D.C.I.T. Cir-7, Kolkata, Kolkata v. M/s. Akarsh Printers Ltd., Kolkata

ITA 2279/KOL/2007 | 2004-2005
Pronouncement Date: 19-03-2010

Appeal Details

RSA Number 227923514 RSA 2007
Assessee PAN AADCA0767E
Bench Kolkata
Appeal Number ITA 2279/KOL/2007
Duration Of Justice 2 year(s) 3 month(s) 22 day(s)
Appellant D.C.I.T. Cir-7, Kolkata, Kolkata
Respondent M/s. Akarsh Printers Ltd., Kolkata
Appeal Type Income Tax Appeal
Pronouncement Date 19-03-2010
Appeal Filed By Department
Bench Allotted B
Tribunal Order Date 19-03-2010
Assessment Year 2004-2005
Appeal Filed On 27-11-2007
Judgment Text
1 IN THE INCOME TAX APPELLATE TRIBUNAL : B BENCH : KOLKATA [ BEFORE SRI B.R. MITTAL J.M. & SHRI B.C. MEENA A.M. ] I.T.A.NO. 2279 (KOL) OF 2007 ASSESSMENT YEAR 2004-05 DY.COMMISSIONER OF INCOME-TAX -VS- M/S. A KARSH PRINTERS LTD. CIRCLE-7 KOLKATA. KOLKATA. (PAN-AADCA0767E] ( APPELLANT ) ( RESPONDENT ) APPELLANT BY : SRI PIYUSH KOLHE RESPONDENT BY : SRI ARVIND AGARWAL O R D E R PER SRI B.C.MEENA A.M. : THE APPEAL OF THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 05.09.2007 OF C.I.T.(A)-VII KOLKATA FOR ASSESSMENT YEAR 2004-05. 2. THE FIRST GROUND IN THIS APPEAL IS AGAINST DIRECTION OF LD . C.I.T.(A) TO ALLOW BUSINESS LOSS OF RS.22 31 246/-. AT THE TIME OF HEARING BEFORE US THE LD. D.R. SUPPORTED THE ORDER OF A.O. THE ASSESSEES LE ARNED COUNSEL SUBMITTED THAT THE ASSESSEE-COMPANY WAS ENGAGED IN PR INTING JOB IN TIMES OF INDIA AND OTHER NEWSPAPERS ON BEHALF OF BENNETT COLEMAN CO. LTD. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAD INCURRE D LOSS OF RS.22 31 246/-. HE SUBMITTED THAT THE ACCOUNTS OF THE ASS ESSEE ARE AUDITED. ALL THE BILLS/VOUCHERS ALONG WITH COMPLETE DETAILS OF EXPENSE S AND BOOKS OF ACCOUNT WERE DULY PRODUCED DURING ASSESSMENT PROCEED ING WHEREIN NO SPECIFIC DEFECT COULD BE POINTED OUT BY THE A.O. OR THERE IS NO FINDING THAT ANY PARTICULAR EXPENDITURE WAS NOT RELATED TO ASSESSEES BU SINESS. THE A.O. HOWEVER ON MERE SURMISES AND CONJECTURES DISALLOWED TH E ENTIRE BUSINESS LOSS ON THE GROUND THAT THERE WAS NO BUSINESS ACTIVITY DURING THE YEAR UNDER APPEAL. WHILE DOING SO HE EVEN DISALLOWED STATUTORY EXPEN SES EXPENSES ALLOWABLE U/S.35D DEPRECIATION ROUTINE BUSINESS EXPENSES E TC. HE SUBMITTED THAT THERE WAS TEMPORARY LULL IN THE BUSINESS. THAT THE AGREEMENT FOR PRINTING OF NEWSPAPERS ON BEHALF OF M/S. BENNETT COLEMAN CO. LTD. ST OOD TERMINATED LAST YEAR AND THE ASSESSEE-COMPANY WAS TRYING TO GET FRESH BUSINESS FROM NEWSPAPER COMPANIES. FURTHER THE ASSESSEE-COMPANY HA S BEEN RUNNING ITS REGISTERED OFFICE AND IT HAS ITS ESTABLISHMENT. NATURALLY TH EREFORE INCIDENTAL 2 EXPENSES IN THIS REGARD HAD ALSO BEEN INCURRED. FURTHER DURING THE PERIOD OF TERMINATION OF CONTRACT WITH B/S. BENNETT COLEMAN CO. LTD. THE ASSESSEE FOR ITS SURVIVAL AND TO MEET UP ITS FINANCIAL CRISIS EXPLOITED ITS C OMMERCIAL ASSETS BY LETTING THEM OUT TEMPORARILY. THEREFORE IT CANNOT BE HELD THAT THE COMPANY WAS OUT OF ITS BUSINESS ACTIVITIES MORE SO WHEN THERE WAS NO PERMANENT CLOSURE OF THE BUSINESS. HE FURTHER SUBMITTED T HAT IN THE P/L ACCOUNT FOR THE YEAR UNDER APPEAL THE ASSESSEE HAD SH OWN INCOME OUT OF RENT SERVICE CHARGE/COMMISSION WHICH IS EVIDENT FROM TDS C ERTIFICATES IN THIS REGARD. IN VIEW OF THE ABOVE THE LD. C.I.T.(A) HAS RIGHTLY DIRECTE D THE A.O. TO ALLOW THE ENTIRE BUSINESS LOSS OF RS.22 31 246/-. 3. WE HAVE HEARD THE PARTIES AND PERUSED THE MATERIAL PLACED BEFORE US. IT IS NOT DISPUTED THAT THE ASSESSEE HAD BEEN DOING PRINTING JOB IN N EWSPAPERS ON BEHALF OF M/S. BENNETT COLEMAN CO. LTD. DURING THE YEAR UNDER APPEAL THE AGREEMENT FOR SUCH PRINTING JOB WAS CANCELLED AND TO SURVIVE AS WELL AS TO MEET UP THE FINANCIAL CRISIS THE ASSESSEE EXPLOITED COMMERC IAL ASSETS BY LETTING THEM OUT ON RENT. AS IS EVIDENT FROM P/L ACCOUNT THE ASSESSEE ALSO EARNED IN ADDITION TO RENTAL INCOME INCOME FROM SERVICE CHA RGE/COMMISSION. THE A.O. IN HIS ASSESSMENT ORDER HAS NOT POINTED OUT ANY IRREGULARITY IN MAINTAINING THE BOOKS OF ACCOUNT OR TO INDICATE ANY EXPEN DITURE WHICH WAS ACCORDING TO HIM NOT RELATED TO BUSINESS EXPENDITURE. HE DISALLOWED THE LOSS CLAIMED BY THE ASSESSEE ONLY ON THE GROUND THAT THE A SSESSEE HAD NO BUSINESS ACTIVITY DURING THE YEAR UNDER CONSIDERATION. ON THE ABOVE FACTS THE LD. C.I.T.(A) ALLOWED THE BUSINESS LOSS CLAIMED BY THE ASSESS EE BY HOLDING AS UNDER :- THE ASSESSING OFFICER DISALLOWED AN AMOUNT OF RS.22 31 246/- BEING THE BUSINESS LOSS. THE APPELLANT HAS AN ESTABLISHMENT INCURRED EXPENSES AND RETAINING ITS REGISTERED OFFICE. THE APPELLANT EXP LOITED ITS COMMERCIAL ASSETS DURING THE LULL IN THE BUSINESS. CASE LAW OF CIT V S. PREMCHAND JUTE MILLS LTD. 164 ITR 288 (CALCUTTA HIGH COURT) IS APPLICABLE TO THE CASE OF THE APPELLANT. REGARDING THE OBSERVATION OF THE ASSESSING OFFICER IN RESPECT OF NO BUSINESS ACTIVITY DURING THE YEAR THERE IS NO MATERIAL INDI CATION ON RECORD THAT WHETHER THE DISCONTINUANCE OF BUSINESS WAS A TEMPORARY OR H AD THE INTENTION OF CLOSING DOWN THE BUSINESS. IT IS FOR THE ASSESSING OFFICER TO ESTABLISH SUCH INFERENCE TO BRING ON RECORD A CONCRETE MATERIAL T O THAT EFFECT AND OTHERWISE THE SAME WILL BE LACKING THE SUPPORT. IN THE CASE OF LAKSMI NARAYAN BOARD MILLS PVT. LTD. VS. CIT 205 ITR 88 (CALCUTTA HIGH C OURT) WHEREIN IT WAS HELD THAT AS THERE WAS AN INTENTION TO RESUME THE BUSINE SS THE ASSESSEE WAS 3 ENTITLED TO ALLOWANCE OF CARRY FORWARD OF LOSS AND DEDUCTION OF RUNNING EXPENSES . 3.1. THERE IS DIFFERENCE BETWEEN LULL IN BUSINESS AND GOING OUT OF BUSINESS. A TEMPORARY DISCONTINUANCE OF BUSINESS MAY IN CERTAIN CIRC UMSTANCES GIVE RISE TO AN INFERENCE THAT THE BUSINESS IS GOING THROUGH A LEAN PERIOD OF TRANSACTION AND IT COULD BE REVIVED IF PROPER CIRCUMSTANCE S ARISE. OUR VIEW IS SUPPORTED BY THE DECISIONS OF THE HONBLE MADRAS HIGH C OURT IN THE CASES OF SAROJINI RAJAH VS. CIT [71 ITR 504] AND K. SREEDHARAN & C O. VS. CIT [202 ITR 796]. IT HAS BEEN HELD IN THE FOLLOWING CASES THAT IF A BUS INESS REMAINS IN TEMPORARY LULL OR IF ITS ACTIVITIES ARE KEPT UNDER SUSPENSIO N TEMPORARILY THE BUSINESS CANNOT BE CONSIDERED TO HAVE BEEN CLOSED OR D ISCONTINUED. THE PERIOD OF TEMPORARY LULL OF THE BUSINESS IS THUS REQUIRED TO BE TREATED AS ITS CONTINUATION. I) LAKSHMI NARAYANA BOARD MILLS PR. LTD. [205 ITR 88 (CAL)AT 91-92] II) VIKRAM COTTON MILLS LTD. 169 ITR 597 (SC) III) CIT VS. UNITED COLLIERIES [49 TAXMAN 227 (CAL)]. THE SAME ANALOGY WOULD HOLD GOOD IN RESPECT OF THE RELATIV E IMPORTANCE OF TWO OR MORE BUSINESSES BEING CARRIED ON BY A CONCERN. SIMPLY BECAUSE THE VOLUME OF THE PRINCIPAL BUSINESS GOES DOWN TEMPORARILY IT CANNOT BE SAID THAT IT HAS LOST THE PRINCIPAL CHARACTER. WE FURTHER FIND THAT HONBLE J URISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. GANGA PROPERTIES LTD. [199 ITR 94 (CAL)] HELD AS UNDER :- IN OUR VIEW A LIMITED COMPANY EVEN IF IT DOES NOT CAR RY ON BUSINESS BUT IT DERIVES INCOME FROM OTHER SOURCES HAS TO MA INTAIN ITS ESTABLISHMENT FOR COMPLYING WITH STATUTORY OBLIGATIO NS SO LONG IT IS IN OPERATION AND ITS NAME IS NOT STRUCK OFF THE REGISTE R OR UNLESS THE COMPANY IS DISSOLVED WHICH MEANS CESSATION OF ALL CORP ORATE ACTIVITIES OF THE COMPANY FOR ALL PRACTICAL PURPOSES. SO LONG AS IT IS IN OPERATION IT HAS TO MAINTAIN ITS STATUS AS A COMPANY AND IT HAS TO DISCHARGE CERTAIN LEGAL OBLIGATIONS AND FOR THAT PURPOSE IT IS NECESSARY TO APPOINT CLERICAL STAFF AND SECRETARY OR ACCOUNTANT AN D INCUR INCIDENTAL EXPENSES. THEREFORE IT IS EVIDENT THAT THE BUSINESS OF THE ASSESSEE WAS IN TEMPORARY LULL DURING WHICH PERIOD THE ASSESSEE EXPLOITED ITS COMMERCIAL ASSETS FOR EARNING INCOME. IN ORDER TO BE A BUSINESS INCOME WITHIN THE MEAN ING OF SEC.28 THERE MUST BE EVIDENCE OF EXPLOITATION OF COMMERCIAL ASSET. IN TH IS CASE AS STATED 4 ABOVE THE ABOVE CRITERIA EXIST BECAUSE THE ASSESSEE H AS AN ESTABLISHMENT INCURRED EXPENSES ON RETAINING ITS REGISTERED OFFICE AND TO SURVIVE EXPLOITED ITS COMMERCIAL ASSETS DURING THE LULL IN THE BUSINESS. MOREOVER AS RIGHTLY HELD BY THE C.I.T.(A) THE A.O. COULD NOT BRING ON RECORD ANY EV IDENCE TO ESTABLISH THAT THE ASSESSEE HAD INTENTION TO CLOSE DOWN THE BUSIN ESS OR IT HAS ALREADY CLOSED DOWN ITS BUSINESS ACTIVITIES. THEREFORE SIMPLY ON THE REASON THAT THERE WAS TEMPORARY CESSATION OF BUSINESS THE A.O. WAS NOT JUS TIFIED IN DISALLOWING THE LOSS INCURRED BY THE ASSESSEE. IN THIS VIEW OF THE M ATTER WE UPHOLD THE ORDER OF THE LD. C.I.T.(A) ON THIS ISSUE AND THIS GROUND OF THE REVENUE IS REJECTED. 4. THE NEXT GROUND OF THE REVENUE IS AGAINST DIRECTION O F C.I.T.(A) TO TREAT THE INTEREST INCOME OF RS.32 676/- AS BUSINESS INCOME AS A GAINST INCOME FROM OTHER SOURCES TAKEN BY THE A.O. THE ASSESSEE IN ITS P/L ACCOUNT HAD SHOWN INTEREST INCOME OF RS.32 676/- AS BUSINESS INCOME. TH E A.O. ALLOWED 10% I.E. RS.3 267/- AS INCURRED BY THE ASSESSEE FOR EARNING THIS INCOME AND THE BALANCE OF RS.29 409/- WAS ADDED UNDER THE HEAD INC OME FROM OTHER SOURCES. THE C.I.T.(A) FOLLOWING THE DECISION IN THE CASE O F CIT VS. PARAMOUNT PREMISES (P) LTD. [190 ITR 259 (BOM)] HELD THAT THE ASSESSEE -COMPANY EARNED THE INTEREST INCOME OF RS.32 676/- FROM THE LOAN GIVEN OUT OF SURPLUS BUSINESS FUND AVAILABLE AND SUCH INTEREST CONSTITUTED BUS INESS INCOME. HE THEREFORE DIRECTED THE A.O. TO TREAT THE INTEREST INCOME OF RS.32 676/- AS ASSESSEES BUSINESS INCOME. WE FIND THAT THE A.O. HAS NOT GIVEN ANY REASON WHATSOEVER IN TREATING 10% OF THE SAID INTEREST INCOME AS INCURRED FOR EARNING INTEREST INCOME AND THE BALANCE WAS TREATED AS INCOME FR OM OTHER SOURCES WHEREAS THE ASSESSEE CLAIMED THAT THE ENTIRE INTEREST INCOME OF RS.3 2 676/- IS ITS BUSINESS INCOME. IT WAS THE CLAIM OF THE ASSESSEE THAT BY TEMPORARY DEPLOYMENT OF SURPLUS BUSINESS FUND AS LOAN TO OTHERS IT H AD EARNED INTEREST INCOME AND THE SAME SHOULD BE ASSESSED AS ITS BUSINESS INCOME. IN SUPPORT OF THIS CONTENTION THE LEARNED COUNSEL HAS RELIED UPON THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF C.I.T. VS. TIRUPATI W OOLLEN MILLS LTD. [193 I.T.R. 252 (CAL)]. IN THIS CASE THEIR LORDSHIPS OF HONBLE HIGH COURT HELD AS UNDER :- 5 HELD THAT THE TRIBUNAL HAD FOUND THAT THE INTEREST AR OSE FROM UTILIZATION OF COMMERCIAL ASSETS. THE FUNDS UTILIZED IN MAKING F IXED DEPOSITS WITH BANKS WERE BUSINESS FUNDS LYING TEMPORARILY SURPLUS WITH THE ASSESSEE. IT WAS THEREFORE ASSESSABLE AS BUSINESS INCOME AND R EVENUE EXPENDITURE COULD BE DEDUCTED FROM IT. THE RATIO OF THE ABOVE DECISION WOULD BE SQUARELY APPLICAB LE TO THE CASE OF THE ASSESSEE BECAUSE THE FACTS ARE IDENTICAL. IT HAS BEEN S TATED BY THE ASSESSEES COUNSEL THAT INTEREST HAS BEEN EARNED ON THE UTILIZATION OF COMMERCIAL ASSETS WHICH WERE LYING IN THE FORM OF SURPLUS FUND. THE ABOVE FA CTUAL ASSERTION HAS NOT BEEN CONTROVERTED BY THE REVENUE. IN VIEW OF THE ABOVE WE RESPECTFULLY FOLLOWING THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT UPHO LD THE ORDER OF THE C.I.T.(A) DIRECTING THE A.O. TO ASSESS THE INTEREST INCOM E AS BUSINESS INCOME. THIS GROUND OF THE DEPARTMENT IS DISMISSED. 5. THE NEXT GROUND IN THIS REVENUES APPEAL IS AGAINST DELETION OF DISALLOWANCE OF RS. 1 53 000/- U/S. 14A OF THE ACT BY THE C.I .T.(A). DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE CLAIMED TO HA VE EARNED DIVIDEND INCOME OF RS.15 30 000/- WHICH IS EXEMPTED FROM TAX U/S. 1 0(34) OF THE ACT. THE A.O. BY INVOKING PROVISIONS OF SEC. 14A DISALLOWED ON ESTIM ATE 10% OF THE SAID EXEMPTED INCOME AND ADDED THE SUM OF RS.1 53 000/- T O THE TOTAL INCOME OF THE ASSESSEE. THE C.I.T.(A) DELETED THE DISALLOWANCE MAINLY ON THE GROUND THAT THE A.O. IN ONE HAND DISALLOWED ENTIRE BUSINESS EXPENDITURE AND AGAIN DISALLOWED ON ESTIMATE 10% OUT OF DIVIDEND INCOME. ACC ORDING TO THE C.I.T.(A) THE ASSESSEE HAD NOT MADE ANY PURCHASE OR SALE OF SHARES DURING THE YEAR UNDER CONSIDERATION AND THE DIVIDEND WAS RECE IVED ONLY THROUGH REGISTERED POST. HE THEREFORE HELD THAT THE ASSESSEE D ID NOT INCUR ANY EXPENDITURE ON EARNING DIVIDEND INCOME AND OTHER EXPENDIT URE WAS ROUTINE BUSINESS EXPENDITURE. 5.1. THE ISSUE OF DISALLOWANCE U/S. 14A HAS BEEN CONSIDERE D BY THE SPECIAL BENCH OF I.T.A.T. MUMBAI IN THE CASE OF ITO VS. DAGA CAP ITAL MANAGEMENT P. LTD. [117 ITD 169 (MUM-SB)]. THE MATTER IS THEREFORE SENT BACK TO THE FILE OF A.O. TO DECIDE THE ISSUE IN TERMS OF THE SAID SPECIAL BENCH DECISION OF I.T.A.T. WE ORDER ACCORDINGLY. 6 6. VIDE GROUNDS NO. 4 5 & 6 THE REVENUE HAS CHALLENGED THE DIRECTION OF THE C.I.T.(A) IN TREATING THE FOLLOWING RECEIPTS AS BUSINESS INCOME :- I) RENTAL INCOME RS.1 75 000 II) LIABILITIES WRITTEN BACK RS. 49 144 III) SERVICE CHARGES RS.8 40 000 6.1. WE HAVE HEARD THE PARTIES AND PERUSED THE MATERIA L PLACED BEFORE US. WHILE DEALING GROUND NO.1 ABOVE WE HAVE ALREADY HELD THAT THE ASSESSEE DURING TEMPORARY LULL IN THE BUSINESS HAS EARNED INCOME B Y EXPLOITING ITS COMMERCIAL ASSETS AND AS PER LAW AS DISCUSSED ABOVE THE SAME IS TO BE TREATED AS BUSINESSS INCOME. THE LD. C.I.T.(A) FOLLOWING THE DECISION IN THE CASE OF CIT VS. KATIHAR JUTE MILLS (P) LTD. [116 ITR 781 CA L)] DIRECTED THE A.O. TO TREAT THE SERVICE CHARGES OF RS.8 40 000/- AS ASSESS EES BUSINESS INCOME. SIMILARLY IN THE CASE OF RENTAL INCOME OF RS.1 75 000/- THE A.O . TREATED THE SAME AS INCOME FROM HOUSE PROPERTY. DURING TEMPORARY CESSATION OF BUSINESS THE ASSESSEE HAD LET OUT ITS FLAT WHICH WAS ITS C OMMERCIAL ASSET FOR EARNING INCOME AS THE SAME WAS NOT REQUIRED AT THE RELE VANT TIME FOR ITS BUSINESS USE. THE C.I.T.(A) ALLOWED THE CLAIM OF THE ASSESSEE . THE A.O. ADDED THE SUM OF RS.49 144/- BEING THE LIABILITIES NO LONGER REQUIR ED WRITTEN BACK. THE C.I.T.(A) FOUND THAT THE EARLIER BUSINESS LIABILITIES WHICH WE RE CREATED BY DEBITING BUSINESS EXPENSES DID NOT EXIST AND HENCE THE A SSESSEE WROTE BACK THE LIABILITIES AND CREDITED THE SAME IN THE P/L ACCOUNT AS BUSINESS INCOME. HE THEREFORE DIRECTED THE A.O. TO TREAT THE SAME ASSESS EES BUSINESS INCOME. CONSIDERING THE FACTS OF THE CASE AND OUR FINDINGS GIVEN IN RESPECT OF BUSINESS LOSS OF RS.22 31 246/- WE FIND NO REASON TO INTERFERE WITH T HE ORDER OF THE LD. C.I.T.(A) ON THESE ISSUES. WE THEREFORE UPHOLD HIS FINDINGS IN THIS REGARD AND REJECT THE GROUNDS OF THE REVENUE. 7. IN THE RESULT THE REVENUES APPEAL IS PARTLY ALLOWED AS INDICATED ABOVE. ORDER IS PRONOUNCED IN THE COURT ON 19.03.2010 SD/- SD/- [B.R.MITTAL] [B.C. MEENA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 19-03-2010 7 COPY FORWARDED TO : 1. M/S. AKARSH PRINTERS LTD. M/S. B.GHOSH & CO. P. LTD. 19/1 CAMAC STREET KOLKATA. 2. D.C.I.T. CIRCLE-7 KOLKATA. 3. C.I.T.(A)- VII KOLKATA. (4) CIT KOL- 5. THE DEPARTMENTAL REPRESENTATIVE ITAT KOLKATA. TRUE COPY BY ORDER [DKP] DY. REGISTRAR.