DCIT CENT. CIR. -4(1), CENTRAL RANGE-4, MUMBAI V. M/s. RUNWAL DEVELOPERS P. LTD., MUMBAI

ITA 7049/MUM/2017

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 4253 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-03-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2013-2014
• Appeal Filed On: 11-12-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AGAINST DATED PASSED
• Keywords: Business income; Set aside
• Section: 142(1); 153A; 201; 143(2); 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA , AM AND SHRI AMARJIT SINGH , JM I.T.A. NO . 7049 / M/ 20 1 7 ( ASSESSMENT YEAR : 201 3 - 1 4 ) DCIT, CENTRAL CIRCLE - 4(1), MUMBAI CENTRAL RANGE - 4, PR, CIT(C) - 2 R. NO. 1916, 19 TH FLOOR, AIR INDIA BUILDING, NARIMAN POINT, MUMBAI - 400021 . VS. M/S. RUNWAL DEVELOPMENT PVT. LTD. 5 TH FLOOR, RUNWAL & OMKAR SQUARE OFF. EASTERN EXPRESS HIGH WAY SION (E), MUMBAI - 22 . ./ ./ PAN/GIR NO. : AAACR0395J ( APPELLANT ) .. ( RESPONDENT ) DATE OF HEARING : 06 . 0 2 .201 9 DATE OF PRONOUNCEMENT : 13. 03 . 201 9 O R D E R PER AMARJIT SINGH, JM: THE PRESENT APPEA L HA S BEEN FILED BY THE REVENUE AGAINST THE ORDER DATED 05 . 0 9 .201 7 PASSED BY THE COMMIS S IONER OF INCOME TAX (APPEALS) - 52 , MUMBAI [HEREINAFTER REFERRED TO AS THE CIT(A)] RELEVANT TO THE ASSESSMENT YEAR 2013 - 14 . 2 . THE REVENUE HAS RAISED THE FOLLOWING GROUNDS: - 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN DIRECTING THE AO TO ALLOW THE CLAIM OF EXPENSES FROM THE BUSINESS INCOME AFTER VERIFICATION DESPITE THE ASSESSEE NOT APPORTIONING ANY ASSESSEE BY: SHRI RAKESH JOSHI DEPARTMENT BY: SHRI D. G. PANSARI (SR.AR) ITA. NO. 7049 /M/201 7 A.Y. 2013 - 14 2 EXPENSES TOWARDS EARNING THE RENTAL INCOME, WHICH IS INCIDENTAL TO ITS CORE BUSINESS ACTIVITY? 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN DIREC TING THE AO TO ALLOW THE CLAIM OF EXPENSES FROM THE BUSINESS INCOME OF THE ASSESSEE IS PERVERSE TO THE FACTS THAT THE ASSESSEE HAS FAILED TO DISCHARGE ITS ONUS OF PROVING THAT THE VARIOUS EXPENSES CLAIMED IN ITS BOOKS HAVE BEEN WHOLLY AND EXCLUSIVELY INCURRED FOR THE PURPOSE OF EARNING ITS BUSINESS INCOME.? 3. THE APPELLANT CRAVES TO LEAVE, TO ADD, TO AMEND AND OR TO ALTER ANY OF THE GROUND OF APPEAL IF NEED BE. 4. THE APPELLANT THEREFORE, PRAYS THAT ON THE GROUNDS STATED ABOVE, THE ORDER OF THE LD. CIT(A) - 52, MUMBAI, MAY BE SET ASIDE AND THAT OF THE AO BE RESTORED. ' 3 . THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME ON 29 . 