OMEGA SHIPPING PVT. LTD., MUMBAI V. I.T.O.8(2)(4), MUMBAI

ITA 6484/MUM/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 3875 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 3 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-02-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 12-10-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 23-10-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJIV
• Keywords: Business income; Opportunity of being heard; Revised return
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES C, MUMBAI BEFORE SHRI JASON P. BOAZ (AM) AND SHRI SANDEEP GOS AIN (JM) ITA NO. 6484 /MUM/2012 ASSESSMENT YEAR: 2009-10 OMEGA SHIPPING PVT. LTD . 610 A- WING, KOHINOOR CITY MALL COMPLEX, KIROL ROAD, OFF. L B S MARG, KURLA (WEST), MUMBAI- 400070 PAN : AFTPB8541Q VS. THE ITO - 8 (2) (4), AAYKAR BHAVAN, M.K.MARG, MUMBAI- 400020. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI. MADHUR AGARWAL RESPONDENT BY : SHRI. RAJIV PANT DATE OF HEARING: 04/02/2016 DATE OF PRONOUNCEMENT: 17/02/2016 O R D E R PER JASON P. BOAZ, AM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINS T THE ORDER OF THE CIT(APPEALS)-17, MUMBAI DT. 07/08/2012 FOR ASST. YE AR 2009-10. 2. THE FACTS OF THE CASE BRIEFLY ARE AS UNDER:- 2.1 THE ASSESSEE COMPANY FILED ITS RETURN OF INCOM E FOR ASST. YEAR 2009- 10 ON 29/07/2009 DECLARING NIL INCOME AFTER SETTING OFF BROUGHT FORWARD BUSINESS LOSSES OF RS. 45,232/- FROM A.Y. 2004-05. SUBSEQUENTLY ON 03/11/2009 A REVISED RETURN WAS FILED DECLARING NIL INCOME, BUT CLAIMING CARRY FORWARD OF MAT CREDIT OF RS. 2,77,700/- WHICH WAS NOT CLAIMED IN THE ORIGINAL RETURN. THE CASE WAS SELECTED FOR SCRU TINY AND THE 2 ITA NO. 6484 /MUM/2012 ASSESSMENT YEAR: 2009-10 ASSESSMENT WAS COMPLETED U/S 143(3) OF THE INCOME T AX ACT, 1961 (IN SHORT THE ACT) VIDE ORDER DT. 19/08/2011 AND WHER EIN THE INCOME OF THE ASSESSEE WAS DETERMINED AT RS. 30,02,235/-. THIS WA S DUE TO THE ASSESSING OFFICER HOLDING THAT, THE LEASE RENTALS O FFERED BY THE ASSESSEE AS BUSINESS INCOME ARE TAXABLE UNDER THE HEAD INCOM E FROM HOUSE PROPERTY. 2.2 AGGRIEVED BY THE ORDER OF ASSESSMENT FOR ASST. YEAR 2009-10 DT. 19/08/2011, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(APPEALS)- 17, MUMBAI. THE LD. CIT(A) DISPOSED OFF THE APPEAL VIDE ORDER DT. 07/08/2012 ALLOWING THE ASSESSEE PARTIAL RELIEF. IN THE IMPUGNED ORDER, THE LD. CIT(A) UPHELD THE ACTION OF THE ASSESSING O FFICER IN ASSESSING THE LEASE RENTALS RECEIVED BY THE ASSESSEE UNDER THE HE AD INCOME FROM HOUSE PROPERTY AS AGAINST BUSINESS INCOME DECL ARED BY THE ASSESSEE. IN RESPECT OF THE GROUND RAISED SEEKING EXEMPTION I N RESPECT OF DIVIDEND INCOME U/S 10 (38) OF THE ACT, THE LD. CIT(A) SET A SIDE THE ASSESSEES CLAIM TO THE FILE OF THE ASSESSING OFFICER FOR VERI FICATION OF THE ASSESSEES CLAIM AFTER AFFORDING THE ASSESSEE AN OPPORTUNITY T O PUT FORTH EVIDENCES IN THE MATTER. 3.1 AGGRIEVED BY THE ORDER OF THE CIT(APPEALS)-17, MUMBAI DT. 07/08/2012 FOR ASST. YEAR 2009-10, THE ASSESSEE HAS PREFERRED THIS APPEAL RAISING THE FOLLOWING GROUNDS:- 1. ON THE FACT AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE CIT(A) ERRED IN HOLDING THAT AMOUNT OF RS. 38,29,635/- IS CHARGEABLE AS INCOME FROM HOUSE PR OPERTY AND NOT AS INCOME FROM BUSINESS 2. ON THE FACT AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE CIT(A) ERRED IN NOT APPRECIATING THAT THE INCOME WAS 3 ITA NO. 6484 /MUM/2012 ASSESSMENT YEAR: 2009-10 FROM EXPLOITATION OF COMMERCIAL ASSETS BECAUSE OF T EMPORARY LULL IN BUSINESS WHICH IS CHARGEABLE AS INCOME FROM BUSINESS AND NOT INCOME FROM HOUSE PROPERTY. 3. ON THE FACT AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN HOLDING THAT THE EXPENDITURE OF RS. 39,78,889/- IS NOT ALLOWABLE AS BUSINESS EXPENDITUR E AS THERE IS NO BUSINESS ACTIVITY CARRIED ON DURING THE YEAR. 4. WITHOUT PREJUDICE THE CIT(A) ERRED IN NOT ALLOWI NG THE EXPENDITURE OF RS. 39,78,889/- UNDER THE HEAD INC OME FROM OTHER SOURCES AS THESE ARE EXPENDITURE ESSENTIAL F OR RUNNING OF THE COMPANY. THE APPELLANT CRAVES LEAVE TO ADD, TO AMEND, TO SUB STITUTE, TO WITHDRAW, TO MODIFY, TO ALTER AND/OR RE-INSTATE THE FOREGOING GROUNDS OF THE APPEAL AT OR BEFORE THE TIME OF HEAR ING. 3.2 AT THE OUTSET, THE LD. AR FOR THE ASSESSEE SUBM ITTED THAT THE ISSUES RAISED IN GROUNDS 1 TO 4(SUPRA) ARE SQUARELY COVERE D 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 ISSUE OF WHETHER THE INCOME FROM LEAVE RENTALS RECEIVED BY THE ASSESSEE WAS TO BE ASSESSED UNDER THE HEAD BUSINESS INCOME AS DECLARED BY THE ASSESSEE OR I NCOME FROM HOUSE PROPERTY AS HELD BY THE AUTHORITIES BELOW WAS CONS IDERED. THE CO- ORDINATE BENCH IN ITS ORDER IN ITA NO. 1041/M/11 DT . 16/12/2015 HAS HELD THAT IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE, AS THE ASSESSEE IS NOT IN THE BUSINESS OF LETTING OUT OF I TS ASSETS FOR EARNING BUSINESS INCOME, THE ASSESSING OFFICER IS DIRECTED TO ASSESSEE THE SAID INCOME AS INCOME FROM OTHER SOURCES. THE OPERATIV E PORTION AT PARA 3 OF THE ORDER OF THE CO-ORDINATE BENCH FOR ASST. YEAR 2 007-08(SUPRA) IS EXTRACTED HEREUNDER:- 4 ITA NO. 6484 /MUM/2012 ASSESSMENT YEAR: 2009-10 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. 2002-03 AGENCY 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 W ITH EQUIPMENT AND FURNITURE & FIXTURE WAS INSEPARABLE FROM EACH O THER. PREMISES ALONG WITH EQUIPMENT AND FURNITURE & FIXTU RE WERE LEASED OUT SO THAT EMPLOYEES OF THE COMPANY CAN BE PAID AND ADMINISTRATIVE EXPENSES CAN BE MET WHILE COMPANY EX PLORES POSSIBILITY OF REVIVING ITS AGENCY BUSINESS WITH OT HER CARRIERS. FROM THE RECORD WE FOUND THAT CLAIM OF THE ASSESSEE FOR TREATING SUCH INCOME AS INCOME FROM BUSINESS OR PROFESSION I S CONFIRMED BY THE IT DEPARTMENT ITSELF DURING THE ASSESSMENT O F EARLIER YEAR I.E. 2006-07. COPY OF ORDER U/S 143(3) ALONG W ITH COPY OF BALANCE SHEET AND PROFIT & LOSS ACCOUNT WAS ALSO PL ACED ON RECORD. KEEPING IN VIEW THE TOTALITY OF FACTS AND CIRCUMSTANCES OF THE CASE VIS--VIS THE FACT THAT ASSESSEE IS NOT IN A BUSINESS OF LETTING OUT ITS ASSETS FOR EARNING BUSINESS INCO ME, WE DIRECT THE ASSESSING OFFICER TO ASSESS THE INCOME AS INCO ME 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 ASSESSEES OWN CASE, WE DIRECT THE ASSESSING OFFICE R TO ASSESS THE 5 ITA NO. 6484 /MUM/2012 ASSESSMENT YEAR: 2009-10 ASSESSEES LEASE INCOME FROM LETTING OUT OF ITS ASS ETS AS INCOME FROM OTHER SOURCES. GROUNDS NO 1 TO 4 OF THIS APPEAL AR E DISPOSED OFF AS INDICATED ABOVE. 4.1 IN THE COURSE OF APPELLATE PROCEEDINGS, THE ASS ESSEE RAISED THE FOLLOWING ADDITIONAL GROUNDS NO. 5 & 6:- 5. DEDUCTION OF DIVIDEND OF RS. 3,08,977/- SHOULD BE ALLOWED U/S 10(34). 6. DISALLOWANCE U/S U/S 14A 13,60,082/- SHOULD BE DELETED. 4.2 IN RESPECT OF THE AFORESAID ADDITIONAL GROUNDS RAISED (SUPRA), THE LD. AR SUBMITTED THAT IT IS BY OVERSIGHT THAT THESE ISS UES WERE NOT RAISED BY THE ASSESSEE IN THE PRESENT APPEAL, THOUGH THE ASSE SSEE IS AGGRIEVED BY THE FINDINGS RENDERED ON THESE ISSUES BY THE AUTHOR ITIES BELOW. IT WAS PRAYED THAT THE AFORESAID ADDITIONAL GROUNDS BE ADM ITTED AND DECIDED ON MERITS. WE HAVE HEARD BOTH THE LD. AR FOR THE ASSES SEE AND THE LD. DR FOR REVENUE IN THE MATTER. AFTER DUE CONSIDERATION OF T HE FACTS AND CIRCUMSTANCES INVOLVED, WE ARE OF THE CONSIDERED OP INION THAT, IN THE INTEREST OF EQUITY AND JUSTICE, SINCE THE ASSESSEE IS AGGRIEVED BY THE FINDINGS IN THE ORDERS OF THE AUTHORITIES BELOW, TH E SAME BE ADMITTED FOR HEARING AND ADJUDICATION IN THIS APPEAL. 5.1 IN GROUND NO: 5 THE ASSESSEE SUBMITS THAT EXEMPTION U/S 10(34) OF THE ACT BE ALLOWED TO IT IN RESPECT OF DIVIDEND OF RS. 3,08,977/-. IT IS CONTENDED THAT THIS GROUND WAS RAISED BEFORE THE LD . CIT(A) AND THE PLEA OF THE ASSESSEE WAS SET ASIDE TO THE FILE OF ASSES SING OFFICER FOR AFFORDING THE ASSESSEE OPPORTUNITY OF BEING HEARD IN THE MATT ER. 5.2 HAVING HEARD BOTH THE LD. AR FOR THE ASSESSEE AND THE LD. DR IN THE MATTER AND PERUSED THE MATERIAL ON RECORD, WE FIND THAT THIS ISSUE OF THE 6 ITA NO. 6484 /MUM/2012 ASSESSMENT YEAR: 2009-10 ASSESSEES CLAIM FOR EXEMPTION OF DIVIDEND INCOME OF RS. 3,08,977/- U/S 10(34) OF THE ACT HAS NOT BEEN EXAMINED BY THE AU THORITIES BELOW. WE THEREFORE RESTORE THIS ISSUE TO THE FILE OF THE ASS ESSING OFFICER WITH THE DIRECTION TO EXAMINE AND VERIFY THE ASSESSEES CLAI M FOR EXEMPTION U/S 10(34) OF THE ACT IN RESPECT OF DIVIDEND INCOME OF RS. 3,08,977/- AND ADJUDICATE THEREON, AFTER AFFORDING THE ASSESSEE AD EQUATE OPPORTUNITY OF BEING HEARD AND TO FILE DETAILS / SUBMISSIONS IN TH IS REGARD. IT IS ORDERED ACCORDINGLY. CONSEQUENTLY, ADDITIONAL GROUND NO. 5 IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 6.1. IN GROUND NO. 6 THE ASSESSEE CHALLENGES THE ACTION OF THE ASSESSIN G OFFICER IN COMPUTING DISALLOWANCE U/S 14A OF THE ACT AT RS. 13,60,082/-. IN THIS REGARD, THE LD. AR FOR THE ASSESSEE SUBMITT ED THAT IN THE ORDER OF ASSESSMENT, THE ASSESSING OFFICER HAS COMPUTED THE DISALLOWANCE U/S 14A R.W.RULE 8 D AT RS. 13,60,082/- STATING THAT SU CH DISALLOWANCE WOULD BECOME EFFECTIVE IN THE EVENT OF THE ASSESSEE PREFE RRING AN APPEAL AGAINST THE ORDER OF ASSESSMENT AND CONSEQUENTLY ANY EXPEND ITURE IS ALLOWED AS DEDUCTION. IT IS SUBMITTED THAT IN THE LIGHT OF THE DECISION OF THE CO- ORDINATE BENCH IN ITA NO. 1041/MUM/11 DT. 16/12/201 5 FOR ASST. YEAR 2007-08 (SUPRA), HOLDING THAT THE ASSESSEES INCOME FROM LEASE RENTALS WAS TO BE ASSESSED UNDER THE HEAD INCOME FROM OTHE R SOURCES ALLOWING EXPENDITURES INCURRED IN THIS REGARD, AND THE CLAIM OF EXEMPTION FOR DIVIDEND INCOME OF RS. 3,08,977/- U/S 10(34) OF THE ACT, THE ISSUE OF DISALLOWANCE U/S 14A R.W.S.8D BE RESTORED TO THE FI LE OF THE ASSESSING OFFICER FOR FRESH EXAMINATION. 6.2. 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 R. W. RULE 8D WAS MADE WHILE 7 ITA NO. 6484 /MUM/2012 ASSESSMENT YEAR: 2009-10 COMPUTING THE TAXABLE INCOME OF THE ASSESSEE IN VIE W OF THE FACT THAT THE ASSESSEES INCOME FROM LEASE RENTALS WAS BROUGHT T O TAX BY THE ASSESSING OFFICER UNDER THE HEAD INCOME FROM HOUSE PROPERTY AND NOT BUSINESS INCOME AS CLAIMED BY THE ASSESSEE. THE ASSESSING OFFICER HOWEVER WORKED OUT DISALLOWANCE U/S 14A R. W. RULE 8D AT RS . 13,60,082/- WHICH HE STATES WILL COME INTO EFFECT IN THE EVENT THAT O N APPEAL ANY EXPENDITURE BE ALLOWED AS DEDUCTION. IN THE LIGHT OF THE FACT T HAT WE HAVE FOLLOWED THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE ASSESSEES OWN CASE FOR ASST. YEAR 2007-08(SUPRA) IN HOLDING THAT THE ASSESSEES INCOME FROM LEASE RENTALS BE ASSESSED UNDER THE HEAD INC OME FROM OTHER SOURCES; WHICH WOULD IMPLY ALLOWING OF PERMISSIBLE DEDUCTIONS OF EXPENDITURE, IF ANY AND THE ASSESSEES CLAIM FOR EX EMPTION OF DIVIDEND INCOME U/S 10(34) OF THE ACT BEING RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR FRESH EXAMINATION, IT WOULD BE NECESSAR Y AND IN THE FITNESS OF THINGS THAT THE ASSESSING OFFICERS COMPUTATION O F DEDUCTION U/S U/S 14A R.W. RULE 8D, WHICH WOULD NOW COME INTO PLAY, T O BE ALSO EXAMINED AFRESH BY THE ASSESSING OFFICER AND ADJUDICATED UP ON AFTER AFFORDING THE ASSESSEE ADEQUATE OPPORTUNITY OF BEING HEARD AND TO FILE DETAILS AND SUBMISSIONS IN THIS REGARD. IT IS ACCORDINGLY ORDER ED. CONSEQUENTLY, THIS GROUND IS TREATED AS ALLOWED FOR STATISTICAL PURPOS E. 7. IN THE RESULT, THE ASSESSEES APPEAL FOR ASST. YEAR 2009-10 IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH FEBRUARY, 2016 SD/- SD/- ( SANDEEP GOSAIN ) (JASON P.BOAZ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI; DATED:17/02/2016 8 ITA NO. 6484 /MUM/2012 ASSESSMENT YEAR: 2009-10 / 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