The ACIT(OSD).,Range-4, Ahmedabad V. Jay Infa Trade Pvt. Ltd., Ahmedabad

ITA 80/AHD/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 50972 (ITAT-AHMEDABAD)
• Duration Of Justice: 10 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-12-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2007-2008
• Appeal Filed On: 12-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JAMES KURAIR
• Keywords: Business income; Depreciation; Set aside
• Section: 142(1); 143(1)

Judgement Text

- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D AHMEDABAD BEFORE S/SHRI D.K.TYAGI, JM AND A. K. GARODIA, AM. THE ASSTT. CIT (OSD)-I, RANGE-4, AHMEDABAD. VS. JAY INFA TRADE (P) LTD.,JAY HOUSE, PANCHWATI CIRCLE, AMBAWADI, AHMEDABAD. (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI JAMES KURAIR, DR RESPONDENT BY:- NONE DATE OF HEARING :2/12/2011 DATE OF PRONOUNCEMENT : 2/12/2011 O R D E R PER D. K. TYAGI, JUDICIAL MEMBER . THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF LD. CIT(A) DATED 15.10.2010. THE REVENUE HAS RAISED THE FOLLOWING GROUND:- (1) THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DEL ETING THE DISALLOWANCE OF RS.81,82,775/- MADE BY THE AO ON AC COUNT OF HOUSEKEEPING CHARGES TO VARIOUS BUSINESS ASSOCIATES CONCERNS TREATING THE SAME AS INCOME FROM OTHER SOURCES. 2. THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS E NGAGED IN THE BUSINESS OF SERVICE ACTIVITIES AND MANUFACTURING & EXPORT OF GARMENTS. ITA NO.80/AHD/2011 ASST. YEAR :2007-08 ITA NO.80/AHD/2011 ASST. YEAR 2007-08 2 THE RETURN OF INCOME FOR ASST. YEAR 2007-08 WAS FIL ED ON 28.10.2007 DECLARING LOSS OF RS.45,420/-. THE RETURN WAS PROCE SSED U/S 143(1) OF THE IT ACT, 1961 ON 8.01.2009. SUBSEQUENTLY THE CASE WA S SELECTED FOR SCRUTINY BY ISSUING NOTICE U/S 143(2) OF THE ACT ON 19.9.2008. THE NOTICES U/S 142(1) OF THE ACT WERE ISSUED ON VARIOUS DATES AS PER RECORD. THE AO NOTED THAT THE ASSESSEE COMPANY WAS PROVIDING HOUSE KEEPING SERVICES TO ITS ASSOCIATED CONCERNS. THE TOTAL RECEIPTS OF RS.8 508342/- FROM SUCH SERVICES WERE CREDITED TO THE PROFIT AND LOSS ACCOU NT AND SHOWN UNDER THE HEAD OTHER INCOME IN THE P & L ACCOUNT. DURING TH E COURSE OF ASSESSMENT PROCEEDINGS OF ASST. YEAR 2003-04 THE AS SESSEE WAS ASKED TO FURNISH DETAILS OF HOUSE KEEPING CHARGES RECEIVED A ND THE NATURE OF SERVICE PROVIDED BY IT. IN RESPONSE TO THIS, THE AS SESSEE COMPANY SUBMITTED THAT IT PROVIDED SITTING FACILITIES, TELE PHONE, COMPUTER AND INTERNET FACILITIES, COMPUTER SUPPORT SERVICE ETC. TO VARIOUS CONCERNS OF GROUP UNDER THE ACCOUNT HEAD HOUSE KEEPING CHARGES . THE HOUSE KEEPING CHARGES WERE RECEIVED FROM VARIOUS GROUP CO NCERNS OF ASSESSEE COMPANY WHICH WERE PERSONS COVERED U/S 40A(2)(B) OF THE ACT. ON SCRUTINY OF DETAILS IT WAS SEEN THAT THE COMPANY DI D NOT HAVE ADEQUATE STAFF OR INFRASTRUCTURE TO PROVIDE THE SERVICE TO T HE EXTENT IT CLAIMED. THESE ASPECTS WERE EXAMINED IN DETAIL IN THE ASST. YEAR 2003-04. IN VIEW OF THE DETAILED DISCUSSION AND ANALYSIS MADE BY THE ASSESSING OFFICE IN THE ASSESSMENT ORDER OF ASST. YEAR 2003-04 THE AO PROCE EDED TO CONSIDER THE ITA NO.80/AHD/2011 ASST. YEAR 2007-08 3 RECEIPTS AS INCOME FROM OTHER SOURCES AND IT WAS AC CORDINGLY TREATED WHILE COMPUTING THE TOTAL INCOME. CONSIDERING THE D ETAILED FINDINGS REGARDING SERVICES PROVIDED, FACILITIES/INFRASTRUCT URE AVAILABLE VIS--VIS CHARGES RECEIVED, IT WAS HELD IN THE ASSESSMENT FOR ASST. YEAR 2003-04 THAT THE AMOUNT TO THE EXTENT OF RS.6,24,725/- CAN BE TREATED AS ASSESSEES INCOME FROM BUSINESS WHERE AS THE BALANCE RECEIPTS WERE TREATED AS INCOME FROM OTHER SOURCES. THEREFORE, THE HOUSE KEE PING CHARGES OF RS.6,24,725/- WERE TREATED AS BUSINESS INCOME AND T HE BALANCE AMOUNT OF RS.7883617/- WAS TREATED AS INCOME FROM OTHER SOURC ES ON WHICH THE ASSESSEE WAS NOT ENTITLED FOR DEDUCTION OF THE EXPE NSES AS DEBITED TO P & L A/C. THE AO FURTHER NOTED THAT THE ASSESSEE PROVI DED OFFICE ACCOMMODATION TO VARIOUS SISTER CONCERNS. IN OTHER WORDS, THE SAME HAD BEEN LET OUT TO THE SISTER CONCERNS. HENCE THE PORT ION OF HOUSE KEEPING CHARGES REPRESENTED THE RECEIPTS FOR LETTING OUT TH E PROPERTY AND THE SAME WAS NOTHING BUT RENTAL INCOME. IN VARIOUS JUDGMENTS , COURTS HAVE HELD THAT THE COMPOSITE RENT RECEIPTS FOR PROVIDING ADDE D AUXILIARY SERVICES. THE AO ALSO RELIED ON FOLLOWING DECISIONS IN THIS R EGARD:- 1. CIT VS. SMT. P. ANDAL AMMAL 243 ITR 715 (MAD) 2. CIT VS. MODEL MFG. CO.(P) LTD. (1988) 159 ITR 270 ( CAL) 3. ADDL.CIT VS. NATIONAL NEWSPRINT & PAPER MILLS LTD. (1978) 114 ITR 753 (CAL) 4. CHITPORE GOLABARI CO. (P) LTD. VS. CIT (1971) 82 IT R 753 (CAL) ITA NO.80/AHD/2011 ASST. YEAR 2007-08 4 THE AO HELD THAT NO EXPENSES WOULD HAVE BEEN INCURR ED FOR EARNING INCOME FROM OTHER SOURCES, THEREFORE, NO EXPENSES WERE ALLOWED U/S 57(III) AND DISALLOWED RS.81,42,775/- AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 3. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A) AND SUBMITTED AS UNDER :- EARLIER ALSO DURING ASSESSMENT YEAR 2003-04, THE S AME VIEW WAS TAKEN. BUT HOWEVER, ITAT HAS RULED IN WITH THE FAVOUR OF A SSESSEE I.E. THE ORDER OF CIT(A) TREATING THE INCOME AS THE BUSINESS INCOM E HAS BEEN CONFIRMED (RF.IT NO.261/AHD/2007). THE ITAT HAS ALSO HELD THAT EVEN IF THE INCOME IS H ELD AS INCOME FROM OTHER SOURCES, THE DEPRECIATION IS TO BE ALLOWED, T HERE ARE NO MATERIAL CHANGES SO FAR AS FACTS DURING CURRENT YEAR IS CONC