The Hindustan Times Ltd., New Delhi V. DCIT, New Delhi

ITA 1922/DEL/2010

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 7534 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 7 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-12-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 20-11-2014
• Assessment Year: 2003-2004
• Appeal Filed On: 28-04-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SATPAL SINGH
• Assessee Lawyers: SH IKSHA SHARMACA
• Keywords: Capital asset; Opportunity of being heard; Bad and doubtful debts; Revenue expenditure; Capital expenditure

Judgement Text

ITA NO.1922/DEL/2010 ASSTT.YEAR: 2003-04 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES C NEW DELHI BEFORE SHRI R.S. SYAL, ACCOUNTANT MEMBER AND SHRI CHANDRAMOHAN GARG, JUDICIAL MEMBER ITA NO. 1922/DEL/2010 ASSTT.YEAR: 2003-04 THE HINDUSTAN TIMES LTD., VS DCIT, 18-20, HT HOUSE, CIRCLE-16(1), KASTURBA GANDHI MARG, C.R. BUILDING, NEW DELHI. NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI GAURAV JAIN, ADV.& MS SH IKSHA SHARMA,CA RESPONDENT BY: SHRI SATPAL SINGH , SR. DR O R D E R PER CHANDRAMOHAN GARG, J.M. THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT(A)-XIX, NEW DELHI DATED 03.03.2010 IN APPEAL NO . 21/2006-07 FOR AY 2003-04. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS IN THIS APPEAL:- 1 (A) THAT ON THE FACTS, CIRCUMSTANCES AND LEGAL P OSITION OF THE CASE THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF ASSESSING OFFICER IN DISALLOWING THE EXPENSES OF RS. 270,79,740/- INCURRED IN CONNECTION WITH EXTENSION OF EXISTING BUSINESS AT GREATER NOIDA BY TREATING THE SAME AS C APITAL EXPENDITURE. (B) THAT ON THE FACTS, CIRCUMSTANCES AND LEGAL POSI TION OF THE CASE THE LEARNED CIT(A)HAS ERRED IN NOT APPRECIATIN G THE FACT THAT EXPENSE OF RS. 270,79,740/- (INCLUDING INTERES T EXPENSE OF RS. 254,22,653/-) INCURRED IN CONNECTION WITH EXTEN SION OF ITA NO.1922/DEL/2010 ASSTT.YEAR: 2003-04 2 BUSINESS WERE ALLOWABLE REVENUE EXPENDITURE UNDER S ECTION 37(1)/36(1 )(III) OF THE INCOME TAX ACT 1961. 2. THAT ON THE FACTS, CIRCUMSTANCES AND LEGAL POSIT ION OF THE CASE THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF RS.8,35,000/- BEING ADVANCES GIVEN DURING THE COURSE OF BUSINESS IN EARLIER YEARS, WRITTEN OFF D URING THE YEAR. 2. BRIEFLY STATED THE FACTS GIVING RISE TO THIS APP EAL ARE THAT THE ASSESSEE IS A PRINTER PUBLISHER OF NEWSPAPERS AND MAGAZINES. THE MAIN INCOME IS FROM ADVERTISEMENTS PUBLISHED IN NEWSPAPERS AND PERIODIC ALS AS WELL AS REVENUE FROM SALE OF PUBLICATIONS. DURING THE ASSESSMENT PROCEE DINGS, THE AO MADE CERTAIN ADDITIONS