SHRI PRAHALAD RAI AGRAWAL, SARGUJA (C.G) V. ACIT, CIRCLE- KORBA, KORBA(CG)

ITA 87/BIL/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 2434 (ITAT-RAIPUR)
• Duration Of Justice: 2 year(s) 5 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-02-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 20-08-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: H M MOHARANA
• Keywords: Business income; Depreciation; Corroborative evidences

Judgement Text

, RA IPUR IN THE INCOME TA X A PPELLA TE TRIBUNA L, RA IPUR BEFORE S/SHRI MUKUL SHRAW AT ( JM) SHAMIM YAH Y A (AM) , , ./ I.T.A. NO S . 87 & 88/BIL/20 13 ( / ASSESSMENT YEAR S : 200809 & 2009 - 10 ) PRAHALLAD RAI AGRAW AL, NEHRU PARK KETKA ROAD, POST OFFICE: SURAJPUR / VS. ACIT, CIRCLE, KORBA, AAYAKAR BHAVAN, MAHANADI COMPLEX, NIHARIKA ROAD, KORBA ./ ./ PAN/GIR NO. : ACIPA 0858 L ( / AP PELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : NONE / RESPONDENT BY : SHRI H.M.MOHARANA / DATE OF HEARING : 1 8 - 02 - 2016 / DATE OF PRONOUNCEMENT : 19 - 02 - 2016 / O R D E R PER MUKUL SHRAWAT, JM THESE TWO APPEALS FILED BY THE ASSESSEE PERTAINING TO THE ASSESSMENT YEARS 2008 - 09 & 2009 - 2010 E MANATING FROM SEPARATE ORDER S BOTH DATED 28.3. 2013 OF THE LD CIT(A), BILASPUR. A LMOST IN IDENTICAL MANNER, THE ASSESSEE HAS RAISED THE GROUNDS. 2. GROUND NO.2 IS REPRODUCED HEREINBELOW: 2 I.T.A. NOS. 87 & 88/BIL/2013 ASSESS ME NT YEARS :200809 & 2009 - 10 PRAHALLAD RAI AGARWAL THAT THE RENT RECEIVED FROM GODOWN CONSTRUCTED WITH AN OBJECT TO EARN THE PROFIT BY UTILIZING THE GODOWN FOR COMM ERCIAL PURPOSES, CREDITED TO PROFIT AND LOSS ACCOUNT OFFERED AN INCOME FROM BUSINESS HAS BEEN TREATED AS INCOME FROM HOUSE PROPERTY AND DISALLOWED THE DEPRECIATION AND EXPENSES, THEREBY MAKING THE ADDITION OF RS.4,77,450/ [ (A.Y. 2008 - 09) AND RS.4,67,283/ - F OR A.Y. 2009 - 10) ] IS ARBITRARY AND UNJUSTIFIED. 3. WH EN THE MATTER WAS CALLED ON FOR HEARING, THERE WAS NO RESPONSE FR OM THE SIDE OF THE ASSESSEE. H OWEVER, CONSIDERING THE SMALLNESS OF THE ISSUE INVOLVED, WE HAVE DECIDED TO PROCEED EXPARTE QUA - ASSESSE E HAVING HEARD LD D.R. AND ON THE BASIS OF MATERIAL AVAILABLE ON RECORD. 4 . THE ADMITTED FACTUAL POSITION AS EMERGED FROM THE CORRESPONDING ASSESSMENT ORDER S PASSED BY THE ASSESSING OFFICER U/S.143(3) OF THE I.T.ACT, 1961 DATED 31.3.2 010 AND 27 .12.2011, R ESPECTIVELY WERE THAT THE ASSESSEE IN HIS INDIVIDUAL CAPACITY HAS SHOWN RENTAL INCOME FR OM GODOWN UNDER THE HEAD BUSINESS INCOME, HOWE VER, THE AO HAS ASSESSED THE SAME UNDER THE HEAD INCO ME FROM HOUSE PROPERTY. T HIS LEGAL ISSUE WAS CHAL LENGED BEFORE THE LD CIT(A). THE ACTION OF THE AO WAS CONFIRMED AFTER NARRATING FEW CASE LAWS ON THE GROUND THAT THE GODOWNS WERE STOCK IN TRADE, HENCE, THERE WAS NO COMMERCIAL EXPLOITATION OF THE GODOWNS AND, THEREFORE, THE RENTAL INCOME WAS RIGHTLY TAXE D UNDER THE HEAD INCOME FROM HOUSE PROPERTY. 5. ON THIS LEGAL ISS UE, W E HAVE HEARD LD D.R . WE SHALL DISCUSS THE FACTS F R OM THE ASSESSMENT YEAR 2008 - 09 AND THE DECISION WILL APPLY IDENTICALLY TO A.Y. 2009 - 3 I.T.A. NOS. 87 & 88/BIL/2013 ASSESS ME NT YEARS :200809 & 2009 - 10 PRAHALLAD RAI AGARWAL 2010. IN OUR CONSIDERED O PINION, THERE ARE FEW CASE LA WS, ACCORDING TO WHICH, THE GODOWN RENT IS NOTHING BUT EXPLOITATION OF PROPERTY FOR BUSINESS PURPOSES, HENCE, IS TO BE TAXED UNDER THE HEAD BUSINESS INCOME. T HE FACTS OF THE CASE HAVE REVEALED THAT AS PER THE AUDITED REPORT, THE ASSESSEE HAD DISCLOSED I N THE BLOCK OF ASSETS AS RURAL GODOWN ACCOUNT AND CLAIMED DEPRECIATION @ 10%. AGAINST THE GODOWN RENT OF RS.10,38,292/ - FOR A.Y. 2008 - 09, THE ASSESSEE HAD CLAIMED DEPRECIATION @ 10% OF RS.7,47,513/ - , THE OPENING W. D.V WAS RS.74,75,133/ - AND THE CLOSING W. D.V. WAS SHOWN AT RS.67,27,620/ - . H ENCE, IT WAS VEHEMENTLY PLEADED THAT THE ASSESSEE HAS, SINCE INCEPTION, DISCLOSED GODOWN AS BUSINESS ASSET AND CLAIMED DEPRECIATION YEAR AFTER YEAR, WHICH WAS ARBITRARILY DISTURBED DURING THE YEAR UNDER CONSIDERATION. THERE IS ONE MORE ADMITTED FACTUAL POSITION THAT THE GODOWN RENT WAS RECEIVED FROM CHHATTIS HGARH STATE WA RE HOUSE, RAIPUR, WHICH PROVED THAT THE ASSET IN QUESTION WAS COMMERCIAL Y EXPLOITED. 6 . ON SIMILAR ISSUE, W E FIND THAT IN CIT VS. SH AMBHU INVESTMENT P VT. LTD., (249 ITR 7), WHICH WAS APPROVED BY HONBLE SUPREME COURT IN JUDGMENT REPORTED AT 263 ITR 143 (SC) , LORDSHIPS HAD AN OCCASION TO ELABORATELY DEAL WITH JUDICIAL PRECEDENTS ON WHETHER RENTAL INCOME COULD BE TAXED UNDER THE HEAD BUSINESS PROFITS, AN D THEIR LORDSHIPS CONCLUDED AS FOLLOWS: TAKING A SUM TOTAL OF AFORESAID DISCUSSIONS, IT CLEARLY APPEARS THAT MERELY BECAUSE INCOME IS ATTACHED TO ANY IMMOVABLE PROPERTY CANNOT BE THE SOLE FACTOR FOR ASSESSMENT OF SUCH INCOME AS INCOME FR OM PROPERTY; WH AT H AS TO BE SEEN IS WHAT WAS THE PRIMARY OBJECT OF THE ASSESSEE WHILE EXPLOITING 4 I.T.A. NOS. 87 & 88/BIL/2013 ASSESS ME NT YEARS :200809 & 2009 - 10 PRAHALLAD RAI AGARWAL THE PROPERTY. IF IT IS FOUND, APPLYING SUCH TEST, THAT MAIN INTENTION IS FOR LETTING OUT THE PROPERTY, OR ANY PART THEREOF, THE SAME MUST BE CONSIDERED AS RENTAL INCOME OR INCOME FROM PROPERTY. IN CASE, IT IS FOUND THAT THE MAIN INTENTION IS TO EXPLOIT THE IMMOVABLE PROPERTY BY WA Y OF COMPLEX COMMERCIAL ACTIVITIES, IN THAT EVENT, IT MUS T BE HELD AS BUSINESS INCOME. 6. 1 IT IS THUS CLEAR THAT WHEN A PROPERTY IS EX PLOITED BY WA Y OF COMPLEX COMMERCIAL ACTIVITIES, INCOME SO EARNED BY EXPLOITING THE PROPERTY IS TO BE TAXED AS BUSINESS INCOME. IN VIEW OF ABOVE, AND RESPECTFULLY FOLLOWING THE DECISION IN THE CASE OF SAMBHU INVESTMENT PVT LTD. (SUPRA), WE HEREBY REVERSE THE FINDINGS OF THE AUTHORITIES BELOW AND HOLD THE RENTAL INCOME FROM GODOWN IS BUSINESS INCOME. FOR BOTH THE YEARS N OW UNDER APPEAL, THE GROUND RAISED BY THE ASSESSEE IS ALLOWED. 7. GROUND NO.3 COMMON TO BOTH THE ASSESSEE IS AS UNDER: THAT THE LUMP DISALLOWANCE OF RS.50,000/9(AY 2008 - 09) AND RS.75,000/ - (AY 2009 - 10) OUT OF VARIOUS EXPENSES IS ARBITRARY AND WITHOUT BASIS. 8. THE OBSERVATION OF THE AO WAS THAT CERTAIN EXPENSES NAMELY, DIESEL, LUBRICANT, REPAIRS AND MAINTENANCE , ETC., REMAINED UN VERIFIABLE IN THE ABS ENCE OF VOUCHERS/BILLS. T HE VOUCHERS WHICH WERE PRODUCED WERE SELF MADE INTERNAL VOUCHERS. I N HIS OPINION, CERTAIN EXPENSES WERE INFLATED. T O COVER UP THE POSSIBILITY OF INFLATION OF EXPENSES, A DISALLOWANCE OF RS.50,000/ - WAS MADE FOR A.Y. 2008 - 09. L I KEWISE FOR A.Y. 2009 - 010, THE AO HAD MADE A DISALLOWANCE OF RS.75,000/ - 5 I.T.A. NOS. 87 & 88/BIL/2013 ASSESS ME NT YEARS :200809 & 2009 - 10 PRAHALLAD RAI AGARWAL 9. WH EN THE MATTER WAS CARRIED BEFORE THE LD CITA), LD CIT(A) CONFIRMED THE ACTION OF THE AO . 10. HAVING CONSIDERED THE INABILITY OF THE ASSESSEE TO PRODUCE THE CORROBORATIVE EVIDENCE IN SUPPORT OF THE CLAIM O F CERTAIN EXPENSES, WE FIND THAT THE REVENUE AUTHORITIES HAVE ADOPTED A REASONABLE APPROACH IN DISALLOWING THE EXPENSES, THAT TOO NOT THE ENTIRE CLAIM OF EXPENSES BUT ONLY A SMALL PORTION IN ROUND FIGURES. E VEN BEFORE US, THERE IS NO EVIDENCE IN THE SHAPE OF BILLS AND VOUCHERS, HENCE, IN THE ABSENCE OF SUPPORTING EVIDENCE, WE HEREBY CONFIRM THE FINDINGS OF THE LOWER AUTHORITIES. T HIS GROUND FOR BOTH THE ASSESSMENT YEARS IS DISMISSED. 11. GROUND NO.4 FOR A.Y. 2008 - 09 IS AS UNDER : THAT THE PROPORTIONATE DISALLOWANCE OF INTEREST AMOUNTING TO RS.12,650/ - IS ARBITRARY AND UNJUSTIFIED. 12. THE ASSESSEE HAD ADVANCED A SUM OF RS.1,15,000/ - TO M/S. AMBIKA SUGAR & POWER (P ) LTD., AND NO INTEREST WAS CHARGED ON THE SAID ADVANCE. T HE A O HAS MENTIONED THAT IN REPLY TO A QUERY, THE ASSESSEE HAD EXPRESSED NO OBJECTION FOR THE PROPORTIONATE DISALLOWANCE OF INTEREST. T HE AO HAD APPLIED INTEREST @ 12% ON THE LOAN AMOUNT AND THE INTEREST AMOUNT WAS WORKED OUT AT RS.12,650/ - . A GAINST THE AD DITION, WHEN THE MATTER WAS CARRIED BEFORE THE LD CIT(A), LD CIT(A) CONFIRMED THE SAME. 6 I.T.A. NOS. 87 & 88/BIL/2013 ASSESS ME NT YEARS :200809 & 2009 - 10 PRAHALLAD RAI AGARWAL 13. SINCE BOTH THE REVENUE AUTHORITIES HAVE STATED THAT THE ASSESSEE HAD NOT OBJECTED FOR THE SAME DISALLOWANCE, THEREFORE, THE CLAIM OF INTEREST WAS DISALLOWED. U ND ER THIS CIRCUMSTANCE, WE HEREBY AFFIRM THE VIEW OF THE REVENUE AUTHORITIES ESPECIALLY WHEN THE ASSESSEE HAS NOT ESTABLISHED THE SAID AMOUNT WAS FOR BUSINESS PURPOSES OR OUT OF NON - INTEREST BEARING FUNDS. I N THE ABSENCE OF BOTH THESE ELEMENTS, WE HEREBY CO NFIRM THE DISALLOWANCE. 14. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 19 /02/2016 . S D/ - SD/ - ( , ) ( , ) SHAMIM Y AHY A , ACCOUNT ANT MEMBER MUKUL SHRA WA T , JUDICIAL M EM BER RAIPUR , DATED 19 / 02 /20 1 6 . . ./ PARIDA , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT : PRAHALLAD RAI AGRAWAL, NEHRU PARK KETKA ROAD, POST OFFICE: SURAJPUR 2. / THE RESPONDENT : ACIT, CIRCLE, KO RBA, AAYAKAR BHAVAN, MAHANADI COMPLEX, NIHARIKA ROAD, KORBA 3. ( ) / THE CIT(A) - BILASPUR 4. / CIT , BILASPUR 5. , , / DR, ITAT , RAIPUR 6. / GUARD FILE. / BY ORDER, //TRUE COPY// SR. PS, ITAT, CAMP: RAIPUR