OF APPELLANT WAS TO EARN RENTAL INCOME AND FAILED TO APPRECIATE THAT THE RENTAL WAS SUBSERVIENT TO CONDUCTING BUSINESS ACTIVITY. 4. THE LD CIT (A) ERRED IN RELYING SOLELY ON TWO TRIBUNAL DECISIONS AND IGNORING A NUMBER OF JUDICIAL PRONOUNCEMENTS HOLDING THAT INCOME FROM LETTING OF BUSINESS ASSET IS TO BE TREATED AS BUSINESS INCOME . 5. THE LD CIT (A) ERRED IN CONFIRMING THE DISALLOWANCE OF BUSINESS EXPENDITURE OF RS. 27,11,166/ - ON THE GROUND THAT THE CLAIM OF EXPENDITURE WAS NOT SUBSTANTIATED. 2 6. THE LD CIT (A) ERRED IN CONFIRMING THE DISALLOWANCE OF INTEREST EXPENDITURE OF R S. 1, 50,853/ - CLAIMED AGAINST THE INTEREST INCOME FOR THE YEAR. 2. AT THE OUTSET, LD COUNSEL FOR THE ASSESSEE MENTIONED THAT THERE IS A DELAY OF 9 DAYS IN FILING THE APPEAL BEFORE THE TRIBUNAL. IN THIS REGARD, HE BROUGHT OUT ATTENTION TO THE AFFIDAVIT FILED BY THE MR. ANIL JAYANT SATHE, PARTNER OF M/S. GOKHALE AND SATHE, CHARTERED ACCOUNTS AND READ OUT THE RELEVANT CONTENTS OF THE SAID AFFIDAVIT, WHICH READ AS UNDER: 1..... 2. THE CIT (A) PROCEEDINGS OF THE APPELLANT HAD BEEN COMPLETED IN THE MONTH OF AUGUST, 2011. HOWEVER, THE ORDER OF THE CIT (A) HAD NOT BEEN RECEIVED BY THE APPELLANT ON THE ADDRESS OF COMMUNICATION PROVIDED FOR IN THE FORM OF APPEAL. 3. IN THE LAST WEEK OF MARCH 2013, THE APPELLANTS CHARTERED ACCOUNTANT, MR. N.D. MEHTA WAS INFORMED THAT, SINCE THE CIT (A) HAD DISMISSED THE APPEAL, THE PENALTY PROCEEDINGS WERE TO BE FINALIZED. AFTER FOLLOW UP WITH THE DEPARTMENT, HE HAD OBTAINED PHOTOCOPY OF CIT (A) ORDER DATED 24.8.2011 ONLY IN THE LAST WEEK OF MARCH, 2013. 4. SINCE, THE APPELLANT HAD GENUINE INTENTION OF PERUSING THE APPEAL, OUR OFFICE TOOK EXPEDITIOUS ACTION AND PREPARED THE AFFIDAVIT FOR CONDONATION OF DELAY AS CONSIDERABLE TIME HAD LAPSED FROM THE DATE OF THE CIT (A) ORDER. 5. THE APPELLANT (KARTA) HAS TO FREQUENTLY TRAVEL OUT O F INDIA FOR SOME WORK AND HE WAS OUT OF INDIA DURING THE PERIOD APRIL - MAY 2013........ 3. ON PERUSAL OF THE ABOVE, WE FIND THERE IS A REASONABLE CASE WHICH CONSTITUTES A SUFFICIENT REASON FOR NOT FILING THE APPEAL BEFORE THE TRIBUNAL WITH A DELAY OF 9 DAYS. AFTER HEARING THE LD DR ON THIS ISSUE AND CONSIDERING THE SMALLNESS OF DELAY OF 9 DAYS, WE CONDONE THE DELAY AND PROCEED TO ADJUDICATE THE APPEAL ON MERITS. 4. AT THE OUTSET, LD COUNSEL THE ASSESSEE BROUGHT OUR ATTENTION TO THE ABOVE GROUNDS AND MENTIONED THAT GROUND NO.6 IS NOT PRESSED. AFTER HEARING THE LD DR ON THIS ISSUE, THE SAID GROUND NO.6 IS DISMISSED AS NOT PRESSED. 5. BRIEFLY STATED RELEVANT FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF EXPORT OF GARMENTS AND HOME FURNISHING MATERIALS. ASSESSEE FILED THE RETURN OF INCOME DECLARING THE TOTAL INCOME OF R S. 3,74,85,186/ - . ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT AND THE ASSESSED INCOME IS DETERMINED AT RS. 3,97,39,535/ - . IN THE 3 ASSESSMENT, AO MADE VARIOUS ADDITIONS AND ONE OF SUCH ADDITIONS RELATES TO THE RENT RECEIVED BY THE ASSESSEE FROM STERLITE OPTICAL TECH LTD. DURING THE YEAR, ASSESSEE RECEIVED A SUM OF RS. 14 LAKHS FROM THE SAID COMPANY AND THE SAME WAS TREATED AS A BUSINESS INCOME OF THE ASSESSEE. ASSESSEE CLAIMED VARIOUS EXPENSES AGAINST THE SAID INCOME IN THE RETURN OF INCOME. IN THE A SSESSMENT, AO CONSIDERED THE SAME AS INCOME FROM HOUSE PROPERTY AND ALLOWED DEDUCTION U/S 24 OF THE ACT. AO DENIED THE ASSESSEES CLAIM OF EXPENSES AMOUNTING TO RS. 27,11,166/ - , WHICH WERE CLAIMED AGAINST THE SAID RENTAL INCOME OF RS. 14 LAKHS. AGGRIEV ED WITH THE DECISION OF THE AO, ASSESSEE IS IN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. 6. DURING THE PROCEEDINGS BEFORE THE FIRST APPELLATE AUTHORITY, ASSESSEE SUBMITTED THAT THE ASSESSEES BUSINESS PROPERTIES WERE PUT TO USE FOR EARNING INCOME CONSID ERING THE LULL IN THE MAIN BUSINESS OF THE ASSESSEE. SUCH INCOME EARNED BY THE ASSESSEE HAS RIGHTLY OFFERED IN THE RETURN OF INCOME AS BUSINESS INCOME OF THE ASSESSEE, AND THE SAME NEED NOT BE DISTURBED. CIT (A) EXAMINED THE FACTS OF THE CASE AND ANALY ZED THE TRANSACTIONS AND THE CONTENTS OF WHICH ARE FOUND IN PARA 2.2 OF THE IMPUGNED ORDER. EVENTUALLY, CIT (A) CONFIRMED THE ORDER OF THE AO. REGARDING THE EXPENSES OF RS. 27,11,166/ - , WHICH IS DENIED BY THE AO, ALSO CIT (A) UPHELD THE ORDER OF THE AO. IN THIS REGARD, CIT (A) HELD THAT THE ASSESSEE HAS NOT CONDUCTED ANY BUSINESS DURING THE YEAR UNDER CONSIDERATION, AND THEREFORE, ALLOWING BUSINESS EXPENSES SHOULD NOT ARISE. IN THE PROCESS, CIT (A) DEVIATED FROM THE ORDER OF HIS PREDECESSOR FOR THE IMME DIATELY PRECEDING AY 2007 - 08. AGGRIEVED, ASSESSEE IS IN FURTHER APPEAL BEFORE THE TRIBUNAL. 7. DURING THE PROCEEDINGS BEFORE US, LD COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENTION TO GROUND NOS. 1 TO 4 AND MENTIONED THAT ALL THESE GROUNDS REVOLVE AROUND CO RRECT HEAD OF INCOME FOR TAXING THE SAID AMOUNT OF RS. 14 LAKHS. GROUND NO.5 RELATES TO THE CLAIM OF EXPENSES AGAINST THE SAID INCOME OF RS. RS. 14 LAKHS. IN THIS REGARD, LD COUNSEL FOR THE 4 ASSESSEE BROUGHT OUR ATTENTION TO THE ORDER OF THE CIT (A) FOR TH E AY 2007 - 2008 AND MENTIONED THAT THE SAID ORDER OF THE CIT (A) IS FAIR AND REASONABLE. THEREFORE, ASSESSEE HAS NO OBJECTION IF THE SAME IS FOLLOWED BY THE TRIBUNAL FOR THE YEAR UNDER CONSIDERATION. REFERRING TO THE FIRST ISSUE ABOUT THE CORRECT OF HEAD OF INCOME FOR TAXING THE SUM OF RS. 14 LAKHS, LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT CIT (A) HAS RIGHTLY CONFIRMED THE ORDER OF THE AO, WHO HELD THAT SUCH RENTAL INCOME SHOULD BE TAXED AS INCOME FROM HOUSE PROPERTY. TO THAT EXTENT, LD COUNSEL FOR THE ASSESSE E CONCEDES ON GROUND NOS. 1 TO 4 OF THE PRESENT APPEAL. 8. ON HEARING BOTH THE PARTIES AND ON PERUSAL OF THE ORDERS OF THE REVENUE AUTHORITIES IN GENERAL AND ORDER OF THE CIT (A) IN PARTICULAR, WE ARE OF THE CONSIDERED OPINION THAT THE CIT (A) HAS RIGHTLY ADJUDICATED THE ISSUE BY HOLDING THAT THE ENTIRE RECEIPTS BEING COMPOSITE RECEIPTS ON LETTING OUT ACCOMMODATION HAS TO BE ASSESSED UNDER THE INCOME FROM HOUSE PROPERTY AND MERE REGISTRATION WITH THE SERVICE TAX DEPARTMENT WILL NOT ALTER THE INTENT ION OF THE PARTIES TO THE AGREEMENT . WE AGREE WITH THE SAME AND FIND THE SAID DECISION OF THE CIT (A) IS FAIR AND REASONABLE AND IT DOES NOT CALL FOR ANY INTERFERENCE. ACCORDINGLY, GROUND NOS. 1 TO 4 RAISED BY THE ASSESSEE ARE DISMISSED . 