M/S Haryanan State Minor Irrigation &, Panchkula V. The Dy.Commissioner of Income Tax, Panchkula

ITA 740/CHANDI/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 86180 (ITAT-CHANDIGARH)
• Duration Of Justice: 5 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-02-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 02-02-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 22-08-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AMARVEER SINGH
• Keywords: Business income; Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES A &B CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI T.R. SOOD, ACCOUNTANT MEMBER ITA NO.740/CHD/2014 ASSESSMENT YEARS: 2009-10 (HEARD IN BENCH B) M/S. HARYANA STATE MINOR IRRIGATION, VS. THE DCIT & TUBEWELL CORPORATION LIMITED CIRCLE SINCHAI BHAWAN SECTOR 5 PANCHKULA PANCHKULA PAN NO.AABFH8314F & ITA NO.329/CHD/2014 ASSESSMENT YEARS: 2004-05 (HEARD IN BENCH A) M/S. HARYANA STATE MINOR IRRIGATION, VS. THE DCIT & TUBEWELL CORPORATION LIMITED CIRCLE SINCHAI BHAWAN SECTOR 5 PANCHKULA PANCHKULA PAN NO.AABFH8314F (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI TEJ MOHAN SINGH RESPONDENT BY : SHRI. AMARVEER SINGH DATE OF HEARING : 02/02/2015 DATE OF PRONOUNCEMENT : 06/02/2015 ORDER PER T.R.SOOD, A.M. BOTH THE APPEALS FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE SEPARATE ORDERS PASSED BY THE CIT(A) PANCHKULA DATE D 23.06.2014 AND 05/02/2014 RESPECTIVELY. 2. FIRST WE SHALL DEAL WITH ITA NO.740/CHD/2014 IN WHICH FOLLOWING GROUNDS HAVE BEEN RAISED : 1. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) H AS ERRED IN LAW AS WELL AS ON FACTS IN UPHOLDING THE ACTION OF THE ASSESSING O FFICER WHEREBY HE HAS STATED THAT NO EXPENDITURE IS TO BE ALLOWED AS BUSI NESS EXPENDITURE AFTER THE CLOSURE OF THE BUSINESS AND THEREBY BRINGING TO TAX THE ENTIRE RECEIPTS OF RS. 6,72,89,894/- WHICH IS ARBITRARY AND UNJUSTIFIED. 2. THAT THE ENTIRE EXPENDITURE ON ACCOUNT OF ESTABLISH MENT EXPENSES, WAGES, SALARIES, RETRENCHMENT COMPENSATION, ETC. TOTALING RS. 26,93,09,493/- AS CLAIMED IS ALLOWABLE AS SUCH AND NO DISALLOWANCE IS CALLED FOR. 3. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) H AS FURTHER ERRED IN UPHOLDING THE DISALLOWANCE OF INTEREST CLAIMED AT R S. 10,16,03,500/- WHICH IS ARBITRARY AND UNJUSTIFIED. 4. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) H AS FURTHER ERRED IN UPHOLDING THE DISALLOWANCE OF DEPRECIATION CLAIMED AT RS. 37,99,050/- WHICH IS ARBITRARY AND UNJUSTIFIED. 5. THAT WITHOUT PREJUDICE TO THE ABOVE, EVEN IF IT IS HELD THAT NO EXPENDITURE IS TO BE ALLOWED AS ALLEGED BY THE LD. COMMISSIONER OF IN COME TAX (APPEALS), DEDUCTION UNDER SECTION 24 IN RESPECT OF HOUSE PROP ERTY INCOME AND THE EXPENDITURE OUGHT TO HAVE BEEN HELD ALLOWABLE UNDER SECTION 57 OF THE ACT TO BE SET OFF AGAINST INTEREST INCOME. 3. AFTER HEARING BOTH THE PARTIES WE FIND THAT DURI NG THE ASSESSMENT PROCEEDINGS THE AO NOTED THAT ASSESSEE COMPANY HAD CLOSED ITS BUSINESS OPERATION WITH EFFECT FROM 30/07/2002, AND DURING T HE YEAR NO BUSINESS WAS CARRIED ON. HOWEVER FOLLOWING EXPENSES WERE CLAIMED : I) PAY AND ALLOWANCE RS. 26,93,09,493/- II) INTEREST RS. 10,16,03,500/- III) DEPRECIATION RS. 37.99.050/- TOTAL RS. 37,47,12,043/- 4. IN RESPONSE TO THE QUERY ASSESSEE WAS ASKED WHY THESE EXPENSES SHOULD NOT BE DISALLOWED. IT WAS SUBMITTED THAT EXPENSES P ERTAINING TO SALARY, MEDICAL, RETRENCHMENT COMPENSATION ETC. WHICH ARE ALL NECESS ITY AND THEREFORE SAME SHOULD BE ALLOWED. 5. AO FURTHER NOTED THAT ASSESSEE HAS FURTHER CLAIM ED INTEREST AMOUNTING TO RS. 10,16,03,500/-. ASSESSEE WAS ASKED TO GIVE NAME AND ADDRESS OF THE PERSONS TO WHOM INTEREST IS PAID. IN RESPONSE IT WAS SUBMIT TED THAT IT WAS A PROVISION CREATED AND INTEREST WAS PAYABLE TO THE GOVERNMENT ON THE LOANS RAISED. IN THIS BACKGROUND AO DISALLOWED THE EXPENSES AS WELL AS I NTEREST EXPENDITURE. 6. ON APPEAL THE ACTION OF THE AO WAS CONFIRMED BY THE LD. CIT(A). 7. BEFORE US LD. COUNSEL FOR THE ASSESSEE FAIRLY AD MITTED THAT ISSUE IS COVERED AGAINST THE ASSESSEE BY THE ORDER OF TRIBUNAL IN CA SE OF M/S HARYANA STATE SMALL INDUSTRIES & EXPORT CORPORATION LTD. CHANDIGARH VS. THE ADDL. CIT IN ITA NO. 898/CHD/2009. HOWEVER AS FAR AS THE INCOME FROM HOU SE PROPERTY IS CONCERNED SAME SHOULD HAVE BEEN ASSESSED AS INCOME FROM HOUSE PROPERTY AND 30% STATUTORY ALLOWANCES SHOULD HAVE BEEN GIVEN. 8. ON THE OTHER HAND LD. DR SUPPORTED THE ORDER OF LD. CIT(A). 9. AFTER CONSIDERING THE RIVAL SUBMISSIONS CAREFULL Y WE FIND THAT IDENTICAL ISSUES CAME UP FOR CONSIDERATION IN CASE OF M/S HARYANA ST ATE SMALL INDUSTRIES & EXPORT CORPORATION LTD. CHANDIGARH VS. THE ADDL. CIT IN IT A NO. 898/CHD/2009 (SUPRA), THIS ISSUE WAS ADJUDICATED VIDE PARA 5,6, & 7 WHICH ARE AS UNDER . 5. WE FIND THAT SIMILAR ISSUE AROSE BEFORE THE TRI BUNAL IN ASSESSEES OWN CASE RELATING TO ASSESSMENT YEAR 2005-06 AND VIDE ORDER DATED 10.12.2010, THE TRIBUNAL IN TURN FOLLOWING THE EARLIER RATIO LAID DOWN IN AS SESSMENT YEARS 2006-07 AND 2005- 06 IN THE CASE OF SISTER CONCERN OF THE ASSESSEE, I T WAS OBSERVED BY THE TRIBUNAL AS UNDER:- 6. WE, ON PERUSAL OF RECORD FIND THAT THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO. 919/CHD/2009 RELATING TO ASSESSMENT YEAR 2006-07 VIDE ORDER DATED 30.10.2009, IN TURN FOLLOWING THE ORDER OF THE TRIBUNAL IN ITA NO. 1042/CHD/2008 RELATING TO ASSESSMENT YEAR 2005-06 H AD OBSERVED VIDE PARA 5 THAT THE CURRENT LOSSES WERE IGNORED BY THE ASSESSEE ITSELF AND THE ONLY ISSUE BEFORE THE TRIBUNAL WAS IN RESPECT OF AD JUSTMENT OF BROUGHT FORWARD LOSSES. THE TRIBUNAL ALSO NOTED THE ASSES SEE TO HAVE EARNED INCOME ON FDRS AND THE CARRIED FORWARD BUSINESS LOS SES WERE NOT ALLOWED TO BE SET OFF AGAINST INCOME FROM INTEREST. THE E XPENSES INCURRED BEING NOT RELATABLE TO INTEREST INCOME WERE ALSO NOT ALLO WED BY THE ASSESSING OFFICER. THE TRIBUNAL VIDE PARA 7 HELD AS UNDER:- IN THE LIGHT OF THE RATIO LAID DOWN BY THE TRIBUNA L RELATING TO ASSESSMENT YEAR 2005-06, WE REMAND THE ISSUE BACK T O THE FILE OF THE ASSESSING OFFICER TO ALLOW THE RELIEF O F SET OFF OF CARRIED FORWARDED LOSSES AGAINST BUSINESS INCOME AS SESSED IN THE HANDS OF TE ASSESSEE. THE A IS ALSO DIRECTE D TO VERIFY THE NATURE OF EXPENDITURE AND ITS ALLOW ABILITY AGA INST THE INCOME EARNED BY THE ASSESSEE UNDER THE HEAD INCOME FROM BUSINESS OR INCOME FROM OTHER SOURCES AS THE C ASE MAY BE. THE GROUND OF APPEAL RAISED BY THE ASSESSE E IS THUS ALLOWED FOR STATISTICAL PURPOSES. 6. ADMITTEDLY, THE ISSUE ARISING IN THE PRESENT APP EAL BEFORE US IS IDENTICAL TO THE ISSUE RAISED IN THE EARLIER YEARS AND FOLLOWING THE REASONING IN THE SAID ORDER, WE REMIT THE ISSUE TO THE FILE OF ASSESSING OFFICER TO DECIDE THE SAME IN LINE WITH THE DIRECTION OF THE TRIBUNAL VIDE PARA 7 IN ITA NO . 919/CHD/2009. WE FIND THAT AN ERROR HAD CREPT IN THE ORDER OF THE TRIBUNAL DATED 10.12.2010 WHEREIN A REFERENCE WAS MADE TO ITA NO. 919/CHD/2009 RELATING TO ASSESS MENT YEAR 2006-07 AS BEING ASSESSEES OWN CASE, THOUGH THE SAME RELATES TO M/S HARYANA STATE HANDLOOM AND HANDICRAFT CORPORATION LTD, PANCHKULA. REMITTI NG THE ISSUE BACK TO THE FILE OF ASSESSING OFFICER, WE HOLD THAT THE INTEREST INC OME EARNED BY THE ASSESSEE IS TO BE ASSESSED AS INCOME FROM OTHER SOURCES AND THE EX PENDITURE INCURRED IN RELATION TO THE EARNING OF SAID INCOME IS TO BE ALL OWED AS A DEDUCTION. THE ISSUE RAISED BY THE ASSESSEE OF ASSESSIBILITY OF SAID INC OME AS BUSINESS INCOME VIDE GROUND NO.1 IS THUS DISMISSED, GROUND NO.2 RAISED I S ALLOWED FOR STATISTICAL PURPOSES. IN RESPECT OF THE ISSUE FOR ALLOWING THE BENEFIT OF BROUGHT FORWARD LOSSES, WE FIND THAT THE ISSUE STAND COVERED BY THE ORDER O F THE TRIBUNAL AND THE ASSESSING OFFICER IS DIRECTED TO VERIFY THE CLAIM O F THE ASSESSEE AND DECIDE THE SAME IN ACCORDANCE WITH LAW. THUS, GROUND NO.3 RAIS ED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 7. THE LAST ISSUE AGAINST THE ADJUSTMENT OF THE CU RRENT YEAR LOSSES DOES NOT ARISE IN VIEW OF THE SIMILAR ISSUE BEING IGNORED BY THE ASSESSEE IN THE EARLIER YEARS AND ALSO IN VIEW OF THE ASSESSMENT OF THE INCOME AS INCOME FROM OTHER SOURCES. THUS GROUND NO.4 IS DISMISSED . FOLLOWING THE ABOVE WE DECIDE THE ISSUE REGARDING D ISALLOWANCE OF EXPENDITURE AND INTEREST AGAINST THE ASSESSEE. HOWEVER WE FIND FORCE IN THE SUBMISSIONS OF LD. COUNSEL FOR THE ASSESSEE THAT AS FAR AS INCOME FROM HOUSE PROPERTY IS CONCERNED SAME SHOULD HAVE BEEN ASSESSED AS INCOME FROM HOUSE PROPERTY AND CORRESPONDING 30% STATUTORY DEDUCTION SHOULD HA VE BEEN ALLOWED. THEREFORE, WE SET ASIDE THE ORDER OF LD. CIT(A) AND DIRECT AO TO ASSESSED THE HOUSE PROPERTY INCOME UNDER THE HEAD INCOME FROM HO USE PROPERTY AND CORRESPONDING DEDUCTION SHOULD HAVE BEEN GIVEN. 10. IN THE RESULT APPEAL IS PARTLY ALLOWED. ITA 329/CHD/2014 11. IN THIS APPEAL ASSESSEE HAS RAISED ALTHOUGH FOU R GROUNDS BUT THE ISSUES ARE IDENTICAL AS IN ABOVE NOTED ITA NO. 740/CHD/2014 FI LED BY THE ASSESSEE. THE GROUND NO. 1 RELATES TO DISALLOWANCE OF EXPENSES AN D GROUND NO. 2 RELATES TO ASSESSMENT OF INCOME FROM HOUSE PROPERTY. 12. AFTER CONSIDERING THE RIVAL SUBMISSIONS CAREFUL LY, THE FIRST ISSUE IS DECIDED AGAINST THE ASSESSEE VIDE FOLLOWING OUR DECISION AT PARA NO. 9 OF THIS ORDER. 13. AS FAR AS INCOME FROM HOUSE PROPERTY IS CONCERN ED THE SAME IS DECIDED IN FAVOUR OF THE ASSESSEE VIDE PARA NO. 9 OF THIS ORDE R 14. IN THE RESULT APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 06/02/2015 SD/- SD/- (BHAVNESH SAINI) (T.R. SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 06/02/2015 AG COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT, TH E CIT(A), THE DR