ITO 7(1)(2), MUMBAI V. M/S. BHUVAN LEASING AND INFRASTRUCTURE LLP., MUMBAI

ITA 6423/MUM/2012

• Counselvise Citation: 642319914 RSA 2012
• Duration Of Justice: 2 year(s) 7 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-06-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 24-12-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 22-10-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: INFRASTRUCTURE P
• Keywords: Business income; Depreciation; Business expenditure; Retrospective amendment; Unabsorbed depreciation
• Section: 143(3); 234B; 154

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B, MUMBAI , , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, AND SHRI RAJENDRA, ACCOUNTANT MEMBER ITA NO.21/MUM/2012 ASSESSMENT YEAR: 2006-07 M/S BHUVAN LEASING & INFRASTRUCTURE PVT. LTD. A-49/1360, MIG COLONY, ADARSH NAGAR CO-OP. HSG. SOCIETY LTD. PRABHADEVI, WORLI MUMBAI-400025 / VS. INCOME TAX OFFICER WARD-7(1)2, AYAKAR BHAWAN, MUMBAI-400020 ( ! ' /ASSESSEE) ( # / REVENUE) P.A. NO. AAACO1795K ITA NO.6423/MUM/2012 ASSESSMENT YEAR: 2007-08 INCOME TAX OFFICER WARD-7(1)2, AYAKAR BHAWAN, MUMBAI-400020 / VS. M/S BHUVAN LEASING & INFRASTRUCTURE PVT. LTD. A-49/1360, MIG COLONY, ADARSH NAGAR CO-OP. HSG. SOCIETY LTD. PRABHADEVI, WORLI MUMBAI-400025 ( # / REVENUE) ( ! ' /ASSESSEE) P.A. NO.AAACO1795K ! ' / ASSESSEE BY SHRI RAKESH JOSHI # / REVENUE BY SHRI RADHA K. NARANG M/S BHUVAN LEASING & INFRASTRUCTURE PVT. LTD ITA NO.21 & 6423/MUM/2012 2 $ #% & ' ' / DATE OF HEARING : 17/06/2015 & ' ' / DATE OF ORDER: 30/06/2015 / O R D E R PER JOGINDER SINGH (JUDICIAL MEMBER) THE ASSESSEE IS IN APPEAL FOR ASSESSMENT YEAR 2006 -07 (ITA NO.21/MUM/2012) AGGRIEVED BY THE IMPUGNED ORDE R DATED 09/11/2011 OF THE LD. FIRST APPELLATE AUTHORI TY, MUMBAI, WHEREAS, THE REVENUE IS IN APPEAL FOR APPEA L FOR AY 2007-08 (ITA NO.6423/MUM/2012). 2. FIRST, WE SHALL TAKE UP APPEAL OF THE ASSESSEE (AY. 2006-07), WHEREIN, FIRST GROUND PERTAINS TO CONFIRM ING THE ASSESSMENT ORDER IN TREATING THE LICENCE FEE AS IN COME FROM OTHER SOURCES INSTEAD OF BUSINESS INCOME, W ITHOUT APPRECIATING THE FACT. AT THE OUTSET, THE LD. COUNS EL FOR THE ASSESSEE, SHRI RAKESH JOSHI, CLAIMED THAT THE IMPUG NED ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE O RDER OF THE TRIBUNAL FOR AY 2003-04 AND 2005-06, ORDER DATE D 10/06/2015. THE LD. COUNSEL PRODUCED THE PHOTOCOPY OF THE ORDER OF THE TRIBUNAL. HOWEVER, MS. RADHA K.NA RANG, LD. DR, DEFENDED THE CONCLUSION ARRIVED AT IN THE I MPUGNED ORDER. 2.1. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN VIEW O F THE ABOVE, WE ARE REPRODUCING HEREUNDER THE RELEVANT PO RTION M/S BHUVAN LEASING & INFRASTRUCTURE PVT. LTD ITA NO.21 & 6423/MUM/2012 3 FROM THE AFORESAID ORDER OF THE TRIBUNAL, DATED 10/06/2015, FOR READY REFERENCE:- 4. THE ISSUE ARISING IN THE PRESENT APPEAL IS IN R ELATION TO ASSESSABILITY OF LEAVE AND LICENCE INCOME RECEIVED BY ASSESSEE AND WHETHER THE SAME HAS TO BE ASSESSED AS PROFIT A ND GAINS OF BUSINESS OR AS INCOME FROM OTHER SOURCES. THE TRIBU NAL, IN THE FIRST ROUND OF APPEAL, VIDE ORDER DATED 31ST OCTOBE R, 2008 HAD APPRECIATED THE FACTS OF THE CASE WHEREIN THE ASSES SEE UNDER AN AGREEMENT DATED 16.11.2000 STYLED AS LEAVE AND LICE NCE AGREEMENT GRANTED LICENCE TO M/S. AMERICAN EXPRESS BANK LTD. TO USE THE PREMISES OF WHICH IT WAS THE LESSEE. THE LICENCE FEE WAS FIXED AT RS.13,66,875/- AS QUARTERLY LICENCE FE E. THE SAID PREMISES ALONG WITH FIXTURES AND FITTINGS WERE LICE NSED TO THE PARTY FOR A PERIOD OF THREE YEARS COMMENCING FROM 0 1.01.2001 AND EXPIRING ON 31.12.2003. THE ASSESSEE HAD DECLAR ED THE SAID LICENCE FEE AS INCOME FROM BUSINESS AND CLAIMED CER TAIN EXPENSES AGAINST IT. ON THE OTHER HAND, THE AO HAS SHOW CAUSED THE ASSESSEE AS TO WHY THE SAME SHOULD NOT BE ASSES SED AS INCOME FROM OTHER SOURCES. THE EXPLANATION OF THE A SSESSEE IN THIS REGARD WAS THAT UNDER CLAUSE 53, 109, 129 AND 131 OF THE OBJECT CLAUSE OF MEMORANDUM OF ASSOCIATION OF ASSES SEE, ASSESSEE WAS PERMITTED TO PURSUE BUSINESS OF TAKING ON LEASE AND EARN INCOME FROM THE SAME. ANOTHER PLEA RAISED BY THE ASSESSEE WAS THAT IT HAD TAKEN ON LEASE COMMERCIAL ASSETS WHICH IN TURN WERE LEASED OUT TO DERIVE INCOME AND THE SA ID INCOME WAS TO BE ASSESSED AS BUSINESS INCOME. BOTH THE AO AND THE CIT(A) TREATED THE SAID INCOME AS INCOME FROM OTHER SOURCES AS THE ASSESSEE WAS MERELY SUBLETTING THE PROPERTY AND THERE WAS NO BUSINESS ACTIVITY INVOLVED IN SUCH SUBLETTING. M/S BHUVAN LEASING & INFRASTRUCTURE PVT. LTD ITA NO.21 & 6423/MUM/2012 4 5. THE TRIBUNAL, VIDE ORDER DATED 31ST OCTOBER, 200 8, UPHELD THE ORDERS OF THE AUTHORITIES BELOW HOLDING THAT ASSESS EE HAD NOT BEEN ABLE TO DEMONSTRATE AS TO HOW THE ACTIVITY OF SUBLETTING WAS DONE IN A SYSTEMATIC AND ORGANIZED MANNER, SO A S TO CONSTITUTE CARRYING ON OF BUSINESS. ANOTHER POINT N OTED BY THE TRIBUNAL IN ASSESSEES CASE WAS THAT THE DIRECTORS REPORT DATED 26.08.2003 QUOTED THAT THE LICENCE AGREEMENT WITH A MERICAN EXPRESS BANK CAME TO AN END ON 31.03.2003 AFTER WHI CH A NEW LICENCE AGREEMENT HAD BEEN ENTERED INTO BY THE ASSE SSEE WITH THE BRITISH DEPUTY HIGH COMMISSION, MUMBAI. AS PER THE TRIBUNAL THIS WAS AN ACT OF SUBLETTING BY THE ASSES SEE AND EVEN THE LIST OF FIXTURES AND FITTINGS PROVIDED TO THE L ICENSEE IN THE PREMISES DO NOT FIND PLACE IN THE LEAVE AND LICENCE AGREEMENT AND EVEN OTHERWISE PROVISIONS OF SUCH ITEMS WOULD N OT MAKE THE INCOME IN QUESTION AS BUSINESS INCOME. 6. THE HON'BLE HIGH COURT (SUPRA), ON AN APPEAL FIL ED BY THE ASSESSEE, NOTED THAT ASSESSEE HAD RETURNED THE INCO ME FROM ASSESSMENT YEAR 1993-94 TO 2000-01 TREATING RENTAL/ INCENSING INCOME AS ASSESSABLE UNDER THE HEAD PROFITS AND GA INS OF BUSINESS, WHICH IN TURN WAS ACCEPTED BY THE REVENU E. IT IS ALSO NOTED BY THE HON'BLE HIGH COURT THAT ASSESSMENT FOR ASSESSMENT YEARS 1993-94 TO 2001-02 WERE COMPLETED UNDER SECTI ON 143(3) OF THE ACT AND THE INCOME WAS ASSESSED IN THE HANDS OF THE ASSESSEE AS INCOME FROM BUSINESS. IN THE ABSENCE OF ANY DISTINGUISHING FEATURES BROUGHT IN THE CASE, THE HO N'BLE HIGH COURT DIRECTED THE TRIBUNAL TO RECONSIDER ITS DECI SION HAVING DUE REGARD TO THE CIRCUMSTANCES OF THE CASE. THE RE LEVANT FINDINGS OF THE HON'BLE HIGH COURT ARE AS UNDER: - M/S BHUVAN LEASING & INFRASTRUCTURE PVT. LTD ITA NO.21 & 6423/MUM/2012 5 2. THE APPEAL PERTAINS TO ASSESSMENT YEAR 2003-04. THE ISSUE BEFORE THE TRIBUNAL ON THE FIRST QUESTION WAS WHETH ER INCOME RECEIVED FROM LICENSING OF IMMOVABLE PROPERTY BELON GING TO THE ASSESSEE CAN BE ASSESSED AS INCOME FROM BUSINESS OR AS INCOME FROM OTHER SOURCES. THE ASSESSEE SUBMITTED THAT FROM ASS ESSMENT YEARS 1993-94 TO 2000-01 THE RETURNED INCOME TREATING THE RENTAL/LICENSING INCOME AS ASSESSABLE UNDER THE HEA D OF PROFIT AND GAINS OF BUSINESS WAS ACCEPTED BY THE REVENUE. FOR ASSESSMENT YEARS 1993-04 AND 2001-02 THE ASSESSMENTS WERE COMP LETED UNDER SECTION 143(3) WHEREBY THE ASSESSING OFFICER HAD AC CEPTED THE SUBMISSION THAT THE LICENCE FEES RECEIVED BY THE AS SESSEE WERE BUSINESS INCOME. THE COURT IS INFORMED THAT THIS WA S BROUGHT TO THE NOTICE OF THE TRIBUNAL. THE ASSESSEE SUBMITS THAT N O DISTINGUISHING FEATURES WERE BROUGHT BEFORE THE TRIBUNAL BY THE RE VENUE TO JUSTIFY A DIFFERENT TREATMENT FOR THE ASSESSMENT YEAR IN QU ESTION. IN THESE CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE TRIBUNAL MAY BE REQUESTED TO RECONSIDER ITS DECISION HAVING DUE REG ARD TO THE CIRCUMSTANCES WHICH ARE POINTED OUT. WE, HOWEVER, C LARIFY THAT WE HAVE EXPRESSED NO OPINION ON THE MERITS AND ALL THE CONTENTIONS ARE KEPT OPEN. FOR THE AFORESAID REASONS, WE QUASH AND SET ASIDE THE ORDER AND REMAND THE MATTER ON THE FIRST QUESTION. IN VIEW OF THE DIRECTIONS OF THE HON'BLE HIGH COUR T THE GROUND OF APPEAL NO. 1 WAS FIXED BEFORE THE TRIBUNA L FOR ADJUDICATION. 7. THE LEARNED A.R. FOR THE ASSESSEE POINTED OUT TH AT THE LEASE INCOME EARNED BY THE ASSESSEE FROM YEAR TO YEAR WAS BEING ASSESSED AS INCOME FROM BUSINESS AND THIS FACT WAS BROUGHT BEFORE THE TRIBUNAL ALSO. HOWEVER, THE TRIBUNAL HEL D THAT THE SAID INCOME WAS ASSESSABLE UNDER THE HEAD INCOME F ROM OTHER SOURCES. 8. THE NEXT PLEA OF THE ASSESSEE WAS THAT IN THE AB SENCE OF ANY CHANGE OF FACTS THERE WAS NO MERIT IN ADOPTING LEAS E INCOME M/S BHUVAN LEASING & INFRASTRUCTURE PVT. LTD ITA NO.21 & 6423/MUM/2012 6 AS INCOME FROM OTHER SOURCES AS IT IS INCOME FROM B USINESS ASSESSED IN THE HANDS OF THE ASSESSEE FROM YEAR TO YEAR. IT WAS FURTHER POINTED OUT BY THE LEARNED A.R. FOR THE ASS ESSEE THAT IN ASSESSMENT YEARS 1993-94 AND 2001-02, ASSESSMENT WA S COMPLETED UNDER SECTION 143(3) OF THE ACT WHEREIN S IMILAR INCOME FROM LEAVE AND LICENCE AGREEMENT WAS ASSESSE D AS INCOME FROM BUSINESS. THE LEARNED A.R. FOR THE ASSE SSEE BROUGHT TO OUR ATTENTION COPY OF ASSESSMENT ORDER R ELATING TO ASSESSMENT YEAR 1993-94 ALONG WITH ASSESSMENT ORDER RELATING TO ASSESSMENT YEAR 2001-02 PLACED AT PAGES 32 TO 49 OF THE PAPER BOOK. THE LEARNED A.R. FOR THE ASSESSE E FURTHER REFERRED TO THE OBSERVATION OF THE TRIBUNAL IN PAR A 4 IN WHICH IT WAS ACCEPTED THAT AS PER THE OBJECT CLAUSE OF ME MORANDUM ASSOCIATION OF THE ASSESSEE, THE ASSESSEE, IN ORDER TO ITS BUSINESS ACTIVITIES CAN TAKE ON LEASE AND EARN INCO ME ON RELEASING THE SAME. IT WAS FURTHER POINTED BY HIM T HAT THE HON'BLE SUPREME COURT IN THE CASE OF CHENNAI PROPER TIES & INVESTMENT LTD. VS. CIT REPORTED IN 56 TAXMANN.COM 456 ON SIMILAR FACTS, LAID DOWN THE PROPOSITION THAT WHERE AS PER THE OBJECT CLAUSE IN THE MEMORANDUM OF ASSOCIATION, WAS TO ACQUIRE AND HOLD PROPERTIES WHICH IN TURN WERE LET OUT, THEN THE INCOME ARISING FROM SUCH LETTING OUT WAS ASSESS ABLE IN THE HANDS OF THE ASSESSEE AS INCOME FROM BUSINESS. 9. ON THE OTHER HAND, THE LEARNED D.R. FOR THE REV ENUE PLACED RELIANCE ON THE ORDER PASSED BY THE CIT(A). 10. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. IN THE FACTS OF THE PRESENT CASE ASSESSEE, AS PER ITS OBJECT CLAUSE IN THE MEMORANDUM OF ASSOCIATION, WAS PERMITTED TO PERFORM BUSINESS OF TAKING ON LEASE AN D EARNING M/S BHUVAN LEASING & INFRASTRUCTURE PVT. LTD ITA NO.21 & 6423/MUM/2012 7 INCOME FROM THE SAME. IT HAD TAKEN PREMISES ON LEAS E WHICH IN TURN WAS SUBLET TO M/S. AMERICAN EXPRESS BANK. T HE ISSUE ARISING BEFORE US IS IN RELATION TO ASSESSABILITY O F SUCH LEASE INCOME EARNED BY THE ASSESSEE. THE CLAIM OF THE ASS ESSEE BEFORE THE AUTHORITIES BELOW AND EVEN BEFORE US IS THAT SUCH INCOME BEING IN CONTINUATION OF ITS OBJECT AS PER T HE MEMORANDUM OF ASSOCIATION, IS TO BE ASSESSED AS BUS INESS INCOME IN ITS HANDS. WHEREAS THE CASE OF THE REVENU E IS THAT ASSESSEE WAS ENGAGED IN SUBLETTING OF THE PROPERTY, WHICH IN TURN IT HAD OBTAINED ON LEASE AND HENCE THE INCOME ARISING THERE FROM IS ASSESSABLE IN THE HANDS OF THE ASSESS EE AS INCOME FROM OTHER SOURCES, SINCE THE ASSESSEE WAS N OT THE OWNER OF THE PROPERTY. THE ASSESSEE HAD ENTERED INT O LEASE AGREEMENT WITH AMERICAN EXPRESS BANK IN THE EARLIER YEAR AND ADMITTEDLY THE RENTAL INCOME DECLARED BY THE AS SESSEE WAS ASSESSED AS BUSINESS INCOME IN THE HANDS OF THE ASSESSEE AFTER ALLOWING THE RELATED BUSINESS EXPENDITURE CLA IMED. THE SAID DECISION WAS ACCEPTED BY THE AUTHORITIES BELOW FROM ASSESSMENT YEAR 1993-94 ONWARDS FOR WHICH THE ASSES SMENT WAS COMPLETED UNDER SECTION 143(3) OF THE ACT AND C OPY OF THE ASSESSMENT ORDER IS FILED AT PAGES 32-42 OF THE PAPER BOOK. SIMILARLY, FOR ASSESSMENT YEAR 2001-02 THE AS SESSMENT WAS COMPLETED UNDER THE HEAD INCOME FROM BUSINESS I N THE ASSESSMENT ORDER PASSED UNDER SECTION 143(3) OF TH E ACT, WHICH IN TURN IS PLACED AT PAGES 43 TO 49 OF THE PA PER BOOK. THE ASSESSEE CONTINUES TO EARN INCOME FROM SAME LEA SE AGREEMENT AS IN THE PAST AND THE INCOME DECLARED DU RING THE YEAR UNDER CONSIDERATION WAS RECEIVED FROM AMERICAN EXPRESS BANK, WHICH WILL ALSO BE SUB-LESSEE IN THE EARLIER YEARS. THE HON'BLE HIGH COURT, WHILE ADJUDICATING T HE APPEAL OF THE ASSESSEE, HAD NOTED ALL THE ABOVE SAID FACTS AND ALSO M/S BHUVAN LEASING & INFRASTRUCTURE PVT. LTD ITA NO.21 & 6423/MUM/2012 8 NOTED THAT THERE WERE NO DISTINGUISHING FEATURES BE FORE THE TRIBUNAL TO JUSTIFY IN GIVING A DIFFERENT TREATMENT FOR THE ASSESSMENT YEAR IN QUESTION, WHEREAS SIMILAR INCOME WAS ASSESSED AS INCOME FROM BUSINESS IN THE HANDS OF TH E ASSESSEE IN THE PRIOR YEARS. ON VERIFICATION OF THE RECORDS AVAILABLE WE FIND THAT IN ASSESSMENT YEARS 