DUDHANA INVESTMENT & TRADING PVT.LTD., MUMBAI V. ITO 1(1)(2), MUMBAI

ITA 834/MUM/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 7271 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-03-2010
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 15-03-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 09-02-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: T T JACOB
• Keywords: Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH D: MUMBAI BEFORE SHRI S.V. MEHROTRA (AM) AND SHRI R.S. PADVEKAR(JM) ITA NO. 834 & 835/MUM/2009 (ASSTT. YEAR : 2004-05 & 2005-06) M/S. DUDHANA INVESTMENT & TRADING PVT. LTD., APP ELLANT 19, RAJ MAHAL, 84,VEER NARIMAN ROAD, MUMBAI 400 020 PAN : AAACD4233F V/S. I.T.O. 1(1)(2)/ ASSTT. C.I.T. 1(1), MUMBAI, RES PONDENT AAYKAR BHAVAN, M.K. ROAD, MUMBAI ITA NO. 995 & 1191/MUM/2009 (ASSTT. YEAR : 2004-05 & 2005-06) I.T.O. 1(1)(2)/ 1(1), MUMBAI, APPELLANT AAYKAR BHAVAN, M.K. ROAD, MUMBAI V/S. M/S. DUDHANA INVESTMENT & TRADING PVT. LTD., RES PONDENT 19, RAJ MAHAL, 84,VEER NARIMAN ROAD, MUMBAI 400 020 PAN : AAACD4233F REVENUE BY : SHRI T.T. JACOB (D.R.) ASSESSEE BY : SHRI HIRO RA I : O R D E R : PER BENCH : IN THIS BUNCH OF FOUR APPEALS, TWO APPEALS ARE FILE D BY THE ASSESSEE AND TWO CROSS APPEALS ARE FILED BY THE REVENUE FOR THE A.Y. 2004-05 AND 2005-06 CHALLENGING THE IMPUGNED ASSESSMENT ORDERS OF THE L D CIT(A), MUMBAI FOR THE RESPECTIVE ASSESSMENT YEARS. ITA NO. 834.835,1191 & 995/MUM/2009 2 2. THE ASSESSEE HAS TAKEN THE FOLLOWING TWO EFFECT IVE GROUNDS, WHICH ARE COMMON IN BOTH THESE APPEALS, SAVE THE FIGURES WHIC H READ AS UNDER : 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS W ELL IN LAW THE LEARNED C.I.T.(A) 1 MUMBAI ERRED IN CONFIRMING THE ACTION OF A.O THAT INTEREST INCOME EARNED AS INCOME FROM OTHER SOURCES AND NOT AS BUSINESS INCOME IGNORING THE FACTS THAT THE APPELL ANT HAS SYSTEMATIC ACTIVITY OF LENDING OUT OF INTERNAL ACCRUALS IN A S TRUCTURED MANNER AND IT IS NOT NECESSARY THAT THERE MUST BE A SERIES OF TRA NSACTIONS BEFORE THE ACTIVITIES ARE CHARACTERIZED AS A TRADE OR BUSINESS . 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WE LL IN LAW THE LEARNED C.I.T.(A) 1 MUMBAI ERRED IN CONFIRMING THE ACTION OF A.O. IN DISALLOWING THE DEDUCTION OF RS. 25 LACS CLAIMED FO R RS. 20/- LACS GIVEN TO HYDERABAD EYE RESEARCH FOUNDATION WHICH IS AN AP PROVED ORGANIZATION, ELIGIBLE U/S 35(1)(II) OF INCOME TAX ACT. 3. SO FAR AS THE REVENUES APPEALS ARE CONCERNED, T HE FOLLOWING GROUND IS TAKEN IN BOTH THE APPEALS WHICH READ AS UNDER : 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF OF TH E CASE AND IN LAW, THE LEARNED CIT (A) WAS RIGHT IN ALLOWING ALTERNATE GROUND OF THE ASSESSEE TO ALLOW DEDUCTION U/S. 80GGA WHILE HOLDI NG THAT THE ASSESSEE HAD NO INCOME FROM BUSINESS OR PROFESSION IN VIEW O F THE FACT THAT NO SUCH CLAIM WAS MADE BY THE ASSESSEE COMPANY IN ITS RETURN OF INCOME. 4. THE FACTS WHICH REVEAL FROM THE RECORD ARE AS UN DER. IT IS CLAIMED BY THE ASSESSEE THAT IT IS ENGAGED IN THE ACTIVITY OF INVESTMENT IN SHARES AND OTHER SECURITIES AND ALSO IN THE BUSINESS OF ACCEPT ING AND GRANTING OF THE LOANS TO THE OTHER COMPANIES. THE ASSESSEE FILED THE RE TURNS OF INCOME FOR THE A.YRS. 2004-05 AND 2005-06 DECLARING THE TOTAL INCO ME OF RS. 14,12,106/- AND RS. 10,86,670/- RESPECTIVELY. THE ASSESSEE HAS CLA IMED THE WEIGHTED ITA NO. 834.835,1191 & 995/MUM/2009 3 DEDUCTION U/S. 35(1)(II) OF THE I.T. ACT IN BOTH TH E ASSESSMENT YEARS. SO FAR AS THE A.Y. 2004-05 IS CONCERNED, THE ASSESSEE HAS CLA IMED THE DEDUCTION OF RS. 25,00,000/- AND IN THE A.Y. 2005-06, THE WEIGHTED D EDUCTION OF RS. 31,25,000/- HAS BEEN CLAIMED. THE A.O WAS HAVING R ESERVATION FOR ALLOWING THE DEDUCTION TO THE ASSESSEE U/S. 35(1)(II) OF TH E ACT AS HE WAS OF THE VIEW THAT THE ASSESSEE HAS NOT CARRIED OUT ANY BUSINESS ACTIVITIES DURING BOTH THE YEARS AS THE ASSESSEE HAS MAJOR INCOME FROM THE DIV IDEND AS WELL AS INTEREST. THE A.O HAS ALSO NOTED THAT THE ASSESSEE HIMSELF HA S CONSIDERED THE INCOME FROM DIVIDEND AND INCOME FROM INTEREST UNDER THE HE AD INCOME FROM OTHER SOURCES IN THE IMMEDIATE PRECEDING A. YRS. I.E. 20 02-03 AND 2003-04. THE A.O., THEREFORE, RE-COMPUTED THE ASSESSEES INCOME IN BOTH THE A. YRS. BY ASSESSING THE DIVIDEND AS WELL AS THE INTEREST INCO ME UNDER THE HEAD INCOME FROM OTHER SOURCES. THE A.O HAS NOTED THAT THE AS SESSEE HAS CLAIMED THE WEIGHTED DEDUCTION U/S. 35(1)(II) SHOWING THE INCOM E UNDER THE HEAD BUSINESS BY CHANGING THE HEAD OF INCOME FOR AVAIL ING THE BENEFIT OF THE DEDUCTION. IN THE OPINION OF THE A.O, THERE WAS NO REASON TO CHANGE THE HEAD OF INCOME IN RESPECT OF THE INTEREST INCOME AND DIV IDEND INCOME FROM INCOME FROM OTHER SOURCES TO THE INCOME FROM BUSINESS. TH E A.O, THEREFORE, DENIED THE WEIGHTED DEDUCTION CLAIMED BY THE ASSESSEE U/S. 35(1)(II) OF THE ACT. THE ASSESSEE CHALLENGED THE ACTION OF THE A.O BEFORE TH E FIRST APPELLATE AUTHORITY. THE LD. CIT(A) REJECTED THE PLEA OF THE ASSESSEE T HAT THE INTEREST RECEIVED FROM M/S. INDO AMERICAN HYBRID SEEDS CO. LTD., BANG ALORE AND M/S. ALMET CORPORATION, MUMBAI, TOWARDS THE ADVANCES MADE TO THEM IS TO BE TREATED AS AN INCOME EARNED FROM THE BUSINESS OF MONEY LENDIN G. THE LD CIT(A) HAS ALSO OBSERVED THAT THE ADVANCES/LOANS WERE GIVEN TO THOSE PARTIES IN PAST AND THERE WAS NO FRESH LENDING SHOWN BY THE ASSESSEE, HENCE THERE WAS NO SYSTEMATIC OR ORGANIZED ACTIVITY ON THE PART OF THE ASSESSEE TO TREAT THE INTEREST INCOME AS THE INCOME FROM THE MONEY LENDIN G BUSINESS. THE LD CIT(A) CONFIRMED THE VIEW OF THE A.O THAT THE INTER EST INCOME IS TO BE ASSESSED AS AN INCOME FROM OTHER SOURCES. SO FAR A S THE CLAIM OF DEDUCTION U/S. 35(1)(II) IS CONCERNED, HE WAS OF THE OPINION THAT AS THE ASSESSEE HAS NOT SHOWN ANY BUSINESS, THE A.O HAS RIGHTLY DISALLOWED THE CLAIM OF DEDUCTION OF ASSESSEE U/S. 35(1)(II). AT THE SAME TIME, THE ALT ERNATE PLEA OF THE ASSESSEE THAT THE DEDUCTION SHOULD BE ALLOWED U/S. 80 GGA W AS ACCEPTED BY THE LD ITA NO. 834.835,1191 & 995/MUM/2009 4 CIT(A) AND THE RELEVANT FINDINGS GIVEN IN A.Y. 2004 -05 WHICH HAVE BEEN FOLLOWED IN THE A.Y. 205-06 ARE AS UNDER : 5.2: I HAVE CAREFULLY CONSIDERED THE SUBMISSION O F THE LD A.R. THE DEDUCTION U/S. 80GGA IS AVAILABLE ON ANY SUM PA ID BY THE ASSESSEE IN THE PREVIOUS YEAR TO A SCIENTIFIC RESEARCH ASSOC IATION WHICH HAS AS ITS OBJECTS THE UNDERTAKING OF SCIENTIFIC RESEARCH OR T O THE UNIVERSITY/COLLEGE/OR OTHER INSTITUTION TO BE USED FOR SCIENTIFIC RESEARCH. SUB-SECTION 3 OF SEC. 80GGA MENTIONS THAT THIS DEDU CTION WILL NOT BE ALLOWED IN THE CASE OF AN ASSESSEE WHOSE GROSS TOTA L INCOME IN THE COMPUTATION OF INCOME INCLUDES INCOME FROM PROFIT A ND GAINS OF BUSINESS OR PROFESSION. IN FACT THIS PROVISION IS RELATED TO THE PROVISIONS OF SEC. 35(1). THERE THE DEDUCTION IS ALLOWABLE AG AINST BUSINESS INCOME. IF THERE IS NO BUSINESS INCOME, THIS DEDUC TION CAN BE ALLOWED U/S. 80GGA. SINCE THE A.O HAS GIVEN A FINDING THAT THE APPELLANT HAD NO BUSINESS INCOME, THE APPELLANT IS ENTITLED TO TH IS ALTERNATIVE CLAIM U/S. 80GGA. ACCORDINGLY THE A.O IS DIRECTED TO ALL OW DEDUCTION U/S. 80GGA TAKING INTO CONSIDERATION THE DONATION OF RS. 20 LAKHS MADE BY THE APPELLANT. 5. IN SUM AND SUBSTANCE, THE CIT(A) ALLOWED THE CLA IM OF THE ASSESSEE TO THE EXTENT OF THE AMOUNT PAID BY THE ASSESSEE TO TH E HYDERABAD EYE RESEARCH FOUNDATION WHICH WAS RS. 20 LAKHS IN THE A.Y. 2004- 05 AND RS. 25 LAKHS IN THE A.Y. 2005-06. NOW BOTH, THE ASSESSEE AS WELL AS T HE REVENUE, ARE IN APPEAL BEFORE US. 6. WE HAVE HEARD THE PARTIES. WE HAVE ALSO CAREFUL LY PERUSED THE RECORD AS WELL AS CONSIDERED THE FACTS. THE LD COUNSEL FO R THE ASSESSEE SUBMITTED THAT IN ONE OF THE GROUP CONCERN, ON IDENTICAL SET OF FACTS, THE TRIBUNAL HAS CONFIRMED THE ACTION OF THE LD CIT(A) ALLOWING THE DEDUCTION U/S. 80GGA AND ALSO SAME TIME REJECTED THE PLEA OF THE ASSESSEE FO R CLAIMING DEDUCTION U/S. 35(1)(II) OF THE ACT. THE LD COUNSEL HAS FILED THE COPY OF THE TRIBUNAL ORDER IN THE CASE OF CHITTODA INVESTMENT & TRADING PVT. LTD ., V/S. ITO, ITA NO. 836, 837, 996 M 997/MUM/2007 DT. 17.12.209. WE ALSO H EARD THE LD. D.R. WE HAVE ALSO PERUSED THE ORDER OF THE TRIBUNAL IN THE CASE OF CHITTODA INVESTMENT ITA NO. 834.835,1191 & 995/MUM/2009 5 AND TRADING PVT. LTD. (SUPRA). IN THE SAID CASE ALS O, THE ADVANCES WERE MADE TO M/S. INDO AMERICAN HYBRID COMPANY LTD., BANGALOR E AND INTEREST ON THE SAME WAS CLAIMED AS A BUSINESS INCOME AND ALSO A WE IGHTED DEDUCTION U/S. 35(1)(II) AS WELL AS 35AC OF THE ACT WAS CLAIMED. THE ASSESSEES CLAIM WAS REJECTED BY THE A.O AND WHICH WAS CONFIRMED BY THE CIT(A) IN THE SAID CASE, BUT THE ALTERNATE PLEA OF THE ASSESSEE FOR ALLOWIN G THE DEDUCTION U/S. 80GGA WAS ACCEPTED. IT IS SEEN THAT THE FACTS ARE IDENTIC AL IN BOTH THESE CASES. WE, THEREFORE, FIND NO REASON TO DIFFER FROM THE VIEW T AKEN BY THE TRIBUNAL IN THE CASE OF CHITTODA INVESTMENT & TRADING PVT. LTD., (S UPRA). ADMITTEDLY, IN THIS CASE ALSO, THE ASSESSEE ITSELF WAS SHOWING THE INT EREST INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES IN PRECEDING YEARS. W E, THEREFORE, UPHOLD THE ORDER OF THE LD CIT(A) ON THE ISSUE THAT THE ASSESS EE HAS NOT CARRIED OUT ANY BUSINESS ACTIVITY IN THE FORM OF MONEY LENDING FOR EARNING INTEREST INCOME. WE, ACCORDINGLY, DISMISS ALL THE GROUNDS TAKEN BY T HE ASSESSEE ON THIS ISSUE. SAME WAY, AS THE ASSESSEE IS FULFILLING THE CONDITI ONS FOR DEDUCTION U/S. 80GGA, WE UPHOLD THE ORDER OF THE LD CIT(A) FOR ALL OWING THE DEDUCTION TO THE ASSESSEE UNDER THE SAID SECTION EVEN IF THE ASSESS EE HAS NO INCOME FROM THE BUSINESS. ACCORDINGLY, THE GROUNDS TAKEN BY THE RE VENUE ARE DISMISSED. 7. IN THE RESULT, ALL THE APPEALS OF THE ASSESSEE A S WELL AS THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 24TH DAY OF MARCH, 2010. SD/- SD/- (S.V. MEHROTRA) (R .S. PADVEKAR) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, ON THIS 24TH DAY OF MARCH, 2010. :US COPY TO: 1. APPELLANT 2. RESPONDENT , 3.THE CIT(A)- I, MUMBAI ITA NO. 834.835,1191 & 995/MUM/2009 6 4.THE CIT I,MUMBAI 5.THE DR, D BENCH, MUMBAI 6.GUARD FILE BY ORDER TRUE COPY ASSTT..REGISTRAR, ITAT, MUMBAI. US ITA NO. 834.835,1191 & 995/MUM/2009 7 DATE INITIALS 1. DRAFT DICTATED ON 15/03/10 --------------- S R.P.S. 2. DRAFT PLACED BEFORE AUTHORITY 17/03//10 ----- --------- SR.P.S. 3. DRAFT PROPOSED & PLACED ----------- ---------- --- JM BEFORE THE SECOND MEMBER 4. DRAFT DISCUSSED/APPROVED ----------- ----------- -- JM/AM BY SECOND MEMBER 5. APPROVED DRAFT COMES TO ----------- ------------ - SR.P.S. THE SR. P.S./P.S 6. KEPT FOR PRONOUNCEMENT ON --------- ----------- -- SR.P.S. 7. FILE SENT TO THE BENCH CLERK --------- --------- ---- SR.P.S. 8. DATE ON WHICH FILE GOES TO THE ------- --------- ---- 9. DATE OF DISPATCH OF ORDER --------- --------- ----