NVS CORPORATE CONSULTANCY SERVICES P. LTD, MUMBAI v. ITO 2(2)(3), MUMBAI

ITA 1639/MUM/2010 | 2006-2007
Pronouncement Date: 18-03-2011 | Result: Partly Allowed

Appeal Details

RSA Number 163919914 RSA 2010
Bench Mumbai
Appeal Number ITA 1639/MUM/2010
Duration Of Justice 1 year(s) 16 day(s)
Appellant NVS CORPORATE CONSULTANCY SERVICES P. LTD, MUMBAI
Respondent ITO 2(2)(3), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 18-03-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted B
Tribunal Order Date 18-03-2011
Date Of Final Hearing 15-03-2011
Next Hearing Date 15-03-2011
Assessment Year 2006-2007
Appeal Filed On 03-03-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B MUMBAI BEFORE SHRI R.S.SYAL AM AND SMT.ASHA VIJAYARAGHAVA N JM ITA NO.1639/MUM/2010 : ASST.YEAR 2006-2007 M/S.NVS CORPORATE CONSULTANCY SERVICES PRIVATE LIMITED 1 & 1A BIRLA MANSION 3 RD FLOOR NAGINDAS MASTER ROAD MUMBAI 400 023. PAN :AABCN1322N. VS. THE INCOME TAX OFFICER WARD 2(2)(3) MUMBAI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SATISH R.MODY RESPONDENT BY : SHRI HARI GOVIND SINGH O R D E R PER R.S.SYAL AM : THIS APPEAL BY THE ASSESSEE ARISES OUT OF THE ORDER PASSED BY THE CIT(A) ON 29.01.2010 IN RELATION TO ASSESSMENT YEAR 2006-2007 . 2. THE ONLY ISSUE IS AGAINST THE DISALLOWANCE OF BU SINESS EXPENSES ON THE GROUND THAT THE ASSESSEE WAS NOT CARRYING ON ANY RE GULAR BUSINESS. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT THE ASSESSEE FILED I TS RETURN DECLARING INCOME BY WAY OF HOUSE PROPERTY SPECULATION LOSS CAPITAL GAIN AND INTEREST INCOME FALLING UNDER THE HEAD `INCOME FROM OTHER SOURCES. IN THE COMPUTATI ON OF INCOME THE ASSESSEE CLAIMED CARRIED FORWARD OF NET SPECULATION LOSS WIT HOUT ALLOCATING ANY EXPENDITURE SUCH AS SALARY ADMINISTRATIVE ETC. AMOUNTING TO R S.5 05 827 CLAIMED DURING THE YEAR FOR WHICH BUSINESS LOSS WAS COMPUTED AT RS.4 2 0 721 SEPARATELY WHICH WAS SET OFF AGAINST OTHER INCOME. THE ASSESSING OFFICER NOT ICED THAT THE ASSESSEE WAS NOT HAVING ANY BUSINESS ACTIVITY DURING THE YEAR EXCEPT THE SPECULATION BUSINESS. ON BEING CALLED UPON TO EXPLAIN AS TO WHY THE BUSINESS EXPENSES WERE CLAIMED AGAINST THE NON-SPECULATION BUSINESS INCOME IN THE ABSENCE OF ANY BUSINESS ACTIVITY THE ASSESSEE STATED THAT IT HAD CARRIED OUT THE BUSINES S OF SPECULATION IN SHARE. AS THE ASSESSEE-COMPANY WAS CONTINUOUSLY LOOKING OUT FOR B USINESS OPPORTUNITIES WHICH ITA NO.1639/MUM/2010 M/S.NVS CORPORATE CONSULTANCY SERVICES PVT. LTD. 2 DID NOT MATERIALIZE IN THIS YEAR IT WAS CONTENDED ON BEHALF OF THE ASSESSEE THAT IT WAS ONLY A TEMPORARY LULL AND NOT CLOSURE OF BUSINE SS ACTIVITY. NOT CONVINCED WITH THE ASSESSEES SUBMISSIONS THE ASSESSING OFFICER OBSERVED THAT THERE WAS NET SPECULATION LOSS OF RS.2 788 DURING THE YEAR. HE T HEREFORE TOOK THE ENTIRE EXPENDITURE OF RS.5 05 827 AGAINST THE SPECULATION BUSINESS AND COMPUTED LOSS FROM SPECULATION BUSINESS AT RS5 08 615 THEREBY TAX ING OTHER INCOMES WITHOUT ALLOWING SET OFF OF LOSS AS CLAIMED BY THE ASSESSEE . NO RELIEF WAS ALLOWED IN THE FIRST APPEAL. 3. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SING THE RELEVANT MATERIAL ON RECORD IT IS SEE THAT SCHEDULE 8 OF THE PROFIT & LO SS ACCOUNT COMPRISES OF DETAILS OF INCOME EARNED DURING THE YEAR VIS-A-VIS EARLIER YEA R. THE FIRST ITEM IS INTEREST INCOME WHICH HAS BEEN TAXED UNDER THE HEAD `INCOME FROM OTHER SOURCES AND THERE IS NO DISPUTE ON THAT. THEN THERE IS RENTAL INCOME OF RS.6 LAKHS IN THIS YEAR AS WELL AS THE PRECEDING YEAR WHICH HAS BEEN TAXED UNDER T HE HEAD `INCOME FROM HOUSE PROPERTY ON WHICH AGAIN THERE IS NO DISPUTE. APAR T FROM OTHER MINOR ITEMS OF INCOME THERE WAS COMMISSION INCOME OF RS.54 000 I N THE PRECEDING YEAR CLAIMED BY THE ASSESSEE AS BUSINESS INCOME WHICH IS MISSI NG IN THE INSTANT YEAR. COMING TO SPECULATION GAIN / LOSS ON SALE OF SHARES IT IS SEEN THAT IN THE PRECEDING YEAR THERE WAS INCOME OF RS.402 AND THIS YEAR THERE IS LOSS OF RS.2 788 FROM SPECULATION ON SALE OF SHARES. WHEN THE ASSESSEE IS CARRYING ON SP ECULATION ACTIVITY AS WELL AS OTHER BUSINESS ACTIVITY ON REGULAR BASIS THERE HA S TO BE APPORTIONMENT OF THE COMMON EXPENDITURE BETWEEN THESE TWO STREAMS. THERE IS NO MERIT IN THE CONTENTION OF THE LEARNED A.R. THAT THE ENTIRE EXPE NDITURE OF RS.5 05 827 WAS ATTRIBUTABLE TO BUSINESS FOR WHICH THERE WAS NO INC OME IN THE INSTANT YEAR. ADVERTING TO THE FACTS OF THE INSTANT CASE IT IS N OTED THAT THERE IS NO BUSINESS INCOME IN THIS YEAR. APART FROM THAT IT IS ALSO A F ACT THAT THE ASSESSEE DID HAVE BUSINESS INCOME IN THE PRECEDING YEAR AS WELL AS IN THE SUCCEEDING YEAR. IT SHOWS THAT THE ATTEMPTS TO EARN BUSINESS INCOME DID NOT F RUCTIFY IN THIS YEAR RESULTING INTO ITA NO.1639/MUM/2010 M/S.NVS CORPORATE CONSULTANCY SERVICES PVT. LTD. 3 A TEMPORARY LULL THOUGH THE BUSINESS WAS DONE IN THE EARLIER AND NEXT YEAR. THERE CANNOT BE ANY PRESUMPTION THAT IN THE FACE OF SUCH TEMPORARY LULL THE ASSESSEE COULD NOT HAVE INCURRED ANY EXPENDITURE TO KEEP ITS BUSINESS GOING ON. SINCE IT IS THE QUESTION OF APPORTIONMENT OF EXPENSES BETWEEN SPECULATION AND NON- SPECULATION BUSINESS IN THE ABSENCE OF ANY REASONA BLE BASIS OF APPORTIONMENT SUGGESTED BY THE PARTIES IN OUR CONSIDERED OPINION AND TAKING INTO CONSIDERATION THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE IT WOULD BE FAIR IF 75% OF RS.5 05 827 IS ALLOCATED TO SPECULATION BUSINESS AN D 25% TO NON-SPECULATION BUSINESS. WE ORDER ACCORDINGLY. THE ASSESSING OFFIC ER IS DIRECTED TO COMPUTE TOTAL INCOME ACCORDINGLY. 4. IN THE RESULT THE APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED ON THIS 18 TH DAY OF MARCH 2011 . SD/- SD/- (ASHA VIJAYARAGHAVAN) (R.S.SYAL) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI : 18 TH MARCH 2011. DEVDAS* COPY TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT CONCERNED 4. THE CIT(A) V MUMBAI. 5. THE DR/ITAT MUMBAI. 6. GUARD FILE. TRUE COPY. BY ORDER ASSISTANT REGISTRAR ITAT MUMBAI.