9. ON THE SECOND ISSUE , WHICH RELATES TO THE ALLOWABILITY OF EXPENSES OF RS. 27,11,166/ - . IN THE REGARD, LD COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENTION TO PARA 4.3 OF THE ORDER OF THE CIT (A) FOR THE AY 2007 - 08, DATED 8.12.2011 AND PRAYED FOR IDENTICAL DIRECTION GIVEN THEREOF. ON HEARING BOTH THE PARTIES AND ON PERUSAL OF THE CONTENTS OF THE SAID PARA 4.3 OF THE CIT (A)S ORDER FOR THE AY 2007 - 08, WE FIND THE CIT (A) DIRECTED THE AO TO ALLOW THE SAID EXPENSES AS BUSINESS EXPENSES. HE IS OF THE OPINION THAT IT IS A C ASE OF TEMPORARY LULL IN THE BUSINESS. IN OUR CONSIDERED OPINION, THE DIRECTION GIVEN BY THE CIT (A) FOR THE AY 2007 - 08 (SUPRA) IS FAIR AND REASONABLE. RELEVANT DIRECTIONS OF THE CIT (A) ARE EXTRACTED AS UNDER: 4.3....... CONSIDERING THE FACTS AS EXPLAINED BY THE APPELLANT IN THE ABOVE PARAS, IT WAS NOT A CASE OF SHUT DOWN / CLOSING OF BUSINESS. THE APPELLANT HAD INCURRED VARIOUS EXPENSES, MAJORITY OF WHICH WAS PERTAINING TO SALARIES & ALLOWANCES PAID TO EMPLOYEES. HAD IT BEEN A CASE OF SHUT DOWN /CLOSING DOWN OF BUSINESS, THERE WAS NO NEED OF 5 INCURRING SUCH EXPENSES ON THE EMPLOYEES. SIMILARLY, THERE WAS ALSO NO NEED OF INCURRING VARIOUS OTHER EXPENSES HAD THERE BEEN NO INTENTION OF CONTINUING THE BUSINESS. IN THE FACTS AND CIRCUMSTANCES, IT WA S NOT A CASE OF CLOSING DOWN / SHUT DOWN OF BUSINESS. THOUGH THERE WAS NO BUSINESS RECEIPTS DURING THE YEAR BUT IT COULD NOT BE SAID THAT NO BUSINESS ACTIVI TIES WERE CARRIED OUT DURING THE YEAR. THE BUSINESS ACTIVITIES MAY HAVE BEEN CARRIED OUT THOUGH IT MAY NOT HAVE RESULTED INTO PROCURING OF EXPORT ORDERS. IN THE FACTS AND CIRCUMSTANCES THE VARIOUS BUSINESS EXPENSES CLAIMED BY APPELLANT WERE ALLOWABLE SINCE BUSINESS WAS STILL IN EXISTENCE. HOWEVER, IN THAT CASE ALSO THE BUSINESS EXPENSES CLAIMED BY AP PELLANT WERE ALLOWABLE. THE AO IS, THEREFORE, DIRECTED TO ALLOW APPELLANTS CLAIM OF EXPENSES OF RS. 27,57,758/ - . THESE GROUNDS OF APPEAL ARE, THEREFORE, ALLOWED. 10. CONSIDERING THE ABOVE, WE FIND THERE IS NO INFIRMITY IN THE ORDER OF THE CIT (A) FOR THE AY 2007 - 08 AND ON THE SIMILAR FACTS AND CIRCUMSTANCES, CIT (A) HAS NOT FOLLOWED THE SAME FOR THE YEAR UNDER CONSIDERATION WHICH IS AGAINST THE PRINCIPLES OF CONSISTENCY. THEREFORE, IN OUR OPINION, THE ORDER OF THE CIT (A) FOR THE YEAR UNDER CONSID ERATION ON THE ISSUE OF ALLOWABILITY OF EXPENSES OF RS. 27,11,166/ - IS SET ASIDE AND THE AO IS DIRECTED TO ALLOW THE ASSESSEES CLAIM ON THIS ISSUE. ACCORDINGLY, GROUND NO.5 RAISED BY THE ASSESSEE IS ALLOWED. 11. IN THE RESULT, APPEAL OF THE ASSESSEE IS P ARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 2 3 R D SEPTEMBER, 2015. S D / - S D / - (AMIT SHUKLA) (D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; 2 3 .9 .2015 . . ./ OKK , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . 6 //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI