M/s The Co-op Industrial Estates Ltd.,, Hyderabad v. ITO, Hyderabad

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B ' HYDERABAD BEFORE SHRI G.C.GUPTA VICE PRESIDENT AND SHRI CHANDRA POOJARI ACCOUNTANT MEMBER ITA NO.658/HYD/08 : ASSES SMENT YEAR 2004-05 M/S. THE CO-OP INDUSTRIAL ESTATES LTD. HYDERABAD. ( PAN AABCT 4985 B ) V/S. INCOME-TAX OFFICER WARD-2(2) HYDERABAD (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI S.RAMA RAO RESPONDENT BY : SHRI AMLAN TRIPATHI O R D E R PER CHANDRA POOJARI ACCOUNTANT MEMBER: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-II HYDERABAD DATED 18.1.2008 FOR THE ASSESSMENT YEAR 2004-05. 2. EFFECTIVE GROUNDS OF THE ASSESSEE IN THIS APPE AL READ AS FOLLOWS- 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCO ME-TAX(APPEALS) IS ERRONEOUS BOTH ON FACTS AND IN LAW. 2. THE LEARNED COMMISSIONER OF INCOME-TAX(APPEA LS) ERRED IN ENHANCING THE ASSESSMENT AND IN DETERMINING THE TOTAL INCOME OF THE APPELLANT SOCIETY AT RS.13 62 550/- AS AGAINST THE INCOME DET ERMINED BY THE ASSESSING OFFICER OF RS.11 09 980/.-. 3. THE LEARNED COMMISSIONER OF INCOME-TAX(APPEAL S) ERRED IN HOLDING THAT BY RECOMPUTING THE REVISED TOTAL INCOME AS PER THE REPORT SUBMITTED BY THE ASSESSING OFFICER THE DISPUTE ROS E ON ACCOUNT OF DISALLOWANCE OF RS.4 92 809/- IS SETTLED. THE LEARN ED COMMISSIONER OF INCOME-TAX(APPEALS) OUGHT TO HAVE SEEN THAT THE ASSESSING OFFICER IS NOT CORRECT IN DISALLOWING A SUM OF RS.4 92 809/ - AS THE PROPORTIONATE EXPENDITURE IN RESPECT OF THE INCOME FROM HOUSE PROPERTY. ITA NO.658./HYD/08 M/S. THE CO-OP INDUSTRIAL ESTATES LTD. HYDERABAD 2 4. THE LEARNED COMMISSIONER OF INCOME-TAX(APPEALS) O UGHT TO HAVE VERIFIED THE INCOME AND EXPENDITURE ACCOUNT AND FOU ND THAT THERE IS NO SUCH EXPENDITURE RELATABLE TO THE RENTS DERIVED FROM SBH AND GODOWNS. THE LEARNED COMMISSIONER OF INCOME-TAX(AP PEALS) OUGHT TO HAVE DIRECTED THE ASSESSING OFFICER TO DELETE T HE DISALLOWANCE OF RS.4 92 809/-. 5. THE LEARNED COMMISSIONER OF INCOME-TAX(APPEALS) O UGHT TO HAVE OBSERVED THAT THE RENT FROM SBH AND THE RENTS FORM THE GODOWNS ARE ASSESSABLE AS INCOME FROM BUSINESS ACTIVITY OF THE APPELLANT SOCIETY AND IS NOT ASSESSABLE UNDER THE HEAD INCOME FROM H OUSE PROPERTY OR AT LEAST HELD THAT SUCH RECEIPTS ARE ATTRIBUTABL E TO THE BUSINESS ACTIVITY OF THE APPELLANT. 6. THE LEARNED COMMISSIONER OF INCOME-TAX(APPEALS) E RRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN T REATING THE INCOME FROM HOARDINGS OF RS.51 702/- AND THE INTEREST ON D EPOSITS WITH THE CO-OPERATIVE SOCIETIES AS THE INCOME FROM OTHER SOU RCES. THE LEARNED COMMISSIONER OF INCOME-TAX(APPEALS) OUGHT TO HAVE SEEN THAT THE SAID ITEM S RELATE TO THE INCOM E FROM BUSINESS ACTIVITY. 3. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSE E A COOPERATIVE INSTITUTION FILED RETURN OF INCOME DECLARING AN IN COME OF RS.8 70 740/- COMPRISING OF INCOME FROM HOUSE PROPERTY OF RS.4 74 801 AND INCOME FROM OTHER SOURCES OF RS.13 78 933/- BESIDES LOSS FROM BUSINESS OF RS.6 78 752. WHILE COMPUTING THE BUSINESS LOSS THE ASSESSEE HAS INCURRED TOTAL EXPENDITURE OF RS.27 49 295/-. THE ASSESSING OFFICER AFTER DIS CUSSION WITH THE ADMINISTRATIVE OFFICER AND TAKING HIS CONSENT PROPO SED TO DISALLOW RS.4 92 809/- OUT OF THIS EXPENDITURE CLAIMED BY T HE ASSESSEE. HOWEVER WHILE COMPUTING THE INCOME HE MADE AN ERROR. INSTEAD OF ADDING A SUM OF RS.4 92 809/- WHICH IS TOWARDS DISALLOWANCE OF EXPE NDITURE THE ASSESSING OFFICER MADE A DEDUCTION OF THIS AMOUNT FROM THE IN COME AND THUS THERE WAS AN ERROR IN THE COMPUTATION OF INCOME MADE BY ASSESSIN G OFFICER. THE ASSESSING OFFICER ALSO ASSESSED THE INTEREST ON FIXED DEPOSIT S AND RENTAL INCOME RECEIVED ON HOARDING BY THE ASSESSEE AS INCOME FROM OTHER SOURCES AS AGAINST THE CLAIM OF THE ASSESSEE FOR ASSESSING THE SAME AS BU SINESS INCOME. THE ASSESSING OFFICER ON THAT BASIS ULTIMATELY COMPLE TED THE ASSESSMENT ON A ITA NO.658./HYD/08 M/S. THE CO-OP INDUSTRIAL ESTATES LTD. HYDERABAD 3 GROSS TOTAL INCOME OF RS.14 12 627 AND GIVEN A DEDU CTION U/S 80P OF THE IT ACT AND DETERMINED THE NET INCOME AT RS.11 09 980 VIDE ASSESSMENT ORDER DATED 30.11.2006 PASSED UNDER S.143(3) OF THE INCOME TAX ACT 1961. 4. ON APPEAL THE CIT(A) FOUND THAT THE ASSESSING OFFICER INSTEAD OF DISALLOWING THE EXPENDITURE AS PROPOSED BY HIM BY A DDING IT TO THE INCOME HE HAS DEDUCTED IT FROM THE INCOME. HE ACCORDINGLY CA LLED FOR THE COMMENTS OF THE ASSESSING OFFICER DURING THE COURSE OF APPELLATE P ROCEEDINGS. THE ASSESSING OFFICER IN HIS REPORT DATED 11.9.2007 REVISED THE COMPUTATION OF INCOME GIVEN BELOW THE ASSESSMENT ORDER AND AS PER THE REVISED COMPUTATION THE TOTAL INCOME WORKED OUT TO RS.14 15 253. A COPY OF THE S AID REPORT WAS FORWARDED TO THE ASSESSEE AND AFTER CONSIDERING THE OBJECTIONS OF THE ASSESSEE IN RESPONSE THERETO THE CIT(A) PROCEEDED TO DISPOSE OFF THE GR OUNDS OF THE ASSESSEE IN THE APPEAL BEFORE HIM. FINDING NO MERIT IN THE CONTEN TIONS OF THE ASSESSEE WITH REGARD TO DISALLOWANCE EXPENDITURE ASSESSMENT OF I NTEREST INCOME AND RENTAL INCOME FROM HOARDING UNDER THE HEAD INCOME FORM O THER SOURCES THE CIT(A) REJECTED THE GROUNDS OF THE ASSESSEE BEFORE HIM AND DETERMINED THE INCOME AS FOLLOWS: I) INCOME FROM HOUSE PROPERTY RS.4 74 801 II) INCOME FROM OTHER SOURCES (13 78 933+51 702) = RS.14 30 635 III) LOSS FROM BUSINESS AS RETURNED (-) RS.6 78 752/- LESS: ADDITION PROPOSED IN THE ASSESSMENT ORDER AS AGREED BY THE ASSESSEE RS.4 92 809/- ______________ (-)RS.1 85 943/- ADD: INCOME FROM