M/s Krishna Refractories P. Ltd., Mandi Gobindgarh v. ITO, Rajpura

ITA 307/CHANDI/2011 | 2007-2008
Pronouncement Date: 15-07-2011 | Result: Partly Allowed

Appeal Details

RSA Number 30721514 RSA 2011
Assessee PAN AACCK4579P
Bench Chandigarh
Appeal Number ITA 307/CHANDI/2011
Duration Of Justice 3 month(s) 24 day(s)
Appellant M/s Krishna Refractories P. Ltd., Mandi Gobindgarh
Respondent ITO, Rajpura
Appeal Type Income Tax Appeal
Pronouncement Date 15-07-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted B
Tribunal Order Date 15-07-2011
Date Of Final Hearing 29-06-2011
Next Hearing Date 29-06-2011
Assessment Year 2007-2008
Appeal Filed On 22-03-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES B CHANDIGARH BEFORE SHRI D.K.SRIVASTAVA ACCOUNTANT MEMBER AND MS SUSHMA CHOWLA JUDICIAL MEMBER ITA NO. 307/CHD/2011 ASSESSMENT YEAR: 2007-08 M/S KRISHNA REFRACTORIES P LTD. VS. THE ITO WARD MANDI GOBIDGARH RAJPURA PAN NO. AACCK 4579P (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI T.N.SINGLA RESPONDENT BY: SHRI N.K.SAINI ORDER PER SUSHMA CHOWLA JM THE APPEAL BY THE ASSESSEE IS AGAINST THE ORDER OF CIT(A) PATIALA DATED 27.1.2011 RELATING TO ASSESSMENT YEAR 2007-08 AGAINST THE ORDER PASSED UNDER SECTION 143(3) OF THE I.T. ACT 1961. 2. THE GROUND NO.1 RAISED BY THE ASSESSEE BEING GEN ERAL IS DISMISSED. 3. THE GROUND NOS. 2 & 3 RAISED BY THE ASSESSEE ARE AS UNDER:- 2. THAT THE LD. CIT(A) WRONGLY ASSESSED THE INCOME FRO M LEASE UNDER THE HEAD INCOME FORM OTHER SOURCES INSTEAD OF INCOME FROM BUSINESS & PROFESSION. 3. THAT THE LD. CIT(A) HAS WRONGLY MADE AN ADDITION OF RS. 3 34 650/- IN THE INCOME OF THE ASSESSEE BY DISALLOWING SECURITY SALARY ACCOUNTING AND MAINTENANCE EXPENSES . 2 4. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E HAD SHOWN INCOME FROM LEASING OF ITS PLANT AND MACHINERY TO M/S PION EER CERAMICS. THE ASSESSEE HAD LEASED ITS UNIT AT MONTHLY LEASE CHARG ES OF RS. 75 000/- FOR THE PERIOD 1.7.2006 TO 30.6.2011. AGAINST THE SAID LEASE INCOME THE ASSESSEE HAD CLAIMED EXPENDITURE OF RS. 3 34 650/-. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE EXPENDITURE INCURR ED BY THE ASSESSEE WAS NOT ATTRIBUTABLE TO THE EARNING OF THE LEASED INCOM E DECLARED BY THE ASSESSEE. THE ASSESSING OFFICER NOTED THAT ALL THE EXPENDITURE RELATING TO BUILDING AND MACHINERY WAS TO BE BORNE BY LESSEE AS PER THE LEASE AGREEMENT. THE ASSESSING OFFICER FURTHER OBSERVED THAT AS THE ENTIRE FACTORY INCLUDING THE PLANT & MACHINERY AND BUILDIN G HAD BEEN HANDED OVER TO THE LESSEE SECURITY OF THE BUILDING WAS TH E DUTY OF THE LESSEE AND NO EXPENDITURE ON ACCOUNT OF SECURITY IS TO BE ALLO WED IN THE HANDS OF THE ASSESSEE. THE ASSESSING OFFICER FURTHER HELD THAT INCOME EARNED FROM HIRING OUT PLANT AND MACHINERY WAS INCOME FROM OTH ER SOURCES AND NOT INCOME FROM BUSINESS OR PROFESSION. ACCORDINGLY T HE LEASE INCOME EARNED BY THE ASSESSEE WAS ASSESSED U/S 56 OF THE A CT. IT WAS FURTHER HELD THAT THE EXPENDITURE OF RS. 3 34 650/- WAS NOT ALLO WABLE UNDER SECTION 57 OF THE ACT. THE CIT(A) UPHELD THE ORDER OF THE ASS ESSING OFFICER ON BOTH COUNTS I.E. ASSESSMENT OF LEASE CHARGES AS INCOME F ROM OTHER SOURCES AND THE DISALLOWANCE OF EXPENDITURE CLAIMED. THE ASSES SEE IS IN APPEAL AGAINST THE ORDER OF CIT(A). 5. THE LD. AR FOR THE ASSESSEE POINTED OUT THAT THE EXPENDITURE INCURRED WAS IN CONNECTION WITH THE LEASE INCOME EA RNED BY THE ASSESSEE. IT WAS EXPLAINED BY THE LD. AR THAT ONE SECURITY O FFICER WAS ENGAGED BY THE ASSESSEE IN ORDER TO TAKE CARE OF BOTH THE UNIT AND THE PLANT & MACHINERY LEASED OUT BY THE ASSESSEE. FURTHER SAL ARY EXPENSES WERE ON 3 ACCOUNT OF ONE OF THE PERSONNEL WITHHELD BY THE ASS ESSEE IN CASE THE PLANT AND MACHINERY IS RUN BY THE ASSESSEE IN FUTURE. T HE LD. DR FOR THE REVENUE PLACED RELIANCE ON THE ORDER OF CIT(A). 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORDS. THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION HAD EN TERED INTO A LEASE AGREEMENT WITH M/S PIONEER CERAMICS SIRHIND UNDER WHICH IT HAD LEASED ITS REFRACTORY UNIT FOR A PERIOD OF FIVE YEARS FROM 1.7.2006 TO 30.6.2011. A COPY OF THE LEASE DEED IS PLACED ASSESSMENT PAGES 5 TO 11 OF THE PAPER BOOK. AS PER THE LEASE AGREEMENT THE ASSESSEE HAD LEASED OUT THE PLANT AND MACHINERY ALONGWITH SHED AND WORKSHOP EXCLUDING ONE MAIN HALL ATTACHED WITH TWO ROOMS AND TOILETS. THE LEASE MONE Y WAS FIXED AT RS. 75 000/- PER MONTH AS PER CLAUSE 3 OF THE AGREEMENT . THE PART OF THE PREMISES WITHHELD BY THE ASSESSEE WERE TO BE USED F OR ITS OWN PURPOSES. FURTHER THE MAIN GATE TO THE FACTORY AND PASSAGE T O THE UNIT WAS TO BE JOINTLY USED BY THE ASSESSEE AND THE LESSEE. THE A BOVE SAID CONVENANTS OF THE LEASE AGREEMENT REFLECTS THAT THE UNIT PER SE H AS BEEN HANDED OVER BY THE ASSESSEE TO THE LESSEE FOR BEING RUN ON LEASE AGAINST WHICH LEASE CHARGES ARE DUE TO BE PAID TO THE LESSOR I.E. ASSES SEE BEFORE US. THE ASSESSEE HAS FAILED TO ESTABLISH THAT IT HAS ANY IN TENTION OF RUNNING THE UNIT IN FUTURE AND IN THE ABSENCE OF THE SAME WE U PHOLD THE ORDER OF THE AUTHORITIES BELOW IN ASSESSING INCOME OF LEASE CHAR GES UNDER THE HEAD INCOME FROM OTHER COURSES. 7. NOW COMING TO THE EXPENDITURE TOTALING RS. 3 34 650/- AGAINST THE SAID LEASE INCOME SHOWN BY THE ASSESSEE THE BREAK UP OF THE EXPENDITURE IS AS UNDER:- 4 SECURITY EXPENDITURE RS. 84 000/- SALARY RS. 96 000/- ACCOUNTING CHARGES RS. 84 000/- MACHINERY MAINTENANCE RS. 48 150/- BUILDING EXPENSES RS. 22 500/- TOTAL RS.3 34 600/- 8. THE NATURE OF THE EACH HEAD OF EXPENDITURE REFLE CTS ITS CONNECTIVITY WITH LEASE INCOME EARNED BY THE ASSESSEE. AS EXPLA INED BY THE LD. AR FOR THE ASSESSEE THE SECURITY EXPENSES ARE INCURRED O N ONE GUARD PROVIDED TO TAKE CARE OF THE FACTORY BUILDING AND THE PLANT AND MACHINERY LEASED OUT BY THE ASSESSEE AND THE SAME BEING ATTRIBUTABLE TO THE LEASE MONEY EARNED BY THE ASSESSEE IS ALLOWABLE AS AN EXPENDITURE UN DER THE PROVISIONS OF SECTION 57(III) OF THE ACT. SIMILARLY THE SALARY EXPENSES ACCOUNTING CHARGES MACHINERY MAINTENANCE AND BUILDING EXPENDI TURE HAVING LAID DOWN FOR THE PURPOSE OF EARNING LEASE CHARGES IS AL LOWABLE AS AN EXPENDITURE. ACCORDINGLY. WE DIRECT THE ASSESSING OFFICER TO ALLOW THE EXPENDITURE TOTALING RS. 3 34 600/- AGAINST THE LEA SE INCOME EARNED BY THE ASSESSEE. THE GROUND NO. 2 RAISED BY THE ASSESSEE IS THUS DISMISSED AND THE GROUND NO.3 RAISED BY THE ASSESSEE IS ALLOWED. 9. IN THE RESULT APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 15 TH DAY OF JULY 2011. SD/- SD/- (D.K.SRIVASTAVA) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 15 TH JULY 2011 RKK COPY TO: 5 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR TRUE COPY BY ORDER ASSISTANT REGISTRAR ITAT CHANDIGARH