Income Tax Appellate Tribunal - Jaipur
Alco Enamelled Wire Mfg. Company(P) ... vs Ito, Jaipur on 2 November, 2016
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IN THE INCOME TAX APPELLATE TRIBUNAL,
JAIPUR BENCHES (SMC), JAIPUR
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BEFORE: SHRI BHAGCHAND, ACCOUNTANT MEMBER
vk;dj vihy la-@ITA No. 678/JP/2015
fu/kZkj.k o"kZ@Assessment Year : 2003-04
M/s. Alco Enamelled Wire Mfg. Company cuke The ITO
(P) Ltd. , Road No. 6, VKI Area Vs. Ward- 4(2)
Jaipur Jaipur
LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AACCA 0142 L
vihykFkhZ@Appellant izR;FkhZ@Respondent
fu/kZkfjrh dh vksj ls@Assessee by: Shri Kranti Mehta, CA
jktLo dh vksj ls@ Revenue by :Shri R.A. Addl. CIT - DR
lquokbZ dh rkjh[k@ Date of Hearing : 21/10/2016
?kks"k.kk dh rkjh[k@ Date of Pronouncement : 02 /11/2016
vkns'k@ ORDER
PER BHAGCHAND, AM
The assessee has filed an appeal against the order of the ld. CIT(A)-II, Jaipur dated 15-05-2015 for the assessment year 2003-04 raising therein following grounds:-
''1. That under the facts and circumstances of the case and in law the authorities below have grossly erred in holding that the appellant receipts from lease charge of building Rs. 84,000/- was taxable under the head 'Income 2 ITA No. 678/JP/2015 M/s. Alco Enamelled Wire Mfg. Company (P) Ltd. vs. ITO, Ward- 4(1), Jaipur .
from other sources'' even when there was sufficient material with him to verify the correctness of the claim of ''Income from house property'' and 'Business income'' while doing so, the ld authorities below had not appreciated the intention / prime object of the appellant.''
2. That under the facts and circumstances of the case and in law, the authorities below have grossly erred in restricting the claim of deduction (Rs. 25,200) u/s 24(a) on the rental income considered as ''Income from other sources''.
3. That under the facts & circumstances of the case and in law, the authorities below have grossly erred in holding that the income of Rs. 96,000/- earned by the appellant from leasing of plant and machinery, according to the requirements of the occupier, is to be assessed as income from ''Other Sources'' and not under the head ''Income from business"' as claimed by him. Because, while doing so, the ld. authorities below had not appreciated the intention / prime object of the appellant.
4. That under the facts and circumstances of the case and in law, the authorities below have grossly erred in not allowing business expenditure of Rs. 2,48,355.78 (Auditor's remuneration of Rs. 11,240/- , Misc.& other expenses Rs. 9,732.50/-, Rent rates & taxes Rs. 12,087/-., Bonus Rs. 7,200/-, Employer contribution to ESI Rs. 3,420, ROC filing fees Rs. 900/-, Repairs and Maintenance Rs. 25,609/-, Salary Rs. 42,000/-, Postage and Telephone Expenses Rs. 27,410/-, Vehicle Running Expenses Rs. 57,758/-, Entertainment Expenses Rs. 5,929/-, Financial Expenses Rs. 6,656.28/-,Depreciation of Motor car Rs. 38,414/-) even when these are disallowable expenditures under the provision of the Act and there was sufficient material with him to verify the correctness of the claim. 3 ITA No. 678/JP/2015 M/s. Alco Enamelled Wire Mfg. Company (P) Ltd. vs. ITO, Ward- 4(1), Jaipur .
5. That under the facts & circumstances of the case and in law the authorities below have grossly erred in treating the Misc. Income under the head Income from other sources even when this income was business income. 2.1 Apropos Ground No. 1 and 2 of the assessee, the facts and observations as narrated by the ld. CIT(A) in his order is as under:-
''During the course of appeal hearing, the A.R. for the appellant submitted that the assessee company has 21800 sq.ft land out of which 19800 sq.ft was let out and remaining 2000 sq.ft remained vacant. The rental income of Rs. 9,34,887/- was received from letting out land and building. Further it also received Rs. 84,000/- as a rental income from letting out its plant and machinery. The assessee company in its original return, has shown the rental income from land and building under the head income from house property as per the provisions of the Section 22 of the I.T. Act and the income from letting out its plant and machinery was considered under the head business income. Thereafter in its revised return the expenses of Rs. 5,12,909/- related to letting out of land and building was disallowed at Rs. 4,01,920/- and consequently tax of Rs. 1,88,408/- was deposited. Thereafter ld. AO in its order disallowed rental income of land and building for Rs. 84,000/- from the head income from house property and assessed it under the head other sources. The assessee even during the assessment proceedings furnished the lease deeds. Therefore, the contention of the AO to consider the rental income from land and building under the head other sources is not correct and hence you are requested to kindly consider the facts and allow the rental income under the head income from house property.'' 4 ITA No. 678/JP/2015 M/s. Alco Enamelled Wire Mfg. Company (P) Ltd. vs. ITO, Ward- 4(1), Jaipur .
