ITO 8(1)(3), V. EAST AND WEST CLOTHING P LTD,

MA 146/MUM/2012

• Counselvise Citation: [2013] 123 COUNSELVISE.COM (IT) 9859 (ITAT-MUMBAI)
• Duration Of Justice: 10 month(s) 18 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 23-01-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: J
• Assessment Year: 2006-2007
• Appeal Filed On: 06-03-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: R C JAIN
• Keywords: Notional interest

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, J, MUMBAI BEFORE S/SHRI DINESH KUMAR AGARWAL, JM AND N.K. BIL LAIYA, AM M.A. NO. 146 & 147/MUM/2012 ARISING OUT OF ITA NO. 3296/MUM/2010 & ITA NO. 3297 /MUM/2010 (ASSESSMENT YEARS 2006-07 & 2007-08) INCOME TAX OFFICER -8(1)(3), 2 ND FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400 020. PAN: AAACE 7810R M/S EAST & WEST CLOTHING P. LTD., C/O MACLEODS PHARMACEUTICALS LTD., ATLANTA ARCADE. MAROL CHURCH ROAD, ANDHERI (E), MUMBAI. 400 059. PAN AAACE 7810R APPLICANT V/S RESPONDENT DATE OF HEARING : 18- 01-2013 DATE OF PRONOUNCEMENT : 23-01-201 3 APPLICANT BY : SH RI RAJARSHI DWIVEDY RESPONDENT BY : SHRI R.C. JAIN O R D E R PER DINESH KUMAR AGARWAL (JM) THESE TWO MISC. APPLICATIONS FILED BY THE REVENUE A RE DIRECTED AGAINST THE COMMON ORDER PASSED BY THE TRIBUNAL IN ITA NOS. 3296 & 3297/MUM/2010 FOR ASSESSMENT YEARS 2006-07 & 2007-0 8. 2. IN THE MISC. APPLICATIONS DTD. NIL IT WAS, INTER ALIA, STATED BY THE REVENUE IN PARA 6 OF THE APPLICATION AS UNDER:- 6. THE ABOVE ORDER OF THE HONBLE ITAT IS ERRONEOU S, SINCE, ON THE IDENTICAL ISSUE IN THE ASSESSEES OWN CASE FOR A.Y. 2005-06, THE HONBLE ITAT, VIDE ORDER DATED 09/11/2011 IN ITA NO. 7298/M UM/2008 HAS NOT ALLOWED THE APPEAL OF THE ASSESSEE, BUT HAS RES TORED THE ISSUE TO THE FILE OF THE ASSESSING OFFICER, TO DECIDE THE SAME A FRESH IN THE LIGHT OF THE ABOVE DECISION OF THE HONBLE DELHI HIGH COURT IN T HE CASE OF MONI KUMAR SUBBA (CITED SUPRA). FURTHER, THE HONBLE SUP REME COURT IN THE CASE OF DIT VS. TRANSMARINE CORP. [SLP (C) NO. 8999 OF 2009] ON THE IDENTICAL ISSUE OF USUFRUCTS BENEFIT, HAS RESTORED THE MATTER BACK TO THE FILE OF THE HONBLE BOMBAY HIGH COURT, TO EXAMINE T HE FOLLOWING ASPECTS: MA 146 & 147/MUM/2012 2 A) WHETHER RENT WAS UNDERSTATED? B) WHETHER RENT WAS BROUGHT DOWN BY INTEREST-FREE D EPOSIT, BANK GUARANTEES, ETC.? C) WHETHER THE ENTIRE ARRANGEMENT STOOD ENTERED TO EVADE TAXES? D) WHETHER THE ARRANGEMENT WAS A SHAM? IT WAS, THEREFORE, PRAYED THAT THE ORDER PASSED BY THE TRIBUNAL BE RECALLED. 3. AT THE TIME OF HEARING THE LD. D.R. SUBMITS THAT FOR THE REASONS AS MENTIONED IN MISC. APPLICATIONS FILED BY THE REVENU E, THE ORDER PASSED BY THE TRIBUNAL BE RECALLED. THE RELIANCE WAS ALSO PLACED ON THE DECISION OF THE HONBLE PUNJAB & HARYANA HIGH COURT IN CIT VS. K. S TREETLITE ELECTRIC CORPORATION (2011) 336 ITR 348 (P&H). 4. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSES SEE, AT THE OUTSET, SUBMITS THAT THE REVENUE HAS NOT POINTED OUT ANY MI STAKE IN THE ORDER OF THE TRIBUNAL. HE FURTHER SUBMITS THAT IN PARA 6 OF THE ORDER OF THE TRIBUNAL, THE TRIBUNAL HAS CLEARLY MENTIONED AS UNDER:- 6. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE SUB MITTED THAT THE ISSUE INVOLVED IN BOTH THESE APPEALS IS COVERED BY THE JU DGMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. MONI KUMAR SUBHA AND OTHERS (2011) 333 ITR 38 (DELHI) [FB]. ON THE OTHER HAND, THE LEARNE D D.R. DID NOT OBJECT TO THE SUBMISSION MADE BY THE LEARNED COUNSEL. 