DCIT 24(3), MUMBAI V. GUNDECHA BUILDERS, MUMBAI

ITA 6103/MUM/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 3231 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-08-2016
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 18-07-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 30-09-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MRS VIDHISHA KALRA
• Keywords: Business income; Rule of consistency; Earning of tax free income; Question of law
• Section: 143(3); 14A; 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES G, MUMBAI BEFORE SHRI RAJENDRA (AM) AND SHRI RAM LAL NEGI (JM ) ITA NO. 6103/MUM/2014 ASSESSMENT YEAR: 2011-12 THE DCIT - 24(3), ROOM NO. 702, C-11, 7 TH FLOOR, B.K.C, BANDRA (E), MUMBAI-400 051. VS. M/S. GUNDECHA BUILDERS, 141, GUDECHA HOUSE, JAWAHAR NAGA, GOREGAON(W), MUMBAI- 400 062. PAN :- AAAFG0848E (APPELLANT) (RESPONDENT) APPELLANT BY : MRS. VIDHISHA KALRA RESPONDENT BY : SHRI. VIMAL PUNMIYA DATE OF HEARING: 16/08 /2016 DATE OF PRONOUNCEMENT: 24/08/2 016 O R D E R PER RAM LAL NEGI, JM THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAI NST ORDER DATED 23/07/2014 PASSED BY THE LD CIT(APPEALS)-34, MUMBAI FOR THE AS SESSMENT YEAR 2011-12, WHEREBY THE LD. CIT (A) SET ASIDE THE FINDINGS OF A O IN ASSESSMENT ORDER DATED 19.3.2014 WHILE DECIDING THE FIRST APPEAL FILED BY THE ASSESSEE. 2). BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE A BUILDER & DEVELOPER, FILED ITS RETURN OF INCOME FOR THE ASST. YEAR 2011-12 DECLARI NG THE TOTAL INCOME OF RS. 14,02,03,330/-. THE AO COMPLETED THE ASSESSMENT U/S 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT), DETERMINING THE TOTAL INCOME OF RS. 16,43,11,280/-, AFTER INTER ALIA MAKING ADDITION OF RS. 1,77,33,629/-AS BUSINESS INCOME, RS. 2,49,289/- AS INCREASED PROFIT , RS. 16,31,000/- ADDITION 2 ITA NO. 6103/MUM/2014 ASSESSMENT YEAR: 2011-12 MADE ON ACCOUNT OF DISALLOWANCE OF 1/3 RD SECURITY, LEGAL PROFESSIONAL AND STAFF EXPENDITURE, RS. 9126/- ADDITION ON ACCOUNT OF DISA LLOWANCE MADE U/S 14A READ WITH RULE 8D. IN APPEAL, THE LD. CIT(A) DELETE D ALL THE ADDITIONS EXCEPT ADDITION MADE ON ACCOUNT OF DISALLOWANCE MADE U/S 1 4A READ WITH RULE 8D AS THE LD. CIT(A) RESTRICTED THE DISALLOWANCE TO RS. 7 55/-. 3). THE REVENUE HAS CHALLENGED THE IMPUGNED ORDER O N THE FOLLOWING EFFECTIVE GROUNDS OF APPEAL:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN HOLDING THE LEASE RENT INCOME OF RS. 1,77,33,629/- AS INCOME FROM HOUSE PROPERTY AS AGAI NST BUSINESS INCOME HELD BY THE A.O. BY IGNORING THE DECISION IN THE CASE OF INDIAN CITY PROPERTIES LTD. VS. CIT 55 ITR 262(CAL) AND ALSO IGNORING THE FACT THAT THE PROPERTY WAS HELD AS TRADING ASSE T AND NOT AS INVESTMENT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) ERRED IN DELETING ADDITION OF RS. 22,49, 289/- ON ACCOUNT OF ALLOCATION OF COMMON EXPENDITURE TO POISAR PROJECT AND SAKINAKA D PROJECT BY IGNORING THE FACT THAT SAID EXPENSES WER E INCURRED BY THE ASSESSEE FIRM FOR RUNNING ITS COMMON OFFICE AND HEN CE ATTRIBUTABLE TO ALL THE PROJECTS. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS. 16 ,31,000/- MADE BY THE ASSESSING OFFICER BEING 1/3 RD OF SECURITY EXPENSES AND SALARY EXPENSES IGNORING THE FACT THAT THE ASSESSEE HAS NO T FURNISHED THE REQUIRED DOCUMENTARY EVIDENCE TO SUBSTANTIATE ITS CLAIM FOR EXPENSES INCURRED. 3 ITA NO. 6103/MUM/2014 ASSESSMENT YEAR: 2011-12 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) ERRED IN RESTRICTING THE DISALLOWANCE OF RS. 9,126/- MADE U/S 14A R.W.R.8D TO RS. 755/- ONLY, BEING 5% OF DIV IDEND INCOME, IGNORING THE FACT THAT ADDITION OF RS. 9,126/- WAS MADE AS PER FORMULA GIVEN IN RULE 8D OF THE I.T. RULES. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) ERRED IN TREATING THE INTEREST INCOME AS BUSINESS INCOME INSTEAD OF INCOME FROM OTHER SOURCES IGNORING THE F ACT THAT INTEREST EARNED BY THE ASSESSEE HAS NO NEXUS WITH THE BUSINE SS ACTIVITIES OF THE ASSESSEE. 6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) ERRED IN TREATING THE INTEREST INCOME AS BUSINESS INCOME INSTEAD OF INCOME FROM OTHER SOURCES IGNORING THE F ACT THAT THE ITAT IN THE CASE OF M/S MAMTA ENTERPRISES VIDE ITA NO. 5206/MUM/2010 DATED 30/12/2011 HAS DECIDED THE ISSU E IN FAVOUR OF THE DEPARTMENT. 4). BEFORE US THE LD. DEPARTMENTAL REPRESENTATIVE (DR) SUBMITTED THAT THE LD. CIT(A) HAS WRONGLY HELD THE LEASE RENT INCOME O F RS. 1,77,33,629/- AS INCOME FROM HOUSE PROPERTY CONTRARY TO THE FINDINGS OF THE AO. THE LD. CIT(A) HAS WRONGLY DELETED THE ADDITION OF RS. 2,49,289/- MADE ON ACCOUNT OF ALLOCATION OF COMMON EXPENDITURE TO POISAR PROJECT AND SAKINAKA D PROJECT BY IGNORING THE FACT THAT SAID EXPENSES WERE INCURRED BY THE ASSESSEE FOR RUNNING ITS COMMON OFFICE AND HENCE ATTRIBUTABLE TO ALL TH E PROJECTS. THE LD. CIT(A) HAS FURTHER WRONGLY DELETED THE ADDITION OF RS. 16,31,0 00/- MADE BY THE ASSESSING OFFICER BEING 1/3 RD OF SECURITY EXPENSES AND SALARY EXPENSES IGNORING THE FACT THAT THE ASSESSEE HAS NOT FURNISHED THE REQUIRED D OCUMENTARY EVIDENCE TO SUBSTANTIATE ITS CLAIM FOR EXPENSES INCURRED. FURTH ER THE LD. CIT(A)HAS WRONGLY RESTRICTED THE DISALLOWANCE OF RS. 9,126/- MADE U/S 14A R.W.R.8D TO 4 ITA NO. 6103/MUM/2014 ASSESSMENT YEAR: 2011-12 RS. 755/- ONLY, BEING 5% OF DIVIDEND INCOME, IGNORI NG THE FACT THAT ADDITION OF RS. 9,126/- WAS MADE IN ACCORDANCE WITH THE LAW I N RULE 8D OF THE I.T. RULES. THE LD. CIT(A) FURTHER WRONGLY TREATED THE INTEREST INCOME AS BUSINESS INCOME INSTEAD OF TREATING THE SAME AS INCOME FROM OTHER SOURCES IGNORING THE FACT THAT INTEREST EARNED BY THE ASSESSEE HAS NO NEXUS W ITH THE BUSINESS ACTIVITIES OF THE ASSESSEE. 5). ON THE OTHER HAND THE LD. COUNSEL FOR THE ASSE SSEE SUBMITTED THAT THE CASE OF THE ASSESSEE IS SQUARELY COVERED BY THE DECISION DATED 5.1.2016, RENDERED BY THE ITAT, MUMBAI IN ASSESSEES OWN CASE, ITA NO. 39 06/MUM/2014 FOR THE ASST. YEAR 2010-11, THEREFORE, THE SAME MAY BE DECI DED ACCORDINGLY. 6). WE HAVE HEARD THE RIVAL SUBMISSION AND ALSO PER USED THE MATERIAL PLACED ON RECORD. WE NOTICE THAT THE GROUND NO. 1 OF THIS APPEAL IS IDENTICAL TO GROUND NO. 1 OF THE APPEAL FILED BY THE REVENUE IN ASSESSE ES OWN CASE ITA NO. 3906/MUM/2014(SUPRA) AND THE CO-ORDINATE BENCH HAS DECIDED THE IDENTICAL ISSUE IN FAVOUR OF THE ASSESSEE. THE RELEVANT PORTI ON OF THE ORDER READS AS UNDER:- 5. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTI ES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. LEARNED REPRESENT ATIVE OF BOTH THE PARTIES HAVE AGREED BEFORE US THAT THE ISSUE IN DIS PUTE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL I N ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 200910. ON A PERUSAL OF THE AFORESAID ORDER OF THE COORDINATE BENCH OF THE TRI BUNAL IN ITA NO.762/MUM./ 2013 AND ITA NO.1697/MUM./2013, FOR TH E ASSESSMENT YEAR 200910, ORDER DATED 17TH APRIL 201 5, WE NOTE THAT THE TRIBUNAL, WHILE DECIDING IDENTICAL DISPUTE , HELD AS UNDER: 6. THE NEXT GRIEVANCE OF THE REVENUE RELATES TO CI T(A)S ACTION FOR TREATING RENTAL INCOME AS INCOME FROM HOUSE PROPERT Y. THE ISSUES 5 ITA NO. 6103/MUM/2014 ASSESSMENT YEAR: 2011-12 HAS BEEN DECIDED BY THE TRIBUNAL IN ASSESSEES OWN CASE IN THE ASSESSMENT YEAR 2008-09, WHEREIN VIDE PARA 6, THE T RIBUNAL HAS HELD AS UNDER:- 6. WE HAVE CONSIDERED RIVAL CONTENTIONS AND FOUND FROM THE RECORD THAT THE ISSUE IS SQUARELY COVERED BY THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF SAMBHU INVESTMENT (P) LTD. VS. CIT (2003) 263 ITR 143 (SC), WHEREIN THE HON'BLE APEX C OURT HAS HELD THAT WHEREIN MAIN INTENTION OF LETTING OUT THE PROP ERTY OR ANY PORTION THEREOF IS TO EARN RENTAL INCOME, THE INCOME IS TO BE ASSESSED AS INCOME FROM HOUSE PROPERTY AND WHERE THE INTENTION IS TO EXPLOIT THE IMMOVABLE PROPERTY BY WAY OF COMPLEX COMMERCIAL ACT IVITIES, THE INCOME SHOULD BE ASSESSEE AS INCOME FROM BUSINESS. APPLYING THIS PROPOSITION TO THE FACTS OF THE INSTANT CASE, WE FO UND THAT THE ASSESSEE HAS LET OUT THE PROPERTY TO EARN THE RENTA L INCOME. ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE OR DER OF CIT(A) FOR TREATING THE LEASE INCOME AS INCOME FROM HOUSE PROP ERTY. AS THE FACTS AND CIRCUMSTANCES DURING THE YEAR UNDE R CONSIDERATION ARE SAME, RESPECTFULLY FOLLOWING THE ORDER OF THE T RIBUNAL, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) FOR TREAT ING THE LEASE INCOME AS INCOME FROM HOUSE PROPERTY. 6. THERE BEING NO MATERIAL DIFFERENCE IN THE FACTS OF THE PRESENT CASE, RESPECTFULLY FOLLOWING THE AFORESAID DECISION OF TH E CO-ORDINATE BENCH OF THE TRIBUNAL, WE UPHOLD THE ORDER OF THE LEARNED COMMISSIONER (APPEALS) ON THIS ISSUE. GROUND NO.1 IS DISMISSED. 7). SINCE THE IDENTICAL ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE IN ASSESSEES OWN CASE AFORESAID, RESPECTFULLY FOLLOWI NG THE DECISION OF THE CO- 6 ITA NO. 6103/MUM/2014 ASSESSMENT YEAR: 2011-12 ORDINATE BENCH OF THE TRIBUNAL, WE UPHOLD THE ORDER OF THE LD. CIT(A) ON THIS ISSUE. GROUND NO. 1, OF APPEAL IS THEREFORE DISMISS ED. 8). GROUND NO. 2 OF THIS APPEAL IS IDENTICAL TO G ROUND NO. 3 OF THE APPEAL FILED BY THE REVENUE IN ASSESSEES OWN CASE IN ITA NO. 39 06/MUM/2014(SUPRA) AND THE CO-ORDINATE BENCH HAS DECIDED THE SAME IN FAVOU R OF THE ASSESSEE AND AGAINST THE REVENUE. THE RELEVANT PORTION OF THE OR DER READS AS UNDER:- 15. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PART IES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. AT THE OUTSET, LE ARNED REPRESENTATIVE OF BOTH THE PARTIES ADMITTED THAT TH E ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE TR IBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 200910 AS WELL AS PRECEDING ASSESSMENT YEAR. ON A PERUSAL OF THE ORDE R OF THE CO ORDINATE BENCH OF THE TRIBUNAL, IN ASSESSMENT YEAR 200910, AS REFERRED TO ABOVE, IT IS SEEN THAT THE TRIBUNAL FOL LOWING ITS DECISION IN ASSESSEES OWN CASE FOR THE PRECEDING ASSESSMENT YE AR HELD AS UNDER: 7. THE NEXT GRIEVANCE OF THE REVENUE RELATES TO DEL ETION OF EXPENSES ON ACCOUNT OF ALLOCATION OF COMMON EXPENDITURE. THE CIT(A) HAS DELETED THE ADDITION VIDE PARA 4.3, AFTER OBSERVING AS UNDER :- 4.3. I HAVE CAREFULLY CONSIDERED THE ABOVE SUBMISS IONS, PAPER BOOK AND THE MATERIAL AVAILABLE ON RECORD. IDENTICAL ISS UE AROSE DURING AY.2006-07. THE CIT(A) HAD GIVEN RELIEF TO THE APPE LLANT. AGAINST THE ORDER OF THE CIT(A), THE DEPARTMENT HAD FILED AN AP PEAL BEFORE THE ITAT. THE FINDINGS OF THE IT A T IS IN PARA 11 OF I TS ORDER WHICH IS REPRODUCED AS UNDER- 7 ITA NO. 6103/MUM/2014 ASSESSMENT YEAR: 2011-12 '11. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUS ED THE RECORDS PLACED BEFORE US. IT IS SUBMITTED BY THE LEARNED CO UNSEL FOR THE ASSESSEE THAT THE ASSESSEE HAD MAINTAINED TWO SEPAR ATE ACCOUNTS FOR POISER AS WELL AS SAKINAKA PROJECTS AND THE CIT (A) GAVE A FINDING THAT THE ASSESSEE HAD MAINTAINED TWO SEPARATE ACCOU NTS. THE LEARNED CIT(A) HAS GIVEN A FURTHER FINDING THAT THE ASSESSING OFFICER PRESUMED THAT THE ASSESSEE MIGHT HAVE DEBITED THE E XPENDITURE RELATING TO POISER PROJECT TO SAKI NAKA PROJECT TO GET THE BENEFIT U/S. 80IB(10) BECAUSE THE PROJECT IS