GLORIOUS REALITY P. LTD, MUMBAI V. ITO 6(3)(1), MUMBAI

ITA 5919/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 55998 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-11-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2006-2007
• Appeal Filed On: 28-07-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: A K NAYAK
• Assessee Lawyers: DERDATTA MAINKAR
• Keywords: Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH G,MUMBAI BEFORE SHRI J. SUDHAKAR REDDY (AM) & SHRI V. DURG A RAO (JM) I.T.A. NO.5919/MUM/2010 (A.Y. 2006-07) M/S. GLORIOUS REALTY PVT. LTD., MAHINDRA TOWERS, DR. G.M. BHOSALE MARG, P.K. KURNE CHOWK, WORLI, MUMBAI-400 018. PAN: AAACG2097E. VS. INCOME-TAX OFFICER-6(3)(1), AAYKAR BHAVAN, M.K. ROAD, MUMBAI-400 020. APPELLANT RESPONDENT APPELLANT BY SHRI DERDATTA MAINKAR. RESPONDENT BY SHRI A .K. NAYAK. DATE OF HEARING 02-11-2011 DATE OF PRONOUNCEMENT 18-11-2011 O R D E R PER V. DURGA RAO, JM : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF CIT(A)-12, MUMBAI, DATED 04-03-2919. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS IN THIS APPEAL : 1. THE LEARNED CIT(A) ERRED IN CONCLUDING THAT TH E BUSINESS OF THE COMPANY HAD NOT COMMENCED AND HENCE FURTHER ERRED IN DISALLOWING THE ENTIRE EXPENDITURE OF RS.641086. 2. THE LEARNED CIT(A) FURTHER IGNORED IN GIVING DE CISION ABOUT TREATING THE INTEREST EARNED AMOUNTING TO RS. 39000 AS INCOME FROM OTHER SOURCES INSTEAD OF BUSINESS IN COME. ITA NO.5919/M/2010 GLORIOUS REALTY P.LTD. 2 3. AT THE TIME OF HEARING BEFORE US, THE LD. COUNSE L FOR THE ASSESSEE HAS SUBMITTED THAT THE ISSUES INVOLVED IN THIS APPEAL A RE SIMILAR TO THE ISSUES RAISED IN ASSESSMENT YEAR 1999-2000. THE TRIBUNAL, VIDE IT S ORDER DATED 26-05-2008 IN ITA NO. 5685/MUM/2005, HAS DECIDED THESE ISSUES AGA INST THE ASSESSEE. 4. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE REC ORDS. THE TRIBUNAL, FOR THE ASSESSMENT YEAR 1999-2000 IN THE ASSESSEES OWN CASE (SUPRA), HAS DECIDED THE ISSUES AGAINST THE ASSESSEE BY CONFIRMING THE O RDER OF CIT(A), THE RELEVANT PORTION OF WHICH IS REPRODUCED AS UNDER : 7. WITH REGARD TO THE ISSUES RAISED IN GROUND NO. 2 & 3, THE LD. COUNSEL FAIRLY STATED THAT BOTH THE ISSUES WERE COVERED AGAINST THE ASSESSEE BY THE ORDER OF THE TR IBUNAL IN ASSESSEES OWN CASE FOR A.YS. 1996-97 AND 2001-02 I N ITA NO.6818 & 6818/M/04 ORDER DATED 27 TH SEPTEMBER, 2007, HENCE, WE DISMISS BOTH THESE GROUNDS OF THE ASSESSE E. HOWEVER, FOR THE SAKE OF READY REFERENCE, WE REPROD UCE THE RELEVANT FINDINGS OF THE TRIBUNAL AS UNDER : WHEN WE WENT THROUGH THE FACTS OF THE CASE, THE ASSESSEE HAS NOT COMMENCED ITS BUSINESS OF REALTORS AND DEVELOPERS EVEN TODAY. THE COMPANY WAS FORMED IN THE YEAR 1995, WHEREAS WE ARE STANDING IN THE YEAR 2007. SINCE ITS INCORPORATION, THE ASSESSEE COULD NOT DO ANYTHING TOWARDS CARRYING ON THE BUSINESS FOR WHICH THE COMPANY WAS INCORPORATED. THEREFORE, IT IS VERY APPARENT THAT THE EXPENDITURE INCURRED BY THE ASSESSEE FOR THESE TWO ASSESSMENT YEARS COULD NOT BE TREATED AS EXPENDITUR E INCURRED FOR THE PURPOSE OF BUSINESS CARRIED ON BY IT. EVEN IF, THE ASSESSEE COMPANY WAS CONTEMPLATING TO COMMENCE THE BUSINESS AND MAKING NECESSARY GROUND WORKS, SUCH EXCEPTION COULD BE GIVEN ONLY FO R CERTAIN INITIAL YEARS. IT IS POSSIBLE TO ARGUE THAT THE BUSINESS OF REALTORS AND DEVELOPERS COULD NOT BE COMMENCED IMMEDIATELY AFTER THE INCORPORATION OF THE COMPANY. THE ASSESSEE HAS TO LOOK OUT FOR PROPE R SITE, DEVELOP IT, GET PERMISSION FROM THE CONCERNED AUTHORITIES ETC. TO COMMENCE ITS BUSINESS. THEREFOR E, A REASONABLE MARGIN OF TIME COULD BE GRANTED IN SUC H CASES. BUT AS FAR AS THE PRESENT CASE IS CONCERNED, THE ASSESSEE COMPANY NEVER COMMENCED ITS BUSINESS. IT IS A CASE OF NON-STARTER. THEREFORE, I N ITA NO.5919/M/2010 GLORIOUS REALTY P.LTD. 3 SUCH CIRCUMSTANCES, THE LOWER AUTHORITIES HAVE RIGH TLY DISALLOWED THE CLAIM OF EXPENDITURE. NOW, REGARDING THE INTEREST INCOME EARNED BY THE ASSESSEE COMPANY, IT IS NOT POSSIBLE TO TREAT T HE SAME AS BUSINESS INCOME. THE ASSESSEE HAS NOT COMMENCED ITS BUSINESS. THE INCOME WAS EARNED OUT OF BANK DEPOSITS. IT WAS THE INTEREST INCOME PRIOR TO THE COMMENCEMENT OF BUSINESS. THE HONBLE SUPREME COURT HAS HELD IN THE CASE OF TUTICORIN ALK ALI CHEMICALS AND FERTILISERS VS. CIT (227 ITR 172) AND CIT VS. COROMANDEL CEMENTS (234 ITR 412) THAT SUCH INTERESTS ARE ASSESSABLE AS INCOME FROM OTHER SOURCES. THEREFORE, THE SECOND GROUND ALSO FAILS. RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBUNAL IN THE ASSESSEES OWN CASE (SUPRA), WE DISMISS THESE GROUNDS RAISED BY THE ASS ESSEE. 5. IN THE RESULT, THE ASSESSEES APPEAL STANDS DISM ISSED. ORDER PRONOUNCED ON THE 18 TH DAY OF NOVEMBER, 2011. SD/- SD/- (J. SUDHAKAR REDDY) (V. DURGA RAO) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI: 18 TH NOVEMBER , 2010. NG: ITA NO.5919/M/2010 GLORIOUS REALTY P.LTD. 4 COPY TO : 1. ASSESSEE. 2.DEPARTMENT. 3 CIT(A)-12,MUMBAI. 4 CIT,CITY-6,MUMBAI. 5.DR,G BENCH,MUMBAI. 6.MASTER FILE. (TRUE COPY) BY ORDER, ASST. REGISTRAR, ITAT, MUMBAI.