Indo Caps (P) Ltd.C/o M/s K.l. Datta & Co. CA Vashistha Plaza, 2, Manu Marg, Alwar, Alwar V. DCIT, Central Circle, Alwar, Alwar

ITA 689/JPR/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 2270 (ITAT-JAIPUR)
• Duration Of Justice: 10 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-03-2020
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2016-2017
• Appeal Filed On: 10-05-2019
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Business income; Depreciation
• Section: 143(1); 20

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCH B , JAIPUR JH FOT; IKY JKO] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE : SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM VK;DJ VIHY LA-@ ITA NO. 689/JP/2019 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2016-17 M/S. INDO CAPS (P) LTD. ITARANA ROAD, OLD INDUSTRIAL AREA ALWAR CUKE VS. THE DCIT CENTRAL CIRCLE ALWAR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO .: AAACI 3600 H VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI P.C. PARWAL JKTLO DH VKSJ LS@ REVENUE BY : SHRI K.C. GUPTA, JCIT-DR LQUOKBZ DH RKJH[K@ DATE OF HEARING : 13/03/2020 ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 16 /03/2020 VKNS'K@ ORDER PER VIJAY PAL RAO, JM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF LD. CIT(A)-4, JAIPUR DATED 25-02-2019 FOR THE ASSESSME NT YEAR 2016-17. THE ASSESSEE HAS RAISED THE FOLLOWING GROUND. 1. THAT THE AO HAS ERRED IN LAW AS WELL AS ON THE FACTS AND CIRCUMSTANCES OF THE CASE IN CONSIDERING A SUM OF RS. 36,000/- UNDER THE HEAD INCOME FROM OTHER SOURC ES IN PLACE OF INCOME FROM THE HOUSE PROPERTY AND ALSO ER RED IN ITA NO.689/JP/2019 M/S. INDO CAPS (P) LTD VS DCIT, CENTRAL CIRCLE, ALWAR 2 DISALLOWING OF DEDUCTION CLAIMED U/S 24(A) OF RS. 1 0,800/- AND THE LD. CIT(A) HAS ERRED IN SUSTAINING THE SAME . 2.1 THE ASSESSEE COMPANY HAS CLOSED DOWN ITS FACTOR Y AND LET OUT THE FACTORY BUILDING TO ITS SISTER CONCERN. THE RENTAL INCOME FROM THE BUILDING LET OUT TO ITS SISTER CONCERN M/S. VIJAY SOLVEX LTD . WAS DECLARED AS INCOME FROM HOUSE PROPERTY. THE AO DURING THE SCRUTINY ASS ESSMENT NOTED THAT THE ASSESSEE HAS CLAIMED DEPRECIATION OF RS. 3,212/ - ON THE BUILDING AND SIMULTANEOUSLY CLAIMED DEDUCTION U/S 24(A) OF THE A CT OF RS. 10,800/- ON THE SAME BUILDING WHICH WAS LET OUT TO M/S. VIJAY S OLVEX LTD. FURTHER THE AO OBSERVED THAT THE ASSESSEE HAS NOT FILED ANY REN TAL AGREEMENT IN SUPPORT OF THE CLAIM THAT SAID INCOME IS ASSESSABLE TO TAX UNDER THE HEAD INCOME FROM HOUSE PROPERTY. ACCORDINGLY, THE AO TRE ATED THE RENTAL INCOME AS BUSINESS INCOME OF THE ASSESSEE AND THERE BY DENIED THE DEDUCTION U/S 24(A) OF THE ACT. THE ASSESSEE CHALLE NGED THE ACTION OF THE AO BEFORE THE LD. CIT(A) BUT COULD NOT SUCCEED. 2.2 BEFORE US, THE LD.AR OF THE ASSESSEE HAS SUBMIT TED THAT THE ASSESSEE HAS ERRONEOUSLY CLAIMED DEPRECIATION OF RS. 3,212/- ON THE BUILDING WHEREAS THE SAID BUILDING WAS LET OUT AGAINST RENT WHICH WAS OFFERED TO ITA NO.689/JP/2019 M/S. INDO CAPS (P) LTD VS DCIT, CENTRAL CIRCLE, ALWAR 3 TAX AS INCOME FROM HOUSE PROPERTY. HE FURTHER SUBMI TTED THAT THE ASSESSEE HAS CLOSED DOWN ITS FACTORY AND ALSO SOLD OUT THE P LANT AND MACHINERY. THEREFORE, THE BUILDING WAS LET OUT TO THE TENANT. SINCE NO BUSINESS ACTIVITY IS CARRIED OUT FROM THE SAID BUILDING, THE REFORE, THE RENTAL INCOME CANNOT BE ASSESSED AS BUSINESS INCOME OF THE ASSESS EE. THE LD.AR OF THE ASSESSEE FAIRLY CONCEDED THAT DEPRECIATION CLAIMED BY THE ASSESSEE IN THE RETURN OF INCOME IS NOT AN ALLOWABLE DEDUCTION WHEN THE BUILDING WAS LET OUT AND THE INCOME WAS OFFERED TO TAX AS INCOME FRO M HOUSE PROPERTY. THE LD.AR OF THE ASSESSEE POINTED OUT THAT FOR THE ASSESSMENT YEAR 2006- 07 TO 2008-09, THE AO HAS ACCEPTED THE RENTAL INCOM E AS INCOME FROM HOUSE PROPERTY. 2.3 ON THE OTHER HAND, THE LD. DR HAS SUBMITTED THA T THE ASSESSEE IS OFFERING INCOME FROM BUSINESS AND ALSO CLAIMED DEPR ECIATION ON THE SAID BUILDING. THEREFORE, THE ASSESSEE HAS NEVER CLAIMED THAT IT HAS CLOSED DOWN ITS BUSINESS ACTIVITY. THE LD. DR HAS FURTHER CONTENDED THAT AS PER SCHEDULE OF FIXED ASSETS , THE ASSESSEE IS SHOWING THE FACTORY BUILDING AS PART OF THE FIXED ASSETS AND HAS ALSO SHOWN THE DEP RECIATION AND WRITTEN DOWN VALUE (FOR SHORT WDV) OF THE BUILDING. THE REFORE, ALL THESE ITA NO.689/JP/2019 M/S. INDO CAPS (P) LTD VS DCIT, CENTRAL CIRCLE, ALWAR 4 FACTS SHOW THAT THE ASSESSEE HAS NOT CLOSED DOWN IT S FACTORY TILL THE SHOWING THE SAME AS BUSINESS ASSETS IN THE SCHEDULE OF FIXED ASSETS. THE LD. DR RELIED ON THE ORDERS OF THE LOWER AUTHORITIE S. 2.4 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WEL L AS THE RELEVANT MATERIALS AVAILABLE ON RECORD. THE AO IN THE ASSESS MENT ORDER HAS CLEARLY STATED THE NATURE OF BUSINESS OR SOURCE OF INCOME A S N.A. AND THEREFORE, THE AO HAS ACCEPTED THAT THE ASSESSEE IS NOT DOING ANY BUSINESS. IT IS ALSO NOT IN DISPUTE THAT THE ASSESSEE HAS ALREADY SOLD O UT ITS PLANT AND MACHINERY AND FACTORY BUILDING IS NO MORE UTILIZED FOR THE PURPOSE OF BUSINESS. IN FACT, THE ASSESSEE HAS CLOSED DOWN ITS BUSINESS ACTIVITY IN THE FACTORY IN QUESTION AND THE BUILDING IS LET OUT TO ITS SISTER CONCERN M/S. VIJAY SOLVEX LTD. AGAINST RENT OF RS. 36,000/- PER ANNUM AGAINST WHICH THE ASSESSEE HAS CLAIMED DEDUCTION U/S 24(A) OF THE ACT. THE LD.AR OF THE ASSESSEE HAS FAIRLY ADMITTED THAT DEPRECIATION CLAI MED BY THE ASSESSEE IN THE RETURN OF INCOME OF RS. 3,212/- ON THE SAID BUI LDING IS NOT ALLOWABLE WHEN RENTAL INCOME WAS OFFERED TO TAX AS INCOME FRO M HOUSE PROPERTY. PRIMA FACIE, IT APPEARS THAT THE ASSESSEE HAS CLOSE D ITS BUSINESS ACTIVITY FROM THE FACTORY PREMISES IN QUESTION AND THEREFORE , THE RENTAL INCOME ITA NO.689/JP/2019 M/S. INDO CAPS (P) LTD VS DCIT, CENTRAL CIRCLE, ALWAR 5 CANNOT BE TREATED AS BUSINESS INCOME OF THE ASSESSE E. FURTHER, AT THE SAME TIME, THE CLAIM OF DEPRECIATION AGAINST SAID BUILDI NG IS ALSO NOT PERMISSIBLE AND THE SAME SHALL BE DISALLOWED. THOUG H THE LD.AR OF THE ASSESSEE HAS REFERRED TO THE ASSESSMENT ORDERS FOR THE ASSESSMENT YEARS 2007-08 AND 2008-09 WHEREIN THE ASSESSEE OFFERED TH E RENTAL INCOME AS INCOME FROM HOUSE PROPERTY AND THE AO HAS ACCEPTED THE SAME WHILE PROCESSING THE RETURN U/S 143(1) OF THE ACT. HOWEVE R, THE STATUS OF THE SUBSEQUENT ASSESSMENT YEARS FROM A.Y. 2009-10 TO 20 15-16 IS NOT ASCERTAINABLE FROM THE RECORD AS NOTHING HAS BEEN F ILED BY THE ASSESSEE IN THIS REGARD. EVEN NO SUBMISSION HAS BEEN ADVANCED R EGARDING THE STATUS OF THE RENTAL INCOME EITHER OFFERED TO TAX BY THE A SSESSEE OR TREATMENT OF THE SAME BY THE AO IN THOSE ASSESSMENT YEARS. ACCOR DINGLY, THE AO IS DIRECTED TO DECIDE THIS ISSUE AFRESH IN THE LIGHT O F THE STATUS OF RENTAL INCOME FOR THE PRECEDING ASSESSMENT YEARS I.E. FROM A.Y. 2009-10 TO 2015-16. NEEDLESS TO SAY THAT THE ASSESSEE BE GIVEN AN APPROPRIATE OPPORTUNITY OF HEARING OF APPEAL BEFORE PASSING THE FRESH ORDER. THUS THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL P URPOSES. ITA NO.689/JP/2019 M/S. INDO CAPS (P) LTD VS DCIT, CENTRAL CIRCLE, ALWAR 6 3.0 IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 16 /03/202 0. SD/- SD/- FOE FLAG ;KNO FOT; IKY JKO (VIKRAM SINGH YADAV) (VIJAY PAL RAO) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 16 /03/ 2020 *MISHRA VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1 VIHYKFKHZ@ THE APPELLANT- M/S. INDO CAPS (P) LTD., ALWAR 2 IZR;FKHZ@ THE RESPONDENT-THE DCIT, CENTRAL CIRCLE, ALWAR 3. VK;DJ VK;QDRVIHY ) @ CIT(A), 4. VK;DJ VK;QDR@ CIT, 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO.689/JP/2019) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR