DCIT, C-1(1), Chandigarh V. M/s Asia Resorts Limited, Chandigarh

ITA 1029/CHANDI/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 5356 (ITAT-CHANDIGARH)
• Duration Of Justice: 6 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-01-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 21-06-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: PARVEEN KAPOOR
• Keywords: Earning of tax free income; Capital expenditure
• Section: 14A; 80IC

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCHES A, CHANDIGARH BEFORE MS. DIVA SINGH, JUDICIAL MEMBER AND SHRI B.R.R.KUMAR, ACCOUNTANT MEMBER ITA NO. 1029 & 1030/CHD/2017 A.Y: 2012-13 & 2013-14 THE DCIT, VS M/S ASIA RESORTS LTD., CIRCLE 1(1), SCO 143-144, 2 ND FLOOR, CHANDIGARH. SECTOR 8-C, CHANDIGARH. PAN : AABCA5300M (A PPELLANT) (RESPONDENT) APPELLANT BY : SMT. CHANDER KANTA, SR.DR RESPONDENT BY : SHRI PARVEEN KAPOOR DATE OF HEARING : 14.12.2017 DATE OF PRONOUNCEMENT : 02.01.2018 ORDER PER BENCH THE PRESENT APPEALS HAVE BEEN FILED BY THE REVENUE ASSA ILING THE CORRECTNESS OF THE SEPARATE ORDERS DATED 09/03/2017 OF CIT(A)-1 CHANDIGARH PERTAINING TO 201213 AND 201314 ASSESSMEN T YEARS ON IDENTICAL ISSUES AND FACTS. ACCORDINGLY, FOR THE SAKE OF CONV ENIENCE, A CONSOLIDATED ORDER IS BEING PASSED SINCE THE GROUNDS RAIS ED ARE IDENTICAL. ACCORDINGLY, THE GROUNDS FROM ITA-1029/CHD/2017 ARE BE ING REPRODUCED HEREUNDER : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) HAS ERRED IN ALLOWING APPEAL OF THE ASSESSEE WITHOUT APPRECIATIN G THE FACTS OF THE CASE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.32,34,352 ON ACCOUNT OF DISALLOWANCE U/S 14A BY OBSERVING THAT THE ASSESSEE HAS NOT EARNED ANY EXEM PT INCOME WHEREAS THE CBDT CIRCULAR NO.05/2014 PROVIDES FOR DISALLOWANCE EVEN WHEN NO EXEMPT INCOME IS EARNED. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION MADE ON ACCOUNT OF CAPITALIZA TION OF ROPEWAY EXPENSES AS THE SAME WERE OF ENDURING NATURE AND GIVEN ENDURING BENEFITS. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN ALLOWING DEDUCTION U/S 80IC OF THE ACT ON 'OTHER IN COME' WITHOUT APPRECIATING THE FACT THAT 'OTHER INCOME' HAS NOT BEEN DERIVED F ROM THE BUSINESS OF THE ENTERPRISE ELIGIBLE FOR DEDUCTION U/S 80IC. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN ALLOWING DEDUCTION U/S 80IC OF THE ACT ON THE UNCLA IMED BALANCES WRITTEN OFF WITHOUT APPRECIATING THE FACT THAT 'OTHER INCOME' H AS NOT BEEN DERIVED FROM THE BUSINESS OF THE ENTERPRISE ELIGIBLE FOR DEDUCTION U /S 80IC. ITA 1029&1030/2017 A.Y. 2012-13 & 2013-14 PAGE 2 OF 5 2. THE FACTS RELATABLE TO THE 1 ST ISSUE AGITATED BY THE REVENUE ADDRESSED IN GROUND NUMBERS 1 AND 2 ARE FOUND ADDRESS ED IN THE ASSESSMENT ORDER IN PARA 6 TO PARA 6.3 AND IN THE IMPUG NED ORDER IN PARA 9. A PERUSAL OF THE SAME SHOWS THAT THE ASSESSEE WAS REQUIRED TO EXPLAIN AS TO WHY DISALLOWANCE UNDER SECTION 14A READ WITH RULE 8 SHOULD NOT BE MADE IN VIEW OF THE FACT THAT THE ASSESSEE HAD INVESTMENTS AS ON 01.04.2011 AMOUNTING TO RS. 8,50,54,710/-. THE ASSES SEE IN RESPONSE TO THE SAME BEFORE THE AO PLACED RELIANCE UPON THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF LAKHANI MARK ETING. THE CIT(A) GRANTED RELIEF TAKING INTO CONSIDERATION THE FACT TH AT THE ASSESSEE IN THE YEAR UNDER CONSIDERATION HAD NOT EARNED ANY EXE MPT INCOME AND RELYING UPON THE AFORESAID DECISION OF THE JURISDICTIONAL HIGH COURT AS REPORTED IN 226 TAXMANN 45 AND ORDER OF THE CHANDIGARH BENCH IN THE CASE OF MRS SWAMI AUTOMOBILES PRIVATE LIMITED IN ITA 74/CHD /2015. THE LD. SR.DR RELIES UPON THE ASSESSMENT ORDER AND THE AUTHORISED REPRESENTATIVE OF THE ASSESSEE RELIES UPON THE IMPUGNED ORDER. WE NOTE THAT AS FAR AS THE PRESENT ISSUE IS CONCERNED, IT IS NO LONGER RES INTE GRA AS CONSISTENTLY THE JURISDICTIONAL HIGH COURT IN THE CASE OF L AKHANI MARKETING AND THE DELHI HIGH COURT IN THE CASE OF CHEMINVEST AND HOLCIM HAS SET THE POSITION AT REST ON THE VERY SAME ISSUE. RELYING ON THE SAID DECISION, WE HOLD THAT NO INTERFERENCE IN THE ORDER IS WARRANTED EITHER ON FACTS OF ON LAW. 3. THE NEXT ISSUE AGITATED BY THE REVENUE IN THE PRESE NT APPEAL PERTAINS TO ADDITION MADE BY WAY OF CAPITALISATION OF REPAIR AND MAINTENANCE EXPENSES CLAIMED. THE SAID ISSUE HAS BEEN DIS CUSSED BY THE AO IN PARA 7 TO 7.4 AND THE CIT-A HAS CONSIDERED T HE SAME IN PARA 10 OF HIS ORDER. 4. THE LD. SR. DR RELIES UPON THE ASSESSMENT ORDER AND THE AUTHORISED REPRESENTATIVE OF THE ASSESSEE RELIES UPON TH E IMPUGNED ORDER. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE AO CONSIDERING THE MAINTENANCE EXPENSES INCURRED ON PURCHASE OF CABLE, ICE CUBE MACHINE AND RESCUE MISSION HELD THAT IT WAS A CAPITAL EXPENDITURE. THE ASSESS EE RELYING ON SUBMISSIONS ADVANCED RECORDED BY THE CIT(A) IN PARA 10.1 OF HIS ORDER PRAYED FOR RELIEF. SINCE THE FACTS RELATABLE TO THIS ASPECT HAVE BEEN ITA 1029&1030/2017 A.Y. 2012-13 & 2013-14 PAGE 3 OF 5 ELABORATELY ADDRESSED BY THE ASSESSEE IN THE SUBMISSION S EXTRACTED, THE SAME ARE REPRODUCED HEREUNDER FOR READY REFERENCE : 10.1 IN APPEAL THE LD. COUNSEL FOR THE APPELLANT AR GUED THAT THE MAIN CABLE OF ROPEWAY SYSTEM WAS CHANGED EVERY YEAR THER EFORE NO ENDURING BENEFIT WAS ENJOYED BY THE APPELLANT. THE APPELLA NT REPRESENTATION IS REPRODUCED AS UNDER:- 'THE SAID DISALLOWANCE HAS BEEN MADE BY THE LE ARNED A.O. ON PRESUMPTIVE/ ESTIMATE BASIS WITHOUT ANY COGENT MATERIAL ON RECORD. THE AS SESSEE COMPANY IS DERIVING ROPEWAY INCOME AND THE MAIN CONNECTING CABLE IN ROPEWAY SYS TEM IS CHANGED EVERY YEAR IN WHICH THE ROPEWAY SYSTEM IS COMPLETELY SHUT DOWN. K EEPING IN VIEW THE SHORT LIFE OF THE CABLE, THE EXPENDITURE RELATING TO PURCHASE OF CABLE WAS CHARGED TO REVENUE. THE CONTENTION OF THE LEARNED A.O. THAT THE EXPENDITURE IS MADE FOR BRINGING INTO EXISTENCE AN ASSET OR AN ADVANTAGE FOR THE ENDURING BENEFIT O F A BUSINESS IS COMPLETELY WRONG BECAUSE NEITHER THE PURCHASE OF CABLE IS AN ASSET N OR ITS PURCHASE HAS ANY ENDURING BENEFIT KEEPING IN VIEW OF ITS EVERY YEARS REPLACEM ENT. HENCE THE DISALLOWANCE DESERVED TO BE DELETED. THE FACT OF EVERY YEARS REPLACEMENT IS ALSO SUBSTANTIATED BY THE FACT THAT THE ADDITION ON THE SAME WAS ALSO MADE IN PREVIOUS ASSESSMENT ORDER AND THE ISSUE WAS ALSO RAISED IN APPELLATE PROCEEDINGS AND THE SA ME IS NOT DISPUTED BY THE LEARNED A.O. SIMILARLY THE ICE CUBE MACHINE AND RESCUE SYST EM ALSO HAS A VERY SHORT LIFE SPAN KEEPING IN VIEW OF ITS USAGE IN A COMMERCIAL MANNER .' 5.1 WE FIND THAT CONSIDERING THE SAID SUBMISSION, THE CIT( A) HAS CONCLUDED THAT THE EXPENDITURE IN REGARD TO THE REPLACE MENT IS A REVENUE EXPENSE, SINCE ON THE OTHER 2 ASSETS I.E. ICE CUBE MACH INE AND RESCUE SYSTEM, NO ARGUMENTS WERE FOUND ADVANCED, THE SAME WER E HELD TO BE CAPITAL IN NATURE. ON CONSIDERING THE AFORESAID CONCLUSION O N THE FACTS AS HAVE BEEN BROUGHT OUT ABOVE IN THE EARLIER PART OF THIS ORDER, WE FIND NO GOOD REASON TO VARY THE CONCLUSION ARRIVED AT AS THE R EPLACEMENT OF ROPEWAYS IN THE PECULIAR FACTS AND CIRCUMSTANCES OF THE P RESENT CASE CONSIDERING THE SHORT LIFE OF THE CABLE IS DEFINITELY A REVENU E EXPENDITURE. THE OTHER ISSUES ARE NOT BEFORE US. ACCORDINGLY, THE CO NCLUSION OF THE CIT(A) THEREON IS ALSO UPHELD. 6. THE NEXT ISSUE AGITATED BY THE REVENUE IN THE PRES ENT PROCEEDINGS IS THE OTHER INCOME. THE SAID ASPECT HAS BEEN CONSIDE RED BY THE AO IN PARA 2.1 AND 2.2 OF HIS ORDER. A PERUSAL OF THE SAME SHOW S THAT THE ASSESSING OFFICER WAS OF THE VIEW THAT THE INTEREST ON SEC URITIES AMOUNTING TO RS. 1,88,001/- DID NOT QUALIFY FOR DEDUCT ION UNDER SECTION 80IC AS IT WAS TO BE ASSESSED UNDER THE HEAD OTHER INCOME THE CIT(A) CONSIDERING THE ARGUMENTS ADVANCED ON BEHALF OF TH E ASSESSEE NAMELY THAT THESE FDRS WERE GIVEN AS A SECURITY FOR MA KING BUSINESS OBLIGATION AND CONSIDERING THE DECISION IN THE CASE OF CI T VS MEGHALAYA STEEL (CIVIL APPEAL NO. 7622 OF 2014 (S.C) DISMISSED THE SAID CLA IM VIDE ITA 1029&1030/2017 A.Y. 2012-13 & 2013-14 PAGE 4 OF 5 PARA 4.2 TO PARAGRAPH 3 OF HIS ORDER THEREBY DISMISSING T HE GROUND. THE SPECIFIC CONCLUSION IS REPRODUCED AS UNDER : 4.2 I HAVE EXAMINED THE ISSUE IN DETAIL. INTEREST O N FDR DOES NOT HAVE ANY DIRECT NEXUS WITH THE BUSINESS OF THE APPELLANT . IT IS CLEARLY INCOME FROM OTHER SOURCES AND RIOT INCOME FROM BUSINESS. CASE I S COVERED BY THE DECISION OF HON'BLE DELHI HIGH COURT IN CASE OF CIT VS. SRI RAM HONDA EQUIP (289 ITR 475). 4.2.1 THE CASE OF MEGHALAYA STEEL IS NOT APPLICABLE . THE CASE AND SUBSEQUENT CLARIFICATION OF C.B.D.T. VIDE CIRCULAR NO. 39/2016 DATED 29.11.2016 HAS CLEARLY STATED THAT SUBSIDIES GIVEN BY GOVERNMENT SUCH AS ON TRANSPORT, POWER AND INTEREST WHICH ARE REIMBURSEME NT FOR ELEMENTS OF COST RELATING TO MANUFACTURE AND SALE OF THE PRODUCT. TH E INTEREST ON FDRS IS NOT A SUBSIDY RECEIVED FROM GOVERNMENT AND CANNOT BE PART OF BUSINESS PROFITS. 4.3 IN VIEW OF THE ABOVE, THE ADDITION IS THEREFORE UPHELD AND GROUND OF APPEAL NO. 1 IS DISMISSED. 6.1 IN THE LIGHT OF THE ABOVE CONCLUSION DRAWN BY THE CIT (A), WE FIND THAT THE GROUND NO. 4 RAISED BY THE REVENUE IS MISPLACED AND THUS DESERVES TO BE REJECTED 7. THE NEXT ISSUE AGITATED BY THE REVENUE PERTAINS TO UNCLAIMED BALANCES WRITTEN OFF. THE SAID FACTS HAVE BEEN DISCUSSED IN PARAGRAPH 4.1 4.2 OF THE ASSESSMENT ORDER. THE AMOUNT OF RS. 585/- ON ACCOUNT OF UNCLAIMED BALANCES WRITTEN OFF WAS CONSIDERED TO BE NOT EN TITLED FOR DEDUCTION UNDER SECTION 80IC. THE ISSUE WAS CONSIDERED B Y THE CIT(A) IN PARA 7 TO 7.1 WHEREIN RELIANCE HAD BEEN PLACED ON THE O RDER OF THE CIT(A) FOR 2010 11 ASSESSMENT YEAR. THE RELEVANT EXTRACT RE LIED UPON IS REPRODUCED HEREUNDER : 7. GROUND OF APPEAL NO. 3: THE ASSESSIN G OFFICER DISALLOWED DEDUCTION U/S 80IC ON UNCLAIMED BALANCE WRITTEN OFF TO THE TU NE OF RS. 585/-. THE LD. CIT(A)-1 IN THE ORDER FOR ASSESSMENT YEAR 2010-11 ( SUPRA) HAS MADE THE FOLLOWING OBSERVATION ON THIS ISSUE:- '7.2 I HAVE CONSIDERED THE SUBMISSION OF THE APPELL ANT. ON GOING THROUGH THE FACTS OF THE CASE ON THIS ISSUE, I AM OF THE OP INION THAT THE BALANCES WRITTEN BACK AND THE CREDIT ON ACCOUNT OF CURRENCY EXCHANGE FLUCTUATIONS ARE VERY MUCH PART OF THE BUSINESS OPERATION OF THE APP ELLANT. ALL SUCH CREDIT THEREFORE WOULD RESULT INTO INCREASING THE PROFIT O F THE APPELLANT AND QUALIFIES FOR DEDUCTION U/S 80IC OF THE ACT. IN VIE W OF THE SAME, THE ASSESSING OFFICER IS DIRECTED TO ALLOW DEDUCTION U/ S 80IC OF THE ACT IN RESPECT OF THE AMOUNT OF RS. 92,150/-. GROUND OF AP PEAL NO. 3 IS ALLOWED. 7.1 I CONCUR WITH THE VIEW OF MY PREDECESSOR AND TH E GROUND OF APPEAL NO. 3 IS ALLOWED. 8. THE PARTIES RELY ON THE FINDINGS OF THE AO AND THE CI T(A) RESPECTIVELY. IN THE ABSENCE OF ANY INFIRMITY POINTED OUT BY THE REVENUE, THE SAME IS UPHELD. 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. ITA 1029&1030/2017 A.Y. 2012-13 & 2013-14 PAGE 5 OF 5 10. SINCE THE FACTS, CIRCUMSTANCES ON IDENTICAL ISSUES RAISE D IN ITA 1030/CHD/2017 ARE IDENTICAL, FOLLOWING THE REASONING TAKEN IN ITA 1029/CHD/2017, THE SAME ARE DISMISSED. 11. IN THE RESULT, THE APPEALS OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 02.01. 2018. SD/- SD/- ( DR.B.R.KUMAR) ( DIVA SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER POONAM COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR ASSTT. REGISTRAR ITAT,CHANDIGARH.