Express Newspapers Pvt Ltd., CHENNAI V. ACIT, CHENNAI

ITA 1417/CHNY/2017

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 5131 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-06-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2005-2006
• Appeal Filed On: 02-06-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: G BASKAR
• Keywords: Depreciation; Business expenditure; Opportunity of being heard; Revenue expenditure; Capital expenditure

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : CHENNAI , , BEFORE SHRI GEORGE MATHAN, JUDICIAL MEMBER & SHRI S.JAYARAMAN , ACCOUNTANT MEMBER ./ I.T.A.NO.1417/CHNY/2017 / ASSESSMENT YEAR :2005-06 M/S.EXPRESS NEWSPAPERS PVT. LTD., EXPRESS ESTATES, ANNA SALAI, CHENNAI 600 002. VS. ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE-II(1), PRESENTLY CORPORATE CIRCLE 2(1), CHENNAI -34. [PAN AAACE 1702 G ] ( / APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR.G.BASKAR,ADVOCATE !' /RESPONDENT BY : MR.R.CLEMENT RAMESH KUMAR, JCIT,D.R # $ %& / DATE OF HEARING : 12 - 0 6 - 201 8 '( %& / DATE OF PRONOUNCEMENT : 12 - 0 6 - 201 8 ! / O R D E R PER GEORGE MATHAN, JUDICIAL MEMBER THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-9, CHENNAI IN APPEAL NO.03/CIT(A)-9/2007-08 DATED 27.02.2017 FOR THE ASSESSMENT YEAR 2005-06. ITA NO.1417/CHNY/2017 :- 2 -: 2. IN THIS APPEAL, THE ASSESSEE HAS RAISED THE FOL LOWING GROUNDS:- 1.1 THE CIT (A) ERRED IN CONFIRMING THE ACTION OF THE AO IN TREATING THE MAINTENANCE CHARGES AS PROPERTY INCOME AS AGAIN ST INCOME FROM OTHER SOURCES. 1.2 THE CIT (A) ERRED IN NOT FOLLOWING THE ORDERS O F THE HONBLE TRIBUNAL FOR THE EARLIER YEARS. 2. THE CIT (A), HAVING HELD THAT MAINTENANCE CHARGE S IS INCOME FROM OTHER SOURCES, ERRED IN NOT ALLOWING DEPRECIATION C LAIMED IN RESPECT OF FIREFIGHTING AND LIFT EQUIPMENTS. 3.1 THE CIT (A) ERRED IN CONFIRMING THE DISALLOWANC E OF MISCELLANEOUS EXPENSES OF RS.3.15 CRORES PAID TO M/S. ABAN HOTELS AND RESORTS PVT. LTD. 3.2 THE CIT (A) OMITTED TO SEE THAT THIS IS PURELY A BUSINESS EXPENDITURE RIGHTLY ALLOWABLE AS REVENUE EXPENDITUR E. 3.3 THE CIT (A) ERRED IN MERELY FOLLOWING THE CASE LAWS RELIED ON BY THE ASSESSING OFFICER WHICH IS NOT APPLICABLE TO TH E FACTS OF THE PRESENT CASE. 4.1 THE CIT (A) ERRED IN SENDING THE ISSUE RELATING TO THE ADDITIONS TO THE PROPERTY INCOME TO THE FILE OF THE ASSESSING OF FICER. 4.2 THE CIT (A) OUGHT TO HAVE DELETED THE ENTIRE AD DITION TO THE PROPERTY INCOME AS IT IS UNTENABLE. ITA NO.1417/CHNY/2017 :- 3 -: 3. MR.G.BASKAR REPRESENTED ON BEHALF OF THE ASSESSEE, AND MR.R.CLEMENT RAMESH KUMAR REPRESENTED ON BEHALF OF THE REVENUE. 4. IT WAS SUBMITTED BY LD.A.R THAT GROUND NOS.1.1 & 1.2 WAS AGAINST THE ACTION OF THE LD.CIT(A) IN UPHOLDING TH E ACTION OF THE LD. ASSESSING OFFICER IN TREATING THE MAINTENANCE CHARG ES AS PROPERTY INCOME ASSESSABLE UNDER THE HEAD INCOME FROM HOUSE PROPERTY. 4.1 IT WAS FAIRLY AGREED BY BOTH THE PARTIES THAT THIS ISSUE WAS SQUARELY COVERED BY THE DECISION OF CO-ORDINATE BEN CH OF THIS TRIBUNAL IN ASSESSEE'S OWN CASE IN ITA NO.503/MDS./2001 & 58 8/MDS./2003 DATED 31.10.2006 FOR ASSESSMENT YEARS 1990-91 & 199 9-2000 WHEREIN IT HAS BEEN HELD IN PARA NOS.80 & 81 AS FOLLOWS:- 80. THE NEXT GROUND IS THAT THE C1T(APPEALS) ERRED IN CONFIRMING THE DISALLOWANCE OF SALARY PAID TO STAFF AT RS.18,2 8,252. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSE E RECEIVED RENTAL INCOME ON HOUSE PROPERTY AND ALSO COLLECTED AMENITY CHARGES. THE AMENITY CHARGES CANNOT BE ASSESSED UNDER THE HEAD INCOME FROM HOUSE PROPERTY AND THE SAME HAS TO BE ASSESSED UND ER THE HEAD INCOME FROM OTHER SOURCES. THE ASSESSEE CLAIMED T HE EXPENSES INCURRED FOR EARNING AMENITY CHARGES. THE ASSESSING OFFICER TREATED THE ENTIRE INCOME UNDER SINGLE HEAD I.E. INCOME FR OM HOUSE PROPERTY AND RESTRICTED THE EXPENSES AS PER. SEC.2 4 OF THE ACT. HE SUBMITTED THAT THE INCOME HAS TO BE ASSESSED UNDER TWO HEADS AS ABOVE AND ADMISSIBLE DEDUCTION HAS TO BE GIVEN. HE RELIED ON THE ITA NO.1417/CHNY/2017 :- 4 -: JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT I N THE CASE OF TARAPORE & CO. V. CIT REPORTED IN 259 1TR 389 AND I N THE CASE OF ATTUKAL SHOPPING COMPLEX P. LTD. V. CIT (259 JTR 56 7)(KER.) AND THE ASESSEES OWN REPORTED IN 227 1TR 325 (MAD) AND SUB MITTED THAT THE DEPARTMENT HAS ACCEPTED THIS METHOD OF TREATMEN T OF INCOME FOR THE ASST. YEAR 2002-03 AND 2003-04. THE LEARNED DEP ARTMENTAL REPRESENTATIVE RELIED ON THE ORDER OF THE CIT(APPEA LS). 81. AFTER HEARING BOTH THE PARTIES, WE SET ASIDE TH IS ISSUE TO THE RILE OF THE ASSESSING OFFICER TO RE-DO THE ASSESSMENT ON THIS ISSUE FOLLOWING THE RATIO LAID DOWN BY THE HONBLE JURISD ICTIONAL HIGH COURT IN THE ASSESSEES OWN CASE IN T.C NO.940 OF 1985 (R EPORTED IN 227 ITR 325) WHEREIN THE HIGH COURT HAS ANSWERED THE QU ESTION REGARDING ASSESSMENT OF AMENITIES COLLECTED AS INCO ME FROM OTHER SOURCES. IT IS NEEDLESS TO MENTION THAT WHILE RE-DO ING THE ASSESSMENT AS DIRECTED ABOVE, THE ASSESSEE WILL BECOME ENTITLE D FOR DEDUCTION AS MENTIONED IN SEC.57 OF THE ACT. THIS GROUND IS ALLO WED FOR STATISTICAL PURPOSE. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. AS IT IS NOTICED THAT THE ISSUE OF MAINTENANCE CHARGES, ALSO CLAIMED AS AMENITY CHARGES HAVE BEEN RESTORED TO THE FILE OF LD. ASSES SING OFFICER FOR RE-ADJUDICATION IN RESPECT OF EARLIER ASSESSMENT YE ARS ON IDENTICAL FINDINGS AS HAS BEEN EXTRACTED ABOVE, THE ISSUE RAI SED IN THIS APPEAL IS RESTORED TO THE FILE OF LD. ASSESSING OFFICER FOR R E-ADJUDICATION AFTER GRANTING OF OPPORTUNITY OF BEING HEARD. CONSEQUENTL Y, GROUND NOS.1.1 & 1.2 OF ASSESSEES APPEAL IS ALLOWED FOR STATISTIC AL PURPOSES. ITA NO.1417/CHNY/2017 :- 5 -: 6. IN RESPECT OF GROUND NO.2, IT WAS SUBMITTED BY THE LD.A.R THAT THE ISSUE WAS IN RESPECT OF NON-ALLOWANCE OF D EPRECIATION CLAIMED IN RESPECT OF FIRE FIGHTING AND LIFT EQUIPMENTS. I T WAS FAIRLY AGREED BY BOTH THE PARTIES THAT THIS ISSUE WAS SQUARELY COVER ED BY THE DECISION OF CO-ORDINATE BENCH OF THIS TRIBUNAL IN ASSESSEE'S OW N CASE IN ITA NOS.347, 573 & 1697/MDS./1997 DATED 23.02.2004 FOR ASSESSMENT YEARS 1991-92 & 1993-94 WHEREIN THE ISSUE HAS BEEN RESTORED TO THE FILE OF LD. ASSESSING OFFICER FOR RE-ADJUDICATION. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. AS IT IS NOTICED THAT THE ISSUE OF AMENITY CHARGES HAVE BEEN REMITTE D BACK TO THE FILE OF LD. ASSESSING OFFICER FOR RE-ADJUDICATION AND TH E SAID AMENITY CHARGES INCLUDES THE CHARGES IN RESPECT OF LIFT EQU IPMENTS AND FIRE FIGHTING EQUIPMENTS ETC., WE ARE OF THE VIEW THAT R ESPECTFULLY FOLLOWING THE DECISION OF CO-ORDINATE BENCH OF THIS TRIBUNAL IN ASSESSEE'S OWN CASE REFERRED TO SUPRA, THIS ISSUE IS ALSO RESTORED TO THE FILE OF LD. ASSESSING OFFICER FOR RE-ADJUDICATION AFTER GRANTIN G OF ADEQUATE OPPORTUNITY OF BEING HEARD AND WE DO SO. CONSEQUENT LY, GROUND NO.2 OF ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PUR POSES. ITA NO.1417/CHNY/2017 :- 6 -: 8. IN RESPECT OF GROUND NO.3, IT WAS SUBMITTED BY THE LD.A.R THAT ASSESSEE OWNED 20 ACRES OF LAND ON MOUNT ROAD, CHENNAI AND IT ENTERED INTO A JOINT VENTURE AGREEMENT WITH M/S.ABA N HOTELS & RESORTS (P) LTD. AS PER THE AGREEMENT ENTERED INTO BETWEEN THE ASSESSEE AND M/S.ABAN HOTELS & RESORTS (P) LTD., ASSESSEE HAD RE CEIVED ` 2.15 CRORES AS AN UPFRONT FEE. ON ACCOUNT OF CERTAIN BRE ACH IN CONTRACT, A SETTLEMENT WAS ARRIVED AT BETWEEN THE ASSESSEE AND M/S.ABAN HOTELS & RESORTS (P) LTD., THROUGH ARBITRATION TRIBUNAL, C HENNAI. CONSEQUENTLY, ` 3.15 CRORES WAS PAID BY THE ASSESSEE TO M/S.ABAN HOTELS & RESORTS (P) LTD., TOWARDS PART EXPENSES AN D AS PART DAMAGES FOR NON-PERFORMANCE OF THE CONTRACT IN CONNECTION W ITH THE PROJECT. AS THE ASSESSEE HAD INCURRED ` 3.15 CRORES FOR THE PURPOSE OF VENTURING INTO A NEW BUSINESS ACTIVITY AND THE SAME WAS PAID DURING THIS YEAR FOR BREACH OF CONTRACT, THE LD. ASSESSING OFFICER HAD H ELD THAT THE SAME WAS CAPITAL EXPENDITURE WHEREAS ASSESSEE HAD CLAIME D AS REVENUE EXPENDITURE. IT WAS A SUBMISSION THAT A JOINT VENTU RE AGREEMENT WAS ENTERED INTO IN MARCH, 2000 AND THE WORK IN RESPECT OF MOU HAS ALSO BEEN STARTED BY M/S.ABAN HOTELS & RESORTS (P) LTD. IT WAS A SUBMISSION THAT THE ASSESSEE MAY BE ENTITLED TO CLA IM OF REVENUE EXPENDITURE. IN REPLY, LD.D.R VEHEMENTLY SUPPORTED THE ORDERS OF LD. ASSESSING OFFICER AND THE LD.CIT(A). ITA NO.1417/CHNY/2017 :- 7 -: 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. ADMI TTEDLY, THE MOU HAS BEEN ENTERED INTO BY THE ASSESSEE WITH M/S. ABAN HOTELS & RESORTS (P) LTD., FOR THE ESTABLISHMENT, OWNERSHIP AND OPERATION BY THE PARTIES OF ONE OR MORE JOINT VENTURE COMPANIES. AS PER THE MOU, ASSESSEE WAS HOLDING 50% OF SHARES IN THE JOINT VEN TURE AND BALANCE 50% WAS HELD BY M/S.ABAN HOTELS & RESORTS (P) LTD. THE PHASE-I DEVELOPMENT COMPRISES THE INTEGRATED TOURISM RELATE D DELUXE FIVE STAR HOTEL OF INTERNATIONAL STANDARD OF ABOUT 300 ROOMS, A MODERN SHOPPING MALL WITH VARIOUS FACILITIES FOR SHOPPING, OFFICE SPACE, ENTERTAINMENT OUTLETS ETC. THE ASSESSEE WAS TO PRO VIDE THE LAND ON LEASE BASIS TO THE JOINT VENTURE COMPANY FOR AN INI TIAL PERIOD OF 30 YEARS. THUS CLEARLY THE MOU HAS BEEN ENTERED INTO B Y THE ASSESSEE WITH M/S.ABAN HOTELS & RESORTS (P) LTD., IS NOT ONE IN RESPECT OF TRANSFER OF THE LAND. PER SE THE MOU IS FOR THE PUR POSE OF CREATION OF JOINT VENTURE VEHICLE FOR THE PURPOSE OF PUTTING UP CONSTRUCTIONS ON LEASED PROPERTIES. THIS ADMITTEDLY IS A NEW LINE O F BUSINESS OF THE ASSESSEE. THE VIOLATION OF THE CONDITIONS OF MOU HA S LED TO THE CANCELLATION OF THE SAME AND THE ASSESSEE BEING HEL D RESPONSIBLE FOR REPAYMENT OF PART OF EXPENDITURE INCURRED AS ALSO D AMAGES. THIS IS NOTHING, BUT LOSS OF CAPITAL. THUS, WE ARE OF THE V IEW THAT THE LD. ASSESSING OFFICER WAS RIGHT HOLDING THAT THE EXPEND ITURE WAS IN FACT ITA NO.1417/CHNY/2017 :- 8 -: LOSS OF CAPITAL AND NOT REVENUE EXPENDITURE. THIS B EING SO, GROUND NOS.3.1 TO 3.3 OF ASSESSEES APPEAL STANDS DISMISSE D. 10. IN RESPECT OF GROUND NOS.4.1 & 4.2, IT WAS SUB MITTED BY THE LD.A.R THAT HE DID NOT WISH TO PRESS THESE GROUNDS, CONSEQUENTLY GROUND NOS.4.1 & 4.2 OF ASSESSEES APPEAL STANDS DI SMISSED AS NOT PRESSED. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS P ARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT AFTER CONCLUSION OF HEARING ON 12 TH JUNE, 2018, AT CHENNAI. SD/ - SD/ - ( ) (S. JAYARAMAN) ' # /ACCOUNTANT MEMBER ( ) (GEORGE MATHAN) $ # / JUDICIAL MEMBER ) $ / CHENNAI * / DATED: 12 TH JUNE, 2018. K S SUNDARAM + !%,- . -% / COPY TO: 1 . / APPELLANT 3. # /% () / CIT(A) 5. -23 !%4 / DR 2. !' / RESPONDENT 4. # /% / CIT 6. 35 6$ / GF