GREWAL EXPORT P.LTD, NAVI MUMBAI V. DCIT 10(3), MUMBAI

ITA 7087/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 93143 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-07-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 26-05-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 04-12-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PAWAN KU MAR BEERLA
• Assessee Lawyers: ASHOK PURI
• Keywords: Business income
• Section: 14A

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI . . , , , BEFORE SHRI A.D. JAIN , JUDICIAL MEMBER AND SHRI N.K . BILLAIYA, A CCOUNTANT M EMBER / I .T.A. NO . 7087/MUM/2013 ( / ASSESSMENT YEAR : 2010 - 11 M/S. GREWAL EXPORT PVT. LTD., 901 & 902, GREAT EASTERN SUMMIT A, PLOT NO. 56, SECTOR 15, CBD, BELAPUR, NAVI MUMBAI - 400 614 / VS. THE DCIT 10(3), AAYAKAR BHAVAN, QUEENS ROAD, MUMBAI ./ ./ PAN/GIR NO. : AABCG 0544P ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY: SHRI ASHOK PURI / RESPONDENT BY : SHRI PAWAN KUMAR BEERLA / DATE OF HEARING : 08 . 0 7 .2015 / DATE OF PRONOUNCEMENT : 08 .0 7 .2015 / O R D E R PER N.K. BILLAIYA, AM: T HIS APPEAL BY THE ASSESSEE IS PREFERRED AGAINST THE ORDER OF THE LD. CIT(A) - 2 1 , MUMBAI DT. 2 9 . 10 .2013 PERTAINING TO ASSESSMENT YEAR 20 1 0 - 11 . ITA. NO. 7087/M/2013 2 2. THE GRIEVANCE OF THE ASSESSEE IS TWO - FOLD. THE FIRST GROUND RELATES TO THE TREATMENT OF INCOME FROM INTEREST EARNED ON ADVANCING FUNDS TO SISTER CONCERNS AS INCOME FROM OTHER SOURCES INSTEAD OF INCOME FROM BUSINESS. 3. FROM THE MATERIAL AVAILABLE ON OUR RECORD, WE FIND THAT AN IDENTICAL ISSUE HAS BEEN DECIDED BY THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO. 2987/M/2013 FOR ASSESSMENT YEAR 2009 - 10 AGAINST THE ASSESSEE AND IN FAVOUR OF THE REVENUE . THE RELEVANT PART OF THE ORDER OF THE TRIBUNAL READ AS UNDER: WE HAVE CONSIDERED THE RIVAL CONTENTIONS. IT IS EVIDENT FROM THE FACTS ON THE FILE THAT THE ASSESSEE DID NOT CARRY OUT ITS BUSINESS ACTIVITY, WHICH AS PER THE MAIN OBJECT OF THE COMPANY WAS OF MERCHANT EXPORTER, EXPORT HOUSE, TRADING HOUSE ETC. SINCE NO BUSINESS ACTIVITY WAS CARRIED OUT, THE ASSESSEE INVESTED THE SURPLUS MONEY WIT H ITS SISTER CONCERNS AND EARNED THE INTEREST INCOME. UNDER SECTION 14 OF THE ACT, DIFFERENT HEADS OF INCOME UNDER WHICH THE INCOME IS TO BE ASSESSED HAVE BEEN MENTIONED. AS PER SECTION 56(1) OF THE ACT, ANY INCOME WHICH IS NOT CHARGEABLE TO INCOME T AX UNDER ANY OF THE HEADS SPECIFIED IN SECTION 14 ITEMS, A TO E, IS CHARGEABLE UNDER THE HEAD INCOME FROM OTHER SOURCES. FURTHER UNDER SECTION 56(2), THE INCOME BY WAY OF INTEREST, IF THE SAME IS NOT CHARGEABLE TO INCOME UNDER THE HEAD PROFIT AND GAI N OF BUSINESS OR PROFESSION IS CHARGEABLE UNDER THE HEAD INCOME FROM OTHER SOURCES. NOW COMING TO THE FACTS OF THE CASE, THE ASSESSEE DID NOT DO ANY BUSINESS DURING THE YEAR. THE INVESTING OF MONEY WITH THE SISTER CONCERNS WAS NOT IN ADVANCEMENT OR IN RELATION TO ITS BUSINESS ACTIVITY E.G. ADVANCES TO SUPPLIERS, CUSTOMERS ETC. HAVING DEALING WITH THE COMPANY. IT WAS A SIMPLE CASE OF INVESTMENT OF SURPLUS FUNDS WITH THE SISTER CONCERNS. IN VIEW OF THE SPECIFIC PROVISIONS OF THE ACT, SUCH AN INCOME IS TO BE ASSESSED UNDER THE HEAD INCOME FROM OTHER SOURCES. A PERUSAL OF OBJECT CLAUSES 11 & 12 OF THE MEMORANDUM OF ASSOCIATION OF THE ASSESSEE COMPANY REVEALS THAT THESE CLAUSES ARE OF NO HELP TO THE ASSESSEE, SO FAR ITS CLAIM THAT THE INCOME IS TO BE TR EATED AS BUSINESS INCOME IS CONCERNED. A PERUSAL OF THE OBJECT CLAUSES, AS OBSERVED ABOVE, REVEALS THAT THE MAIN OBJECT OF THE COMPANY IS ITA. NO. 7087/M/2013 3 IN RELATION TO EXPORT OF GOODS. CLAUSES 11 & 12 FALL WITHIN THE HEADING B WHICH DEAL WITH OBJECTS INCIDENTAL OR ANCILLARY TO THE ATTAINMENT OF THE MAIN OBJECTS. WHEN NO MAIN OBJECT WAS CARRIED OUT, THEN UNDER SUCH CIRCUMSTANCES, THE INVESTMENT OF SURPLUS MONEY IN NO WAY CAN BE ASSOCIATED WITH THE OBJECTS INCIDENTAL OR ANCILLARY TO THE MAIN OBJECT. HENCE, IN OUR VI EW, THE LOWER AUTHORITIES RIGHTLY TREATED THE INTEREST INCOME OF THE ASSESSEE UNDER THE HEAD INCOME FROM OTHER SOURCES. SO FAR SO, THE RELIANCE OF THE LD. A.R. ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF RADHASOAMI SATSANG VS. CIT (SUP RA) IS CONCERNED, WE MAY NOTE THAT THE HONBLE SUPREME COURT IN THE SAID DECISION HAS STATED IN CLEAR TERMS THAT THE SAID DECISION IS CONFINED TO THE FACTS OF THAT CASE AND SHOULD NOT BE TREATED AS AN AUTHORITY ON ASPECTS WHICH HAVE BEEN DECIDED FOR GENERA L APPLICATION. THE RELEVANT OBSERVATIONS OF THE HONBLE SUPREME COURT IN THIS RESPECT ARE REPRODUCED AS UNDER: COUNSEL FOR THE REVENUE HAD TOLD US THAT THE FACTS OF THIS CASE BEING VERY SPECIAL, NOTHING SHOULD BE SAID IN A MANNER WHICH WOULD HAVE GENERAL APPLICATION. WE ARE INCLINED TO ACCEPT THIS SUBMISSION AND WOULD LIKE TO STATE IN CLEAR TERMS THAT THE DECIS ION IS CONFINED TO THE FACTS OF THE CASE AND MAY NOT BE TREATED AS AN AUTHORITY ON ASPECTS WHICH HAVE BEEN DECIDED FOR GENERAL APPLICATION. WE DIRECT THE PARTIES TO BEAR THEIR RESPECTIVE COSTS. HOWEVER, WE MAY NOTE THAT THE HONBLE SUPREME COURT I N THE CASE OF DISTRIBUTORS (BARODA) PVT. LTD. VS. UNION OF INDIA & ORS. 155 ITR 120 HAS HELD THAT THAT EVEN WHEN AN ERRONEOUS DECISION OR WRONG VIEW IS TAKEN IN ONE CASE AND SUBSEQUENTLY THE MISTAKE IS REALISED, THEN, SUCH TYPE OF MISTAKE SHOULD NOT BE A LLOWED TO CONTINUE BUT SHOULD BE CORRECTED WHILE DECIDING THE SUBSEQUENT CASE. THE HONBLE SUPREME COURT HAS CATEGORICALLY OBSERVED THAT TO PERPETUATE AN ERROR IS NO HEROISM BUT TO RECTIFY IS THE COMPULSION OF JUDICIAL CONCISE. HENCE, IF THE AO IN THE EA RLIER ASSESSMENT YEARS HAS ERRONEOUSLY TREATED THE INTEREST INCOME AS BUSINESS INCOME OF THE ASSESSEE, THAT ITSELF DOES NOT CREATE OR VEST ANY RIGHT WITH THE ASSESSEE TO TREAT IT AS SUCH IN SUBSEQUENT YEARS, ESPECIALLY, WHEN SUCH TREATMENT OF INCOME IS NOT ALLOWABLE IN VIEW OF THE SPECIFIC STATUTORY PROVISIONS OF THE ACT. HENCE, IN VIEW OF OUR ABOVE OBSERVATIONS, WE DO NOT FIND ANY MERIT IN THE APPEAL OF ITA. NO. 7087/M/2013 4 THE ASSESSEE ON THIS ISSUE AND THIS ISSUE IS ACCORDINGLY DECIDED AGAINST THE ASSESSEE. RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE, THIS ISSUE IS DECIDED AGAINST THE ASSESSEE. GROUND NO. 1 IS ACCORDINGLY DISMISSED. 4. GROUND NO. 2 RELATES TO THE DISALLOWANCE U/S. 14A OF THE ACT. 5. WE FIND THAT A SIMILAR I SSUE WAS ALSO DECIDED BY THE TRIBUNAL IN THE VERY SAME ORDER IN ITA NO. 2987/M/13 , VIDE PARA - 10 ON PAGE - 6 OF ITS ORDER. THE TRIBUNAL HAS RESTRICTED THE DISALLOWANCE TO 1, WHICH WAS CORRECTED BY CORRIGENDUM DT. 12.9.2014 AS A TYPOGRAPHICAL ERROR AND THE T RIBUNAL MADE IT CLEAR THAT IT SHOULD BE READ AS TH THOUGH THE TRIBUNAL HAS TO BE A RIDER THAT ITS FINDINGS SHOULD NOT HAVE ANY APPLICATION OR PRECEDENTIAL VALUE FOR THE FUTURE ASSESSMENT YEARS. HOWEVER, WE DO NOT FIND ANY DISTINGUISHING FEATURE/FACTS DUR ING THE YEAR UNDER CONSIDERATION. THEREFORE, WE MODIFY THE FINDINGS OF THE LD. CIT(A) AND DIRECT THE AO TO RESTRICT THE DISALLOWANCE TO TH OF THE DISALLOWANCE MADE. GROUND NO. 2 IS PARTLY ALLOWED. 6. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. OR DER PRONOUNCED IN THE OPEN COURT AT THE TIME OF HEARING ON 8 TH JU LY , 2015 SD/ - SD/ - ( A.D. JAIN ) (N.K. BILLAIYA) /JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED : 8 TH JU LY , 2015 . . ./ RJ , SR. PS ITA. NO. 7087/M/2013 5 / 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