Observation of the ld. CIT(A) :-I have considered the facts of the case and the submission made. The annual Rental Value u/s 23 calculated by the AO on the basis of facts revealed in the course of survey u/s 133A and on the basis of statement recorded of Director of Company wherein categorically admitted that the business of assessee company had been completely closed down in Sept. 1999, since then there was no business activity in the assessee company except rental income, hence the action of the AO in this regard is sustained. The appellant fails on this ground.
Ground No. 2. The AO had considered the rental income of Rs. 84,000/- under the head of other sources and hence the deduction u/s 24(a) has been consequently decreased by Rs. 25,200/- for which the ld. AR prayed for allowance of consequential deduction u/s 24(a) amounting to Rs. 25,200/-
Observation of the ld. CIT(A): I have considered the facts of the case and the submission made. The decision given in Ground No. 1 is against the appellant hence the same is decided against the appellant and the action of the AO in this regard is fair and reasonable. The same is sustained. The appellant fails on this ground.'' 2.2 During the course of hearing the ld. AR of the assessee has not made any oral submission except relying on the written submission filed before the Bench which has been taken into consideration for adjudication of the grounds of appeal of the assessee.
2.3 The ld. DR relied on the orders of the authorities below.5 ITA No. 678/JP/2015
M/s. Alco Enamelled Wire Mfg. Company (P) Ltd. vs. ITO, Ward- 4(1), Jaipur . 2.4 I have heard the rival contentions and perused the materials available on record. It is observed that the annual rental value was calculated by the AO on the basis of facts revealed in the course of survey conducted u/s 133A of the Act. The statement of the Director of the company was recorded in which he admitted that the business of the assessee company had been completely closed in Sept. 1999 and there was no business activity in the assessee company except rental income. It is noted that the ld. AR of the assessee had not advanced any specific submission as to the sustenance of the action of the AO by the ld. CIT(A). Thus the issue of lease charge of the building is taxable under the head income from other sources as there is no sufficient evidence to establish that income should be charged under the head income from house property or business income. The ld. CIT(A) has rightly restricted the deduction u/s 24(a) of the Act as rental income was assessed under the head Income from other sources. In view of the above facts and circumstances of the case, I am not inclined to interfere with the order of the ld. CIT(A) which is sustained. Thus Ground Nos. 1 and 2 of the assessee are dismissed.
6 ITA No. 678/JP/2015
M/s. Alco Enamelled Wire Mfg. Company (P) Ltd. vs. ITO, Ward- 4(1), Jaipur . 3.1 Apropos Ground No. 3 of the assessee, the facts and observations as narrated by the ld. CIT(A) in his order is as under:-
''During the course of appeal hearing, the A.R. of the appellant submitted that there was temporary suspension of business due to heavy losses incurred by the company and as a result, it has to let out its factory land and building and plant and machinery. Hence, during the year, company earned rental income from land and building and plant and machinery and accordingly considered under the head income from house property and business income. But the rental income of Rs. 96,000/- from plant and machinery was assessed under the head other sources by the ld AO. As per the decision of High Court in the case of Shri Hanuman Sugar & Industrial vs. CIT (266 ITR 106), CIT vs. Northern India Iron &Steel Co. Ltd. (211 ITR 370), it was held that income from leasing out factory and building and machinery due to temporary suspension of business which is due to tied over financial crisis is a business income and not the income and not the income from other sources. This fact that this suspension of business is for temporary phase and we are at the verge of commencing activity was well informed to the ld. AO vide our reply dated 9-01-2007 at last para of page no. 2 during the course of assessment proceedings. Hence, you are requested to allow the rental income from plant and machinery under the head business income.
Observation of the ld. CIT(A) :-I have considered the facts of the case and the submission made. The A/R could not controvert the findings of the AO. In the assessment order, the AO clearly stated that on the basis of statement recorded of director of company wherein he categorically admitted that the business of the assessee company had been completely closed down in Sept. 1999, since there was no business activity in the assessee company except rental 7 ITA No. 678/JP/2015 M/s. Alco Enamelled Wire Mfg. Company (P) Ltd. vs. ITO, Ward- 4(1), Jaipur .
income. Hence, there is no business run by the company during the year under consideration and income from lease cannot be considered as business income. Therefore, the addition made by the AO is hereby sustained. The appellant fails on this ground.
3.2 During the course of hearing the ld. AR of the assessee has not made any oral submission except relying on the written submission filed before the Bench which has been taken into consideration for adjudication of the grounds of appeal of the assessee.
3.3 The ld. DR relied on the orders of the authorities below.
3.4 I have heard the rival contentions and perused the materials available on record. It is noted from the record that the assessee had leased out its plant and machinery and earned the rental income of Rs. 96,000/- due to close down its business since Sept. 1999 which has been explicitly admitted by the Director of the Company. It is also noted from the ld. CIT(A)'s order that the ld. AR of the assessee could not controvert the findings of the AO on this issue. When the Director of the assessee company had admitted that the assessee company had closed down its business due to losses and there was no business activity in the assessee company except rental income then it cannot be considered as 8 ITA No. 678/JP/2015 M/s. Alco Enamelled Wire Mfg. Company (P) Ltd. vs. ITO, Ward- 4(1), Jaipur .
business income of the assessee. Hence, in view of the above deliberations, I concur with the findings of the ld. CIT(A) which is sustained. Thus Ground No. 3 of the assessee is dismissed. 4.1 Apropos Ground No. 4 of the assessee, the facts and observations as narrated by the ld. CIT(A) in his order is as under:-
''The last ground of appeal is against the disallowance of expenses under various heads. The A.R. could not controvert the findings of the AO. In the assessment order, the AO clearly stated that on the basis of the statement recorded of director of company wherein he categorically admitted that the business of assessee company had been completely closed down in Sept. 1999, since then there was no business activity in the assessee company except rental income. Hence, once the business income treated as income from other sources, the claim of expense is held to be unjustified. Therefore, the disallowance made by the AO is hereby sustained. The appellant fails on this ground.'' 4.2 After hearing both the parties and perusing the submissions of the ld. AR of the assessee, I noted that the assessee could not controvert the findings of AO before the ld. CIT(A) and the ld. CIT(A) took the support of the same contentions of the Director of the assessee that the assessee company had completely closed down its business in Sept. 1999 and there was no business activity in the assessee company except the rental 9 ITA No. 678/JP/2015 M/s. Alco Enamelled Wire Mfg. Company (P) Ltd. vs. ITO, Ward- 4(1), Jaipur .
income . Once the business income was treated as income from other sources by the AO, the claim of the expenses of the assessee was held unjustified by the ld. CIT(A) and he confirmed the action of the AO. Thus taking into consideration all the facts and circumstances of the case, I find no reason to interfere with the order of the ld. CIT(A). Thus Ground No. 4 of the assessee is dismissed.
5.1 Apropos Ground No. 5 of the assessee, the facts and observations as narrated by the ld. CIT(A) in his order is as under:-
''The assessee company earned misc. income at Rs. 13,855/- which was shown under the head business income in its original as well as revised return. Thereafter during the assessment proceedings, the AO assessed the misc. income under the head income from other sources.
During the course of appeal hearing, the A.R. for the appellant submitted that as per Companies Act, companies are required to prepare its financial as per the Schedule VI. As per its requirement the income which are incidental and ancillary to business are shown as misc. income under direct income whereas as per Income tax Act, 1961 income from sources means which is not a business income. Hence, misc. earned by the assessee company should be considered under the head business income. But the ld. AO has not considered the above facts and assessed the misc. income under the head other sources. Hence, you are requested to kindly consider the fact and allow the misc. income under the head business income.10 ITA No. 678/JP/2015
M/s. Alco Enamelled Wire Mfg. Company (P) Ltd. vs. ITO, Ward- 4(1), Jaipur .
Observation of the ld. CIT(A) : I have considered the facts of the case and the submission made. The A.R. could not controvert the findings of the AO. In the assessment order the AO clearly stated that on the basis of the statement recorded of director of company wherein he categorically admitted that the business of the assessee company had been completely closed down in Sept. 1999, since there was no business activity in the assessee company except rental income. Hence, there is no business run by the company during the year under consideration. Therefore, the addition made by the AO under the head misc. income is hereby sustained. The appellant fails on this ground.
5.2 After hearing both the parties and perusing the submissions of the ld. AR of the assessee, I noted that the assessee could not controvert the findings of AO before the ld. CIT(A) and the ld. CIT(A) took the support of the same contentions of the Director of the assessee that the assessee company had completely closed down its business in Sept. 1999 and there was no business activity in the assessee company except the rental income. Hence, when there was no business run by the assessee company during the year then addition made AO under the head Misc. income was rightly confirmed by the ld. CIT(A) and I concur with the findings of the ld. CIT(A). Thus Ground No. 5 of the assessee is dismissed.11 ITA No. 678/JP/2015
M/s. Alco Enamelled Wire Mfg. Company (P) Ltd. vs. ITO, Ward- 4(1), Jaipur . 3.0 In the result, the appeal of the assessee is dismissed.
Order pronounced in the open court on 02 /11/2016.
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fnukad@Dated:- 02 /11/ 2016
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vkns'k dh izfrfyfi vxzfs "kr@Copy of the order forwarded to:
1. vihykFkhZ@The Appellant- M/s. Alco Enammelled Wire Mfg. Company (P) Ltd. , Jaipur
2. izR;FkhZ@ The Respondent- The ITO, Ward- 4 (2) , Jaipur
3. vk;dj vk;qDr¼vihy½@ CIT(A).
4. vk;dj vk;qDr@ CIT,
5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur
6. xkMZ QkbZy@ Guard File (ITA No. 678/JP/2015) vkns'kkuqlkj@ By order, lgk;d iathdkj@ Assistant. Registrar