JAIN ENTERPRISES, Jaipur V. ITO, Jaipur

ITA 747/JPR/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 5514 (ITAT-JAIPUR)
• Duration Of Justice: 2 year(s) 4 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-01-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 27-09-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJ MEHRA JCIT DR DHK
• Assessee Lawyers: H M SINGHVI
• Keywords: Business income

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES (SMC), JAIPUR JH VKJ-IH-RKSYKUH] U;KF;D LNL; DS LE{K BEFORE: SHRI R.P. TOLANI, JUDICIAL MEMBER VK;DJ VIHY LA-@ ITA NO. 747/JP/2013 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2008-09 M/S. JAIN ENTERPRISES A-55, JANTA COLONY JAIPUR CUKE VS. THE ITO WARD- 5 (2) JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO .: AAAFJ 9282 D VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI H.M. SINGHVI, CA JKTLO DH VKSJ LS@ REVENUE BY : SHRI RAJ MEHRA, JCIT- DR LQUOKBZ DH RKJH[K@ DATE OF HEARING : 03/12/2015 ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 27 /01/2016 VKNS'K@ ORDER PER R.P. TOLANI, JM THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF THE LD. CIT(A)-II, JAIPUR DATED 30-07-2013 FOR THE ASSESS MENT YEAR 2008-09 RAISING FOLLOWING GROUNDS: - 1. THAT THE LD. CIT(A) ERRED IN CONFIRMING THE AD DITION / DISALLOWANCE OF RS. 3,54,1153/- MADE BY AO ON ACCOU NT OF INTEREST ON SECURITY DEPOSITS WITH THE CONSIGNOR TREATING AS INCOME FROM OTHER SOURCES INSTEAD OF BUSINESS INCOME IN SPITE O F THE FACT THAT IN A.Y. 2007-08 THE DISALLOWANCE MADE BY AO DELETED BY LD. CIT(A). ITA NO. 747/JP/2013 M/S. JAIN ENTERPRISES VS. IT O, WARD- 5 (2) JAIPUR . 2 2. THAT THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS.1,93,163/- ON ACCOUNT OF REMUNER ATION U/S 40(B) PAID TO THE PARTNER FOR REASON THAT THE INTEREST ON SECURITY DEPOSIT AS INCOME FROM OTHER SOURCES AND NOT AS BUSINESS INCOM E IN SPITE OF THE FACT THAT THE SAME HAS BEEN ALLOWED BY LD. CIT( A) IN A.Y. 2007-08. 2.1 DURING THE COURSE OF HEARING, THE LD. AR CONTEN DS THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS AS CONSIGNMENT AGENT FOR SELLING THE MEDICINES AND EARNS COMMISSION THEREON. THOUGH IT IS NOT COVE RED UNDER THE PROVISIONS OF SECTION 44AB OF THE ACT YET ASSESSEE' S BOOKS OF ACCOUNT ARE AUDITED. THE ASSESSEE RECEIVED RS. 1,88,805/- AS IN TEREST ON SECURITY DEPOSIT FROM THE CONSIGNORS AND RS. 1,66,098/- AS I NTEREST IN THE AMOUNT ADVANCED TO JAIN AGENCIES WHICH WAS A SISTER CONCER N. THE AO TREATED BOTH THESE AMOUNTS AS INCOME FROM OTHER SOURCES AND EXCLUDED THEM FROM WORKING OF THE REMUNERATION TO PARTNERS U/S 40 (B) ALLOWING RS. 1,745/- AND DISALLOWING RS. 93,163/-. 2.2 THE LD. CIT(A) CONFIRMED THE DISALLOWANCE OF SA LARY PAID TO PARTNERS U/S 40(B) OF THE ACT. THE LD. CIT(A) CONS IDERED THE BUSINESS PROFITS AFTER DEDUCTION OF SALARY TO PARTNERS AS CL AIMED IN PROFIT AND LOSS ACCOUNT AND DID NOT CONSIDER THE NET PROFIT AS PER PROFIT AND LOSS ACCOUNT WHICH IS BOOK PROFIT AS PER EXPLANATION 3 OF SECTIO N 40(B). INTEREST ON ITA NO. 747/JP/2013 M/S. JAIN ENTERPRISES VS. IT O, WARD- 5 (2) JAIPUR . 