ITA NOS.3875 & 3884/Del/2011 &
ITA NOS. 756 & 983/DEL/2012
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH "C", NEW DELHI
BEFORE SHRI S.V. MEHROTRA, ACCOUNTANT MEMBER
AND
SHRI H.S. SIDHU, JUDICIAL MEMBER
I.T.A.No.3875/DEL/2011
A.Y. : 2005-06
ACIT, VS. M/S HL MALHOTRA &
CIRCLE-12(1), CO. PVT. LTD.
New Delhi 506, DAKHA HOUSE,
PUSA LANE, 18/17,
WEA KAROL BAGH,
NEW DELHI
(PAN: AAACH0936J)
(APPELLANT) (RESPONDENT)
I.T.A. NO. 3884/Del/2011
A.Y. : 2005-06
M/S HL MALHOTRA & VS. ACIT,
CO. PVT. LTD. CIRCLE-12(1),
506, DAKHA HOUSE, New Delhi
PUSA LANE, 18/17,
WEA KAROL BAGH,
NEW DELHI
(PAN: AAACH0936J)
(APPELLANT) (RESPONDENT)
I.T.A.No.756/DEL/2012
A.Y. : 2008-09
M/S HL MALHOTRA & VS. ACIT,
CO. PVT. LTD. CIRCLE-12(1),
506, DAKHA HOUSE, New Delhi
PUSA LANE, 18/17,
WEA KAROL BAGH,
NEW DELHI
(PAN: AAACH0936J)
(APPELLANT) (RESPONDENT)
I.T.A. NO. 983/Del/2012
A.Y. : 2008-09
ACIT, VS. M/S HL MALHOTRA &
CIRCLE-12(1), CO. PVT. LTD.
New Delhi 506, DAKHA HOUSE,
PUSA LANE, 18/17,
WEA KAROL BAGH,
NEW DELHI
(PAN: AAACH0936J)
(APPELLANT) (RESPONDENT)
1
ITA NOS.3875 & 3884/Del/2011 &
ITA NOS. 756 & 983/DEL/2012
Department by : Sh. Robin Rawal, Sr. DR
Assessee by : Sh. Rohit Jain, CA &
Sh. Rohit Garg, CA
Date of Hearing : 19-1-2015
Date of Order : 23-1-2015
ORDER
PER BENCH
These are the Cross Appeals filed by the Revenue as well as
Assessee emanate out of respective Orders passed by the Ld. CIT(A)-X,
New Delhi pertaining to assessment years 2005-06 & 2008-09
respectively.
2. The grounds raised in the Revenue's Appeal No. 3875/Del/2011 (AY.
2005-06) reads as under:-
"1. On the facts and circumstances of the case in law, the
Ld. CIT(A) has erred in giving relief of Rs. 18,35,634/-
out of total disallowance of Rs. 27,04,339/- made by the
AO on account of expenses and depreciation.
2. On the facts and circumstances of the case, the Ld.
CIT(A) was not right in taking cognizance of the facts
which were not available to the AO during the course of
assessment proceedings and it was during the
appellate proceedings only that assessee has been
found to have resumed business.
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ITA NOS.3875 & 3884/Del/2011 &
ITA NOS. 756 & 983/DEL/2012
3. The appellant craves leave, to add, alter or amend any
ground of appeal raised above at the time of the
hearing."
3. The grounds raised in the Assessés Appeal No. 3884/Del/2011 (A.Y.
2005-06) read as under:-
"1. That the Commissioner of Income Tax (Appeals) erred
on facts and in law in confirming the action of the
assessing officer in assessing service charges of
Rs.19,610 and interest income of Rs.1,52,970 under the
head 'Income from other sources' instead of 'Profits and
Gains from Business and Profession', as declared by the
appellant.
2. That the Commissioner of Income Tax (Appeals) erred
on facts and in law in confirming the disallowance of the
following expenditure holding the same to be personal
expenditure of the directors of the appellant:
1. Electricity & water expenses - Rs.1 ,46,739; and
2. Watch & ward expenses Rs.1,08,000
2.1 That the Commissioner of Income Tax (Appeals) erred on
facts and in law in not appreciating that the above
expenditure were incurred in respect of the registered 'office
of the appellant.
2.2 That the Commissioner of Income' Tax (Appeals) further
failed to appreciate that these cannot be disallowance of any
expenditure in case of a corporate assessee on account of
personal expenses.
3. That the Commissioner of Income Tax (Appeals) erred
on facts and in law in confirming the disallowance of the
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ITA NOS.3875 & 3884/Del/2011 &
ITA NOS. 756 & 983/DEL/2012
travelling expenditure to the extent of Rs.3,96,735 holding the
same to be personal expenditure of the directors of the
appellant.
3.1 That the Commissioner of Income Tax (Appeals) erred on
facts and in law in alleging that the appellant failed to produce
any details justifying the above travelling expenditure.
3.2 That the Commissioner of Income Tax (Appeals) further
failed to appreciate that these cannot be disallowance of any
expenditure in case of a corporate assessee on account of
personal expenses.
4. That the Commissioner of Income Tax (Appeals) erred
on facts and in law in making ad-hoc disallowance of 50% out
of the total director's remuneration of Rs 4,80,000 on the
ground that part of such remuneration pertains to earning of
rental income.
The appellant craves leave to add, alter, amend or vary
from the above grounds of appeal before or at the time of
hearing."
4. The grounds raised in the Asessee's Appeal No. 756/Del/2012 (A.Y.
2008-09) read as under:-
1. That the Commissioner of Income Tax (Appeals) erred
on facts and in law in confirming the action of the assessing
officer in assessing service charges of Rs 4,06,675 and
interest income of Rs.1,67,584 under the head 'Income from
'Other sources' instead of 'profits and Gains from Business and
Profession', as declared by the appellant.
2. That the Commissioner of Income Tax (Appeals) erred
on facts and in law in confirming the disallowance of the
following expenditure holding the same to be personal
expenditure of the directors of the appellant:
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ITA NOS.3875 & 3884/Del/2011 &
ITA NOS. 756 & 983/DEL/2012
i) Electricity and water charges : Rs.1,85,113; and
ii) Watch and ward expenses : RS. 1,47,420
2.1 That the Commissioner of Income Tax (Appeals) erred on
facts and in law in not appreciating that the above
expenditure were incurred in respect of the registered office
of the appellant.
2.2 That the Commissioner of Income Tax (Appeals) further
failed to appreciate that these cannot be disallowance of any
expenditure in case of a corporate assessee on account of
personal expenses.
3. That the Commissioner of Income Tax (Appeals) erred
on facts and in law in confirming the disallowance of the
travelling expenditure to the extent of Rs.4,48,227 holding the
same to be personal expenditure of the directors of the
appellant.
3.1 That the Commissioner of Income Tax (Appeals) erred on
facts and in law in alleging that the appellant failed to produce
any details justifying the above travelling expenditure.
3.2 That the Commissioner of Income Tax (Appeals) further
failed to appreciate that these cannot be disallowance of any
expenditure in case of a corporate assessee on account of
personal expenses.
4. That the Commissioner of Income Tax (Appeals) erred
on facts and in law in making ad-hoc disallowance of 50% out
of the total director's remuneration of Rs4,80,000 on the
ground that part of such remuneration pertains to earning of
rental income.
The appellant craves leave to add, alter, amend or vary from
the above grounds of appeal before or at the time of hearing.
5
ITA NOS.3875 & 3884/Del/2011 &
ITA NOS. 756 & 983/DEL/2012
5. The grounds raised in the Revenue's Appeal No. 983/Del/2012 (A.Y.
2008-09) read as under:-
1. Whether Ld. CIT(A) was correct on facts and
circumstances of the case and in law in giving relief to
the assessee of Rs. 21,97,811/- against the disallowance
of Rs. 32,18,941/- made by the AO on account of
expenses debited to profit and loss account.
2. The appellant craves leave, to add, alter or amend any
ground of appeal raised above at the time of hearing."
REVENUE'S & ASSESSEE'S APPEALS (ITA NOS. 3875/DEL/2011 &
3884/DEL/2011) (A.Y. 2005-06)
6. Assesse filed its Return of income declaring a total income of
Rs.3,44,492/- on 27.10.2005 and was processed u/s 143(1) of the I.T. Act
on 11.03.2006. The case of the assessee was selected for scrutiny and
notice u/s 143(2) of the I.T. Act was issued to assessee on 30.10.2006. In
response to the same the Authorised Representative of the assessee
appeared before the AO and filed necessary details/ documents. The
assessee is engaged in the business of Travel related activities for the last
more than 23 years. During the year under consideration the assessee
company has not carried out any business activities. The company has
shown income from house property as Ieave and license fees of
Rs.41,11,890/- and income from other sources as interest income of
Rs.1,52,970/- and service charges of Rs.19,610/-. Against this income, the
assessee company has claimed expenses of Rs.27,04,339/- and 30%
statutory deduction against house property of Rs.12,33,567/-. The AO
asked to furnish justification regarding allowability of business expenses
and depreciations as no business activities appear to have conducted
during the year and immediate preceding year. The assessee company
filed details in respect of house property including leave & lease
agreement but could not offer any justification for claiming of expenses
against no business income. The AO asked the assessee to furnish the
6
ITA NOS.3875 & 3884/Del/2011 &
ITA NOS. 756 & 983/DEL/2012
explanation for not submitting any justification for claim of huge expenses
against no business income and show cause as to why the entire
expenses including depreciation of RS.27.04 lacs should not be disallowed
as company has not carried out any' business activities not only during
year but since 1999-2000. The assessee vide letter dated 14.12.2007
submitted that "the assessee company has been carrying on the business
of travel related activities for the last more than 23 years and during the
previous year relevant to the assessment year 2005-06 has continued the
same business activities. In the past the assessee company have been
General Selling Agent for Japan Airlines and Alitalia and had been having
branch offices in Punjab, Haryana, Bengal and many other states and
cities. Further, after termination of contracts by Japan Airlines and Alitalia
the branch offices were closed. The main income of the assessee
company consists of leave and license fee, service charges and interest.
Assessee further submitted that for the purpose of carrying on the
business the assessee company has incurred expenses on salaries, rent of
office, electricity, printing and stationery, audit fee. telephone, filing fee of
registrar of companies, watch and ward, depreciation etc. The assessee
has filed the profit and loss accounts contains the detail of the said
expenses. Assessee further submitted before the AO that in the past the
said expenses have been allowed by the AO by completing the
assessment under section 143(3) of the I.T. Act.
6.1 The AO considered the contention of the assessee considered and
found in accurate as assessee company not only not carrying out its
business activities since past 7-8 years but also not carried out any
business activities in future 2-3 years. Therefore, the assessee company is
entitled only for the expenses incurred u/s 57 of the Act against income
from other sources earned u/s 56 and 30% deduction under sub-section
(a) of section 24 of the I.T. Act is allowable against income from house
property. The assessee has claimed business expenses as well as 30%
deduction u/s 24 against house property of Rs.41,11,890/- and against
income from other sources of RS.1,72,580/- deliberately with special
7
ITA NOS.3875 & 3884/Del/2011 &
ITA NOS. 756 & 983/DEL/2012
motive to reduce its income from house property and income from other
sources just to defraud revenue, even though no business activities in any
manner were carried out.
6.2 AO has also held that the assessee company has not any intention
to regularize its business activities in the near future, as per the details/
documents filed by the assessee company. Keeping in view of the
aforesaid discussion, the AO was of the view that the entire expenses
and depreciation of Rs. 27,04,339/- claimed by the assessee company as
business expenses are disallowed and therefore, completed the
assessment u/s. 143(3) of the I.T. Act vide his order dated 24.12.2007.
7. Aggrieved with the assessment order dated 24.12.2007, assessee
filed an appeal before the Ld. First Appellate Authority who vide impugned
order dated 31.5.2011 partly allowed the appeal filed by the assessee and
restricted the disallowance of Rs. 8,68,705/- by allowing the relief of Rs.
18,35,634/- out of the total disallowance made by the AO amounting to
Rs. 27,04,339/- on account of expenses and depreciation.
8. Revenue has filed the Appeal against the relief given by the Ld. First
Appellate Authority amounting to Rs. 18,35,634/- and the assessee has filed
the Cross Appeal against the disallowance of expenditure amounting to
Rs.8,68,705/-mentioned in the impugned order and as per prayer made.
9. At the time of hearing Sh. Robin Rawal, Ld. Sr. DR appeared for the
Revenue and stated that the assessee company has not carried out its
business activities since past 7-8 years but also not carried out any
business activities in future 2-3 years. He further submitted that the
assessee company is entitled only for the expenses incurred u/s 57 of the
Act against income from other sources earned u/s 56 and 30% deduction
under sub-section (a) of section 24 of the I.T. Act is allowable against
income from house property. He stated that the assessee has claimed
business expenses as well as 30% deduction u/s 24 against house
property of Rs.41,11,890/- and against income from other sources of
Rs.1,72,580/- deliberately with special motive to reduce its income from
8
ITA NOS.3875 & 3884/Del/2011 &
ITA NOS. 756 & 983/DEL/2012
house property and income from other sources in spite of the fact that no
business activity in any manner were carried out by the assessee.
Finally, he argued that Ld. CIT(A) has wrongly restricted the disallowance
of expenditure of Rs. 8,68,705/- on account of electricity, water expenses
and watch and ward expenses and Director's remuneration which is
contrary to the law and facts of the case. He requested that the AO has
passed the assessment order as per law and the Ld. CIT(A)'s order is
contrary to the law and the same may be cancelled.
10. Shri Rohit Jain and Shri Rohit Garg, Chartered Accountants appeared
for the assessee and argued that the AO has wrongly observed that
assessee was not carrying out the business activities during the year
under consideration and has wrongly assessed the services charges and
interest income as income from other sources. In fact the assessee has
booked the commission charges on booking of air-tickets which was the
principal business of the assessee and the service charges received by the
assessee are part and parcel of the assessee's business activities and his
business income. As regards to the interest income he stated that the
same represent bank interest of available business funds of the assessee
and was also in the nature of business income which has been accepted
by the Department in the earlier assessment years. He also draw our
attention toward the impugned order at Page 4-5 to support his
contention. He further submitted that the principle of Rule of Consistency
must be followed by the Tax Authorities, in view of the various decisions
of the Hon'ble Apex Court; Hon'ble High Courts and the Tribunal. In
support of his contention he filed the copies of the case laws in the shape
of Paper Book pages 1-69. He also draw our attention toward the
relevant paragraphs of the decisions rendered by the Hon'ble Supreme
Court of India as well as Hon'ble High Courts. He requested that the
Revenue Authority has wrongly disallowed the expenses claimed by the
assessee merely on the ground that the assessee's business has not
functional for the past 7-8 years and for the 2-3 subsequent years.
Whereas infact these expenses are very much necessary for maintaining
9
ITA NOS.3875 & 3884/Del/2011 &
ITA NOS. 756 & 983/DEL/2012
the assessee's office, retaining the staff and other related expenditure to
keep the assessee company alive. Therefore, the impugned order passed
by the Ld. CIT(A) may be cancelled and the Appeal filed by the assessee
may be allowed.
11. We have heard both the parties and perused the relevant records,
especially the order passed by the Revenue Authroity alongwith the case
laws cited by the Ld. Counsel of the assessee as well as other
documentary evidence filed by the assessee's counsel in the shape of
paper book. We are of the considered view that the assessee has claimed
the expenses of RS. 27,04,339/- for which the details of the same are as
under:-
To Salaries 642,432.00
To Rent 50,388.00
To Electricity AND Water 146,740.00
To Office Maintenance 44,420.00
To Printing Stationery 6,224.00
To Postage, Telegrams AND Couriers 3,380.00
To Repairs and Maintenance 113,247.00
To Telephone AND Trunk Calls 124,403.00
To Travelling AND Conveyance 449,418.00
To Car Maintenance 198,855.00
To Bank Charges AND Commission 5,606.00
To Insurance 11,849.00
To Staff Welfare 16,202.00
To Staff Medical 16,531.00
To Staff Uniform 4,275.00
To SubScriptions 21,770.00
To News Papers AND Trade Journals 2,799.00
To Filing Fee 2,454.00
To Bonus 9,000.00
To Auditors Remunerations 19,980.00
To Legal AND Professional Fees 22,500.00
To Documentation 3,497.00
To Watch AND Wards 108,000.00
To Directors' Remunerations 480,000.00
To Meeting AND Conference 4,459.00
To Loss on Sale of Assets 3,979.00
To Diwali Expenses 11,501.00.
To Depreciation 180,430.00
11.1 The AO has disallowed the entire expenses and depreciation total
amounting Rs. 27,04,339/- by holding that the assessee company
has not only carrying out its business activities past 7-8 years but also
10
ITA NOS.3875 & 3884/Del/2011 &
ITA NOS. 756 & 983/DEL/2012
not carried out any business activities in future 2-3 years. He further
observed that only expenses incurred u/s 57 of the Act against income
from other sources earned u/s 56 and 30% deduction under sub-section
(a) of section 24 of the I.T. Act is allowable against income from house
property. AO was of the view that assessee has claimed business
expenses as well as 30% deduction u/s 24 against house property of
Rs.41,11,890/- and against income from other sources of RS.1,72,580/-
with the objective to reduce its income from house property and income
from other sources in spite of the fact that no business activity in any
manner were carried out by the assessee. Assessee company has no
intention to regularize its persons activities in future also, as per the
details and documentary evidence filed by the assessee. Ld. CIT(A) after
hearing both the parties and documentary evidence filed by the
assessee has allowed the following expenses. He has mentioned at Page
No. 30 of the impugned order:-
Ground Description Amount Decision in brief
No.
involved(Rs.)
1 General - Does not require
adjudication
2 i) Interest on Bank FDR i) Rs. 117355 The view of the
assessing officer to
ii) Interest on IT Refund ii) Rs. 35615
treat the same as
iii) Service charges iii) Rs. 19610 "income from other
sources" is upheld.
3 Disallowance of Rs. 27,04,339/- In view of the
expenditure in the P&L discussion made
A/c hereinabove out of
total expenses of Rs.
27,04,339/- debited
in P&L A/c, the
following expenses
are directed to be
disallowed.
(a) Electricity &
Water Expn.
(Rs.
1,23,970)
(b) Watch &
Ward (Rs.
11
ITA NOS.3875 & 3884/Del/2011 &
ITA NOS. 756 & 983/DEL/2012
1,08,000)
(c) Travelling
Exp. (Rs.
2,96,735)
(d) Directors
Remunerati
on (Rs.
2,40,000/-)
Totaling Rs.
8,68,705/-
11.2 After considering the aforesaid finding of the AO as well as by the
Ld. CIT(A), we are of the considered view that it is an admitted fact that
the assessee is a company and its business is travelling related activities.
During the assessment year in dispute assessee has shown its income
from house property of Rs. 41,11,89/- and income from other sources Rs.
1,52,970/- and service charges of Rs. 19,610/-. Against this income
assessee has claimed expenses of Rs. 27,40,339/- and the AO has
disallowed the total expenses on the ground that assessee company not
carry out any business since 7-8 years and but also not carried out any
business activities in future 2-3 years and only expenses incurred u/s 57
& u/s. 24 of the I.T. Act are allowable. Ld. CIT(A) treated services charges
as income from other sources, but according to the assessee that the
assessee is entitled for all business expenses even during lull period in
the business as covered under section 30 to 37 of the I.T. Act. All
expenses are to be allowed to either keep the corporate status alive or
incurred for the purpose of business during the period of lull. Therefore,
the Ld. CIT(A) after examining all the expenses has restricted the
disallowance to the tune of Rs. 8,68,705/- and given the relief of Rs.
18,35,634/- out of the total disallowance of Rs. 27,04,339/-. We have
considered the arguments advanced by both the parties and the order
of the Revenue Authority alongwith the details of the expenses incurred
by the assessee as well as expense allowed by the Ld. CIT(A). As per the
details submitted by the assessee in Paper Book dated 29.10.2012 at
Page no. 77 in which the assessee has shown the details of salary of the
12
ITA NOS.3875 & 3884/Del/2011 &
ITA NOS. 756 & 983/DEL/2012
employees working with the assessee. For the sake convenience the
same is reproduced as under:-
Name Amount (Rs.)
1. SH. Bhupender Kumar 117000.00 Accounts Officer
2. Sh. Upendra Prasad 87000.00 Accounts Assistant
3. Sh. Subhash Chandar 75000.00 Executive
4. SH. Hakesh Sharma 73367.00 Computer Operator
5. Sh. Ravinder Singh 74800.00 Executive
6.Sh. Shiv Nandan 50665.00 Driver
7.Krishan Dutt Shukla 49400.00 Driver
8. Sh.Ramesh Chand Jukhwal 34800.00 Peon
9. Sh. Shankar Rawat 38400.00 Chartered Accountant
10. Sh. Dhirender Panday 14000.00 Assistant
11. Ms. Pooja Gupta 4000.00 Computer operator
Total 642432.00
11.3 Keeping in view of the above details of salaries paid to the
aforesaid employees of the assessee company, we find that Ld. CIT(A) has
allowed the entire salary expenses to the assessee in the impugned order
which is not permissible under the facts and circumstances of the present
case, because the assessee company is not carrying out its business
activities since past 7-8 years and also not carry out for subsequent 2-3
years amount to Rs. 6,42,432/- has wrongly been allowed by the Ld.
CIT(A). After examining the same, we are of the view that under the facts
and circumstances of the case and to keep the corporate status alive,
minimum expenses on account of salary should be allowed to the
13
ITA NOS.3875 & 3884/Del/2011 &
ITA NOS. 756 & 983/DEL/2012
assessee. Therefore, we allow the salary of one Account Assistant
amounting to Rs. 87000/-; Computer Operator Rs. 73,367/-; Driver Rs.
49,400/-; Peon Rs. 38,400/- and salary of one CA Rs. 24,000/- only and
salary for others claimed by the assessee and the other expenses are
disallowed. AO is directed to recompute the income of the assessee, as
per the directions given as aforesaid.
12. As regards the Assessee's Cross Appeal NO. 3884/Del/2011 (A.Y.
2005-06) in which assessee has raised four grounds of appeal and
challenged the impugned order passed by the Ld. CIT(A),
12.1 As regard No. 1 raised in the assessee's appeal is concerned, we
find that the assessee has assailed the findings of the Ld. CIT(A) in holding
that services charges of Rs. 19,610/- and interest income of Rs.
1,52,970/- both have to be assessed under the head "income from other
sources", instead of profit and gains from business and profession. As far
as the issue regarding the interest income on FDR is concerned, the same
is not mere res integra and we concur with the finding of the Ld. CIT(A)
recorded in para 4.6 of his order. As far as the issue regarding the
taxability of service charges under the head "income from other sources"
vis-a-vis profits and gains on business or profession is concerned, we find
that the services charges were merely received. The same has been
received from M/s Span Excursion Pvt. Ltd. on account of "referral" of
some passengers to other travel agents. Ld. CIT(A) in para 4.8 of his
order has observed that the service charges had been received for
referring cases of its own Directors, relatives and business associates. In
14
ITA NOS.3875 & 3884/Del/2011 &
ITA NOS. 756 & 983/DEL/2012
the back drop of this fact Ld. CIT(A) has rightly concluded as under vide
para no. 4.9 & 4.10 as under:-
4.9. Although it was strenuously argued by the Ld.
A.R.s that the receipts by way of service charges should be
treated as "income from business" as against "income from
other sources" held by the assessing officer, arguments for
the following reasons:
(i) Section 2(13) of the LT. Act defines "business"- as
under:
"S.2(13) - "business" includes any trade, commerce
or manufacture or any adventure or concern in the nature
of trade, commerce or manufacture"
Applying the above principles, I find that the
receipts by way of service charges does not form a
continuous and systematic course of activity for the
appellant. Some stray "referrals" in the case of its own
directors and their relatives (for example director's son Sh.
R. Malhotra and couple of business associates) resulted in
booking of tickets through Span Excursions Pvt Ltd. Against
that purchase, a few thousand by way of service charges
has been received during the year. The income, therefore,
was more of a casual nature.
15
ITA NOS.3875 & 3884/Del/2011 &
ITA NOS. 756 & 983/DEL/2012
(ii) Earlier till 1993, the appellant company was
operating as a General Selling Agent (G.S.A.) for Alitalia
Airlines (Italian Airlines) and Japan Airlines (JAL). However,
after the discontinuance of the GSA business of Alitalia
Airlines (Italian
Airlines) and Japan Airlines (JAL), the appellant continued
to struggle in the same line for some time. Thereafter, it
has tied up with Infolink (P) Ltd.[now known a Spryance
(India) Pvt Ltd] for providing business support services and
had earned some service charges in earlier years.
However, the fact remains that neither in the impugned
assessment year nor in subsequent 2 assessment years
there is any regular source of income from any activity,
which can be categorized as "business" or "trade" or
"adventure in the nature of trade" within the meaning of
section 2(13) of the I. T. Act.
(iii) The assessee's other argument that in the earlier
assessment years, such income has been disclosed under
the head "profit and gains from business and profession"
and, therefore, this accepted view of the department
should not be disturbed, has no merit because as can be
seen from the details given below, there was not enough
reason to do so in earlier years because in those years, the
appellant company was receiving income from secretarial
16
ITA NOS.3875 & 3884/Del/2011 &
ITA NOS. 756 & 983/DEL/2012
and other support services, which activity actually fell
under the head "business".
A.Y. Amount in (Rs.)
2001-02 3,60,000
2002-03 3,60,000
2003-04 6,30,000
2004-05 5,40,000
(iv) Further the "principle of consistency" would not
apply in a case where there is a material change in the
factual position. This has been so held in a 3-Member
judgment of the same Apex Court reported in BSNL vs.
Union of India 282 ITR 273 (SC) wherein the Lordships have
held as under:
"The decision cited above uniformly held that res judicata
does not apply in matters pertaining to tax for different
assessment years because course of action for each
assessment year is different & distinct (para 20). The
courts will generally adopt an earlier pronouncement of the
law or a conclusion of fact unless there is a new ground
urged or a material change in factual position. "
(v) In this 3-Member judgement, the Supreme Court
has impliedly over-ruled the earlier decision of the 2,-
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ITA NOS.3875 & 3884/Del/2011 &
ITA NOS. 756 & 983/DEL/2012
Member Judge Bench of the Supreme Court in the case of
Radhasoami Satsangl vs. CIT 193 ITR 321(SC), wherein it
had been held that "principle of consistency" must be
followed by tax authorities. But even in Radhasoami
Satsang case, the Hon'ble Supreme Court had categorically
mentioned that its findings would not be cited as a
precedent in any other case. The relevant portion of the
said judgement is reproduced hereunder:
"Counsel for the Revenue had told us that the facts of this
case being very special, nothing should be said in a
manner which would have general application. We are
inclined to accept this submission and would like to state in
clear terms that the decision is confined to the facts of the
case and may not be treated as an authority on aspects
which have been decided for general application"
(emphasis mine)
(vi) The appellant has also submitted that beginning
with F. Y. 2007-08 relevant to AY. 2008-09, the assessee
has again started rendering some outsourcing services to
I.P. Engine Management (I) Pvt Ltd. However, the fact
remains that during the impugned assessment year and its
subsequent 2 assessment years i.e. 2005-06 and 2006-07,
there has been no income under the head "business".
Under the Income Tax Act, each assessment, being
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ITA NOS.3875 & 3884/Del/2011 &
ITA NOS. 756 & 983/DEL/2012
separate, principle of "res judicata" will not strictly apply,
more so when the facts are different. This is a settled
position of law on which there could be no difference of
opinion. The Hon'ble Delhi High Court in CIT v. M. Chawla
(1989) 177 ITR 299 (Del), has held that each assessment is
separate and independent. In another recent decision, the
Hon'ble Delhi Tribunal in a case reported in K.K. Khullar vs.
DCIT 304 ITR (AT) 295 (Del) has held the same view in the
following words:
"Coming to the issue of consistency of assessments, it may
be mentioned that the Hon'ble Supreme Court itself
mentioned in Radhasoami Satsang vs. CIT 193 ITR 321
(SC) that their findings should not be followed in every
case. We may add that if a manifestly wrong decision is
taken by the AO in one year or in a number of years, it will
not bind the AO in the assessment of a subsequent year
because there cannot be any estoppel against the law"
4.10. Hence, the assessee's contention to treat "service
charges" as "income from business" cannot be accepted.
Accordingly, as in the case of interest on FDs as well as
interest on income tax refund, the service charges of Rs.
19,610/- is also to be treated as income from other
sources. Accordingly, Ground No.2 stands dismissed."
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ITA NOS.3875 & 3884/Del/2011 &
ITA NOS. 756 & 983/DEL/2012
12.2 Keeping in view of the facts noted by the Ld. CIT(A) we are in
agreement with his findings that there was no business income earned
during the year and the amounts received in the form of credit notes were
primarily casual in nature. Thus, they were rightly assessed under the
head "income from other sources".
12.3 As regards the disallowances assailed by the Assessee vide Ground
Nos. 2 to 4, we are of the view that Ld. CIT(A) has rightly disallowed the
expenditure on account of electricity and water charges, watch and ward
charges, traveling expenses and Director's remuneration, we uphold the
same. Accordingly, the ground nos. 2 to 4 are dismissed.
13. In the result, the appeal filed by the Revenue stands partly allowed
and appeal filed by the assessee stands dismissed.
ASSESSEE'S & REVENUE'S APPEALS (ITA NOS. 756/DEL/2012 &
983/DEL/2012) (A.Y. 2008-09)
14. We have gone through the facts of the cross appeals and we are of
the view that the facts of the present appeals are identical to the facts of
the Appeal No. 3576 & 3884/Del/2011 (A.Y. 2005-06) as aforesaid.
Therefore, need not to repeat here for the sake of brevity.
15. We have heard both the parties on the issues in dispute and
perused the relevant records available with us especially the Paper Books
filed by the assessee's counsel alongwith the case laws filed in the shape
of the paper book. We are of the view that the issue in the present
appeals are identical to the issue involved in the cross appeal for the
Asstt. year 2005-06 as aforesaid. Since we have discussed the facts and
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ITA NOS.3875 & 3884/Del/2011 &
ITA NOS. 756 & 983/DEL/2012
circumstances of the case, detailed arguments of both the parties in the
Revenue's Appeal for asstt. year 2005-06, which are applicable in the
present cross appeals also.
16. In the present cross appeals the AO has made almost the identical
disallowance on a different ground by holding that the assessee can
claim expenses to the extent of business receipts only. In our considered
view the finding of the AO is not as per law and the facts of the
assessment year in dispute. As stated by the Ld. Counsel of the assessee
that assessee has written to the AO vide letter dated 16.12.2010
regarding the balance and profit and loss account for the succeeding
years ending 31.3.2009 and 31.3.2010 showing the business activities of
the assessee. In spite of these facts the AO has made the disallowance as
per the assessment year 2005-06 which is contrary to the facts of the
present case. He also stated that these facts have also brought to the
notice of the Ld. CIT(A) by filing the written submissions dated 1.11.2011,
but the same has also not been appreciated by the Ld. CITA(). He
requested that the assessee is entitled for the expenses under section 30
to 37, even during the lull period. But in the present case the assessee
has run its business as pointed out to the revenue authority as stated
above. He requested that the issue involved in the present asstt. year
required re-examination at the level of the AO and he requested that the
issue in dispute may be set aside to the AO to allow the admissible
expenses under section 30 to 37 of the Act.
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ITA NOS.3875 & 3884/Del/2011 &
ITA NOS. 756 & 983/DEL/2012
16.1 Ld. DR has not raised any objection to the request of the assessee's
counsel.
17. We have heard both the parties and perused the relevant records
available with us, we are of the considered view that no doubt the issue in
dispute in the present cross appeals are identical, but in the present
appeal, with regard to ground no. 1, we find that Ld. CIT(A) has followed
the findings of asstt. year 2005-06 and thus assailed that the service
income is to be income under the head "income from other sources". In
this regard, we find that in the year under consideration the business has
revived and therefore, the matter needs to be considered afresh by the
AO in order to find out the source from which the service income has been
earned. Accordingly, Ground NO. 1 is set aside to the file of the AO to
consider the same afresh.
17.1 We also find that assessee has started its business activities for
which the assessee is entitled for deduction of expenses u/s. 30 to 37 of
the I.T. Act. As requested by the Ld. Counsel of assessee as aforesaid and
non-opposition of the same by the Ld. DR, we are of the view that the AO
has wrongly held that the assessee can claim expenses to the extent of
business receipts only. Whereas the assessee is entitled to claim
expenses covered under section 37 of the I.T. Act, therefore, direction is
issue to the AO to reexamine the expenses and allow the same in view of
the provisions of section 37 of the I.T. Act. In the result, both the
appeals are allowed for statistical purposes.
22
ITA NOS.3875 & 3884/Del/2011 &
ITA NOS. 756 & 983/DEL/2012
18. In the result, the Revenue's Appeal No. 3875/Del/2011 (A.Y. 2005-
06) is partly allowed and Assessee's Appeal No. 3884/Del/2011 (A.Y.
2005-06 is dismissed and Assessee's another Appeal No. 756/Del/2012
(A.Y. 2008-09) and Revenue's Appeal No. 983/Del/2012 (A.Y. 2008) are
allowed for statistical purpose.
Order pronounced in the Open Court 23-1-2015.
Sd/- Sd/-
[S.V. MEHROTRA] [H.S. SIDHU]
ACCOUNTANT MEMBER JUDICIAL MEMBER
Date 23/1/2015
"SRBHATNAGAR"
Copy forwarded to: -
1. Appellant -
2. Respondent -
3. CIT
4. CIT (A)
5. DR, ITAT
TRUE COPY
By Order,
Assistant Registrar,
ITAT, Delhi Benches
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ITA NOS. 756 & 983/DEL/2012
24
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