M/s Ayodhya Investment Syndicate, Aligarh v. ITO, Aligarh

ITA 410/AGR/2008 | 2003-2004
Pronouncement Date: 05-01-2010

Appeal Details

RSA Number 41020314 RSA 2008
Assessee PAN AACFA8287F
Bench Agra
Appeal Number ITA 410/AGR/2008
Duration Of Justice 1 year(s) 7 month(s)
Appellant M/s Ayodhya Investment Syndicate, Aligarh
Respondent ITO, Aligarh
Appeal Type Income Tax Appeal
Pronouncement Date 05-01-2010
Appeal Filed By Assessee
Bench Allotted SMC
Tribunal Order Date 05-01-2010
Date Of Final Hearing 08-12-2009
Next Hearing Date 08-12-2009
Assessment Year 2003-2004
Appeal Filed On 05-06-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AGRA BENCH SMC AGRA BEFORE SHRI P.K. BANSAL ACCOUNTANT MEMBER ITA NO.410/AGR./2008 ASST. YEAR: 2003-04 M/S. AYODHYA INVESTMENT SYNDICATE VS. INCOME TAX OFFICER WARD 4 MANICK CHOWK ALIGARH ALIGARH. (PAN : AACFA 8287 F) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI R.C. TOMAR I.T.P. RESPONDENT BY : SHRI S.R. SAHU JR. D.R. ORDER THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT(A) DATED 04.02.2008. 2. DURING THE COURSE OF HEARING THE ASSESSEE SUBMI TTED CONCISE GROUNDS OF APPEAL WHICH READS AS UNDER :- (1) THAT THE A.O. HAS ERRED ON FACTS AND IN LAW IN TREATING THE INCOME FROM HOUSE PROPERTY TO BE THE INCOME FROM BUSINESS/ PROFESSION. 2. MERELY BECAUSE THE HOUSE PROPERTY RENT RECEIPTS WHICH HAVE BEEN SHOWN IN THE SEPARATE HOUSE PROPERTY RENT ACCOUNT A ND AT THE END OF THE YEAR TRANSFER OF THE SAME TO PROFIT AND LOSS ACCOUN T DOES NOT JUSTIFY THE INFERENCE/ACTION OF THE AO THAT IT WILL BE INCOME F ROM BUSINESS/PROFESSION. 3) THAT THE A.O. HAS FAILED TO POINT OUT ANY DEVIAT ION FROM METHOD OF ACCOUNTING REGULARLY FOLLOWED BY THE APPELLANT AND ACCEPTED BY THE DEPARTMENT FOR MORE THAN A DECADE AND THE DISALLOWA NCE MADE ON THE ARBITRARY FINDING THAT INCOME FROM PROPERTY IS INCO ME FROM PROFESSION/BUSINESS BEING ILLEGAL AND AGAINST FACT DESERVES TO BE DELETED. 4) THAT THE A.O. HAS FAILED TO APPRECIATE THAT APPE LLANT IS NOT CARRYING ANY BUSINESS OF PURCHASE AND SALE OF PROPE RTY THE INCOME DERIVED FROM HOUSE PROPERTY IS FROM THE ASSET OF TH E FIRM LET OUT FOR THE LAST SO MANY YEARS AND AS SUCH IT WAS RIGHTLY COMPUTED U NDER THE HEAD INCOME 2 FROM HOUSE PROPERTY AS PER REGULARLY ACCEPTED METHO D OF ACCOUNTING FOLLOWED AND ACCEPTED BY DEPARTMENT YEAR AFTER YEAR AND EVEN UNDER SECTION 143(3) ASSESSMENT. ACTION TAKEN U/S 148 ON MERE CHANGE OF OPINION IS BAD IN LAW. 5) THAT THE A.O. HAS ERRED ON FACTS AND IN LAW IN DISALLOWING THE CLAIM OF DEDUCTION U/S 24(A) OF I.T. ACT AT RS.8086 6/- OUT OF JAI MAHAL LET OUT PROPERTY INCOME CREDITED IN SEPARATE HOUSE PROP ERTY ACCOUNT. 6) THAT THE APPELLANT CRAVES TO ADD OR ALTER ANY OT HER GROUND OF APPEAL AS MAY BE WARRANTED. 3. THE GROUND NOS.1 TO 5 RELATE TO THE SAME ISSUE O F ASSESSING THE INCOME RECEIVED FROM HOUSE PROPERTY UNDER THE HEAD INCOME FROM BUSINESS/ PROFESSION. THE CLAIM OF THE ASSESSEE IS THAT THE INCOME HAS TO BE ASSESSED UNDER THE HEAD I NCOME FROM HOUSE PROPERTY AND CONSEQUENTLY THE ASSESSEE IS ENTITLED FOR DEDUCTION UNDER SECTIO N 24(A) OF THE INCOME-TAX ACT 1961 (THE ACT HEREINAFTER). 4. THE BRIEF FACTS ARE THAT THE ASSESSEE IS A PARTN ERSHIP FIRM CONSISTING OF 4 PARTNERS. THE FIRM CARRIED ON THE BUSINESS OF FINANCING DISCOUNT ING OF DRAFTS AND CHEQUES AND THAT OF MONEY LENDING. THE FIRM ALSO OWNS IMMOVABLE PROPERTIES N AMED JAI MAHAL AND OTHER SMALL PROPERTIES FROM WHICH THE ASSESSEE RECEIVED THE RENTAL INCOME. THE INCOME FROM BUSINESS PROFESSION HAS ALSO BEEN EARNED IN THE FORM OF INTEREST EARNED ON MONEY ADVANCED TO THE DEBTORS AND COMMISSION ON DISCOUNTING OF BANK DRAFTS AND CHEQUE S. THE ASSESSEE HAD MAINTAINED REGULAR BOOKS OF ACCOUNTS IN WHICH THE INCOME EARNED BY THE ASSESSEE WERE DULY ACCOUNTED FOR. THE ASSESSEE WHILE SUBMITTING HIS INCOME TAX RETURN HAS COMPUTED THE INCOME UNDER THE DIFFERENT HEADS OF INCOME I.E. INCOME FROM HOUSE PROPERTY A S WELL AS INCOME FROM BUSINESS AND CLAIMED THE DEDUCTIONS WHICH ARE AVAILABLE UNDER EACH HEAD OF THE INCOME. IN THE SAME MANNER THE INCOME WAS COMPUTED BY THE ASSESSEE FOR THE EARLIER YEAR AND THE DEPARTMENT HAS DULY ACCEPTED THE RENTAL INCOME FROM THE SAID PROPERTY FROM WHICH THE ASSESSEE DERIVED INCOME DURING THE YEAR 3 UNDER THE HEAD INCOME FROM HOUSE PROPERTY. DURIN G THE YEAR THE A.O. DID NOT AGREE WITH THE ASSESSEE AND TREATED THE RENTAL RECEIPT TO BE THE I NCOME OF THE ASSESSEE FROM BUSINESS AS THE ASSESSEE HAS CREDITED THE RENT IN HIS P&L ACCOUNT I GNORING THE FACT THAT IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE WHATEVER RENT RECEIVED HAS TO BE AC COUNTED FOR AND INCOME HAD TO BE COMPUTED AS PER THE PROVISIONS OF SECTION 14 UNDER DIFFERENT HE ADS OF THE INCOME. CONSEQUENTLY THE A.O. DISALLOWED THE DEDUCTION CLAIMED BY THE ASSESSEE UN DER SECTION 24(A) AMOUNTING TO RS.80 865/-. THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A). THE CIT(A) CONFIRMED THE ORDER OF THE A.O. BEING AGGRIEVED THE ASSESSEE HAS COME IN APPEAL BE FORE THE TRIBUNAL. 5. I HAVE HEARD THE PARTIES AND CAREFULLY CONSIDERE D THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. I NOTED THAT THE DEPARTMENT HA S ACCEPTED THE INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY FROM THE SAME PROPERTY DURING THE ASSESSMENT YEAR 1999-2000 FOR WHICH THE ASSESSMENT ORDER WAS PASSED UNDER SECTION 143(3 ) READ WITH SECTION 148 OF THE ACT EVEN THOUGH IN ALL THE ASSESSMENT YEARS INCOME FROM THE SAME PROPERTY WAS ALSO ACCEPTED IN THE RETURN PROCESSED UNDER SECTION 143(1) AS THE INCOME FROM HOUSE PROPERTY. SECTION 22 OF THE ACT LAYS DOWN THAT THE ANNUAL VALUE OF PROPERTY CONSIST ING OF ANY BUILDINGS OR LANDS APPURTENANT THERETO OF WHICH THE ASSESSEE IS THE OWNER OTHER T HAN SUCH PORTIONS OF SUCH PROPERTY AS THE ASSESSEE MAY OCCUPY FOR THE PURPOSES OF ANY BUSINES S OR PROFESSION CARRIED ON BY HIM WILL BE CHARGEABLE TO TAX UNDER THE HEAD INCOME FROM HOUSE PROPERTY. SECTION 14 OF THE ACT LAYS DOWN THAT ALL INCOME FOR THE PURPOSES OF CHARGE OF INCOME TAX AND COMPUTATION OF THE TOTAL INCOME HAS TO BE CLASSIFIED UNDER THE VARIOUS HEAD S OF INCOME AND INCOME FROM HOUSE PROPERTY IS ONE OF THE HEAD OF THE INCOME. THE AS SESSEE DERIVED RENTAL INCOME FROM THE PROPERTY FOR WHICH THE ASSESSEE IS THE OWNER. THIS FACT HAS NOT BEEN DENIED BY THE LD.D.R. THE PROPERTY IS NOT OCCUPIED BY THE ASSESSEE FOR THE PU RPOSE OF BUSINESS. THEREFORE IN MY VIEW THE 4 RENT RECEIVED BY THE ASSESSEE FROM THE PROPERTY WIL L BE CHARGEABLE TO TAX UNDER THE HEAD INCOME FROM HOUSE PROPERTY AND ONCE THE RENT WILL BE CHAR GEABLE TO TAX UNDER THE HEAD INCOME FROM HOUSE PROPERTY THE ASSESSEE WILL BE ENTITLED FOR T HE DEDUCTION AS HAS BEEN ENUMERATED UNDER SECTION 24 OF THE ACT. SECTION 24(A) ALLOWS DEDUCT ION TO THE ASSESSEE @ 30% OF THE ANNUAL VALUE AND ACCORDINGLY THE ASSESSEE HAS CLAIMED THE DEDUCT ION AMOUNTING TO RS.80 865/-. MERELY THE ASSESSEE HAS CREDITED THE RENT RECEIVED IN ITS P&L ACCOUNT WILL NOT CONVERT THE INCOME FROM HOUSE PROPERTY TO BE THE INCOME FROM BUSINESS. ALL THE INCOME AND THE EXPENDITURE IS TO BE ACCOUNTED FOR IN THE P&L ACCOUNT DRAWN BY THE CONCE RN AT THE END OF THE YEAR BUT FOR THE PURPOSE OF INCOME TAX THE INCOME HAS TO BE COMPUTED UNDER T HE VARIOUS HEADS AND THE INCOME IN VIEW OF SPECIFIC PROVISIONS LAID DOWN UNDER SECTION 14 OF T HE ACT THE A.O. IN OUR OPINION COULD NOT APPRECIATE THE PROVISIONS OF SECTION 14 AND HAS TRE ATED THE RENTAL INCOME RECEIVED BY THE ASSESSEE TO BE THE INCOME FROM BUSINESS AS THE ASSESSEE HAS CREDITED THE RENT IN THE P&L ACCOUNT. P&L ACCOUNT DEPICTS THE PROFIT OR LOSS EARNED/INCURRED BY THE ASSESSEE DURING AN ACCOUNTING PERIOD. IF ANY INCOME IS CREDITED TO THE P&L ACCOUNT IT WILL NOT BECOME THE INCOME FROM BUSINESS. IT IS SECTION 28 OF THE ACT WHICH LAYS DOWN WHAT INCOME H AS TO BE ASSESSED UNDER THE HEAD PROFIT AND GAIN OF THE BUSINESS OR PROFESSION. SECTION 29 OF THE ACT LAYS DOWN THAT INCOME REFERRED UNDER SECTION 28 I.E. INCOME UNDER THE HEAD INCOME FROM BUSINESS SHALL BE COMPUTED IN ACCORDANCE WITH THE PROVISIONS CONTAINED UNDER SECTIONS 30 TO 43D. SECTION 28 NOWHERE LAYS DOWN THAT ANY RECEIPT FROM WHATEVER SOURCE IF CREDITED TO THE P&L ACCOUNT WILL BECOME THE BUSINESS INCOME. I THEREFORE DO NOT AGREE WITH THE SUBMISSION OF THE LD. D.R. AND ACCORDINGLY DELETE THE DISALLOWANCE MADE BY THE A.O. AND SET ASIDE THE ORD ER OF THE CIT(A) AND DIRECT THE ASSESSING OFFICER TO ASSESS THE RENT RECEIVED BY THE ASSESSEE FROM THE LAND AND BUILDING AT HATHRAS ROAD UNDER THE HEAD INCOME FROM HOUSE PROPERTY AND ALLOW DEDUCTION TO THE ASSESSEE AMOUNTING TO RS.80 865/- I.E. @ 30% OF THE RENT RECEIVED AS PE R THE PROVISIONS OF SECTION 24(A) OF THE ACT. 5 6. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED . (ORDER PRONOUNCED IN THE OPEN COURT ON 05.01.2010) SD/- (P.K. BANSAL) ACCOUNTANT MEMBER PLACE: AGRA DATE: 5 TH JANUARY 2010. PBN/* COPY OF THE ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT BY ORDER 3. CIT CONCERNED 4. CIT (APPEALS) CONCERNED 5. DR ITAT AGRA BENCH AGRA 6. GUARD FILE ASSIST ANT REGISTRAR INCOME-TAX APPELLATE T RIBUNAL AGRA TRUE COPY