OMEGA SHIPPING P.LTD, MUMBAI V. ITO 8(2)(4), MUMBAI

ITA 6341/MUM/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 3472 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-05-2016
• Appeal Filed By: Assessee
• Bench Allotted: C
• Assessment Year: 2011-2012
• Appeal Filed On: 13-10-2014
• Court: TRIBUNAL
• Department Lawyers: SUDHA RAMACHANDRAN
• Keywords: Business income; Business expenditure; Opportunity of being heard
• Section: 143(3); 14A

Judgement Text

1 ITA NO.6341/MUM/2014 1 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES C, MUMBAI BEFORE SHRI JOGINDER SAINGH (JUDICIAL MEMBER) AND SHRI ASHWANI TANEJA (ACCOUNTANT MEMBER) I.T.A. NO.6341/MUM/2014 (ASSESSMENT YEAR : 2011-12) OMEGA SHIPPING PVT LTD 610, A-WING, KOHINOOR CITY MALL XOMPLEX, KIROL ROAD, OFF LBS MARG KURLA (WEST), MUMBAI 70 VS ITO 8(2)(4) MUMBAI PAN : AAACO1408R (APPELLANT) (RESPONDENT) APPELLANT BY SHRI MADHUR AGARWAL RESPONDENT BY MS. SUDHA RAMACHANDRAN, CIT-DR DATE OF HEARING : 05-05-2016 DATE OF ORDER : 18-05-2016 O R D E R PER ASHWANI TANEJA, AM THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS) (HEREINAFTER C ALLED CIT(A)) DATED 03- 01-2014 FOR THE ASSESSMENT YEAR 2011-12 RAISING THE FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACT AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE 2 ITA NO.6341/MUM/2014 2 CIT(A) ERRED IN HOLDING THAT AMOUNT OF' 44,66,0391- IS CHARGEABLE AS ' INCOME FROM HOUSE PROPERTY' AND NOT AS 'INCOME FROM BUSINESS'. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE CIT (A) ERRED IN NOT APPRECIATING THAT THE INCOME W AS FROM EXPLOITATION OF COMMERCIAL ASSETS BECAUSE OF TEMPOR ARY LULL IN BUSINESS WHICH IS CHARGEABLE AS INCOME FROM BUSINES S AND NOT INCOME FROM HOUSE PROPERTY. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE CIT (A) ERRED IN HOLDING THAT THE EXPENDITURE OF 36,47,246 1 - IS NOT ALLOWABLE AS BUSINESS EXPENDITURE AS THERE IS NO BUSINESS ACT IVITY CARRIED ON DURING THE YEAR. 4. WITHOUT PREJUDICE, THE CIT(A) ERRED IN NOT ALLOW ING THE EXPENDITURE OF '36,47,246/- UNDER THE HEAD 'INCOME FROM OTHER S OURCES' AS THESE ARE EXPENDITURE ESSENTIAL FOR RUNNING OF THE COMPAN Y. 5. CIT(A) ERRED IN HOLDING DISALLOWED U/S 14A R.W R ULE 8D OF RS.23,07,4351 - AFTER CONSIDERING ALLOWANCE @30% UN DER INCOME FROM HOUSE PROPERTY.. 2. DURING THE COURSE OF HEARING IT HAS BEEN STATED AT THE VERY OUTSET BY THE LD.COUNSEL OF THE ASSESSEE THAT ISSUES INVOLVED IN THE PRESENT APPEAL STAND COVERED WITH THE DECISION OF THE TRIBUNAL IN ASSESS EES OWN CASE FOR A.Y. 2009- 10 IN ITA NO.6484/MUM/2012 ORDER DATED 17-02-2016. COPY OF THE DECISION HAS BEEN PLACED ON RECORD. 3. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESE NTATIVE FOR THE REVENUE HAS RELIED UPON THE ORDERS OF LOWER AUTHORI TIES. 3 ITA NO.6341/MUM/2014 3 4. WE HAVE GONE THROUGH THE FACTS OF THIS CASE AS W ELL AS COPY OF ORDER OF THE TRIBUNAL FOR A.Y. 2009-10 IN ASSESSEES OWN CAS E AND FIND THAT ALL THE GROUNDS IN THE PRESENT APPEAL ARE COVERED WITH THE SAID ORDER AND WE DISPOSE OF THE SAME IN THE FOLLOWING MANNER: GROUNDS 1 TO 4 : IN THESE GROUNDS, THE MAIN ISSUE TO BE DECIDED IS W HETHER THE LEASE RENTAL RECEIVED BY THE ASSESSEE TO BE ASS ESSED UNDER THE HEAD INCOME FROM HOUSE PROPERTY OR UNDER THE HEAD BUS INESS INCOME AS DECLARED BY THE ASSESSEE IN ITS RETURN. IDENTICAL ISSUE ON THIS VERY INCOME AROSE IN A.Y. 2009-10. RELEVANT PARA OF THE ORDER OF THE TRIBUNAL FOR A.Y. 2009-10 IS REPRODUCED HEREUNDER:- 3.2 AT THE OUTSET, THE LD. AR FOR THE ASSESSEE SUB MITTED THAT THE ISSUES RAISED IN GROUNDS 1 TO 4(SUPRA) ARE SQUARELY COVERED BY THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE ASSESSEE'S OWN CASE FOR ASST.YEAR 2007-08, WHEREIN THE SAME IS SUE OF WHETHER THE INCOME FROM LEAVE RENTALS RECEIVED BY THE ASSES SEE WAS TO BE ASSESSED UNDER THE HEAD 'BUSINESS INCOME' AS DECLAR ED BY THE ASSESSEE OR 'INCOME FROM HOUSE PROPERTY' AS HELD BY THE AUTHORITIES BELOW WAS CONSIDERED. THE CO-ORDINATE BENCH IN ITS ORDER IN ITA NO. 1041/M/11 DT. 16/12/2015 HAS HELD THAT IN VIEW OF T HE FACTS AND CIRCUMSTANCES OF THE CASE, AS THE ASSESSEE IS NOT I N THE BUSINESS OF LETTING OUT OF ITS ASSETS FOR EARNING BUSINESS INCO ME, THE ASSESSING OFFICER IS DIRECTED TO ASSESSEE THE SAID INCOME AS 'INCOME FROM OTHER SOURCES'. THE OPERATIVE PORTION AT PARA 3 OF THE OR DER OF THE CO- ORDINATE BENCH FOR ASST. YEAR 2007-08(SUPRA) IS EXT RACTED HEREUNDER:- WE HAVE CONSIDERED RIVAL CONTENTIONS AND FOUND THA T THE ASSESSEE COMPANY WAS ACTING AS SHIPPING AGENT OF HI MALYA EXPRESS UP TO F. Y.2001-02. DURING THE F. Y. 2002-0 3 AGENCY 4 ITA NO.6341/MUM/2014 4 WAS TERMINATED AND COMPANY RECEIVED COMPENSATION OF RS. 1.96 CRORE WHICH WAS OFFERED TO TAX. HAVING FAILED IN ITS EFFORTS TO REVIVE BUSINESS AND LEFT WITH STAFF ALONG WITH A LL PERIPHERALS LIKE FURNITURE, FIXTURE, COMPUTERS, CABINS, CUBICAL ETC. THE COMPANY LEASED OUT FOUR PREMISES TO VARIOUS LICENSE S ON LEAVE AND LICENSE ALONG WITH VARIOUS FURNITURE, FIXTURE A ND EQUIPMENT, DETAILS OF WHICH HAVE BEEN INCORPORATED IN PARA 3.3 AT PAGE 2 OF THE CIT(A)'S ORDER. LETTING OUT OF PREMISES ALONG WITH EQUIPMENT AND FURNITURE & FIXTURE WAS IN SEPARABLE FROM EACH OTHER. PREMISES ALONG WITH EQUIPMENT AND FURNITURE & FIXTURE WERE LEASED OUT SO THAT EMPLOYEES OF THE COMPANY CAN BE PAID AND ADMINISTRATIVE EXPENSES CAN BE MET WHILE COMPANY EXPLORES POSSIBILITY OF REVIVING ITS AGENCY BUSINESS WITH OTHER CARRIERS. FROM THE RECORD WE FOUND THAT CLAIM OF THE ASSESSEE FOR TREATING SUCH INCOME AS INCOME FRO M BUSINESS OR PROFESSION IS CONFIRMED BY THE IT DEPARTMENT ITS ELF DURING THE ASSESSMENT OF EARLIER YEAR I.E. 2006-07. COPY O F ORDER U/ S 143(3) ALONG WITH COPY OF BALANCE SHEET AND PROFIT & LOSS ACCOUNT WAS ALSO PLACED ON RECORD. KEEPING IN VIEW THE TOTALITY OF FACTS AND CIRCUMSTANCES OF THE CASE VIS -A-UIS THE FACT THAT ASSESSEE IS NOT IN A BUSINESS OF LETTING OUT ITS ASSETS FOR EARNING BUSINESS INCOME, WE DIRECT THE ASSESSIN G OFFICER TO ASSESS THE INCOME AS (INCOME FROM OTHER SOURCES'. 3.3 FOLLOWING THE AFORESAID ORDER OF THE CO-ORDINAT E BENCH IN ITA NO. 1041/MUM/2011 DT. 16/12/2015 FOR ASST. YEAR 2007-08 IN THE ASSESSEE'S OWN CASE, WE DIRECT THE ASSESSING OFFICE R TO ASSESS THE ASSESSEE'S LEASE INCOME FROM LETTING OUT OF ITS ASS ETS AS 'INCOME FROM OTHER SOURCES'. GROUND~ TO 4 OF THIS APPEAL ARE DIS POSED OFF AS INDICATED ABOVE. 4. NO DISTINCTION ON FACTS HAS BEEN MADE BEFORE US. THUS, WE DIRECT THE ASSESSING OFFICER TO FOLLOW THE ORDER OF A.Y. 2 009-10 AND ASSESS LEASE INCOME AS INCOME FROM OTHER SOURCES AND ALSO ALLO W THE EXPENSES 5 ITA NO.6341/MUM/2014 5 ACCORDINGLY. THE ASSESSING OFFICER IS DIRECTED TO FOLLOW THE ORDER OF TRIBUNAL FOR ASSESSMENT YEAR 2009-10. 5. GROUND 5. IN THIS GROUND, THE ASSESSEE HAS RAISED THE ISSUE O F DISALLOWANCE U/S 14A R.W. RULE 8D FOR RS.23,07,435. IT HAS BEEN UNANIMOUSLY SUBMITTED BY BOTH THE PARTIES THAT SIM ILAR ISSUE WAS INVOLVED IN A.Y. 2009-10 WHEREIN THE TRIBUNAL HAS DECIDED TH E ISSUE AS UNDER :- WE HAVE HEARD BOTH THE LD. AR FOR THE ASSESSEE AND THE LD. DR FOR THE REVENUE IN THE MATTER AND PERUSED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD. IT APPEARS FROM A PERUSAL OF TH E IMPUGNED ORDER OF ASSESSMENT THAT NO DISALLOWANCE U/S 14A L W. RUL E 8D WAS MADE WHILE COMPUTING THE TAXABLE INCOME OF THE ASSESSEE IN VIEW OF THE FACT THAT THE ASSESSEE'S INCOME FROM LEASE RENTALS WAS BROUGHT TO TAX BY THE ASSESSING OFFICER UNDER THE HEAD ' INCOME FR OM HOUSE PROPERTY' AND NOT 'BUSINESS INCOME' AS CLAIMED BY T HE ASSESSEE. THE ASSESSING OFFICER HOWEVER WORKED OUT DISALLOWANCE U /S 14A R. W. RULE 80 AT RS. 13,60,082/- WHICH HE STATES WILL COME INT O EFFECT IN THE EVENT THAT ON APPEAL ANY EXPENDITURE BE ALLOWED AS DEDUCTION. IN THE LIGHT OF THE FACT THAT WE HAVE FOLLOWED THE DECISIO N OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE ASSESSEE'S OWN CASE F OR ASST. YEAR 2007- 08(SUPRA) IN HOLDING THAT THE ASSESSEE'S INCOME FRO M LEASE RENTALS BE ASSESSED UNDER THE HEAD ' INCOME FROM OTHER SOURCES '; WHICH WOULD IMPLY ALLOWING OF PERMISSIBLE DEDUCTIONS OF EXPENDI TURE, IF ANY AND THE ASSESSEE'S CLAIM FOR EXEMPTION OF DIVIDEND INCO ME U/S 10(34) OF THE ACT BEING RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR FRESH EXAMINATION, IT WOULD BE NECESSARY AND IN THE FITNE SS OF THINGS THAT THE ASSESSING OFFICER'S COMPUTATION OF DEDUCTION U/ S U/S 14A R.W. RULE 80, WHICH WOULD NOW COME INTO PLAY, TO BE ALSO EXAM INED AFRESH BY THE ASSESSING OFFICER AND ADJUDICATED UPON AFTER AF FORDING THE ASSESSEE ADEQUATE OPPORTUNITY OF BEING HEARD AND TO FILE DETAILS SUBMISSIONS IN THIS REGARD. IT IS ACCORDINGLY ORDER ED. CONSEQUENTLY, GROUND IS TREATED AS ALLOWED FOR STATISTICAL PURPOS E. 6 ITA NO.6341/MUM/2014 6 6. IT IS NOTED FROM THE ABOVE SAID ORDER OF THE TRI BUNAL THAT THE ISSUE OF DISALLOWANCE U/S 14A HAS BEEN SENT BACK TO THE FILE OF THE ASSESSING OFFICER FOR FRESH ADJUDICATION. THE FACTS IN THIS YEAR TOO, UN DISPUTEDLY, REMAIN AS WELL. THEREFORE, THIS ISSUE IS SENT BACK TO THE FILE OF T HE ASSESSING OFFICER AND THE ASSESSING OFFICER IS DIRECTED TO FOLLOW THE DIRECTI ONS GIVEN BY THIS TRIBUNAL FOR A.Y. 2009-10. 7. AS A RESULT, APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE COURT ON 18 TH MY, 2016. SD/- SD/- (JOGINDER SINGH) (ASHWANI TANEJA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DT : 18 TH MAY, 2016 PK/- COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. THE CIT 5. THE LD. DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE , C, BENCH (TRUE COPY) BY ORDER ASSTT.REGISTRAR, ITAT, MUMBAI BENCHES