INCLUDING IMPUGNED TWO ADDITIONS PERTAINI NG TO DISALLOWANCE OF EXPENSES OF RS.27,079,740/- INCURRED BY THE ASSESSE E IN CONNECTION WITH EXTENSION OF EXISTING BUSINESS AT GREATER NOIDA WHI CH WAS TREATED BY THE AUTHORITIES BELOW AS CAPITAL EXPENDITURE. THE MAIN CONTENTION OF THE ASSESSEE WAS THAT THE ALLEGED EXPENDITURE WAS INCURRED IN CO NNECTION WITH EXTENSION OF EXISTING BUSINESS OF THE ASSESSEE AND THE SAME WAS ALLOWABLE AS REVENUE EXPENDITURE U/S 37(1)/36(1)(III) OF THE INCOME TAX ACT, 1961. THE AO ALSO MADE ANOTHER DISALLOWANCE AMOUNTING TO RS.8,35,000 BEING ADVANCES GIVEN DURING THE COURSE OF BUSINESS IN EARLIER YEARS AND WHICH WAS WRITTEN OFF DURING THE FINANCIAL YEAR UNDER CONSIDERATION. THE AO HE LD THAT SINCE THE AMOUNT WAS EITHER PAID TO ACQUIRE CAPITAL ASSET OR IN THE NATU RE OF ADVANCE, THEN IT CANNOT BE ALLOWED AS REVENUE EXPENDITURE. THE AO ALSO MADE D ISALLOWANCE AND ADDITIONS IN RESPECT TO LATE DEPOSIT OF EMPLOYER TOWARDS ESI AND PF AND IN REGARD TO ITA NO.1922/DEL/2010 ASSTT.YEAR: 2003-04 3 EARLIER YEARS EXPENSES AND PUBLICITY EXPENSES. BE ING AGGRIEVED BY THE ABOVE ASSESSMENT ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) WHICH WAS PARTLY ALLOWED GRANTING SOME RELIEF FOR THE ASSESSE E BUT PARTLY DISALLOWED ON THE ISSUE OF EXPENSES TREATED BY THE AO AS CAPITAL EXPE NDITURE AND ON THE ISSUE OF DISALLOWANCE OF BAD DEBTS. NOW, THE ASSESSEE HAS P REFERRED THIS SECOND APPEAL AGAINST THE IMPUGNED ORDER OF THE CIT(A) ON BOTH IS SUES WITH THE GROUNDS AS REPRODUCED HEREINABOVE. GROUND NO. 1(A) AND (B) OF THE ASSESSEE 3. APROPOS THESE GROUNDS, LD. COUNSEL OF THE ASSESS EE HAS DRAWN OUR ATTENTION TOWARDS PAPER BOOK PAGE NO. 12 TO 25 WHER EIN WE SEE COPY OF THE ORDER OF ITAT DELHI C BENCH IN ASSESSEES OWN CA SE FOR AY 2002-03 IN ITA NO. 613/DEL/2009 WHEREIN SIMILAR ISSUE HAS BEEN REM ITTED TO THE FILE OF AO FOR FRESH CONSIDERATION. LD. COUNSEL SUBMITTED THAT UN DER THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE AND LEGAL POSITIO N, THE CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF THE AO IN DISALLOWING THE EXPENSES OF RS. 270,79,740/- INCURRED IN CONNECTION WITH EXTENSION OF EXISTING B USINESS AT GREATER NOIDA BY TREATING THE SAME AS CAPITAL EXPENDITURE. LD. COUNS EL FURTHER CONTENDED THAT THE LEARNED CIT(A) HAS ERRED IN NOT APPRECIATING THE FA CT THAT EXPENSE OF RS. 270,79,740/- (INCLUDING INTEREST EXPENSE OF RS. 254 ,22,653/-) INCURRED IN CONNECTION WITH EXTENSION OF BUSINESS WERE ALLOWABL E REVENUE EXPENDITURE UNDER SECTION 37(1)/36(1 )(III) OF THE INCOME TAX A CT 1961. ITA NO.1922/DEL/2010 ASSTT.YEAR: 2003-04 4 4. REPLYING TO THE ABOVE, LD. DR HAS DRAWN OUR ATTE NTION TOWARDS PARA NO. 2.10 OF THE ORDER OF THE TRIBUNAL DATED 12.3.2010 I N ASSESSEES OWN CASE FOR AY 2002-03 (SUPRA) AND SUBMITTED THAT ADMITTEDLY, THE DETAILS SHOW ONLY EXPENDITURE ON ACQUISITION OF LAND AND BUILDING CON STRUCTION BUT THERE WAS NO FINDING BY THE TRIBUNAL REGARDING THE NATURE OF PUR CHASE BEING UNDERTAKEN BY THE ASSESSEE. LD. DR FURTHER SUBMITTED THAT WHEN A SSESSEE HAD ITSELF CAPITALISED BORROWING COST IN THE PRECEDING YEAR UPTO 12.12.200 1, THEN THE SUBSEQUENT BORROWING COST CANNOT BE HELD AS ALLOWABLE AS REVEN UE EXPENDITURE. LD. DR PARTED HIS ARGUMENT WITH A FINAL SUBMISSION THAT TH E DEPARTMENT HAS NO SERIOUS OBJECTION IF IT IS FOUND JUST AND PROPER TO REMIT T HE ISSUE TO THE FILE OF THE AO ON THE SIMILAR LINE WHICH WAS ADOPTED BY THE ITAT IN T HE ORDER FOR AY 2002-03 (SUPRA) ON THE SAME GROUND. 5. ON CAREFUL CONSIDERATION OF ABOVE SUBMISSIONS AN D CONTENTIONS OF BOTH THE SIDES, FROM PARA 12 AND 13 OF THE IMPUGNED ORDE R, WE OBSERVE THAT THE CIT(A) HAS DECIDED THE ISSUE ON SIMILAR LINE OF ADJ UDICATION FOR AY 2002-03 BY REITERATING ITS CONCLUSION FOR AY 2002-03 AGAINST T HE ASSESSEE. WE FURTHER NOTE THAT ON THE APPEAL FILED BY THE ASSESSEE, THE ITAT, DELHI C BENCH REMITTED THE ISSUE TO THE FILE OF AO WITH FOLLOWING OBSERVATIONS , FINDINGS AND CONCLUSION:- 2.7 WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS. AS PER THE FACTS OF THE CASE THE ASSESSEE IS ENGAGED I N NEWSPAPER PRINTING AND PUBLICATION BUSINESS. IT IS AN OWNER O F PRINTING PRESS AT KASTURBA GANDHI MARG, NEW DELHI. IT HAS EN GAGED INTO ACQUISITION OF LAND AND CONSTRUCTION OF BUILDI NG AT NOIDA ITA NO.1922/DEL/2010 ASSTT.YEAR: 2003-04 5 TO EXPAND ITS BUSINESS. AO OR THE LD. CIT(A) HAS NO T REFERRED TO THE NATURE EXPANSION OF THE BUSINESS. ASSESSEE HAS OBTAINED LOAN FOR THIS PROJECT AND HAD CAPITALIZED THE BORRO WING COST IN THE PREVIOUS YEAR WHICH WAS RS.2898602/- AND THE CU RRENT YEAR RS. 19398338/- UPTO 12.12.2001. THE ASSESSEE H AD INCURRED RS. 13231892/- MAINLY INTEREST EXPENDITURE OF RS. 12292275/- AFTER 12.12.2001 WHICH WAS CLAIMED AS RE VENUE EXPENDITURE ON THE GROUND THAT IT WAS IN ACCORDANCE WITH THE AS-16 OF THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA. IT IS FURTHER CLAIMED THAT SECTION 36(1)(III) MANDATES TH AT AMOUNT OF INTEREST PAID IN RESPECT OF CAPITAL BORROWED FOR TH E PURPOSE OF BUSINESS AS ALLOWABLE REVENUE EXPENDITURE. THE PROV ISO, HOWEVER, INSERTED ON 1.4.2004 MANDATES THAT INTERES T PAID IN RESPECT OF CAPITAL BORROWED FOR ACQUISITION OF AN ASSET FOR EXTENSION OF EXISTING BUSINESS SHOULD NOT BE ALLOWE D AS DEDUCTION FOR A PERIOD UPTO THE DATE ON WHICH THE A SSET WAS FIRST PUT TO USE. NOW IT IS A SETTLED THAT THIS PRO VISO IS NOT RETROSPECTIVE IN NATURE. AS-16 AS RELIED BY THE ASS ESSEE MANDATES VIDE PARA 6 AS UNDER:- 6. BORROWING COSTS THAT ARE DIRECTLY ATTRIBUTABLE TO THE ACQUISITION, CONSTRUCTION OR PRODUCTION OF A QUALIF YING ASSET SHOULD BE CAPITALIZED AS PART OF THE COST OF THAT A SSET. THE AMOUNT OF BORROWING COSTS ELIGIBLE FOR CAPITALIZATI ON SHOULD BE DETERMINED IN ACCORDANCE WITH THIS STANDARD. OTHER BORROWING COSTS SHOULD BE RECOGNIZED AS AN EXPENSE IN THE PERIOD IN WHICH THEY ARE INCURRED. 2.8 PARA 17 AND 18 OF THE AS-16 MANDATE AS UNDER:- SUSPENSION OF CAPITALIZATION 17. CAPITALIZATION OF BORROWING COSTS SHOULD BE SUS PENDED DURING PERIODS IN WHICH ACTIVE DEVELOPMENT IS INTER RUPTED. 18. BORROWING COSTS MAY BE INCURRED DURING AN EXTEN DED PERIOD IN WHICH THE ACTIVITIES NECESSARY TO PREPARE AN ASSET FOR ITS INTENDED USE OR SALE OR INTERRUPTED. SUCH COSTS ARE COSTS OF HOLDING PARTIALLY COMPLETED ASSETS AND DO NOT QUALI FY FOR CAPITALIZATION. HOWEVER, CAPITALIZATION OF BORROWIN G COSTS IS NOT NORMALLY SUSPENDED DURING A PERIOD WHEN SUBSTAN TIAL TECHNICAL AND ADMINISTRATIVE WORK IS BEING CARRIED OUT. CAPITALIZATION OF BORROWING COSTS IS ALSO NOT SUSPE NDED WHEN A TEMPORARY DELAY IS A NECESSARY PART OF THE PROCES S OF GETTING AN ASSET FOR ITS INTENDED USE OR SALE. FOR EXAMPLE, ITA NO.1922/DEL/2010 ASSTT.YEAR: 2003-04 6 CAPITALIZATION CONTINUES DURING THE EXTENDED PERIOD NEEDED FOR INVENTORIES TO MATURE OR THE EXTENDED PERIOD DURING WHICH HIGH WATER LEVELS DELAY CONSTRUCTION OF A BRIDGE, I F SUCH HIGH WATER LEVELS ARE COMMON DURING THE CONSTRUCTION PER IOD IN THE GEOGRAPHIC REGION INVOLVED. 2.9 NOW THE ASSESSEES CLAIM IS THAT AFTER 12.12.20 01 THE ASSESSEE HAS SUSPENDED THE WORK ON THE NEW PROJECT AND AS IT IS MANDATE OF AS-6 DURING THE PERIOD IN WHICH THE PROJECT IS SUSPENDED, THE BORROWING COST SHOULD NOT BE CAPITAL IZED. HENCE THE INFERENCE IS THAT IT SHOULD BE RECOGNIZED AS AN EXPENSE IN THE PERIOD THEY ARE INCURRED. NOW TO CON SIDER AS TO WHETHER AS-16 IS APPLICABLE OR NOT, IT IS RELEVANT TO FIND OUT AS TO WHETHER THE PRESENT CASE FALLS UNDER THE SUSPENS ION OF CAPITALIZATION. IT HAS BEEN SUBMITTED THAT BEFORE U S THAT THIS PROJECT WAS NOT REVIVED BY THE ASSESSEE AND THE SAM E WAS ULTIMATELY SOLD TO HT MEDIA LTD. IN JULY, 2003. HOW EVER LD. COUNSEL OF THE ASSESSEE CLAIMED THAT THE PROJECT WA S REVIVED BY THE PURCHASING COMPANY. NOW WE DEAL WITH THE CASE L AWS SUBMITTED BY THE LD. COUNSEL OF THE ASSESSEE: - 60 ITR 52 (SC) INDIA CEMENT LTD. VS. CIT. THE ISS UE WAS ALLOWABILITY OF RS. 84633/- INCURRED ON STAMPS, REG ISTRATION FEE, LEGAL FEE ETC. IN OBTAINING THE LOAN. IN THIS CASE IT WAS HELD THAT :- A) LOAN OBTAINED WAS NOT AN ASSET OR ADVANCE OF AN ENDURING NATURE (B) EXPENDITURE WAS MADE FOR EXECUTING THE USE OF M ONEY FOR THE CERTAIN PERIOD AND (C) IT WAS IRRELEVANT TO CON SIDER THE OBJECT WITH WHICH THE LOAN WAS OBTAINED. CONSEQUENT LY, IN THE CIRCUMSTANCES OF THE CASE THE EXPENDITURE WAS REVEN UE EXPENDITURE WITHIN SECTION 10(2)(XV). - 220 ITR 185 IN THE CASE OF VEECUMSEES VS. CIT. HO NBLE APEX COURT HAS HELD THAT THE TRIBUNAL HAS GIVEN A F INDING THAT BUSINESS CARRIED ON BY THE ASSESSEE AS JEWELLER AND BUSINESS OF RUNNING CINEMA THEATRE WAS COMPOSITE, INTEREST O N SUCH LOAN HAD TO BE TREATED AS DEDUCTION UNDER SECTION 3 6(1)(III) EVEN AFTER THE BUSINESS OF RUNNING OF THEATRE HAD B EEN CLOSED. - 200 ITR 345 CIT VS. MODI INDUSTRIES. THE HONBL E HIGH COURT HELD THAT WHEN TRIBUNAL HAD HELD THAT THE MAN AGEMENT OF NEW BUSINESS AND EARLIER BUSINESS WAS SAME AND T HERE WAS ITA NO.1922/DEL/2010 ASSTT.YEAR: 2003-04 7 UNITY OF CONTROL OF COMMON FUND, THE TRIBUNAL WAS J USTIFIED IN HOLDING THAT BUSINESS OF MANUFACTURE OF MS SPECIAL ALLOY WIRES AND BILLETS WAS EXPANSION OF BUSINESS AND NOT A NEW BUSINESS AND AS SUCH THE EXPENDITURE INCURRED BY AS SESSEE FOR RAISING LOANS BY ISSUE OF DEBENTURES WAS ALLOWABLE AS DEDUCTION. - 221 CTR 226 CIT VS. MONNET INDUSTRIES LTD. IN THIS CASE THE HONBLE DELHI HIGH COURT HELD THAT THE TRIBUNAL HAS FOUND THAT THERE WAS A COMMON BOARD OF DIRECTORS CONTROLL ING BOTH PLANTS. THAT FUNDS FOR TWO PLANTS WERE COMMON AND H ENCE THERE WAS INTERMINGLING AND INTERLACING OF FUNDS AN D THAT EVEN THOUGH TWO DIVISIONS WERE GEOGRAPHICALLY LOCATED AT DIFFERENT SITES, MARKETING OF THE FINAL PRODUCTS WAS CARRIED OUT UNDER THE SUPERVISION AND CONTROL OF THE SAME SET OF EXECUTIV ES. THE TRIBUNAL WAS JUSTIFIED IN HOLDING THAT SUGAR PLAN W AS MERE EXTENSION OF EXISTING BUSINESS OF FERRO ALLOYS PLAN T AND THEREFORE INTEREST PAID ON FUNDS BORROWED FOR THE P URPOSE OF SETTING UP OF SUGAR PLAN WAS ALLOWABLE UNDER SECTIO N 36(1)(III). 2.10 NOW ON THE ANALYSIS OF THE ABOVE CASE LAWS SHO W THAT IF IT IS EXPANSION OF THE SAME LINE OF BUSINESS, THE EXPE NSE INCURRED ON OBTAINING THE BORROWED FUNDS SHOULD BE ALLOWED A S REVENUE EXPENDITURE. WE FIND THAT IN THE PRESENT CASE THERE WAS NO FINDING REGARDING THE NATURE OF THE PROJECT BEING U NDERTAKEN AT NOIDA. ADMITTEDLY, THE DETAIL SHOWS ONLY EXPENDITUR E ON ACQUISITION OF LAND AND BUILDING CONSTRUCTION. IN S UCH CIRCUMSTANCES, IT IS NOT POSSIBLE ON OUR PART TO GI VE A FINDING REGARDING THE NATURE OF THE SAID PROJECT WHETHER TH E SAME WAS A NEW BUSINESS ALTOGETHER OR THE EXPANSION OF THE E XISTING PROJECT. MOREOVER THIS LINE OF ARGUMENT WAS NEVER M ADE BY THE ASSESSEE BEFORE THE LOWER AUTHORITIES. ASSESSEE HAD ITSELF CAPITALIZED THE BORROWING COST IN THE PRECEDING AS WELL AS CURRENT YEAR AND ONLY AFTER 12.12.2001 WHEN THE PRO JECT WAS DEFERRED/SUSPENDED, THAT THE ASSESSEE HAS CLAIMED T HE BORROWING COST TO BE ALLOWABLE AS REVENUE EXPENSES AS PER THE AS-16 OF THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA. THE RELIANCE UPON A.S. 16 BY THE ASSESSEE IS ON THE PRE MISE THAT THE CASE COMES UNDER SUSPENSION OF CAPITALIZATION. TH IS ASPECT ALSO NEEDS EXAMINATION OF FACTS. THESE FACTS HAVE N OT BEEN EXAMINED BY THE AUTHORITIES BELOW. THE RELEVANT MAT ERIAL IS ALSO NOT ON RECORD BEFORE US. IT IS PARADOXICAL THA T THIS NEW ITA NO.1922/DEL/2010 ASSTT.YEAR: 2003-04 8 CLAIM OF THE ASSESSEE THAT THE ENTIRE EXPENDITURE O F INTEREST COST SHOULD BE ALLOWED AS IT IS EXPANSION OF THE NE W LINE OF BUSINESS IS NOT FULLY IN CONSONANCE TO THE AS-16 WH ICH MANDATES CAPITALIZATION OF BORROWING COST TILL THE ASSET IS PUT TO USE. IN FACT ASSESSEE HAD CAPITALIZED THESE EXPE NDITURES UPTO THE DATE OF DEFERRAL OF THE PROJECT IN THE PRESENT AS WELL AS IN THE PRECEDING ASSESSMENT YEAR. HENCE, IN OUR CONSID ERED OPINION, IT WOULD BE APPROPRIATE, IF THE PRESENT IS SUE REGARDING FINDING OUT AS TO WHETHER THE NOIDA PROJECT WAS A N EW PROJECT OR THE EXPANSION OF THE EXISTING BUSINESS IS REMITT ED TO THE FILES OF THE AO TO GIVE A FINDING THEREON, AFTER GIVING T HE ASSESSEE ADEQUATE OPPORTUNITY OF BEING HEARD. ACCORDINGLY, T HE ISSUE STANDS REMITTED TO THE FILES OF AO, TO CONSIDER THE CASE IN ACCORDANCE WITH THE DIRECTIONS AS ABOVE AND IN ACCO RDANCE WITH LAW. 6. WE FURTHER OBSERVE THAT THE ITAT IN PARA 3.3 HAS ALSO RESTORED THE ISSUE OF ALLOWABILITY OF INTEREST EXPENDITURE TO THE FILE OF AO AS THE ISSUE WAS FOUND TO BE INTERLINKED WITH THE ADJUDICATION OF ISSUE RAISE D IN GROUND NO. 1 OF THAT APPEAL WHICH IS SIMILAR TO GROUND NO. 1(A) OF THE P RESENT APPEAL. UNDER THESE FACTS AND CIRCUMSTANCES, WE ARE OF THE CONSIDERED O PINION THAT SINCE THERE IS NO FINDING OF THE AUTHORITIES BELOW REGARDING NATURE O F THE PROJECT BEING UNDERTAKEN BY THE ASSESSEE AT GREATER NOIDA, THEREFORE, THE IS SUE OF SUSPENSION OF CAPITALISATION ALSO NEEDS EXAMINATION OF FACTS AT T HE END OF AO. HENCE, IN OUR CONSIDERED OPINION, WE FIND IT PROPER TO RESTORE TH E ISSUE TO THE FILE OF AO WITH A DIRECTION THAT THE AO SHALL DECIDE THE ISSUE AFRESH AFTER AFFORDING DUE OPPORTUNITY OF HEARING FOR THE ASSESSEE AND WITHOUT BEING PREJUDICED BY THE EARLIER ASSESSMENT AND IMPUGNED ORDERS OF THE CIT(A ) IN ACCORDANCE WITH RELEVANT PROVISIONS OF THE ACT. ACCORDINGLY, GROUN D NO. 1(A) AND (B) OF THE ITA NO.1922/DEL/2010 ASSTT.YEAR: 2003-04 9 ASSESSEE ARE RESTORED TO THE FILE OF AO WITH THE DI RECTIONS AS MENTIONED HEREINABOVE AND DEEMED TO BE TREATED AS ALLOWED FOR STATISTICAL PURPOSES. GROUND NO.2 7. APROPOS GROUND NO.2 OF THE ASSESSEE, LD. COUNSEL HAS DRAWN OUR ATTENTION TOWARDS PAGE NO. 10 & 11 OF THE PAPER BOOK AND SUBM ITTED THAT THE CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF RS.8,35,000 /- BEING ADVANCES GIVEN DURING THE COURSE OF BUSINESS IN EARLIER YEARS WHIC H WERE WRITTEN OFF AS BAD DEBTS DURING THE FINANCIAL YEAR UNDER CONSIDERATION , THEREFORE, THE AO WAS WRONG IN DISALLOWING THE SAME AND THE CIT(A) CONFIR MED THE IMPUGNED ADDITION WITHOUT ANY JUSTIFIED AND COGENT BASIS. 8. REPLYING TO THE ABOVE, LD. DR POINTED OUT THAT A DMITTEDLY THE AMOUNTS WERE ADVANCED FOR PURCHASE OF CAPITAL ASSETS, THERE FORE, IN THE LIGHT OF DECISION OF ITAT DELHI IN THE CASE OF TULIP STAR HOTELS LTD. VS. ADDITIONAL COMMISSIONER OF INCOME TAX 114 ITD 202(D EL) , THOSE ADVANCES GIVEN FOR PURCHASE OF CAPITAL ASSETS ARE NOT ALLOWABLE AS BAD DEBTS/BUSINESS LOSS. 9. ON CAREFUL CONSIDERATION OF ABOVE RIVAL SUBMISSI ONS, WE NOTE THAT THE CIT(A) DECIDED THE ISSUE AGAINST THE ASSESSEE WITH FOLLOWING CONCLUSION:- 29. ADMITTEDLY THE AMOUNTS WERE ADVANCED FOR PURCHASE OF CAPITAL ASSETS. IN THE CASE OF TULIP ST AR HOTELS LTD. VS. ADDL. CIT 114 ITD 202(DEL), IT WAS HELD THOSE A DVANCES ITA NO.1922/DEL/2010 ASSTT.YEAR: 2003-04 10 GIVEN FOR PURCHASE OF CAPITAL ASSETS NOT ALLOWABLE AS BUSINESS LOSS. THE HON'BLE ITAT OBSERVED AS UNDER AT PAGE 22 4. '35. NOW, WE WILL TAKE UP THE REMAINING ISSUE IN RE GARD TO BAD DEBTS OF RS. 27.89 LAKHS RAISED THROUGH GRO UND NO. 2. 36. THE ASSESSING OFFICER DISALLOWED THE CLAIM OF T HE ASSESSEE BY HOLDING THAT THE ADVANCES WERE FOR ACQU IRING CAPITAL ASSETS. THE CIT(A) ALSO CONFIRMED THE ACTIO N OF THE ASSESSING OFFICER. 37. THE ID. AUTHORISED REPRESENTATIVE WHO APPEARED BEFORE THE TRIBUNAL COULD NOT CONTROVERT THE FINDIN GS OF THE ID. ASSESSING OFFICER AND LD. CIT(A) THAT THE AMOUNT SO ADVANCED WAS FOR ACQUIRING CAPITAL ASSETS. THE CIT(A) HAS TA KEN INTO CONSIDERATION THE DECISION OF THE HON'BLE MADRAS HI GH COURT IN THE CASE OF SEMBI TRADERS (SUPRA) AND IN THE CAS E OF HASIMARA INDUSTRIES LTD. (SUPRA), WHEREIN IT HAS BE EN HELD THAT THE MONEY ADVANCED FOR ACQUIRING CAPITAL ASSET S CANNOT BE ALLOWED AS BUSINESS LOSS. 38. THE ID. COUNSEL OF THE ASSESSEE COULD NOT CONTROVERT THIS FINDINGS OF THE ID. CIT(A) AS HE SI MPLY PLACED RELIANCE ON THE DECISION IN CIT VS ANJANI KUMAR CO. LTD (2003) 259 ITR 114 '(RAJ.). THE DECISION RELIED UPO N BY THE LD. AUTHORISED REPRESENTATIVE IS ON SOME DIFFERENT FACT S, THEREFORE, WE ARE NOT INCLINED TO INTERFERE WITH THE FINDINGS OF THE LD. CIT(A) TO THIS EXTENT. ACCORDINGLY, THE DISALLOWANC E OF RS. 27.89 LAKHS IS CONFIRMED.' ACCORDINGLY, THE CLAIM' OF THE ASSESSEE IS NOT ALLO WABLE. GROUND NO. 7 IS DISMISSED. 10. ON CAREFUL PERUSAL OF PAGE 10 AND 11 OF THE PAP ER BOOK OF THE ASSESSEE, WE OBSERVE THAT A PROPOSAL OF RECONFIGURATION OF IT SET UP FOR THE ASSESSEE COMPANY HAS BEEN PUT UP BY SHRI ABIR BASAK TO MR. D INESH CHANDNA WITH A BOTTOM LINE THAT THE COMMERCIAL TERM FOR THE SAME H AS BEEN NEGOTIATED TO RS. 5 LACS WITH M/S IBM GLOBAL SERVICES. FROM THE DETAIL S GIVEN IN THE IMPUGNED ORDER IN PARA 27, WE OBSERVE THAT THE ASSESSEE HAS CLAIMED BAD DEBTS OF RS. 5 ITA NO.1922/DEL/2010 ASSTT.YEAR: 2003-04 11 LAKH PAID TO M/S TRIVOLI MANAGEMENT, RS. 1,25,000 T O M/S IBM GLOBAL SERVICES AND RS. 2,10,000 TO M/S IBM GLOBAL SERVICES & EXCEL COMPUTER TOTALLING TO RS. 8,35,000/-. ON SPECIFIC QUERY FROM THE BENCH, LD.AR HAS NOT CONTRADICTED THE FACT THAT THE AMOUNTS WERE ADVANCED FOR THE PUR CHASE OF CAPITAL ASSETS. FROM PAGE NO. 11 OF THE PAPER BOOK, WE ALSO OBSERVE THAT AS PER SCOPE OF WORK, CERTAIN DEVICES, SYSTEMS WERE PROPOSED TO BE INSTAL LED FOR THE PURPOSE OF RECONFIGURATION OF IT SET UP OF THE ASSESSEE. IN T HIS SITUATION, IT CAN SAFELY BE PRESUMED THAT THE AMOUNTS WERE ADVANCED FOR PURCHAS E OF CAPITAL ASSETS AND AS PER RATIO OF THE DECISION OF THE COORDINATE BENCH O F ITAT DELHI IN THE CASE OF TULIP STAR HOTELS LTD. (SUPRA), ADVANCE GIVEN FOR P URCHASE OF CAPITAL ASSETS ARE NOT ALLOWABLE AS BAD DEBTS/BUSINESS LOSS. THUS, WE ARE IN AGREEMENT WITH THE CONCLUSION OF THE AUTHORITIES BELOW AND WE ARE UNAB LE TO SEE ANY AMBIGUITY, PERVERSITY OR ANY OTHER VALID REASON TO INTERFERE W ITH THE CONCLUSION OF THE AO AND THE CIT(A). ACCORDINGLY, GROUND NO. 2 OF THE A SSESSEE BEING DEVOID OF MERITS IS DISMISSED. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE ON GR OUND NO. 1(A) AND (B) IS PARTLY ALLOWED FOR STATISTICAL PURPOSES AND PARTLY DISMISSED ON GROUND NO.2 AS STATED ABOVE. ITA NO.1922/DEL/2010 ASSTT.YEAR: 2003-04 12 ORDER PRONOUNCED IN THE OPEN COURT ON 22.12.2014. SD/- SD/- (R.S.SYAL) (CHANDRAMOHAN GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER DT. 22ND DECEMBER, 2014 GS COPY FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. C.I.T.(A) 4. C.I.T. 5. DR BY ORDER AS STT. REGISTRAR