09 .201 3 FOR THE A.Y. 2013 - 14 DECLARING TOTAL I NCOME TO THE TUNE OF RS.66,66,495/ - . A SEARCH ACTION U/S 132 OF THE ACT WAS CARRIED OUT AT RUNWAL GROUP CASES ON 17.11.2014. THE ASSESSEE COMPANY BELONGS TO THE RUNWAL GROUP AND SEARCH WARRANT WAS ISSUED TO THE ASSESSEE. NOTICE U/S 153A OF THE ACT WAS ISSUED WHICH WAS SERVED UP ON THE ASSESSEE. IN RESPONSE TO THE NOTICE, THE ASSESSEE FILED RETURN OF INCOME WHICH HE HAD FILED EARLIER. NOTICES U/S 143(2) & 142(1) OF THE ACT WERE ISSUED AND SERVED UPON THE ASSESSEE. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF BUILDING AND DEV ELOPING OF PROPERTIES AND RUNNING AND MANAGING MALL, MORE PARTICULARLY, R - MALL AT MULUND MUMBAI. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE WAS LEASING OUT OF IMMOVABLE PROPERTY AND EARNED LEAVE AND LICENCE FEES IN SUM OF RS.5,87,27,518/ - AND FLAT R ENT ITA. NO. 7049 /M/201 7 A.Y. 2013 - 14 3 OF RS. 32,63,392/ - TOTALING IN SUM OF RS.6,19,90,910/ - . THE ASSESSEE HAS CREDITED THE SAME TO ITS BUSINESS AND PROFIT AND LOSS ACCOUNT . W HILE COMPUTING T HE INCOME OF THE HOUSE PROPERTY, T HE ASSESSEE REDUCE D THE PROPERTY TAX AND STANDARD DEDUCTION @ 30% DEDUCTION OF REPAIRS CHARGES AND OFFERED TO TAX ACCORDINGLY. HOWEVER, WHILE COMPUTING ITS INCOME FROM BUSINESS, THE ASSESSEE HAS FAILED TO APPORTION AND DISALLOW THE EXPENSES DEBITED TO THE PROFIT & LOSS ACCOUNT ON ACCOUNT OF THE ABOVE RENTAL INCOME AS EAR NED BY IT. THE ASSESSEE HAS ALREADY TAKEN THE ADVANTAGE OF 30% REPAIRS ALLOWED BY THE STATUTE AS A STANDARD DEDUCTION AGAINST THE HOUSE PROPERTY INCOME. ACCORDINGLY, THE ASSESSEE SHOULD HAVE SUO MOTO APPORTIONED CERTAIN EXPENSES TO THE RENTAL INCOME WHILE COMPUTING THE INCOME. IN THE A.Y. 2010 - 11 & 2011 - 12 THIS ISSUE WAS EXAMINED BY THE AO AND MADE DISALLOWANCE OF RS.1,60,77,911/ - TO THE EXTENT OF 30% AS CLAIMED IN COME FROM THE HOUSE PROPERTY. HOWEVER, THE MATTER TRAVELLED UP TO THE LEVEL OF HONBLE ITAT AND THE ISSUE IS RESTORED BEFORE THE AO . AFTER GIVING THE NOTICE, TH E 30% INCOME FROM THE HOUSE PROPERTY WAS DECLINED AND ADDED TO THE INCOME OF THE ASSESSEE. FEELING AGGRIEVED, T HE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A) WHO ALLOWED THE CLAIM OF THE ASSESSEE, THEREFORE, THE REVENUE HAS FILED THE PRESENT APPEAL BEFORE US. ISSUE NOS. 1 & 2 ITA. NO. 7049 /M/201 7 A.Y. 2013 - 14 4 4 . ISSUE NOS. 1 & 2 ARE INTER - CONNECTED, THEREFORE, ARE BEING TAKEN UP TOGETHER FOR ADJUDICATION. HOWEVER, BOTH THE ISSUES ARE IN CONNECTION WITH THE ALLOWANCE OF THE CLAIM OF THE EXPENSES FROM BUSINESS INCOME DESPITE THIS FACT THAT THE ASSESSEE FAILED TO APPORTION ANY EXPENSES TOWARD EARNING RENTAL INCOME. BEFORE GOING FURTHER, WE DEEMED IT NECESSARY TO ADVERT THE FINDING OF THE CIT(A) ON RECORD.: - 5.3.3 IT IS OBSER VED THAT THIS ISSUE HAS ALREADY BEEN DECIDED BY THE HONBLE ITAT IN THE CASE OF ASSESSEE ITSELF FOR THE AYS 2010 - 11 & 2011 - 12. THE HON'BLE ITAT HAS SET ASIDE THE ISSUE TO THE FILE OF THE AO WITH A SPECIFIC DIRECTION TO EXAMINE THE EXPENSES CLAIMED BY THE A SSESSEE UNDER THE HEADS 'BUSINESS PROMOTION' AND ADVERTISEMENT EXPENSES' FOR QUANTIFYING THE DISALLOWANCE OF THE EXPENSES RELATED TO RUNWAL MAIL BEING CLAIMED WHILE COMPUTING ITS 'BUSINESS INCOME. RESPECTFULLY FOLLOWING THE ORDERS OF THE HON'BLE ITAT IN TH E CASE OF ASSESSEE ITSELF FOR AYS 2010 - 11 AND 2011 - 12. THE AO IS REQUIRED TO COMPUTE THE QUANTUM OF EXPENSES RELATED TO RUNWAL MAL AFTER EXAMINING THE EXPENSES UNDER THE HEADS 'BUSINESS PROMOTION'. 'ADVERTISEMENT EXPENSES', ETC CLAIMED BY THE ASSESSEE WHILE COMPUTING ITS INCOME UNDER THE HEAD 'BUSINESS INCOME', AS DIRECTED BY THE HON'BLE TRIBUNAL. ACCORDINGLY, THE GROUNDS NO 1 & 2 OF THE APPEAL ARE PARTLY ALLOWED . 5 . ON APPRAISAL OF THE ABOVE SAID FINDING, WE FIND THAT THE ISSUE HAS BEEN DECIDED ON THE BASIS OF THE DIRECTIONS OF HONBLE ITAT IN THE ASSESSEES OWN CASE FOR THE A.Y. 2010 - 11 & 2011 - 12 AND ACCORDINGLY, THE CLAIM OF THE ASSESSEE WAS PARTLY ALLOWED AS THE QUANTUM OF EXPENSES RELATED TO RUNWAL MALL AFTER EXAMINING THE EXPENSES UNDER THE HEADS OF BUSINESS PROMOTION, ADVERTISEMENT EXPENSES ETC, CLAIMED BY THE ASSESSEE WHILE COMPUTING ITS INCOME UNDER HEAD BUSINESS INCOME. SINCE THE ISSUE S ARE SQUARELLY COVERED BY DECISION OF HONBLE ITAT IN THE ASSESSEES OWN CASE FOR THE A.Y. 2010 - 11 & ITA. NO. 7049 /M/201 7 A.Y. 2013 - 14 5 201 1 - 12, THEREFORE, WE ARE OF THE VIEW THAT THE CIT(A) HAS DECIDED THE MATTER OF CONTROVERSY JUDICIOUSLY AND CORRECTLY WHICH IS NOT LIABLE TO BE INTERFERE WITH AT THIS APPELLATE STAGE. ACCORDINGLY, WE DECIDE THESE ISSUES IN FAVOUR OF THE ASSESSEE AGAINST THE REVENUE. 6 . IN RESULT, APPEAL FILED BY THE REVENUE IS HEREBY ORDERED TO BE DISMISSED . ORDER P RONOUNCED IN THE OPEN COURT ON 1 3 . 03 .2019 . SD/ - SD/ - ( SHAMIM YAHYA ) (AMARJIT SINGH) / ACCOUNTANT MEMBER /JUDICIAL MEMBER MUMBAI; DATED : 1 3 . 03 .2019 V IJAY / 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