Love Shoppers Ltd, Ahmedabad V. The Income tax Officer,Ward-4(3), Ahmedabad

ITA 827/AHD/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 85536 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 9 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-01-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 22-12-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 15-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DINESH SINGH
• Assessee Lawyers: G C PIPARA
• Keywords: Business income; Notional interest
• Section: 27; 6; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD BEFORE SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER AND SHRI N.S. SAINI , ACCOUNTANT MEMBER ITA NO S . 826 & 827 /AHD/20 1 1 A. Y S . 200 5 - 0 6 & 2006 - 07 LOVE SHOPPERS LTD. 10 TH FLOOR, BROADWAY BUSINESS CENTRE , NR. LAW GARDEN, ELLISBRIDGE, AHMEDABAD. PAN: AAACL 5963A VS THE INCOME TAX OFFICER, WARD - 4(3), AHMEDABAD. (APPELLANT) (RESPONDENT) REVENUE BY : SHRI DINESH SINGH , SR. D.R. , ASSESSEE(S) BY : SHRI G.C, PIPARA , A.R. / DATE OF HEARING : 22 / 1 2 /201 4 / DATE OF PRONOUNCEMENT: 9 JAN /201 5 / O R D E R PER SHRI MUKUL KUMAR SHRAWAT, JUDICIAL MEMBER BOTH THESE APPEALS HAVE BEEN FILED BY THE ASSESSEE ARISING FROM THE ORDERS OF LEARNED CIT(A) - XX, AHMEDABAD, BOTH ORDERS DATED 13.01.2011, RESPECTIVELY FOR THE A.YS. 2005 - 06 AND 2006 - 07. THE GROUNDS RAISED ARE REPRODUCED BELOW : A. A.Y.2005 - 06 1. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN NOT ONLY CONFIRMING THE ADDITION OF RS.8,87,874/ - MADE BY THE A.O. ON ACCOUNT OF DISALLOWANCE OF VARIOUS EXPENSES OUT OF TOTAL EXPENSES OF RS.10,96,235/ - BUT HAVE FURTHER ERRED IN ENHANCING THE S AID DISALLOWANCE TO THE ENTIRE EXPENSES AGGREGATING TO RS.10,96,235/ - CLAIMED AGAINST INCOME OF RS.2,67,647/ - WITHOUT PROPER CONS I DERATIO N AND A PPRECIATION OF THE FACTS OF THE CASE AND THE NATURE OF EXPENSES INCURRED. IN VIEW OF FACTS AND SUBMISSIONS FILED, THE IMPUGNED ADDITION OF RS.10,96,235/ - REQUIRES TO BE DELETED. ITA NO S . 826 & 8 2 7 /AHD/201 1 LOVE SHOPPERS LTD. VS. ITO, WARD - 4(3), AHMEDABAD . FOR A.Y S . 2005 - 06 & 200 6 - 0 7 - 2 - 1.1 THE LEARNED CI T(A) HAS ERRED IN HOLDING THAT THE INCOME OF RS.2,67,647/ - IS IN THE NATURE OF 'INCOME FROM OTHER SOURCES' AND NOT 'INCOME FROM BUSINESS OR PROFESSION' AS CLAIMED BY THE APPELLANT IN THE RETURN OF INCOME. 1.2 THE LEARNED CIT(A) HAS FURTHER ERRED IN NOT C ONSIDERING THE ALTERNATIVE ARGUMENT OF THE APPELLANT THAT EVEN IF THE SAID INCOME OF RS.2,67,647/ - IS TREATED AS 'INCOME FROM OTHER SOURCES', THE EXPENSES AGGREGATING TO RS.10,96,235/ - CLAIMED BY THE APPELLANT AGAINST SUCH INCOME WERE ALLOWABLE AS PER THE PROVISIONS OF SECTION 57(III) OF THE ACT, THE SAME HAVING BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF EARNING THE SAID INCOME. 2. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ADDITION OF RS.1,29,432/ - MADE BY THE A.O. BY WORKING OUT PROFIT OF RS.1,29,432/ - ON SALE OF 8 TH FLOOR AS AGAINST LOSS OF RS.74,252/ - WORKED OUT BY THE APPELLANT WITHOUT PROPER APPRECIATION OF THE FACTS OF THE CASE. IN VIEW OF FACTS, SUBMISSIONS AND WORKING FILED BY THE APPELLANT, THE IMPUGNED ADDITIO N OF RS.1,29,432/ - REQUIRES TO BE DELETED. 3. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ADDITION OF RS.1,15,226/ - MADE BY THE A.O. BEING THE ALLEGED DIFFERENCE IN RENT INCOME SHOWN AND ACTUALLY RECEIVABLE FROM HAKOBA MERELY ON SURM ISES AND WITHOUT PROPER CONSIDERATION OF THE FACTS AND EVIDENCE AVAILABLE ON RECORD. IN VIEW OF FACTS AND SUBMISSIONS FILED, THE IMPUGNED ADDITION OF RS.1,15,226/ - REQUIRES TO BE DELETED. 4. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING TH E ADDITION OF RS.2,24,000/ - BEING THE ALLEGED DIFFERENCE IN RENT INCOME FROM V - MART AS SHOWN BY THE APPELLANT AT RS.5,11,000/ - AND AS WORKED OUT BY THE A.O. AT RS.7,35,000/ - MERELY ON SURMISES AND WITHOUT PROPER CONSIDERATION OF THE FACTS AND COMPREHENSIVE EVIDENCES AVAILABLE ON RECORD. IN VIEW OF FACTS, SUBMISSIONS AND EVIDENCES FILED, THE IMPUGNED ADDITION OF RS.2,24,000/ - REQUIRES TO BE DELETED. B. A.Y. 2006 - 07 1. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ADDITION OF R S.3,59,055/ - OUT OF TOTAL ADDITION OF RS.4,24,388/ - MADE BY THE A.O. ON ACCOUNT OF ALLEGED UNDISCLOSED RENTAL RECEIPT ON COMPARING THE INCOME AS PER TDS CERTIFICATES AND AS SHOWN IN THE ACCOUNTS MERELY ON SURMISES, CONJECTURES AND ASSUMPTIONS WITHOUT PROPE R UNDERSTANDING, CONSIDERATION OR VERIFICATION OF THE FACTS OF THE CASE. IN VIEW OF FACTS, SUBMISSIONS AND EVIDENCES FILED, THE IMPUGNED ADDITION OF RS.3,59,055/ - REQUIRES TO BE DELETED. 1.2 THE LEARNED CIT(A) HAS FURTHER ERRED IN REJECTING THE ALTERNAT IVE CONTENTION AND ARGUMENT OF THE APPELLANT THAT IN CASE ADDITION ON ACCOUNT OF RENTAL RECEIPT OF RS.4,000/ - FROM NOKIA, RS.3,15,817/ - FROM HDFC BANK AND RS.30,000/ - (INCLUSIVE IN ADDITION OF RS.4,24,388/ - ) BEING ADVANCE RENT IS MADE IN THE YEAR UNDER CON SIDERATION, THE INCOME FOR PREVIOUS YEAR I.E. A.Y.2005 - 06 MAY BE REDUCED TO THAT EXTENT, THE SAID RENTAL RECEIPT HAVING ALREADY BEEN OFFERED IN A.Y.2005 - 06 ON THE BASIS OF TDS CERTIFICATES. 2. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN NOT A DJUDICATING THE GROUND OF APPEAL NO. 3 DISPUTING THE ADDITION OF RS.5,00,574/ - MADE BY ITA NO S . 826 & 8 2 7 /AHD/201 1 LOVE SHOPPERS LTD. VS. ITO, WARD - 4(3), AHMEDABAD . FOR A.Y S . 2005 - 06 & 200 6 - 0 7 - 3 - THE AO. BEING NOTIONAL INTEREST ON LOANS AND ADVANCES. IN VIEW OF FACTS AND SUBMISSIONS FILED AS WELL AS LEGAL POSITION, THE IMPUGNED ADDITION OF RS.5,00,574/ - REQUIRES T O BE DELETED. 3. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN NOT ONLY CONFIRMING THE ADDITION OF RS.7,32,960/ - MADE BY THE A.O. ON ACCOUNT OF DISALLOWANCE OF VARIOUS EXPENSES OUT OF TOTAL EXPENSES OF RS.15,81,247/ - [EXCLUDING EXPENSES ON MUN ICIPAL TAX AND INTEREST ON LOAN] BUT HAVE FURTHER ERRED IN ENHANCING THE SAID DISALLOWANCE TO THE ENTIRE EXPENSES AGGREGATING TO RS.15,81,247/ - CLAIMED AGAINST INCOME OF RS.6,91,854/ - WITHOUT PROPER CONSIDERATION AND APPRECIATION OF THE FACTS OF THE CASE A ND THE NATURE OF EXPENSES INCURRED. IN VIEW OF FACTS AND SUBMISSIONS FILED, THE IMPUGNED ADDITION OF RS.15,81,247/ - REQUIRES TO BE DELETED. 3.1 THE LEARNED CIT(A) HAS ERRED IN HOLDING THAT THE INCOME OF RS.6,91,854/ - IS IN THE NATURE OF 'INCOME FROM O THER SOURCES' AND NOT 'INCOME FROM BUSINESS OR PROFESSION' AS CLAIMED BY THE APPELLANT IN THE RETURN OF INCOME. 3.2 THE LEARNED CIT(A) HAS FURTHER ERRED IN NOT CONSIDERING THE ALTERNATIVE ARGUMENT OF THE APPELLANT THAT EVEN IF THE SAID INCOME OF RS.6, 91,854/ - IS TREATED AS 'INCOME FROM OTHER SOURCES', THE EXPENSES AGGREGATING TO RS.15,81,247/ - CLAIMED BY THE APPELLANT AGAINST SUCH INCOME WERE ALLOWABLE AS PER THE PROVISIONS OF SECTION 57(III) OF THE ACT, THE SAME HAVING BEEN INCURRED WHOLLY AND EXCLUSI VELY FOR THE PURPOSE OF EARNING THE SAID INCOME. 2. AT THE OUTSET, LEARNED AR, MR. G.C. PIPARA HAS VEHEMENTLY PLEADED THAT FOR BOTH THE YEARS LEARNED CIT(A) HAS DIRECTED TO ENHANCE THE INCOME WITHOUT ISSUING NOTICE OF ENHANCEMENT AS PRESCRIBED U/S.251(2) OF IT ACT. TO DEMONSTRATE THAT THE ENHANCEMENT WAS MADE BY LEARNED CIT(A) WITHOUT PROVIDING AN OPPORTUNITY, RELEVANT PORTION OF THE FINDING FROM A.Y. 2005 - 06 WAS REFERRED BEFORE US, REPRODUCED FOR READY REFERENCE. 5.2(1) IT IS SEEN THAT THE INCOME OF TH E APPELLANT OTHER THAN RENT CONSISTS OF THE FOLLOWING INCOMES WHICH CANNOT BE CATEGORIZED AS BUSINESS INCOMES. ALL THESE INCOMES ARE PRIMARILY IN THE NATURE OF FIXED INCOMES AND ARE CLOSELY RELATED TO THE IMMOVABLE PROPERTY. 5.2(II) IT IS SEEN THAT THESE I NCOMES CANNOT BE ASSESSED TO TAX AS BUSINESS INCOME. BUSINESS BY ITS VERY NATURE MEANS THAT THERE IS A CHANCE TO MAKE PROFIT AT THE SAME TIME THERE IS AN ELEMENT OF UNCERTAINTY WHEREBY ONE MAY INCUR A LOSS ALSO. IN THE INSTANT CASE IT IS SEEN THAT THE MAIN INCOME OF THE APPELLANT OTHER THAN RENT IS INCOME FROM INTEREST OF RS.99,08 1 / - WHICH HAS BEEN EARNED BY THE APPELLANT FROM THE ADVANCES GIVEN BY IT. THE APPELLANT IS ITA NO S . 826 & 8 2 7 /AHD/201 1 LOVE SHOPPERS LTD. VS. ITO, WARD - 4(3), AHMEDABAD . FOR A.Y S . 2005 - 06 & 200 6 - 0 7 - 4 - NOT INTO THE BUSINESS OF GIVING MONEY ON INTEREST. IN FACT TO CARRY ON ANY BUSINESS OF MO NEY LENDING A COMPANY HAS TO BE REGISTERED AS A NON BANKING FINANCE COMPANY WITH THE RESERVE BANK OF INDIA AND ALSO HAS TO BE REGISTERED UNDER THE GUJARAT MONEY LENDING ACT. FAILURE TO COMPLY WITH THESE LAWS ENTAILS PROSECUTION UNDER THOSE ACTS. THE APPELL ANT HAS NOT BEEN REGISTERED UNDER THESE ACTS. IN VIEW OF THE ABOVE IT IS CLEAR THAT THE INCOME FROM INTEREST CANNOT BE THE BUSINESS INCOME OF THE APPELLANT. 5.2(III) MOREOVER THE INCOME FROM INTEREST ON MONEY LENT IS INCOME FROM OTHER SOURCES AS HAS BEE N DECIDED IN THE FOLLOWING CASES: I) M.P. INDUSTRIAL CORPORATION LTD. VS.CIT 69 ITR 824(MP) II) CIT VS. RAVI RATAN EXPORTS LTD. 246 ITR - 443(BOM.) III) CIT VS. K.K. DOSHI 245 ITR 849 (BOM.) IV) CIT VS. SAMIR DIAMOND EXPORTS LTD. 245 ITR 548(BOM.) V) TRAUSCON BUILDERS & CONTRA CTORS PVT. LTD. VS. ACIT [IT APPEAL NO.294 OF 2001(BOM.HC.)] ORDER DTD. 19 - 4 - 2004. IN VIEW OF THE ABOVE THE INTEREST INCOME OF THE APPELLANT IS TO BE TAXED AS INCOME FROM OTHER SOURCES ONLY. 5.2(IV) AS FAR AS THE INCOME APART FROM INTEREST IS CONCERNED THE SAME CANNOT BE CONSIDERED AS BUSINESS BECAUSE IT ARISES FROM THE PROPERTY IN THE FORM OF HOARDINGS WHICH HAVE BEEN LET OUT. THE SAME IS HENCE ASSESSABLE AS INCOME FROM OTHER SOURCES ONLY AND NOT INCOME FROM BUSINESS OR PROFESSION. IN VIEW OF THE ABOVE THE EXPENSES CLAIMED BY THE APPELLANT ARE NOT ALLOWABLE BECAUSE ONLY THOSE EXPENSES ARE ALLOWABLE AGAINST INCOME FROM OTHER SOURCES WHICH HAVE BEEN INCURRED WHOLLY NECESSARILY AND EXCLUSIVELY FOR EARNING SUCH INCOME. 5.2(V) IN VIEW OF THE ABOVE THE EXPEN SES CLAIMED ARE NOT ALLOWABLE. APART FROM THE INTEREST EXPENSES DEBITED TO THE P & L ACCOUNT WHICH IN FACT IS THE INTEREST EXPENDITURE ON AMOUNTS BORROWED FOR THE CONSTRUCTION OF THE HOUSE PROPERTY AND CONSTITUTES ALLOWABLE DEDUCTION UNDER THE HEAD INCOME FROM HOUSE PROPERTY, NO OTHER EXPENDITURE CAN BE SAID TO HAVE BEEN INCURRED WHOLLY, NECESSARILY AND EXCLUSIVELY FOR EARNING THE INCOME SHOWN BY THE APPELLANT. IN VIEW OF THE ABOVE, EXPENSES CLAIMED BY THE APPELLANT TO THE EXTENT OF RS.10,96,235/ - ARE ADDED BACK TO THE INCOME OF THE APPELLANT. 3. LIKEWISE FOR A.Y. 2006 - 07 AN ENHANCEMENT WAS MADE WITHOUT REQUISITE NOTICE. 4. HAVING HEARD THE SUBMISSIONS OF BOTH THE SIDES. SINCE IN RESPECT OF THE MAIN ADDITION LEARNED CIT(A) HAS NOT FOLLOWED THE PROCEDURE AS ITA NO S . 826 & 8 2 7 /AHD/201 1 LOVE SHOPPERS LTD. VS. ITO, WARD - 4(3), AHMEDABAD . FOR A.Y S . 2005 - 06 & 200 6 - 0 7 - 5 - PRE SCRIBED U/S.251(2) OF IT ACT; THEREFORE, THIS GROUND IS RESTORED BACK FOR DENOVO CONSIDERATION BY LEARNED CIT(A), NEEDLESS TO SAY AFTER PROVIDING AN ADEQUATE OPPORTUNITY OF HEARING TO THE ASSESSEE. 5. NEXT, WE HAVE BEEN INFORMED THAT ONE OF THE GROUND, I. E., GROUND NO.2 HAS ALSO NOT BEEN ADJUDICATED UPON BY LEARNED CIT(A); THEREFORE, THIS GROUND IS ALSO RESTORED BACK FOR DENOVO CONSIDERATION. IN RESPECT OF THE DIFFERENCE IN TDS , THE RELEVANT DETAILS HAVE NOT BEEN DISCUSSED; HENCE THIS ISSUE IS ALSO TO BE D ECIDED AFRESH BY LEARNED CIT(A). RESULTANTLY, THE GROUNDS BEING RESTORED BACK MAY BE TREATED AS ALLOWED BUT FOR STATISTICAL PURPOSE ONLY. 6. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE MAY BE TREATED AS ALLOWED BUT FOR STATISTICAL PURPOSE ONLY. SD/ - SD/ - ( N.S. SAINI ) ( MUKUL KR. SHRAWAT ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 09 / 1 2 / 20 1 5 PRABHAT KR. KESARWANI , SR. P . S . / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A) - III, AHMEDABAD 5. , , / DR, ITAT, AHMEDABAD 6. / GUARD FILE . / BY ORDER, / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD