Anjali Hotels P.Ltd, Cochin V. The ACIT, Cochin

ITA 158/COCH/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 81410 (ITAT-COCHIN)
• Duration Of Justice: 7 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-12-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 03-12-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 11-04-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K K JOHN
• Assessee Lawyers: P K SASIDHARAN
• Keywords: Revenue expenditure; Capital expenditure
• Section: 139

Judgement Text

1 ITA NO.158 /COCH/2014 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI N.R.S. GANESAN (JM) AND SHRI CHANDRA PO OJARI (AM) I.T.A NO.158/COCH/2014 (ASSESSMENT YEAR 2008-09) M/S ANJALI HOTELS P LTD VS THE ACIT, CIR.1(1) W/ISLAND, KOCHI KOCHI PAN : AACCA2654H (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI P.K. SASIDHARAN RESPONDENT BY : SHRI K.K. JOHN DATE OF HEARING : 03-12-2014 DATE OF PRONOUNCEMENT : 05-12-2014 O R D E R PER N.R.S. GANESAN (JM) THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE CIT(A)-II, KOCHI DATED 13-12-2013 FOR THE ASSESSMEN T YEAR 2008-09. 2. THE FIRST ISSUE IS WITH REGARD TO DISALLOWANCE O F RS. 17,47,032. SHRI P.K. SASIDHARAN, THE LD.REPRESENTATIVE FOR THE ASSE SSEE SUBMITTED THAT THE ASSESSEE TOOK OVER THE FLIGHT CATERING DEPARTMENT F ROM M/S HOTEL ALLIED TRADES PVT LTD IN PURSUANCE OF THE AGREEMENT DATED 01-04-2007. ACCORDING TO THE LD.REPRESENTATIVE, THE ASSESSEE HA S SPENT A SUM OF 2 ITA NO.158 /COCH/2014 RS.17,47,032 ON THE LEASEHOLD PREMISES. THIS WAS C LAIMED AS REVENUE EXPENDITURE ON THE BASIS OF THE JUDGMENT OF THE MAD RAS HIGH COURT IN TVS LEAN LOGISTICS LTD 293 ITR 432 (MAD). ACCORDING TO THE LD.REPRESENTATIVE, THE AMOUNT SPENT FOR CONSTRUCTION OF BUILDING OR MO DIFICATION OF THE BUILDING IN THE LEASEHOLD PREMISES IS ALLOWABLE AS REVENUE E XPENDITURE. REFERRING TO THE DECISION OF THIS TRIBUNAL IN M/S HOTEL ALLIE D TRADES PVT LTD IN ITA NO.678/COCH/2010 DATED 25 TH OCTOBER, 2012, THE LD.REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT THIS TRIBUNAL FOUND THAT TH E BUILDING WAS CONSTRUCTED IN THE LEASEHOLD LAND IN THE EARLIER YE AR, THEREFORE, IT CANNOT BE ALLOWED AS REVENUE EXPENDITURE IN THE SUBSEQUENT YE AR. ACCORDING TO THE LD.REPRESENTATIVE, THE EXPENDITURE INCURRED BY THE ASSESSEE IN THE LEASEHOLD PREMISES HAS TO BE ALLOWED AS REVENUE EXP ENDITURE. 3. ON THE CONTRARY, SHRI K.K. JOHN, THE LD.DR SUBM ITTED THAT THE ASSESSEE HAS CLAIMED THE WRITTEN DOWN VALUE OF THE BUILDING ON THE LEASEHOLD LAND AS CURRENT REPAIR. ACCORDING TO THE LD.DR THE ASSESSEE CLAIMED THE VALUE OF THE BUILDING ON THE LEASEHOLD PREMISES AS ON 01-04- 2007 AS CURRENT REPAIR. ACCORDING TO THE LD.REPRES ENTATIVE, THE EXPENDITURE INCURRED BY THE ASSESSEE TO PRESERVE AND MAINTAIN A N EXISTING ASSET ALONE HAS TO BE ALLOWED AS CURRENT REPAIR. IN THIS CASE, ACCORDING TO THE LD.DR THE BUILDING WAS ALREADY CONSTRUCTED IN THE EARLIER YEAR AND THE ASSESSEE TOOK THE PREMISES ON LEASE, THEREFORE, THE VALUE OF PREMISES TAKEN ON 3 ITA NO.158 /COCH/2014 LEASE CANNOT BE CONSIDERED TO BE REVENUE EXPENDITUR E. THE VALUE OF THE BUILDING EXISTING IN THE LEASEHOLD PREMISES AS ON T HE DATE OF LEASE CANNOT BE CONSIDERED AS CURRENT REPAIR. ACCORDING TO THE LD.REPRESENTATIVE, IT HAS TO BE TREATED AS CAPITAL EXPENDITURE. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. ADMITTED LY, THE ASSESSEE TOOK THE BUSINESS AS A GOING CONCERN FROM HOTEL ALLIED T RADES (P) LTD. THE QUESTION ARISES FOR CONSIDERATION IS WHETHER THE VA LUE OF THE BUILDING WHICH EXISTED ON THE LEASEHOLD PREMISES HAS TO BE TREATED AS CURRENT REPAIRS OR CAPITAL EXPENDITURE? THIS TRIBUNAL IS OF THE CONSI DERED OPINION THAT THE VALUE OF THE BUILDING WHICH EXISTED ON THE LEASEHOL D PREMISES ON THE DATE OF LEASE CANNOT BE CONSIDERED AS CURRENT REPAIR. N O MATERIAL IS AVAILABLE ON RECORD TO SUGGEST THAT THE ASSESSEE HAS CONSTRUC TED ANY BUILDING OR HAS MODIFIED THE EXISTING BUILDING AFTER TAKING THE PREMISES ON LEASE. THEREFORE, THE JUDGMENT OF THE MADRAS HIGH COURT IN TVS LEAN LOGISTICS LTD (SUPRA) CANNOT BE APPLICABLE TO THE FACTS OF TH E CASE. IN THE ABSENCE OF ANY MATERIAL TO SHOW THAT THE ASSESSEE HAS INCURRED AN EXPENDITURE OF RS. 17,47,032 ON MODIFICATION OR CONSTRUCTION OF THE BU ILDING ON THE LEASEHOLD PREMISES, THIS TRIBUNAL IS OF THE CONSIDERED OPINIO N THAT THE SAME CANNOT BE ALLOWED AS CURRENT REPAIR. THEREFORE, THE ORDER OF THE LOWER AUTHORITIES ON THIS ISSUE IS CONFIRMED. 4 ITA NO.158 /COCH/2014 5. THE NEXT GROUND OF APPEAL IS WITH REGARD TO DISA LLOWANCE OF RS. 83,989 U/S 40(A)(IA) OF THE ACT. 6. SHRI P.K. SASIDHARAN, THE LD.REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT THE ASSESSING OFFICER DISALLOWED A S UM OF RS.83,989 U/S 40(A)(IA) ON THE GROUND THAT THE TAX DEDUCTED WAS N OT PAID WITHIN THE PREVIOUS YEAR. ACCORDING TO THE LD.REPRESENTATIVE, IT IS NOT DISPUTED THAT THE TAX DEDUCTED WAS PAID BEFORE THE DUE DATE FOR FILIN G OF THE RETURN OF INCOME. THEREFORE, ACCORDING TO THE LD.REPRESENTAT IVE, THE ASSESSING OFFICER IS NOT JUSTIFIED IN DISALLOWING THE CLAIM O F THE ASSESSEE. 7. ON THE CONTRARY, SHRI K.K. JOHN, THE LD.DR SUBMI TTED THAT A SUM OF RS.83,989 WAS DEDUCTED IN THE MONTHS OF JANUARY AND FEBRUARY, 2008. HOWEVER, THE SAME WAS PAID BEYOND THE PREVIOUS YEAR . REFERRING TO SECTION 40(A)(IA) OF THE ACT, THE LD.DR SUBMITTED T HAT EVEN THOUGH TAX WAS DEDUCTED, IT IS NOT PAID WITHIN THE PREVIOUS YEAR, THEREFORE, THE ASSESSING OFFICER HAS DISALLOWED THE CLAIM OF THE ASSESSEE AN D THE CIT(A) HAS RIGHTLY CONFIRMED THE SAME. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. WE HAVE CAREFULLY GONE THROUGH THE PROVISOS TO SECTION 40(A)(IA) OF THE ACT. FIRS T PROVISO TO SECTION 5 ITA NO.158 /COCH/2014 40(A)(IA) CLEARLY SAYS THAT IF TAX WAS DEDUCTED DUR ING THE PREVIOUS YEAR BUT PAID AFTER THE DUE DATE SPECIFIED IN SUB SECTION (1 ) OF SECTION 139 THEN THE SAID SUM SHALL BE ALLOWED AS DEDUCTION IN COMPUTING THE INCOME OF THE PREVIOUS YEAR IN WHICH SUCH TAX HAS BEEN PAID. IN THIS CASE, THE ASSESSEE HAS PAID THE TAX DEDUCTED AT SOURCE BEFORE THE DUE DATE SPECIFIED IN SECTION 139(1) OF THE ACT FOR FILING THE RETURN OF INCOME. EVEN THOUGH THE ASSESSEE HAS DEDUCTED THE TAX AND IT IS NOT PAID WI THIN THE PREVIOUS YEAR, BUT HAS BEEN PAID BEFORE THE DUE DATE FOR FILING TH E RETURN OF INCOME U/S 139(1). THEREFORE, THIS TRIBUNAL IS OF THE CONSIDE RED OPINION THAT THE ASSESSING OFFICER IS NOT JUSTIFIED IN REJECTING THE CLAIM OF THE ASSESSEE. ACCORDINGLY, THE ORDERS OF THE LOWER AUTHORITIES AR E SET ASIDE AND THE ASSESSING OFFICER IS DIRECTED TO DELETE THE DISALLO WANCE OF RS.83,989 MADE U/S 40(A)(IA) OF THE ACT. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 05 TH DECEMBER, 2014. SD/- SD/- (CHANDRA POOJARI) (N.R.S. GANESAN) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN, DT : 05 TH DECEMBER, 2014 PK/- 6 ITA NO.158 /COCH/2014 COPY TO: 1. M/S ANJALI HOTELS P LTD, W/ISLAND, KOCHI 2. THE ACIT, CIR.1(1), KOCHI 3. THE COMMISSIONER OF INCOME-TAX, KOCHI 4. THE COMMISSIONER OF INCOME-TAX(A)-II, KOCHI 5. THE DR (TRUE COPY) BY ORDER ASSTT. REGISTRAR, INCOME-TAX APPELLATE TRIBUNAL, COCHIN BENCH