5. THE LD. COUNSEL FOR THE ASSESSEE FURTHER SUBMITS THAT FROM THE SAID PARA, IT IS CLEAR THAT AT THE TIME OF HEARING THE L D. D.R. DID NOT OBJECT TO THE SUBMISSION MADE BY THE LD. COUNSEL FOR THE ASSESSEE IN APPLYING THE RATIO OF THE DECISION IN MONI KUMAR SUBHA AND OTHERS (SUPRA) . AS REGARDS THE DECISION OF THE HONBLE SUPREME COURT IN DIRECTOR O F INCOME-TAX VS. TRANSMARINE CORP. IN CIVIL APPEAL NO. 5470 OF 2011 DTD. 15-7-2011 THEIR MA 146 & 147/MUM/2012 3 LORDSHIPS HAVE RESTORED THE MATTER TO THE FILE OF T HE HONBLE HIGH COURT TO EXAMINE THE FOLLOWING ASPECTS:- A) WHETHER RENT WAS UNDERSTATED? B) WHETHER RENT WAS BROUGHT DOWN BY INTEREST-FREE D EPOSIT, BANK GUARANTEES, ETC.? C) WHETHER THE ENTIRE ARRANGEMENT STOOD ENTERED TO EVADE TAXES? D) WHETHER THE ARRANGEMENT WAS A SHAM? HE FURTHER SUBMITS THAT SINCE THE FACTS OF THE PRES ENT CASE ARE ENTIRELY DIFFERENT, THEREFORE, BOTH THE DECISIONS RELIED ON BY THE REVENUE ARE DISTINGUISHABLE AND NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. HE FURTHER SUBMITS THAT THE A.O. IN ASSESSEES OWN CASE FOR A. Y. 2005-06 WHICH WAS SET ASIDE BY THE TRIBUNAL HAS ACCEPTED THE ACTUAL RENT RECEIVED BY THE ASSESSEE AND HAS NOT MADE ANY ADDITION IN THIS REGARD VIDE A SSESSMENT ORDER DTD. 31- 10-2012 PASSED U/S 143(3 R.W.S. 250 OF THE ACT. HE FURTHER SUBMITS THAT THE TRIBUNAL IN THE CASE OF ITO VS. TRANSMARINE CORPORA TION IN ITA NO. 5500/MUM/2010 FOR A.Y. 2006-07 ORDER DTD. 6-1-2012 WHILE APPLYING THE DECISION OF MONI KUMAR SUBHA AND OTHERS (SUPRA) DEL ETED THE ADDITION OF NOTIONAL INTEREST OF 10% ON TOTAL SECURITY DEPOSIT OF RS. 3 CRORES. HE, THEREFORE, SUBMITS THAT THERE IS NO MISTAKE IN THE ORDER WHICH MAY BE RECTIFIED U/S 254(2) OF THE ACT AND, THEREFORE, THE MISC. APP LICATIONS FILED BY THE REVENUE BE REJECTED. 6. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND T HAT THERE IS NO DISPUTE ON THE FACTS MENTIONED BY THE TRIBUNAL IN PARA 4 & 5 O F ITS ORDER DTD. 29-6-2011 WHICH ARE REPRODUCED AS UNDER:- MA 146 & 147/MUM/2012 4 4 BRIEFLY STATED THE FACTS OF THE CASE ARE THAT DU RING THE ASSESSMENT PROCEEDINGS, THE AO HAD OBSERVED THAT THE ASSESSEE COMPANY HAD RECEIVED AN AMOUNT OF RS. 30,00,000/- FROM M/S MACL EOD PHARMA LTD. AS RENT. IT WAS ALSO SEEN THAT M/S MACLEOD PHARMA L TD. HAD GIVEN INTEREST FREE DEPOSIT OF RS. 5,00,00,000/- TO THE A SSESSEE COMPANY. THE AO HAD GIVEN A SHOW CAUSE NOTICE TO EXPLAIN AS TO W HY USUFRUCTS BENEFIT ON INTEREST FREE DEPOSIT SHOULD NOT BE ADDE D O THE ANNUAL LET OUT VALUE OF THE PROPERTY FOR THE PURPOSE OF COMPUTING INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY. THE AO AFTER CON SIDERING THE SUBMISSIONS OF THE ASSESSEE AND RELYING UPON VARIOU S CASE LAWS MENTIONED AT PAGE 3 OF CIT(A)S ORDER, COMPUTED THE USUFRUCTS BENEFIT @ 12% PER ANNUM WHICH WORKED OUT TO RS. 60,00,000/- A ND THE SAME WAS ADDED TO ALV FOR THE PURPOSE OF COMPUTING INCOM E UNDER THE HEAD INCOME FROM HOUSE PROPERTY. AGGRIEVED, THE ASSESS EE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). 5. BEFORE THE CIT(A), THE ASSESSEE HAS RELIED UPON VARIOUS CASE LAWS, WHICH WERE MENTIONED AT PAGE 3 & 4 OF CIT(A)S ORDE R. AFTER CONSIDERING THE SAME, THE CIT(A) HELD THAT KEEPING IN VIEW TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE AS CLEARLY EXPLAINED IN S ECTION 22 & 23 OF THE ACT AND FURTHER, THE ABOVE CITED DECISIONS OF THE H ONBLE TRIBUNAL WHERE THE CASE HAS BEEN DECIDED IN FAVOUR OF THE REVENUE, I AM INCLINED TO AGREE WITH THE DECISION OF HONBLE COURTS STATED ABOVE AN D THE VIEW OF THE AO, HENCE, THE ADDITION MADE BY THE AO ON THIS ISSUE IS CONFIRMED AND THE GROUND OF APPEAL IS DISMISSED. STILL AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 7. WE FURTHER FIND THAT THE TRIBUNAL IN PARA 6 OF T HE ORDER (SUPRA) HAS NOTED THE SUBMISSIONS OF THE PARTIES THAT THE CASE IS COVERED BY THE DECISION IN THE CASE OF MONI KUMAR SUBHA AND OTHERS (SUPRA). WE FURTHER FIND THAT IN PARA 7 OF THE ORDER OF THE TRIBUNAL, THE TRIBUNAL W HILE HOLDING THAT THE ISSUE UNDER CONSIDERATION IS SQUARELY COVERED BY THE JUDG MENT IN THE CASE OF MONI KUMAR SUBHA AND OTHERS (SUPRA) HAS SET ASIDE THE OR DER OF THE LD. CIT(A) AND ALLOWED THE GROUND RAISED BY THE ASSESSEE IN BOTH T HE YEARS. 8. FROM THE ABOVE, IT IS VERY CLEAR THAT THE A.O. H AS MADE THE ADDITION OF USUFRUCTS BENEFIT OF RS. 60,00,000/- UNDER THE HEAD INCOME FROM HOUSE PROPERTY ON THE GROUND THAT THE ASSESSEE HAS RECEI VED INTEREST FREE DEPOSIT OF RS. 5 CRORES FROM M/S MACLEOD PHARMA LTD. WE FURTH ER FIND THAT THE A.O. WHILE MAKING THE ABOVE ADDITION HAS ALSO RELIED ON THE APPELLATE ORDER IN MA 146 & 147/MUM/2012 5 ASSESEES OWN CASE FOR A.Y. 2005-06 WHEREIN A SIMIL AR ADDITION WAS MADE. HOWEVER, SUBSEQUENTLY, THE A.O. PURSUANT TO THE ORD ER OF THE TRIBUNAL IN A.Y. 2005-06 HAS ACCEPTED THE RENT RECEIVED BY THE ASSES SEE AS INCOME WITHOUT MAKING ANY ADDITION OF USUFRUCTS BENEFIT OF RS. 60, 00,000/-. IT IS NOT THE CASE OF THE REVENUE THAT THE INTEREST FREE SECURITY DEPO SIT TAKEN BY THE ASSESSEE IS HIGHLY DISPROPORTIONATE TO THE MONTHLY RENT CHARGED OR THE RENT RECEIVED BY THE ASSESSEE IS BELOW THE STANDARD RENT AS PER RENT CONTROL LEGISLATION. IN THE ABSENCE THEREOF, WE ARE OF THE VIEW THAT THE RATIO OF BOTH THE DECISIONS RELIED ON BY THE LD. D.R. I.E. IN TRANSMARINE CORPORATION (SUPRA) AND K. STREETLITE ELECTRIC CORPORATION (SUPRA)ARE DISTINGUISHABLE AND NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. THIS BEING SO AND KEEPING IN VIEW THAT AT THE TIME OF HEARING OF THE APPEAL THE LD. D.R. DID NOT DISPUTE THE RATIO OF THE DECISION IN MONI KUMAR SUBHA AND OTHERS (SUPRA), THE A.O. HIMSE LF HAS ACCEPTED THE RENT SHOWN BY THE ASSESSEE AS INCOME WITHOUT MAKING ANY ADDITION OF USUFRUCTS BENEFIT OF RS. 60,00,000/- IN THE A.Y. 2 005-06 AND THE TRIBUNAL IN THE CASE OF TRANSMARINE CORPORATION FOR A.Y. 2006-0 7 (SUPRA) HAS ALSO DELETED THE SIMILAR ADDITION MADE BY THE A.O., WE ARE OF TH E VIEW THAT THERE IS NO MISTAKE IN THE ORDER OF THE TRIBUNAL IN TERMS OF PR OVISIONS OF SECTION 254(2) OF THE ACT AND ACCORDINGLY THE MISC. APPLICATIONS FILE D BY THE REVENUE ARE REJECTED. 9. IN THE RESULT, THE MISC. APPLICATIONS FILED BY T HE REVENUE ARE DISMISSED. ORDER PRONOUNCED ON 23-01-2013 SD/- SD/- (N.K. BILLAIYA) (DINESH KUMAR AGARWAL) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED : 23-01-2013 MA 146 & 147/MUM/2012 6 RK.: COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT , CONCERNED, MUMBAI 4. CIT(A) CONCERNED, MUMBAI 5. DR D BENCH 6. GUARD FILE. BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI