ITO 1(1)(2), MUMBAI V. DWEEKAM WELDTECH P.LTD, MUMBAI

ITA 4958/MUM/2011

• Counselvise Citation: 495819914 RSA 2011
• Duration Of Justice: 2 year(s) 2 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-09-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 22-05-2013
• Assessment Year: 2005-2006
• Appeal Filed On: 22-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: HARIGOVIND SINGHDR
• Assessee Lawyers: BHUPENDRA SHAH
• Keywords: Business income

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL,MUMBAI - D BENCH. . .. . , !' !' !' !' # # # # $%&' $%&' $%&' $%&' , % % % % () () () () BEFORE S/SH.D.MANMOHAN,VICE-PRESIDENT & RAJENDR A,ACCOUNTANT MEMBER ./ ././ ./ ITA NO.4958/MUM/2011 , + + + +/ // / ASSESSMENT YEAR-2005-06 ITO 1(1)(2) R.NO. 534/59, AAYAKAR BHAVAN, M.K.ROAD, MUMBAI- 400020 VS. DWEEKAM WELDTECH P. LTD. 402 DALAMAL CHAMBERS, 29 NEW MARINE LINES, MUMBAI- 400020 PAN: AAACD5317N ( ,- / // / APPELLANT ) ( ./,- / RESPONDENT ) ,- ,- ,- ,- 0 0 0 0 % %% % / APPELLANT BY : SHRI HARIGOVIND SINGH(DR) ./,- 1 0 % / RESPONDENT BY : SHRI BHUPENDRA SHAH 1 11 1 2 2 2 2 / DATE OF HEARING : 04/09/2013 3+ 1 2 / DATE OF PRONOUNCEMENT : 18/09/2013 , 1961 1 11 1 254(1) % %% % &242 &242 &242 &242 (%5 (%5 (%5 (%5 ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA, A.M: CHALLENGING THE ORDER OF THE CIT(A)-1, MUMBAI DATED 02.02.2011 ASSESSING OFFICER(AO) HAS FILED FOLLOWING GROUND OF APPEAL: 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A)ERRED IN DIRECTING THE ASSESSING OFFICER TO TAX THE INTEREST INCOME UNDER THE HEAD INCOME FROM BUSINESS AND PROFESSION AS AGAINST THE INCOME ASSESSED UNDE R THE HEAD INCOME FROM OTHER SOURCES. 2. ASSESSEE-COMPANY, ENGAGED IN THE BUSINESS OF TRADIN G OF WELDING ELECTRODES & CONSUMABLE ITEMS,FILED ITS RETURN OF INCOME ON 28.10.2005 DECL ARING TOTAL INCOME OF RS. 4,24,180/- UNDER THE HEAD CAPITAL GAIN AND RS. 1.0.44 LACS UNDER THE H EAD INCOME FROM BUSINESS.ASSESSMENT WAS FINALISED U/S.143(3) OF THE ACT BY THE AO ON 03 .12.2007 DETERMINING THE TOTAL INCOME OF THE ASSESSEE AT RS. 14.68 LACS. 2.1 .DURING THE ASSESSMENT PROCEEDINGS, AO FOUND THAT A SSESSEE HAD SHOWN NET INTEREST INCOME OF RS. 6,85,944/- IN THE PROFIT & LOSS ACCOUNT AND SAME HAD BEEN CONSIDERED UNDER THE HEAD BUSINESS INCOME. HE FURTHER FOUND THAT ASSESSEE H AD RECEIVED INTEREST OF RS. 11.7 LACS AND HAD PAID INTEREST OF RS. 4.85 LACS.ON THE BASIS OF RECO RDS OF THE CURRENT YEARS AS WELL AS PRECEDING YEARS,HE HELD THAT ASSESSEE WAS NOT ENGAGED IN THE BUSINESS OF MONEY LENDING, THAT THE INTEREST INCOME HAD TO BE TAXED UNDER THE HEAD INCOME FROM OTHERS SOURCES. HE DIRECTED THE ASSESSEE TO FURNISH MEMORANDUM AND ARTICLE OF COMPANY. AFTER GOING THROUGH THE MEMORANDUM OF ASSOCIATION, HE FOUND THAT THE MAIN OBJECT OF THE A SSESSEE WAS TO CARRY ON THE BUSINESS OF MANUFA -CTURING/DEALING OF WELDING ELECTRODES ETC., THAT T HE ASSESSEE-COMPANY WAS NOWHERE CONNECTED WITH THE BUSINESS OF MONEY LENDING. VIDE HIS LETTER DATED 06.08.2007 HE DIRECTED THE ASSESSEE TO EXPLAIN AS TO WHY THE INTEREST INCOME SHOULD NOT BE TAKEN UNDER THE HEAD INCOME FROM OTHER SOURCES.ASSESSEE FILED DETAILS,REQUIRED BY THE AO VIDE ITS LETTER DATED 16.08.2007. AS PER THE AO, ASSESSEE DID NOT FURNISH ANY EXPLANATION AS TO WHY THE INCOME RECEIVED BY HIM SHOULD NOT BE TREATED AS BUSINESS INCOME. AFTER DEFINING THE W ORD BUSINESS, AO HELD THAT ASSESSEE WANTED THE INTEREST INCOME TO BE TAXED UNDER THE HEAD BUS INESS INCOME SO THAT IT CAN AVAIL THE BENEFIT OF SET OFF OF UNABSORBED BUSINESS LOSSES OF THE PRE VIOUS YEARS, THAT UNABSORBED BUSINESS LOSS WAS NOT BE ALLOWED OTHERWISE. FINALLY, HE HELD THAT INT EREST INCOME RECEIVED BY THE ASSESSEE HAD TO BE 2 ITA NO. 4958/MUM/2011(AY-2005-06) DWEEKAM WELDTECH P. LTD. ASSESSED AS INCOME FROM OTHER SOURCES AND WAS TO BE TAXED ACCORDINGLY, THAT THE ASSESSEE WAS NOT BEING ALLOWED ANY DEDUCTION U/S. 57 OF THE ACT, THAT THE INTEREST ON CAR LOAN WAS BUSINESS EXPENSE, THAT IT COULD NOT BE ALLOWED U/S. 57 OF TH E ACT, THAT THE INTEREST ON LOANS FROM SHRI B.P. INANI COULD NOT BE ALSO ALLOWED AS IT HAD NOT BEEN TAKEN DURING THE YEAR UNDER CONSIDERATION. FINALLY, HE HELD THAT INTEREST INCOME OF RS. 11,70, 951/- HAD TO BE TAXED AS INCOME FROM OTHER SOURCES. AO RELIED UPON THE CASE OF TUTICORIN ALKAL I CHEMICALS & FERTILIZERS LTD. (227 ITR 172) 2.2 .ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPE LLATE AUTHORITY (FAA). AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND THE ASSESSMENT ORDER, FAA HELD THAT ASSESSEE WAS SHOWING INTEREST INCOME IN EARLIER YEARS ALSO, THAT SAME WA S TAXED BY THE DEPARTMENT AS INCOME FROM BUSINESS, THAT IT WAS NOT NECESSARY THAT THE ASSESS EE SHOULD HAVE MONEY LENDING LICENCE FOR EARNING INTEREST INCOME, THAT THE ASSESSEE-COMPANY HAD PUT IT SURPLUS FUND IN THE FORM OF ADVANCE FROM WHERE IT HAD RECEIVED THE INTEREST. RE FERRING TO CASES OF SNAM PROGETTI S.P.A. (132 ITR 70), GOPAL RAM PREM RAM (72 TTJ 698),HE HELD TH AT AO WAS NOT JUSTIFIED IN TAXING THE INCOME AS PER THE PROVISIONS OF SECTION 57.HE ALSO HELD THAT FACTS OF THE CASE AND THE CASE OF TUTICORIN ALKALI CHEMICALS & FERTILIZERS LTD. (SUPR A) WERE DIFFERENT,THAT SAME WERE NOT RELEVANT FOR DECIDING THE ISSUE BEFORE HIM. 2.3. BEFORE US, DEPARTMENTAL REPRESENTATIVE (DR) SUBMITT ED THAT ASSESSEE WAS NOT IN BUSINESS OF MONEY LENDING, IT HAD NO IDEAL FUND AVAILABLE WITH IT, THAT INCOME FROM INTEREST OFFERED UNDER THE HEAD BUSINESS INCOME TO SET OFF THE BROUGHT FORWA RD LOSSES, THAT INTEREST WERE NOT EARNED IN NORMAL COURSE OF BUSINESS, HE REFERRED TO PAGE NO. 22 OF THE PAPER BOOK. AUTHORISED REPRESENTATIVE(AR) SUBMITTED THAT ASSESSEE WAS SHOW ING THE INTEREST INCOME AS BUSINESS INCOME REGULARLY IN ITS RETURN OF INCOME, THAT THE DEPARTM ENT HAD ACCEPTED THE SAID INCOME UNDER THE HEAD BUSINESS INCOME, IN THE SUBSEQUENT YEARS AS WE LL AS IN THE EARLIER YEARS, THAT INTEREST INCOME WAS NEVER ASSESSED U/S. 57 OF THE ACT, THAT TEMPORA RY FUND WERE AVAILABLE WITH THE ASSESSEE FOR MAKING INVESTMENT TO EARN INTEREST, THAT LEASE RENT INCOME WAS SHOWN AS BUSINESS INCOME AND SAME WAS ACCEPTED AS SUCH BY THE DEPARTMENTAL AUTHO RITIES, THAT THE AO HAD RAISED THE ISSUE OF INTEREST INCOME ONLY DURING THE YEAR UNDER CONSIDER ATION THAT HE HAD NOT DISCUSSED ANYTHING ABOUT INTEREST EXPENDITURE. HE REFERRED TO PAGE NO. 24 OF THE PAPER BOOK IN THIS REGARD. (HE RELIED UPON THE ORDER OF SMT. GULAB SUNDRI BAPNA (79 ITD 4 45), SNAM PROGETTI S.P.A. (132 ITR 70), GOPAL RAM PREM RAM (72 ITJ 698). 2.4 .WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED TH E MATERIAL BEFORE US.WE FIND THAT IN THE PROFIT & LOSS ACCOUNT, FOR THE YEAR UNDER CONSIDERA TION, INTEREST INCOME HAS BEEN SHOWN UNDER THE HEAD BUSINESS INCOME,THAT WHILE COMPUTING THE I NTEREST INCOME,ASSESSEE HAS TAKEN A NET FIGURE OF RS. 6.85 LACS,THAT THE INTEREST INCOME OF THE ASSESSEE HAD BEEN TAXED AS BUSINESS INCOME FOR THE EARLIER AND SUBSEQUENT YEARS.AS THE FACTS A ND CIRCUMSTANCES OF EARLIER AND SUBSEQUENT YEARS REMAIN SAME, WE DO NOT SEE ANY JUSTIFICATION FOR THE AO TO ASSESS INTEREST INCOME U/S.57 OF THE ACT. JUST BECAUSE ASSESSEE HAD OPTED FOR SETTIN G OFF UNABSORBED LOSS OF EARLIER YEARS HEADS OF INCOME CANNOT BE CHANGED.WE FIND THAT FAA HAS GIVEN A CATEGORICAL FINDING THAT ASSESSEE HAD SURPLUS FUNDS IN FORM OF ADVANCE AND INTEREST WERE RECEIVED BY IT FROM THE SAID FUNDS. IN THESE CIRCUMSTANCES, WE ARE OF THE OPINION THAT ORDER OF THE FAA DOES NOT SUFFER FROM ANY LEGAL INFIRMITY AND HENCE WE DO NOT WANT TO DISTURB THE F INDINGS GIVEN BY HIM. THEREFORE, UPHOLDING HIS ORDER WE DECIDE EFFECTIVE GROUND OF APPEAL AGAI NST THE AO. AS A RESULT, APPEAL FILED BY THE AO STAND DISMI SSED. 6 )7 62 8 ( 9 6$ 1 $ 2 :. ORDER PRONOUNCED IN THE O PEN COURT ON 18 TH SEPTEMBER, 2013 (%5 1 3+ % & ; <( 18, 2 2013 1 4 = 3 ITA NO. 4958/MUM/2011(AY-2005-06) DWEEKAM WELDTECH P. LTD. SD/- SD/- ( . / D. MANMOHAN ) ( $%&' $%&' $%&' $%&' / RAJENDRA) !' !' !' !' / VICE-PRESIDENT % % % % () () () () /ACCOUNTANT MEMBER / MUMBAI, <( /DATE: 18.09 . 2013 SK (%5 (%5 (%5 (%5 1 11 1 .2> .2> .2> .2> ?%>+2 ?%>+2 ?%>+2 ?%>+2 / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / ,- 2. RESPONDENT / ./,- 3. THE CONCERNED CIT(A)/ @ A , 4. THE CONCERNED CIT / @ A 5. DR D BENCH, ITAT, MUMBAI / >B 4 .2 . , . . & . 6. GUARD FILE/ 4 C / >2 .2 //TRUE COPY// (%5 / BY ORDER, / $ DY./ASST. REGISTRAR , /ITAT, MUMBAI