PREM ARANHA, MUMBAI v. DCIT CIR 18(3), MUMBAI

ITA 5207/MUM/2009 | misc
Pronouncement Date: 21-01-2011 | Result: Dismissed

Appeal Details

RSA Number 520719914 RSA 2009
Assessee PAN AAGPA5931N
Bench Mumbai
Appeal Number ITA 5207/MUM/2009
Duration Of Justice 1 year(s) 4 month(s) 10 day(s)
Appellant PREM ARANHA, MUMBAI
Respondent DCIT CIR 18(3), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 21-01-2011
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted C
Tribunal Order Date 21-01-2011
Date Of Final Hearing 12-01-2011
Next Hearing Date 12-01-2011
Assessment Year misc
Appeal Filed On 11-09-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL 'C' BENCH MUMBAI BEFORE SHRI D.K. AGARWAL JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH ACCOUNTANT MEMBER ITA NO. 5207/MUM/2009 (ASSESSMENT YEAR: 2006-07) SHRI PREM ARANHA DCIT CIRCLE 18(3) SHOP NO. 8 ST. MICHAEL BHAVAN PIRAMAL CHAMBERS LA LBAUG LADY JAMSHEDJI ROAD VS. MUMBAI 400012 MAHIM (W) MUMBAI 400016 PAN - AAGPA 5931 N APPELLANT RESPONDENT APPELLANT BY: SHRI S.V. KANETKAR RESPONDENT BY: SHRI SURENDRA KUMAR O R D E R PER B. RAMAKOTAIAH A.M. THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER OF THE CIT(A)-XXVII MUMBAI DATED 10.06.2009. 2. ASSESSEE HAS RAISED THE FOLLOWING THREE GROUNDS: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE LEARNED CIT(A) HAS ERRED IN TREATING THE RENTAL INCOME UNDE R THE HEAD HOUSE PROPERTY AND NOT TREATING IT AS BUSINESS INCO ME AS CLAIMED BY THE APPELLANT. 2. WITHOUT PREJUDICE TO THE ABOVE THE LEARNED CIT(A) HAS ERRED IN NOT ALLOWING THE EXPENSES UNDER THE HEAD B USINESS / PROFESSION AND THEREBY ERRED IN NOT ALLOWING THE LO SS UNDER THE HEAD BUSINESS/PROFESSION. 3. WITHOUT FURTHER PREJUDICE TO THE ABOVE THE LEARNED CIT(A) HAS ERRED IN NOT CONSIDERING THE FACT THAT T HE APPELLANT WAS IN FACT CARRYING ON BUSINESS AND THEREBY ERRED IN NOT COMPUTING THE LOSS UNDER THE HEAD BUSINESS/PROFESSI ON AND THEREBY ERRED IN NOT SETTING OFF THE LOSS AGAINST T HE INCOME FROM HOUSE PROPERTY. DURING THE COURSE OF HEARING THE LEARNED COUNSEL FO R THE ASSESSEE DID NOT PRESS THE GROUND NO. 1 TREATING RENTAL INCOME UNDER THE HEAD HOUSE PROPERTY CONTESTED BY THE ASSESSEE. ACCORDINGLY THE GROUND IS TREATED WITHDRAWN. THAT LEAVES US WITH THE ALTERNATE GROUND NOS. 2 & 3. ITA NO. 5207/MUM/2009 SHRI PREM ARANHA 2 3. ASSESSEE HAS A PROPRIETARY CONCERN M/S. ARANHA AGE NCIES IN MAHIM MUMBAI AND OWNS A SHOP AT TOPAZ APARTMENTS BANDRA (W) MUMBAI. THE RENTAL INCOME FROM THE SHOP WAS TREATED AS INCOME F ROM BUSINESS AND CLAIMED EXPENSES THEREON. THE A.O. TREATED THE RENT AL INCOME AS INCOME FROM HOUSE PROPERTY AND DISALLOWED VARIOUS OTHER EXPENSE S NOT RELATABLE TO EARNING THE HOUSE PROPERTY INCOME AS PER THE PROVIS IONS. ASSESSEE HAS CONTESTED THE SAME BEFORE THE CIT(A) AND THE CIT(A) HAS EXAMINED ASSESSEES CLAIM WITH REFERENCE TO PAST RECORD AND CONFIRMED T HE TREATMENT OF INCOME UNDER THE HEAD HOUSE PROPERTY AND ALSO REJECTED VAR IOUS EXPENDITURE CLAIMS. ACCORDINGLY THE ASSESSEE IS AGGRIEVED. 4. AS STATED ABOVE THE AMOUNT PERTAINING TO TREATMENT OF RENTAL INCOME UNDER THE HEAD HOUSE PROPERTY INCOME HAS BEEN ACCEP TED BY THE ASSESSEE BY WITHDRAWING GROUND NO. 1. THE FINDING OF THE CIT (A) WITH REFERENCE TO THE EXPENSES ARE AS UNDER: - 4.2 I HAVE CAREFULLY CONSIDERED THE INFORMATION ON RECORD. DURING THE COURSE OF APPELLATE PROCEEDINGS THE APPELLANT WAS ASKED TO SUBMIT P & L A/C. AND BALANCE SHEET FOR THE LAST 10 YEARS. FROM THE PERUSAL OF P & L A/C. RIGHT FROM ASSESSMENT YEAR 20 00-01 ONWARDS THE APPELLANT HAD CREDITED RENT/DIVIDEND/ INTEREST/ CAR HIRE CHARGES RECEIVED TO P & L A/C. AND CLAIMED EXPENSES LIKE SO CIETY CHARGES ELECTRICITY CHARGES TELEPHONE OTHER INTEREST GEN ERAL EXPENSES RENTAL AND TAXES TRANSPORT CHARGES HIRE CHARGES ETC. ETC . WHAT IS TO BE NOTED THAT THE ASSESSEE DID NOT MAKE ANY SALES RIGH T FROM THE A.Y. 2000-01 ONWARD. THE ASSESSEES CONTENTION THAT HE I NCURRED ALL THE EXPENSES WITH A HOPE THAT ONE DAY HIS BUSINESS WOUL D REVIVE IS PRACTICALLY UNBELIEVABLE AND AS ON THE DATE OF PASS ING THE APPEAL ORDER ALSO THE APPELLANT HAD NOT REVIVED HIS BUSINE SS. FOR THE CURRENT YEAR HE HAS SHOWN RENTAL INCOME INTEREST INCOME AN D CAR HIRE CHARGES. 4.3 THE A.O. OBSERVED THAT THE ASSESSEE HAD SHOWN C AR HIRE CHARGES OF RS.24 000/- AND SUO-MOTTO ALLOWED 50% OF THE SAME AS EXPENSES INCURRED FOR EARNING SUCH INCOME AND BROUG HT TO TAX THE BALANCE RS.12 000/-. 4.4 THE A.O. ALSO NOTED THAT THE APPELLANT HAD GIVE N INTEREST FREE LOAN TO SISTER CONCERN AND THE QUANTUM OF SUCH INTE REST FREE LOAN EXCEEDS THE QUANTUM OF LOANS ON WHICH INTEREST WAS PAYABLE THEREFORE THE A.O. DISALLOWED THE INTEREST CLAIMED BY THE ASSESSEE AND BROUGHT TO TAX THE INTEREST RECEIVED OF RS.2 24 746/-. 4.5. THE CRUCIAL ISSUE IS THE APPELLANT IS NOT CARR YING OUT ANY BUSINESS ACTIVITY SINCE A.Y. 2000-01 HENCE THE QUE STION COMPUTING THE BUSINESS INCOME AND ALLOWING THE CARRY FORWARD LOSS DOES NOT ARISE. ITA NO. 5207/MUM/2009 SHRI PREM ARANHA 3 4.6 AS FAR AS THE RENTAL INCOME IS CONCERNED THE P ROPERTY IS LET OUT TO M/S. BOMBAY MERCANTILE CO. OP. BANK LTD. AND THE APPELLANT IS DERIVING SUBSTANTIAL INCOME. THE A.O. HAS CORRECTLY ASSESSED THIS AS INCOME FROM PROPERTY. IT IS ALSO PERTINENT TO MENTI ON THAT THE ASSESSEES BUSINESS IS NOT RENTING OUT THE PREMISES AS HE OWNS ONLY ONE PROPERTY WHICH WAS LET OUT TO BANK. FROM THE AB OVE DISCUSSION IT IS EVIDENT THAT THE APPELLANT WAS NOT CARRYING OUT ANY BUSINESS ACTIVITY AND IS SIMPLY DERIVING THE RENTAL INCOME B Y LETTING OUT THE PREMISES. IN VIEW OF THIS THE ADDITIONS MADE BY TH E A.O. ARE CONFIRMED. 5. THE LEARNED COUNSEL REITERATED THE SUBMISSIONS MADE BEFORE THE CIT(A) THAT THE ASSESSEE WAS IN THE BUSINESS FOR THE LAST 30 YEARS AND ASSESSEE WAS IN THE LOOKOUT FOR A NEW BUSINESS OF INVESTMENT AND ACCORDINGLY HE WAS GOING TO THE BUSINESS PREMISES AND EMPLOYED PEOPLE IN ANT ICIPATION OF CONDUCTING OF BUSINESS. IT WAS HIS SUBMISSION THAT THE EXPENDI TURE CLAIMED IN THE P & L ACCOUNT SHOULD HAVE BEEN ALLOWED AS THERE WERE CAR RENTAL CHARGES AND OTHER RECEIPTS. THE LEARNED COUNSEL PLACED ON RECORD THE P & L ACCOUNT FOR THE YEAR AND SUBMITTED THAT THE BANK CHARGES AND OTHER AMOUN TS WERE ALSO DISALLOWED BY THE A.O. AND ACCORDINGLY THE ASSESSEE SHOULD HAV E BEEN ALLOWED SOME EXPENDITURE IN RESPECT OF THE BUSINESS. 6. THE LEARNED D.R. HOWEVER SUBMITTED THAT THERE IS A FINDING THAT THE ASSESSEE WAS NOT DOING ANY BUSINESS RIGHT FROM A.Y. 2000-01 AND ACCORDINGLY NO BUSINESS ACTIVITY HAVE BEEN CARRIED OUT SO AS TO ALLOW THE EXPENDITURE. 7. FOR A QUERY WHETHER ASSESSEE HAS STARTED BUSINESS S UBSEQUENT TO THE IMPUGNED ASSESSMENT YEAR THE LEARNED COUNSEL SUBMIT TED THAT SO FOR NO BUSINESS ACTIVITY HAS BEEN STARTED/CARRIED ON. 8. AFTER CONSIDERING THE FACTS ON RECORD AND SUBMISSIO NS WE ARE OF THE OPINION THAT THERE IS NO NEED TO DIFFER FROM THE FI NDINGS OF THE CIT(A) WHO HAS EXAMINED ASSESSEES P & L ACCOUNT AND BALANCE S HEET FOR THE LAST 10 YEARS AND PARTICULARLY FROM A.Y. 2000-01. THERE IS A FINDING THAT ASSESSEE HAS NOT CARRIED OUT ANY BUSINESS ACTIVITY AND FURTH ER SO FAR ASSESSEE HAS NOT STARTED ANY BUSINESS. IN VIEW OF THIS CLAIMING VARIOUS EXPENDITURES AS PERTAINING TO BUSINESS IS NOT ACCEPTABLE AS THE SAI D EXPENDITURE IS NOT FOR THE PURPOSE OF BUSINESS WHOLLY OR EXCLUSIVELY AS RI GHTLY CONSIDERED BY THE CIT(A). ASSESSEES P & L ACCOUNT SHOWN ON THE HEAD ARANHA AGENCIES ITA NO. 5207/MUM/2009 SHRI PREM ARANHA 4 INDICATES RENT FROM BMC BANK LTD. ` 21.09 LAKHS INTEREST FROM BANKS ` 2 46 746/- DIVIDEND AT ` 50 000/- AND CAR HIRE CHARGES OF ` 24 000/- FOR WHICH THERE WAS A DEBIT OF CAR HIRE CHARGES 7 120/- . THE A.O. HAS RIGHTLY CONSIDERED THE CAR HIRE CHARGES AND ALLOWED 50% AS DEDUCTION WHILE TAXING THAT SOURCE OF INCOME. THE BALANCE EXPENDITURE CLAI MED TOWARDS VARIOUS HEADS INCLUDING DEPRECIATION HAD NOT BEEN SUBSTANTI ATED AND AS SEEN FROM THE SCHEDULE OF EXPENSES THE FAX MACHINE ELECTRON IC TYPEWRITER TELEVISION MOTOR CAR AND AIR CONDITIONER WERE SHOWN AS ASSETS AND DEPRECIATION WAS CLAIMED IN THE P & L ACCOUNT. THE AIR CONDITIONER W AS PURCHASED DURING THE YEAR. IT IS ALSO NOT RECORD WHETHER THE AIR CONDITI ONER WAS INSTALLED IN THE SO CALLED BUSINESS PREMISES OR NOT AND HOW THE EXPENDI TURE CLAIM IS FOR THE PURPOSE BUSINESS. IN THE ABSENCE OF ANY JUSTIFICATI ON WE ARE OF THE OPINION THAT THE A.O. WAS CORRECT IN DISALLOWING VARIOUS CL AIMS OF EXPENDITURES MADE IN THE P & L ACCOUNT. ACCORDINGLY GROUND NOS. 2 & 3 PERTAINING TO CLAIMS OF EXPENDITURE AS ALTERNATE CLAIMS ARE REJECTED. 9. IN THE RESULT APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST JANUARY 2011. SD/- SD/- (D.K. AGARWAL) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI DATED: 21 ST JANUARY 2011 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) XXVIII MUMBAI 4. THE CIT XVIII MUMBAI CITY 5. THE DR C BENCH ITAT MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT MUMBAI BENCHES MUMBAI N.P.