ITO WD 1(1)(3), MUMBAI V. EMINENT TRAVELS P.LTD, MUMBAI

ITA 5782/MUM/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0877 (ITAT-MUMBAI)
• Duration Of Justice: 6 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-04-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 27-09-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M C OMI NINGSHEN
• Assessee Lawyers: DR K SHIVRAM
• Keywords: Business income; Question of law
• Section: 143(3); 72(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E, MUMBAI BEFORE SHRI G.S.PANNU, ACCOUNTANT MEMBER AND SHRI C.N.PRASAD, JUDICIAL MEMBER ITA NO.5782/MUM/2016 (AY. 2010-11) INCOME-TAX OFFICER, WARD -1(1)(3), ROOM NO.531A, AAYKAR BHAVAN,M.K.ROAD, MUMBAI 400 020 ...... APPELLANT VS. M/S. EMINENT TRAVELS PVT. LTD., 501, ARIHANT APARTMENT, M.V.PANDLOSKAR MARG, VILE PARLE(E)MUMBAI -400 057 PAN: AAACE 2507M .... RESPONDENT APPELLANT BY : SHRI M.C. OMI NING SHEN RESPONDENT BY : DR. K.SHIVRAM & MS. NEELAM JADHAV DATE OF HEARING : 05/04/2017 DATE OF PRONOUNCEMENT : 26/04/2017 ORDER PER G.S.PANNU,A.M: THE CAPTIONED APPEAL FILED BY THE REVENUE PERTA INING TO ASSESSMENT YEAR 2010-11 IS DIRECTED AGAINST AN ORDER PASSED BY CIT(A)-2, MUMBAI DATED 29/06/2016, WHICH IN TURN, ARISES OUT OF AN ORDER PASSED BY THE ASSESSING OFFICER UNDER SECTION 143(3) OF THE INCOME TA X ACT, 1961 (IN SHORT THE ACT) DATED 12/03/2013. 2 ITA NO.5782/MUM/2016 (AY. 2010-11) 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. 'WHETHER, ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) IS JUSTIFIED IN ALLOWING THE SET-OFF OF CARR IED FORWARD BUSINESS LOSSES AGAINST THE SHORT TERM CAPITAL GAINS IN VIEW OF PROVISIONS OF SECTION 72 OF THE IT. ACT' 2. 'WHETHER, ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS CORRECT IN ALLOWING EXPENSES OF PROFESSI ONAL FEES, ROC, AUDIT FEES AND TAX AUDIT FEES OF RS. 1,18,772/- AGAINST INCOME FRO M OTHER SOURCES EVEN THOUGH THERE WAS NO BUSINESS ACTIVITY DURING THE YEAR AND ROC EXPENSES CLAIMED PERTAINS TO PRIOR PERIOD.' 3. 'THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A ) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFICER RESORTED.' 3. IN SO FAR AS THE FIRST GROUND OF APPEAL IS CONCE RNED, THE RELEVANT FACTS ARE THAT THE RESPONDENT ASSESSEE WAS ENGAGED IN THE BUSINESS OF TRAVEL AGENCY, WHICH HAD SINCE BEEN CLOSED DOWN W.E.F. AU GUST, 2007 AND DURING THE YEAR UNDER CONSIDERATION NO BUSINESS ACTIVITY W AS CARRIED OUT. IN THE RETURN OF INCOME, ASSESSEE HAD DECLARED PROFIT ON S ALE OF OFFICE PREMISES AMOUNTING TO RS.48,91,949/- AGAINST WHICH, ASSESSEE CLAIMED SET-OFF OF BROUGHT FORWARD BUSINESS LOSSES OF ASSESSMENT YEAR S 2006-07,2007-08 AND 2009-10 AMOUNTING TO RS.31,01,347/-. THE ASSESSING OFFICER DENIED THE AFORESAID SET-OFF PRIMARILY ON THE GROUND THAT THE PROFIT ON SALE OF OFFICE PREMISES CANNOT BE ASSESSED AS INCOME FROM BUSINES S. ACCORDING TO THE ASSESSING OFFICER, THE OPENING WDV OF THE BLOCK OF ASSETS OF OFFICE PREMISES AS ON 01/04/2009 WAS RS.17,85,145/- AND THE BLO CK OF ASSETS CEASED TO EXIST AS ON 31/03/2010, AFTER THE SALE OF OFFICE PR EMISES BY THE ASSESSEE. THE ASSESSING OFFICER HELD THAT THE PROFIT ON SALE OF O FFICE PREMISES WAS ON ACCOUNT OF A DEPRECIABLE ASSET AND, THEREFORE, THE SAME WAS TO BE GOVERNED BY THE PROVISIONS OF SECTION 50 OF THE ACT; THUS, THE ASSESSING OFFICER TREATED THE GAIN ON SALE OF OFFICE PREMISES AS SHORT TERM C APITAL GAIN, BEING A GAIN ARISING FROM TRANSFER OF DEPRECIABLE ASSET BY RELYI NG ON SECTION 50 OF THE ACT. 3 ITA NO.5782/MUM/2016 (AY. 2010-11) ACCORDINGLY, THE BROUGHT FORWARD BUSINESS LOSSES WE RE NOT ALLOWED TO BE SET- OFF AGAINST SHORT TERM CAPITAL GAIN. THE CIT(A) HAS SINCE ALLOWED THE CLAIM OF THE ASSESSEE. THE CIT(A) OBSERVED THAT SECTION 72 OF THE ACT PERMITS SET-OFF OF THE BROUGHT FORWARD BUSINESS LOSSES AGAINST THE GAINS OF BUSINESS AND THAT THERE WAS NO REQUIREMENT THAT SUCH GAIN OUGHT TO BE TAXABLE UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION' ; AND, THAT SO LONG AS THE GAIN IS ON ACCOUNT OF ANY BUSINESS CARRIED ON BY TH E ASSESSEE, SUCH SET-OFF COULD NOT BE DENIED. IN COMING TO SUCH A DECISION, THE CIT(A) HAS RELIED UPON THE DECISION OF THE MUMBAI TRIBUNAL IN THE CASE OF DIGITAL ELECTRONICS LTD. VS. CIT(2012) 49 SOT 65 (MUM). AGAINST SUCH A DECISION OF THE CIT(A), REVENUE IS IN APPEAL BEFORE US. 4. BEFORE US, THE LD. DEPARTMENTAL REPRESENTATIVE R EITERATED THE STAND OF THE ASSESSING OFFICER THAT ON ACCOUNT OF SECTION 50 OF THE ACT, GAIN ARISING ON TRANSFER OF A DEPRECIABLE ASSET WAS DEEMED TO BE SH ORT TERM CAPITAL GAIN AND, THEREFORE, IN TERMS OF SECTION 72 OF THE ACT BROUGH T FORWARD BUSINESS LOSSES COULD NOT BE SET-OFF AGAINST THE SHORT TERM CAPITAL GAIN EARNED ON SALE OF OFFICE PREMISES. 5. ON THE OTHER HAND, THE LD. REPRESENTATIVE FOR TH E ASSESSEE HAS DEFENDED THE ORDER OF THE CIT(A) AND POINTED OUT TH AT THE DECISION OF THE TRIBUNAL IN THE CASE OF DIGITAL ELECTRONICS LTD. ( SUPRA) RELIED UPON BY THE CIT(A) HAS IMPLIEDLY BEEN APPROVED BY THE HON'BLE B OMBAY HIGH COURT IN THE DECISION RENDERED IN THE CASE OF CIT VS. M/S. HICKS ON & DADAJEE PVT. LTD. IN ITA NO. 1493 OF 2014 DATED 28/02/2017, A COPY OF WH ICH WAS PLACED ON RECORD. 4 ITA NO.5782/MUM/2016 (AY. 2010-11) 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. IN SO FAR AS IT IS RELEVANT FOR OUR PURPOSE, IT IS NOTICEABLE THAT SEC TION 72 OF THE ACT PRESCRIBES SET-OFF OF UNABSORBED BUSINESS LOSS AGAINST THE PRO FITS AND GAINS OF ANY BUSINESS OR PROFESSION CARRIED ON BY THE ASSESSEE A ND ASSESSABLE FOR THAT ASSESSMENT YEAR. IN THE PRESENT CASE, THE ISSUE IS WITH RESPECT TO THE BUSINESS LOSES OF ASSESSMENT YEARS 2006-07, 2007-08 AND 2009-10, WHICH HAVE BEEN BROUGHT FORWARD AND ASSESSEE HAD SOUGHT S ET OFF OF THE SAME AGAINST THE PROFIT EARNED IN THIS YEAR ON SALE OF OFFICE PREMISES. THE CLAIM HAS BEEN OPPOSED BY THE REVENUE PRIMARILY ON THE GROUND THAT IN THE INSTANT YEAR NO BUSINESS HAS BEEN CARRIED OUT, A ND THUS PROFIT ON SALE OF PREMISES IS NOT ASSESSABLE UNDER THE HEAD PROFITS AND GAINS OF BUSINESS AND PROFESSION. QUITE CLEARLY, SECTION 72(1) OF THE ACT DOES NOT PRESCRIBE THAT IN THE YEAR OF SET-OFF THE INCOME IN QUESTION BE ASSES SABLE UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION' AND T HUS, CONSIDERING THE PHRASEOLOGY OF THE SECTION, IT WOULD BE SUFFICIENT IF SUCH INCOME IS OF THE BUSINESS OR PROFESSION CARRIED ON BY HIM. THEREFOR E, THE OBJECTION OF THE ASSESSING OFFICER THAT THE GAIN ON SALE OF OFFICE P REMISES WAS ASSESSABLE AS SHORT TERM CAPITAL GAIN IS OF NO AVAIL TO DENY THE SET-OFF ENVISAGED UNDER SECTION 72 OF THE ACT BECAUSE IN COMMERCIAL SENSE, THE GAIN ON SALE OF OFFICE PREMISES REPRESENTS PROFITS OF BUSINESS. THE SAID PROPOSITION WAS APPLIED BY OUR CO-ORDINATE BENCH IN THE CASE OF DIGITAL ELECT RONICS LTD. (SUPRA), WHICH HAS SINCE BEEN FOLLOWED BY THE CIT(A) IN THE PRESEN T CASE. THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF M/S. HICKSON & D ADAJEE PVT. LTD(SUPRA) WAS CONSIDERING THE APPEAL OF THE REVENUE, INTER-AL IA, ON THE FOLLOWING QUESTION OF LAW:- 5 ITA NO.5782/MUM/2016 (AY. 2010-11) (I)WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE TRIBUNAL WAS JUSTIFIED IN ALLOWING SET OFF OF BROUG HT FORWARD BUSINESS LOSS AGAINST DEEMED SHORT TERM CAPITAL GAINS ARISING FROM SALE O F BUILDING AND PLANT AND MACHINERY? THE HON'BLE BOMBAY HIGH COURT APPROVED THE STAND OF THE ASSESSEE AND NEGATED THE STAND OF THE REVENUE. THE HON'BLE BOMB AY HIGH COURT ALSO NOTED THAT THERE WAS NO REQUIREMENT OF SECTION 72 O F THE ACT THAT SUCH GAINS OF BUSINESS SHALL BE TAXABLE UNDER THE HEAD 'PROFIT S AND GAINS OF BUSINESS OR PROFESSION' AND, THEREFORE, UPHELD THE DECISION OF THE TRIBUNAL HOLDING THAT THE BROUGHT FORWARD BUSINESS LOSS CAN BE SET OFF AGAINST PROFITS OF ANY BUSINESS OR PROFESSION INCLUDING THE PROFIT ON SALE OF BUILDING AND PLANT & MACHINERY. FOLLOWING THE AFORESAID PARITY OF REAS ONING, IN THE PRESENT CASE ALSO, THE BROUGHT FORWARD LOSSES ARE ELIGIBLE FOR SET-OFF AGAINST SHORT TERM CAPITAL GAIN ON SALE OF OFFICE PREMISES. THEREFORE , THE DECISION OF THE CIT(A) IS JUSTIFIED AND IS HEREBY AFFIRMED. THUS, ON THIS AS PECT THE REVENUE FAILS. 7. IN SO FAR AS THE NEXT GROUND IS CONCERNED, THE S AME RELATES TO THE EXPENSES OF RS.1,18,772/- INCURRED BY THE ASSESSEE ON ACCOUNT OF PROFESSIONAL FEE, ROC EXPENSES, AUDIT FEE AND TAX A UDIT FEE. THE ASSESSING OFFICER DENIED THE DEDUCTION FOR AFORESAID EXPENSES ON THE GROUND THAT THERE WAS NO BUSINESS INCOME AND ASSESSEES ONLY INCOME I S BY WAY OF INTEREST, DIVIDEND AND MISCELLANEOUS INCOME WHICH WERE ASSESS ABLE UNDER THE HEAD INCOME FROM OTHER SOURCES. THE CIT(A) HAS ALLOWE D THE CLAIM OF THE ASSESSEE. 8. ON THIS ASPECT, WE FIND THAT THE CIT(A) HAS NOTE D THAT THE IMPUGNED EXPENSES ARE STATUTORILY REQUIRED TO BE INCURRED AN D, THEREFORE, THE SAME WAS ALLOWABLE. IN OUR CONSIDERED OPINION, THE CIT( A) MADE NO MISTAKE IN 6 ITA NO.5782/MUM/2016 (AY. 2010-11) ALLOWING THE CLAIM OF THE ASSESSEE BECAUSE EVEN IN THE ABSENCE OF REGULAR BUSINESS ACTIVITY, SUCH EXPENSES ARE REQUIRED TO BE STATUTORILY INCURRED AND, THEREFORE, THE SAME ARE ALLOWABLE AGAINST THE ASSES SED INCOME. THUS, ON THIS ASPECT ALSO THE ORDER OF THE CIT(A) IS HEREBY AFFIR MED. 9. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 26/04/201 7 SD/- SD/- (C.N.PRASAD ) (G.S. PANNU) JUDICIAL MEMBER ACCOCUNTANT MEMBER MUMBAI, DATED 26/04/2017 VM , 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. BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI