Jay Infra Trade Pvt.ltd. Ahmedabad

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IN THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD BENCH ? A ?

Before Shri T.K.SHARMA, JUDICIAL MEMBER and
Shri D.C.AGRAWAL, ACCOUNTANT MEMBER

Date of hearing : 11/09/09 Drafted on: 25/09/2009
ITA No.261/AHD/2007
Assessment Year : 2003-04

The DCIT Vs. Jay Infra Trade Pvt.Ltd.
Circle-4 Jay House
Ahmedabad Panchvati Circle
Ambawadi
Ahmedabad
PAN/GIR No. : AAACJ 3800 C
(APPELLANT) .. (RESPONDENT)

Appellant by : Shri Govind Singhal Sr.DR
Respondent by: Shri Nimish Vyawala

O R D E R

PER D.C.AGRAWAL , ACCOUNTANT MEMBER :-

This is an appeal filed by the Revenue against the order of the

Learned CIT(Appeals)-VIII, Ahmedabad dated 16/10/2006

passed for Assessment Year 2003-04, by raising following grounds:-

1. The Ld. CIT(A) erred in law and on facts of the case in deleting
the disallowance of portion of house keeping charges treated as
income from other sources holding that the house keeping charges
received by the assessee should be assessed as business receipts
for various business services provided to the occupants though
they happened to be associated concerns.

2. The Ld. CIT(A) has erred in law and on the facts of the case in
deleting the disallowance of depreciation of Rs.18,53,334/-.

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The DCIT vs. Jay Infra Trade Pvt.Ltd.
Asst.Year ? 2003-04
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3. On the facts and in the circumstances of the case, the
Ld.CIT(A) ought to have upheld the order f the Assessing Officer.

4. It is, therefore, prayed that the order of the Ld.CIT(A) may
be cancelled and that of the Assessing Officer may be restored to
the above effect.

2. The brief facts of the case are that the assessee is in the business

of providing House Keeping services to various business associate

concerns. These activities are being carried out since 1998-99. As per

assessee ?House Keeping Services?, include following facilities,

1. Sitting facilities to the various employees of this concerns.
2. Parking facilities.
3. Conference Room and Properly furnished room for directors for
those concerns.
4. Software Development and computer support services.
5. Services of Lab assistant.
6. Internet connection services.
7. Receptionist services.
8. Services of Peons for handling of files.
9. Services for moving the papers to the Bank, filing of Cheques,
etc.

3. It was also noticed that except providing services, no business was

carried out by the assessee. The various group concerns to whom the

services are provided are engaged in the business of manufacturing of

Dyes and chemicals. Some of the concerns to whom such services

provided are M/s.Jay Chemical Industries having a turnover of more than

100 crores and M/s.J.H. Kharawala Pvt.Ltd. which is engaged in the

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ITA No.261/ahd/2007
The DCIT vs. Jay Infra Trade Pvt.Ltd.
Asst.Year ? 2003-04
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manufacturing of Intermediates on a large scale. During the year under

consideration, the assessee received Rs.76,13,561/- for providing such

House Keeping Services to the group concerns. The Assessing Officer

enquired into the genuineness of the work done. On the basis of

information furnished by the assessee, the Assessing Officer noted that

assessee owned assets like, land, computer, furniture, cooler,

communication system, electric installation, lift, office building, air

conditioners, etc. In addition, it is providing chairs, tables, cup-board,

fan, fridge, printer, Xerox machine, scanner, fax-machines and sofa set,

whose details are given by the Assessing Officer in his order.

4. On the basis of material collected by the Assessing Officer from

the assessee-company, he noted that –

(i) There is no written agreement or contract between the assessee-

company and the various group concerns as regards to the nature

of services to be provided, rate of each item of service, terms of

payment and validity of contracts.

(ii) In absence of any contract, it is not possible to work out value

of services provided by the assessee.

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ITA No.261/ahd/2007
The DCIT vs. Jay Infra Trade Pvt.Ltd.
Asst.Year ? 2003-04
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(iii) There is no bifurcation as to what assets or services have been

provided to whom. The assets provided are interchangeable

between various group concerns.

5. On the basis of this findings, the Assessing Officer, as per detailed

discussion in his order, held that the money received by the assessee is

not genuine and at best he could receive only a sum of Rs.33,39,085/-

being the charges for giving on hire, the table, sofa sets, etc. For other

services like, computer, sitting facilities, common parking places, etc. he

worked out the value of service at Rs.6,24,724/- which is included in the

sum of Rs.33,39,085/-. Thus, he held that the value of services rendered

by the assessee is worth Rs.6,24,725/- which should be considered as

income from business and remaining amount of Rs.69,88,836/- should be

assessed as income from other sources. No expenses should be allowed

as no expenses have been incurred against Rs.69,88,836/-.

6. The Learned CIT(Appeals), after considering the reply of the

assessee, treated the entire sum as business income, he also allowed the

depreciation. His observation in this regard are contained in paragraph

Nos.2.2 and 3 as under:-

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ITA No.261/ahd/2007
The DCIT vs. Jay Infra Trade Pvt.Ltd.
Asst.Year ? 2003-04
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?2.2. I have perused the assessment order and also considered the

various arguments and the written submissions advanced in

support of the appellant?s grounds. It is an admitted fact that the

appellant company made huge investments in buildings other than

machineries and also provided technical services like EDP,

internet and other corporate services under one roof. The

recipient of such services were the group concerns. This is not an

attempt during the relevant previous year. This arrangement was

there from A.Y. 1997-98 onwards. As rightly contended the

provision of such services and the object behind utilization of

properties owned by the appellant should be seen in a proper

perspective and not through a narrow compass. The AO

obviously took into account the value of services provided by the

limited man power but ignoring the major aspect of provision of

office accommodation and support services provided by the

appellant company. In fact, he has not made any attempt to find

out the floor area made available for use by the group concerns

and the possible license charges that could have been collected in

an open market condition. The periodical billing or otherwise

cannot render the very provision of business support services as

not genuine. Incidentally the learned counsel for the assessment

proceedings was arguing that lesser payments in the hands of

some of the group concerns would have benefited them by way of

deduction u/s.80HHC out of total income computed. On the

contrary, the appellant company, the recipient of such house

keeping charges, has not claimed any other benefit or reduction

and hence no design or hidden motive could be attributable. In

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ITA No.261/ahd/2007
The DCIT vs. Jay Infra Trade Pvt.Ltd.
Asst.Year ? 2003-04
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fact, the appellant company had paid tax on entire receipts after

accounting for establishment charges and depreciation on the

assets utilized for this commercial exercise. This being the factual

position, it is beyond reasoning to conclude that the receipt in the

hands of the appellant should be assessed as income from Other

Sources. The AO did not allow any expense u/s.57(iii) holding that

no expenditure was incurred. Even if for argument the immovable

assets and machineries were to be let out as inseparable units then

the expenses provided u/s.57 should have been considered. Thus,

the approach of the AO was very narrow and not holistic. The

reliance placed by the appellant on the decision of the Hon’ble

ITAT Rajkot Bench cited above (282 ITR 224) is quite relevant as

the facts obtaining in the case of the appellant are rather identical.

In that case though the properties were let out and charges were

subjected to TDS u/s.194(1) still it was held that as per object of

exploitation of the property it was for business purpose only. In

that view of the matter, the case of the appellant could fall

squarely under business head. Accordingly, I hold that house

keeping charges received by the appellant should be assessed as

business receipts for various business services provided to the

occupants though they happened to be associated concerns.

3. Ground No.2 relates to disallowance of depreciation at

Rs.18.53 lacs. The AO for the reasons that the activities of the

appellant constitute earning of income under Other Sources, did

not allow depreciation though a portion oat Rs.6.24 lacs was

considered as house keeping charges being business income. That

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ITA No.261/ahd/2007
The DCIT vs. Jay Infra Trade Pvt.Ltd.
Asst.Year ? 2003-04
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being so, there is no specific reason why the depreciation was

disallowed. The allowance of depreciation cannot depend on the

quantum of income. For the reasons stated in the previous

paragraphs, the house keeping charges or receipts on exploitation

of depreciable asset being building, lift, machinery, etc. are for

business purpose only and hence the depreciation as admissible

under the IT Act is directed to be allowed while giving effect to this

order.

7. Before us, the Ld.DR relied on the order of the ld. Assessing

Officer, whereas the Learned Authorised Representative of the

assessee submitted that the assessee-company is providing

following services:-

(1) Sitting arrangements are not in the nature of single

table chairs, but arrangements are such that all the

papers, etc. can be stored, moved and mailed. The

conference room for meeting the visitors is also

provided. The visitors and staff can use the services of

peons who are on the payroll of the company.

(2) The company allows the use of computers. This is not a

simple hiring of computers. With the help of E.D.P.

personnel, the company has developed specific

programs which are used by all occupants. The

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ITA No.261/ahd/2007
The DCIT vs. Jay Infra Trade Pvt.Ltd.
Asst.Year ? 2003-04
– 8 –

computers may be operated by the personnel of the

occupants but all services related to software, etc. are

provided to the occupants by the company.

(3) The company has entered into Internal Telephone

System maintenance contract. All the business related

telephones of the occupants are received through this

system. The company has also engaged telephone

operator and receptionist for the purpose. The company

has also entered into internet. It provides the user of this

facility to the occupants.

(4) Lab assistance of the company helps in testing the

materials, especially of JCIL. The laboratory

equipments belong to those companies but company has

provided space and personnel assistance for this

purpose. The directors of the company are also

technically qualified for the purpose.

(5) All the Banking operations of all the concerns like filing

of cheques, taking papers to the Bank, etc. is handled by

Shri Y.K. Mehta of the company. All other support

services for the business of the occupant concerns are

run by the peons of the company.

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ITA No.261/ahd/2007
The DCIT vs. Jay Infra Trade Pvt.Ltd.
Asst.Year ? 2003-04
– 9 –

8. We have heard the rival submissions, perused the orders of the

lower authorities and the materials available on record. In our

considered view, there is no case for interference in the order of the

Learned CIT(Appeals). The reasons are:-

(i) That, the Assessing Officer has not doubted that what

the assessee is receiving is income from business as

part of it as has been so assessed by him. Only a

part amounting to Rs.69,88,836/- has been treated as

income form ?other sources?.

(ii) That, the assessee has been assessed in the past on

these receipts from ?House Keeping Services? under

the head ?Business?. Facts remaining the same, the

Revenue should take a consistent view. It has been

so held by the Hon’ble Rajasthan High Court in the

case of CIT vs. Malbaro Polychem Pvt.Ltd. (2009)

309/ITR 43 (Raj.), of Hon’ble Delhi High Court in

the case of CIT vs. Moon Light Builders and

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ITA No.261/ahd/2007
The DCIT vs. Jay Infra Trade Pvt.Ltd.
Asst.Year ? 2003-04
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Developers (2008) 307 ITR 197 (Delhi) and of

Hon’ble Madhya Pradesh High Court in the case of

CIT vs. Dineshkumar (2008) 299 ITR 59 (M.P.).

Thus, if the facts are not different, then view once

taken should be followed in subsequent year also.

(iii) If certain part of expenditure incurred by group

concerns in receiving services from the assessee-

company is not genuine or is excessive, then

action is required to be taken in their hands.

Assessee-company is showing the receipts in full

as taxable income. There is no reason to either

reduce it or change the head.

(iv) The logic given by the Assessing Officer in

treating the part of the receipt as income from

?other sources? is not comprehendible and does

not create any logical difference between receipts

taken under the head ?business? and receipt taken

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The DCIT vs. Jay Infra Trade Pvt.Ltd.
Asst.Year ? 2003-04
– 11 –

under the head ?other sources?. Following the

rule of consistency, no such distinction should

have been created and secondly, it does not at all

affect the taxability of the receipt and tax imposed.

Therefore, entire exercises merely academic and

could have been avoided.

(v) Finally, the depreciation cannot be disallowed

whether the part of income is assessed under the

head ?business? or under the head ?other sources?

as under both the heads there is provision for

allowing depreciation. When income is

computed under the head ?business?, depreciation

is allowable u/s.32 of the I.T. Act, 1961 as per

Rules and when income is computed u/s.56 of the

I.T. Act, 1961 and income is of the nature of

clauses (ii) & (iii) of section (1) of section 56, then

deduction of the nature of that provided u/s.32(1)

& 32(2) are to be allowed by virtue of section

57(2) of the I.T. Act, 1961. The receipt shown by

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The DCIT vs. Jay Infra Trade Pvt.Ltd.
Asst.Year ? 2003-04
– 12 –

the assessee is fully taxable and has been so

offered by the assessee.

9. Accordingly, the order of the Learned CIT(Appeals) is correct

and, therefore, does not require any interference.

10. In the result, the appeal of the Revenue is dismissed.

Order signed, dated and pronounced in the Court on 309/09/2009.

Sd/- Sd/-
( T.K.SHARMA ) ( D.C.AGRAWAL )
JUDICIAL MEMBER ACCOUNTANT MEMBER

Ahmedabad; Dated 30/ 09 /2009

T.C. NAIR

Copy of the Order forwarded to :
1. The Appellant
2. The Respondent
3. The CIT Concerned
4. The ld. CIT(Appeals)-VIII, Ahmedabad
5. The DR, Ahmedabad Bench
6. The Guard File.

BY ORDER,
//True Copy//
(Dy./Asstt.Registrar), ITAT, Ahmedabad

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