1993-94 AND 2001-02 T HE INCOME HAD BEEN ASSESSED UNDER THE HEAD INCOME FROM BUSINESS. THOUGH THE HON'BLE HIGH COURT HAD RESTORE D THE ISSUE BACK TO THE FILE OF THE TRIBUNAL BUT WITH THE DIRECTION THAT THE SAID ISSUE BE DECIDED WITH REGARD TO THE CIRCUMSTANCES OF THE CASE. 11. IN THE FACTS OF THE PRESENT CASE ASSESSEE HAD L EASED OUT THE PREMISES TO AMERICAN EXPRESS BANK LTD. W.E.F. OCTOB ER 1992. THE SAID LEASE AGREEMENT CONTINUED UPTO 31.03.2003 AND WAS IN APPLICATION DURING THE FINANCIAL YEAR 2002- 03, I.E. IN THE YEAR WHICH IS IN APPEAL BEFORE US. THE SAID LEASING OF THE PREMISES BY THE ASSESSEE WAS AS PER THE OBJECTS PRO VIDED IN MEMORANDUM OF ASSOCIATION. A PERUSAL OF THE EARLIER ORDER PASSED BY THE TRIBUNAL IN ASSESSEES OWN CASE REFLE CTS THAT THE TRIBUNAL, VIDE PARA 4 OF ITS ORDER HAD ACKNOWLEDGED THAT UNDER CLAUSE 53, 109, 129 AND 131 OF THE OBJECT CLA USE (OTHER OBJECTS) OF MEMORANDUM OF ASSOCIATION OF THE ASSESS EE, ASSESSEE WAS PERMITTED TO PURSUE THE BUSINESS OF TA KING ON LEASE AND EARNING INCOME FROM THE SAME. WHERE IT IS THE INTENTION OF THE ASSESSEE TO LEASE OUT VARIOUS PREM ISES AND THEN SUBLET THE SAME ON LEAVE AND LICENCE BASIS TO DIFFERENT PARTIES, THEN SUCH ACTIVITY CARRIED ON BY THE ASSES SEE IN LINE WITH ITS OBJECTS IS BUSINESS ACTIVITY UNDERTAKEN BY THE ASSESSEE. THE INCOME ARISING FROM SUCH EXPLOITATION OF THE ASSETS WHICH HAD BEEN TAKEN BY THE ASSESSEE ON LEAS E AND HAD M/S BHUVAN LEASING & INFRASTRUCTURE PVT. LTD ITA NO.21 & 6423/MUM/2012 9 BEEN FURTHER SUBLET BY IT IS A SYSTEMATIC AND ORGAN IZED ACTIVITY OF CARRYING ON ITS BUSINESS. UNDOUBTEDLY, ASSESSEE WAS NOT THE OWNER OF THE PREMISES BUT WAS ONLY A LESSEE OF THE PREMISES, WHICH IN TURN HAD BEEN SUBLET BY THE ASSE SSEE WITH THE INTENTION OF EXPLOITING THE SAME AND THE RECEI PTS ARISING THERE FROM ARE ASSESSABLE IN THE HANDS OF THE ASSES SEE AS INCOME FROM BUSINESS AND THE NECESSARY RELATED EXPE NDITURE HAS TO BE ALLOWED AS DEDUCTION IN THE HANDS OF THE ASSESSEE. 12. THE HON'BLE SUPREME COURT IN THE CASE OF CHENNA I PROPERTIES AND INVESTMENT LTD. (SUPRA) HAS APPRECIA TED THE FACTS BEFORE IT, WHEREIN THE ASSESSEE HAD ACQUIRED PROPERTIES IN THE CITY OF MADRAS AND IN TURN LET OUT THOSE PRO PERTIES AND THE RENTAL INCOME RECEIVED BY IT WAS SHOWN AS INCOM E FROM BUSINESS, IT WAS HELD THAT WHERE MAIN OBJECT OF THE ASSESSEE COMPANY AS PER ITS MEMORANDUM OF ASSOCIATION WAS TO ACQUIRE PROPERTIES AND TO LET OUT THOSE PROPERTIES AS WELL AS MAKE ADVANCES UPON THE SECURITY OF LAND AND BUILDIN G, THEN IT WAS HELD THAT WHAT WE EMPHASIS IS THAT HOLDING THE AFORESAID PROPERTIES AND EARNING INCOME BY LETTING OUT THESE PROPERTIES IS THE MAIN OBJECTIVE OF THE COMPANY. T HE HON'BLE SUPREME COURT, HOWEVER, NOTED THAT IN THE RETURN OF INCOME THE ENTIRE INCOME WHICH HAD ACCRUED AND ASSESSED IN THE HANDS OF THE ASSESSEE WAS FROM LETTING OUT OF THE S AID PROPERTY AND THERE WAS NO OTHER INCOME ARISING TO T HE ASSESSEE. THE HON'BLE SUPREME COURT MADE REFERENCE TO THE RATIO LAID DOWN BY THE CONSTITUTION BENCH OF THE AP EX COURT IN THE CASE OF SULTAN BROTHERS (P) LTD. VS. CIT [(1 964) (5) SCR 807] AND THE RATIO LAID DOWN IN THE CASE OF KARANPU RA DEVELOPMENT CO. LTD. VS. CIT REPORTED IN 44 ITR 362 (SC) AND OBSERVED AS UNDER: - M/S BHUVAN LEASING & INFRASTRUCTURE PVT. LTD ITA NO.21 & 6423/MUM/2012 10 8. BEFORE WE REFER TO THE CONSTITUTION BENCH JUDGM ENT IN THE CASE OF SULTAN BROTHERS (P) LTD., WE WOULD BE WELL ADVISED TO DISCUSS THE LAW LAID DOWN AUTHORITATIVELY AND SUCCINCTLY BY THIS COURT I N 'KARANPURA DEVELOPMENT CO. LTD. V. COMMISSIONER OF INCOME TAX, WEST BENGAL' [44 ITR 362 (SC)]. THAT WAS ALSO A CASE WHERE THE COMPA NY, WHICH WAS THE ASSESSEE, WAS FORMED WITH THE OBJECT, INTER ALIA, O F ACQUIRING AND DISPOSING OF THE UNDERGROUND COAL MINING RIGHTS IN CERTAIN COAL FIELDS AND IT HAD RESTRICTED ITS ACTIVITIES TO ACQUIRING C OAL MINING LEASES OVER LARGE AREAS, DEVELOPING THEM AS COAL FIELDS AND THE N SUB-LEASING THEM TO COLLIERIES AND OTHER COMPANIES. THUS, IN THE SAID C ASE, THE LEASING OUT OF THE COAL FIELDS TO THE COLLIERIES AND OTHER COMPANI ES WAS THE BUSINESS OF THE ASSESSEE. THE INCOME WHICH WAS RECEIVED FROM LE TTING OUT OF THOSE MINING C.A. NO. 4494/2004 ETC. 5 PAGE 6 LEASES WAS SHOWN AS BUSINESS INCOME. DEPARTMENT TOOK THE POSITION THAT IT IS TO BE TREATED AS INCOME FROM THE HOUSE PROPERTY. IT WOULD BE THUS, CLEAR TH AT IN SIMILAR CIRCUMSTANCES, IDENTICAL ISSUE AROSE BEFORE THE COU RT. THIS COURT FIRST DISCUSSED THE SCHEME OF THE INCOME TAX ACT AND PART ICULARLY SIX HEADS UNDER WHICH INCOME CAN BE CATEGORISED / CLASSIFIED. IT WAS POINTED OUT THAT BEFORE INCOME, PROFITS OR GAINS CAN BE BROUGHT TO COMPUTATION, THEY HAVE TO BE ASSIGNED TO ONE OR THE OTHER HEAD. THESE HEADS ARE IN A SENSE EXCLUSIVE OF ONE ANOTHER AND INCOME WHICH FALLS WIT HIN ONE HEAD CANNOT BE ASSIGNED TO, OR TAXED UNDER, ANOTHER HEAD. THERE AFTER, THE COURT POINTED OUT THAT THE DECIDING FACTOR IS NOT THE OWN ERSHIP OF LAND OR LEASES BUT THE NATURE OF THE ACTIVITY OF THE ASSESS EE AND THE NATURE OF THE OPERATIONS IN RELATION TO THEM. IT WAS HIGHLIGHTED AND STRESSED THAT THE OBJECTS OF THE COMPANY MUST ALSO BE KEPT IN VIEW TO INTERPRET THE ACTIVITIES. IN SUPPORT OF THE AFORESAID PROPOSITION , NUMBER OF JUDGMENTS OF OTHER JURISDICTIONS, I.E. PRIVY COUNSEL, HOUSE O F LORDS IN ENGLAND AND US COURTS WERE TAKEN NOTE OF. THE POSITION IN LAW, ULTIMATELY, IS SUMMED UP IN THE FOLLOWING WORDS: - AS HAS BEEN ALREADY POINTED OUT IN CONNECTION WITH THE OTHER TWO CASES WHERE THERE IS A LETTING OUT OF PREMISES AND COLLEC TION OF RENTS THE ASSESSMENT ON PROPERTY BASIS MAY BE CORRECT BUT NOT SO, WHERE THE LETTING OR SUB-LETTING IS PART OF A TRADING OPERATI ON. THE DIVING LINE IS DIFFICULT TO FIND; BUT IN THE CASE OF A COMPANY WIT H ITS PROFESSED OBJECTS M/S BHUVAN LEASING & INFRASTRUCTURE PVT. LTD ITA NO.21 & 6423/MUM/2012 11 AND THE MANNER OF ITS ACTIVITIES AND THE NATURE OF ITS DEALINGS WITH ITS PROPERTY, IT IS POSSIBLE TO SAY ON WHICH SIDE THE O PERATIONS FALL AND TO WHAT HEAD THE INCOME IS TO BE ASSIGNED. 13. THE APEX COURT ALSO NOTED THE FACT THAT IN SULT AN BROTHERS (P) LTD. (SUPRA) THE CONSTITUTION BENCH HAD CLARIFI ED THAT MERELY AN ENTRY IN THE OBJECT CLAUSE SHOWING A PART ICULAR OBJECT WOULD NOT BE DETERMINATIVE FACTOR TO ARRIVE AT A CONCLUSION WHETHER THE INCOME HAS TO BE TREATED AS INCOME FROM BUSINESS AND SUCH QUESTION WOULD DEPEND UPON T HE CIRCUMSTANCES OF EACH CASE, I.E. WHETHER A PARTICUL AR BUSINESS IS LETTING OUT OR NOT. AFTER NOTING DOWN THE ABOVE SAID DECISIONS THE HON'BLE APEX COURT HELD THAT THE CIRC UMSTANCES OF THE CASE HAVE TO BE CONSIDERED AND IN VIEW OF TH E FACTS BEFORE IT AND ITS CIRCUMSTANCES THE HON'BLE SUPREME COURT HELD THAT LETTING OF THE PROPERTIES WAS THE BUSINES S OF THE ASSESSEE AND ASSESSEE, THEREFORE, RIGHTLY DISCLOSED THE INCOME UNDER THE HEAD INCOME FROM BUSINESS. 14. THE FACTS BEFORE US ARE SIMILAR TO THE FACTS B EFORE THE HON'BLE SUPREME COURT IN CHENNAI PROPERTIES & INVES TMENT LTD. AS POINTED OUT BY US HEREIN ABOVE ASSESSEE, IN FURTHERANCE OF ITS OBJECT OF MEMORANDUM OF ASSOCIAT ION, HAD LEASED OUT THE PREMISES, WHICH IN TURN WAS SUBLEASE D ON LEAVE AND LICENCE BASIS, THUS THE INTENTION OF THE ASSESS EE WAS TO EXPLOIT THE ASSET LEASED BY IT, BY WAY OF LETTING O UT THE SAME, THEN SUCH LETTING OUT ACTIVITY IS IN FURTHERANCE OF ASSESSEES INTENTION TO CARRY OUT THE BUSINESS IN A SYSTEMATIC AND ORGANIZED MANNER. CONSEQUENTLY WE HOLD THAT THE REN TAL INCOME DECLARED BY THE ASSESSEE IS TO BE ASSESSED A S INCOME FROM HOUSE PROPERTY. ANOTHER ASPECT TO BE KEPT IN M IND IS THAT SIMILAR INCOME OFFERED BY THE ASSESSEE ON ACCO UNT OF M/S BHUVAN LEASING & INFRASTRUCTURE PVT. LTD ITA NO.21 & 6423/MUM/2012 12 SIMILAR RENT RECEIVED FROM SAME TENANT IN EARLIER Y EARS WERE ASSESSED AS INCOME FROM BUSINESS IN THE HANDS OF TH E ASSESSEE. ANOTHER ASPECT TO BE KEPT IN MIND IS THAT DURING TH E YEAR UNDER CONSIDERATION, I.E. AT THE CLOSE OF THE YEAR ON 31.03.2003 THE AGREEMENT WITH AMERICAN EXPRESS BANK HAD COME T O AN END AND THE ASSESSEE ENTERED INTO A FRESH AGREEMENT WITH BRITISH HIGH COMMISSION AGAIN ESTABLISHES THE CASE OF THE ASSESSEE, THAT IT IS INVOLVED IN A SYSTEMATIC AND O RGANIZED ACTIVITY OF LEASING OUT ITS PREMISES, WHICH IN TURN ARE NOT OWNED BY THE ASSESSEE. IN THE TOTALITY OF THE ABOVE FACTS AND CIRCUMSTANCES WE HOLD THAT THE LEASE RENT RECEIVED BY THE ASSESSEE IS ASSESSABLE AS INCOME FROM BUSINESS IN T HE HANDS OF THE ASSESSEE AND THE RELATED EXPENDITURE HAS TO BE ALLOWED IN THE HANDS OF THE ASSESSEE. THE AO SHALL ACCORDINGLY COMPUTE THE INCOME IN THE HANDS OF THE ASSESSEE IN LINE WIT H OUR DIRECTIONS AFTER AFFORDING REASONABLE OPPORTUNITY O F HEARING TO THE ASSESSEE. THIS GROUND OF APPEAL, WHICH WAS R ESTORED BACK TO THE FILE OF THE TRIBUNAL BY THE HON'BLE HIG H COURT IS ALLOWED. 15. THE ISSUE IN GROUND OF APPEAL NO. 1 RAISED BY T HE ASSESSEE IN ITA NO. 3033/MUM/2010 IS IDENTICAL TO THE ISSUE IN GROUND NO. 1 BEFORE THE TRIBUNAL IN ITA NO. 4977/MUM/2006 AND OUR DECISION IN ITA NO. 4977/MUM/2006 IS APPLICABLE MUTATIS MUTANDIS TO GROUND OF APPEAL NO. 1 IN ITA 3033/MUM/2010, HENCE THE SAID GROUND IS ALLOWED. 2.2. IF THE OBSERVATION MADE IN THE ASSESSMENT ORD ER, LEADING TO ADDITION MADE TO THE TOTAL INCOME, CONCL USION DRAWN IN THE IMPUGNED ORDER, MATERIAL AVAILABLE ON RECORD, ASSERTIONS MADE BY THE LD. RESPECTIVE COUNSEL AND T HE M/S BHUVAN LEASING & INFRASTRUCTURE PVT. LTD ITA NO.21 & 6423/MUM/2012 13 CONCLUSION DRAWN IN THE ORDER OF THE TRIBUNAL, IF K EPT IN JUXTAPOSITION AND ANALYZED, WE FIND THAT VIDE PARA- 4 ONWARDS OF THE ORDER, THE TRIBUNAL HAS DELIBERATED UPON LEAVE & LICENCE INCOME, RECEIVED BY THE ASSESSEE, I S WHETHER TO BE ASSESSED AS PROFIT & GAINS OF BUSINESS OR FRO M OTHER SOURCES. WHILE COMING TO A PARTICULAR CONCLUSION, THE TRIBUNAL HAS DISCUSSED THE DIRECTORS REPORT DATED 26/08/2003 WITH RESPECT TO LICENCE FEE WITH AMERICA N EXPRESS BANK, WHICH CAME TO AN END ON 31/03/2003 AF TER WHICH A NEW LICENCE AGREEMENT WAS ENTERED INTO BY T HE ASSESSEE WITH BRITISH DEPUTY HIGH COMMISSION, RATIO LAID DOWN IN SULTAN BROTHER PVT. LTD. (1964) (5) SCR 807 (SC), KARANPURA DEVELOPMENT COMPANY LTD. VS CIT (44 ITR 3 62) (SC), IDENTICAL FACT IN THE CASE OF CHENNAI PROPERT IES, DECIDED BY HONBLE APEX COURT AND BY FOLLOWING THE DECISIO N IN ITA NO.3033/MUM/2010 ALONG WITH ITA NOS.4977/MUM/2006 DECIDED IN FAVOUR OF THE ASSESSEE. NO CONTRARY DECI SION, ON IDENTICAL FACT, WAS NOT BROUGHT TO OUR NOTICE, SPEC IFICALLY BY THE REVENUE, THEREFORE, FOLLOWING THE ORDER OF THE CO- ORDINATE BENCH THAT TOO IN THE CASE OF ASSESSEE ITS ELF, WE DECIDE THIS ISSUE IN FAVOUR OF THE ASSESSEE. 2.3. THE NEXT GROUND PERTAINS TO DISALLOWING THE C LAIM OF EXPENSES ON ACCOUNT OF STAFF RECRUITMENT/ TRAINI NG EXPENSES AMOUNTING TO RS.7,81,609/-. AT THE OUTSET , THE LD. COUNSEL FOR THE ASSESSEE FAIRLY CONTENDED THAT THIS ISSUE IS DECIDED AGAINST THE ASSESSEE BY THE AFORESAID ORDER OF THE TRIBUNAL. THE LD. DR ALSO CONTENDED THAT THE ISSUE IS DECIDED AGAINST THE ASSESSEE BY THE TRIBUNAL. M/S BHUVAN LEASING & INFRASTRUCTURE PVT. LTD ITA NO.21 & 6423/MUM/2012 14 2.4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN VIEW O F THE ABOVE, WE ARE REPRODUCING HEREUNDER THE RELEVANT PO RTION FROM THE AFORESAID ORDER OF THE TRIBUNAL FOR READY REFERENCE:- 16. NOW COMING TO THE GROUND OF APPEAL NO. 2 RAISE D BY ASSESSEE IN ITA NO. 3033/MUM/2010. THE LEARNED A.R. FOR THE ASSESSEE FAIRLY POINTED OUT THAT THE ISSUE ARISING IN THE PRESENT APPEAL IS SQUARELY COVERED AGAINST THE ASSE SSEE IN VIEW OF THE ORDER OF THE HON'BLE HIGH COURT IN THE CASE THE ASSESSEE. 17. WE FIND THAT SIMILAR ISSUE OF DISALLOWANCE OF RECRUITMENT AND STAFF TRAINING EXPENSES AND SALARY PAID TO SHRI NAVAL KUMAR AROSE BEFORE THE TRIBUNAL IN ASSESSEES OWN C ASE RELATING TO ASSESSMENT YEAR 2003-04. THE TRIBUNAL V IDE PARA 12 OF ITS ORDER HELD AS UNDER: - 12. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. MR. NAVAL KUMAR WAS SENT ABROAD IN EDUCATION IN NOVEMBER, 2000. AS EARL Y AS 19TH JUNE 2000, THE BOARD CONSIDERED THE FALLING AND COMPETITIVE IN DUSTRY OF TEXTILE BUSINESS AND DECIDED TO DIVERSIFY INTO ELECTRONIC M EDIA AND COMPUTER RELATED ACTIVITY FOR PRINTING. IN THIS BOARD RESOLU TION, THERE IS NO MENTION WITH REGARD TO CARRYING OUT ANY PRINTING WITH REGA RD TO TOWELS EXPORTED BY THE ASSESSEE. THE BOARD RESOLUTION CLEARLY INDIC ATES THAT THE ASSESSEE WANTED TO PURSUE A NEW LINE OF BUSINESS WITH NO IND ICATION OF ITS RELEVANCE TO THE EXISTING LINE OF BUSINESS. IT WAS PURSUANT THIS BOARD RESOLUTION THAT MR. NAVAL KUMAR WAS SENT TO USA TO PURSUE HIS EDUCATION. AS RIGHTLY CONTENDED BY LEARNED DEPARTME NTAL REPRESENTATIVE THAT THERE WAS NO EVIDENCE AS TO SHOW WHAT WAS THE NATURE OF COURSE THAT WAS TO BE PURSUED BY MR. NAVAL KUMAR IN USA. T HE CERTIFICATE FOR ELIGIBILITY FOR NON-IMMIGRANT STUDENT STATUS MENTIO NS THAT MR. NAVAL KUMAR WAS TO PURSUE A COURSE IN ROCHESTER INSTITUTE OF TECHNOLOGY, M/S BHUVAN LEASING & INFRASTRUCTURE PVT. LTD ITA NO.21 & 6423/MUM/2012 15 U.S.A. WITH COMPUTER SCIENCE AS A MAJOR SUBJECT. TH IS DOCUMENT IS AT PAGE NO. 79 OF THE ASSESSEES PAPER BOOK. THIS DOES NOT GIVE ANY INDICATION AS TO WHAT IS THE NATURE OF COURSE THAT WAS TO BE PURSUED BY MR. NAVAL KUMAR. IN ITS LETTER DATED 28.11.2005, TH E ASSESSEE HAS EXPLAINED BEFORE THE ASSESSING OFFICER THAT THERE W AS GOOD SCOPE FOR TOWEL WITH PRINTED IMAGES AND THAT ONE M/S. MAX IMA GING SYSTEMS LTD., UK WAS DOING THE DIGITAL PRINTING ON ASSESSES TOWE L AND SUCH PRODUCT COMMANDS GOOD MARKET ABROAD. IT HAS BEEN FURTHER EX PLAINED BY THE ASSESSEE THAT BECAUSE OF GETTING THE PRINTING DONE BY MAX IMAGING SYSTEMS LTD., UK, COST OF THE TOWEL WAS HIGH AND TH EREFORE TO HAVE INHOUSE PRINTING MR. NAVAL KUMAR WAS SENT FOR TRAIN ING ABROAD. THE ASSESSEE HAS FILED VARIOUS CORRESPONDENCES BETWEEN ITSELF AND OVERSEAS BUYERS AND MAX IMAGING SYSTEMS LIMITED. THESE DOCUM ENTS ARE AT PAGE NO. 112 TO 181 OF THE ASSESSEES PAPER BOOK. THE CO RRESPONDENCE, WHICH IS AFTER NOVEMBER, 2000 WHEN MR. NAVAL KUMAR WAS SE NT TO USA, IN OUR VIEW WILL NOT HELP THE CASE OF THE ASSESSEE. THE PO SITION AS IT PREVAILED PRIOR TO MR. NAVAL KUMAR BEING SENT TO ABROAD ALONE HAVE TO BE LOOKED INTO. DOCUMENTS AT PAGE NO. 137 TO 182 RELATED TO T HE PERIOD PRIOR TO MR. NAVAL KUMAR BEING SENT ABROAD. IN THESE CORRESPONDE NCES, THERE IS NOTHING TO INDICATE THAT TOWELS WERE SENT ABROAD FO R PRINTING AND BECAUSE OF HIGH COST OF PRINTING ABROAD, THE ASSESS EE COULD NOT EXPLORE OR DO EXPORT BUSINESS. CORRESPONDENCES ONLY SHOW THAT TOWELS WERE BEING SENT ABROAD AND PRINTING WAS DONE ON THE SAME THROU GH MAX IMAGING SYSTEMS LTD., UK. THE PLEA OF THE ASSESSEE THAT BEC AUSE OF THE HIGH COST OF PRINTING ABROAD, IT EXPLORED POSSIBILITY OF SENDING MR. NAVAL KUMAR ABOARD FOR TRAINING IN PRINTING TECHNOLOGY; AND THA T THE SAME WOULD BENEFIT THE BUSINESS OF THE ASSESSEE, IN OUR VIEW H AS NOT BEEN ESTABLISHED BY THE ASSESSEE. THE PLEA OF THE ASSESSEE REMAINS U NSUBSTANTIATED. AS ALREADY STATED THE PURPOSE FOR WHICH A PERSON WAS T O BE SENT ABROAD AS EXPRESSED IN THE BOARD RESOLUTION DATED 19.6.2000 A ND THE EXPLANATION OF THE ASSESSEE BEFORE THE ASSESSING OFFICER IN ITS LE TTER DATED 28.11.2005 IS DIFFERENT. THE PLEA TAKEN IN LETTER DATED 28.11.200 5 IS AN AFTER THOUGHT AND A VAIN ATTEMPT TO SUBSTANTIATE THE CLAIM FOR DE DUCTION. AS FAR AS THE ACTION OF THE REVENUE IN ALLOWING THE VERY SAME EXP ENSES IN A.Y. 2001-02 IS CONCERNED, WE NOTICE THAT THE EXPLANATION GIVEN BY THE ASSESSEE BEFORE THE ASSESSING OFFICER DOES NOT HIGHLIGHT ALL THE AS PECTS WHICH HAVE BEEN M/S BHUVAN LEASING & INFRASTRUCTURE PVT. LTD ITA NO.21 & 6423/MUM/2012 16 BROUGHT OUT BY THE ASSESSING OFFICER IN THE ORDER O F THE ASSESSMENT IN THE PRESENT A.Y. IT IS WELL SETTLED THAT PRINCIPLES OF RES-JUDICATA DOES NOT APPLY IN INCOME TAX PROCEEDINGS. THE ASSESSEE HAS TO ESTA BLISH THAT THE EXPENDITURE CLAIMED BY HIM IS WHOLLY AND EXCLUSIVEL Y FOR THE BUSINESS WHICH IT WAS CARRYING ON. DECISION IN THE CASE OF S AKAL PAPERS PVT. LTD. (SUPRA) IS ON DIFFERENT FACTS AND THE SUBMISSIONS O F LEARNED DEPARTMENTAL REPRESENTATIVE IN THIS REGARD HAVE TO BE ACCEPTED. ON AN OVERALL APPRECIATION OF THE EVIDENCE AND EXPLANATION SUBMIT TED ON BEHALF OF THE ASSESSEE, WE ARE OF THE VIEW THAT THE ASSESSEE HAS FAILED TO EXPLAIN AND SUBSTANTIATE THAT THE EXPENDITURE ON STAFF TRAINING AND SALARY PAD TO MR. NAVAL KUMAR WAS WHOLLY AND EXCLUSIVELY FOR THE PURP OSE OF BUSINESS OF THE ASSESSEE. WE, THEREFORE, CONFIRM THE ORDERS OF REVENUE AUTHORITIES AND DISMISS GROUND N. 2 & 3 OF THE ASSESSEE. 18. THE HON'BLE HIGH COURT (SUPRA) APPROVED THE ORD ER OF THE TRIBUNAL OBSERVING AS UNDER: - 3) ON THE SECOND QUESTION, WE DO NOT FIND ANY REAS ON TO INTERFERE WITH THE DECISION OF THE TRIBUNAL, HAVING REGARD TO THE FACTUAL POSITION. AS NOTED IN THE ORDER OF THE TRIBUNAL, THE ASSESSEE WA S NOT ABLE TO SUBSTANTIATE THAT SENDING SHRI NAVAL KUMAR FOR TRAI NING ABROAD WAS FOR THE BENEFIT OF THE BUSINESS OF THE ASSESSEE. COUNSE L APPEARING ON BEHALF OF THE ASSESSEE FAIRLY PLACED ON RECORD THE JUDGMENTS OF THE DIVISION BENCH IN THE CASE OF M/S. ECHJAY FORGING LTD. V/S. THE AS STT. COMMISSIONER OF INCOME TAX & ANR. [INCOME TAX APPEAL NO. 584 OF 200 9] DECIDED ON 12TH JUNE, 2009 WHERE THIS COURT AFFIRMED THE DECISION O F THE TRIBUNAL FOR SIMILAR REASONS. 19. THE ISSUE RAISED BEFORE US IS SIMILAR, I.E. ON ACCOUNT OF STAFF RECRUITMENT AND STAFF TRAINING EXPENSES OF RS.15,27 ,872/- INCURRED ON SHRI NAVAL KUMAR. FOLLOWING THE SAME PA RITY OF REASONING, WE UPHOLD THE ORDER OF THE CIT(A) AND DI SMISS GROUND NO. 2 OF THE ASSESSEE. M/S BHUVAN LEASING & INFRASTRUCTURE PVT. LTD ITA NO.21 & 6423/MUM/2012 17 2.5. IN VIEW OF THE ORDER OF THE TRIBUNAL, IN THE CASE OF ASSESSEE ITSELF, ON IDENTICAL FACTS/ISSUES FOLLOWIN G THE REASONING CONTAINED THEREIN, WE DECIDE THIS ISSUE A GAINST THE ASSESSEE AND IN FAVOUR OF THE REVENUE, THUS, TH IS GROUND OF THE ASSESSEE IS DISMISSED. 3. NOW WE SHALL TAKE UP THE APPEAL OF THE REVENUE, WHEREIN, THE ONLY GROUND RAISED PERTAINS TO SET OFF OF UNABSORBED DEPRECIATION. THE LD. COUNSEL FOR THE A SSESSEE, DEFENDED THE CONCLUSION DRAWN IN THE IMPUGNED ORDER , WHEREAS, THE LD. DR DEFENDED THE OBSERVATION/CONCLU SION MADE IN THE ASSESSMENT ORDER. 3.1. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE FACTS , IN BRIEF, ARE THAT THE ASSESSEE CLAIMED SET OFF OF UNA BSORBED DEPRECIATION FOR AY 1997-98 AMOUNTING TO RS.13,32,0 94/- AGAINST THE INCOME OF ASSESSMENT YEAR 2007-08. THE LD. ASSESSING OFFICER OPINED THAT IN VIEW OF SECTION 32 (2) OF THE ACT SUCH UNABSORBED DEPRECIATION IS NOT ALLOWABLE T O BE SET OFF OF AGAINST THE INCOME OF ASSESSMENT YEAR 2007-0 8. THE AGGRIEVED ASSESSEE WENT IN APPEAL BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEALS), WHO PLACE REL IANCE UPON THE DECISION IN MEPCO INDUSTRIES LTD. (2009) 3 1 ITR 208/227 CTR 313 SC, SOORA SUBRAMANIAN (2010) 230 CT R 92 (MAD.) AND SRI RAM CHITS (BANG.) LTD. (2010) 41 DTR 366 (KAR.) HELD THAT THE ASSESSMENT BASED UPON THE M/S BHUVAN LEASING & INFRASTRUCTURE PVT. LTD ITA NO.21 & 6423/MUM/2012 18 SUPREME COURT DECISION CANNOT BE RECTIFIED ON SUBSE QUENT RETROSPECTIVE AMENDMENT OF LAW. THUS ORDER OF RECTI FICATION U/S 154 OF THE ACT, FOR AY 1998-99, LEVYING INTERES T FOR THE FIRST TIME 234B IS NOT VALID AND SINCE IT WAS A DEB ATABLE ISSUE NO RECTIFICATION U/S 154 OF THE ACT IS PERMIS SIBLE. WE ARE IN AGREEMENT WITH THE CONCLUSION DRAWN BY THE L D. COMMISSIONER OF INCOME TAX (APPEALS) BECAUSE IN MEP CO INDUSTRIES LTD. (319 ITR 208) HELD THAT DEBATABLE I SSUE CANNOT BE RECTIFIED U/S 154 OF THE ACT, THUS, THE O RDER OF RECTIFICATION DATED 14/10/2011 WAS RIGHTLY QUASHED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS). WE FIND N O INFIRMITY IN THE ORDER, THUS, APPEAL OF THE REVENUE IS DISMISSED. FINALLY, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOW ED AND THAT OF THE REVENUE IS DISMISSED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVES FROM BOTH SIDES AT THE CONCLUSION OF THE HEARING ON 30/06/2015. SD/ - (RAJENDRA) SD/ - (JOGINDER SINGH) ' # / ACCOUNTANT MEMBER $ # / JUDICIAL MEMBER MUMBAI; ( DATED : 30/06/2015 F{X~{T? P.S/. .. !%$&'()(*& / COPY OF THE ORDER FORWARDED TO : 1. *+,- / THE APPELLANT 2. ./,- / THE RESPONDENT. 3. 0 0 1' ( *+ ) / THE CIT, MUMBAI. M/S BHUVAN LEASING & INFRASTRUCTURE PVT. LTD ITA NO.21 & 6423/MUM/2012 19 P4. 0 0 1' / CIT(A)- , MUMBAI 5. 3#4.' , 0 *+'* 5 , / DR, ITAT, MUMBAI 6. 6 7 / GUARD FILE. ! / BY ORDER, /3+'.' //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI