ITO 7(1)(1), MUMBAI v. NENSEY POULTRY FARM P.LTD, MUMBAI

ITA 5031/MUM/2013 | 2009-2010
Pronouncement Date: 31-07-2015 | Result: Dismissed

Appeal Details

RSA Number 503119914 RSA 2013
Assessee PAN AAACN0775B
Bench Mumbai
Appeal Number ITA 5031/MUM/2013
Duration Of Justice 2 year(s) 27 day(s)
Appellant ITO 7(1)(1), MUMBAI
Respondent NENSEY POULTRY FARM P.LTD, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 31-07-2015
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 31-07-2015
Date Of Final Hearing 21-04-2015
Next Hearing Date 21-04-2015
Assessment Year 2009-2010
Appeal Filed On 03-07-2013
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH B MUMBAI. BEFORE SHRI G.S. PANNU ACCOUNTANT MEMBER AND SHRI SANJAY GARG JUDICIAL MEMBER ITA NO 5031/MUM/2013 ASSESSMENT YEAR: - 2009-10 INCOME TAX OFFICER 7(1)(1) ROOM NO. 623 M.K. ROAD MUMBAI 400 020. M/S NENSEY POULTRY PVT. LTD. 28 WADALA UDYOG BHAWAN WADALA MUMBAI 400 031. PAN/GIR NO. AAACN0775B APPELLANT RESPONDENT ORDER PER G.S. PANNU AM THE CAPTIONED APPEAL BY THE REVENUE IS DIRECTED AGA INST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) [HEREINAFTER R EFERRED TO AS THE CIT(A)] DATED 19.04.2013 WHICH IN-TURN HAS ARISEN FROM AN ORDER PASSED BY THE ASSESSING OFFICER U/S 143(3) OF THE INCOME TAX ACT 1961(HEREINAFTER REFERRED TO AS THE ACT) DATED 30.12.2011 PERTAINI NG TO ASSESSMENT YEAR 2009- 10. REVENUE BY SHRI YOGESH KAMAT ASSESSEE BY SHRI REEPAL TARLASHWALA DATE OF HEARING 09.06.2015 DATE OF PRONOUNCEMENT 31 .07.2015 2 ITA NO 5031/MUM/2013 ASSESSMENT YEAR: - 2009-10 PAGE 2 OF 9 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- (1) 'THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FA CTS IN DIRECTING THE AO TO TREAT THE RENTAL INCOME OF RS. 30 60 000/- FROM H OUSE PROPERTY AS INCOME FROM OTHER SOURCE AND ALLOW THE DEPRECIATION OF RS.31 10 499/- ON POULTRY FARMS SHEDS AND OTHER EQUIPMENTS REPAIRS AND MAINTENANCE EXPENSES OF RS. 32 778/- RENT AND MAINTENANCE EXPENSES OF RS.41 200/- WITHOU T PROPERLY APPRECIATING THE FACTUAL AND LEGAL MATRIX AS CLEARLY BROUGHT OUT BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER.' (2) 'THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FAC TS IN NOT APPRECIATING THE FACT THAT THE ASSESSE HAD LEASED OUT ITS LAND AND C ONSTRUCTION THEREON ALONG WITH PLANT AND MACHINERY ELECTRICAL INSTALLATION FURNI TURE AND FIXTURES SLAUGHTER HOUSE ETC AND THE DECISION OF THE APEX COURT IN THE CASE OF M/S. SHAMBHU INVESTMENTS (263ITR 143) IS APPLICABLE TO THE FACTS OF THE CASE. 3. IN THIS APPEAL THE SUBSTANTIVE DISPUTE IS WITH REGARD TO THE ASSESSABILITY OF INCOME EARNED BY THE ASSESSEE FROM HIRING ITS LA ND PLANT AND MACHINERY TO M/S VENKATESHWARA HATCHERIES PVT. LTD. THE ASSESSE E HAD DECLARED SUCH INCOME AS BUSINESS INCOME WHICH WAS ASSESSED BY THE ASSESSING OFFICER UNDER THE HEAD INCOME FROM HOUSE PROPERTY. THE CIT(A) H AS SINCE HELD THAT SUCH RENTAL INCOME IS LIABLE TO BE ASSESSED UNDER THE HE AD INCOME FROM OTHER SOURCES AND NOT UNDER THE HEAD INCOME FROM HOUSE PROPERTY AS DONE BY THE ASSESSING OFFICER. AGAINST SUCH DECISION OF TH E CIT(A) REVENUE IS IN APPEAL BEFORE US CONTENDING THAT RENTAL INCOME IS L IABLE TO BE ASSESSED UNDER THE HEAD INCOME FROM HOUSE PROPERTY. 4. AT THE TIME OF HEARING IT WAS NOTICED THAT THOU GH THE CIT(A) HAS HELD THE RENTAL INCOME TO BE ASSESSABLE UNDER THE HEAD INCOME FROM OTHER SOURCES AS AGAINST THE STAND OF THE ASSESSEE IN TH E RETURN OF INCOME THAT SUCH 3 ITA NO 5031/MUM/2013 ASSESSMENT YEAR: - 2009-10 PAGE 3 OF 9 INCOME IS ASSESSABLE AS BUSINESS INCOME HOWEVER T HERE IS NO APPEAL PREFERRED BY THE ASSESSEE AGAINST THE ORDER OF CIT( A). 5. BEFORE US THE PLEA OF THE LD. DR IS THAT THE AS SESSING OFFICER HAD JUSTIFIABLY ASSESSED THE RENTAL INCOME UNDER THE HE AD INCOME FROM HOUSE PROPERTY INASMUCH AS ASSESSEE HAD GIVEN IT LAND TO GETHER WITH STRUCTURE THEREON ALONG WITH PLANT AND MACHINERY ELECTRIC IN STALLATION FURNITURE & FIXTURES SLAUGHTER HOUSE ETC ON RENT TO M/S VENKAT ESHWARA HATCHERIES PVT. LTD AND THEREFORE SUCH RENTAL INCOME IS TO BE TRE ATED AS INCOME FROM HOUSE PROPERTY FOLLOWING THE JUDGMENT OF THE HONBLE SUPR EME COURT IN THE CASE OF SHAMBHU INVESTMENT PVT. LTD.(263 ITR 143) . 6. ON THE OTHER HAND THE LD. REPRESENTATIVE FOR TH E RESPONDENT-ASSESEE HAS DEFENDED THE ORDER OF THE CIT(A) BY PLACING REL IANCE ON THE SAME. APART THEREFROM THE LD. REPRESENTATIVE REFERRED TO THE P APER BOOK FILED WHEREIN IT PLACED THE COPY OF AGREEMENT WITH M/S VENKATESHWARA HATCHERIES PVT. LTD ACCORDING TO THE LD. REPRESENTATIVE THE RENTAL INC OME WAS DERIVED NOT MERELY FROM LETTING OUT OF A LAND OR BUILDING RATHE R THE ENTIRE OPERATION OF ITS HATCHING AND LAYER FARMING ACTIVITY WAS LEASED OUT AND THEREFORE SUCH INCOME COULD NOT BE ASSESSED UNDER THE HEAD INCOME FROM H OUSE PROPERTY. 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. THE FACTUAL POSITION WHICH EMERGES FROM A PERUSAL OF THE ORDER S OF AUTHORITIES BELOW AND THE OTHER MATERIAL ON RECORD IS AS FOLLOWS. THE RES PONDENT-ASSESSEE WAS ENGAGED IN THE BUSINESS OF POULTRY FARMING WHICH HA D THREE SUB ACTIVITIES I.E. 4 ITA NO 5031/MUM/2013 ASSESSMENT YEAR: - 2009-10 PAGE 4 OF 9 (I) BROILER FARM;(II) HATCHERY; AND (III) LAYER FARMING. IN THE PAST YEARS ASSESSEE HAS BEEN CARRYING OUT AFORESAID THREE ACTI VITIES BY ITSELF AND IN AROUND 2005 ASSESSEE HIRED OUT THE FIRST ACTIVITY OF BROILER FARM TO A THIRD PARTY ON LEAVE AND LICENSE AGREEMENT AND SUCH ACTIV ITY HAS BEEN TAKEN BACK BY THE ASSESSEE SUBSEQUENTLY. BE THAT AS IT MAY THE S UBJECT MATTER OF THE CONTROVERSY BEFORE US IS ON ACCOUNT OF INCOME EARNE D IN PURSUANCE TO AN AGREEMENT DATED 01.09.2007 WITH M/S VENKATESHWARA H ATCHERIES PVT. LTD. IN TERMS OF THE SAID AGREEMENT THE HATCHERY AND LAYER FARMING ACTIVITY CONSISTING OF LAND SHED AND OTHER ASSETS PLANT AN D MACHINERY ETC HAS BEEN GIVEN ON A TEMPORARY LEAVE & LICENSE FOR A PERIOD O F 36 MONTHS COMMENCING FROM 01.09.2007. IN TERMS OF THE SAID AGREEMENT AS SESSEE HAS EARNED RENTAL INCOME OF RS. 30 00 000/- WHICH IT OFFERED TO TAX AS BUSINESS INCOME IN THE RETURN OF INCOME FILED WHEREAS THE ASSESSING OFFICE R ASSESSED AS AN INCOME ASSESSABLE UNDER THE HEAD INCOME FROM HOUSE PROPER TY. THE SAID INCOME HAS BEEN HELD TO BE ASSESSABLE UNDER THE HEAD INCOME F ROM OTHER SOURCES BY THE CIT(A) AGAINST WHICH REVENUE IS IN APPEAL BEFORE U S. PERTINENTLY THE ISSUE BEFORE US IS AS TO WHETHER THE RENTAL INCOME EARNE D BY THE ASSESSEE IS TO BE ASSESSED UNDER THE HEAD INCOME FROM OTHER SOURCES AS HELD BY THE CIT(A) OR UNDER THE HEAD INCOME FROM HOUSE PROPERTY AS HELD BY THE ASSESSING OFFICER. 8. IN THIS CONTEXT A PERUSAL OF THE LEAVE & LICENS E AGREEMENT WITH M/S VENKATESHWARA HATCHERIES PVT. LTD. REVEALS THAT THE LICENSEE WAS ALREADY IN THE BUSINESS OF POULTRY FARMING AND THAT IT WAS IN NEED OF PREMISES FOR RUNNING AND PRODUCING OF HATCHING EGGS AND DAY OLD CHICKS AND FOR THE SAID 5 ITA NO 5031/MUM/2013 ASSESSMENT YEAR: - 2009-10 PAGE 5 OF 9 PURPOSE IT TOOK ON TEMPORARY LEAVE & LICENSE BASIS THE FACILITY OF THE ASSESSEE PERTAINING TO HATCHERY AND LAYER FARMING. THE AGREE MENT DATED 01.09.2007 ALSO SHOWS THAT M/S VENKATESHWARA HATCHERIES PVT. L TD. OBTAINED ON LEAVE & LICENSE BASIS THE AGRICULTURAL/NON-AGRICULTURAL LAN D AND CONSTRUCTIONS STANDING THEREON AND OTHER ASSETS EQUIPMENTS MACH INERIES ETC WHICH PERTAINED TO THE HATCHERY AND LAYER FARMING ACTIVIT Y OF THE ASSESSEE. IT IS QUITE CLEAR FROM THE TERMS AND CONDITION OF THE LEAVE & L ICENSE AGREEMENT THAT THE ESSENCE WAS TO UTILIZE THE EQUIPMENTS MACHINERIES ETC IN THE POULTRY FARMING ACTIVITY OF M/S VENKATESHWARA HATCHERIES PVT. LTD. AND THAT SUCH ASSETS COULD NOT BE PROVIDED ON LEASE WITHOUT ENABLING THE USE OF LAND AND THE CONSTRUCTION THEREON I.E. SHEDS ETC. THE CIT(A) HAS APPRECIATED THE AFORESAID FACTUAL MATRIX AND CONCLUDED THAT THE INTENTION WAS NOT TO GIVE OR TAKE ON RENT THE LAND AND/OR THE CONSTRUCTION THEREON BUT THE DO MINANT OBJECT WAS TO GIVE AND TAKE ON RENT THE OTHER ASSETS I.E. EQUIPMENTS MACHINERIES ETC RELATED TO THE POULTRY FARMING. THE AFORESAID FACTUAL MATRIX HAS NOT BEEN ASSAILED BY THE REVENUE BEFORE US. FURTHERMORE THE SAID FACTUAL MA TRIX IS OTHERWISE ALSO UNEXCEPTIONAL INASMUCH AS M/S VENKATESHWARA HATCHER IES PVT. LTD. WAS ALREADY IN THE BUSINESS OF POULTRY FARMING AND THE RECITALS OF THE IMPUGNED LEAVE & LICENSE AGREEMENT ALSO SUGGEST THAT THE LIC ENSEE (I.E. M/S VENKATESHWARA HATCHERIES PVT. LTD. ) WAS IN NEED OF THE PREMISES FOR RUNNING AND PRODUCING OF HATCHING EGGS AND ANY OLD CHICKS. THEREFORE FROM THE AFORESAID STANDPOINT IT COULD NOT BE SAID THAT THE IMPUGNED TRANSACTION WAS OF RENTING OF PROPERTY SIMPLICITOR. IN FACT FROM THE POINT OF THE ASSESSEE THE INTENTION WAS NOT TO LET OUT THE PROPERTY MERELY AS A LAND AND BUILDING BUT THE OVER-RIDING INTENTION IS TO GIVE THE ENTIRE INFRAST RUCTURE OF ITS HATCHERY AND 6 ITA NO 5031/MUM/2013 ASSESSMENT YEAR: - 2009-10 PAGE 6 OF 9 LAYING FARMING ACTIVITY INCLUSIVE OF THE LAND AND BUILDING ON LEASE. UNDER THESE CIRCUMSTANCES THE PRIMARY OBJECT OF THE ASSESSEE C ANNOT BE SEEN TO BE DERIVING INCOME BY EXPLOITING THE PROPERTY SIMPLICI TOR SO AS TO BE ASSESSED UNDER THE HEAD INCOME FROM HOUSE PROPERTY. THE AS SESSING OFFICER HOWEVER ASSESSED THE IMPUGNED INCOME AS INCOME FRO M HOUSE PROPERTY AND IN COMING TO SUCH CONCLUSION HE HAS RELIED UPON TH E JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE SHAMBHU INVESTMENTS PVT. LTD. (SUPRA) . THE HONBLE SUPREME COURT HAD APPROVED THE JUDGMENT OF HONBLE CALCUTTA HIGH COURT IN THE CASE CIT VS. SHAMBHU INVESTMENT P. LTD . OF REPORTED AT [2001] 249 ITR 47 (CAL.). THE HONBLE CALCUTTA HIGH COURT HAD OBSERVED THAT IS THE MAIN INTENTION IF FOR LETTING OUT THE PROPERTY OR A NY PART THEREOF THE SAME MUST BE CONSIDERED AS AN INCOME ASSESSABLE UNDER TH E HEAD INCOME FROM HOUSE PROPERTY. ON THE CONTRARY IF IT WAS FOUND T HAT THE MAIN INTENTION WAS TO EXPLOIT THE IMMOVABLE PROPERTY BY WAY OF COMPLEX COMMERCIAL ACTIVITIES IN THAT EVENT THE RENTAL INCOME IS TO BE ASSESSED AS BUSINESS INCOME. BE THAT AS IT MAY INSOFAR AS THE PRESENT CONTROVERSY IS CONCE RNED WE ARE ONLY TRYING TO EMPHASIZE THE RATIO APPROVED IN THE CASE OF SHAMBHU INVESTMENT PVT. LTD. (SUPRA) TO THE EFFECT THAT WHERE THE MAIN INTENTION IS FOR LETTING OUT THE PROPERTY THE INCOME THEREOF IS ASSESSABLE AS INCOM E FROM HOUSE PROPERTY. IN THE PRESENT CASE WE HAVE ALREADY NOTED ON THE BASI S OF THE FACTUAL MATRIX THAT IT IS NOT A CASE WHERE THE INTENTION OF THE ASSESSE E WAS TO LET OUT PROPERTY SIMPLICITOR AND THEREFORE IN OUR VIEW THE CIT(A) MADE NO MISTAKE IN DISAGREEING WITH THE STAND OF THE ASSESSING OFFICER . THE RELIANCE PLACED BY THE ASSESSING OFFICER ON THE JUDGMENT OF HONBLE SUPREM E COURT IN THE CASE OF 7 ITA NO 5031/MUM/2013 ASSESSMENT YEAR: - 2009-10 PAGE 7 OF 9 SHAMBHU INVESTMENT PVT. LTD (SUPRA) DOES NOT HELP THE CASE OF REVENUE IN THE PRESENT CASE. 9. THEREFORE HAVING REGARD TO THE AFORESAID DISCUS SION WE FIND THAT THE CIT(A) MADE NO MISTAKE IN DISAGREEING WITH THE ASSE SSING OFFICER AND DECLINING TO UPHOLD THE ASSESSMENT OF THE IMPUGNED RENTAL INCOME AS INCOME UNDER THE HEAD HOUSE PROPERTY. IN THIS MANNER W E AFFIRM THE ORDER OF THE CIT(A) AND ACCORDINGLY REVENUE FAILS ON THIS ASPEC T. 10. THE ONLY OTHER ISSUE IN THIS APPEAL IS WITH REG ARD TO AN ADDITION OF RS. 2 04 486/-. IN THIS CONTEXT THE BRIEF FACTS ARE T HAT THE ASSESSING OFFICER NOTED THAT THERE WAS A CREDIT BALANCE OF RS. 2 04 486/- S TANDING IN THE NAME OF ONE M/S. SHIV TRADING CO. WHICH HAS BEEN ADDED AS AN UN EXPLAINED CREDIT U/S 68 OF THE ACT. BEFORE THE CIT(A) ASSESSEE CONTENDED T HAT THE AFORESAID AMOUNT OF RS. 2 04 486/- WAS A BALANCE OUTSTANDING FROM EARLI ER YEARS TRANSACTION AND THAT THERE WAS NO TRANSACTION WITH THE SAID PARTY D URING THE YEAR UNDER CONSIDERATION. THEREFORE ACCORDING TO THE ASSESSEE INVOKING OF SECTION 68 OF THE ACT WAS NOT JUSTIFIED. THE CIT(A) DIRECTED THE ASSESSING OFFICER TO VERIFY THE CLAIM OF ASSESSEE AND IF IT IS FOUND TO BE CORR ECT THEN ADDITION IS DIRECTED TO BE DELETED. AGAINST SUCH DIRECTION OF THE CIT(A) REVENUE IS IN APPEAL BEFORE US. 11. AFTER HEARING THE PARTIES WE FIND NO REASON TO INTERFERE WITH THE CONCLUSION OF THE CIT(A) WHICH IS FAIR AND PROPER. THUS ON THIS ASPECT ALSO REVENUE FAILS. 8 ITA NO 5031/MUM/2013 ASSESSMENT YEAR: - 2009-10 PAGE 8 OF 9 12. IN THE RESULT APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 31ST DAY OF JULY 2015. SD/- SD/- (SANJAY GARG) (G.S. PANNU) (JUDICIAL MEMBER) (AC COUNTANT MEMBER) MUMBAI DATED 31-07-2015 SKS SR. P.S COPY TO: THE APPELLANT THE RESPONDENT THE CONCERNED CIT(A) THE CONCERNED CIT THE DR BBENCH ITAT MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES MUMBAI