DAMASK PROJECTS P.LTD, MUMBAI V. DCIT CIR 6(2), MUMBAI

ITA 7672/MUM/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 3026 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-06-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 24-12-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Business income; Capital receipt
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH SMC, MUMBAI BEFORE SHRI G.S.PANNU, ACCOUNTANT MEMBER ITA NO. 7672/MUM/2014,(A. Y : 2010-11) M/S. DAMASK PROJECTS PVT. LTD. 167, READY MONEY TERRACE, DR. ANNIE BESANT ROAD, WORLI NAKA, MUMBAI 400 018 PAN: AAACD 5994P ... APPELLANT VS. THE DCIT, CIR.6(2), AAYKAR BHAVAN, M.K.ROAD, MUMBAI 400020 .... RESPONDENT APPELLANT BY : SHRI FIROZE B.ANDHYARUJINA RESPONDENT BY : SHRI SANTOSH MANKOSKAR DATE OF HEARING : 21/06/2016 DATE OF PRONOUNCEMENT : 29/06/2016 ORDER THE CAPTIONED APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY CIT(A)-12, MUMBAI DATED 11/11/2014, PERTAINING TO THE ASSESSMENT YEAR 2010-11, WHICH IN TURN HAS ARISEN F ROM THE ORDER PASSED BY THE ASSESSING OFFICER DATED 07/02/2013 UN DER SECTION 143(3) OF THE INCOME TAX ACT, 1961 ( IN SHORT THE ACT). 2. IN THIS APPEAL ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE T HE LEARNED DY, COMMISSIONER OF INCOME TAX OFFICER, RANGE 6(2), MUM BAI (DCIT): 1. RENT RECEIVED- INCOME FROM BUSINESS OR HOUSE PROPER TY: 2 ITA NO. 7672/MUM/2014,(A. Y : 2010-11) ERRED IN RELATING THE INCIDENTAL RENT INCOME UNDER THE HEAD HOUSE PROPERTY WITHOUT APPRECIATING THE FACT THAT THE MAI N BUSINESS ACTIVITY OF THE APPELLANT IS TO ACQUIRE PROPERTIES, DEVELOP THE SAME AND GIVE THEM ON RENT IS THE MAIN OBJECT AS PER MEMORANDUM OF ASS OCIATION OF THE COMPANY AND FURTHER THE ASSETS ARE HELD AS STOCK I N TRADE; 2. COMPENSATION INCOME FROM BUSINESS OR OTHER SOURCES : ERRED IN TREATING THE INCIDENTAL COMPENSATION RECEI VED FOR EARLY VACATION OF PREMISES UNDER THE HEAD OTHER SOURCES W ITHOUT APPRECIATING THE FACT THAT THE MAIN BUSINESS ACTIVI TY OF THE APPELLANT IS TO ACQUIRE PROPERTIES, DEVELOP THE SAME AND GIVE TH EM ON RENT IS THE MAIN OBJECT AS PER MEMORANDUM OF ASSOCIATION OF THE COMPANY AND FURTHER THE ASSETS ARE HELD AS STOCK IN TRADE; 3. DISALLOWANCE OF BUSINESS LOSS: ERRED IN CONSIDERING NO BUSINESS ACTIVITY CARRIED O N BY THE APPELLANT AS THE RENTAL INCOME IS CONSIDERED UNDER THE HEAD HOUS E PROPERTY AND COMPENSATION UNDER THE HEAD OTHER SOURCES AND THERE BY NOT ALLOWING ANY EXPENDITURE UNDER THE HEAD BUSINESS INCOME; 4. DISALLOWANCES OF EXPENDITURE FOR INCREASE OF AUTHORI ZED CAPITAL ERRED IN DISALLOWING THE EXPENDITURE INCURRED ON IN CREASE OF AUTHORIZED CAPITAL, WITHOUT APPRECIATING THE FACT THAT THE SAM E IS REVENUE IN NATURE. 3. THE ISSUE RAISED IN GROUND OF APPEAL NO.1, RELAT ES TO THE ASSESSABILITY OF RENTAL INCOME OF RS.10.00 LACS E ARNED BY THE ASSESSEE IN RESPECT OF THE PROPERTY LET OUT. THE APPELLANT HAD TREATED IT AS AN INCOME ASSESSABLE UNDER THE HEAD INCOME FROM BUSIN ESS AND PROFESSION, WHEREAS THE ASSESSING OFFICER TAXED IT UNDER THE HEAD INCOME FROM HOUSE PROPERTY. THE SAID ACTION OF T HE ASSESSING OFFICER HAS BEEN CONFIRMED BY CIT(A). 