Aerens Motels & resorts Pvt Ltd, V. ACIT CC-8,

ITA 1914/DEL/2007

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 58826 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 10 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-02-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 16-02-2012
• Assessment Year: 2002-2003
• Appeal Filed On: 18-04-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: PRAKASH YADAV
• Keywords: Business expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL DELHI DELHI DELHI DELHI BENCH A BENCH A BENCH A BENCH A : NEW DELHI : NEW DELHI : NEW DELHI : NEW DELHI BEFORE SHRI G. BEFORE SHRI G. BEFORE SHRI G. BEFORE SHRI G.D.AGRAWAL, D.AGRAWAL, D.AGRAWAL, D.AGRAWAL, VICE PRESIDENT AND VICE PRESIDENT AND VICE PRESIDENT AND VICE PRESIDENT AND SHRI SHRI SHRI SHRI A.D.JAIN A.D.JAIN A.D.JAIN A.D.JAIN, JUDICIAL MEMBER , JUDICIAL MEMBER , JUDICIAL MEMBER , JUDICIAL MEMBER ITA NO. ITA NO. ITA NO. ITA NO.1914/DEL/200 1914/DEL/200 1914/DEL/200 1914/DEL/2007 77 7 ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR : : : : 2002 2002 2002 2002- -- -03 0303 03 M/S AERENS MOTELS & RESORTS M/S AERENS MOTELS & RESORTS M/S AERENS MOTELS & RESORTS M/S AERENS MOTELS & RESORTS PVT.LTD., PVT.LTD., PVT.LTD., PVT.LTD., A AA A- -- -15, 1 15, 1 15, 1 15, 1 ST STST ST FLOOR, FLOOR, FLOOR, FLOOR, ANNEXE ANNEXE ANNEXE ANNEXE MAIN, MAIN, MAIN, MAIN, HAUZ KHAS, HAUZ KHAS, HAUZ KHAS, HAUZ KHAS, NEW DELHI NEW DELHI NEW DELHI NEW DELHI 110 016. 110 016. 110 016. 110 016. PAN : AABCA2481R. PAN : AABCA2481R. PAN : AABCA2481R. PAN : AABCA2481R. VS. VS. VS. VS. DY.COMMISSIONER OF INCOME TAX, DY.COMMISSIONER OF INCOME TAX, DY.COMMISSIONER OF INCOME TAX, DY.COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE CENTRAL CIRCLE CENTRAL CIRCLE CENTRAL CIRCLE- -- -8, 8,8, 8, NEW DELHI. NEW DELHI. NEW DELHI. NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI PRAKASH YADAV, ADVOCATE. RESPONDENT BY : MRS.ANUSHA KHURANA, SR.DR. ORD ORD ORD ORDER ER ER ER PER G. PER G. PER G. PER G.D.AGRAWAL, D.AGRAWAL, D.AGRAWAL, D.AGRAWAL, VP VPVP VP : : : : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF LEARNED CIT(A) DATED 1 ST FEBRUARY, 2007 FOR THE ASSESSMENT YEAR 2002- 03. 2. GROUND NOS.1 & 2 RAISED BY THE ASSESSEE READ AS UNDER:- 1. THAT THE LD.CIT(APPEAL) HAS ERRED IN CONFIRMING THE ADDITION OF RS.9,91,384 INCURRED BY THE APPELLANT T OWARDS HORTICULTURE EXPENSES. 2. THAT THE LD.CIT(APPEAL) HAS ERRED IN CONFIRMING THE DISALLOWANCES OF THE FOLLOWING EXPENSES - (A) BUSINESS PROMOTION RS.3,00,000 (B) CONSUMABLE STORES RS.3,00,000 (C) MISCELLANEOUS EXPENSES RS.1,00,000 (D) REPAIRS AND MAINTENANCE RS.1,00,000 ----------------- RS.8,00,000 ----------------- ITA-1914/DEL/2007 2 3. GROUND NOS.3 TO 7 RAISED BY THE ASSESSEE ARE ONL Y THE ARGUMENTS IN SUPPORT OF GROUND NOS.1 & 2. 4. THE FACTS OF THE CASE ARE THAT THE ASSESSEE COMP ANY IS ENGAGED IN ESTABLISHING, DEVELOPING AND RUNNING HOTELS, HOL IDAYS AND HEALTH RESORTS. DURING THE YEAR UNDER CONSIDERATION, IT H AD INCURRED EXPENDITURE ON ACCOUNT OF HORTICULTURE TO THE TUNE OF ` 9,91,384/-. THE ASSESSING OFFICER DISALLOWED THE ENTIRE EXPENDITURE CLAIMED IN THIS HEAD AND ALSO DISALLOWED THE ENTIRE EXPENSES INCURR ED ON ACCOUNT OF BUSINESS PROMOTION, CONSUMABLE STORES, MISCELLANEOU S EXPENSES AND REPAIRS & MAINTENANCE ON THE GROUND THAT IN THE LAS T YEAR, THE EXPENDITURE INCURRED WAS ON A LOWER SIDE. 5. THE LEARNED CIT(A) SUSTAINED THE 100% DISALLOWAN CE OUT OF HORTICULTURE EXPENSES AND SUBSTANTIAL DISALLOWANCE OUT OF OTHER EXPENSES WHICH IS AS HIGH AS ALMOST 50% TO 75% OF T HE EXPENDITURE INCURRED. AGGRIEVED BY THE SAME, THE ASSESSEE IS I N APPEAL BEFORE US. 6. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT THE MAIN ACTIVITY UNDERTAKEN BY THE ASSESSEE COMPANY IS ESTA BLISHING, DEVELOPING AND RUNNING HOTELS AND RESORTS. FOR THI S PURPOSE, THE ASSESSEE COMPANY HAS TO INCUR EXPENDITURE ON BEAUTI FICATION OF THE RESORT AND MAINTAINING LAWNS. IT HAS TO MAINTAIN G REENERY IN AND AROUND THE HOTELS AND RESORTS. DUE TO INCREASE IN C OMPETITION IN THIS LINE OF BUSINESS, MAINTAINING LAWNS AND GREENERY IS VERY NECESSARY AND IT IS FOR THIS REASON THAT THE ASSESSEE HAS TO INCU R MORE EXPENSES ON HORTICULTURE THAN THE LAST YEAR. THE SAME IS ALSO N ECESSARY FOR SUSTAINING BUSINESS GROWTH. THEREFORE, THE EXPENDI TURE OF THIS NATURE IS A NECESSARY BUSINESS EXPENDITURE AND THE ENTIRE DISALLOWANCE OUT OF SUCH EXPENSES SHOULD BE DELETED. HE ALSO SUBMITTED THAT SIMILAR EXPENSES INCURRED BY THE ASSESSEE WERE ALWAYS ALLOW ED BY THE ASSESSING OFFICER IN THE LAST YEAR. IN RESPECT OF OTHER EXPENSES ITA-1914/DEL/2007 3 INCURRED BY THE ASSESSEE COMPANY, HE SUBMITTED THAT THE ASSESSING OFFICER DISALLOWED THE SAME ON THE GROUND THAT SIMI LAR EXPENSES INCURRED IN THE LAST YEAR WERE ON A LOWER SIDE. HE STATED THAT ALL THE EXPENDITURE WAS INCURRED FOR RUNNING AND MAINTENANC E OF HOTEL/RESORT. WITHOUT THE EXPENSES ON CONSUMABLE STORES, MISCELLA NEOUS EXPENSES, REPAIR EXPENSES, RESORT CANNOT BE RUN. HE, THEREFO RE, SUBMITTED THAT THE DISALLOWANCE SUSTAINED BY CIT(A) MAY BE DELETED . 7. THE LEARNED DR, ON THE OTHER HAND, CONTENDED THA T PROPER BILLS, VOUCHERS ETC. WERE NOT PRODUCED BY THE ASSESSEE IN SUPPORT OF THE SAID CLAIM OF EXPENSES. THE EXPENDITURE INCURRED ON HOR TICULTURE AND OTHER HEADS WAS MUCH HIGHER THAN THE LAST YEAR FOR WHICH NO SATISFACTORY EXPLANATION HAD BEEN OFFERED BY THE ASSESSEE AND, T HEREFORE, THE DISALLOWANCE MADE MAY BE SUSTAINED. 8. WE HAVE HEARD THE CONTENTIONS OF BOTH THE SIDES AND HAVE PERUSED THE RELEVANT MATERIAL ON RECORD. THERE IS NO DISPUTE TO THE FACT THAT THE EXPENDITURE ON HORTICULTURE AND OTHER HEADS WAS INCURRED FOR THE PURPOSE OF BUSINESS. THE ASSESSEE HAS ALSO FURNISHED NECESSARY DETAILS PERTAINING TO SUCH EXPENSES INCUR RED. SIMILAR EXPENSES WERE ALSO ALLOWED BY THE DEPARTMENT IN THE LAST YEAR. THE ASSESSING OFFICER HAD DISALLOWED THE ENTIRE EXPENDI TURE ON HORTICULTURE AND OUT OF OTHER HEADS, I.E. BUSINESS PROMOTION, CO NSUMABLE STORES, MISCELLANEOUS EXPENSES AND REPAIRS & MAINTENANCE ON LY ON THE GROUND THAT THE EXPENDITURE INCURRED IN THE YEAR UNDER CON SIDERATION ARE ON THE HIGHER SIDE. CONSIDERING THE FACTS OF THE CASE, THE DISALLOWANCE OF ENTIRE EXPENDITURE UNDER THE HEAD HORTICULTURE EXPE NSES AND SUBSTANTIAL DISALLOWANCE OUT OF BUSINESS PROMOTION EXPENSES, CONSUMABLE STORES, MISCELLANEOUS EXPENSES, REPAIRS AND MAINTENANCE CANNOT BE SUSTAINED. THESE EXPENDITURE ARE NECESSA RY FOR RUNNING OF THE HOTEL/RESORT BEING RUN BY THE ASSESSEE. AT THE SAME TIME, THE ASSESSEE HAS NOT FURNISHED SATISFACTORY EXPLANATION FOR SUBSTANTIAL ITA-1914/DEL/2007 4 INCREASE IN THE EXPENDITURE UNDER THESE HEADS AND H AS ALSO NOT PRODUCED COMPLETE BILLS AND VOUCHERS SUPPORTING THE SE EXPENDITURE. CONSIDERING THE TOTALITY OF THE FACTS AND ARGUMENTS OF BOTH THE SIDES, IN OUR OPINION, IT WOULD MEET THE ENDS OF JUSTICE IF T HE DISALLOWANCE IS PARTLY SUSTAINED. ACCORDINGLY, WE SUSTAIN THE DISA LLOWANCE AS UNDER:- (I) ON ACCOUNT OF HORTICULTURE : ` 5,00,000/- (II) ON ACCOUNT OF BUSINESS PROMOTION : ` 1,50,000/- (III) ON ACCOUNT OF CONSUMABLE STORES : ` 1,50,000/- (IV) ON ACCOUNT OF MISCELLANEOUS EXPENSES : ` 50,000/- (V) ON ACCOUNT OF REPAIRS AND MAINTENANCE : ` 50,000/- 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. DECISION PRONOUNCED IN THE OPEN COURT ON 29 TH FEBRUARY, 2012. SD/- SD/- ( (( (A.D.JAIN A.D.JAIN A.D.JAIN A.D.JAIN) )) ) (G.D.AGRAWAL) (G.D.AGRAWAL) (G.D.AGRAWAL) (G.D.AGRAWAL) JUDICIAL JUDICIAL JUDICIAL JUDICIAL MEMBER MEMBER MEMBER MEMBER VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT DATED : 29.02.2012 VK. COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT ASSISTANT REGISTRAR