ERNED. FOR ASST. YEAR 2005-06, 2006-07, YOUR HONOURS PREDECESSORS HAVE TA KEN THE SAME VIEW. THE ASSESSEE HAS BEEN CARRYING ON THE ACTIVITY SINC E 1997. THE ASSESSEE IS ALSO PAYING SERVICE TAX AS BUSINESS SUPPORT SERVICE PROVIDER. WE ARE ENCLOSING THE FOLLOWING : ASSESSMENT ORDER FOR 2003-04. CIT(A)S ORDER 2003-04, 2005-06, 2006-07. ITATS ORDER FOR 2003-04 ITATS ORDER FOR 2003-04 IN CASES OF J.H.K.P.L/JAY CHEMICAL IND. LTD. AUDITED ACCOUNTS FOR 2006-07 IN VIEW OF THIS THE ASSESSEES APPEAL DESERVES TO B E ALLOWED. THE LD. CIT(A) CONSIDERING THE SUBMISSIONS OF ASSES SEE AND FOLLOWING THE DECISIONS OF THE TRIBUNAL IN ITA NO.261/AHD/2007 DA TED 30.09.2009 DELETED THE IMPUGNED ADDITION AND ALLOWED THE APPEA L OF ASSESSEE. ITA NO.80/AHD/2011 ASST. YEAR 2007-08 5 AGGRIEVED BY THIS ORDER OF THE LD. CIT(A) THE REVEN UE IS IN APPEAL BEFORE THE TRIBUNAL. 4. NONE APPEARED ON BEHALF OF THE ASSESSEE. HOWEVER , AFTER HEARING THE LD. DR AND CONSIDERING THE MATERIAL ON RECORD, WE PROCEEDED TO DECIDE THE APPEAL. 5. THE LD. DR RELIED ON THE ORDER OF AO AND SUBMITT ED THAT NO EXPENSES WOULD HAVE BEEN INCURRED FOR EARNING INCO ME FROM OTHER SOURCES. THEREFORE, NO EXPENSES WERE ALLOWED U/S 5 7(III) OF THE ACT. ACCORDINGLY, THE INCOME OF ASSESSEE WAS COMPUTED AN D AN AMOUNT OF RS.81,42,775/- WAS ADDED BY THE AO. THE LD. CIT(A) HAS WRONGLY DELETED THE ADDITION. HIS ORDER MAY KINDLY BE SET ASIDE AND THAT OF THE AO BE RESTORED. 6. AFTER CONSIDERING THE SUBMISSIONS OF THE LD. DR AND GOING THROUGH THE ORDER OF LD. CIT(A) WE FIND THAT THE LD. CIT(A) HAS DELETED THE ADDITION BY FOLLOWING THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASST. YEAR 2003-04, WHEREIN THE TRIBUNAL IN ITA NO.261/AHD/2007 OBSERVED AS UNDER :- WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE O RDERS OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABLE ON RECORD. IN OUR CONSIDERE D VIEW, THERE IS NO CASE FOR INTERFERENCE IN THE ORDER OF THE LEARNED CIT(APPEAL S). THE REASONS ARE:- ITA NO.80/AHD/2011 ASST. YEAR 2007-08 6 (I) THAT, THE ASSESSING OFFICER HAS NOT DOUBTED THA T WHAT THE ASSESSEE IS RECEIVING IS INCOME FROM BUSINESS AS PART OF IT AS HAS BEEN SO A SSESSED BY HIM. ONLY A PART AMOUNTING TO RS.69,88,836/- HAS BEEN TREATED AS INC OME FORM OTHER SOURCES. (II) THAT, THE ASSESSEE HAS BEEN ASSESSED IN THE PA ST ON THESE RECEIPTS FROM HOUSE KEEPING SERVICES UNDER THE HEAD BUSINESS. FACTS REMAINING THE SAME, THE REVENUE SHOULD TAKE A CONSISTENT VIEW. IT HAS BEEN SO HELD BY THE HON'BLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. MALBARO POLYCHEM PVT.LTD. (2009) 309/ITR 43 (RAJ.), OF HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. MOON LIGHT BUILDERS AND DEVELOPERS (2008) 307 ITR 197 (DELHI) AND OF HON'BL E MADHYA PRADESH HIGH COURT IN THE CASE OF CIT VS. DINESHKUMAR (2008) 299 ITR 5 9 (M.P.). THUS, IF THE FACTS ARE NOT DIFFERENT, THEN VIEW ONCE TAKEN SHOULD BE FOLLO WED IN SUBSEQUENT YEAR ALSO. (III) IF CERTAIN PART OF EXPENDITURE INCURRED BY G ROUP CONCERNS IN RECEIVING SERVICES FROM THE ASSESSEE COMPANY IS NOT GENUINE OR IS EXCE SSIVE, THEN ACTION IS REQUIRED TO BE TAKEN IN THEIR HANDS. ASSESSEE-COMPANY IS SHOWING T HE RECEIPTS IN FULL AS TAXABLE INCOME. THERE IS NO REASON TO EITHER REDUCE IT OR C HANGE THE HEAD. (IV) THE LOGIC GIVEN BY THE ASSESSING OFFICER IN TR EATING THE PART OF THE RECEIPT AS INCOME FROM OTHER SOURCES IS NOT COMPREHENDIBLE A ND DOES NOT CREATE ANY LOGICAL DIFFERENCE BETWEEN RECEIPTS TAKEN UNDER THE HEAD B USINESS AND RECEIPT TAKEN UNDER THE HEAD OTHER SOURCES. FOLLOWING THE RULE OF CON SISTENCY, NO SUCH DISTINCTION SHOULD HAVE BEEN CREATED AND SECONDLY, IT DOES NOT AT ALL AFFECT THE TAXABILITY OF THE RECEIPT AND TAX IMPOSED. THEREFORE, ENTIRE EXERCISE S MERELY ACADEMIC AND COULD HAVE BEEN AVOIDED. (V) FINALLY, THE DEPRECIATION CANNOT BE DISALLOWED WHETHER THE PART OF INCOME IS ASSESSED UNDER THE HEAD BUSINESS OR UNDER THE HEA D OTHER SOURCES AS UNDER BOTH THE HEADS THERE IS PROVISION FOR ALLOWING DEPRECIAT ION. WHEN INCOME IS COMPUTED UNDER THE HEAD BUSINESS, DEPRECIATION IS ALLOWABL E U/S.32 OF THE I.T. ACT, 1961 AS PER RULES AND WHEN INCOME IS COMPUTED U/S.56 OF THE I.T. ACT, 1961 AND INCOME IS OF THE NATURE OF CLAUSES (II) & (III) OF SECTION (1) O F SECTION 56, THEN DEDUCTION OF THE NATURE OF THAT PROVIDED U/S.32(1) & 32(2) ARE TO BE ALLOWED BY VIRTUE OF SECTION 57(2) OF THE I.T. ACT, 1961. THE RECEIPT SHOWN BY THE ASS ESSEE IS FULLY TAXABLE AND HAS BEEN SO OFFERED BY THE ASSESSEE. ACCORDINGLY, THE ORDER OF THE LEARNED CIT(APPEALS) IS CORRECT AND, THEREFORE, DOES NOT REQUIRE ANY INTERFERENCE. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISS ED. IN VIEW OF ABOVE, WE ARE OF THE VIEW THAT LD. CIT(A ) HAS RIGHTLY DELETED THE IMPUGNED ADDITION. HIS ORDER IS IN CONFORMITY W ITH THE ORDER OF THE TRIBUNAL. WE UPHOLD THE SAME. THE GROUND RAISED BY THE REVENUE IS DISMISSED. ITA NO.80/AHD/2011 ASST. YEAR 2007-08 7 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER WAS PRONOUNCED IN OPEN COURT ON 2/12/11. SD/- SD/- (A. K. GARODIA) (D.K. TYAGI) ACCOUNTANT MEMBER JUDICI AL MEMBER AHMEDABAD, MAHATA/- COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD 1.DATE OF DICTATION 7/12/2011. 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING MEMBER.OTHER MEMBER 9/12/2011 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT.. 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..