4. BEFORE ME IT WAS A COMMON POINT BETWEEN THE PART IES THAT IDENTICAL ISSUE CAME UP BEFORE THE TRIBUNAL IN ASSE SSEES OWN CASE FOR ASSESSMENT YEAR 2008-09, WHEREIN THE TRIBUNAL VIDE ITS ORDER IN ITA 3 ITA NO. 7672/MUM/2014,(A. Y : 2010-11) NO.6216/MUM/2013 DATED 4/11/2015 HAS SET-ASIDE THE MATTER TO THE FILE OF THE ASSESSING OFFICER FOR A DECISION AFRESH , IN THE LIGHT OF THE HON'BLE SUPREME COURTS DECISION IN THE CASE OF CH ENNAI PROPERTIES & INVESTMENTS LTD.,373 ITR 673(SC). IT WAS THEREFORE , CONTENDED THAT IN THIS YEAR TOO, THE MATTER MAY BE REMANDED BACK TO T HE FILE OF ASSESSING OFFICER, TO BE DECIDED AFRESH IN THE LIGHT OF AFORE SAID PRECEDENT. AS A CONSEQUENCE, THE ORDER OF THE CIT(A) IS SET-ASIDE A ND THE ASSESSING OFFICER IS DIRECTED TO DECIDE THE ISSUE AFRESH IN T HE LIGHT OF THE TRIBUNALS ORDER DATED 4/11/2015(SUPRA). 5. THE ISSUE IN SECOND GROUND OF APPEAL RELATES TO THE TAXABILITY OF AN AMOUNT RECEIVED BY THE ASSESSEE AS COMPENSATION FROM THE LESSEE OF THE PROPERTY FOR NON-COMPLIANCE WITH THE TERMS OF LEASE AGREEMENT. THE ASSESSING OFFICER TREATED THE SAID SUM AS ASSES SABLE UNDER THE HEAD INCOME FROM OTHER SOURCES AS AGAINST ASSESSEES C LAIM OF SUCH INCOME BEING ASSESSABLE UNDER THE HEAD INCOME FROM BUSINE SS AND PROFESSION. 5.1 AT THE TIME OF HEARING, LD. REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT THE DETERMINATION OF THE SAID DISPUT E WOULD BE IMPACTED BY THE DECISION IN THE ISSUE RAISED IN G ROUND OF APPEAL NO.1 ALSO. APART THERE FROM, THE LD. REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE WISHES TO RAISE AN ADDI TIONAL POINT OF LAW, WHICH IS TO THE EFFECT THAT THE SAID COMPENSATION W AS A CAPITAL RECEIPT NOT CHARGEABLE TO TAX. LD. REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT IN VIEW OF THE DECISION TO REMAND BACK THE IS SUE IN GROUNDS OF APPEAL NO.1, , THIS GROUND MAY ALSO BE REMANDED BAC K , TO BE DECIDED 4 ITA NO. 7672/MUM/2014,(A. Y : 2010-11) AGAIN, INCLUDING THE ADDITIONAL POINT OF LAW THAT THE ASSESSEE WISHES TO CANVASS. 5.2 THE LD. DEPARTMENTAL REPRESENTATIVE HAS NOT OPP OSED THE PLEA OF THE ASSESSEE. ACCORDINGLY, CONSEQUENT TO THE DEC ISION IN GROUNDS OF APPEAL NO.1, THE ASSESSABILITY OF THE COMPENSATION FROM LESSEE FOR NON- ADHERENCE TO THE TERMS OF LEASE AGREEMENT IS ALSO R EMANDED BACK TO THE FILE OF ASSESSING OFFICER, TO BE DECIDED AFRESH IN ACCORDANCE WITH LAW. THE ASSESSEE SHALL BE AT LIBERTY TO PUT-FORTH ANY CLAIM IN SUPPORT OF ITS STAND, WHICH SHALL BE DEALT WITH BY THE ASSESSI NG OFFICER IN ACCORDANCE WITH LAW. THIS GROUND OF APPEAL OF THE ASSESSEE SUCCEEDS FOR STATISTICAL PURPOSES. 6. IN GROUND OF APPEAL NO.3, THE ISSUE ARISE FROM T HE ACTION OF THE ASSESSING OFFICER IN TREATING THE RENTAL INCOME UND ER THE HEAD HOUSE PROPERTY AND THEREBY NOT ALLOWING ANY EXPENDITURE UNDER THE HEAD BUSINESS INCOME. THIS GROUND IS ALSO REMANDED TO THE FILE OF ASSESSING OFFICER TO BE DECIDED AFRESH IN ACCORDANCE WITH LAW . 7. THE LAST GROUND OF APPEAL RELATING TO DISALLOWAN CE OF EXPENDITURE INCURRED ON INCREASE IN AUTHORIZED CAPITAL WAS NOT PRESSED AND ACCORDINGLY THE SAME IS DISMISSED AS NOT PRESSED. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED, AS ABOVE. [[ ORDER PRONOUNCED IN THE OPEN COURT ON 29/06/2016. SD/- (G.S.PANNU) ACCOUNTANT MEMBER MUMBAI, DATED 29/06/2016 VM , SR. PS 5 ITA NO. 7672/MUM/2014,(A. Y : 2010-11) 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