TIMESTAR LTD., MUMBAI V. DCIT, CIRCLE 9(3), MUMBAI

ITA 6534/MUM/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 4014 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 5 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-04-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Assessment Year: 2010-2011
• Appeal Filed On: 07-11-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A K NAYAK
• Keywords: Business income; Principle of natural justice
• Section: 143(3)

Judgement Text

1 TIMESTAR LIMITED ITA 65 34 /M/2013 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E , MUMBAI , , BEFORE SHRI B R BASKARAN , ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA , JUDICIAL MEMBER ITA NO. 65 34 /MUM/201 3 (ASSESSMENT YEAR 2010 - 11) TIME S TAR L IMI T E D., 12 UDYOG NAGAR, S V ROAD, GOREGAON (WEST), MUMBAI - 400 062 PAN: AAACI 3210 M VS DCIT, CIRCLE 9(3), ROOM NO. 229, 2 ND FLOOR, AAYAKAR BHAVAN, M K ROAD, MUMBAI - 400 020 (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI K GOPAL AND MISS NEHA PARANJPE RESPONDENT BY : SHRI A K NAYAK /DATE OF HEARING : 13 - 04 - 201 6 /DATE OF PRONOUNCEMENT : 13 - 04 - 2016 ORDER , . : - PER AMIT SHUKLA, J. M. : T HE AFORESAID APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST IMPUGNED ORDER DATED 26 TH AUGUST, 2013 PASSED BY COMMISSIONER OF INCOME - TAX (APPEALS) CIT(A) - 20 , MUMBAI, FOR THE QUANTUM OF ASSESSMENT PASSED UNDER SECTION 143(3) FOR THE ASSESSMENT YEAR 2010 - 11. IN THE GROUNDS OF APPEAL, THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1 . DISALLOWANCE OF ADMINISTRATIVE EXPENSES. A . THE LD. COMMISSIONER OF INCOME TAX (A) [CIT(A)] FAILED TO APPRECIATE THE FACT THAT THE ONUS TO ESTABLISH NEXUS OF THE EXPENDITURE WITH THE INCOME, IS ON THE REVENUE AND THEREFORE NO DISALLOWANCE OF ADMINISTRATIVE EXPENSES COULD HAVE BEEN MADE BY THE ASSESSING OFFICER. 2 TIMESTAR LIMITED ITA 65 34 /M/2013 B. THE LD. CIT(A) FAILED TO CONSIDER THE PRINCIPLE OF PROXIMATE CAUSE LAID DOWN BY HONBLE SUPREME COURT IN CASE OF WALFORT SUPRA AND THE HONBLE BOMBAY HIGH COURT IN CASE OF GODREJ & BOYCE SUPRA WHILE RESTRICTING THE DISALLOWANCE OF EXPENSES OF TO THE TUNE OF 20% OF THE TOTAL ADMINISTRATIVE EXPENSES WITHOUT ANY BASIS. C. THE LD. CIT(A) SHOULD HAVE, WITHOUT PREJUDICE, DISALLOWED A REASONABLE TOKEN SUM ON AD - HOC BASIS OUT OF THE TOTAL ADMINISTRATIVE EXPENSES INSTEA D OF RESTRICTING THE SAME TO 20% OF THE TOTAL ADMINISTRATIVE EXPENSES ON PERCENTAGE BASIS. 2 . THE HONBLE CIT(A) ERRED ON THE FACTS, WHILE REJECTING THE GROUND PREFERRED BY THE APPELLANT FOR NOT GIVING SUFFICIENT AND ADEQUATE OPPORTUNITY TO THE APPELLANT BY THE ASSESSING OFFICER BEFORE PASSING THE ASSESSMENT ORDER IN VIOLATION OF PRINCIPLES OF NATURAL JUSTICE TO JUSTIFY THE APPELLANTS CLAIM THAT NO EXPENSE HAS BEEN INCURRED FOR EARNING THE INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY. 2. BRIEF FACTS QUA THE FIRST ISSUE IS THAT , ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF BUILDER AND DEVELOPER. THE ASSESSEE HAD SHOWN FOLLOWING INCOME IN THE PROFIT AND LOSS ACCOUNT: S.NO. PARTICULARS AMOUNT (RS.) 1 SALES (FROM CONSTRUCTION BUSINESS) 4,30,09,375 2 PROFIT FROM BANQUET HAL (PROPRIETARY 2,06,165 3 INTEREST ON F.D. 1,28,419 4 RENT RECEIVED 1,13,34,419 TOTAL 5,46,78,378 FROM THE AFORESAID RECEIPTS, THE ASSESSEE HAS CLAIMED FOLLOWING EXPENSE S : 1 . COST OF SALES RS. 5,06,66,560/ - 2 . ADMINISTRATIVE & OTHER EXPENSES RS. 32, 47 , 5 14/ - TOTAL RS.5,33,14,114/ - 3. BESIDES THIS, THE ASSESSEE HAS ALSO OFFERED RENTAL INCOME FROM LEASE, DECLARED UNDER T HE HEAD I NCOME FROM HOUSE P ROPERTY AND ACCORDINGLY , CLAIMED DEDUCTION UNDER SECTION 24 (B) @ 30% OF THE SAID RECEIPTS. THE AO SH OW CAUS E THE ASSESSEE, AS TO WHY 30% OF 3 TIMESTAR LIMITED ITA 65 34 /M/2013 ADMINISTRATIVE AND OTHER EXPENSES SHOULD NOT BE DISALLOWED. IN RESPONSE, THE ASSESSEE SUBMITTED THAT, ADMINISTRATIVE EXPENSES HAVE BEEN INCURRED M AINLY TO RUN THE BUSINESS OF CONSTRUCTION ACTIVITY AND, ASSESSEE HAS T O MAINTAIN ITS CORPORATE SET - UP, THEREFORE, SO FAR AS ADMINISTRATIVE EXPENSES ARE CONCERNED, THE SAME CANNOT BE DISALLOWED. FURTHER, THE ASSESSEE HAS BUSINESS INCOME FROM CONSTRUCTION AS WELL AS LEASING OF THE PROPERTY THEREFORE ONE CANNOT MAKE DISALLOWANC E ON PROPORTIONATE BASIS BY DIFFERENTIATION THE ADMINISTRATIVE EXPENSES TOWARDS EACH SEPARATE HEAD OF INCOME. LD. AO REJECTED THE ARGUMENT AND HELD THAT, IN SUCH CASE IT IS DIFFICULT TO BIFURCATE THE EXPENSES FOR VARIOUS STRENUOUS THEREFORE, 30% OF THE ADM INISTRATIVE EXPENSES CLAIMED SHOULD BE DISALLOWED. ACCORDINGLY, HE DISALLOWED THE SAME. 4. THE LD. CIT(A) CONFIRMED THE ACTION OF THE AO, HOWEVER, HE HELD THAT INSTEAD OF DISALLOWANCE OF 30%, HE RESTRICTED THE DISALLOWANCE @ 20% AND ACCORDINGLY, THE DISALLOWANCE WAS SCALED DOWN TO RS.6,28,526/ - . 5. AFTER HEARING BOTH THE PARTIES AND ON PERUSAL OF THE FINDING GIVEN IN THE IMPUGNED ORDERS AND MATERIAL PLACED BEFORE US, WE FIND THAT THE ASSESSEE HAS SHOWN INCOME FROM VARIOUS STREAMS INCLUDING CONSTRUCTI ON BUSINESS AND LOOSING INCOME / RENTAL INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY. THE ADMINISTRATIVE AND OTHER EXPENSES DEBITED HAS BEEN SHOWN AT RS.32,47,554/ - . THE AUTHORITIES BELOW HAVE DISALLOWED THE PROPORTIONATE EXPENDITURE ON THE GROUND TH AT THERE IS NO BIFURCATION OF ADMINISTRATIVE EXPENSES UNDER EACH HEAD AND HOW ALL THE ADMINISTRATIVE EXPENSES CAN BE HELD TO BE EXCLUSIVELY RELATED TO THE CONSTRUCTION BUSINESS. SUCH A REASONING CANNOT BE UPHELD BECAUSE, O NCE THE ASSESSEE HAD SHOWN INCOME FROM TWO DIFFERENT HEADS AND HAS COMPUTED THE INCOME ACCORDINGLY, THEN IT CANNOT BE HELD THAT EXPENSES DEBITED AGAINST THE BUSINESS INCOME SHOULD BE PROPORTIONATELY DISALLOWED ON THE 4 TIMESTAR LIMITED ITA 65 34 /M/2013 GROUND THAT THE SAME MUST BE ALLOCATED IN RELATION TO THE OTHER INCOME ALSO . EVEN IF THERE IS NO CONSTRUCTION ACTIVITY CARRIED ON THIS YEAR THEN ALSO IT CANNOT BE HELD THAT ADMINISTRATIVE EXPENSES SHOULD BE ALLOCATED OR EVEN PROPORTIONATELY FOR EARNING OF RENTAL INCOME. BEFORE US, THE LD. COUNS EL HAD CATEGORICALLY STATED THAT, IN THE NEXT YEAR, THE CONSTRUCTION ACTIVITY HAS AGAIN STARTED. HE ALSO DREW OUR ATTENTION TO WORKING OF WORK - IN - PROGRESS AND ALSO THE DETAILS OF SALES DURING THE YEAR. THUS, ON THESE FACTS, WE ARE UNABLE TO APPRECIATE THE STAND TAKEN BY THE REVENUE THAT, SOME PROPORTIONATE DISALLOWANCE ON ACCOUNT OF ADMINISTRATIVE EXPENSES SHOULD BE MADE BY ALLOCATING THE SAME FOR EARNING OF LEASE / RENTAL INCOME , WHICH A DMITTEDLY IS ASSESSABLE UNDER THE HEAD INCOME FROM HOUSE PROPERTY. A CCORDINGLY, GROUND NO. 1 IS TREATED AS ALLOWED. 6 . REGARDING GROUND NO.2, NO ARGUMENT WAS PLACED BEFORE US , THEREFORE, SAME I S NOT BE I N G ADJUDICATED UPON AND ACCORDINGLY , IT IS TREATED AS INFRUCTOUS AND DISMISSED. 7 . IN THE RESULT, APPEAL FILED BY THE ASSESSEE STANDS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH AP R IL , 2016. SD/ - SD/ - ( ) ( ) (B R B ASKARAN ) ( AMIT SHUKLA ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATE: 13 TH APRIL, 2016 /COPY TO: - 1 ) / THE APPELLANT. 2 ) / THE RESPONDENT. 3) THE CIT(A) - 20 , MUMBAI. 5 TIMESTAR LIMITED ITA 65 34 /M/2013 4 ) THE COMMISSIONER OF INCOME TAX - __ CONCERNED , MUMBAI. 5 ) , , / THE D.R. E BENCH, MUMBAI. 6 ) \ COPY TO GUARD FILE. / BY ORDER / / TRUE COPY / / , ASSTT. REGISTRAR I.T.A.T., MUMBAI * . . *CHAVAN, SR.PS