RATATOULLIE HOSPITALITY SERVICES PVT. LTD., MUMBAI V. ITO 2(3)(1), MUMBAI

ITA 5329/MUM/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 8677 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-01-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 30-08-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SUMAN KUMAR
• Assessee Lawyers: MATI CHAMPA PUROHIT
• Keywords: Business income; Depreciation
• Section: 143(3); 147

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI BEFORE SHRI MAHAVIR SINGH , JM AND SHRI RAJESH KUMAR, AM ./ I.T.A. 5329 / MUM/201 6 ( / ASSESSMENT YEAR: 20 11 - 12 ) M/S RA TATOULLIE HOSPITALITY SERVICES PVT LTD., 34, CCI CHAMBERS, DINSHAW VACCHA ROAD, CHUCHGATE, MUMBAI - 400020. / VS. I NCOME TAX OFFICER, WARD 2(3)(1), ROOM NO.544, 5 TH FLOOR, AAYAKAR BHAVAN, M K ROAD, MUMBAI - 400020 ./ ./ PAN : AAECR1362F ( / APP LICANT ) : ( / RESPONDENT ) / APP LICANT BY : SHRI MATI CHAMPA PUROHIT /RESPONDENT BY : SHRI SUMAN KUMAR / DATE OF HEARING : 1 7 .1.2017 / DATE OF PR ONOUNCEMENT : 27 .1.2017 / O R D E R PER RAJESH KUMAR, A. M: THIS IS AN APPEAL FILED BY THE ASSESSEE CHALLENGING THE ORDER DATED 27.2.2015 PASSED BY THE LD.CIT(A) AGAINST THE DISALLOWING FOLLOWING EXPENSES : A ) DEPRECIATION OF RS.90,083/ - ; B ) SUNDRY EXPENSES OF RS.54,000/ - . THE APPEAL FILED BY THE ASSESSEE PERTAINS TO THE ASSESSMENT YEAR 2011 - 1 2 . 2 . FACTS OF THE CASE ARE THAT THE ASSESSEE DID NOT FILE RETURN OF INCOME UNDER SECTION 139(1) OF THE INCOME TAX ACT, 1961. SUBSEQUENTLY, THE CASE 2 ITA NO. 5329 /MUM201 6 WAS REO PENED AND NOTICES UNDER SECTION 147 R.W.S 148 WERE ISSUED TO THE ASSESSEE ON 18.3.2015 WHICH WAS COMPILED BY THE ASSESSEE BY FILING RETURN OF INCOME ON 30.9.2015 DECLARING TOTAL LOSS OF RS.9,083/ - . THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) R.W .S.147 VIDE ORDER DATED 30.12.2015 AT AN INCOME OF RS.5,96,766/ - BY MAKING AN ADDITION OF RS.1,35,000/ - AS AN INCOME FROM OTHER SOURCES AND SECONDLY RS.4,70,849/ - BEING MONEY RECEIVED UNDER THE HEAD INTEREST AS PER FROM NO.26AS WHEREAS AS A MATTER OF FA CT THERE WAS NO INTEREST INCOME APPEARING IN THE FORM 26AS BUT ENTRIES OF PURCHASE OF LIQUOR WERE THERE OF EQUAL AMOUNT ON WHICH THE TCS WAS DEDUCTED . DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO NOTED THAT THE ASSESSEE HAS SHOWN AN INCOME OF RS.1 ,35,000/ - AN INCOME FROM OTHER SOURCES AGAINST WHICH THE ASSESSEE HAS CLAIMED VARIOUS SEVERAL EXPENSES AND NET RESULT WORKED OUT TO LOSS OF RS.9,083/ - . THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO FOUND THAT THE ASSESSEE HAS NOT DONE ANY BUS INESS ACTIVITY DURING THE YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION AND WHATEVER INCOME WAS EARNED WAS IN THE NATURE OF INCOME FROM OTHER SOURCES AND ALSO NOTED THAT THE EXPENSES CLAIMED BY THE ASSESSEE WERE NOT DIRECTLY ATTRIBUTABLE TO EARN ING OF THE SAID INCOME. THE AO ACCORDINGLY DISALLOWED THE SAID EXPENSES AND TREATED THE ENTIRE RECEIPTS OF RS.1 , 35 00 0 / - AS INCOME FROM OTHER SOURCES. THE EXPENSES DISALLOWED WERE IN THE NATURE DEPRECIATION OF RS.90,083/ - AND RS.54,000/ - SUNDRY EXPENSE S IN THE NATURE OF WEAR AND TEAR . 3 ITA NO. 5329 /MUM201 6 3 . IN THE APPELLATE PROCEEDINGS, THE LD.CIT(A) DISMISSED THE APPEAL OF THE ASSESSEE BY OBSERVING AND HOLDING AS UNDER : 4.2 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE AND SUBMISSION MADE BY THE LD. AR. I HAVE ALSO GONE THROUGH THE DECISIONS RELIED ON BY THE LD. AR. THE AO HAS DISALLOWED DEPRECIATION OF RS.90,083/ - AND MISCELLANEOUS EXPENSES OF RS.54,OOO / - . THE APPELLANT HAS SUBMITTED THAT THOUGH IT TERMINATED ITS CONDUCTING AGENCY, IT CONTINUED TO RECEIVE ADVERTISE MENT CHARGES FROM M/S.BACARDI INDIA PVT. LTD. WHICH IS NOT THE BUSINESS INCOME OF THE ASSESSEE. THE LD. AR ADMITTED THAT EVEN NOW THE BUSINESS IS NOT REVIVED. HENCE, IT IS A CASE OF PERMANENT CLOSURE OF BUSINESS. THEREFORE, THE DECISIONS RELIED ON BY THE A PPELLANT ARE DISTINGUISHABLE ON FACTS. SINCE NO BUSINESS ACTIVITY WAS CONDUCTED, THE DEPRECIATION CLAIMED CANNOT BE ALLOWED. SIMILARLY, IN THE ABSENCE OF ANY BUSINESS ACTIVITIES, THE OTHER EXPENSES CANNOT BE ALLOWED. THEREFORE, THE ACTION OF THE AO IS IN O RDER AND THE SAME IS UPHELD. THE GROUND IS DISMISSED 4. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS, PERUSED THE MATERIAL PLACED BEFORE US DURING THE COURSE OF HEARING INCLUDING THE DECISION OF AUTHORITIES BELOW . WE FIND THAT THE ASSESSEE RE CEIVED AN AMOUNT OF RS.1,35,000/ - BY WAY OF ADVERTISEMENT FROM M/S.BACARDI INDIA PVT. LTD. AGAINST WHICH THE COMPANY HAS CHARGED MISCELLANEOUS EXPENSES OF RS.54 , 000/ - AND DEPRECIATION CLAIM OF RS.9,083/ - THEREBY SHOWING NET LOSS FROM THE BUSINESS RS.9, 083/ - . WE FIND FROM THE RECORD THAT THE AGREEMENT FOR CONDUCTING BUSINESS ENTERED INTO WITH APPOLLO HOTEL DATED 30.10.2008 WAS TERMINATED ON 15.07. 200 9 AND ACCORDINGLY CONDUCTING THE RESTAURANT/CLUB SITUATED AT 20 , MAHAKAVI BHUSHAN MARG, LANDOWNE ROAD, C OLABA , MUMBAI - 400001 WAS STOPPED DUE TO TERROR ATTACK ON 26.11.2008 WHEREBY THE BUSINESS WAS BADLY AFFECTED RESULTING INTO TERMINATION OF BUSINESS CONDUCTING AGREEMENT AS STATED EARLIER. B UT THE 4 ITA NO. 5329 /MUM201 6 ASSESSEE CONTINUED TO RECEIVE THE ADVERTISEMENT CHARGES F ORM M/S BACARDI INDIA PVT LTD FOR WHICH THE ASSESSEE CONTINUE TO OPERATE FROM ITS OFFICE HAVING VARIOUS FIXED ASSETS SUCH AS FURNITURE AND OTHERS ON WHICH IT CLAIMED DEPRECIATION ALONGWITH OTHER NORMAL WE AR AND TEAR EXPENSES. IN OUR OPINION, THE ASSESS EE HAS NOT DISCONTINUED ITS BUSINESS AND ITS OPERATION ALTOGETHER BUT IT WAS TEMPORARY LULL IN THE BUSINESS FOR WHICH THE COMPANY HAS NOT ALTOGETHER STOPPED ITS OPERATION BUT CONTINUED TO RECEIVE INCOME NOTWITHSTANDING THE FACT THAT THE MAIN BUSINESS WAS CLOSED FOLLOWING TERMINATION OF AGREEMENT FOR CONDUCTING RESTAURANT. IN VIEW OF THE FACTS STATED HEREINABOVE , THE ASSESSEE IS ENTITLED TO CLAIM EXPENSES BY WAY OF DEPRECIATION AND SUNDRY EXPENSES. ACCORDINGLY , WE ARE INCLINED TO SET ASIDE THE ORDER OF T HE LD.CIT(A) AND DIRECT THE AO TO ALLOW THE EXPENSES. 5 . THE ISSUE RAISED IN THE GROUNDS OF APPEAL NO.2 AND 3 IS AGAINST THE CONFIRMATION OF ADDITION OF RS.4,70,849 / - ON THE BASIS OF ENTRIES AS APPEARED IN THE FORM NO.26AS. 6 . THE BRIEF FACTS OF THE CASE ARE THAT THERE WERE ENTRIES APPEAR ING IN FORM NO.26AS IN RESPECT OF LIQUOR PURCHASED ON VARIOUS DATES ON WHICH THE TCS WAS COLLECTED AND DEPOSITED UNDER SECTION 206 C A OF THE ACT . ACCRDING TO THE ASSESSEE THE LIQUOR WAS NOT PURCHASED BY IT BUT THE PURCHASE OF LIQUOR BY M/S APPOLLO HOTEL WAS WRONGLY ENTERED ON ITS PAN AND SO THE TCS. THE AO WRONGLY TREATED THE SAID AMOUNT AS INTEREST INCOME BY HOLDING THAT THE TAX AT SOURCE WAS DEDUCTED UNDER SECTION 194A 5 ITA NO. 5329 /MUM201 6 OF THE ACT WHEREAS AS A MATTER OF FACTS THE SAID ENTRIES REPRESENT ED THE PURCHASE OF LIQUOR ON WHICH TCS WAS DEDUCTED AND DEPOSITED THAT TOO NOT BY THE ASSESSEE BUT BY THE APPOLLO HOTEL . THE LD. CIT(A) ALSO CONFIRMED THE SAID ADDITION BY OBSERVING AND HOLDING AS UNDER : 5.2 I HAVE CAREFULLY CON SIDERED THE FACTS OF THE CASE AND SUBMISSION MADE BY THE LD. AR. THERE IS NO DISPUTE THAT AS PER 26AS, AN AMOUNT OF RS.4,70,849/ - IS APPEARING IN THE NAME OF THE ASSESSEE. SINCE TDS HAS BEEN DEDUCTED U/S.194A, NATURE OF INCOME IS INTEREST INCOME. THE LD. AR HAS STATED THAT VARIOUS PARTIES HAD COLLECTED T C S ON BEHALF OF M/S.HOTEL APOLLO BUT THE PAN BEING USED BY THEM WAS OF THE APPELLANT. HOWEVER, THERE IS NO EVIDENCE TO SHOW THAT THE SAID AMOUNTS WERE OFFERED BY THE OTHER PARTIES. FURTHER, THE APPELLANT IT SELF HAD CLAIMED TDS FROM THE IMPUGNED SUMS. HENCE, THE AO HAS RIGHTLY ADDED THE INTEREST OF RS.4,70,849/ - . THE ADDITION IS CONFIRMED AND THE GROUND IS DISMISSED 7 . WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS, PERUSED THE MATERIAL PLACED BEFORE US DURING THE COURSE OF HEARING INCLUDING THE ORDERS OF AUTHORITIES BELOW. WE FIND FROM THE RECORD AND FORM NO.26AS FILED AT PAGES 26, 27 AND 28 OF THE PAPER BOOK THAT BOTH THE AUTHORITIES BELOW HAS RECORDED WR O NG FINDINGS OF FACTS THAT THE ASSESSEE HAS BEEN CREDITED AND PAID INTEREST ON WHICH TDS WAS DEDUCTED U/S 194A OF THE ACT WHEREAS AS A MATTER OF FACT, THE ENTRIES REPRESENTED THE TCS ON THE PURCHASE OF LIQUOR WHICH WAS NOT ACTUALLY PURCHASED BY THE ASSESSEE BUT BY HOTEL APOLLO AS IS CLEAR FR OM THE CONFIRMATION LETTER FROM HOTEL APOLLO FILED AT PAGE 35 OF THE PAPER BOOK STATING THAT THE PURCHASES OF LIQUOR WAS MADE BY APOLLO HOTEL . THE TCS SHOULD HAVE BEEN DEPOSITED I THE NAME OF APPOLLO HOTEL AND NOT IN THE NAME OF THE ASSESSEE. UNDER THESE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE OPINION THE TCS HAS BEEN INADVERTENTLY 6 ITA NO. 5329 /MUM201 6 MISTAKEN AS TDS DEDUCTED UNDER SECTION 194A OF THE ACT WHICH WAS TOTALLY WRONG AND REQUIRED TO BE DELETED. BUT SINCE THE MATTER REQUIRED VERIFICATION AT THE LEVEL OF AO AND A CCORDINGLY, WE SET ASIDE THE ORDER OF THE LD.CIT(A) AND RESTORE THE ISSUE BACK TO THE FILE OF THE AO WITH A DIRECTION TO VERIFY ALL THESE ENTRIES AND DECIDE THE ISSUE ACCORDINGLY AFTER ALLOWING A REASONABLE OPPORTUNITY TO THE ASSESSEE T O PRESENT HIS CASE AND IF FOUND CORRECT DELE T E THE ADDITION . 8 . I N THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 27 .1.2017 . SD SD ( MAHAVIR SINGH ) ( RAJESH KUMAR) / J UDICIAL MEMBER / A CCOUNTANT MEMBER MUMBAI ; DATED : 27. 1. 201 7 SRL,SR.PS / COPY OF THE ORDER FORWARDED TO : 1. / THE A PPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F ILE / BY ORDER, TRUE COPY / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI