ITO 10(1)(4), MUMBAI V. DIVYANSH CONSTRUCTION P.LTD, MUMBAI

ITA 583/MUM/2014

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 3672 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-01-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 27-10-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 23-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K RAVI RAMACHANDRAN
• Keywords: Business income; Rule of consistency; Revenue expenditure
• Section: 142(1)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE S/SHRI N.K.BILLAIYA, ACCOUNTANT MEMBER AND AMARJIT SINGH, JUDICIAL MEMBER / I .T.A. NO.583/MUM/2014 ( / ASSESSMENT YEAR: 2010-11) INCOME TAX OFFICER 10(1)(4) 457, AAYAKAR BHAVAN, 4 TH FLOOR, M.K.MARG, MUMBAI - 400020 / VS. M/S. DIVYANSH CONSTRUCTION PVT. LTD. 16, NAVAL PALACE, NARIMAN POINT, VILE PARLE (E), MUMBAI - 400057 ./ ./ PAN/GIR NO. : AACCD1341C ( / APPELLANT ) .. ( / RESPONDENT ) ASSESSEE BY: SHRI NISHIT GANDHI DEPARTMENT BY: SHRI K. RAVI RAMACHANDRAN / DATE OF HEARING: 27.10.2015 /DATE OF PRONOUNCEMENT: 15.01.2016 / O R D E R PER AMARJIT SINGH, JM: THIS IS AN APPEAL DIRECTED AGAINST THE ORDER DATED 26.11.2013 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS)-21, MUMBAI [HEREINAFTER REFERRED TO AS THE CIT(A)] RELEVANT TO THE ASSESSMENT YEAR 2010-11. 2. THE ASSESSEE FILED THE RETURN OF INCOME DECLARING TOTAL INCOME OF RS.1,93,700/- ON 30.09.2010. SUBSEQUENTLY, THE CASE WAS SELECTED FOR SCRUTINY UNDER CASS AND ACCORDINGLY NOTICE U/S. 143(2) OF THE INCOME TAX ACT, 1961( IN SHORT THE ACT) DATED 24.08.2011 WAS ISSUED AND DULY SERVED UPON THE ASSESSEE. THEREAFTER, THE NOTICES U/S. 142(1) DATED 28.08.2011 AND 26.07.2012 WERE ALSO ISSUED. AFTER RECEIPT OF THE NOTICE M/S. MANOJ V. JAIN & CO. CAS APPEARED. THE ASSESSEE COMPANY IS PRIMARILY ENGAGED IN THE CONSTRUCTION ITA NO.583/MUM/2014 ASSESSMENT YEAR: 2010-11 2 ACTIVITIES AND IN THE BALANCE SHEET SHOWN CAPITAL WORK IN PROGRESS. DURING THE YEAR THE ADDITION IN LAND COST AND CONSTRUCTION COST SHOWN AT RS.10,445/- AND RS.4,92,181/- RESPECTIVELY. AS PER PROFIT & LOSS ACCOUNT THE ASSESSEE SHOWN RENT RECEIPTS OF RS.23,40,000/- AND AFTER DEBITING VARIOUS EXPENSES SHOWN NET PROFIT OF RS.1,93,696/-. THE ASSESSING OFFICER DISALLOWED THE EXPENSES OF RS.20,96,304/- AND TRANSFERRED IT AS WORK IN PROGRESS. THE ASSESSING OFFICER ALSO FURTHER DISALLOWED SUNDRY EXPENSES OF RS.67,254/-. THEREFORE, THE ASSESSEE FILED THE APPEAL BEFORE LEARNED CIT(A) AND THE LEARNED CIT(A) TREATED AS ALLOWED THE SAID EXPENSES AND HENCE FEELING AGGRIEVED THE REVENUE HAS FILED THE PRESENT APPEAL BEFORE US. 3. WE HAVE HEARD THE ARGUMENTS ADVANCED BY THE LEARNED REPRESENTATIVE OF THE PARTIES AND HAVE GONE THROUGH THE RECORD CAREFULLY. THE LEARNED REPRESENTATIVE OF THE DEPARTMENT HAS ARGUED THAT THE LEARNED CIT(A) IS WRONG IN ALLOWING THE BUSINESS LOSS AGAINST THE RENTAL INCOME OF THE ASSESSEE, THEREFORE, THE ORDER IN QUESTION IS WRONG AGAINST LAW AND FACTS AND IS LIABLE TO BE SET ASIDE. IT IS ALSO ARGUED THAT THE LEARNED CIT(A) HAS WRONGLY ALLOWED THE SUNDRY EXPENSES OF RS.67,524/- WITHOUT ANY EVIDENCE ON RECORD HENCE THE ORDER IN QUESTION IS NOT LIABLE TO BE SUSTAINABLE IN THE EYES OF LAW. ON THE OTHER HAND THE LEARNED REPRESENTATIVE OF THE ASSESSEE HAS REFUTED THE SAID CONTENTIONS. KEEPING IN VIEW OF THE ARGUMENTS ADVANCED BY THE PARTIES AND GOING THROUGH THE RECORD CAREFULLY IT CAME INTO NOTICE THAT THE ASSESSEE IS IN THE BUSINESS OF CONSTRUCTION ACTIVITIES BUT ASSESSEE HAD STOPPED THE CONSTRUCTION ACTIVITIES TEMPORARILY DUE TO THE REASON OF THAT IN THE YEAR 2006 TO 2008 THERE WAS A SHARP FALL IN REAL ESTATE MARKET AND SEVERE LIQUIDITY CRUNCH. THE ASSESSEE HAD CLAIMED CERTAIN EXPENSES AS REVENUE EXPENDITURE IN PROFIT & LOSS ACCOUNT FOR THE ADVERTISING AGENCY WHICH WAS ADJUSTED AND FILED THE RETURN AS NIL. IN THE ASSESSEES BOOKS OF ACCOUNTS DIRECT EXPENDITURE INCURRED FOR THE CONSTRUCTION WAS TREATED AS WORK IN PROGRESS AND INDIRECT EXPENSES RELATED TO THE BUSINESS WERE DEBITED TO PROFIT AND ITA NO.583/MUM/2014 ASSESSMENT YEAR: 2010-11 3 LOSS ACCOUNT. THE ASSESSING OFFICER HAD ADDED THIS REVENUE EXPENDITURE UNDER WORK IN PROGRESS AND THIS AMOUNT WAS NOT ALLOWED TO BE ADJUSTED WITH RENTAL INCOME RECEIVED BY THE ASSESSEE. ASSESSEE WAS FOLLOWING SAME METHOD EVERY YEAR AND WITHOUT CHANGE OF ANY PARTICULAR FACTS IN THIS CASE, ASSESSING OFFICER HAD CHANGED THE ASSESSEES ACCOUNTING SYSTEM. RULE OF CONSISTENCY IS TO BE FOLLOWED AND ACCORDINGLY, LEARNED CIT(A) BY RELYING UPON THE NUMBER OF AUTHORITIES DID NOT CHANGE THE ACCOUNTING SYSTEM AND ALLOWED THE APPEAL OF THE ASSESSEE. UNDOUBTEDLY, THE BUSINESS OF CONSTRUCTION ACTIVITY HAS BEEN TEMPORARILY SUSPENDED DUE TO LULL IN THE REAL ESTATE. THE ASSESSEE RENTED THE PROPERTY FOR ADVERTISING PURPOSES AND RECEIVED THE RENT FOR THE SAME. IF THERE IS TEMPORARY LULL IN THE BUSINESS AND IF THE ASSESSEE IS EXPLOITED THIS HAS TO BE TREATED AS BUSINESS INCOME IN VIEW. HOWEVER THE VIEW OF THE ASSESSING OFFICER IS THAT IN THE EARLIER YEAR ASSESSEE HAS TREATED THE RENTAL INCOME AS INCOME FROM OTHER SOURCES BUT U/S. 71 OF THE ACT EXCEPT FROM THE CAPITAL GAIN, DIFFERENT HEADS OF INCOME OF THE SAME YEAR CAN BE SET OFF. IN VIEW OF THE LAW SETTLED IN THE CASE OF CIT VS. VIKRAM COTTON MILLS LTD. (1998) 169 ITR 597 (SC). IN THE INSTANT CASE THERE WAS A LOSS IN THE REVENUE ACCOUNT AND THERE WAS INCOME FROM BOTH OTHER SOURCES, HENCE, THIS INCOME CAN BE ADJUSTED AGAINST BUSINESS LOSS. THEREFORE, IN THE SAID CIRCUMSTANCES LEARNED CIT(A) HAS RIGHTLY ADJUDICATED THE MATTER OF CONTROVERSY WHICH DOES NOT REQUIRED ANY INTERFERENCE IN THIS APPELLATE STAGE. HENCE THE APPEAL IS HEREBY ORDERED TO BE DISMISSED. 5. IN RESULT THE APPEAL OF THE REVENUE IS HEREBY DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 15 TH JANUARY, 2016. SD/- SD/- (N.K.BILLAIYA) (AMARJIT SINGH) / ACCOUNTANT MEMBER /JUDICIAL MEMBER MUMBAI; DATED : 15 TH JANUARY, 2016 MP ITA NO.583/MUM/2014 ASSESSMENT YEAR: 2010-11 4 / 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