Income Tax Appellate Tribunal - Raipur
Shri Prahalad Rai Agrawal,, Sarguja ... vs Acit, Circle- Korba, Korba(Cg) on 19 February, 2016
आयकर अपील य अ धकरण, RAIPUR
IN THE INCOME TAX APPELLATE TRIBUNAL, RAIPUR
BEFORE S/SHRI MUKUL SHRAWAT (JM) SHAMIM YAHYA (AM)
सव ी मुकुल ावत, या यक सद य एवं शमीम याहया, लेखा सद य के सम ।
आयकर अपील सं./I.T.A. Nos. 87 & 88/Bil/2013
( नधारण वष / Assessment Years :200809 & 2009-10 )
Prahallad Rai Agrawal, बनाम/ ACIT, Circle, Korba,
Nehru Park Ketka Road, Aayakar Bhavan, Mahanadi
Vs.
Post Office: Surajpur Complex, Niharika Road,
Korba
थायी ले खा सं . /जीआइआर सं . /PAN/GIR No. : ACIPA 0858 L
(अपीलाथ /Appellant) .. ( यथ / Respondent)
अपीलाथ ओर से / Appellant by : None
यथ क ओर से/Respondent by : Shri H.M.Moharana
सुनवाई क तार ख / Date of Hearing : 18-02-2016
घोषणा क तार ख /Date of Pronouncement : 19 -02-2016
आदे श / O R D E R
Per Mukul Shrawat, JM
These two appeals filed by the assessee pertaining to the assessment years 2008-09 & 2009-2010 emanating from separate orders both dated 28.3.2013 of the ld CIT(A), Bilaspur. Almost in identical manner, the assessee has raised the grounds.
2. Ground No.2 is reproduced hereinbelow:
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I.T.A. Nos. 87 & 88/Bil/2013 A s s e s s m en t Y e a r s : 2 0 0 8 0 9 & 2 0 0 9- 1 0 Prahallad Rai Agarwal 'That the rent received from godown constructed with an object to earn the profit by utilizing the godown for commercial purposes, credited to profit and loss account offered an income from business has been treated as income from house property and disallowed the depreciation and expenses, thereby making the addition of Rs.4,77,450/[(A.Y. 2008-09) and Rs.4,67,283/- for A.Y. 2009-10)] Is arbitrary and unjustified."
3. When the matter was called on for hearing, there was no response from the side of the assessee. However, considering the smallness of the issue involved, we have decided to proceed exparte qua-assessee having heard ld D.R. and on the basis of material available on record.
4. The admitted factual position as emerged from the corresponding assessment orders passed by the Assessing Officer u/s.143(3) of the I.T.Act, 1961 dated 31.3.2010 and 27.12.2011, respectively were that the assessee in his individual capacity has shown rental income from godown under the head "business income", however, the AO has assessed the same under the head "income from house property". This legal issue was challenged before the ld CIT(A). The action of the AO was confirmed after narrating few case laws on the ground that the godowns were stock in trade, hence, there was no commercial exploitation of the godowns and, therefore, the rental income was rightly taxed under the head "income from house property".
5. On this legal issue, we have heard ld D.R. We shall discuss the facts from the assessment year 2008-09 and the decision will apply identically to A.Y. 2009- 3 I.T.A. Nos. 87 & 88/Bil/2013 A s s e s s m en t Y e a r s : 2 0 0 8 0 9 & 2 0 0 9- 1 0 Prahallad Rai Agarwal 2010. In our considered opinion, there are few case laws, according to which, the godown rent is nothing but exploitation of property for business purposes, hence, is to be taxed under the head "business income". The facts of the case have revealed that as per the audited report, the assessee had disclosed in the block of assets as "Rural godown account" and claimed depreciation @ 10%. Against the godown rent of Rs.10,38,292/- for A.Y. 2008-09, the assessee had claimed depreciation @ 10% of Rs.7,47,513/-, the opening W.D.V was Rs.74,75,133/- and the closing W.D.V. was shown at Rs.67,27,620/-. Hence, it was vehemently pleaded that the assessee has, since inception, disclosed godown as business asset and claimed depreciation year after year, which was arbitrarily disturbed during the year under consideration. There is one more admitted factual position that the godown rent was received from Chhattishgarh State Ware House, Raipur, which proved that the asset in question was commercialy exploited.
6. On similar issue, we find that in CIT vs. Shambhu Investment Pvt. Ltd., (249 ITR 7), which was approved by Hon'ble Supreme Court in judgment reported at 263 ITR 143 (SC), Lordships had an occasion to elaborately deal with judicial precedents on whether rental income could be taxed under the head business profits, and Their Lordships concluded as follows:
Taking a sum total of aforesaid discussions, it clearly appears that merely because income is attached to any immovable property cannot be the sole factor for assessment of such income as income from property; what has to be seen is what was the primary object of the assessee while exploiting 4 I.T.A. Nos. 87 & 88/Bil/2013 A s s e s s m en t Y e a r s : 2 0 0 8 0 9 & 2 0 0 9- 1 0 Prahallad Rai Agarwal the property. If it is found, applying such test, that main intention is for letting out the property, or any part thereof, the same must be considered as rental income or income from property. In case, it is found that the main intention is to exploit the immovable property by way of complex commercial activities, in that event, it must be held as business income.
6.1 It is thus clear that when a property is exploited by way of "complex commercial activities", income so earned by exploiting the property is to be taxed as business income. In view of above, and respectfully following the decision in the case of Sambhu Investment Pvt Ltd. (supra), we hereby reverse the findings of the authorities below and hold the rental income from godown is "business income". For both the years now under appeal, the ground raised by the assessee is allowed.
7. Ground No.3 common to both the assessee is as under:
"That the lump disallowance of Rs.50,000/9(AY 2008-09) and Rs.75,000/-(AY 2009-10) out of various expenses is arbitrary and without basis."
8. The observation of the AO was that certain expenses namely, diesel, lubricant, repairs and maintenance, etc., remained unverifiable in the absence of vouchers/bills. The vouchers which were produced were self made internal vouchers. In his opinion, certain expenses were inflated. To cover up the possibility of inflation of expenses, a disallowance of Rs.50,000/- was made for A.Y. 2008-09. Likewise for A.Y. 2009-010, the AO had made a disallowance of Rs.75,000/-
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I.T.A. Nos. 87 & 88/Bil/2013 A s s e s s m en t Y e a r s : 2 0 0 8 0 9 & 2 0 0 9- 1 0 Prahallad Rai Agarwal
9. When the matter was carried before the ld CITA), ld CIT(A) confirmed the action of the AO.
10. Having considered the inability of the assessee to produce the corroborative evidence in support of the claim of certain expenses, we find that the revenue authorities have adopted a reasonable approach in disallowing the expenses, that too not the entire claim of expenses but only a small portion in round figures. Even before us, there is no evidence in the shape of bills and vouchers, hence, in the absence of supporting evidence, we hereby confirm the findings of the lower authorities. This ground for both the assessment years is dismissed.
11. Ground No.4 for A.Y. 2008-09 is as under:
"That the proportionate disallowance of interest amounting to Rs.12,650/- is arbitrary and unjustified."
12. The assessee had advanced a sum of Rs.1,15,000/- to M/s. Ambika Sugar & Power (P ) Ltd., and no interest was charged on the said advance. The AO has mentioned that in reply to a query, the assessee had expressed "no objection" for the proportionate disallowance of interest. The AO had applied interest @ 12% on the loan amount and the interest amount was worked out at Rs.12,650/-. Against the addition, when the matter was carried before the ld CIT(A), ld CIT(A) confirmed the same.
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I.T.A. Nos. 87 & 88/Bil/2013 A s s e s s m en t Y e a r s : 2 0 0 8 0 9 & 2 0 0 9- 1 0 Prahallad Rai Agarwal
13. Since both the revenue authorities have stated that the assessee had not objected for the same disallowance, therefore, the claim of interest was disallowed. Under this circumstance, we hereby affirm the view of the revenue authorities especially when the assessee has not established the said amount was for business purposes or out of non-interest bearing funds. In the absence of both these elements, we hereby confirm the disallowance.
14. In the result, both the appeals of the assessee are partly allowed.
Order pronounced in the open court on 19 /02/2016 .
आदे श क घोषणा खुले यायालय म दनांकः को क गई ।
Sd/- sd/-
(शमीम याहया,लेखासद य) (मुकुल ावत, या यक सद य)
SHAMIM YAHYA, ACCOUNTANT MEMBER MUKUL SHRAWAT,JUDICIAL MEMBER
Raipur, दनांक Dated 19 / 02/2016
व. न.स./ Parida , Sr. PS
आदे श क त ल प अ े षत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant : Prahallad Rai Agrawal, Nehru Park Ketka Road, Post Office: Surajpur
2. यथ / The Respondent: ACIT, Circle, Korba, Aayakar Bhavan, Mahanadi Complex, Niharika Road, Korba
3. आयकर आयु त(अपील) / The CIT(A)- Bilaspur
4. आयकर आयु त / CIT, Bilaspur
5. वभागीय त न ध, आयकर अपील य अ धकरण, / DR, ITAT, Raipur
6. गाड फाईल / Guard file.
आदे शानुसार/ BY ORDER, स या पत त //True Copy// SR. PS, ITAT, CAMP: RAIPUR