M/S LIFO INTERNATIONAL THR RAMAN BANSAK vs. CIT AAYAKAR BHAWAN SEC 13 KARNAL

The appellant-assessee through the instant appeal under Section 260A of the Income Tax Act, 1961 (in short, “the Act”) impugns the order dated 03.11.2015, Annexure A.3, passed by the Income Tax Appellate Tribunal, Delhi Bench ‘D’ (in short, “the Tribunal”) in I.T.A. No.732/DEL/2011 for the assessment year 2003-04, claiming following substantial questions of law:- (i) “Whether under the facts and circumstances of the case, the ITAT was justified in concurring with the order of authorities below in making addition of ` 17,07,358/- in Gurbax Singh 2017.03.24 11:07

Briefly, the facts necessary for adjudication of the controversy involved, as narrated in the appeal, may be noticed. The appellant-assessee is a firm engaged in the business of sale and purchase of shoes at Karnal. It is also getting rental income. It filed its return of income for the assessment year 2003-04 on 29.10.2003 declaring income at ` 7,33,550/- . The return was selected for scrutiny. The assessee appeared before the Assessing Officer and submitted relevant details. The assessee firm is getting income from job work shown from the sale and purchase of PU soles, hawai chappals, sandals and shoes etc. It is also getting rental income from Agra Building given on rent to M/s Liberty Group Marketing Division, its sister concern. The assessee declared income of ` 7,21,675/- from its business, ` 78,000/- as income being rentals. The Assessing Officer asked the assessee to furnish details of opening stock, purchases and closing stock. The assessee filed the ITA No. 87 of 2016 3

We have heard learned counsel for the parties.

The first issue that arises for consideration relates to addition of ` 17,07,358/- in respect of valuation of depleted/unusable/unsalable/rat bitten stock. After examining the entire material on record, it has been categorically recorded by the Tribunal that nothing was brought on record by the assessee to prove that the stock was very old. The assessee was not able to produce the last purchase invoice to prove how old the stock was which could be written off/rejected. Thus, the Tribunal rightly upheld the finding recorded by the CIT(A) disallowing the claim made by the assessee. The relevant findings on this issue recorded by the Tribunal read thus:- “We have heard the rival submissions and have gone through the orders of the entire material available on record. The case of the assessee is that the order of the Assessing Officer is altogether

With regard to the second issue of disallowance of claim under Section 24(1) of the Act against rental income derived by the assessee at ` 78,000/-, the Tribunal concurred with the findings recorded by the Assessing Officer as well as the CIT(A) that since the income was to be assessed under the head “income from other sources”, deduction under Section 24(1) of the Act was not allowable. The relevant findings recorded by the Tribunal read thus:- “14. Ground No.5 is against the confirmation of disallowance under Section 24(1) against rental income derived by the assessee at ` 78,000/-.

Facts relating to this ground are that the assessee declared rental income of ` 78,000/-. The Assessing Officer did not allow deduction under Section 24(1) of the Act by holding that income is to be assessed under the head income from other sources as was in the past. The learned CIT(A), too, confirmed the action of the Assessing Officer. We find that the learned CIT(A) has come to the conclusion by holding that since the rental income was held to be assessed under the head ‘income from other sources’ deduction under section 24(1) was not allowable.

After considering the rival submissions, we find it relevant to reproduce Section 22 of Chapter IV of the Income Tax Act which deals with computation of income from house property reads as under: Income from house property.

The annual value of property consisting of any buildings or lands appurtenant thereto of which the assessee is the owner, other than such portions of such property as he may occupy for the purposes of any business or profession carried on by him the profits of which are chargeable to income-tax, shall be chargeable to income-tax under the head ‘income from house property’. From the above section it is clear that the assessee had let out his factory building to its sister concern and the factory building is not covered under this head. Therefore, deduction under Section 24(1) of the Act cannot be allowed. Accordingly this ground stands dismissed.”

The findings recorded by the Tribunal have not been shown to be illegal or perverse by the learned counsel for appellant-assessee. Consequently, no substantial question of law arises and the appeal stands dismissed.