FULLY ELIGIBLE FOR DEDUCTION. IT IS A FACT THAT THE ASSESSEE HAS ALREADY DEBITED EXPENSES FOR POISER PROJECT OF RS.1,05,11,664/- AND THE ASSESSING OFFICER HAS NOT POINTED OUT ANY DEFECT IN THE BOOKS OF ACCOUNT SUBMITTED BY THE ASS ESSEE. IN VIEW OF THE ABOVE, WE DO NOT FIND ANY INFIRMITY IN THE ORDE R OF THE CIT(A) AND UPHOLD THE SAME. THE ORDER OF THE CIT(A) WAS UPHOLD BY THE ITAT. SINCE THE FACTS AND CIRCUMSTANCES ARE IDENTICAL AND THE PROJECTS BEING THE SAME, RESPECTFULLY FOLLOWING THE HON'BLE ITAT'S DECISION, I DIRECT THE ASSESSING OFFICER TO DELETE THE ADDITION MADE. THIS GROUND OF APPEAL IS ALLOWED. 8. WE FOUND THAT SIMILAR ISSUE HAS BEEN DECIDED BY THE TRIBUNAL IN ASSESSEE S OWN CASE VIDE PARA 12, 13 & 14, WHICH READS AS UN DER:- 12. THE LAST GRIEVANCE OF THE REVENUE RELATES TO DE LETION OF ADDITION OF RS.38,75,050/- ON ACCOUNT OF ALLOCATION OF COMMO N EXPENDITURE TO POISAR PROJECT AND SAKINAKA D PROJECT. 13. THE CI T(A) HAS DELETED THE ADDITION AFTER FOLLOWING THE ORDER OF THE TRIBU NAL IN ASSESSEE S OWN CASE FOR THE ASSESSMENT YEAR 2006-07. THE PRECI SE OBSERVATIONS OF THE CIT(A) ARE AS UNDER :- 5.3 I HAVE GONE THOUGH THE CONTENTS OF THE IMPUGNE D ASSESSMENT ORDER AS WELL AS ARGUMENTS & SUBMISSIONS OF LD. AUT HORIZED 8 ITA NO. 6103/MUM/2014 ASSESSMENT YEAR: 2011-12 REPRESENTATIVE OF THE APPELLANT ALONG WITH MATERIAL AVAILABLE ON RECORD INCLUDING THE HON'BLE ITA TS ORDERS IN APPEL LANT'S OWN CASE (SUPRA) I HAVE ALSO GONE THROUGH THE CHART FURNISHE D BY THE APPELLANT IT IS CLEAR FROM THE DETAILS OF EXPENSES FURNISHED THAT SEPARATE EXPENDITURE WAS DEBITED UNDER ALL HEADS OF POISER P ROJECT AND THE ASSESSING OFFICER HAS ALSO NOT POINTED OUT A SINGLE INSTANCE IN HIS ORDER AS TO WHICH EXPENDITURE WAS TAXABLE INCOME. H E HAS WORKED SIMPLY ON PRESUMPTION WITHOUT BRINGING ANY EVIDENCE ON RECORD. ON THE OTHER HAND, THE APPELLANT HAS MAINTAINED SEPARA TE BOOKS OF ACCOUNTS AND BANK ACCOUNT FOR THE POISER PROJECT WH EREIN NO DISCREPANCY WAS POINTED OUT BY THE ASSESSING OFFICE R SO IN THE ABSENCE OF ANY CONCLUSIVE EVIDENCE AND INVESTIGATIO N DONE BY THE ASSESSING OFFICER AND IN VIEW OF THE SUBMISSIONS MA DE BY THE APPELLANT, I AM OF THE VIEW THAT THE ASSESSING OFFI CER WAS NOT JUSTIFIED IN ALLOCATING THE EXPENDITURE OF RS. 38,7 5,050/- TO POISER PROJECT WHEREIN EXPENDITURE OF RS. 17,26,112/- WAS ALREADY DEBITED BY THE APPELLANT BEFORE MAKING RE-ALLOCATION OR DIS ALLOWANCE. ON PERUSAL OF PROFIT & LOSS ACCOUNT SUBMITTED REGARDIN G 'D' WING OF SAKINAKA. ASSESSEE HAS DEBITED THE EXPENSES TO THE TUNE OF RS. 6,88,12,548/- AND ALL THESE HAS BEEN ADDED TO THE C LOSING STOCK. THEREFORE, ADDITION OF RS. 81,37,369/- MADE BY THE ASSESSING OFFICER TO 'D' WING OF SAKINAKA WITHOUT POINTING OU T ANY REASON IS NOT JUSTIFIABLE. THE ASSESSING OFFICER SHOULD HAVE POIN TED OUT THE DEFECTS IN THE BOOKS OF ACCOUNTS OF THE APPELLANT A ND THE ITEMS OF EXPENDITURE WHICH WERE DIVERTED FOR REDUCING THE TA XABLE INCOME. INSTEAD OF THAT, THE ASSESSING OFFICER HAS SIMPLY M ADE REALLOCATION OF EXPENSES OF THE PROJECT WHICH CANNOT BE APPROVED AND CONFIRMED IN THE ABSENCE OF ANY EVIDENCE. FURTHER RESPECTFULL Y FOLLOWING THE DECISIONS IN APPELLANT'S OWN CASE OF HON'BLE ITAT M UMBAI, G BENCH, ITA NO.2087/MUM/2010 FOR A.Y.200607 AND THE REASON ING OF MY LD. PREDECESSOR'S APPELLATE ORDER FOR A.Y.200708, THE ASSESSING 9 ITA NO. 6103/MUM/2014 ASSESSMENT YEAR: 2011-12 OFFICER IS DIRECTED TO ALLOW DEDUCTION AS CLAIMED B Y THE APPELLANT TO MAINTAIN THE JUDICIAL DISCIPLINE IN THE FACTS AND C IRCUMSTANCES OF THE INSTANT CASE AS DISCUSSED ABOVE. ACCORDINGLY THIS G ROUND OF APPEAL IS ALSO ALLOWED. 14. WE HAVE CONSIDERED RIVAL CONTENTIONS. AS THE FA CTS AND CIRCUMSTANCES DURING THE YEAR UNDER CONSIDERATION A RE PARI MATERIA TO THE FACTS AND CIRCUMSTANCES AS CONSIDERED AND DE CIDED BY THE TRIBUNAL IN ASSESSEES OWN CASE, WHICH HAS BEEN ELA BORATELY REFERRED BY THE CIT(A) IN HIS IMPUGNED ORDER ACCORD INGLY, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) FOR DELET ING THE ADDITION MADE ON ACCOUNT OF ALLOCATION OF COMMON EXPENDITURE . AS THE FACTS AND CIRCUMSTANCES DURING THE YEAR UNDE R CONSIDERATION ARE SAME, RESPECTFULLY FOLLOWING THE ORDER OF THE T RIBUNAL AS QUOTED ABOVE, WE CONFIRM THE ACTION OF THE CIT(A) WITH REG ARD TO ALLOCATION OF EXPENDITURE. 16. NO MATERIAL DIFFERENCE IN FACTS HAVING BEEN BROUGHT TO OUR NOTICE BY THE LEARNED DEPARTMENTAL REPRESENTATIVE BY ADHER ING TO THE RULE OF CONSISTENCY, WE FOLLOW THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE AS REFERRED TO ABOVE AND UPHOLD THE ORDER OF T HE LEARNED COMMISSIONER (APPEALS) ON THIS ISSUE. GROUND NO.2, RAISED BY THE DEPARTMENT IS DISMISSED. 9). SINCE THE IDENTICAL ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE IN ASSESSEES OWN CASE AFORESAID, RESPECTFULLY FOLLOWI NG THE AFORESAID DECISION OF THE CO-ORDINATE BENCH OF THE TRIBUNAL, WE UPHOLD TH E ORDER OF THE LD. CIT(A) ON THIS ISSUE. GROUND NO. 2, OF THE APPEAL IS ACCORDIN GLY DISMISSED. 10). GROUND NO. 3 OF THIS APPEAL IS IDENTICAL TO T HE COMMON ISSUE RAISED IN GROUND NO. 6,7, & 8 OF THE APPEAL FILED BY THE REVE NUE IN ASSESSEES OWN CASE IN 10 ITA NO. 6103/MUM/2014 ASSESSMENT YEAR: 2011-12 ITA NO. 3906/MUM/2014(SUPRA) THE CO-ORDINATE BENCH HAS DECIDED THE SAME IN FAVOUR OF THE ASSESSEE. THE RELEVANT PORTION OF THE ORDER READS AS UNDER:- 32. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PART IES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. AT THE OUTSET, TH E LEARNED REPRESENTATIVE FOR BOTH THE PARTIES, STATED BEFORE US THAT THE ISSUE IN DISPUTE IS COVERED BY THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 200910. ON PERUSING T HE ORDER OF THE COORDINATE BENCH AS REFERRED TO ABOVE, WE FIND THA T THE ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY HOLDING A S UNDER: 14. THE CIT(A) HAS ALSO CONFIRMED THE DISALLOWANCE OF RS.8,51,418/- BEING 1/3RD OF EXPENSES ON SECURITY, LEGAL FEES AND PROFESSIONAL FEES. WE FOUND THAT THESE EXPENDITURES WERE INCURRED IN RESPECT OF PROPERTIES, WHICH WAS IN DISPUTE. SUCH E XPENSES WERE INDIRECT EXPENDITURE AND ITEM OF PROFIT AND LOSS AC COUNT, THE SAME CANNOT BE ADDED TO WORK-IN-PROGRESS AS SAME ARE IND IRECT EXPENDITURE. EVEN THE PROVISIONS OF SECTION 145 WHI CH PROVIDES METHOD OF ACCOUNTING ALSO STATES THAT INDIRECT EXPE NDITURE IS TO BE DEDUCTED TO PROFIT AND LOSS ACCOUNT AND THE SAME IS NOT TO BE ADDED TO THE VALUE OF CLOSING STOCK AS PER AS2. ACCORDING LY, WE DO NOT FIND ANY MERIT IN THE ACTION OF THE LOWER AUTHORITIES FO R DISALLOWING RS.8,51,418/- BEING 1/3RD OF THE EXPENDITURE INCURR ED ON SECURITY, LEGAL FEE AND PROFESSIONAL FEE. 33. THERE BEING NO MATERIAL DIFFERENCE IN THE FACTS BRO UGHT TO OUR NOTICE BY THE LEARNED DEPARTMENTAL REPRESENTATIVE, FOLLOWING THE DECISION OF THE COORDINATE BENCH AS AFORESAID, WE UPHOLD THE ORDER OF THE LEARNED COMMISSIONER (APPEALS) BY DISMISSING THE GROUNDS NO.6,7 AND 8 RAISED BY THE DEPARTMENT. 11 ITA NO. 6103/MUM/2014 ASSESSMENT YEAR: 2011-12 11). SINCE THE IDENTICAL ISSUE HAS BEEN DECIDED I N FAVOUR OF THE ASSESSEE IN ASSESSEES OWN CASE AFORESAID, RESPECTFULLY FOLLOWI NG THE AFORESAID DECISION OF THE CO-ORDINATE BENCH OF THE TRIBUNAL, WE UPHOLD TH E ORDER OF THE LD. CIT(A) ON THIS ISSUE. GROUND NO. 3, OF THE APPEAL IS ACCORDIN GLY DISMISSED. 12). GROUND NO. 4 OF THIS APPEAL IS IDENTICAL TO GROUND NO. 5 OF THE APPEAL FILED BY THE REVENUE IN ASSESSEES OWN CASE IN ITA NO. 39 06/MUM/2014(SUPRA) AND THE CO-ORDINATE BENCH HAS DECIDED THE SAME IN FAVOU R OF THE REVENUE AND AGAINST THE ASSESSEE. THE RELEVANT PORTION OF THE O RDER READS AS UNDER:- 25. BRIEFLY STATED THE FACTS ARE, IN THE COURSE OF ASSESSMENT PROCEEDINGS, ASSESSING OFFICER, NOTICING THAT THE A SSESSEE HAS EARNED EXEMPT INCOME BY WAY OF DIVIDEND OF ` 15,100 , ASKED THE ASSESSEE TO EXPLAIN WHY EXPENDITURE RELATING TO EAR NING OF SUCH INCOME SHALL NOT BE DISALLOWED AS PER SECTION 14A O F THE ACT. AFTER CONSIDERING THE EXPLANATION OF THE ASSESSEE AND FIN DING THAT THE ASSESSEE HAS NOT INCURRED ANY DIRECT EXPENDITURE RE LATING TO INTEREST DISALLOWED AN AMOUNT OF ` 9,126, BEING 0.5% OF AVER AGE INVESTMENT BY APPLYING RULE 8D(2)(III) R/W SECTION 14A OF THE ACT. ASSESSEE CHALLENGED THE DISALLOWANCE BEFORE THE LEARNED COMM ISSIONER (APPEALS). 26. THE FIRST APPELLATE AUTHORITY, THOUGH, REJECTED ASSESSEES CLAIM THAT NO AMOUNT WAS PAID FOR EARNING THE DIVIDEND IN COME BUT HE NEVERTHELESS RESTRICTED THE DISALLOWANCE TO RS.755/ - BEING 5% OF THE DIVIDEND INCOME EARNED OF RS.15,100/-. 27. LEARNED COUNSEL FOR THE ASSESSEE FAIRLY STATED BEFORE US THAT THE TRIBUNAL, IN ASSESSMENT YEAR 2009-10, HAS DECIDED T HE ISSUE AGAINST THE ASSESSEE BY UPHOLDING THE DISALLOWANCE OF EXPENDITURE MADE BY THE ASSESSING OFFICER BY APPLYING PROVISION S OF RULE 8D. 12 ITA NO. 6103/MUM/2014 ASSESSMENT YEAR: 2011-12 28. IT IS SEEN FROM THE ASSESSMENT ORDER THAT ASSES SING OFFICER HAS NOT MADE ANY DISALLOWANCE ON ACCOUNT OF DIRECT EXPE NDITURE. HE HAS ONLY MADE DISALLOWANCE UNDER RULE 8D(III). CONSIDERING THE FACT THAT THE ASSESSEE HAS EARNED EXEMPT INCOME DURING THE YE AR AND DISALLOWANCE HAS TO BE MADE IN TERMS WITH SECTION 1 4A R.W RULE 8D AND ALSO KEEPING IN VIEW THE DECISION OF THE COORD INATE BENCH AS REFERRED TO ABOVE, WE UPHOLD THE DISALLOWANCE MADE BY THE ASSESSING OFFICER BY RESTORING THE ADDITION OF RS. 9,126. GROUND NO.5, RAISED BY THE DEPARTMENT IS ALLOWED. 13). THE IDENTICAL ISSUE HAS BEEN DECIDED AGAINST THE ASSESSEE IN ASSESSEES OWN CASE AFORESAID. SO, RESPECTFULLY FOLLOWING THE DECISION OF THE CO-ORDINATE BENCH OF THE TRIBUNAL, WE UPHOLD THE DISALLOWANCE M ADE BY THE AO. GROUND NO. 4 OF THE APPEAL IS ACCORDINGLY ALLOWED. 14). GROUND NO. 5 & 6 OF THIS APPEAL IS IDENTICA L TO GROUND NO. 4 OF THE APPEAL FILED BY THE REVENUE IN ASSESSEES OWN CASE IN ITA NO. 3906/MUM/2014 AND THE CO-ORDINATE BENCH HAS DECIDED THE SAME IN FAVOU R OF THE ASSESSEE AND AGAINST THE REVENUE. THE RELEVANT PART OF THE ORDER READS AS UNDER:- 22. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PART IES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE DISPUTE IN TH E AFORESAID GROUND IS CONFINED TO THE ISSUE WHETHER INTEREST INCOME EA RNED ON UTILIZATION OF SURPLUS BUSINESS FUND IS TO BE ASSESSED UNDER TH E HEAD BUSINESS AS CLAIMED BY THE ASSESSEE OR AS INCOME FROM OTHER SOURCES AS HELD BY THE ASSESSING OFFICER. THE LEAR NED COMMISSIONER (APPEALS) HAS DECIDED THE ISSUE IN FAV OUR OF THE ASSESSEE BY FOLLOWING THE ORDERS OF THE TRIBUNAL PA SSED IN CASE OF TWO OTHER SISTER CONCERNS OF THE ASSESSEE VIZ. MINA L ENTERPRISES AND MAMTA ENTERPRISES WHEREIN THE TRIBUNAL UPHELD ASSES SEES CLAIM THAT INTEREST EARNED ON SURPLUS BUSINESS FUNDS IS T O BE ASSESSED 13 ITA NO. 6103/MUM/2014 ASSESSMENT YEAR: 2011-12 UNDER THE HEAD BUSINESS. THOUGH, WE AGREE WITH TH E LEARNED DEPARTMENTAL REPRESENTATIVE THAT THE CO ORDINATE B ENCH OF THE TRIBUNAL IN MAMTA ENTERPRISES FOR THE ASSESSMENT YE AR 200506 AND 200607 HAS DECIDED THE ISSUE AGAINST THE ASSES SEE BUT FACT REMAINS THAT SUBSEQUENTLY THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF SAME ASSESSEE I.E., MAMTA ENTERPRISES W HILE DECIDING THE APPEAL FOR THE ASSESSMENT YEAR 200405 IN ITA NO.8713/MUM./2010, ORDER DATED 27TH JUNE 2013, HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY FOLLOWING THE DE CISION OF THE CO ORDINATE BENCH IN CASE OF ANOTHER SISTER CONCERN MI NAL ENTERPRISES VIDE ITA NO.8185/MUM./2010, DATED 16TH APRIL 2013. THE OBSERVATION OF THE TRIBUNAL IS AS UNDER: 2. AT THE OUTSET IT WAS POINTED OUT BY LD. A.R THA T SIMILAR APPEAL WAS FILED BY THE REVENUE IN THE CASE OF THE GROUP C ONCERN NAMELY M/S. MINAL ENTERPRISES AND TRIBUNAL VIDE ITS ORDER DATED 16/04/2013 IN ITA NO.8185/MUM/2010 HAS UPHELD THE O RDER OF LD. CIT(A). A COPY OF THE SAID ORDER WAS PLACED ON OUR RECORD AND A COPY WAS ALSO GIVEN TO LD. D.R. IT WAS OBSERVED THAT THE GROUND RAISED BY THE REVENUE IN THE PRESENT CASE IS EXACTLY SIMILAR TO THE AFOREMENTIONED GROUP CASE. FOR THE SAKE OF COMPLETE NESS THE SAID ORDER IS REPRODUCED BELOW: THE PRESENT APPEAL IS DIRECTED AGAINST THE ORDER D T.14.10.2010 PASSED BY THE CIT(A)-34, MUMBAI. FOLLOWING GROUNDS OF APPEAL HAVE BEEN RAISED BY THE ASSESSING OFFICER (AO) 1. ON THE FACTS & IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO TREAT THE INTEREST INCOME OF THE ASSESSEE AS BUSINESS INCOME INSTEAD O F INCOME FROM OTHER SOURCES IGNORING THE FACT THAT THE CASE IS CO VERED BY THE 14 ITA NO. 6103/MUM/2014 ASSESSMENT YEAR: 2011-12 DECISION OF HIGH COURT, BOMBAY IN THE CASE OF SHREE KRISHNA POLYSTER LTD. VS. DEPUTY COMMISSIONER OF INCOME TAX (274 ITR 271). 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD. CIT( 4} ERRED IN ALLOWING THE INTEREST PAID ON UNSECURED LOANS AGAINST THE ABOVE STATED INTEREST INCOME CONSIDERIN G IT TO BE BUSINESS INCOME. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT A,) ON THE GROUNDS BE SET ASIDE AND MATTER MAY HE DECIDED ACCORDING TO LA W. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD NEW GROUND WHICH MAY BE NECESSARY. 2. ASSESSEE-FIRM, ENGAGED IN THE BUSINESS OF BUILDE RS AND DEVELOPERS, FILED ITS RETURN OF INCOME ON 31.10.200 7 DECLARING TOTAL INCOME AT RS 1.76 CRORES. ASSESSMENT WAS FINALIZED U/S. 143(3) OF THE ACT BY THE AO ON 15.12.2009 DETERMINING TOTAL I NCOME OF THE ASSESSEE AT RS.1.83 CRORES. 2.1..EFFECTIVE GROUND OF THE APPEAL IS ABOUT TREATI NG THE INTEREST INCOME AMOUNTING TO RS. 1,92, 00,094/- EARNED BY TH E ASSESSEE UNDER THE HEAD BUSINESS INCOME AND NOT UNDER THE HEAD INCOME FROM OTHER SOURCES .DURING THE ASSESSMENT PROCEEDINGS, AU FOUND THAT ASSESSEE HAD CLAIMED THAT INCOME EARNED BY IT FOR THE AY UNDER CONSIDERATION SHOULD BE ASSESSED AS BUSINESS INCOME AND INTEREST PAID BY IT SHOULD BE ALLOWED U/S.57 OF THE ACT. AFT ER CONSIDERING THE FACTS OF THE CASE AO HELD THAT INCOME OF THE ASSESS EE WAS TO BE TAXED UNDER THE HEAD INCOME FROM OTHER SOURCES. HE FURTHER HELD THAT INTEREST PAID BY THE ASSESSEE WAS NOT ALLOWABL E EITHER U/S. 36(I)(III) OR U/S 57 OF THE ACT. 15 ITA NO. 6103/MUM/2014 ASSESSMENT YEAR: 2011-12 2.2. ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPEAL AUTHORITY (FAA).AFTER CONSIDERING THE SUBMISSIONS OF THE ASSE SSEE AND THE ASSESSMENT ORDER HE HELD THAT THE SAME ISSUE IN THE CASE OF SISTER CONCERN M/S. MAMTA ENTERPRISES (ME) FOR THE SAME AS SESSMENT YEAR HAD ARISEN BEFORE HIS PREDECESSOR AND IT WAS DECIDE D IN FAVOUR OF THE APPELLANT, THAT SAME AO HAD PASSED THE ORDERS F OR M/S. ME FOR AYS. 2005-06 & 2006-07 AS WELL AS FOR THE ASSESSE F IRM, THAT THERE WAS NO MATERIAL DIFFERENCE IN EITHER THE ACTION OF THE AO OR THE FACTS AND CIRCUMSTANCES OF BOTH THE CASES. FOLLOWING THE ORDER OF HIS PREDECESSOR IN THE CASE OF M/S. ME AND RELYING UPON THE JUDGMENTS OF THE HON BLE HIGH COURTS OF KARNATAKA AND BOMBAY IN THE CASE S SATISH CHANDRA & CO.(234 ITR 70) AND LOK HOLDINGS(3 08 ITR 356) DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. HE HEL D THAT INTEREST EARNED ON SURPLUS FUNDS OF BUSINESS SHOULD BE ASSES SED AS BUSINESS INCOME AND NOT AS INCOME FROM OTHER SOURCE S. HE FURTHER DIRECTED THE AO TO ALLOW THE INTEREST PAID AGAINST THE SAME, ACCORDINGLY AS PER THE PROVISIONS OF ACT. 2.3. BEFORE US, DEPARTMENTAL REPRESENTATIVE (DR) SU PPORTED THE ORDER OF THE AO. AUTHORISED REPRESENTATIVE (AR) SUB MITTED THAT AO HAD TREATED THE INTEREST-INCOME AS BUSINESS INCOME IN THE CASE OF M/S.ME, THE SISTER CONCERN, ON IDENTICAL FACTS, THA T ASSESSEE WAS ENGAGED IN THE BUSINESS OF ADVANCING MONEY AND THE INTEREST RECEIVED BY IT WAS TO BE ASSESSED UNDER THE HEAD BU SINESS. HE RELIED UPON THE JUDGMENT OF JURISDICTIONAL HIGH COU RT DELIVERED IN THE CASE OF LOK HOLDINGS (SUPRA).THE BRIEF RELEVANT FAC TS OF THE CASE ARE THAT M/S. LOK HOLDINGS, A FIRM INVOLVED IN THE BUSI NESS OF DEVELOPMENT OF PROPERTIES, RECEIVED MONIES IN ADVAN CE FROM CUSTOMERS INTENDING TO PURCHASE FLATS IN THE PROPER TIES AS DEVELOPED BY IT. THESE MONIES WERE OF THE NATURE OF BOOKING! ADVANCES. SINCE THESE MONIES RECEIVED COULD NOT BE IMMEDIATELY UTIL ISED FOR THE 16 ITA NO. 6103/MUM/2014 ASSESSMENT YEAR: 2011-12 BUSINESS OF THE FIRM, SO SURPLUS AMOUNTS FROM SUCH MONEY RECEIVED WAS TEMPORARILY INVESTED WITH BANKS AND OTHER CONCE RNS. SUCH DEPOSITS WITH ACCRUED INTEREST AND SAME WERE ASSESS ED BY THE AU AS INCOME FROM OTHER SOURCES. FAA AND TRIBUNAL HELD THAT INTEREST INCOME WAS TO BE ASSESSED AS BUSINESS INCOME. REVEN UE PREFERRED AN APPEAL BEFORE THE HON BLE HIGH COURT. WHILE DECIDING THE QUESTION OF LAW AS WHETHER THE INTEREST INCOME EARN ED BY THE ASSESSEE WAS ASSESSABLE AS INCOME FROM BUSINESS OR AS INCOME FROM OTHER SOURCE HON BLE COURT DISMISSED THE APPEAL OF THE REVENUE. WE FIND THAT THE FACTS OF THE CASE UNDER C ONSIDERATION ARE SIMILAR TO THE FACTS OF M/S. LOK HODINGS. WE ALSO F IND THAT ON SIMILAR FACTS AO; IN THE CASE OF THE SISTER CONCERN; HAS HE LD THAT THE INTEREST- INCOME HAD TO BE ASSESSED AS BUSINESS INCOME. RESPE CTFULLY, FOLLOWING THE JUDGMENT OF THE HON BLE JURISDICTIONAL HIGH COURT DELIVERED IN THE CASE OF LOK HOLDINGS WE CONFIRM TH E ORDER OF THE FAA. GROUNDS OF APPEAL FILED BY THE AO ARE DECIDED AGAIN ST HIM. AS A RESULT APPEAL FILED BY THE AO STANDS DISMISSED . 3. IN THIS VIEW OF THE SITUATION, AFTER HEARING BOT H THE PARTIES, RESPECTFULLY FOLLOWING THE AFOREMENTIONED ORDER PAS SED BY THE COORDINATE BENCH, AS THE FACTS ARE AND CIRCUMSTANCE S ARE SAME WE DISMISS THE APPEAL FILED BY THE REVENUE. 23. THEREFORE, FOLLOWING THE VIEW EXPRESSED BY THE TRIBUNAL IN CASE OF MAMTA ENTERPRISES AND MINAL ENTERPRISES, WHICH H AVE BEEN PASSED SUBSEQUENT TO THE ORDER OF THE TRIBUNAL IN C ASE OF MAMTA ENTERPRISES FOR THE ASSESSMENT YEAR 200506 AND 200 607, WE UPHOLD THE VIEW OF THE LEARNED COMMISSIONER (APPEAL S) TO THE EFFECT THAT INTEREST INCOME EARNED BY THE ASSESSEE UNDER T HE 17 ITA NO. 6103/MUM/2014 ASSESSMENT YEAR: 2011-12 15). SINCE THE IDENTICAL ISSUE HAS BEEN DECIDED I N FAVOUR OF THE ASSESSEE IN ASSESSEES OWN CASE AFORESAID, RESPECTFULLY FOLLOWI NG THE DECISION OF THE CO- ORDINATE BENCH OF THE TRIBUNAL, WE UPHOLD THE ORDER OF THE LD. CIT(A) ON THIS ISSUE. GROUND NO. 4 AND 5 OF THE APPEAL ARE ACCORDI NGLY DISMISSED. 16). IN THE RESULT APPEAL FILED BY THE REVENUE FOR THE ASST. YEAR 2011-12 IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH AUGUST, 2016 SD/- SD/- ( RAJENDRA ) (RAM LAL NEGI) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI; DATED: 24/08/2016 / 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 PRAMILA