ITO,WARD-2(4), KOLKATA, Kolkata V. M/S. West Bengal Tourism Development Corporation Ltd., Kolkata

ITA 1539/KOL/2014

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 1869 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 5 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-01-2018
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 11-07-2017
• Assessment Year: 2005-2006
• Appeal Filed On: 16-07-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S DASGUPTA A DDL
• Keywords: Depreciation; Earning of tax free income; Unabsorbed depreciation

Judgement Text

ITA NOS.1538 TO 1540/KOL/2014 WEST BENGAL TOURISM D EVELOPMENT CORPORATION LTD.A.Y.2004- 05,2005-06 & 2008-09 1 IN THE INCOME TAX APPELLATE TRIBUNAL B B ENCH : KOLKATA [BEFORE HONBLE SRI N.V.VASUDEVAN, JM & DR.ARJUN LAL SAINI, AM] I.T.A NOS.1538 TO 1540/KOL/2014 ASSESSMENT YEARS : 2004-05, 2005-06 & 2008-09 I.T.O., WARD-2(4) -VS.- M/S. WEST BENGAL T OURISM KOLKATA DEVELOPMENT CORPORATION LTD. KOLKATA [PAN : AAACW 3093 Q] (APPELLANT) (RESPONDENT) FOR THE APPELLANT : SHRI S.DASGUPTA, A DDL. CIT (DR) FOR THE RESPONDENT : NONE DATE OF HEARING : 13.12.2017. DATE OF PRONOUNCEMENT : 03.01.2018. ORDER PER N.V.VASUDEVAN, JM ITA NO.1538/KOL/2014 AND ITA NO.1539/KOL/2014 ARE APPEALS BY THE REVENUE AGAINST TWO ORDERS BOTH DATED 05.02.2014 OF CIT(A)-1, KOLKATA RELATING TO A.Y.2004-05 AND 2005-06 RESPECTIVELY. ITA NO.1540/K OL/2014 IS AN APPEAL BY THE REVENUE AGAINST THE ORDER DATED 31.03.2014 OF CIT( A)-1, KOLKATA RELATING TO A.Y.2008-09. THE ISSUES THAT ARISE FOR CONSIDERATIO N IN THESE THREE APPEALS ARE IDENTICAL AND ARISE OUT OF THE SAME FACTS AND CIRCU MSTANCES. THESE APPEALS ARE HEARD TOGETHER. WE DEEM IT CONVENIENT TO PASS A COMMON OR DER. ITA NO.1538/KOL/2014 (A.Y.2004-05) 2. GROUND NO.1 RAISED BY THE REVENUE READS AS FOLLO WS :- 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE , THE LD. CIT(A) IS NOT JUSTIFIED IN DELETING DISALLOWANCE OF RS. 3,17,638/- ON CONTR IBUTION TO STAFF WELFARE FUND. THIS FUND WAS CREATED WITHOUT PASSING THE SAME THRO UGH THE PROFIT & LOSS ACCOUNT. THE ASSESSEE ACTUALLY UNDERSTATED SERVICE CHARGE INCOME AND RESULTANT CASH WAS DIRECTLY CREDITED TO THIS FUND. ITA NOS.1538 TO 1540/KOL/2014 WEST BENGAL TOURISM D EVELOPMENT CORPORATION LTD.A.Y.2004- 05,2005-06 & 2008-09 2 3. THERE IS A DELAY OF 19 DAYS IN FILING ITA NO.153 8 AND 1539/KOL/2014 AND DELAY OF TWO DAYS IN FILING ITA NO.1540/KOL/2014. I T HAS BEEN EXPLAINED IN THE AFFIDAVIT OF SHRI B.SHAH, ITO, WARD-2(4), KOLKATA THAT THE DELAY IN FILING THESE APPEALS WAS DUE TO ADMINISTRATIVE AND PROCEDURAL DE LAYS. THE REASONS GIVEN IN THE AFFIDAVIT ARE ACCEPTED AND WE HOLD THAT THERE WAS A REASONABLE AND SUFFICIENT CAUSE FOR THE DELAY IN FILING THESE APPEALS. THE DELAY IN FIL ING THESE APPEALS ARE ACCORDINGLY CONDONED. 4. THE ASSESSEE IS A STATE GOVERNMENT UNDERTAKING E NGAGED IN THE BUSINESS OF TOURISM IN THE STATE OF WEST BENGAL AND ALSO IN THE INTERSTATE TOURISM DEVELOPMENT. IN THE COURSE OF ASSESSMENT PROCEEDINGS U/S 143 (3) OF THE INCOME TAX ACT, 1961 (ACT) THE AO NOTICED THAT THERE WAS AN ITEM, OF STAFF WEL FARE FUNDS OF RS.3,17,638/- WHICH WAS SHOWN AS CURRENT LIABILITY IN THE BALANCE SHEET . THERE WAS ALSO ANOTHER ITEM OF CURRENT LIABILITY BROKERAGE COMPENSATION FUND OF RS .2,85,871/-. AS WE HAVE ALREADY SEEN THAT THE ASSESSEE IS IN THE BUSINESS OF TOURIS M THEREFORE RUNS TOURIST LODGES. IT COLLECTS SERVICE CHARGES FROM THE OCCUPANTS OF VARI OUS LODGES. DURING THE PREVIOUS YEAR THE ASSESSEE HAD COLLECTED A SUM OF RS.31,76, 380/- BUT IN THE BOOKS OF ACCOUNTS THE ASSESSEE HAD SHOWN SERVICE CHARGES OF ONLY RS.2 6,32,569/-. THE STAFF WELFARE FUND AND BROKERAGE COMPENSATION FUN D WERE 10% AND 9% OF THE SERVICE CHARGES EARNED BY THE ASSESSEE. ON THE ABOVE FACTS THE AO WAS OF THE VIEW THAT THE STAFF WELFARE FUND AND BROKERAGE COMPENSATION FUND SHOULD BE ADDED TO THE TOTAL INCOME OF THE ASSESSEE FOR THE FOLLOWING REASONS :- 3. DURING THE COURSE OF INVESTIGATION OF ACCOUNTS , IT WAS FOUND' THAT THE ASSESSEE COMPANY CREATED TWO FUNDS IN THE NAMES OF 'STAFF WE LFARE FUND' AND 'BREAKAGE COMPENSATION FUND'. THE ASSESSEE TREATED THE SAID F UNDS AS CURRENT LIABILITY. THESE FUNDS WERE CREATED WITHOUT PASSING THE SAME T HROUGH THE PROFIT & LOSS ACCOUNT. AMOUNTS CREDITED DIRECTLY TO THESE FUNDS AND KEPT THE UNDER 'CURRENT LIABILITY' WERE AS BELOW ; . STAFF WELFARE FUND (10%) RS.. 3,17,638/- BREAKAGE COMPENSATION FUND (9%) : RS.2,85,871/- RS. 6,03,509/- POINT NO. IX OF NOTES ON ACCOUNTS STATES THAT THESE TWO FUNDS WERE CREATED BY RESPECTIVELY CREDITING INTO IT 10% AND 9% OF THE SE RVICE CHARGES EARNED BY TILE ITA NOS.1538 TO 1540/KOL/2014 WEST BENGAL TOURISM D EVELOPMENT CORPORATION LTD.A.Y.2004- 05,2005-06 & 2008-09 3 ASSESSEE. IN ACCORDANCE WITH THIS STATEMENT THE SER VICE CHARGE SHOULD HAVE BEEN RS.31,76,380/-.. BUT SERVICE CHARGE INCOME IS SHOWN AT RS..26,32,569/- IN THE SCHEDULE 12 OF THE BALANCE SHEET FURNISHED BY THE A SSESSEE, IMPLYING THAT ASSESSEE HAS UNDERSTATED ITS SERVICE CHARGE INCOME BY RS.5,43,811/-. IT APPEARS FROM THE ACCOUNTS FURNISHED BY THE ASSE SSEE THAT NO AMOUNT OUT OF THE SAID FUNDS WAS UTILISED DURING THE RELEVANT. FINANC IAL YEAR. DURING THE COURSE OF HEARING THE MATTER WAS DISCUSSED AND IT WAS FOUND T HAT THE ASSESSEE ACTUALLY UNDERSTATED THE SERVICE CHARGE INCOME AND THE RESUL TANT CASH WAS DIRECTLY CREDITED TO THE ABOVE MENTIONED FUNDS. THUS. THE INCOME OF T HE ASSESSEE AMOUNTING TO RS.6,03,509/- WHICH WAS CREDITED TO THE ABOVE MENTI ONED TWO ACCOUNTS DIRECTLY SHOULD BE ADDED BACK TO THE TOTAL INCOME OF THE ASS ESSEE. 5. ON APPEAL BY THE ASSESSEE THE CIT(A) FOUND THAT IN ASSESEES OWN CASE FOR A.Y.2004-05 IN ITA NO.985/KOL/2007 ORDER DATED 19.1 2.2007 ITAT KOLKATA BENCH HELD THAT CONTRIBUTION TO STAFF WELFARE FUND CANNOT BE ADDED TO THE INCOME OF THE ASSESSEE. FOLLOWING THE AFORESAID ORDER THE CIT(A) DELETED THE ADDITION MADE TOWARDS CONTRIBUTION TO STAFF WELFARE OF RS.3,17,638/-. THE FOLLOWING WERE THE RELEVANT OBSERVATIONS OF THE CIT(A) :- 4.2 THE SUBMISSIONS OF THE APPELLANT AS ABOVE HAVE BEEN CONSIDERED. IT HAS BEEN HELD BY THE ITAT IN THE APPELLANT'S OWN CASE F OR A.Y 2003-04 THAT THE CLAIM OF THE APPELLANT IS ALLOWABLE ONLY TO THE EXT ENT OF STAFF WELFARE FUND. THE RELEVANT PORTION OF THE ORDER OF ITAT IS RE-PRODUCE D AS UNDER :- 'ON CAREFUL CONSIDERATION OF THE MATERIALS MADE AVA ILABLE WITH THE TRIBUNAL AND ANALYZING THE SAME IN THE LIGHT OF THE RIVAL SUBMISSIONS OF BOTH THE PARTIES, IT IS FOUND THAT THE ASSESSEE MAI NTAINS STAFF WELFARE FUND A/C COPY OF WHICH IS MADE AVAILABLE BEFORE THE TRIB UNAL WHICH SHOWS THAT THE SERVICE CHARGES RECEIVED BY THE ASSESSEE W ERE ACCOUNTED TO THE STAFF WELFARE FUND AND THEY WERE ACCORDINGLY DISTRI BUTED TO THE STAFF AND THIS VERY PROCEDURE IS FOLLOWED BY THE ASSESSEE BASING ON THE MINUTES OF BOARD OF DIRECTORS OF WEST BENGAL TOURIS M DEVELOPMENT & CORPN. HELD ON 5-12-79 A COPY OF WHICH IS ALSO MADE AVAILABLE BEFORE THE TRIBUNAL BUT AT THE SAME TIME, THE ASSESSEE IS NOT ABLE TO JUSTIFY THE CLAIM RELATING TO BREAKAGE COMPENSATION FUND. THERE FORE, WE ARE OF THE CONSIDERED VIEW THAT THE AMOUNTS CREATED FOR THE ST AFF WELFARE FUND ARE TO BE ALLOWED AS IT IS IN ACCORDANCE WITH THE MINUT ES OF THE BOARD OF DIRECTORS WHICH IS HAVING AN OVERRIDING TITLE AND B ASING ON WHICH THE DIVERSION OF THE FUND WAS MADE. ACCORDINGLY, THE AO IS DIRECTED TO DELETE THE ADDITION RELATING TO THE STAFF WELFARE F UND ONLY. ACCORDINGLY, THE ASSESSEE'S APPEAL IS PARTLY ALLOWED. ' ITA NOS.1538 TO 1540/KOL/2014 WEST BENGAL TOURISM D EVELOPMENT CORPORATION LTD.A.Y.2004- 05,2005-06 & 2008-09 4 CONSIDERING THAT THE ABOVE DECISION OF THE ITAT KOL KATA IS ON IDENTICAL ISSUES IN THE APPELLANT'S CASE FOR A.Y 2003-04, THEREFORE RES PECTFULLY FOLLOWING THE ORDER OF THE JURISDICTIONAL ITAT, THE ADDITION MADE TOWAR DS CONTRIBUTION TO STAFF WELFARE FUND OF RS. 3, 17,638/- IS DELETED AND THE ADDITION TOWARDS BREAKAGE COMPENSATION FUND OF RS.2,85,871/- IS CONFIRMED. 6. AGGRIEVED BY THE ORDER OF CIT(A) THE REVENUE RAI SED GROUND NO.1 BEFORE THE TRIBUNAL. 7. NONE APPEARED ON BEHALF OF THE ASSESSEE. WE HAVE HEARD THE SUBMISSIONS OF THE LD. DR, WHO RELIED ON THE ORDER OF AO. WE ARE OF TH E VIEW THAT THERE IS NO MERIT IN GROUND NO.1 RAISED BY THE REVENUE. ON IDENTICAL FAC TS THIS TRIBUNAL HAS ALREADY TAKEN A VIEW IN ASSESSEES OWN CASE FOR A.Y.2003-04 AND HEL D THAT THE CONTRIBUTION TOWARDS STAFF WELFARE FUND WAS BASED ON A RESOLUTION OF TH E BOARD OF DIRECTORS OF THE ASSESSEE HELD ON 05.12.1979 AND BY VIRTUE OF THAT RESOLUTIO N AN OVER RIDING TITLE ON THE SERVICE CHARGES RECEIVED AND CONSEQUENTLY THERE WAS A DIVER SION OF INCOME BY OVER RIDING TITLE AT SOURCE ON THE SERVICE CHARGES RECEIVED BY THE AS SESSEE. THE CIT(A) HAS FOLLOWED THE ORDER OF ITAT ON IDENTICAL FACTS . IN VIEW OF T HE ABOVE, WE FIND NO GROUNDS TO INTERFERE WITH THE ORDER OF CIT(A). GROUND NO.1 RAI SED BY THE REVENUE IS ACCORDINGLY DISMISSED. 8. GROUND NO.2 RAISED BY THE REVENUE READS AS FOLL OWS :- 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE , THE LD. CIT(A) IS NOT JUSTIFIED IN DIRECTING THE A.O. TO VERIFY THE CLAIM OF THE AS SESSEE IN RESPECT OF A CARRY FORWARD OF LOSSES FOR A.Y. 1995-96 I) UNABSORBED DE PRECIATION OF RS. 1,70,56,577/-, II) BUSINESS LOSS OF RS. 1,45,62,730 /- AND B) DIVIDEND INCOME OF RS. 7,25,760/- AS EXEMPT INCOME U/S 10(34) OF THE I .T.ACT, 1961 AND TO ALLOW THE SAME AS PER LAW. THE ISSUE HAS BEEN SET ASIDE BY TH E LD. CIT(A), WHICH IS NOT PERMISSIBLE IN LAW. 9. THE ASSESSEE MADE A CLAIM BEFORE THE CIT(A) FOR CARRY FORWARD OF LOSS FOR A.Y.1995-06 WHICH WAS IN THE FORM OF UNABSORBED DEP RECIATION AND BUSINESS LOSS. THE ASSESSEE ALSO CLAIMED THAT THERE WAS A DIVIDEND INCOME WHICH WAS WRONGLY INCLUDED IN THE TOTAL INCOME DECLARED IN THE RETURN OF INCOME. SINCE THE DIVIDEND INCOME IS EXEMPT U/S 10(34) OF THE INCOME TAX ACT, 1961 (ACT) THE SAME SHOULD BE ITA NOS.1538 TO 1540/KOL/2014 WEST BENGAL TOURISM D EVELOPMENT CORPORATION LTD.A.Y.2004- 05,2005-06 & 2008-09 5 EXCLUDED FROM THE TOTAL INCOME. ON THE AFORESAID CL AIMS MADE BY THE ASSESSEE THE CIT(A) DIRECTED THE AO TO VERIFY THE RELEVANT ASSES SMENT RECORDS WITH REGARD TO CARRY FORWARD OF UNABSORBED DEPRECIATION AND BUSINESS LOS S AND GAVE THE BENEFIT AFTER DUE VERIFICATION. WITH REGARD TO THE EXCLUSION OF DIVID END INCOME THE CIT(A) DIRECTED THE AO TO VERIFY THE CLAIM OF THE ASSESSEE AND IF FOUND CORRECT ALLOW RELIEF IN ACCORDANCE WITH LAW. 10. IT IS THE PLEA OF THE REVENUE IN GROUND NO.2 TH AT THE CIT(A) U/S 251 OF THE ACT DOES NOT HAVE THE POWER TO SET ASIDE AN ISSUE TO TH E AO AND THEREFORE HIS ORDER IS NOT IN ACCORDANCE WITH LAW. WE ARE OF THE VIEW THAT THE CONTENTION RAISED ON BEHALF OF THE REVENUE IS CORRECT BUT NEVERTHELESS WE ARE OF THE V IEW THAT THE ISSUE REQUIRES EXAMINATION BY THE AI AND IN THE CIRCUMSTANCES WE D IRECT THE AO TO VERIFY THE CLAIM OF THE ASSESSEE AND IF FOUND CORRECT GIVE APPROPRIA TE RELIEF. THUS GROUND NO.2 IS TREATED AS ALLOWED. 11. IN THE RESULT ITA NO. 1538/KOL/2014 IS PARTLY A LLOWED FOR STATISTICAL PURPOSES. ITA NOS.1539/KOL/2014 AND ITA NO.1540/KOL/2014 (A.Y .2005-06 & 2008-09) 12. GROUNDS OF APPEAL RAISED BY THE REVENUE READ AS FOLLOWS : A.Y.2005-06 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE , THE LD. CIT(A) IS NOT JUSTIFIED IN DELETING DISALLOWANCE OF RS. 3,39,328/- ON CONTR IBUTION TO STAFF WELFARE FUND. THESE EXPENSES WERE NOT ACTUAL EXPENSES, ONLY PROVI SIONS WERE CREATED. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) IS NOT JUSTIFIED IN DIRECTING THE A.O. TO VERIFY THE CLAIM OF THE AS SESSEE IN RESPECT OF A) CARRY FORWARD OF LOSSES FOR A.Y. 1995-96 I) UNABSORBED DE PRECIATION OF RS. 1,70,56,577/-, II) BUSINESS LOSS OF RS. 1,45,62,730 /- AND B) DIVIDEND INCOME OF RS. 7,25,760/- AS EXEMPT INCOME U/S 10(34) OF THE I .T.ACT, 1961 AND TO ALLOW THE SAME AS PER LAW. THE ISSUE HAS BEEN SET ASIDE BY TH E LD. CIT(A), WHICH IS NOT PERMISSIBLE IN LAW. 3. THE APPELLANT CRAVES LEAVE TO AMEND, MODIFY OR A LTER ANY GROUNDS OF APPEAL DURING THE COURSE OF HEARING OF THIS CASE. A.Y.2008-09 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE , THE LD. CIT(A) IS NOT JUSTIFIED IN DELETING DISALLOWANCE OF RS. 4,47,890/ - ON STAFF WELFARE EXPENSES, CONSIDERING THE FACT THAT THE CLAIM IS IN RESPECT O F A LIABILITY WHICH HAS NOT BEEN ASCERTAINED. ITA NOS.1538 TO 1540/KOL/2014 WEST BENGAL TOURISM D EVELOPMENT CORPORATION LTD.A.Y.2004- 05,2005-06 & 2008-09 6 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) IS NOT JUSTIFIED IN DIRECTING THE A.D. TO VERIFY THE CLAIM IN RESPEC T OF CARRY FORWARD OF UNABSORBED DEPRECIATION OF RS. 2,61,93,483/- AND BU SINESS LOSS OF RS. 78,67,136/- AND TO ALLOW THE SAME AS PER LAW. THE ISSUE HAS BEE N SET ASIDE BY THE LD. CIT(A), WHICH IS NOT PERMISSIBLE IN LAW. 3. THE APPELLANT CRAVES LEAVE TO AMEND, MODIFY OR A LTER ANY GROUNDS OF APPEAL DURING THE COURSE OF HEARING OF THIS CASE. 13. THESE GROUNDS ARE IDENTICAL TO GROUND NO.1 AND 2 RAISED BY THE REVENUE IN ITA NO.1538/KOL/2014 FOR A.Y.2004-05. FOR THE REASONS S TATED WHILE DECIDING THESE GROUNDS WE DISMISS GROUND NO.1 IN BOTH THESE APPEAL S AND ALLOW GROUND NO.2 FOR STATISTICAL PURPOSES. 14. IN THE RESULT ITA NOS. 1539 AND 1540/KOL/2014 A RE PARTLY ALLOWED FOR STATISTICAL PURPOSES. 15. IN THE RESULT ALL THE APPEALS ARE PARTLY ALLOWE D FOR STATISTICAL PURPOSES. ORDER PRONOUNCED I N THE COURT ON 03.01.2018. SD/- SD/- [DR.A.L.SAINI] [ N.V.V ASUDEVAN ] ACCOUNTANT MEMBER JUDI CIAL MEMBER DATED : 03.01.2018. [RG SR.PS] COPY OF THE ORDER FORWARDED TO: 1. M/S. WEST BENGAL TOURISM DEVELOPMENT CORPORATION LTD., HEMANTA BHAWAN, 4 TH FLOOR, 12, B.B.D.BAG (EAST), KOLKATA-700001. 2. I.T.O., WARD-2 (4), KOLKATA. 3 C.I.T.(A)-1, KOLKATA 4. C.I.T.-1, KOLKATA . 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER SENIOR PRIVATE SECRETARY HEAD OF OFFICE / D.D.O., ITAT KOLKATA BENCHES