ANOOP SILVER PALACE, RAIPUR (CG) V. DY.COMMISSIONER OF INCOME TAX ,2(1), RAIPUR (CG)

ITA 53/BIL/2011

• Counselvise Citation: 5324714 RSA 2011
• Duration Of Justice: 11 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-02-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2006-2007
• Appeal Filed On: 01-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P W ATHAYLE
• Assessee Lawyers: R B DOSHI
• Keywords: Business income; Depreciation; Business expenditure; Commercial expediency
• Section: 143(3); 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BILASPUR BENCH SMC BILASPUR BEFORE SHRI SHAILENDRA KUMAR YADAV (J.M) ITA NO. 53/BLPR/2011(A.Y.2006-07) ANOOP SILVER PALACE, BUDHAPARA, RAIPUR (CG) PAN:AAEFA 1383L (APPELLANT) VS. THE DY.COMMISSIONER OF INCOME TAX, CIRCLE 2(1), CIVIL LINES, RAIPUR (CG) (RESPONDENT) APPELLANT BY : SHRI R.B.DOSHI RESPONDENT BY : SHRI P.W.ATHAYLE DATE OF HEARING : 02/02 /2012 DATE OF PRONOUNCEMENT : 10/0 2/2012 ORDER THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A), RAIPUR (CG) DATED 29/11/2010 FOR THE ASSESSMENT YEA R 2006-07. THE GROUND OF APPEAL RAISED BY THE ASSESSEE READS AS UNDER: THAT ASSESSEE HAVE MADE THE CLAIM OF REVENUE EXPE NSES AS UNDER: DEPRECIATION RS. 10,498/- ELECTRICITY EXPENSES RS. 39,398/- RENT OF SHOP PREMISES RS. 69, 900/- RS.1,19,796/- ----------------- AND ABOVE ADDITION OF RS. 1,19,796/- MADE IN THE TO TAL INCOME BY THE ASSESSING OFFICER U/S. 143(3) AND THIS WHOLE ADDIT ION OF RS.1,19,796/- HAVE BEEN CONFIRMED BY THE HONBLE COMMISSIONER OF INCOME TAX APPEAL, RAIPUR BUT IT IS SUBMITTED AS ALL THE EXPENSES SHOW ARE REVENUE EXPENSES AND ALLOWABLE AS BUSINESS EXPENSES AND ASSESSEE HAV E FILED P&L A/C. ITA NO. 53/BLPR/2011(A.Y.2006-07) 2 AND COMPUTATION OF THE TOTAL INCOME AS BUSINESS INC OME AND THIS WHOLE ADDITION OF RS.1,19,769/- MAY KINDLY BE DELETED FRO M THE TOTAL INCOME. 2. THE ASSESSEE IS A FIRM WHO CARRIED ON BUSINESS UNDER THE NAME AND STYLE OF ANOOP SILVER PALACE DERIVING INCOME FROM PURCHASE AND SALE OF SILVER TILL A.Y 2004-05 AND THE BUSINESS WAS DISCONTINUED IN SUBSEQUENT YEARS. DURING THE ASSESSMENT YEAR 2006-07 THE ASSESSEE WAS DRIVING INCOME FROM OTHER SOURCES I.E. INTEREST RECEIPTS FROM FIVE PERS ONS ON OLD DEBIT BALANCE AND FILED THE RETURN OF INCOME DECLARING A TAXABLE INCO ME OF RS.22,998/- AFTER CLAIMING THE EXPENDITURE ON, DEPRECIATION OF RS. 10 ,498/-, ELECTRICITY EXPENSES OF RS. 39,398/- AND RENT OF RS. 69,900/-. THE AS SESSMENT WAS COMPLETED U/S. 143(3) AFTER DISALLOWING THE EXPENSES CLAIMED AND COMPUTED THE TOTAL INCOME AT RS.1,42,794/-. THE MATTER WAS CARRIED BE FORE FIRST APPELLATE AUTHORITY WHO SUSTAINED THE ORDER OF AO BY OBSERVI NG THAT EXPENSES IN QUESTION WERE NOT SPENT FOR THE PURPOSE OF EARNIN G THE INCOME IN TERMS OF SEC. 57(III) OF THE INCOME TAX ACT, 1961. 3. BEING AGGRIEVED BY THE ORDER OF CIT(A) ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. THE MAIN CONTENTION WAS THAT THE AO AS WELL AS CIT(A) ERRED IN MAKING ADDITION OF RS. 1,19,794/- BECAUSE ALL THE E XPENSES ARE REVENUE AND ALLOWABLE BUSINESS EXPENDITURE AND ASSESSEE HAS FI LED PROFIT AND LOSS ACCOUNT AND COMPUTATION OF THE TOTAL INCOME AS BUSINESS IN COME AND THIS WHOLE ADDITION OF RS. 1,19,796/- WAS REQUESTED TO BE DE LETED. ON THE OTHER HAND, LD. D.R SUPPORTED THE ORDERS OF AUTHORITIES BELOW A ND SUBMITTED THAT AUTHORITIES BELOW WERE JUSTIFIED IN DISALLOWING DEP RECIATION OF RS. 10,498/-, SINCE NO BUSINESS ACTIVITIES WAS CARRIED OUT BY TH E ASSESSEE AND MACHINERY WAS NOT PUT TO USE FOR BUSINESS ACTIVITY SO DEPRECI ATION IS NOT ALLOWABLE AS PER THE PROVISIONS OF SECTION 32 OF THE ACT. ELECTRI CITY, RENT OF SHOP PREMISES AMOUNTING TO RS.39,398/- AND RS.69,900/- RESPECTIVE LY WERE NOT ALLOWABLE AS THESE AMOUNTS WERE SPENT FOR THE PURPOSE OF EARNING INCOME IN TERMS OF ITA NO. 53/BLPR/2011(A.Y.2006-07) 3 SECTION 57(III) OF THE ACT. ACCORDINGLY, THE AUTHO RITIES BELOW WERE JUSTIFIED IN MAKING THE ADDITION, THEREFORE, THE SAME SHOULD BE CONFIRMED. 4. AFTER GOING THROUGH THE RIVAL SUBMISSIONS I FIND THAT THE ASSESSEE WAS INITIALLY CARRYING ON THE BUSINESS IN THE NAME OF ANOOP SILVER PALACE DERIVING INCOME FROM PURCHASE AND SALE OF SILVER TILL THE A SSESSMENT YEAR 2004-05 AND THE BUSINESS WAS DISCONTINUED. DURING THE ASSES SMENT YEAR 2006-07 THE ASSESSEES ONLY INCOME WAS FROM INTEREST FROM FIVE PERSONS ON OLD DEBIT BALANCES AND FILED THE RETURN OF INCOME DECLARING A TOTAL INCOME OF RS.22,998/- AFTER CLAIMING EXPENDITURE ON DEPRECIA TION OF RS. 10,498/- ON OFFICE MACHINERIES, ELECTRICITY EXPENSES RS. 39,398 /- AND RENT OF RS. 69,900/-, WHICH WAS DISALLOWED BY AO AND CONFIRMED THE ORDER OF CIT(A). IT IS AN UNDISPUTED FACT THAT THE ASSESSEE WAS DERIVING ONL Y INTEREST INCOME FROM FIVE PERSONS ON OLD DEBIT BALANCE OF THE FIRM AND NO OTH ER BUSINESS ACTIVITIES WERE CARRIED OUT FOR THE YEAR UNDER CONSIDERATION. T HE ASSESSEE HAS RETURNED THIS INCOME AS BUSINESS INCOME WHICH IS EVIDENT FROM THE FACT THAT AO AT FIRST PAGE OF HIS ORDER MENTIONED INTEREST INCOME AGAINST N ATURE OF THE BUSINESS. ACCORDING TO THE ASSESSEE THE AFORESAID INCOME HAS BEEN CLAIMED AS BUSINESS INCOME AND INTEREST PAID TO PARTNERS HAS BEEN CLAI MED U/S. 40(B) OF THE ACT AS EVIDENT FROM THE ENTRIES IN COMPUTATION OF TOTAL AN D RETURNED INCOME PLACED AT PAGE 15 AND 16 RESPECTIVELY CLAIMED TO BE FILED BEF ORE THE AUTHORITIES BELOW. THE AO HAS ALLOWED THE INTEREST ON UNSECURED LOAN AND INTEREST TO PARTNERS ALLOWED UNDER SECTION 36(1)(III) AND 40(B) RESPECTI VELY, WHICH INDICATE THE EXISTENCE OF FINANCE BUSINESS. THE ELECTRICITY EX PENSES, SHOP EXPENSES AND DEPRECIATION EXPENSES ARE INCURRED WHOLLY AND EXCLU SIVELY FOR THE PURPOSE OF THE BUSINESS OF THE ASSESSEE. THERE IS NO DISPUTE THAT EXPENSES IN QUESTION ARE GENUINE AND ACTUALLY INCURRED. HAVING ACCEPTED THE INTEREST ON UNSECURED LOAN AND INTEREST TO THE PARTNERS UNDER THE PROVISI ONS OF SECTION 36(1)(III) AND 40(B) RESPECTIVELY AO WAS NOT JUSTIFIED TO QUEST ION THE COMMERCIAL EXPEDIENCY ITA NO. 53/BLPR/2011(A.Y.2006-07) 4 OF THE EXPENDITURE IN QUESTION. MOREOVER SIMILAR IN COME WAS INCORPORATED IN BUSINESS INCOME IN EARLIER YEARS WHICH HAS NOT BEEN DISPUTED BY THE REVENUE. THE AO IS NOT SUPPOSED TO SIT IN THE CHAIR OF ASSES SEE ON THE POINT OF NECESSITY FOR EXPENDITURE FOR BUSINESS. THIS SPACE LIES WITH THE ASSESSEE ONLY. IN VIEW OF THE ABOVE FACTUAL AND LEGAL DISCUSSION CIT(A) WA S NOT JUSTIFIED IN UPHOLDING THE DISALLOWANCE IN QUESTION AND THE SAME ARE DIRE CTED TO BE ALLOWED. 5. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 1 0 TH DAY OF FEB. 2012. SD/- ) (SHAILENDRA KUMAR YADAV)) JUDICIAL MEMBER BILASPUR, DATED. 10 TH FEB. 2012 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3 . THE CIT CITY CONCERNED 4. THE CIT(A)- CONCERNED 5. THE D.R BILASPUR BENCH. (TRUE COPY) BY ORDER SR. PRIVATE SECRETARY, ITAT, BILASP UR BENCH BILASPUR VM. ITA NO. 53/BLPR/2011(A.Y.2006-07) 5 DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 1/2/2012 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 2/2/2012 SR.PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7. FILE SENT TO THE BENCH CLERK SR.PS/PS 8 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER