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ITO 6(1)(3), Mumbai-20 Vs. M/s ARK Industries Pvt. Ltd., 103, Steel Centre, 1st Floor, Ahmedabad Street, Masjid (E), Mumbai-400 020
December, 17th 2014
                          
     IN THE INCOME TAX APPELLATE TRIBUNAL " A", BENCH MUMBAI

                                                        ,
                  BEFORE        SHRI R.C.SHARMA, AM
                                       &
                               SHRI SANJAY GARG, JM
                                  ITA No.2788/Mum/2011
             (                Assessment Year :2007-2008)
     ITO 6(1)(3), Mumbai-20         Vs. M/s ARK Industries Pvt.
                                        Ltd., 103, Steel Centre,
                                        1st   Floor,   Ahmedabad
                                        Street,      Masjid   (E),
                                        Mumbai-400 020
                                  PAN/GIR No. : AAEC A 8885 E
         (        Appellant)        ..      (       Respondent)

                 /Revenue by           :     Shri J.Premanand
                   /Assessee by        :     Shri Ashok J. Patil

                   Date of Hearing :         4th December, 2014
                 Date of Pronouncement       12th December, 2014

                                    ORDER

PER R.C.SHARMA (A.M):

        This is an appeal filed by the Revenue against the order of CIT(A)

dated 28-2-2011 for the Assessment Year 2007-08, in the matter of order

passed u/s.143(3) of the Act.

2.      The only grievance of the Revenue relates to CIT(A)'s direction for

treating income from warehousing as income from business in place of

AO's action treating the same as income from house property.

3.      Rival contentions have been heard and record perused. Facts in

brief are that the assessee company has filed its return of income on

30.10.2009 declaring total income at Rs.1,11,068/-. The case was
                                     2
                                                               ITA No.2788/11

selected for scrutiny. During the assessment proceedings, the AO noticed

that assessee is a registered private limited company incorporated in the

year 2004 and is carrying on the business of Steel processing and also

earns income from Warehousing. In the concerned assessment year the

assessee had entered into contract with Essar Steels Limited for Storage

and Material Handling. The Essar Steels Limited has appointed assessee

as stockyard for HR/CR, coils, Sheets, packet and for that assessee will

have to perform activities like safe storage material under covered shade

with proper flooring, dust free environment safe unloading/loading

activities from truck/trailer with the help of EOT crane. The assessee

earned income from warehousing amounting to Rs.31,82,646/-, which

was offered as business income after claim of expenditure incurred

thereon. The AO treated such income as income from house property.

4.    By the impugned order, CIT(A) held that income earned by the

assessee was assessable under the head business income after having

the following observations :-

      "To earn the said income assessee has spent Rs. 17,81,783/-
      during the period to earn the Warehousing income. The other
      expenses incurred during the year to the tune of Rs. 42,92,997/-
      was capitalized to capital work in progress and was added to the
      assets. Only the relevant expenses were claimed as expenses to
      earn the said warehousing income. The warehousing income
      wouldn't have accrued without spending the expenses. This clearly
      suggest that the assessee has carried out business activities and
      has not earned income from house property rights. The above fact
      clearly suggest that the intention of the assessee was to earn the
      profits and same cannot be earned without providing the required
      services listed in the agreement."

5.    We have considered rival contentions and found from the record

that assessee had carried out warehousing activity for which he earned

gross receipts of Rs.31,82,646/-. For carrying out the warehousing
                                    3
                                                            ITA No.2788/11






activity, the assessee has undertaken activity of receipt handling &

dispatch of materials, maintenance of stock register, description of

material received, Truck No./Trailer No., Invoice No., GRR No. & Date.

The assessee also carried out activity of stock reconciliation, physical

stock verification and stock verification. The warehousing income has

been earned from the business volume achieved after providing the

desired activities as listed in the contract. To earn the said income

assessee has spent Rs. 17,81,783/- during the period. The other

expenses incurred during the year to the tune of Rs. 42,92,997/- was

capitalized to capital work in progress and was added to the assets. Only

the relevant expenses were claimed as expenses to earn the said

warehousing income. The warehousing income wouldn't have accrued

without carrying all the above activities. This clearly suggest that the

assessee has carried out business activities and has not earned income

from house property rights or other sources. The above fact clearly

suggests that the intention of the assessee was to earn the business

profits and same cannot be earned without providing the required services

listed in the agreement.

6.    The detailed finding recorded by the CIT(A) with regard to the

services rendered by assessee at para 6 has not been controvered by the

department by brining any positive material on record. Accordingly, we do

not find any infirmity in the order of CIT(A) for treating the warehousing

income as income from business.

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

      Order pronounced in the open court on this   12/12/2014.
                                           4
                                                                        ITA No.2788/11

                                                         12/12/2014


                       Sd/-                                           Sd/-
          (      )                                             (       )
       (SANJAY GARG)                                         (R.C.SHARMA)
               / JUDICIAL MEMBER                             / ACCOUNTANT MEMBER
     Mumbai;              Dated        12/12/2014
      /pkm,      PS
                       Copy of the Order forwarded to :
1.       / The Appellant
2.      / The Respondent.
3.                     / The CIT(A), Mumbai.
4.             / CIT
5.                                      / DR, ITAT, Mumbai

6.          Guard file.
                                  //True Copy//
                                                                                / BY ORDER,


                                                                      (Asstt.   Registrar)
                                                                             / ITAT, Mumbai

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