HOARDINGS RS.51 702/- (-) RS.2 37 645/- __________________________________ GROSS TOTAL INCOME RS.16 66 791/- ITA NO.658./HYD/08 M/S. THE CO-OP INDUSTRIAL ESTATES LTD. HYDERABAD 4 LESS: 80P DEDUCTION AS ALLOWED BY ASSESSING OFFICER RS.3 04 240/- _______________ RS.13 62 551/- ________________ 4.1. THUS THE ABOVE COMPUTATION OF INCOME RESULT ED IN ENHANCEMENT OF ASSESSMENT BY RECTIFYING THE MISTAKES IN THE COMPU TATION MADE BY THE ASSESSING OFFICER BY ADOPTING THE LOSS FROM BUSINE SS MAKING THE DISALLOWANCE OF EXPENDITURE OF RS.4 92 809 AND ALSO BY HOLDING THAT WHILE COMPUTING THE BUSINESS INCOME/LOSS OF THE ASSESSEE THE AMOUNT OF RENTAL INCOME OF RS.51 702 FROM HOARDING SHOULD BE EXCLUDED FROM THE RECEIPT. AS PER THE RE- COMPUTATION MADE BY THE CIT(A) IN THE IMPUGNED ORDE R AFTER THE ABOVE ENHANCEMENT THE TOTAL INCOME OF THE ASSESSEE WOUL D WORK OUT TO RS.13 62 550 AS AGAINST THE INCOME COMPUTED BY THE ASSESSING OFF ICER IN THE ASSESSMENT ORDER OF RS.11 09 980. AGGRIEVED BY THE ORDER OF T HE CIT(A) ASSESSEE PREFERRED THE PRESENT APPEAL BEFORE US. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE FIRST GRIEVANCE OF THE ASSESSEE HER EIN IS WITH REGARD TO ENHANCEMENT OF INCOME. AS SEEN FROM THE COMPUTATIO N OF INCOME MADE BY THE ASSESSING OFFICER ORIGINALLY INSTEAD OF MAKING ADD ITIONS OF RS.4 92 809/- TO THE GROSS TOTAL INCOME THE ASSESSING OFFICER DEDUCTED THIS AMOUNT FROM THE TOTAL INCOME. ACTUALLY THE ASSESSING OFFICER IS REQUI RED TO COMPUTE THE BUSINESS INCOME BY ADDING THIS AMOUNT OF RS.4 92 809/- TOWA RDS DISALLOWANCE OF EXPENDITURE AND THEREAFTER HE IS REQUIRED TO MAKE A DDITION/DELETION OF INCOME UNDER HEAD INCOME FROM BUSINESS TO THE GROSS TOT AL INCOME. HOWEVER THE ASSESSING OFFICER IS ADDED THIS AMOUNT RS.4 92 809/ - TO THE GROSS TOTAL INCOME. THUS THE LOSS CLAIMED BY THE ASSESSEE AT RS.6 78 752 /- SHOULD HAVE BEEN REDUCED BY AN AMOUNT OF RS.4 92 809/-AS AGREED BY T HE ADMINISTRATIVE OFFICER OF THE ASSESSEE AND THE NET RESULTANT FIGURE OF BUS INESS LOSS SHOULD BE 1 85 943/- AND THIS AMOUNT OF RS.1 85 943/- BEING BUSINESS LOSS SHOULD HAVE ITA NO.658./HYD/08 M/S. THE CO-OP INDUSTRIAL ESTATES LTD. HYDERABAD 5 BEEN REDUCED FROM THE GROSS TOTAL INCOME. FURTH ER THE INCOME FROM HOARDING WAS WRONGLY TREATED BY THE ASSESSEE AS BUS INESS INCOME THE CIT(A) CORRECTED THIS ERROR AND TREATED THIS INCOME UNDE R HEAD INCOME FROM OTHER SOURCES WHICH IS RESULTED IN INCREASE OF BUSINESS LOSS BY RS.51 702/- AND INCREASE OF INCOME FROM OTHER SOURCES BY RS.51 7 02/-. REGARDING THE FIRST CONTENTION OF THE ASSESSEES COUNSEL IS WITH REFERE NCE TO DISALLOWANCE OF RS.4 92 809/- IN OUR OPINION THIS IS AN AGREED A DDITION. THE PLEA OF THE ASSESSEE CANNOT BE ACCEPTED BECAUSE THE INCOME WAS ASSESSED BY THE ASSESSING OFFICER ON THE BASIS OF DISALLOWANCE ACCEPTED BY TH E ASSESSEE IN THE COURSE OF ASSESSMENT PROCEEDINGS. THE DISALLOWANCE ACCEPTED BY THE ASSESSEE IS VOLUNTARY BASIS AND THERE WAS NO COERCION OR COMPUL SION ON THE ASSESSEE. THE DISALLOWANCE MADE BY THE ASSESSING OFFICER IS NOT A GAINST THE WISHES OF THE ASSESSEE. THE DISALLOWANCE ACCEPTED BY THE ASSESSE E IS NOT ON ACCOUNT OF MENTAL OR OTHER CONSTRAINTS. THERE WAS NO COERCION EXERTED ON THE ASSESSEE FORCING TO ACCEPT THE DISALLOWANCE OF EXPENDITURE. THE DISALLOWANCE ACCEPTED BY THE ASSESSEE CANNOT BE SAID THAT THERE WAS ANY COMP ULSION ON THE ASSESSEE TO ACCEPT SUCH DISALLOWANCE. THE DISALLOWANCE ACCEP TED BY THE ASSESSEE ACTUALLY TANTAMOUNT TO AN ADMISSION ON THE PART OF THE ASSES SEE TO EFFECT THAT THE SAME AMOUNT IS DISALLOWED. ONCE THE ASSESSEE VOLUNTARIL Y ACCEPTED THE DISALLOWANCE THEN IT IS NOT POSSIBLE TO THE ASSESSEE TO CONTEND THAT THERE IS NO SUCH ACCEPTANCE OR ADMISSION AND CANNOT SAY THAT IT WAS MADE ON ACCOUNT OF MISTAKEN BELIEF WITHOUT BRINGING ANY MATERIAL CONTR ARY TO THIS. THE ASSESSEE IS ESTOPPED FROM RAISING ANY SUCH CONTENTION ESPECIALL Y WHEN THE DISALLOWANCE WAS MADE AFTER AN ELABORATE DISCUSSION AND OPPORTUN ITY OF HEARING WITH THE DEPARTMENT. CONSIDERING THE TOTALITY OF FACTS AND CIRCUMSTANCES OF THE CASE THERE IS NO ERROR OF LAW IN THE VIEW TAKEN BY THE C IT(A) THAT THE DISALLOWANCE WAS MADE BY THE ASSESSING OFFICER ON THE BASIS OF CONSENT GIVEN BY THE ASSESSEE VOLUNTARILY. THE DISALLOWANCE MADE BY ASSESSING OF FICER WHICH WAS ACCEPTED BY THE ASSESSEE AND THE SAME MUST BE ACCEPTED BY THE A SSESSEE AS AN HONEST ITA NO.658./HYD/08 M/S. THE CO-OP INDUSTRIAL ESTATES LTD. HYDERABAD 6 DISCLOSURE AND SUCH DISALLOWANCE CANNOT BE DELETED AS THE ASSESSEE IS BOUND BY THAT DISALLOWANCE AND THE ASSESSEE CANNOT HAVE ANY GRIEVANCE AGAINST THE ASSESSEES OWN ADMISSION AT THIS POINT OF TIME. TH E CASE LAW RELIED BY THE LEARNED DEPARTMENTAL REPRESENTATIVE IN THE CASE OF RAMESH CHANDRA & COMPANY VS. CIT (168 ITR 375) (BOM) RAMALAL KAMDAR VS. CIT (108 ITR ) (MDS.) MAHESH B SHAH VS. ACIT (238 ITR 130 (KER) JAYASREE CHIT FUNDS AND SERVICES (P) LTD. VS. CIT (127 ITR 740) (KER) TURN ER MORISON AND CO. LTD. VS. HUNGERFORD INVESTMENT TRUST LTD. (85 ITR 607) (SC) STERLING MACHINE TOOLS VS. CIT (123 ITR 261) (BOM) JIVATIAL PURTAPSHI VS CIT (65 ITR 261) (BOM.) ARE ALSO SUPPORTS OUR VIEW. 6. THE NEXT CONTENTION OF THE ASSESSEES COUNSEL IS WITH REGARD TO TREATMENT OF RENT FROM SBH AND RENT FROM GODOWNS IS ASSESSABLE AS INCOME UNDER THE HEAD INCOME FROM BUSINESS AND NOT ASSES SABLE AS INCOME FROM HOUSE PROPERTY. WE HAVE CAREFULLY GONE THROUGH T HE STATEMENT OF INCOME FILED BY THE ASSESSEE AS WELL AS RETURN OF INCOME WHEREIN THE ASSESSEE COMPUTED THE INCOME FROM HOUSE PROPERTY AS FOLLOWS: INCOME FROM PROPERTY RENT FROM SBH RENT FROM GOD OWNS TOTAL ANNUAL VALUE OF RENT RS.2 45 934 4 32 353 LESS: MUNICIPAL TAXES - - LESS: DEDUCTION U/S 24 73 780 1 29 706 ------------------------------------------ ---------------- RS. 1 72 154 3 02 647 RS.4 74 801/- ----------------------------------------------- ---------------- 7. AS DISCUSSED IN EARLIER PARA THE ASSESSEE CANN OT HAVE ANY GRIEVANCE REGARDING THE TREATMENT OF RENTAL INCOME AS INCOME FROM HOUSE PROPERTY AS THE ASSESSEE ITSELF HAS DISCLOSED THE R ENTAL INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY. ONCE THE ASSESSEE V OLUNTARILY FILED THE RETURN OF ITA NO.658./HYD/08 M/S. THE CO-OP INDUSTRIAL ESTATES LTD. HYDERABAD 7 INCOME AND NOT FILED ANY REVISED RETURN BY CHANGI NG THE HEAD OF INCOME DECLARED BY IT ON EARLIER OCCASION THEN IT IS NOT POSSIBLE TO THE ASSESSEE TO CONTEND THAT ANY SUCH DISCLOSURE OR ADMISSION WAS M ADE ON ACCOUNT OF MISTAKEN BELIEF. CONSIDERING THE TOTALITY AND CIRC UMSTANCES OF THE CASE THE ASSESSEE CANNOT CLAIM THE CHANGE IN HEAD OF INCOME WITHOUT ANY VALID REVISED RETURN OF INCOME. 8. THE LAST CONTENTION OF THE ASSESSEE IS WITH R EGARD TO TREATING THE INCOME FROM DISPLAY OF HOARDING AND INTEREST ON DEP OSITS WITH THE COOPERATIVE SOCIETIES AS INCOME FROM OTHER SOURCES. WE HAV E HEARD BOTH THE PARTIES ON THIS ISSUE. WE HAVE CAREFULLY GONE THROUGH THE NAT URE OF BUSINESS OF THE ASSESSEE. THE ASSESSEE IS MAINLY ENGAGED IN THE BU SINESS OF ESTABLISHING AND RUNNING INDUSTRIAL ESTATES FOR SMALL INDUSTRIES. THE ASSESSEE LET OUT PROPERTIES FOR THE PURPOSE OF GODOWNS WAREHOUSES FOR STORAGE/ PROCESSING. DISPLAY OF HOARDING CANNOT BE TAKEN TO BE PART AND PARCEL OF T HE BUSINESS ACTIVITIES OF THE ASSESSEE. SIMILARLY MAKING DEPOSITS WITH THE COOP ERATIVE BANK CANNOT BE CONSIDERED AS BUSINESS ACTIVITIES OF THE ASSESSEE. THE ASSESSEE IS NOT AN INVESTMENT COMPANY ENGAGED IN MONEY LENDING OR IN A N INVESTMENT BUSINESS. IN OUR OPINION IN THIS CASE OF THE ASSESSEE THE INTEREST ON DEPOSITS ARE TO BE ASSESSED AS INCOME FROM OTHER SOURCES ONLY. 9. IN THE RESULT THE APPEAL OF THE ASSESSEE IS DI SMISSED. ORDER PRONOUNCED IN THE COURT ON 18.2.20 11 SD/- SD/- (G.C.GUPTA) (CHANDRA POOJARI) VICE PRESIDENT ACCOUNTANT MEMBER DT/- 18 TH FEBRUARY 2011 ITA NO.658./HYD/08 M/S. THE CO-OP INDUSTRIAL ESTATES LTD. HYDERABAD 8 COPY FORWARDED TO: 1. M/S. THE CO-OP INDUSTRIAL ESTATES LTD. C/O. SHR I S.RAMA RAO ADVOCATE FLAT NO.103 H.NO.3-6-542/4 INDIRADEVI N ILAYAM ST. NO.7 HIMAYATNAGAR HYDERABAD-500 029 2. INCOME-TAX OFFICER WARD 2(2) HYDERABAD 3. COMMISSIONER OF INCOME-TAX(APPEALS) III HYDERAB AD 4. COMMISSIONER OF INCOME-TAX-II HYDERABAD 5. THE DEPARTMENTAL REPRESENTATIVE ITAT HYDERABAD . B.V.S