D.C.I.T.Circle - 7,Kol, Kolkata v. M/s Mangalam Fashions Ltd., Kolkata

ITA 1692/KOL/2012 | 2009-2010
Pronouncement Date: 29-04-2015

Appeal Details

RSA Number 169223514 RSA 2012
Assessee PAN AACCM9294P
Bench Kolkata
Appeal Number ITA 1692/KOL/2012
Duration Of Justice 2 year(s) 5 month(s) 8 day(s)
Appellant D.C.I.T.Circle - 7,Kol, Kolkata
Respondent M/s Mangalam Fashions Ltd., Kolkata
Appeal Type Income Tax Appeal
Pronouncement Date 29-04-2015
Appeal Filed By Department
Bench Allotted C
Tribunal Order Date 29-04-2015
Assessment Year 2009-2010
Appeal Filed On 20-11-2012
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: KOLKATA [BEFORE HON BLE SHRI MAHAVIR SINGH JM & HON BLE SHRI B.P.JAIN AM ] I.T.A NO.169 2 /KOL/2012 ASSESSMENT YEAR: 2009 - 2010 D.C.I.T. CIRCLE - 7 VS. M/S.MANGALAM FASHIONS LTD. KOLKATA KO LKATA (APPELLANT) ( RESPONDENT) (PAN: AACCM 9294 P) FOR THE APPELLANT : SHRI P.N.BARNWAL JCIT FOR THE RESPONDENT : SHRI ANIL KOCHAR & SHRI S.L.KOCHAR ADVVOCATE DATE OF HEARING : 08.04 .2015. DATE OF PRONOUNCEMENT: 29.04.2015. ORDER PER SHRI B.P.JAIN AM : THIS APPEAL OF THE REVENUE A RISES OUT OF THE ORDER OF LD.CIT (A) - VIII KOLKATA DATED 13 .08 .2012 FOR ASSESSMENT YEAR 2009 - 10. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : - 1. THAT UNDER THE FACTS AND CIRCUMSTA NCES OF THE CASE THE LD. CIT(APPEALS) - VIII KOLKATA ERRED IN TREATING THE RECEIPTS OF RS.94 37 636 AS INCOME FROM HOUSE PROPERTY INSTEAD OF INCOME FROM OTHER SOURCES. 2. THAT UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(APPEALS) - VIII KOLKA TA ERRED IN ALLOWING INSURANCE PREMIUM OF RS.1 81 851/ - RELATING TO THE PREMISES. 3. THAT UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(APPEALS) - VIII KOLKATA ERRED IN ALLOWING THE CLAIM OF THE APPELLANT FOR INCURRING AN EXPENDITURE OF RS.1 3 93 080/ - UNDER THE HEAD BUSINESS ADVISORY EXPENSES. 4. THAT UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(APPEALS) - VIII KOLKATA ERRED IN ALLOWING THE CLAIM OF THE APPELLANT FOR PAYMENT OF DIRECTOR S REMUNERATION OF RS.24 00 000/ - . 3. THE BRIEF FACTS OF THE CASE AS REGARDS GROUND NO.1 ARE THAT AO OBSERVED THAT THE INCOME SHOWN UNDER THE HEAD UTILITY INCOME AND MISCELLANEOUS RE CEIPTS DO NOT RELATE THE PROPERTY AND HENCE THESE RECEIPTS ARE TO BE ASSESSED AS INCOME FROM OTHER SOURCES. AFTE R RELYING UPON CERTAIN JUDICIAL PRONOUNCEMENTS AO HAS ADDED THE AFORESAID TOTAL ITA NO. 1692/KOL/2012 M/S.MANGALAM FASHIONS LTD. . A.YR. 2009 - 10 2 AMOUNT OF RS.94 37 636/ - IS TO BE ASSESSED AS INCOME FROM OTHER SOURCES AND NOT INCOME FROM HOUSE PROPERTY . 3.1. THE LD. CIT(A) DELETED THE DISALLOWANCE VIDE PARA 5.2.6 OF HIS ORDER BY OBSERVING THAT AO HAS NOT BROUGHT ON RECORD ANY EVIDENCE OR ANY SOUND REASON TO CHANGE THE HEAD OF THE INCOME AS HAS BEEN DERIVED BY THE ASSESSEE IN THE EARLIER YEARS WHERE THE ASSESSEE HAS REGULARLY BEEN TREATED AS INCOME ASSESSABLE UNDER TH E HEAD HOUSE PROPERTY AS THE SAME IS FULLY AND TOTALLY RELATED TO THE HOUSE PROPERTY AND ACCORDINGLY HELD THAT SUCH INCOMES ARE TO BE ASSESSED AS INCOME FROM HOUSE PROPERTY AS IN THE EARLIER YEARS AND ALLOWED. 4. THE LD. DR RELIED UPON THE ORDER OF AO WH EREAS THE LD. COUNSEL FOR THE ASSESSEE RELIED UPON THE SUBMISSIONS MADE BEFORE LD. CIT(A) AND THE ORDER OF LD. CIT(A). 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. THE UNDISPUTED FACTS OF THE PRESENT CASE ARE THAT THE ASSESSEE HAS RECEIVED RENTS FROM BENGAL UNITECH DEVYANI INTERNATIONAL AND MANPOWER SERVICES. FROM THESE THREE TENANTS THE ASSESSEE HAD ALSO RECEIVED RENTS FOR UTILITY SERVICES FOR PROVIDING UPGRADATION AMENITIES AND UTILITIES IN THE PREMISES. AS PER BILLS ON RECO RD RAISED UPON THESE TENANTS THE RECEIPTS ARE PART AND PARCEL OF THE RENTS WHICH ARE BEING RECEIVED BY THE ASSESSEE FROM THESE TENANTS. THE AGREEMENTS WITH ALL THE THREE TENANTS ARE ON RECORD WHICH DATED 21 ST JULY 2005 10 TH APRIL 2007 AND 17 TH JUNE 200 5 RESPECTIVELY. IT WAS STATED THAT RECEIPTS FROM UTILITY SERVICES ARE INTIMATELY CONNECTED WITH THE PROPERTY ITSELF AND PART AND PARCEL OF THE INCOME DERIVED BY THE ASSESSEE AS RENT FROM THESE TENANTS. IT IS ONLY FOR THE PURPOSE OF RECEIVING RENTS THAT THE ASSESSEE CHARGES RENT FOR SPACE TENANTED FOR PROVIDING RELEVANT UTILITIES SUCH AS SPECIAL WIDOWS DOORS FLOORING AND OTHER ITEMS AS DULY STATED AND NOTED IN THE AGREEMENT ITSELF AND WHICH UTILITIES CANNOT BE SEPARATED FROM THE TENANTED SPACES IN ANY MA NNER. IN THE EARLIER YEARS AO HAS ACCEPTED THE FACTUAL ASPECTS OF THE MATTER AND HAD TREATED THE UTILITY INCOME AS PART AND PARCEL OF THE RENTALS AND THUS ASSESSED AS INCOME FROM HOUSE ITA NO. 1692/KOL/2012 M/S.MANGALAM FASHIONS LTD. . A.YR. 2009 - 10 3 PROPERTY. IN A.YR.2006 - 07 THE ASSESSEE HAD RECEIVED LEASE RENT OF RS.26 51 861/ - AND UTILITY CHARGES OF RS.67 04 688/ - . AO HAS ACCEPTED THE AFORESAID FIGURES FOR DETERMINING THE INCOME FROM HOUSE PROPERTY AND AFTER ALLOWING NECESSARY DEDUCTIONS U/S 22 OF IT ACT WERE ALLOWED. SIMILARLY IN A.YRS. 2007 - 08 AND 2008 - 09 THE ASSESSE E WAS HAVING RENTAL INCOME AND UTILITY RECEIPTS WHICH WAS DECLARED AS RENTAL INCOME AND WERE ACCEPTED BY AO AND WERE ASSESSED AS INCOME FROM HOUSE PROPERTY. THERE IS NOTHING ON RECORD THAT SUCH UTILITY RECEIPTS ARE NOT FROM THE SAID TENANTS FROM WHOM THE A SSESSEE DERIVED RENT. THE LD. CIT(A) HAS RIGHTLY DISTINGUISHED THE DECISIONS RELIED UPON BY THE AO. THE FACTS REMAINING THE SAME OVER THE PAST YEARS AS ALREADY MENTIONED HEREIN ABOVE AND THERE IS NO CHANGE AND THE DOCTRINE OF CONSISTENCY HAS TO BE TAKEN IN TO CONSIDERATION. IN THE CIRCUMSTANCES AND FACTS OF THE CASE WE FIND NO INFIRMITY IN THE ORDER OF LD. CIT(A)IN PARA 5.2.6. WHO HAS RIGHTLY DELETED THE DISALLOWANCE MADE BY AO. THUS GROUND NO.1 OF THE REVENUE IS DISMISSED. 6. AS REGARDS GROUND NO.2 OF THE REVENUE AO HAS DISALLOWED INSURANCE PREMIUM PAID BY THE ASSESSEE AMOUNTING TO RS.1 81 851/ - . THE LD. CIT(A) ALLOWED THE SAME VIDE PARA 3.0. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. AS PER SECTION 24(I)(II) THE AMOUNT OF P REMIUM PAID TO INSURE THE PROPERTY AGAINST RISK OF DAMAGE OR DESTRUCTION IS ALL OWABLE IN THE IMPUGNED YEAR AS PER INCOME TAX ACT 1961. THEREFORE THE SAID INSURANCE PREMIUM PAID TO INSURE THE PROPERTY IS AN ALLOWABLE DEDUCTION. NOTHING HAS BEEN BROUGHT ON RECORD BY THE REVENUE THAT THE SAID PREMIUM HAS NOT BEEN PAID TO INSURE THE PROPERTY AGAINST RISK OF DAMAGE OR DESTRUCTION. ACCORDINGLY WE FIND NO INFIRMITY IN THE ORDER OF LD. CIT(A) WHO HAS RIGHTLY ALLOWED THE CLAIM OF ASSESSEE. THUS GROUND NO.2 OF THE REVENUE IS DISMISSED. 8. AS REGARDS GROUND NO.3 OF THE REVENUE THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HAS INCURRED AN EXPENDITURE OF RS.13 93 080/ - AS BUSINESS ADVISORY EXPENSES PAID TO JONES LANG LASSALE PROPERTY CONSULTANTS (INDIA)PVT. LTD. AO OBSERVED THAT THIS PAYMENT WAS MADE FOR MANAGEMENT ADVICE REGARDING BUSINESS CENTRE FOR THE SAID ITA NO. 1692/KOL/2012 M/S.MANGALAM FASHIONS LTD. . A.YR. 2009 - 10 4 PROPERTY AND ACCORDINGLY HELD THAT THIS WAS NOT AN ALLOWABLE EXPENSES AND DISALLOWED THE SAME. 8.1. THE LD. CIT(A) VIDE PARA 5.4.2. ALLOWED THE SAME BY CON SIDERING THE EXPLANATIONS OF THE ASSESSEE. SINCE THE ASSESSEE HAD CLAIMED DEDUCTION OF THE EXPENSES UNDER THE HEAD BUSINESS AND NOT FROM UNDER THE HEAD INCOME FROM HOUSE PROPERTY THE EXPENDITURE IS TOTALLY RELATED TO THE ESTABLISHMENT OF BUSINESS CENTRE WH ERE FROM THE ASSESSEE HAD DERIVED INCOME CONSIDERABLY IN THE SUBSEQUENT YEARS AS WELL. 9. THE LD. DR RELIED UPON THE ORDER OF AO WHEREAS THE LD. COUNSEL FOR THE ASSESSEE RELIED UPON THE SUBMISSIONS MADE BEFORE LD. CIT(A) AND THE ORDER OF LD. CIT(A). 10. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. THE UNDISPUTED FACTS IN THE PR ESENT CASE ARE THAT THE ASSESSEE HAD PAID RS.13 93 080/ - TO JONES LANG LASSALE PROPERTY CONSULTANTS (INDIA) PVT. LTD. AS MANAGEMENT ADVISORY PAYMENT. THIS IS ALSO NOT DISPUTED. AO HAD OBSERVED IN THE ORDER THAT THE AMOUNT WAS SPENT FOR MANAGEMENT ADVICE REGARDING BUSINESS CENTRE WHICH WAS LET OUT. THE ASSESSEE HAS CLAIMED THE SAID EXPENDITURE UNDER THE HEAD BUSINESS ADVISORY EXPENSES . IT WAS STATED THAT T HIS FIRM WAS ACTING AS AN AGENT FOR ARRANGING AN INTERNATIONAL FIRM OPERATING IN INDIA IN THE NAME OF MLS BUSINESS CENTERS (I)PVT.LT D. (IN SHORT MLS) TO BE ASSOCIA TED WITH THE ASSESSEE FOR RUNNING A BUSINESS CENTRE OPERATION FROM ASSESSEE S SPACE. COPY OF THE AGREEMENT HAS BEEN PLACED ON RECORD. DURING THE YEAR THE ASSESSEE HAD DECLARED INCOME OF RS.1 088/ - FROM THE SAID BUSINESS CENTRE. THE ASSESEE HAD THE INCOME FROM SUCH BUSINESS CENTRE IN THE FOLLOWING YEARS I.E. A.YR.2010 - 11 AT RS.89 49 658/ - AND DURIN G A.YR.2011 - 12 AT RS.13 00 90 880/ - . IT HAS BEEN SHOWN AS BUSINESS INCOME AND NOT INCOME FROM HOUSE PROPERTY AS THERE IS NO ELEMENT OF RENT INVOLVED IN THESE ACTIVITIES. ACCORDINGLY WE ARE OF THE VIEW THAT SUCH EXPENDITURE PAID FOR AN ADVISORY CAPACITY IS A REVENUE EXPENDITURE AND IS ALLOWABLE U/S 37(1) OF THE ACT. WE FIND NO INFIRMITY IN THE ORDER OF LD. CIT(A) WHO HAS RIGHTLY ALLOWED THE CLAIM OF ASSESSEE. THUS GROUND NO.3 OF THE REVENUE IS DISMISSED. ITA NO. 1692/KOL/2012 M/S.MANGALAM FASHIONS LTD. . A.YR. 2009 - 10 5 11. AS REGARDS GROUND NO.4 AO DISALLOWED RS.24 00 0 00/ - AS DIRECTORS REMUNERATION. IT WAS CLAIMED THAT THE AFORESAID REMUNERATION WAS PAID TO THE DIRECTORS IN THE COURSE OF BUSINESS FOR LETTING OUT OF THE PROPERTY AND ACCORDINGLY THE SAME WAS DISALLOWED. 11.1. THE LD.CIT(A) ALLOWED THE SAME SINCE SAME HAD BEEN ALLOWED CONSISTENTLY IN THE EARLIER YEARS AND ALSO THE ASSESSEE IS DOING BUSINESS WHO ARE LOOKING AFTER ALL THE ACTIVITIES OF THE BUSINESS AND THERE IS A DEDUCTION AGAINST THE BUSINESS INCOME AND ACCORDINGLY ALLOWED THE SAME. 12. T HE LD. DR RELIED UP ON THE ORDER OF AO WHEREAS THE LD. COUNSEL FOR THE ASSESSEE RELIED UPON THE SUBMISSIONS MADE BEFORE LD. CIT(A) AND THE ORDER OF LD. CIT(A). 13. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. THE UNDISPUTED FACTS ARE THAT REMUNERATIO NS HAVE BEEN PAID TO TWO DIRECTORS THE DETAILS OF WHICH ARE PLACED ON RECORD AND THE DIRECTORS ARE WHOLE TIME DIRECTORS LOOKING AFTER THE BUSINESS OF THE ASSESSEE AS WELL AS FOR DEVELOPMENT WORK. THE ASSESSEE AS A RESULT ENTERED INTO AN AGREEMENT FOR NEW BUSINESS VENTURE AS OBSERVED HEREIN ABOVE AND THEREFORE SUCH AN EXPENDITURE WHICH HAS BEEN CONSISTENTLY ALLOWED BY THE DEPARTMENT AND THERE IS NO DISPUTE TO THE FACT THAT THE DOCTRINE OF CONSISTENCY IS TO BE TAKEN INTO CONSIDERATION AND THE SAID EXPENDITUR E IS ALLOWABLE IN THE IMPUGNED YEAR AS WELL. ACCORDINGLY WE FIND NO INFIRMITY IN THE ORDER OF LD. CIT(A) WHO HAS RIGHTLY ALLOWED THE CLAIM OF ASSESSEE. THUS GROUND NO.4 OF THE REVENUE IS DISMISSED. 14 . IN THE RESULT THE APPEAL OF THE REVENUE IN ITA NO.16 92 /KOL/2012 IS DISMISSED. O RDER PRONOUNCE D IN THE COURT ON 29.04.2015. SD/ - SD/ - [ MAHAVIR SINGH ] [ B.P.JAIN ] JUDICIAL MEMBER ACCOUNTANT MEMBER DATE : 29.04.2015. R.G.(.P.S.) ITA NO. 1692/KOL/2012 M/S.MANGALAM FASHIONS LTD. . A.YR. 2009 - 10 6 COPY OF THE ORDER FORWARDED TO: 1 . M/S.MANGALAM FASHIONS LTD. 22 CAMAC STREET KOL KATA - 700016. 2 D.C.I.T. CIRCLE - 7 KOLKATA. 3 . CIT(A) - VIII KOLKATA 4. CIT KOLKATA 5. CIT(DR)KOLKATA BENCHES KOLKATA. TRUE COPY BY ORDER ASST. REGISTRAR I TAT KOLKATA BENCHES