3 SECURITY DEPOSIT WITH CONSIGNOR WAS BUSINESS INCOME . SECURITY DEPOSIT WAS A CONDITION PRECEDENT TO DEPOSIT RS. 15 LACS. T HIS DEPOSIT WAS FOR BUSINESS CONSIDERATION. IN THE A.Y. 2007-08, THE LD . CIT(A) PARTLY ALLOWED THE APPEAL OF THE ASSESSEE CONSIDERING THE INTEREST IN SECURITY DEPOSIT AS BUSINESS INCOME. 2.3 APROPOS GROUND NO. 2, ASSESSEE CLAIMED LIABILIT Y OF REMUNERATION TO PARTNERS U 40(B) OF THE ACT BY KEEPING THE SAME AS INTEREST INCOME. THE AO WORKED OUT THE REMUNERATION BY EXCLUDING THE INT EREST INCOME WHICH WAS CONFIRMED BY THE LD. CIT(A). 2.4 IT IS CONTENDED THAT AS A CONSIGNMENT AGENT ASS ESSEE REQUIRES THE SECURITY DEPOSITS FROM CLIENTS TO ENSURE THE SAFETY OF ITS PAYMENT, THIS TRADE PRACTICE IS NOT DISPUTED BY THE DEPARTMENT. T HUS KEEPING SECURITY DEPOSITS IS AN INTEGRAL PART OF THE BUSINESS OPERAT IONS AND INCOME THEREFROM CONSTITUTES BUSINESS INCOME. SIMILARLY, T HE ADVANCES GIVEN TO THE ASSOCIATE CONCERN WAS ALSO IN THE COURSE OF BUS INESS. RELIANCE IS PLACED ON HONBLE SUPREME COURT JUDGMENT IN THE CAS E OF S A BUILDERS 288 ITR 1. THEREFORE, BOTH THESE RECEIPTS ARE BUSIN ESS RECEIPTS AND ELIGIBLE TO BE INCLUDED WHILE CALCULATING THE PARTN ERS REMUNERATION U/S 40(B) OF THE ACT. FURTHER RELIANCE IS PLACED ON:- ITA NO. 747/JP/2013 M/S. JAIN ENTERPRISES VS. IT O, WARD- 5 (2) JAIPUR . 4 (I) MD. SERAJUDDIN & BROS VS. CIT (2012), 210 TAXMA N 84 (CAL.) IT HAS BEEN HELD FOR COMPUTATION OF REM UNERATION AND PARTNERS, EVEN IF INCOME FROM OTHER SOURCES IS INCLUDED IN PROFIT AND LOSS ACCOUNT TO ASCERTAIN THE NET PRO FIT QUA BOOK PROFIT THE SAME COULD NOT BE DISCLOSED. (II) CIT VS. J.J. INDUSTRIES (2013) 358 ITR 531 (GU J) IT HAS BEEN HELD THAT INTEREST FROM FIXED DEPOSIT OF S HARE FUND CANNOT BE EXCLUDED FROM BOOK PROFIT FOR DETERMINING ALLOWABLE DEDUCTION OF REMUNERATION TO PARTNERS. 2.5 THE LD. DR IS HEARD. 2.6 I HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IN MY CONSIDERED VIEW WHEN THE RECEIPTS ARE INTRINSICALLY RELATED WITH THE BUSINESS OF THE ASSE SSEE, THEN THE SAME ARE TO BE TREATED AS BUSINESS INCOME. CONSEQUENTLY, IT IS HELD THAT ABOVE RECEIPTS ARE BUSINESS INCOME OF THE ASSESSEE AND REMUNERATIO N TO PARTNERS U/S 40(B) IS TO BE CALCULATED BY INCLUDING THE ABOVE RE CEIPTS AS BUSINESS INCOME. I FIND THAT THE ASSESSEE IS ELIGIBLE FOR RE MUNERATION TO PARTNERS U/S 40(B) AT RS. 1,93,163/- RELYING ON THE ABOVE DE CISIONS OF MD. SERAJUDDIN & BROS VS. CIT (CAL) AND CIT VS. J.J. IN DUSTRIES (2013) 358 ITR 531 (GUJ). THUS GROUND NOS. 1 AND 2 OF THE ASSE SSEE ARE ALLOWED. ITA NO. 747/JP/2013 M/S. JAIN ENTERPRISES VS. IT O, WARD- 5 (2) JAIPUR . 5 3.0 IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT ON 27 /01/ 2016. SD/- VKJ-IH-RKSYKUH (R.P.TOLANI) U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 27/01/ 2016 *MISHRA VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- M/S. JAIN ENTERPRISES, JAIPUR 2. IZR;FKHZ@ THE RESPONDENT- THE ITO, WARD- 5(2), JAIPUR 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. 747/JP/2013) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR