DCIT, New Delhi V. M/s. C.J. International Hotels Ltd., New Delhi

ITA 218/DEL/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 6904 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-02-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 20-01-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 11-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUNIL CHANDER SHARMA
• Assessee Lawyers: SYALI SENIOR
• Keywords: Reopening of assessment; Depreciation; Business expenditure; Rule of consistency; Earning of tax free income; Question of law; Difference of opinion; Change of opinion; Reassessment proceedings
• Section: 143(3); 244A; 234B; 14A; 37(1); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH B : NEW DELHI) BEFORE SHRI A.T. VARKEY, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO.771/DEL./2012 (ASSESSMENT YEAR : 2003-04) ITA NO.787/DEL./2012 (ASSESSMENT YEAR : 2008-09) ITA NO.386/DEL./2013 (ASSESSMENT YEAR : 2009-10) M/S. C.J. INTERNATIONAL HOTELS LTD., VS. DCIT, CIR CLE 3 (1), HOTEL LE MERIDIAN, NEW DELHI. 8, WINDSOR PLACE, JANPATH, NEW DELHI. (PAN : AAACC0174E) ITA NO.1107/DEL./2012 (ASSESSMENT YEAR : 2008-09) ITA NO.218/DEL./2013 (ASSESSMENT YEAR : 2009-10) DCIT, CIRCLE 3 (1), VS. M/S. C.J. INTERNATIONAL HOTELS LTD., NEW DELHI. HOTEL LE MERIDIAN, 8, WINDSOR PLACE, JANPATH, NEW DELHI. (PAN : AAACC0174E) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI M.S. SYALI, SENIOR ADVOCATE AND SHRI TARANDEEP SINGH, ADVOCATE REVENUE BY : SHRI SUNIL CHANDER SHARMA, CIT DR O R D E R PER A.T. VARKEY, JUDICIAL MEMBER : 2 ITA NO.771, 787 & 1107/DEL./2012 ITA NO.218 & 386/DEL./2013 THESE CROSS APPEALS FILED BY THE ASSESSEE AND THE R EVENUE AGAINST THE ORDER PASSED BY THE CIT (APPEALS)-VIII, NEW DELHI DATED 2 0.12.2011 FOR AY 2008-09 AND BY THE CIT (APPEALS)-VI, NEW DELHI 18.10.2012 FOR A Y 2009-10. FOR ASSESSMENT YEAR 2003-04, ONLY THE ASSESSEE HAS PREFERRED AN AP PEAL AGAINST THE ORDER OF CIT(APPEALS)-VIII, NEW DELHI DATED 21.12.2011. ALL THE FIVE APPEALS WERE HEARD TOGETHER BY US. SINCE ISSUES INVOLVED ARE COMMON PA RTIES APPEARING BEFORE US ADMITTED THAT APPEALS FOR A.Y. 2008-09 BE TAKEN AS THE LEAD CASE. 2. FOR ASSESSMENT YEAR 2008-09, ASSESSEE HAS FILED AN APPEAL IN ITA NO.787/DEL/2012 WHEREAS THE REVENUE HAS FILED AN AP PEAL IN ITA NO.1107/DEL/2012. WE SHALL FIRST TAKE UP FOR CONSIDERATION APPEAL FIL ED BY THE REVENUE. THE GROUNDS OF APPEALS ARE AS FOLLOWS :- 1. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN DELETING OF RS.6,96,49,795/- ON ACCOUNT OF NOTIONAL INCOME FROM HOUSE PROPERTY. 2. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN DELETING DISALLOWANCE OF RS.7,33,602/- ON ACCOUNT OF INTEREST ON LOAN AND AD VANCES. 3. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN DELETING ADDITION OF RS.27,768/- ON ACCOUNT OF EXTRA DEPRECIATION CLAIME D ON COMPUTER PERIPHERALS. 4. THE APPELLANT CRAVES LEAVE FOR RESERVING THE RIG HT TO AMEND, MODIFY, ALTER, ADD OR FOREGO ANY GROUND(S) OF APPEAL AT ANY TIME B EFORE OR DURING THE HEARING OF THIS APPEAL. 3. IN GROUND NO. 1 REVENUE IS AGGRIEVED BY THE ACTI ON OF LD. CIT(A) IN DELETING THE ADDITION OF RS.6,96,49,795/- MADE BY THE AO ON ACCOUNT OF NOTIONAL INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY. THIS I SSUE IS DISCUSSED AT LENGTH BY THE AO AT PAGES 1-8 OF THE ASSESSMENT ORDER. IT IS OBSERVED BY THE LD. AO AT PAGE 6 OF HIS ORDER THAT IDENTICAL ADDITION WAS MADE BY TH E TAX DEPARTMENT IN ASSESSEES OWN 3 ITA NO.771, 787 & 1107/DEL./2012 ITA NO.218 & 386/DEL./2013 CASE FOR A.Y. 2001-02 TO A.Y. 2003-04. LD. CIT(A) O N THE OTHER HAND NOTES THAT THE SIMILAR ADDITION MADE BY THE AO IN CASE OF ASSESSEE FOR EARLIER ASSESSMENT YEARS HAS BEEN DELETED BY TRIBUNAL VIDE ORDER DATED 24 TH JULY, 2007 WHICH HAS SUBSEQUENTLY BEEN UPHELD BY THE JURISDICTIONAL HIGH COURT VIDE O RDER DATED 18 TH NOVEMBER, 2010. THE ADDITION HAS BEEN DELETED BY THE LD. CIT(A) FOL LOWING ORDERS PASSED BY JURISDICTIONAL HIGH COURT IN ASSESSEES OWN CASE. D URING THE COURSE OF HEARING BEFORE US LD. CIT(DR) STATED THAT SINCE THE TAX DEPARTMENT HAS PREFERRED AN SLP BEFORE HONBLE APEX COURT AGAINST HIGH COURT ORDER DATED 1 8 TH NOVEMBER 2010 ADDITIONS ARE BEING MADE BY THE LD. AO IN ASSESSMENTS FOR SUB SEQUENT YEARS IN ORDER TO KEEP THE MATTER ALIVE. ON THE OTHER HAND LD. AR FOR THE ASSESSEE INVITED OUR ATTENTION TO ORDER PASSED BY TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2001-02 IN ITA NOS.1519 & 1698/DEL/2005 ORDER DATED 24 TH JULY, 2007 COPY OF WHICH IS ENCLOSED AT PAGES 175 TO 199 OF THE PAPER BOOK WHEREIN THIS ADDITION HAS BEEN DELETED BY THE TRIBUNAL. LD. AR ALSO INVITED OUR ATTENTION TO PAGES 200-203 OF T HE PAPER BOOK WHEREIN THE JURISDICTIONAL HIGH COURT VIDE ORDER REPORTED IN 19 7 TAXMANN 230 (DEL) HAS UPHELD THE ORDER OF TRIBUNAL DELETING THE ADDITION. IT IS ADMITTED BEFORE US THAT FACT AND CIRCUMSTANCES OF THE ISSUE INVOLVED IS IDENTICAL TO EARLIER YEARS. A PERUSAL OF ORDER PASSED BY THE JURISDICTIONAL HIGH COURT REVELS THAT THE NOTIONAL ADDITION HAS BEEN DELETED BY THEIR LORDSHIPS OBSERVING AS UNDER :- 4. WITH THE CONSENT OF THE LEARNED COUNSEL FOR THE PARTIES, WE HAVE HEARD THE MATTER FINALLY AT THIS STAGE ITSELF. THE FACTS IN B RIEF LEADING TO THE AFORESAID QUESTION OF LAW MAY BE RECAPITULATED FIRST. THE ASSESSEE-COM PANY IS RUNNING A FIVE STAR HOTEL KNOWN AS HOTEL LE-MERIDIAN WINDSOR PLACE, NEW DELHI . THE LAWN ON WHICH THE 4 ITA NO.771, 787 & 1107/DEL./2012 ITA NO.218 & 386/DEL./2013 HOTEL IS CONSTRUCTED BELONGS TO NDMC AND NDMC HAS E XECUTED A LICENSE DEED IN FAVOUR OF THE ASSESSEE GRANTING LICENCE FOR A PERIO D OF 99 YEARS FOR THE RUNNING OF THE AFORESAID HOTEL. AFTER TAKING THE SAID LAWN ON LICENCE ON THE TERMS EXECUTED IN THE LICENCE DEED, THE ASSESSEE HAD CONSTRUCTED THE SAID HOTEL. ADJACENT TO THE HOTEL, THERE IS ANOTHER BUILDING CONSTRUCTED ON THIS VERY LAWN, WHICH IS KNOWN AS WEST TOWER. THIS BUILDING IS LOCATED IN THE SAME COMPOUN D IN WHICH THE HOTEL BUILDING IS LOCATED. ADMITTEDLY, THIS BUILDING IS NOT USED F OR HOTEL BUSINESS OF THE ASSESSEE, BUT THE APARTMENTS OF THIS BUILDING WERE GIVEN ON S UB-LICENCE BASIS TO DIFFERENT PARTIES FOR CARRYING ON BUSINESS AS SPECIFIED ON TH E SUB-LICENCE AGREEMENTS. THE LICENCE AGREEMENT WHICH WAS ENTERED INTO BETWEEN TH E ASSESSEE AND THE NDMC PERMITS THE ASSESSEE TO SUB-LICENCE THE PORTION OF THE PREMISES. IT IS ON THE BASIS OF THIS AUTHORIZATION GIVEN IN THE LICENCE DEED THAT T HE ASSESSEE HAS SUB-LICENCED OFFICES AND APARTMENTS IN THE WEST TOWER TO THE VAR IOUS PARTIES. THE SUB-LICENCES GIVEN TO THESE PARTIES ARE FOR A PERIOD OF 9 YEARS AND 11 MONTHS, WHICH IS RENEWABLE AT THE REQUEST FOR THE SUB-LICENSEES. THE ASSESSEE IS NOT CHARGING ANY RENT LEASE OR LICENCE FEE FROM THESE PARTIES INSTEAD, THE ASSESSE E HAS RECEIVED INTEREST FREE SECURITY DEPOSITS IN THE YEAR OF ORIGINAL SUB-LICEN CE, WHICH RECEIPT WAS SHOWN BY THE ASSESSEE-COMPANY AS UNSECURED LOAN IN ITS BALAN CE SHEET. THE SUB-LICENCE DEEDS, WHICH ARE EXECUTED BY THE ASSESSEE WITH THE SUB-LICENSEES ALSO PERMIT THE SUB-LICENSEES TO TRANSFER THE SAME TO ANY OTHER PER SON ON PAYMENT OF TRANSFER CHARGES TO THE ASSESSEE-COMPANY. THUS, THE SUB-LICE NSEE IS ENTITLED TO TRANSFER THE SAID SUB-LICENCE TO THIRD PARTY AS WELL. HOWEVER, A T THE TIME OF TRANSFER OF THE SAID SUB-LICENCE, CERTAIN TRANSFER CHARGES ARE PAYABLE T O THE ASSESSEE-COMPANY. IT IS NOT IN DISPUTE THAT WHENEVER THESE TRANSFER CHARGES ARE RECEIVED BY THE ASSESSEE ON TRANSFER OF SUB-LICENCE BY THE SUB-LICENSEE IN FAVO UR OF THE THIRD PARTY, THE ASSESSEE IS SHOWING THESE TRANSFER CHARGES AS ITS INCOME AND IS OFFERING THE SAME FOR TAX. 5. THE ASSESSING OFFICER (AO) FOUND THAT ALMOST ALL THE SUB-LICENSEES HAD TRANSFERRED THEIR SUB-LICENSES AND VARIOUS OTHER PE RSONS WERE, THUS, OCCUPYING THESE PREMISES. THOSE PERSONS HAVE ENTERED INTO THE AGREE MENT WITH THE SUB-LICENSEES AS PER WHICH THEY WERE PAYING RENTS TO THE SUB-LICENSE ES. IT IS ALSO AN ADMITTED FACT THAT THE RENTS/LICENCE FEES RECEIVED BY THE SUB-LIC ENSEES ON THESE TRANSFERS TO THE OCCUPIERS HAS BEEN SHOWN AS RENTAL INCOME AND TAXED AT THE HANDS OF SUB-LICENSEES UNDER THE HEAD INCOME FROM HOUSE PROPERTY. 6. THE ASSESSING OFFICER, HOWEVER, ASKED THE ASSESS EE TO EXPLAIN WHY PROPERTY KNOWN AS WEST TOWER BE NOT FIXED ON ITS ANNUAL LETT ING VALUE AS PER WHICH SECTION 23 OF THE INCOME-TAX ACT (HEREINAFTER REFERRED TO A S THE ACT). TO PUT IT OTHERWISE, THE ASSESSING OFFICER WANTED TO FIX ANNUAL LETTING VALUE IN RESPECT OF THE SAID WEST TOWER SUB-LICENSED BY THE ASSESSEE BY FIXING ITS NO TIONAL VALUE AND CHARGING THE TAX THEREUPON UNDER THE HEAD INCOME FROM HOUSE PROPERT Y. IT IS FOR THIS REASON THAT THE AFORESAID SHOW- CAUSE NOTICE WAS ISSUED. THE AS SESSEE IN REPLY TO THE SAID NOTICE RAISED VARIOUS OBJECTIONS TO THE AFORESAID PROPOSED MOVE OF THE ASSESSING OFFICER. SOME OF THESE OBJECTIONS INCLUDED: (A) THE ASSESSEE WAS ONLY A LICENSEE IN RESPECT OF THE AFORESAID PREMISES AND THE ACTUAL OWNER WAS NDMC. THUS, THE ASSESSEE WAS N OT THE OWNER OF THE PREMISES. THEREFORE, PROVISIONS OF SECTION 23 OF TH E ACT ARE NOT APPLICABLE. (B) IT WAS ALSO HIGHLIGHTED THAT IN THE PREVIOUS YE ARS, THE AFORESAID ARRANGEMENT AS DISCLOSED BY THE ASSESSEE WAS ACCEPTED BY THE AS SESSING OFFICER AND THEREFORE, 5 ITA NO.771, 787 & 1107/DEL./2012 ITA NO.218 & 386/DEL./2013 ON THE PRINCIPLE OF CONSISTENCY, SUCH A MOVE ON THE PART OF THE ASSESSING OFFICER IN FIXING THE ANNUAL LETTING VALUE OF THE WEST TOWER, WHEN NO ACTUAL RENT/LICENCE FEE WAS RECEIVED BY THE ASSESSEE, WAS NOT PROPER. (C) THE ASSESSEE HAD ENTERED INTO SUB-LICENCE DEEDS IN RESPECT OF THOSE PORTIONS AND IT COULD NOT BE DEEMED AS LETTING OF THE PROP ERTY AND FOR THIS REASON ALSO PROVISIONS OF SECTION 22 OF THE ACT WOULD NOT BE AP PLICABLE, AS THE ASSESSEE CONTINUED TO BE IN THE LEGAL OCCUPATION AND POSSESS ION. (D) THE USE OF THE PREMISES BY THE SUB-LICENSEES WA S TO ASSIST THE ASSESSEE- COMPANY IN GETTING HOTEL ACCOMMODATION BOOKED FOR T HE GUESTS, DELEGATES OF THE SUB-LICENSEES, APART FROM THE INCREASE IN CATERING AND RESTAURANTS ACTIVITIES USED BY THE SUB-LICENSEES. THEREFORE, THE USE OF CERTAIN PO RTION BY THE SUB-LICENSEES WAS NOT FOR THE PURPOSE OF OR FOR THE BENEFIT OF THE BUSINE SS OF THE ASSESSEE-COMPANY. 7. THE ASSESSING OFFICER, HOWEVER, DID NOT ACCEPT T HE AFORESAID EXPLANATION FURNISHED BY THE ASSESSEE. HE WAS OF THE VIEW THAT THE LICENSE AGREEMENT WITH THE NDMC WAS FOR A PERIOD OF 99 YEARS WITH THE RIGHT OF CONSTRUCTING AND DEVELOPING THE PROPERTY WHICH MAKES THE ASSESSEE-COMPANY OWNER OF THE PROPERTY. HE ALSO OPINED THAT THE ASSESSEE-COMPANY HAD SUB-LICENSED T HE OFFICES AND APARTMENTS TO VARIOUS PERSONS, SOME OF WHOM HAD FURTHER SUB-LICEN SED THE SAME; THE ASSESSEE WAS NOT CHARGING ANY RENT, FEES ETC. ON THE SUB-LICENSI NG OF THESE PROPERTIES, EXCEPT INTEREST FREE SECURITY DEPOSITS WHICH WERE TAKEN BY THE ASSESSEE AT THE TIME OF SUB- LICENCE AGREEMENT. THEREFORE, IT WAS PROPER, IN SUC H CIRCUMSTANCES, TO FIX NOTIONAL ANNUAL LETTING VALUE OF THE PREMISES AND TO CHARGE TAX THEREUPON INSOFAR AS THE ASSESSEE IS CONCERNED. 8. WE MAY ALSO POINT OUT THAT IN ITA NO. 1254 OF 20 10, WHICH PERTAINS TO THE ASSESSMENT YEAR 1999-2000 ORIGINALLY NO SUCH ADDITI ON WAS MADE. HOWEVER, REASSESSMENT PROCEEDINGS WERE STARTED BY ISSUANCE O F NOTICE UNDER SECTION 143(2) READ WITH SECTION 147 OF THE ACT AND THE TRIBUNAL Q UASHED THOSE REASSESSMENT PROCEEDINGS. IT IS NOT NECESSARY TO GO INTO THE QUE STION AS TO WHETHER REASSESSMENT PROCEEDINGS WERE INITIATED OR NOT INASMUCH AS ON ME RIT ITSELF WE HAVE DECIDED THAT SUCH AN ADDITION WAS NOT PROPER. 9. THE ASSESSING OFFICER THEREAFTER TOOK INTO CONSI DERATION THE RENT/LICENCE FEE, WHICH WAS PAID BY THE OCCUPIERS TO THE SUB-LICENSEE S TO WHOM THE ASSESSEE HAD SUB- LICENSED THE PREMISES. THE ASSESSING OFFICER ON THA T BASIS CALCULATED FIRST CARE FEE AVERAGE AND TREATED THE SAME AS ANNUAL LETTING VALU E OF THE SAID WEST TOWER AND ADDED THE SAME UNDER THE HEAD 'INCOME FROM HOUSE PR OPERTY'. 10. THE ASSESSEE PREFERRED APPEAL AGAINST THIS ORDE R BEFORE THE CIT(A). IN THIS APPEAL, THE ASSESSEE TOOK AN ADDITIONAL GROUND PRED ICATED ON THE PROVISIONS OF SECTION 27(III) READ WITH SECTION 269UA(F)( II) OF THE ACT AND SUBMITTED THAT UNDER THOSE PROVISIONS, IT WOULD BE A SUB-LICENSEE AS DEE MED OWNER WOULD BE CHARGED TO TAX IN HIS HANDS. THE CIT(A) CONSIDERED THIS ARGUME NT, WHICH WAS PURELY A LEGAL ARGUMENT BASED ON THE INTERPRETATION OF THE AFORESA ID SECTIONS ON ADMITTED FACTS ON RECORD, BUT DID NOT ACCEPT THE AFORESAID PLEADING. AFTER CONSIDERING OTHER SUBMISSIONS OF THE APPELLANT, WHICH WERE RAISED BEF ORE THE ASSESSING OFFICER, THE CIT(A) UPHELD THE ORDER OF THE ASSESSING OFFICER ON THIS GROUND. IN THIS SCENARIO, THE ASSESSEE PREFERRED FURTHER APPEAL BEFORE THE IN COME-TAX APPELLATE TRIBUNAL (HEREINAFTER REFERRED TO AS THE TRIBUNAL). THIS T IME, BEFORE THE TRIBUNAL, THE ASSESSEE SUCCEEDED IN ITS ATTEMPT TO DEMONSTRATE TH AT THE ASSESSEE COULD NOT BE 6 ITA NO.771, 787 & 1107/DEL./2012 ITA NO.218 & 386/DEL./2013 LIABLE TO PAY ANY SUCH TAX FIXING LETTING VALUE ON NOTIONAL BASIS WHEN, IN FACT, NO SUCH AMOUNT OF RENT/LICENCE FEE WAS RECEIVED BY THE ASSESSEE. THE TRIBUNAL EXAMINED THE LICENCE AGREEMENT ENTERED INTO BETWEEN THE NDMC AND THE ASSESSEE ON THE BASIS OF WHICH IT HAS COME TO THE CONCLUSION THAT IT IS THE NDMC, WHICH IS THE 'OWNER OF THE PREMISES AND REMAINS TO BE THE OW NER OF THE PREMISES IN QUESTION'. THE TRIBUNAL HAS FURTHER ACCEPTED THE SU BMISSIONS OF THE ASSESSEE THAT IN VIEW OF THE PROVISIONS OF SECTION 27(III) OF THE AC T, IT IS THE SUB-LICENSEE WHO WOULD BE 'DEEMED OWNER' OF THOSE PREMISES WHICH THE SUB-L ICENSEES WHEREOF TRANSFERRED TO THE PRESENT OCCUPIERS AND THOSE OCCUPIERS ARE PA YING RENT/LICENCE FEE TO THE SUB- LICENSEES. ON THAT BASIS, THE TRIBUNAL HAS SET ASID E THE ADDITION MADE BY THE ASSESSING OFFICER AND DELETED THIS COMPONENT OF INC OME HOLDING THAT THE SAME WOULD NOT BE CHARGEABLE TO TAX. 11. THIS IS HOW THE DEPARTMENT HAS FILED THE APPEAL S PERTAINING TO DIFFERENT ASSESSMENT YEARS. AS POINTED OUT ABOVE, THOUGH THE ISSUES BEFORE THE ASSESSING OFFICER, CIT(A) AS WELL AS THE TRIBUNAL WERE NUMERO US, IN THESE APPEALS PRIMARILY ONE QUESTION OF LAW WHICH IS FORMULATED AND REPRODU CED ABOVE HAS BEEN PRESSED BY THE DEPARTMENT. 12. FOR THE AFORESAID REASONS, WE ARE OF THE VIEW T HAT THE APPROACH OF THE TRIBUNAL IN DECIDING THE AFORESAID ISSUE IS PERFECT LY JUSTIFIED. THERE IS NO REASON TO INTERFERE WITH THE SAME. WE CLARIFY THAT THE ASSESS EE WOULD NOT BE ENTITLED TO DEPRECIATION ON THIS PURPOSE. WE, THUS, ANSWER THE QUESTION OF LAW IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE, AS A RESULT THERE OF ALL THESE APPEALS ARE DISMISSED. RESPECTFULLY FOLLOWING THE DECISION OF JURISDICTION AL HIGH COURT ABOVE GROUND NO.1 OF THE REVENUE APPEAL IS DISMISSED. 4. IN GROUND NO. 2 REVENUE IS AGGRIEVED BY THE ACTI ON OF LD. CIT(A) IN DELETING DISALLOWANCE OF RS.7,33,602/- OUT OF INTEREST EXPEN DITURE CLAIMED BY THE ASSESSEE. THE SAID ADDITION WAS MADE BY THE AO BY OBSERVING A S UNDER :- THE ASSESSEE COMPANY CHARGED INTEREST @ 8% PER ANN UM FROM M/S PURE DRINKS LTD. WHEREAS IT HAS PAID INTEREST TO BANKS AT 12%. COST OF INTEREST ON THESE ADVANCES TO M/S PURE DRINKS LTD. HAS BEEN BORNE BY THE ASSES SEE COMPANY WHICH HAS RESULTED INTO EXCESS EXPENSE AND THE REDUCTION OF P ROFIT OF THE ASSESSEE COMPANY. THE INTEREST PAID DURING THE YEAR TO THE BANKS AS P ER THE SUBMISSIONS GIVEN BY THE ASSESSEE COMPANY IS RS.7,33,602/-. THEREFORE, THE I NTEREST PAID TO BANK AMOUNTING TO RS.7,33,602/- IS BEING DISALLOWED AND ADDED TO T HE TOTAL INCOME OF THE ASSESSEE. BEING AGGRIEVED BY THE AFORESAID DISALLOWANCE ASSES SEE FILED AN APPEAL BEFORE LD. CIT(A). DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE CIT(A) ASSESSEE 7 ITA NO.771, 787 & 1107/DEL./2012 ITA NO.218 & 386/DEL./2013 SUBMITTED DETAILS OF FINANCE CHARGES DEBITED TO THE PROFIT & LOSS ACCOUNT. IT WAS CLAIMED BY THE ASSESSEE THAT DURING THE YEAR UNDER CONSIDERATION NO INTEREST COST WAS DEBITED AS EXPENDITURE IN THE PROFIT & LOSS ACCOUNT AND HENCE THERE WAS NO SUCH CLAIM MADE IN THE RETURN OF INCOME. CONSIDERING THE SUBMISSIONS MADE BEFORE HIM LD. CIT(A) HAS HELD AS UNDER :- ON A CAREFUL CONSIDERATION, I FIND THAT DURING THE FY RELEVANT TO THE AY UNDER CONSIDERATION, THE APPELLANT COMPANY HAS NOT PAID A NY INTEREST TO THE BANKS AS STATED BY THE LD. AO. THE FINANCE CHARGES OF RS.7,3 3,602/- DEBITED TO THE PROFIT & LOSS A/C PERTAINS TO VARIOUS SERVICES EXTENDED BY T HE BANKERS TO THE APPELLANT COMPANY. IN SUCH CIRCUMSTANCES, NO DISALLOWANCE ON ACCOUNT OF ADVANCES MADE TO M/S PURE DRINKS LTD. WAS LIABLE TO BE MADE. ACCORDI NGLY, THE DISALLOWANCE OF RS.7,33,602/- IS BEING DELETED. DURING THE COURSE OF HEARING BEFORE US LD. CIT (DR) WAS UNABLE TO REBUT THE ABOVE FACTUAL FINDING OF LD. CIT(A). PER CONTRARY LD. AR SUPPORTED THE FINDING OF CIT(A) BEFORE US. AFTER CAREFUL CONSIDERATION OF THE ISSUE WE DO NOT FIND ANY INFIRMITY IN THE VIEW ADOPTED BY CIT(A) AND HENCE THE SAME IS UPHELD GROUND NO.2 OF THE REVENUE APPEAL IS THEREFORE DISMISSED. 5. IN GROUND NO.3 THE REVENUE IS AGGRIEVED BY THE A CTION OF LD. CIT(A) IN DELETING AN ADDITION OF RS.27,768/- ON ACCOUNT OF E XTRA DEPRECIATION CLAIMED ON COMPUTER PERIPHERALS. CASE RECORDS SHOW THAT DURING THE YEAR UNDER CONSIDERATION ASSESSEE HAS CLAIMED DEPRECIATION ON COMPUTER PERIP HERALS AT THE RATE OF 60%, HOWEVER, THIS WAS RESTRICTED BY THE LD. AO TO THE R ATE OF 15%. LD. CIT(A) HAS DELETED THE DISALLOWANCE BY FOLLOWING THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF BSES YAMUNA POWER LTD. REPORTED IN 358 ITR 47 (DEL). DURING THE 8 ITA NO.771, 787 & 1107/DEL./2012 ITA NO.218 & 386/DEL./2013 COURSE OF HEARING LD. AR INVITED OUR ATTENTION TOWA RDS A RECENT PRONOUNCEMENT OF DELHI HIGH COURT IN THE CASE OF ORIENT CERAMICS AND INDUSTRIES REPORTED IN 200 TAXMANN 64 (DEL) WHEREIN, THE DELHI HIGH COURT HAS REITERATED THE EARLIER VIEW IN CASE OF BSES YAMUNA (SUPRA). AFTER CAREFUL CONSIDER ATION OF THE CASE RECORDS WE FIND NO REASON NOT TO UPHOLD THE VIEW TAKEN BY CIT( A) BY FOLLOWING DECISION OF JURISDICTIONAL HIGH COURT NOTED ABOVE. AS SUCH GROU ND NO.3 OF REVENUE APPEAL IS ALSO DISMISSED. 6. AS A RESULT, REVENUE APPEAL IN ITA NO.1107/DEL/2 012 IS DISMISSED. 7. WE SHALL NOW TAKE UP FOR CONSIDERATION APPEAL FI LED BY ASSESSEE IN ITA NO.787/DEL/2012. IN ITS APPEAL THE ASSESSEE HAS RAI SED FOLLOWING GROUNDS: 1. THAT ON FACTS AND IN LAW THE ORDERS PASSED BY C OMMISSIONER OF INCOME TAX (APPEALS) {HEREINAFTER REFERRED TO AS THE CIT(A)} AND THE DEPUTY COMMISSIONER OF INCOME TAX {HEREINAFTER REFERRED TO AS AO} ARE VOID AND BAD IN LAW. 2. THAT ON FACTS AND IN LAW, THE AO / CIT(A) ERRED IN MAKING/UPHOLDING THE DISALLOWANCE OF RS.9,43,232/- U/S 14A OF THE ACT R/ 2 RULE 8D OF THE INCOME TAX RULES, 1962. 2.1 THAT ON FACTS AND IN LAW, THE AO / CIT(A) ERRED IN ASSUMING JURISDICTION U/S 14A R/W RULE 8D(2) WITHOUT FULFILLING THE JURISDICT IONAL PRECONDITIONS OF RESORTING THERETO. 3. THAT ON FACTS AND IN LAW, THE AO / CIT(A) ERRED IN MAKING/UPHOLDING THE DISALLOWANCE OF LICENSE FEE OF RS.12,00,00,000/- PA ID TO NDMC DURING THE YEAR UNDER CONSIDERATION. 3.1 THAT ON FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW, THE AO / CIT(A) ERRED IN NOT CONSIDERING THE FACT THAT PAYMENT OF L ICENSE FEE OF RS.12,00,00,000/- TO NMDC, IN EARLIER YEARS, HAS BEEN DISALLOWED BY THE AO HIMSELF. 4. THAT ON FACTS AND IN LAW, THE AO / CIT(A) ERRED IN CHARGING / UPHOLDING THE CHARGE OF INTEREST U/S 234B & 234D OF THE INCOME TA X ACT, 1961. 8. GROUND NO.1 IS GENERAL AND DOES NOT REQUIRE A SP ECIFIC ADJUDICATION. 9 ITA NO.771, 787 & 1107/DEL./2012 ITA NO.218 & 386/DEL./2013 9. IN GROUND NOS. 2 & 2.1 THE ASSESSEE IS AGGRIEVED BY THE ACTION OF LD. CIT(A) IN UPHOLDING DISALLOWANCE OF RS. 9,43,232/- MADE BY THE LD. AO INVOKING PROVISIONS OF SECTION 14A OF THE INCOME TAX ACT READ WITH RULE 8D OF THE INCOME TAX RULES. CASE RECORDS REVEAL THAT DURING THE YEAR UNDER CONS IDERATION ASSESSEE HAS EARNED DIVIDEND INCOME OF RS.1,44,95,247/-. IN THE RETURN OF INCOME NO DISALLOWANCE U/S 14A OF THE ACT WAS MADE BY THE ASSESSEE. HOWEVER, T HE LD. AO IN HIS ORDER OF ASSESSMENT COMPUTED THE SAID DISALLOWANCE AS PER PR OVISION OF RULE 8D AT RS.9,43,232/-. LD. CIT(A) HAS ALSO CONFIRMED THE SA ME. DURING THE COURSE OF HEARING BEFORE US THE MAIN CONTENTION OF LD. AR WAS THAT TH E ASSESSING OFFICER DID NOT RECORD A DISSATISFACTION OVER THE CLAIM MADE BY THE ASSESSEE THAT IT HAD NOT INCURRED ANY EXPENDITURE FOR THE PURPOSE OF EARNING EXEMPT I NCOME. IT WAS SUBMITTED THAT RECORDING OF SATISFACTION HAVING REGARD TO BOOKS OF ACCOUNT WAS A JURISDICTIONAL PRE- REQUISITE BEFORE INVOKING PROVISION OF RULE 8D. IN SUPPORT OF HIS PROPOSITION THE LD. AR PLACED RELIANCE ON THE DECISION RENDERED BY HON BLE DELHI HIGH COURT IN THE CASE OF CIT VS. TAIKISHA ENGINEERING INDIA LTD. REPORTED IN 370 ITR 338 (DEL). WE PRINCIPALLY AGREE WITH THE SAID CONTENTION OF THE A SSESSEE. THE AO SHOULD HAVE FIRST EXAMINED THE BOOKS OF ACCOUNTS OF THE ASSESSEE AND ONLY THEREAFTER IF HE WAS NOT SATISFIED WITH THE CLAIMED BY THE ASSESSEE THAT IT HAD NOT INCURRED ANY EXPENDITURE FOR THE PURPOSE OF ANY EXEMPT INCOME THAT HE COULD HAVE INVOKED PROVISIONS OF RULE 8D. IN THE INSTANT CASE LD. AO HAS FAILED TO ADOPT THIS MANDATORY PROCEDURE. IT IS ALSO SEEN THAT EVEN THE ASSESSEE HAS NOT BEEN ABLE TO SU BSTANTIATE ITS CLAIM BEFORE THE LOWER 10 ITA NO.771, 787 & 1107/DEL./2012 ITA NO.218 & 386/DEL./2013 AUTHORITY. IN OUR CONSIDERED OPINION THIS ISSUE REQ UIRES FRESH EXAMINATION AT THE END OF THE AO. ACCORDINGLY WE SET ASIDE THE ORDER OF LD . CIT(A) ON THIS ISSUE AND DIRECT THE AO TO EXAMINE THIS ISSUE AFRESH IN LIGHT OF DIS CUSSIONS MADE SUPRA. 10. IN GROUNDS NOS.3 AND 3.1 THE ASSESSE IS AGGRIEV ED BY THE ACTION OF LOWER AUTHORITIES IN MAKING A DISALLOWANCE OF RS 12,00,00 ,000/- ON ACCOUNT OF LICENSE FEES PAID BY THE ASSESSE TO NEW DELHI MUNICIPAL CORPORAT ION (NDMC). FACTS IN BRIEF IN THIS REGARD ARE THAT IN YEAR 1982, A PLOT OF LAND O N WHICH THE HOTEL LE MERIDIAN IS RUNNING WAS LICENSED BY NDMC TO THE ASSESSEE FOR 99 YEARS. ASSESSEE IN RETURN WAS REQUIRED TO PAY LICENSE FEES TO NDMC AS PER LICENSE DEED EXECUTED BETWEEN THE PARTIES ON 14 TH JULY 1982. AS PER CLAUSE 3 OF THE SAID LICENSE DEE D THE ASSESSEE WAS REQUIRED TO PAY AN ANNUAL LICENSE FEE WHICH WAS TO BE CALCULATED AT 21% OF ITS GROSS TURNOVER AS CERTIFIED BY THE STATUTORY AUDITORS PER FINANCIAL YEAR WITH A MINIMUM ANNUAL GUARANTEE OF RS. 2.68 CRORES. THEREAFTER A D ISPUTE AROSE BETWEEN THE PARTIES ON THE QUANTIFICATION OF LICENSE FEE PAYABLE BY THE AS SESSEE TO NDMC AS PER LICENSE AGREEMENT. ON THIS ISSUE DURING THE COURSE OF ASSES SMENT YEAR UNDER CONSIDERATION LITIGATION WAS PENDING FINAL ADJUDICATION BEFORE TH E HONBLE DELHI HIGH COURT. PENDING FINAL ADJUDICATION OF THIS CIVIL SUIT, THE HONBLE DELHI HIGH COURT VIDE AN INTERIM ORDER DATED 6 TH FEBRUARY, 2002 DIRECTED THE ASSESSEE TO MAKE PAYME NT OF RS. 1 CRORE PER MONTH TO NDMC PENDING FINAL ADJUDICATION OF CIVIL SUIT. IN THIS ORDER, IT WAS HELD BY THE HONBLE HIGH COURT AS UNDER: 11 ITA NO.771, 787 & 1107/DEL./2012 ITA NO.218 & 386/DEL./2013 MR CHANDHIOK, SR COUNSEL FOR THE APPELLANTS SAYS T HAT HE WILL PAY RS.75 LAKHS PER MONTH FROM FEBRUARY 2002 AND IF THE APPEAL IS NOT H EARD TILL THE NEXT DATE OF HEARING THEN HE WILL PAY RS 1 CRORE PER MONTH FROM AUGUST 2002. LIST THE MATTER ON 8 TH APRIL, 2002 IN THE CATEGORY OF AFTER NOTICE MISCE LLANEOUS MATTERS. TILL THE NEXT DATE OF HEARING OPERATION OF THE JUDG MENT IS STAYED. IF THE AMOUNT AS STATED BY SR COUNSEL FOR THE APPEL LANT BODY IS NOT PAID MONTH BY MONTH THEN THIS APPEAL SHALL BE DEEMED TO HAVE BEEN DISMISSED 11. PREMISED ABOVE DIRECTIONS ISSUED BY DELHI HIGH COURT ASSESSE CLAIMED AS DEDUCTION U/S 37(1) OF THE ACT THE AMOUNT OF LICENS E FEE OF RS 12 CRORES PAID BY IT TO NDMC DURING THE YEAR UNDER CONSIDERATION. THE LD AO HOWEVER WAS UNIMPRESSED WITH THE CLAIM MADE. LD AO WAS OF THE VIEW THAT THE AMOUNT PAID TO NDMC CONSTITUTED A CONTINGENT LIABILITY AND THEREFORE HE DISALLOWED THE SAME. IN THIS REGARD IT IS HELD BY THE LD AO IN HIS ORDER OF ASSESSMENT AS UNDER: DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE H AD DEBITED AN AMOUNT OF RS.12,00,00,000/- IN THE P & L ACCOUNT TOWARDS LICE NSE FEES PAID TO NDMC. AS PER SCHEDULE 14 NOTE 2(IV) OF NOTES TO ACCOUNTS THE ABOVE PAYMENT HAS BEEN CLASSIFIED AS CONTINGENT LIABILITY WHICH IS AN UNAS CERTAINED LIABILITY. IT CANNOT BE ACCEPTABLE THAT ON ONE HAND A LIABILITY IS SHOWN AS CONTINGENT LIABILITY AND ON THE OTHER IT IS CLAIMED AS AN ASCERTAINED LIABILITY WIT HOUT SUFFICIENT MATERIAL EVIDENCE IN SUPPORT OF SUCH A CLAIM. FURTHER IT HAS BEEN HELD I N FOLLOWING CASE LAWS THAT :- LAW IN WELL SETTLED THAT EXPENDITURE WHICH IS DEDU CTIBLE FOR INCOME TAX PURPOSE IS TOWARDS A LIABILITY ACTUALLY EXISTING IN THE YEAR OF ACCOUNT. CONTINGENT LIABILITIES DO NOT CONSTITUTE EXPENDITUR E AND CANNOT BE THE SUBJECT MATTER OF DEDUCTION EVEN UNDER THE MERCANTILE SYSTEM OF AC COUNTING. THE INCOME TAX LAW MAKES A DISTINCTION BETWEEN THE ACTUAL LIABILITY IN PRAESENTI AND A LIABILITY DE FUTURE WHICH, FOR THE TIME BEING, IS ONLY CONTINGENT. THE FORMER IS DEDUCTIBLE BUT NOT THE LATTER. INDIAN MOLASSES CO. PVT. LTD. VS. CIT (1959) 37 IT R 66 (SC) SEE : STANDARD MILLS CO. LTD. VS. CIT (1998) 2290 ITR 36 6 (BOM). 12 ITA NO.771, 787 & 1107/DEL./2012 ITA NO.218 & 386/DEL./2013 EXPENDITURE WHICH IS DEDUCTIBLE FOR INCOME TAX PUR POSES IS ONE WHICH IS TOWARDS A LIABILITY ACTUALLY EXISTING AT THE TIME; BUT PUTTIN G ASIDE OF MONEY WHICH MAY BECOME EXPENDITURE ON THE HAPPENING OF AN EVENT IS NOT EXPENDITURE. WHERE THE LIABILITY ITSELF IS CONTINGENT, AS CONTRASTED FROM PAYMENT BEING CONTINGENT, THERE CAN BE NO DEDUCTION. CIT VS. MOTOR INDUSTRIES CO. LTD. (1998) 229 ITR 1 37 (KAR). SALE OF COMMODITY: PROVISION FOR WARRANTY CHARGES . NO EVIDENCE OF ACTUAL EXPENDITURE IN PRIOR YEARS. THE ASSESSEE MADE A PROVISION AS REGARDS WARRANTY C HARGES PAYABLE UNDER THE TERMS OF SALE. IT WAS STATED THAT SUCH A PROVISION WAS MA DE IN THE ACCOUNTS TO MEET FUTURE REQUIREMENTS ARISING ON ACCOUNT OF THE WARRANTY CLA USE IN THE SALE OF AGREEMENT. IT WAS ADMITTED BY THE ASSESSEE THAT THE WARRANTY P ROVISION MADE AS AGAINST THE LIABILITY HAD NOT CRYSTALIZED AGAINST THE ASSESSEE. CONSEQUENTLY, HOLDING THE PROVISION AN UNASCERTAINE D LIABILITY, THE ASSESSING AUTHORITY REJECTED THE PLEA OF THE ASSESSEE. THE TRIBUNAL ALLOWED THE DEDUCTION. THE ASSESSEE COULD NOT PROVE THE ACTUAL INCURRENCE OF LIABILITY UNDER THE WARRANTY CLAUSE ON THE BASIS OF FIXING A PERCENTAGE ON THE T URNOVER. IN THE ABSENCE OF ANY DETAILS, ACCEPTING THE CLAIM OF PERCENTAGE ON THE TURNOVER COULD NOT BE SUSTAINED. PROVISION FOR WARRANTY CHARGES WAS HELD NOT DEDUCTI BLE. CIT VS. TOTORK CONTROLS INDIA LTD. (2007) 293 ITR 3 11 (MAD) THUS IT IS CLEAR THAT THE CLAIM OF THE ASSESSEE WIT H REGARDS PAYMENT TO NDMC IS IN THE NATURE OF CONTINGENT LIABILITY AND HENCE NOT AL LOWABLE UNDER THE ACT AND IS ADDED BACK TO THE INCOME OF THE ASSESSEE. 12. BEING AGGRIEVED THE ASSESSE PREFERRED AN APPEAL TO LD CIT(A). LD CIT(A) WAS OF THE VIEW THAT LICENSE DEED DATED 14 TH JULY 1982 WAS NOT IN FORCE DURING THE COURSE OF YEAR UNDER CONSIDERATION AND HENCE HE UPHELD THE DISALLOWANCE MADE BY THE LD AO. IN SUPPORT OF HIS CONCLUSIONS LD CIT(A) HAS EXT RACTED AND FORCEFULLY RELIED UPON SHOW CAUSE NOTICE DATED 12 TH NOVEMBER 1999 ISSUED BY NDMC TO THE ASSESSEE. CONCLUSIONS RECORDED BY LD CIT(A) ARE AS UNDER: 5.4 THUS, IT MAY BE SEEN THAT AS PER THE SHOW CAUS E NOTICE ISSUED BY THE NDMC ON 12.11.1999, THERE IS NO VALID AGREEMENT BETWEEN THE NDMC AND THE ASSESSEE 13 ITA NO.771, 787 & 1107/DEL./2012 ITA NO.218 & 386/DEL./2013 COMPANY. THEREFORE, IN THE ABSENCE OF ANY TERMS OF PAYMENT OF LICENSE FEE, IT IS NOT UNDERSTOOD AS TO HOW THE APPELLANT CLAIMS THAT THE LIABILITY OF RS.12 CRORES WAS A PRESENT, ASCERTAINED AND QUANTIFIED LIABILITY. FURT HER, EVEN THE STATUTORY AUDITORS HAVE FOUND IT APPROPRIATE TO QUALIFY THEIR AUDIT RE PORT AND THIS IS WHY THEY HAVE NOTED THAT THE PAYMENT OF RS.12 CRORES IS ONLY A CO NTINGENT LIABILITY. THEREFORE, IN THE PRESENT CIRCUMSTANCES THE CLAIM OF RS.12 CRORES MAY BE AT BEST TERMED AS A PROVISION TOWARDS PAYMENT OF LICENSE FEE TILL THE I SSUE IS FINALLY ADJUDICATED UPON BY THE HONBLE HIGH COURT. NOW COMING TO THE DIRECTIONS OF THE HONBLE HIGH CO URT WHICH HAVE BEEN HEAVILY RELIED UPON BY THE LD. COUNSEL FOR THE APPELLANT. O N A CAREFUL CONSIDERATION, I FIND THAT THE HONBLE COURT HAS NOT ISSUED ANY DIRECTION S AS SUCH. A PERUSAL OF THE ORDER DATED 06.02.2002 SUGGEST THAT IT WAS A SUO-MOTTO OF FER BY MR. A.S. CHANDHIOK, SENIOR COUNSEL FOR THE APPELLANT TO PAY RS.1 CRORE PER MONTH FROM AUGUST, 2002. THE HONBLE COURT HAS NOT COMMENTED ANYTHING ABOUT THE MERITS OF THIS OFFER AND THEY HAVE SIMPLY LISTED THE MATTER FOR HEARING ON 8 TH APRIL, 2002 IN THE CATEGORY OF AFTER NOTICED MISCELLANEOUS MATTERS. THEREFORE, I AM NOT IN AGREEMENT WITH THE LD. COUNSEL FOR THE APPELLANT THAT THE PAYMENT OF RS.12 CRORES WAS MADE IN TERMS OF THE COURT DIRECTIONS. 5.5 IN VIEW OF THE AFORESAID FACTS AND HAVING REGAR D TO THE FACT NARRATED IN THE SHOW CAUSE ISSUED BY THE NDMC ON 12.11.1999 THAT TH ERE HAS BEEN NO AGREEMENT EXECUTED BETWEEN THE ASSESSEE COMPANY AND THE NDMC AFTER 31.03.1998, I HAVE NO HESITATION IN HOLDING THAT THE PAYMENT OF RS.12 CRO RES BY THE APPELLANT COMPANY TO THE NDMC WAS ONLY A PAYMENT MADE ON ADHOC BASIS WIT HOUT THERE BEING ANY ASCERTAINMENT OF THE ACTUAL LIABILITY. I ALSO HOLD THAT THE PAYMENT WAS NEITHER IN TERMS OF ANY AGREEMENT NOR THE SAME WAS MADE IN TER MS OF ANY BINDING DIRECTIONS ISSUED BY THE HONBLE DELHI HIGH COURT. ACCORDINGLY , THE DISALLOWANCE MADE BY THE AO IS BEING SUSTAINED. 13. BEING FURTHER AGGRIEVED THE ASSESSEE IS NOW IN APPEAL BEFORE US. DURING THE COURSE OF HEARING BEFORE US SENIOR COUNSEL SHRI M.S SYALI SUBMITTED THAT BOTH THE LOWER AUTHORITIES HAVE NOT PROPERLY APPRECIATED THE FACTUAL POSITION OF THE CASE. AT THE OUTSET IT WAS SUBMITTED BY THE LD SENIOR COUNSEL TH AT CIT(A) AFTER BRIEFLY NARRATING THE PRELIMINARY FACTS RELATING TO DISPUTE REGARDING QUANTIFICATION OF LICENSE FEE AT PAGES 9 AND 10 OF HIS ORDER HAS THEN STOPPED SHORT AT THE STAGE OF ISSUE OF SHOW CAUSE NOTICE DATED 12 TH NOVEMBER 1999 BY NDMC. IT WAS HIS CLAIM THAT LD CI T(A) HAS OMITTED TO TAKE INTO CONSIDERATION THE EVENTS WHICH TRANSPIRED THEREAFTER. LD SENIOR COUNSEL REFERRED BEFORE US INTERIM ORDER DATED 18 TH MAY 2001 PASSED BY DELHI HIGH 14 ITA NO.771, 787 & 1107/DEL./2012 ITA NO.218 & 386/DEL./2013 COURT IN THE MAIN CIVIL SUIT I.E IA NO. 3075/2000 I N SUIT NO. 610/2000 TO NEGATE SUPPOSITION OF CIT(A) THAT LICENSE DEED DATED 14 TH JULY 1982 WAS NOT IN FORCE DURING THE COURSE OF YEAR UNDER CONSIDERATION. IT WAS SUBM ITTED BY HIM THAT BEING AGGRIEVED BY THE SHOW CAUSE NOTICE DATED 12 TH NOVEMBER 1999 THE ASSESSE FILED A CIVIL SUIT BEFORE DELHI HIGH COURT WHICH VIDE INTERIM ORDER DA TED 18 TH MAY 2001 REFRAINED NDMC FROM INTERFERING WITH RIGHTS OF ASSESSE TO USE THE LAND FOR RUNNING A HOTEL SUBJECT TO ASSESSE PAYING NDMC LICENSE FEE AS PER T HE FORMULAE LAID DOWN BY THE LD SINGLE JUDGE IN THAT ORDER. IN THE WRITTEN SYNOPSIS SUMMARIZED DATES CHART OF THE LITIGATION WAS SUBMITTED BEFORE US AS UNDER: DATE PARTICULARS HONBLE DELHI HIGH COURT VIDE ORDER DATED 18.05.2001 (PAGES 58 TO 94 OF PB) 14-07-1982 LICENSE DEED EXECUTED BETWEEN NDMC AND A 58, LAST PARA 07-12-1989 NOTICE WAS SENT BY NDMC TO MAKE PAYMENT OF THE ARREARS OF LICENSE FEE AMOUNTING TO RS. 6,84,091,331.89 AND TO SHOW CAUSE WHY ALLOTMENT OF LAND BE NOT CANCELLED. 59, MIDDLE 06-03-1990 NDMC CALLED UPON THE PLAINTIFFS TO STOP THE USE OF THE PLOT OF LAND AND HAND OVER VACANT POSSESSION AND FURTHER PA Y THE AMOUNT OF MORE THAN RS.13 CRORES BEING THE ARREARS OF LICE NSE FEE. 59, LAST 7 LINES 16-10-1990 UPON THE AFORESAID THREATS BEING GIVEN, THE PLAINTIFFS FILED A SUIT BEING SUIT NO. 1193/90 UNDER SECTION 20 OF THE ARBI TRATION ACT, 1940 FOR APPOINTMENT OF AN ARBITRATOR. THIS SUIT FO R AN AD-INTERIM INJUNCTION WAS DISMISSED. 60, TOP PARA 11-03-1991 AN APPEAL WAS PREFERRED AGAINST THE JUDG MENT DATED 16-10-1990 AND DURING THE PENDENCY OF THIS APPEAL, AN OUT OF C OURT SETTLEMENT WAS ARRIVED AT BETWEEN THE PARTIES WHICH RESULTED IN THE EXECUTION OF A SUPPLEMENTARY AGREEMENT INSTAL LMENTS 62, LAST PARA 15 ITA NO.771, 787 & 1107/DEL./2012 ITA NO.218 & 386/DEL./2013 AGREED UPON 04-08-1995 & 31-03- 1998 TWO FURTHER SUPPLEMENTARY AGREEMENTS EXECUTED BETWE EN PARTIES. AMOUNT OF INSTALLMENTS AGREED UPON VIDE SU PPLEMENTARY AGREEMENT DATED 11-03-1991 INCREASED. 64, 2 ND PARA TOP - IN BETWEEN REPRESENTATIONS WERE MADE BY A WITH NDMC TO RECONSIDER AMOUNT OF LICENSE FEE AS THE AMOUNT BEIN G CHARGED FROM A WAS MUCH MORE THAN WHAT WAS BEING CHARGED FROM OTHER HOTELS. IN THIS DURATION A ADHERED TO 1991 AGREEMENT. IT WAS CLAIMED BY A THAT ALL DUES TOWARDS LICENSE FE E HAD BEEN PAID UPTO THE YEAR 2003. 64, LAST PARA 65, TOP PARA 28-06-1999 NDMC SENT A SHOW CAUSE NOTICE TO THE PLA INTIFFS CALLING UPON THEM TO DEPOSIT RS.109,82,16,368/- ALREADY DUE TO T HE NDMC UPTO 30 TH JUNE 1999. 65, MIDDLE 12-11-1999 ANOTHER SHOW NOTICE ISSUED BY NDMC (CONT ENTS NOTED BY CIT(A) AT PAGES 11 TO 13 OF HIS ORDER) 65, LAST FIVE LINES 07-03-2000 WRIT OF CERTIORARY WP(C) 7163/99 FILED B Y A SEEKING RELIEF ON VARIOUS ISSUES INCLUDING QUASHING OF SHOW CAUSE NOT ICES DATED 28-06-1999 AND 12-11-1999. THIS WRIT WAS DISMISSED BY HIGH COURT ON THE GROUND THAT MATTER INVOLVED DISPUTED Q UESTIONS OF FACT AND HENCE CANNOT BE DECIDED IN A WRIT PETITION . 66 67 - PRESENT SUIT NO. 610/2000 FILED BY A FOR AN INJ UNCTION RETRAINING NDMC FROM TAKING ANY ACTION PURSUANT TO SHOW CAUSE NOTICES DATED 28-06-1999 AND 12-11-1999. A ALSO C LAIMED A DECREE FOR SPECIFIC PERFORMANCE OF AGREEMENTS. ALON G WITH SUIT AND APPLICATION FOR TEMPORARY INJUNCTION WAS ALSO F ILED. 67, TOP PARA 18-05-2001 INTERIM ORDER PASSED BY A SINGLE JUDGE O F DELHI HIGH COURT IN IA NO. 3075/2000 IN SUIT NO, 610/2000 RESTRAINING NDMC FROM INTERFERING WITH POSSESSION RIGHTS OF A SUBJECT T O A DEPOSITING ENTIRE LICENSE FEE IN THE MANNER DIRECTED IN THIS O RDER. 93, LAST PARA THEREAFTER 06-02-2002 A CHALLENGED THE INTERIM ORDER DATED 1 8-05-2001 PASSED BY THE SINGLE JUDGE BEFORE A DIVISION BENCH OF DELHI HIGH COURT. DIVISION BENCH DIRECTED AS UNDER: MR CHANDHIOK, SR COUNSEL FOR THE APPELLANTS SAYS T HAT HE WILL PAY RS 75 LAKHS PER MONTH FRO FEBRUARY 2002 AND IF THE APPEAL IS NOT HEARD TILL THE NEXT DATE OF HE ARING THEN HE WILL PAY RS 1 CRORE PER MONTH FROM AUGUST 2002. LIST THE MATTER ON 8 TH APRIL, 2002 IN THE CATEGORY OF AFTER NOTICE MISCELLANEOUS MATTERS. TILL THE NEXT DATE OF HEARING OPERATION OF THE JUDG MENT IS 95 16 ITA NO.771, 787 & 1107/DEL./2012 ITA NO.218 & 386/DEL./2013 STAYED. IF THE AMOUNT AS STATED BY SR COUNSEL FOR THE APPEL LANT BODY IS NOT PAID MONTH BY MONTH THEN THIS APPEAL SH ALL BE DEEMED TO HAVE BEEN DISMISSED 21-04-2015 SUIT NO. 610/2000 DISPOSED OFF BY THE DE LHI HIGH COURT 108 - 109 14. SHRI SYALI FURTHER SUBMITTED THAT VIDE ORDER DA TED 06 TH FEBRUARY 2002 WHILE DIRECTING PAYMENT OF RS 1 CR PER MONTH THE HIGH COU RT HAD FURTHER HELD THAT IF THE AMOUNT AS STATED BY SR. COUNSEL FOR THE APPELLANT T ODAY IS NOT PAID MONTH BY MONTH THEN THIS APPEAL SHALL BE DEEMED TO HAVE BEEN DISMI SSED. UNDER THE CIRCUMSTANCES IT WAS CLAIMED, THAT THE ASSESSEE WAS MANDATORILY REQU IRED TO MAKE THE PAYMENTS TO NDMC TO SAFEGUARD THE HOTEL BUSINESS BEING CARRIED ON BY IT. IT WAS ALSO SUBMITTED BEFORE US THAT IN ORDER DATED 06 TH FEBRUARY 2002 IT HAS NOWHERE BEEN HELD BY THE HIGH COURT THAT IN CASE THE ASSESSEE SUCCEEDS IN ITS CLA IMS THEN THE AMOUNT OF RS 12 CR PAID BY IT TO NDMC WOULD BE REFUNDABLE TO IT. IN THIS RE GARD SUPPORT WAS DRAWN FROM THE DECISION OF HONBLE APEX IN CASE OF KCP LIMITED REP ORTED IN 245 ITR 421(SC). LD SENIOR COUNSEL THEREAFTER SUBMITTED THAT IDENTICAL CLAIM HAS BEEN ALLOWED IN CASE OF ASSESSE IN PAST. IN THIS REGARD HE REFERRED TO ASSE SSMENT ORDER PASSED BY LD AO FOR AY 2004-05 IN WHICH IT IS HELD BY HIM AS UNDER: LICENSE FEES DURING THE YEAR, THE ASSESSEE HAS CLAIMED AN AMOUNT OF RS 14.41 CRORES AS LICENSE FEE PAID TO THE NDMC. AS PER THE AGREEMENT, THE ASS ESSEE IS REQUIRED TO PAY LICENSE FEE @ 21 % OF THE TURN OVER OR 2.68 CRORES WHICHEVER IS HIGHER TO NDMC AS PER CLAUSE 3 OF THE LICENSE DEED. IT IS NOTICED THAT THE LICENSE FEE PAYABLE BY THE ASSESSEE TO THE NDMC WAS IN DISPUTE AND IS PEND ING IN THE DELHI HIGH COURT. THE ASSESSEE WAS ASKED TO EXPLAIN SINCE THE LICENSE FEE PAYABLE TO NDMC IS IN DISPUTE, WHY THE SAME SHOULD NOT BE DISALLOWED. THE ASSESSEE VIDE SUBMISSIONS 17 ITA NO.771, 787 & 1107/DEL./2012 ITA NO.218 & 386/DEL./2013 DATED 20.12.06 STATED THAT THE LICENSE FEE WAS PAID AS PER THE INTERIM ORDER DATED 06.02.02 PASSED BY THE HON'BLE DELHI COURT ACCORDIN G TO WHICH, IT HAD DIRECTED THE ASSESSEE TO PAY RS.1 CRORE PER MONTH, WHICH WAS EXA MINED. THE ASSESSEE HAD STATED THAT AN ADDITIONAL AMOUNT OF RS. 2.41 CRORES WAS PAID AS PER HON'BLE DELHI COURT'S ANOTHER ORDER DATED 18.05.01. ON PERUSAL OF THIS ORDER, IT IS NOTICED THAT THE HON'BLE DELHI COURT HAD NOT GIVEN ANY DIRECTIONS TO THE ASSESSEE TO PAY RS 2.41 CRORES TO THE ASSESSEE. HOWEVER HON'BLE DELHI COURT 'S ORDER DATED 06.02.02 WAS PASSED AFTER THE ORDER DATED 18.05.01, WHICH THE AS SESSEE REFERRED. HENCE THE AMOUNT OF RS 2.41 CRORES REMAINED UNASCERTAINED LIA BILITY OF THE ASSESSEE AND SUBJUDICE. HENCE THE SAME WAS DISALLOWED AND ADDED BACK TO THE INCOME OF THE ASSESSEE. IT WAS SUBMITTED BY SHRI SYALI THAT TO THE EXTEND O F RS 12 CRORES DEDUCTION ON ACCOUNT OF LICENSE FEES PAID TO NDMC WAS HIMSELF ALLOWED BY AO IN AY 2004-05 AND IN FURTHER APPEAL THE EXCESS AMOUNT OF RS 2.41 CRORES WAS ALLOWED AS DEDUCTION BY CIT(A) WHOSE ORDER HAS BEEN UPHELD BY THE TRIBUNAL AND HIGH COURT WHICH HAS NOW BECOME FINAL. IT WAS THEN SUBMITTED BY MR SYALI THA T THE LD AO HAS WRONGLY CONCLUDED IN HIS ORDER THAT THE STATUTORY AUDITORS HAVE CERTIFIED THE EXPENSE AS CONTINGENT. REFERRING TO THE RELEVANT NOTE APPENDED TO AUDITED ACCOUNTS FOR YEAR ENDING MARCH 2008 IT WAS SUBMITTED BY HIM THAT WHAT IS SHOWN THEREIN AS CONTINGENT LIABILITY WAS THE AMOUNT WHICH MAY BE PAYABLE TO ND MC IN FUTURE SUBJECT TO OUTCOME OF LITIGATION BEFORE HIGH COURT. IT WAS SUB MITTED BY THE SHRI SYALI TO THE EXTEND AMOUNT ACTUALLY PAID I.E RS 12 CRORES IT IS STATED BY THE AUDITORS THAT THE SAME IS DEBITED TO THE P&L ACCOUNT AND HENCE THERE IS NO QUESTION THIS BEING CONTINGENT. LASTLY, IT WAS SUBMITTED BY SHRI SYALI THAT SUBSEQU ENT EVENTS IN THE CASE VINDICATE THE STAND TAKEN BY THE ASSESSE. IN THIS REGARD IT WAS S UBMITTED THAT RECENTLY VIDE ASSESSMENT ORDER DATED 18 TH MARCH 2015 PASSED BY THE LD AO FOR AY 2012-13 IT H AS BEEN HELD BY HIM THAT THE AMOUNT OF RS 12 CRORES PA ID BY THE ASSESSEE AS LICENSE FEES 18 ITA NO.771, 787 & 1107/DEL./2012 ITA NO.218 & 386/DEL./2013 TO NDMC IS NOT A CONTINGENT LIABILITY. CLAIM MADE F OR DEDUCTION OF RS 12 CRORES AS A BUSINESS EXPENSE HAS BEEN WAS ALLOWED BY THE LD AO AFTER TAKING INTO CONSIDERATION CLARIFICATION ISSUED BY NDMC VIDE LETTER DATED 26 TH SEPTEMBER, 2014. 15. PER CONTRARY LD CIT(DR) SHRI SUNIL SHARMA VEHEM ENTLY SUPPORTED THE DISALLOWANCE MADE BY THE LD AO AND UPHELD BY LD CIT (A). HE NOT ONLY PLACED RELIANCE UPON CONCLUSIONS RECORDED BY THE LD AO IN THE ASSESSMENT ORDER AND BY LD CIT(A). DURING THE COURSE OF HIS SUBMISSIONS HE REF ERRED TO THE FINAL ORDER DATED 21 ST APRIL 2015 PASSED BY DELHI COURT HIGH COURT DISPOSI NG OF THE CIVIL SUIT IN WHICH IT IS NOTED THAT A COMPROMISE IS REACHED BETWEEN ASSES SE AND NDMC UPON PAYMENT OF RS 150.92 CRORES AS ARREARS OF LICENSE FEES UPTO YE AR 2013-14. IT WAS SUBMITTED BY HIM THAT THE BREAK UP OF THIS SUM BE SOUGHT FROM TH E ASSESSE. THE LD SENIOR COUNSEL APPEARING FOR THE ASSESSEE ACCEDED TO THIS REQUEST AND HE PLACED ON RECORD THE NECESSARY BREAK-UP. IT WAS SUBMITTED BY THE LD CIT( DR) THAT FINAL ADJUDICATION REGARDING QUANTUM OF LICENSE FEE PAYABLE TO NDMC TO OK PLACE IN APRIL 2015 HAS THEREFORE ANY PAYMENT PRIOR TO THAT MADE BY THE ASS ESSE TO NDMC WAS ONLY A CONTINGENT LIABILITY. 16. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS M ADE BY BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN OUR CO NSIDERED OPINION LOOKING TO THE FACTS OF THE PRESENT CASE APPELLANT MERITS TO SUCCE ED IN ITS CLAIM MADE FOR DEDUCTION OF 12 CRORES AS A LEGITIMATE BUSINESS EXPENSE. COMI NG FIRST TO THE ALLEGATION OF LD CIT(A) THAT LICENSE DEED DATED 14 TH JULY 1982 WAS NOT IN FORCE DURING THE COURSE OF 19 ITA NO.771, 787 & 1107/DEL./2012 ITA NO.218 & 386/DEL./2013 YEAR UNDER CONSIDERATION. WE CONCUR WITH SUBMISSION S OF SHRI SYALI THAT LD CIT(A) HAS ERRED IN NOT TAKING INTO CONSIDERATION EVENTS W HICH TRANSPIRED POST ISSUE OF SHOW CAUSE NOTICE DATED 12 TH NOVEMBER 1999 BY NDMC. ORDER DATED 18 TH MAY 2001 PASSED BY LD SINGLE JUDGE OF HONBLE DELHI HIGH COU RT NEGATES THIS PRESUMPTION OF LD CIT(A). LD SINGLE JUDGE IN ITS ORDER HAS HELD AS UNDER: ON 25 TH SEPTEMBER, 1998, HOWEVER, THE NDMC GAVE ANOTHER NO TICE TO THE PLAINTIFFS UPON THEM TO PAY THE ARREARS OF LICENCE FEE. IT WAS STATED THAT IN CASE THE ENTIRE OUTSTANDING DUES WERE NOT DEPOSITED, ACTION WOULD BE TAKEN UNDER THE PROVISIONS OF THE PUBLIC PREMISES (EVICTION OF UNAU THORISED OCCUPANTS) ACT AGAINST THE PLAINTIFFS. ON 28 TH JUNE, 1999 THE NDMC SENT A SHOW CAUSE NOTICE TO TH E PLAINTIFFS CALLING UPON THEM TO DEPOSIT RS.109,82,1 6,368/- ALLEGEDLY DUE TO THE NDMC UPTO 30 TH JUNE, 1999. THIS WAS NATURALLY DISPUTED BY THE PLA INTIFFS AND IT WAS ASSERTED THAT LICENCE FEE UPTO THE YEAR 2003 ST OOD PAID AND NO AMOUNT WAS PAYABLE BY THEM TO THE NDMC. THEREAFTER CERTAIN MEE TINGS TOOK PLACE BETWEEN THE PARTIES, HOWEVER, NO AMICABLE SOLUTION WAS ARRIVED AT BETWEEN THEM. A NOTICE DATED 12 TH NOVEMBER, 1999 WAS THEN ISSUED BY THE NDMC TO THE PLAINTIFFS INFORMING THE PLAINTIFFS THAT THE RE-VALUATION OF THE LICENCE FEE WAS NEITHER POSSIBLE NOR WARRANTED. A MEETING OF THE PLAINTIFFS REPRESENTATIVE ALSO TOO K PLACE WITH THE CHAIRMAN OF THE NDMC ON 22 ND NOVEMBER, 1999. PLAINTIFFS ALLEGE THAT IN THAT MEE TING THE CHAIRPERSON OF THE PLAINTIFFS HOTEL AGREED TO PAY A SUM OF RS.3 CRORES ON THE CLEAR UNDERSTANDING THAT AN INDEPENDENT AGENCY / COMMITTE E WOULD BE CONSTITUTED BY THE NDMC TO DETERMINE THE FAIR AND EQUITABLE QUANTUM/RA TE OF LICENCE FEE. HOWEVER, THE CHAIRPERSON REFUSED TO HAVE AGREED TO THE APPOI NTMENT OF ANY SUCH COMMITTEE AND GAVE ONE WEEKS TIME TO THE PLAINTIFFS TO MAKE PAYMENT FAILING WHICH IT WAS THREATENED THAT THE LICENCE WOULD BE CANCELLED AND POSSESSION OF THE HOTEL WOULD BE TAKEN. ON THIS THREAT BEING GIVEN, THE PLAINTIFFS F ILED A PETITION BEING CIVIL WRIT PETITION NO.7163/99 IN THIS COURT. IN THE AFORESAID WRIT PETITION FILED BY THE PLAINTI FFS, THEY PRAYED FOR ISSUE OF A WRIT OF CERTIORARY OR ANY OTHER APPROPRIATE WRIT ORDER O R DIRECTION FOR QUASHING THE SHOW CAUSE NOTICE DATED 28 TH JUNE, 1999 AND 12 TH NOVEMBER, 1999 AND FOR ISSUE OF AN APPROPRIATE WRIT ORDER OR DIRECTION DIRECTING THE R ESPONDENTS TO CONSTITUTE A COMMITTEE OF INDEPENDENT PERSONS TO EVALUATE THE LE GITIMATE / FAIR LICENCE FEE PAYABLE IN RESPECT OF THE LAND HAVING REGARD TO THE LICENCE FEE PAID BY OTHER HOTELS WHICH WERE SIMILARLY SITUATE AS WELL AS THE ECONOMI C VIABILITY OF THE PLAINTIFFS HOTEL CONSISTENT WITH THE SUPPLEMENTARY AGREEMENT DATED 1 1 TH MARCH, 1999. CERTAIN OTHER RELIEFS WERE ALSO CLAIMED IN THIS WRIT PETITION. TH IS PETITION WAS DISMISSED BY A.K. SIKRI, J. BY ORDER DATED 7 TH MARCH, 2000 ON THE GROUND THAT SINCE THE MATTER INVOLVED DISPUTED QUESTIONS OF FACT, THE SAME CANNO T BE DECIDED IN THE WRIT PETITION. WHILE DISMISSING THE PETITION, THE COURT CONTINUED THE INTERIM ORDER GRANTED EARLIER TILL 31 ST MARCH, 2000. PRESENT SUIT WAS THEREAFTER FILED BY THE PLAINTIFFS FOR AN INJUNCTION RESTRAINING THE DEFENDANT FROM TAKING AN Y ACTION PURSUANT TO THE SHOW 20 ITA NO.771, 787 & 1107/DEL./2012 ITA NO.218 & 386/DEL./2013 CAUSE NOTICES MENTIONED ABOVE AND FROM CAUSING ANY OBSTRUCTION TO THE AMENITIES LIKE WATER AND ELECTRICITY TO THE PREMISES OF THE P LAINTIFFS. PLAINTIFFS ALSO CLAIMED A DECREE FOR SPECIFIC PERFORMANCE OF THE AGREEMENT DA TED 14 TH JULY, 1982 AS ALLEGEDLY MODIFIED BY THE AGREEMENTS DATED 11 TH MARCH, 1991; 4 TH AUGUST, 1995 AND 31 ST MARCH, 1998. ALONG WITH THE SUIT, AN APPLICATION FO R TEMPORARY INJUNCTION WAS ALSO FILED BY THE PLAINTIFFS. BY THIS ORDER, I PROPOSE T O DISPOSE OF THIS APPLICATION OF THE PLAINTIFFS FOR THE GRANT OF AN AD-INTERIM INJUNCTIO N. . . THE ONLY QUESTION WHICH REMAINS TO BE CONSIDERED IS AS TO HOW THIS LICENCE FEE WAS TO BE CALCULATED. WHILE THE CASE OF THE DEFENDANTS IS THAT THE PLAINTIFFS WERE REQUIRED TO PAY 21% OF THE ANNUAL GROSS TURN OVER OF THE HOT EL AS DISCLOSED BY THE BALANCE SHEETS, THE PLAINTIFFS CASE IS THAT EVEN ASSUMING THAT THE PLAINTIFFS ARE REQUIRED TO PAY THE LICENCE FEE @ 21% OF THE GROSS TURNOVER OF THE HOTEL, IT HAS TO BE 21% OF THE GROSS TURN OVER AS CERTIFIED BY THE CERTIFIED AUDIT ORS OF THE PLAINTIFFS. THE QUESTION IS AS TO WHAT IS THE GROSS TURN OVER AS CERTIFIED BY T HE CERTIFIED AUDITORS OF THE PLAINTIFFS. A CHART HAS BEEN PLACED ON RECORD BY TH E DEFENDANT-NDMC SHOWING THE ANNUAL GROSS TURNOVER OF THE HOTEL FROM 1988-89 TO 1998-99 AND THE AMOUNT OF LICENCE FEE PAYABLE BY THE PLAINTIFFS HAS BEEN CALC ULATED IN TERMS OF THE SAID ANNUAL GROSS TURN OVER. . . THOUGH, IT IS MENTIONED IN THE AGREEMENT THAT IT IS THE GROSS TURNOVER OF THE HOTEL AS CERTIFIED BY THE CERTIFIED AUDITORS OF THE HOTEL ON WHICH THE LICENCE FEE IS PAYABLE BY THE PLAINTIFFS, HOWEVER, PRIMA FACIE, IN MY VIEW, P LAINTIFFS MAY NOT BE ENTITLED TO ALL THE APPROPRIATIONS MENTIONED BY THE AUDITORS IN THE IR CERTIFICATES. PRIMA FACIE, IT APPEARS TO THE COURT THAT ONLY THAT INCOME WHICH IS COMPULSORILY PAYABLE BY THE PLAINTIFFS IN TERMS OF AN AGREEMENT WHICH IT MIGHT HAVE ARRIVED AT WITH THE THIRD PARTY OR STATUTORY LIABILITY NECESSARILY PAYABLE MA Y ONLY HAVE BE DEDUCTED FOR THE PURPOSE OF ARRIVING AT THE GROSS TURN OVER TO THE H OTEL. THE FRANCHISEE FEE PAYABLE IS 3% BY THE NDMC TO THE FRANCHISEE AND IT IS ONLY THE 97% OF THE RECEIPTS WHICH ARE RECEIVED BY THE HOTEL. PRIMA FACIE, THIS 3% MAY HAV E TO BE DEDUCTED FROM THE ROOM TARIFF. LUXURY TAX ON BEHALF OF THE GOVERNMENT IS A LSO RECEIVED BY THE HOTEL AT THE TIME OF PROVIDING ITS SERVICES TO THE GUESTS AND SI NCE THIS TAX DOES NOT COME IN THE HANDS OF THE HOTEL, THIS MAY ALSO HAVE TO BE DEDUCT ED FROM THE GROSS TURN OVER OF THE HOTEL. THE OTHER AMOUNT WHICH MAY HAVE TO BE DEDUCT ED FROM OUT OF THE GROSS TURN OVER OF THE HOTEL AS SHOWN IN THE BALANCE SHEETS IS THE CREDIT CARD COMMISSION AS THE AMOUNT WHICH IS RECEIVED BY THE HOTEL ON PAYMENTS R ECEIVED THROUGH CREDIT CARDS IS NET OF COMMISSION CHARGED BY THE CREDIT CARD COMPAN IES. OTHER COMPONENT WHICH MAY HAVE TO BE DEDUCTED FROM THE GROSS TURN OVER IS THE INTEREST INCOME ON THE DEPOSITS WITH BANKS. THE ONLY OTHER RECEIPT TO WHIC H THE PLAINTIFFS MAY BE ENTITLED TO DEDUCTION IS THE TELEPHONE RECEIPTS. THE PLAINTI FFS MAY BE SAID TO BE ACTING AS AGENTS FOR THE MAHANAGAR TELEPHONE NIGAM LIMITED WH ILE THE TELECOMMUNICATION SERVICES ARE PROVIDED TO THE GUESTS. THE PAYMENT, T HEREFORE, WHICH IS ACTUALLY MADE TO THE MAHANAGAR TELEPHONE NIGAM LIMITED MAY HAVE T O BE DEDUCTED FORM OUT OF THE GROSS AMOUNT WHICH IS RECEIVED BY THE PLAINTIFF FOR PROVIDING TELECOMMUNICATION SERVICES SO THAT THE BALANCE AMOU NT RECEIVED BY THE HOTEL IS 21 ITA NO.771, 787 & 1107/DEL./2012 ITA NO.218 & 386/DEL./2013 TAKEN AS ITS INCOME. BESIDES THESE DEDUCTIONS WHICH , PRIMA FACIE, MAY BE PERMISSIBLE FROM THE GROSS TURNOVER OF THE HOTEL, I N MY VIEW, THE PLAINTIFFS ARE NOT ENTITLED TO ANY OTHER DEDUCTION FROM OUT OF THE GRO SS TURN OVER OF THE HOTEL. THE COST OF FOOD AND BEVERAGES IS A PART OF RUNNING OF THE H OTEL AND CANNOT, IN MY OPINION, BE DEDUCTED FROM OUT OF THE GROSS TURN OVER OF THE HOTEL. IF THIS IS DEDUCTED FROM THE GROSS TURN OVER, WHAT WILL BE ARRIVED AT IS THE GRO SS INCOME AND NOT THE GROSS TURN OVER. AT THIS STAGE OF DECIDED THIS APPLICATION THE COURT IS NOT DECIDING FINALLY AS TO WHAT WOULD BE THE GROSS TURN OVER OF THE HOTEL ON W HICH IT IS LIABLE TO PAY THE LICENCE FEE AND IT IS ONLY A PRIMA FACIE VIEW OF TH E COURT THAT THE AFORESAID OUTGOINGS MAY HAVE TO BE DEDUCTED FROM THE GROSS TU RNOVER AS REFLECTED IN THE BALANCE SHEETS. SINCE, IN MY OPINION, NONE OF THE SUPPLEMENTARY AGR EEMENTS MODIFIED THE TERMS OF THE AGREEMENT OF 14 TH JULY, 1982, PROVIDING FOR PAYMENT OF LICENCE FEE @ 21% OF THE GROSS TURN OVER OF THE HOTEL, PLAINTIF FS ARE, PRIMA FACIE, LIABLE TO PAY LICENCE FEE @ 21% OF THE GROSS TURN OVER TO BE CALCULATED ON THE BASIS OF THE GROSS TURN OVER AS MENTIONED IN THE BALANCE SHE ETS FILED ON RECORD BY THE PLAINTIFFS AND DEDUCTING FROM THIS TURN OVER THE AM OUNT TO BE CALCULATED IN TERMS OF THE AFORESAID PARAGRAPH. THE PLAINTIFF BEI NG PRIMA-FACIE LIABLE TO PAY LICENCE FEE AT THE RATE OF 21% OF THE GROSS TURNOVE R OF THE HOTEL, IN MY OPINION, THERE IS NO QUESTION OF THE PLAINTIFF SUFFERING IRR EPARABLE LOSS IN CASE IT HAS TO PAY THE LICENCE FEE IN TERMS OF THE AGREEMENT. DEFENDANT-NDMC IS A CIVIC AUTHORITY AND FOR PURPOSES OF PROVIDING SERVICE TO THE PEOPLE IT REQUIRES FUNDS. PUBLIC BENEFIT IN THE PRESENT CASE OUTWEIGHS THE CA SE OF THE PLAINTIFFS IN WITHHOLDING THE AMOUNT LEGITIMATELY DUE TO THE NDMC. BALANCE OF CONVENIENCE CLEARLY LIES IN FAVOUR OF THE LARGER PUBLIC INTEREST RATHER THAN IN FAVOUR OF THE PLAINTIFFS. THE ONLY INDULGENCE TO WHICH THE PLAINTIFFS MAY BE ENTITLED IS TO PAY THE ARREARS OF LICENCE FEE IN INSTALLMENTS. SINCE THE AMOUNT WHICH MAY BE CALC ULATED ON THE BASIS OF THE ABOVE FORMULA MAY BE QUITE HEAVY, THE PLAINTIFFS WI LL BE AT LIBERTY TO DEPOSIT THE SAID AMOUNT IN FOUR EQUAL QUARTERLY INSTALLMENTS, F IRST OF WHICH WILL BE PAID WITHIN THREE WEEKS FROM THE DATE OF THIS ORDER. I, ACCORDINGLY, RESTRAIN DEPENDENT-NDMC, ITS AGENTS AND EMPLOYEES FROM INTERFERING WITH THE POSSESSION OF THE PLAINTIFFS O VER THE LAND AND BUILDING SITUATE AT 1, WINDSOR PLACE, JANPATH, NEW DELHI IN ANY MANNER WHATSOEVER AND FROM DISCONNECTING, WITHHOLDING OR CAUSING TO B E WITHHELD ANY AMENITIES INCLUDING WATER AND / OR ELECTRICITY TO THE PLAINTI FFS HOTEL, SUBJECT TO THE PLAINTIFFS DEPOSITING THE ENTIRE LICENCE FEE IN THE MATTER DIRECTED IN THIS ORDER CALCULATED @ 21% OF THE GROSS TURNOVER OF THE HOTEL ARRIVED AT ON THE BASIS ON THE OBSERVATIONS MADE IN THIS ORDER. PRIMA FACIE, I AM ALSO OF THE OPINION THAT THE PLAINTIFF WILL ALSO HAVE TO PAY INTEREST ON THIS AM OUNT CALCULATED FOR THE TIME BEING AT THE RATE OF 10% P.A. WITH THESE OBSERVATIONS, THE APPLICATION OF THE PLA INTIFFS STANDS DISPOSED OF. ANY OBSERVATION MADE IN THIS ORDER WILL NOT BE TAKEN AS EXPRESSION OF OPINION ON THE MERITS OF THE CASE. 22 ITA NO.771, 787 & 1107/DEL./2012 ITA NO.218 & 386/DEL./2013 AS CAN BE SEEN FROM THE INTERIM DIRECTIONS ISSUED B Y THE LD SINGLE JUDGE PARTIES WERE BOUND BY THE TERMS AND CONDITIONS STIPULATED IN LIC ENSE DEED DATED 14 TH JULY 1982. THE DISPUTE SOLELY RESTED ON THE INTERPRETATION OF TERM GROSS TURNOVER AS CERTIFIED BY THE STATUTORY AUDITORS. TO THIS THE LD SINGLE JUDGE ALLOWED CERTAIN EXCLUS IONS. HOWEVER ASSESSE WAS NOT SATISFIED FROM THIS INTERIM ORDER SINCE IN ITS VIEW IT WAS ENTITLED TO FURTHER EXCLUSIONS FROM GROSS TURNOVER LIKE SUMS COLLECTED FOR FOOD AND BEVERAGES, ETC. IT THEREFORE PREFERRED AN APPEAL AG AINST THIS INTERIM ORDER BEFORE DIVISION BENCH OF HIGH COURT WHICH VIDE ORDER DATED 06 TH FEBRUARY 2002 DIRECTED ASSESSE TO MAKE PAYMENT OF RS 1 CR PER MONTH PENDIN G FINAL DISPOSAL OF THE CIVIL SUIT. SHRI SYALI RIGHTLY POINTED OUT THAT THERE IS NO DIRECTION ISSUED BY THE HIGH COURT IN ORDER DATED 06 TH FEBRUARY 2002 THAT IF ASSESSE SUCCEEDS AGAINST ITS CLAIMS FROM NDMC THEN IT SHALL BE ENTITLED TO A REFUND OF RS 1 CR. THIS IS VERY CRUCIAL. IN ABSENCE OF SUCH A DIRECTION THE PAYMENT OF RS 1 CR PER MONT H MADE BY THE ASSESSEE VIRTUALLY PARTAKES THE CHARACTER OF A CONFIRMED LIABILITY DIS CHARGE OF WHICH (I.E TO THE EXTEND OF RS 1 CR PER MONTH) IS ACCEPTED BY NDMC. IN SUPPORT OF THIS LD SENIOR COUNSEL HAS APPROPRIATELY RELIED UPON THE DECISION OF HONBLE A PEX COURT IN CASE OF KCP LIMITED (SUPRA) WHEREIN IT IS HELD AS UNDER: 11. THE LEARNED SENIOR COUNSEL FOR THE ASSESSEE-AP PELLANT RELIED ON THREE DECISIONS BY DIFFERENT HIGH COURTS AND SUBMITTED THAT IN IDEN TICAL FACT AND CIRCUMSTANCES, THE PRICE OF THE SUGAR REALISED IN EXCESS OF THE LEVY P RICE WAS HELD NOT TO BE A TRADING RECEIPT OF THE ASSESSEE AND, HENCE, NOT LIABLE TO T AX. THE DECISIONS SO RELIED ON ARE : CIT V. MYSORE SUGAR CO. LTD. [1990] 183 ITR 113 / 5 1 TAXMAN 208 (KAR.), CIT V. SEKSARIA BISWAN SUGAR FACTORY (P.) LTD. [1992] 195 ITR 778 /[1991] 59 TAXMAN 453 (BOM.) AND CIT V. CHODAVARAM CO-OPERATIVE SUGAR S LTD. [1987] 163 ITR 420/ 30 TAXMAN 615 (AP). WE HAVE CAREFULLY PERUSED THE D ECISIONS. IT IS CLEAR FROM THE FACTS STATED BY THE HIGH COURTS THAT IN EACH OF THE CASES, THE ASSESSEES RIGHT TO 23 ITA NO.771, 787 & 1107/DEL./2012 ITA NO.218 & 386/DEL./2013 REALISE THE EXCESS PRICE WAS THE SUBJECT-MATTER OF DISPUTE PENDING IN THE HIGH COURT AND THE HIGH COURTS HAD PASSED DIFFERENT INTERIM OR DERS PURSUANT TO WHICH THE RESPECTIVE ASSESSEES WERE COLLECTING THE EXCESS PRI CE. THOUGH THE INTERIM ORDERS OF THE HIGH COURTS ARE DIFFERENTLY WORDED IN THE THREE CASES, ONE COMMON FEATURE OF ALL THE ORDERS IS THAT THE REALISATION OF THE EXCES S PRICE BY THE RESPECTIVE ASSESSEES WAS HEDGED BY SEVERAL CONDITIONS, ONE OF WHICH WAS THAT THE ASSESSEE SHALL REFUND THE AMOUNT RECEIVED IN EXCESS OF THE PRICE FIXED IN THE EVENT OF THE PENDING DISPUTE BEING DECIDED ADVERSELY TO THE ASSESSEE BY THE COUR T. THUS, THE RECEIPT OF THE AMOUNT BY THE ASSESSEE WAS CLEARLY ASSOCIATED WITH A LIABILITY TO REFUND THE AMOUNT WHICH LIABILITY WAS ASCERTAINABLE AND QUANTIFIED. S UCH IS NOT THE CASE AT HAND. 17. WE FURTHER OBSERVE THAT IN PAST THE TAX DEPARTM ENT ITSELF HAD ALLOWED THE CLAIM MADE BY THE APPELLANT. BARING REASSESSMENT PROCEEDI NGS FOR AY 2003-04, WHICH TOO ARE PREMISED UPON A CHANGE OF OPINION (AS HELD BY U S LATER IN THIS ORDER) THE CLAIM MADE BY THE APPELLANT HAS BEEN ALLOWED IN AYS 2004- 05, 2005-06, 2006-07 AND 2012-13. IN FACT IN AY 2004-05 LIABILITY OF RS 12 C RORES BEING ACTUALLY PAID WAS HELD ALLOWABLE AS A DEDUCTION BY THE LD AO HIMSELF AND A DISPUTE AROSE VIS A VIS ADDITIONAL RS 2.41 CRORES PAID TO NDMC IN THAT YEAR . ON THIS HONBLE DELHI HIGH COURT FOR AY 2004-05 VIDE ORDER DATED 04 TH SEPTEMBER 2009 IN ITA NO. 450/2011 HAS HELD AS UNDER: 8. THE ASSESSING OFFICER HAD DISALLOWED EXPENDITUR E OF RS.2.41 CRORES OUT OF EXPENDITURE OF RS.14.41 CRORES ON THE GROUND THAT I T WAS CONTINGENT LIABILITY AS THERE WERE DISPUTES BETWEEN THE NDMC, THE LICENSOR AND THE RESPONDENT RELATING TO THE LICENCE FEE. THIS WAS SUBJECT MATTER OF LITI GATION PENDING IN DELHI HIGH COURT. THE ASSESSING OFFICER HAS MENTIONED THAT RS.2.41 CR ORES WAS NOT PAID BY THE ASSESSEE AND HE HAD MADE REFERENCE TO TWO ORDERS PA SSED BY THE DELHI HIGH COURT DATED 18.5.2001 AND 6.2.2002. THE RESPONDENT HAS ST ATED IN ITS LETTER DATED 21.04.2003 THAT A CHEQUE OF RS.2.41 CRORES DRAWN ON CITI BANK DATED 21 ST APRIL, 2003 HAD BEEN ENCLOSED. CIT(A) HELD THAT THE ASSESS ING OFFICER WAS NOT JUSTIFIED IN TREATING RS.2.41 CRORES AS UNASCERTAINED / DISPUTED LIABILITY AND THE DISALLOWANCE OF RS.2.41 CRORES BY THE ASSESSEE OFFICER WAS NOT JUST IFIED. THE TRIBUNAL NOTED THAT BY CONSEQUENCE OF THE LETTER DATED 17 TH APRIL, 2003 ISSUED BY NDMC THE AMOUNT OF RS.2.41 CRORES CAME TO BE QUANTIFIED AND THE AMOUNT PAID HAD BEEN IN COMPLIANCE OF THE SAID DEMAND. THE TRIBUNAL UPHELD THE ORDER O F CIT(A) AND STATED THAT THE DEMAND HAD SPECIFICALLY COME INTO EXISTENCE DURING THE ASSESSMENT YEAR 2004-05 AND CONSEQUENTLY THE SAME WAS ALLOWED FOR THE YEAR 2004-05. THUS, THE AMOUNT OF 24 ITA NO.771, 787 & 1107/DEL./2012 ITA NO.218 & 386/DEL./2013 RS.2.41 CRORES WAS PAID BY THE RESPONDENT ON 21.4.2 003 AND HENCE, WAS NOT A CONTINGENT LIABILITY LEARNED COUNSEL FOR THE APPELLANT HAS NOT BEEN ABLE TO CONTROVERT THAT THE SAID FINDING IS INCORRECT. IN VIEW OF THE AFORESAID POSITION, WE ARE NOT INCLI NED TO ENTERTAIN THE PRESENT APPEAL ON THIS GROUND. EVEN AS PER THE ABOVE DECISION OF HONBLE JURISDICT IONAL HIGH COURT ONCE LIABILITY IS PAID AND ACCEPTED BY NDMC THEN IT CANNOT BE TERMED AS CONTINGENT. APPEAL OF REVENUE WAS DISMISSED AT ADMISSION STAGE ITSELF AS NO QUESTION OF LAW AROSE. WE FURTHER NOTE THAT IN ASSESSMENT ORDER FOR AY 2012-1 3 AGAIN THE CLAIM MADE BY THE APPELLANT HAS BEEN ALLOWED BY THE AO BY OBSERVING A S UNDER: 5.5 I HAVE CAREFULLY CONSIDERED THE SUBMISSION MAD E BY THE ASSESSEE. DURING THE COURSE OF ASSESSMENT PROCEEDINGS ASSESSEE WAS DIREC TED TO SUBMIT AS TO WHY ADDITION / DISALLOWANCES MADE IN PAST BE NOT REPEAT ED. IN REPLY VIDE SUBMISSION DATED 07.01.2015 AND 28.02.2015 IT WAS ARGUED BY TH E ASSESSEE THAT VIS--VIS DISALLOWANCE OF LICENSE FEE OF RS.12 CRORES PAID TO NDMC THE PREDECESSOR ASSESSING AUTHORITIES HAVE NOT PROPERLY APPRECIATED THE FACTUAL AND LEGAL POSITION OF THE INSTANT CASE. THE LD. AR CLARIFIED THAT THE LIA BILITY TO PAY LICENSE FEE IS NOT IN DISPUTE HOWEVER, ACTUAL QUANTIFICATION OF SAME IS C URRENTLY PENDING FINAL ADJUDICATION BY THE HONBLE DELHI HIGH COURT. UNDIS PUTEDLY, THE LIABILITY TO PAY LICENSE FEE IS A CONTRACTUAL LIABILITY. NDMC VIDE A RECENT COMMUNICATION DATED 26/9/14 HAS CLARIFIED AS UNDER :- THE CHAIRPERSON HOTEL CJ INTERNATIONAL (LE-MERIDIEN) WINDSOR PLACE, JANPATH NEW DELHI 110 001 SUBJECT :- SUBMISSION OF AUDITED BALANCE SHEETS AND CALCULATIONS OF GTO FOR DETERMINATION OF LICENSE FEES TO NDMC IN RESPECT OF PREMISES SITUATED AT JANPATH ROAD, WINDSOR PLACE, NEW DELHI (KNOWN AS LE-MERIDIE N) DEAR MADAM, PLEASE REFER TO YOUR LETTER DATED 11.09.2014 ON THE SUBJECT CITED ABOVE, IN THE RESPECT FOR THE PURPOSES OF RECORDS, PLEASE NOTE TH AT THE AMOUNT RENDERED AS LICENSE FEE IN TERMS OF CLAUSE 3 OF AGREEMENT DATED 14.07.1 982 READ WITH SUPPLEMENTARY AGREEMENTS THERETO ARE IRRETRIEVABLE OUTFLOWS ADJUS TABLE AS PER YOUR REQUEST AGAINST THE PRINCIPAL LICENSE FEE DUE. HOWEVER, YOU MAY KIN DLY NOTE THAT THE SAME ARE BEING ACCOUNTED FOR UNDER HEADING LICENSE FEE (PROV.) IN THE ACCOUNTS OF NDMC. 25 ITA NO.771, 787 & 1107/DEL./2012 ITA NO.218 & 386/DEL./2013 FROM OUR RECORDS THE FOLLOWING AMOUNTS HAVE BEEN PA ID AND ADJUSTED TOWARDS LICENSE FEES: S. NO. FINANCIAL YEAR LICENSE FEE PAID (RS.) 1. 2002-03 11 CR. 2. 2003-04 TO 2013-14 12 CR. EACH YEAR 3. 2014-15 I) RS.4 CR. II) RS.8 CR. ON 10.07.2014 III) RS.2.5 CR. ON 08.08.2014 AS PER OUR RECORDS THE ABOVE AMOUNTS HAVE BEEN DULY CREDIT IN D & C REGISTER AND ULTIMATE LIABILITY TOWARDS LICENSE FEE SHALL STAND APPROPRIATELY REDUCED. THE ABOVE NON-REFUNDABLE PAYMENTS ARE NOT IN ANY WAY DEPENDEN T UPON OUTCOME OF PENDING LITIGATION BEFORE HONBLE HIGH COURT. COPY OF LATES T BILL IS ENCLOSED PLEASE. YOURS FAITHFULLY, SD/- DEPUTY DIRECTOR (ESTATE) THE ABOVE CLARIFICATION ISSUED BY NDMC INDICATES TH AT THERE WAS NEVER AN UNDERSTANDING BETWEEN THE PARTIES CHARACTERIZING PA YMENT OF ANNUAL SUM OF RS.12 CRORES AS CONTINGENT IN NATURE. PAYMENTS MADE AS PE R COURT ORDER DATED 6.2.2002 HAVE ALWAYS BEEN TREATED BY NDMC AS NON REFUNDABLE AND THE DISPUTE IN THE CIVIL APPEAL BEFORE HIGH COURT RELATES ONLY TO ANY ADDITI ONAL ABILITY IF ANY THAT CAN BE ATTRIBUTABLE TO THE ASSESSEE. NDMC AFTER RECEIPT OF SAID SUM HAS NEVER DOUBTED THE RIGHTS OF POSSESSION ENJOYED BY THE ASSESSEE FOR CA RRYING ON ITS BUSINESS OF RUNNING A FIVE STAR HOTEL. AFTER AN EXHAUSTIVE EXAMINATION OF THE CASE RECORDS I FIND THE PAYMENTS OF RS.12 CRORES MADE BY THE ASSESSEE TO ND MC ARE OF ASCERTAINABLE LEGITIMATE BUSINESS EXPENDITURE. 18. DURING THE COURSE OF HEARING LD CIT(DR) REQUEST ED ASSESSE TO FURNISH BREAK UP OF RS 150.09 CR FINALLY PAID BY IT AS ARREARS UPTO YEAR 2013-14 AS PER HIGH COURT DIRECTIONS DATED 21 ST APRIL 2015. IN REPLY APPELLANT SUBMITTED THE FOLLO WING CHART: 26 ITA NO.771, 787 & 1107/DEL./2012 ITA NO.218 & 386/DEL./2013 27 ITA NO.771, 787 & 1107/DEL./2012 ITA NO.218 & 386/DEL./2013 THE ABOVE BREAK UP FURTHER EXONERATES THE CLAIM MAD E BY THE ASSESSEE. AS PER INTERIM ORDER DATED 06 TH FEBRUARY 2002 ASSESSEE HAS BEEN MAKING PAYMENTS TO NDMC FROM FY 2001-02 ONWARDS. FOR ALL THESE YEARS I.E FYS 200 1-02 FY 2013-14 EVEN AFTER PAYMENT OF RS 75 LAKHS PER MONTH INITIALLY AND RS 1 CRORE PER MONTH THEREAFTER THE FINAL LIABILITY DETERMINED IN YEAR 2015 WAS MUCH MO RE. CONTINGENCY IF AT ALL DURING FYS 2001-02 TO 2013-14 WAS VIS A VIS RS 150.09 CR W HICH FINALLY BECAME DETERMINABLE IN YEAR 2015. HOWEVER FOR THE YEAR UND ER CONSIDERATION THE PAYMENT OF RS 12 CR WAS A CONFIRMED LIABILITY, WHICH NDMC ACCE PTS AS NOT BEING SUBJECT TO FURTHER LITIGATION BEFORE DELHI HIGH COURT. CONSIDE RING THE PECULIAR FACTS OF THE PRESENT CASE WE THEREFORE HOLD THAT THE APPELLANT W AS ENTITLED TO CLAIM DEDUCTION OF RS 12 CRORES PAID BY IT TO NDMC AS LICENSE FEES UND ER LICENSE DEED DATED 14 TH JULY 1984. DECISIONS RELIED UPON BY THE LD AO IN HIS ORD ER OF ASSESSMENT ARE ALSO NOT RELEVANT SINCE THESE ARE DECISIONS WHEREIN CERTAIN PROVISIONS MADE IN BOOKS OF ACCOUNTS WERE SOUGHT TO BE CLAIMED AS A DEDUCTION, PER CONTRARY THIS IS A CASE WHERE LIABILITY ACTUALLY BEING DISCHARGED IS BEING CLAIME D AS DEDUCTION. WE ACCORDINGLY 28 ITA NO.771, 787 & 1107/DEL./2012 ITA NO.218 & 386/DEL./2013 HOLD THAT APPELLANT MERITS SUCCEEDING IN ITS CLAIM. GROUND NOS 3 AND 3.1 ARE THEREFORE ALLOWED. 19. IN GROUND NO. 4 APPELLANT CHALLENGES LEVY OF IN TEREST U/S 234B AND 234D. LEVY OF INTEREST WILL BE CONSEQUENTIAL IN THE INSTANT CA SE. NO SEPARATE DIRECTIONS NEED BE ISSUED IN THIS REGARD. 20. APPEAL FILED BY THE ASSESSEE IN ITA NO. 787/DEL /2012 IS THEREFORE ALLOWED FOR STATISTICAL PURPOSES. 21. REVENUE IN ITS APPEAL FOR AY 2009-10 IN ITA NO. 218/DEL/2013 HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. WHETHER THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.6,96,49,798/- MADE ON ACCOUNT OF INCOME FROM HOU SE PROPERTY : (A) THE PROVISIONS OF TAXABILITY OF ANNUAL LETTING VALU E OR PROPERTY CONSISTING OF ANY BUILDING OR LANDS APPURTENANT THERETO ARE DEALT IN SECTIONS 22 TO 27 OF INCOME TAX ACT, 1961. AS PER THE PROVISIONS OF SECT ION 22 OF THE INCOME TAX ACT, 1961. ANNUAL VALUE OF PROPERTY OF WHICH THE AS SESSEE IS OWNER IS TAXABLE UNDER THE HEAD INCOME FROM HOUSE PROPERTY EXCEPT TH E PORTION OF THE PROPERTY USED BY THE OWNER OF THE PROPERTY FOR THE PURPOSES OF ITS OWN BUSINESS OR PROFESSION, THE PROFIT OF WHICH ARE CHARGEABLE TO I NCOME TAX. (B) THE TAXABILITY OF THE PROPERTY U/S 22 IS THAT THE S AID PROPERTY SHALL NOT BE IN USE OF BUSINESS OF THE ASSESSEE ITSELF, THE PROFIT OF W HICH IS TAXABLE TO INCOME TAX. HERE IN THIS CASE, THE ASSESSEE COMPANY HAS SUB-LIC ENSED THE OFFICES AND APARTMENTS TO VARIOUS PERSONS SOME OF WHOM HAVE FUR THER SUB-LICENSED. THE ASSESSEE COMPANY IS NOT CHARGING ANY RENT, FEES, ET C. ON THE SUB-LICENSING OF THESE PROPERTIES, EXCEPT THEREOF FOR SECURITY DEPOS ITS WHICH WERE TAKEN BY THE ASSESSEE COMPANY AT THE TIME OF SUB-LICENSE AGREEME NT. (C) THE ASSESSEE COMPANY IS NOT PROVIDING ANY SERVICES IN THE NATURE OF HOTEL BUSINESS SUCH A CATERING, LAUNDRY, TELEPHONE, RECEP TION ETC., TO THE OCCUPANTS OF WEST TOWER. FURTHER FURNITURES AND FIXTURES IN THES E OFFICES AND APARTMENTS PERTAIN TO THE OCCUPANTS ONLY AND THEY ARE THE OWNE R OF THE SAME. 2. WHETHER THE LD. CIT(A) HAS ERRED IN LAW AND ON F ACTS IN DELETING THE ADDITION OF RS.1,53,268/- ON ACCOUNT OF EXTRA DEPRE CIATION ON COMPUTER PERIPHERALS IGNORING THE FACTS THAT ONLY THE COMPUTERS AND COMP UTER SOFTWARE ARE ELIGIBLE FOR DEPRECIATION OF 60% AND THE SAME CANNOT BE EXTENDED TO COMPUTER ACCESSORIES AND PERIPHERALS. 29 ITA NO.771, 787 & 1107/DEL./2012 ITA NO.218 & 386/DEL./2013 WE HAVE ALREADY CONSIDERED BOTH THESE ISSUES WHILE DECIDING REVENUE APPEAL FOR AY 2008-09 ABOVE IN ITA NO. 1107/DEL/2012. CONCLUSIONS RECORDED BY US IN ITA NO. 1107/DEL/2012 WOULD APPLY MUTATIS MUTANDIS TO ITA NO. 218/DEL/2013. AS RESULT REVENUE APPEAL IN ITA NO. 218/DEL/2013 IS DISMISSED . 22. ASSESSEE IN ITS APPEAL FOR AY 2009-10 IN ITA NO . 386/DEL/2013 HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. THAT ON FACTS AND IN LAW, CIT(A) ERRED IN UPHOL DING THE DISALLOWANCE MADE BY THE AO ON ACCOUNT OF LICENSE FEE OF RS.12,00,00, 000/- PAID TO NDMC DURING THE YEAR UNDER CONSIDERATION. 2. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE LEVY OF INTEREST U/S 234B & 234D OF THE INCOME TAX ACT, 1961 IS BAD IN LAW. 3. THAT ON FACTS AND IN LAW THE COMMISSIONER OF INC OME TAX (APPEALS) ERRED IN UPHOLDING THE ORDER OF AO PARTLY AND NOT ALLOWIN G RELIEF AS CLAIMED. 4. THAT ON FACTS AND IN LAW THE ORDERS PASSED BY TH E ASSESSING OFFICER {HEREINABOVE REFERRED TO AS THE AO IS BAD IN LAW AND VOID AB INITIO. SOLE ISSUE INVOLVED IN THIS APPEAL PERTAINS TO DISA LLOWANCE OF LICENSE FEE OF RS 12 CRORES PAID TO NDMC DURING THE YEAR UNDER CONSIDERA TION. WE HAVE ALSO CONSIDERED THIS ISSUE IN APPEAL FILED BY ASSESSE FOR AY 2008-0 9 ABOVE IN ITA NO. 787/DEL/2012. FOR REASONS STATED ABOVE CLAIM MADE BY THE ASSESSE IS ALLOWED. AS A RESULT APPEAL OF ASSESSE IN ITA NO. 386/DEL/2013 IS ALLOWED. 23. FOR AY 2003-04 ONLY ASSESSEE HAS FILED AN APPEA L IN ITA NO. 771/DEL/2012. FOLLOWING GROUNDS OF APPEAL HAVE BEEN RAISED BY THE ASSESSEE: 1. THAT ON FACTS AND IN LAW THE COMMISSIONER OF IN COME TAX (APPEALS) {HEREINAFTER REFERRED TO AS THE CIT(A)} ERRED IN UPHOLDING ASSUMPTION OF JURISDICTION UNDER SECTION 147 OF THE INCOME-TAX AC T, 1961 {HEREINAFTER REFERRED TO AS THE ACT} BY THE ASSESSING OFFICER {HEREINAFTE R REFERRED TO AS THE AO}. 30 ITA NO.771, 787 & 1107/DEL./2012 ITA NO.218 & 386/DEL./2013 1.1 THAT ON FACTS AND IN LAW THE CIT(A) ERRED IN NO T APPRECIATING THAT THE PREREQUISITES OF ASSUMPTION OF VALID JURISDICTION I N TERM OF PROVISO TO SECTION 147 ARE NOT MET RENDERING THE REASSESSMENT ORDERS PASSE D THERETO AS BAD IN LAW. 1.2 THAT ON FACTS AND IN LAW THE CIT(A) ERRED IN NO T APPRECIATING THAT THE IMPUGNED RE-ASSESSMENT PROCEEDINGS WERE INITIATED B Y THE AO AS A RESULT OF A MERE CHANGE OF OPINION ON SIMILAR SET OF FACTS. 2. THAT ON FACTS AND IN LAW, THE CIT(A) ERRED IN UP HOLDING THE DISALLOWANCE MADE BY THE AO ON ACCOUNT OF LICENSE FEE OF RS 11,0 0,00,000/- PAID TO NDMC DURING THE YEAR UNDER CONSIDERATION. 3. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE LEVY OF INTEREST U/S 234B & 234D OF THE INCOME TAX ACT, 1961 IS BAD IN LAW. 3.1 THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AO ERRED IN WITHDRAWING INTEREST U/S 244A OF THE ACT 4. THAT ON FACTS AND IN LAW THE ORDERS PASSED BY BO TH THE AO AND CIT(A) ARE BAD IN LAW AND VOID AB INITIO. 24. GROUND NO. 2 OF THE APPEAL AGAIN PERTAINS TO AL LOWABILITY OF DEDUCTION OF RS.11 CRORES PAID TO NDMC AS LICENSE FEES. WE HAVE ALSO C ONSIDERED THIS ISSUE IN APPEAL FILED BY ASSESSE FOR AY 2008-09 ABOVE IN ITA NO. 78 7/DEL/2012. FOR REASONS STATED ABOVE CLAIM MADE BY THE ASSESSE IS ALLOWED. THIS GR OUND IS ACCORDINGLY ALLOWED. 25. IN GROUND NOS. 3 AND 3.1 APPELLANT CHALLENGES L EVY OF INTEREST U/S 234B AND 234D AND WITHDRAWAL OF INTEREST U/S 244A OF THE ACT . LEVY OF INTEREST WILL BE CONSEQUENTIAL IN THE INSTANT CASE. NO SEPARATE DIRE CTIONS NEED BE ISSUED IN THIS REGARD. 26. GROUND NO. 4 IS GENERAL IN NATURE AND DOES NOT REQUIRE A SPECIFIC ADJUDICATION. 27. THIS LEAVES US WITH GROUND NO. 1 TO 1.2 OF THE APPEAL CHALLENGING ASSUMPTION OF JURISDICTION U/S 147 OF THE ACT. NOTICE U/S 148 IN THIS CASE WAS ISSUED ON 26 TH FEBRUARY 2010 I.E FOUR YEARS AFTER THE END OF RELEVANT ASSES SMENT YEAR. ORIGINAL ASSESSMENT IN THIS CASE WAS FRAMED BY THE LD AO U/S 143(3) OF THE ACT VIDE ORDER DATED 28 TH MARCH 31 ITA NO.771, 787 & 1107/DEL./2012 ITA NO.218 & 386/DEL./2013 2006. REASONS FOR REOPENING THE CASE RECORDED BY TH E LD AO U/S 148(2) OF THE ACT ARE AS UNDER: THE RETURN IN THIS CASE FOR THE AY 2003-04 WAS FIL ED ON 28.11.2003 DECLARING AN INCOME OF RS.1,14,49,935/- WHICH WAS PROCESSED U/S 143(1) OF THE I.T. ACT, 1961 ON 06.03.2004. THE CASE WAS SELECTED FOR SCRUTINY A ND THE ASSTT. WAS COMPLETED U/S 143(3) OF THE ACT ON 20.08.2006 AT AN INCOME OF RS. 9,16,82,026/-. THE PERUSAL OF ASSTT. RECORDS FOR THE AY 2003-04 RE VEALS THAT THE ASSESSEE HAD DEBITED AN AMOUNT OF RS.11,00,00,000/- IN THE P/L A CCOUNT TOWARDS LICENSE FEES PAID TO NDMC. IT IS REVEALED THAT AS PER SCHEDULE 1 4 NOTE 2 (III) OF NOTES TO ACCOUNTS THE ABOVE PAYMENT HAS BEEN CLASSIFIED AS C ONTINGENT LIABILITY WHICH IS AN UNASCERTAINED LIABILITY AND SHOULD HAVE BEEN ADDED BACK. THE I.T. ACT, 1961 PROVIDES THAT A PROVISION MAD E IN THE ACCOUNTS FOR AN ACCRUED OR IS KNOWN LIABILITY IS AN ADMISSIBLE DEDUCTION, W HILE OTHER PROVISIONS MADE DO NOT QUALIFY FOR DEDUCTION. IT HAS BEEN JUDICIALLY HELD THAT FOR A LOSS TO BE DEDUCTIBLE, IT MUST HAVE ACTUALLY ARISEN AND INCURRED AND NOT MERE LY ANTICIPATED AS CERTAIN TO OCCUR IN FUTURE. IN VIEW OF ABOVE FACTS OF THE CASE, I HAVE REASON T O BELIEVE THAT THE INCOME TO THE TUNE OF 11,00,00,000/- HAS ESCAPED ASSESSMENT OWING TO THE FAILURE ON PART OF ASSESSEE TO DISCLOSE FULLY AND TRULY MATERIAL FACTS NECESSARY FOR ASSTT. AND HENCE NOTICE U/S 148 IS HEREBY ISSUED FOR REOPENING ASSTT . U/S 147 OF THE I.T. ACT FOR THE AY 2003-04. THE REASONS RECORDED DEPICT THAT THE SOLE ISSUE ON WHICH THE CASE OF THE APPELLANT HAS BEEN RE-OPENED PERTAINED TO A CLAIM FOR DEDUCTION O F RS 11 CRORES ON ACCOUNT OF LICENSE FEE PAID BY THE APPELLANT TO NDMC. 28. DURING THE COURSE OF HEARING BEFORE US LD AR SU BMITTED THAT ON THIS VERY ISSUE A DETAILED ENQUIRY WAS CONDUCTED BY THE LD AO DURIN G THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS U/S 143(3) OF THE ACT. IN TH IS REGARD LD AR REFERRED TO QUESTIONNAIRES DATED 09 TH DECEMBER 2005 AND 30 TH JANUARY 2006 ISSUED BY THE LD AO DURING THE COURSE OF PROCEEDINGS U/S 143(3) OF THE ACT AND THE REPLY FILED BY THE ASSESSE VIDE SUBMISSION DATED 15 TH FEBRUARY 2006. IT WAS ACCORDINGLY CLAIMED BY THE 32 ITA NO.771, 787 & 1107/DEL./2012 ITA NO.218 & 386/DEL./2013 LD AR THAT THE REASSESSMENT PROCEEDINGS ARE BAD IN LAW AS THE MANDATORY CONDITION STIPULATED UNDER PROVISO TO SECTION 147 OF THE ACT IS NOT SATISFIED IN THE INSTANT CASE. IT WAS MOREOVER CLAIMED THAT THE REASSESSMENT PROCEEDI NGS ARE BAD IN LAW AS THE SAME HAVE BEEN INITIATED SOLELY AS A RESULT OF A CHANGE IN OPINION. LD CIT(DR) PER CONTRARY SUPPORTED INITIATION OF REASSESSMENT PROCEEDINGS U/ S 147 OF THE ACT BY THE LD AO. LD CIT(DR) ALSO PLACED RELIANCE UPON ORDER DATED 10 TH SEPTEMBER 2010 PASSED BY THE AO IN ACCORDANCE WITH RATIO LAID DOWN BY HONBLE AP EX COURT IN CASE OF GKN DRIVESHAFTS REPORTED IN 259 ITR 19(SC). 29. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS MA DE BY BOTH THE PARTIES AND HAVE ALSO PERUSED THE CASE RECORDS CAREFULLY. IT IS UNDISPUTED THAT DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS VIDE QUESTIONNAIRE DATED 09 TH DECEMBER 2005 IN QUERY NO. 8 LD AO DIRECTED THE APPELLANT TO FURNISH COPY OF HIGH COURT ORDER W.R.T THE LICENSE FEE PAID TO NDMC. THEREAFTER VIDE QUEST IONNAIRE DATED 30 TH JANUARY 2006 THE LD AO DIRECTED THE APPELLANT TO FURNISH A REPLY ON THE FOLLOWING QUERY RAISED BY HIM: 5. IT IS SEEN FROM THE NOTES THAT THE ASSESSEE COM PANY HAS PAID PAYMENT AGGREGATING TO RS.11 CRORES TO NDMC BASING ON SUPPL EMENTARY AGREEMENT AND ORDERS OF THE HONBLE DELHI HIGH COURT, THOUGH THE DISPUTE IS PENDING. THE COPY OF THE DELHI HIGH COURT ORDER IS ALSO FURNISHED AND IT IS SEEN THAT THE HONBLE DELHI HIGH COURT HAS NOT SPECIFICALLY DIRECTED THE ASSESS EE COMPANY TO MAKE THE PAYMENT. IT IS ALSO STATED IN THE NOTES THAT THE LOANS AND ADVANCES INCLUDES RS.983.72 LACS PAID TO NDMC PURSUANT TO AGREEMENT W ITH NDMC AND ORDERS OF DELHI HIGH COURT THAT THIS AMOUNT HAS BEEN DEBITED WITHOUT PREJUDICE TO THE COMPANYS RIGHTS TO REFUND AND INTEREST. FROM THE A BOVE, IT IS CLEAR THAT THE ASSESSEE COMPANY RESERVED THE RIGHT TO CLAIM THE REFUND AND SINCE THE DISPUTE WAS STILL PENDING, WHY THE AMOUNT PAID SHOULD NOT BE DISALLOW ED. 33 ITA NO.771, 787 & 1107/DEL./2012 ITA NO.218 & 386/DEL./2013 IN REPLY VIDE SUBMISSIONS DATED 15 TH FEBRUARY 2006 THE APPELLANT SUBMITTED FOLLOWING REPLY TO THE LD AO: IN YOUR LETTER DATED 30.01.06, YOU HAVE REQUIRED T HE COMPANY TO SHOW WHY THE AMOUNT PAID OF RS 11.00 CRORES TO NDMC SHOULD NOT B E DISALLOWED. THE COMPANY IS REQUIRED TO PAY 21% OF THE TURNOVER OR R S 2.68 CRORES WHICHEVER IS HIGHER AS LICENSE FEE TO NDMC AS PER CLAUSE 3 OF TH E LICENSE DEED. ON THE TURNOVER OF RS.6900.17 LACS THE AMOUNT AT 21% WORKS OUT TO RS.1449.04 LACS. THE COMPANY HAS CLAIMED RS 1100.00 LACS, WHICH IS LESS THAN THE ABOVE. THE MATTER IS PENDING FOR ADJUDICATION BEFORE THE HONBLE DELHI H IGH COURT, PENDING FINAL ORDER WE HAVE BEEN DIRECTED TO PAY RS 75 LACS PER MONTH F ROM FEBRUARY 2002 AND RS 1 CRORE PER MONTH AUGUST, 2002 ONWARDS. SINCE THIS A MOUNT HAS BEEN PAID TO NDMC WE FEEL THAT THE FINAL AMOUNT THAT MAY BE DECI DED AS BEING PAYABLE TO NDMC SHALL DEFINITELY BE MUCH MORE THAN THIS AMOUNT . ACCORDINGLY, THE COMPANY HAS CLAIMED THIS LESSER AMOUNT. IN THE UNLIKELY EV ENT OF THE AMOUNT BEING SETTLED AT A LESSER AMOUNT, THIS EXPENSE WILL BE REVERSED IN T HE BOOKS OF THE COMPANY AND THE TAX WILL BE PAID THEREON. IT IS, THEREFORE, REQUES TED THAT THE AMOUNT MAY KINDLY BE ALLOWED. AFTER CONSIDERING THE ABOVE REPLY SUBMITTED BY THE APPELLANT NO ADDITION ON ACCOUNT OF PAYMENT OF LICENSE FEE WAS MADE BY THE AO WHILE PASSING ORIGINAL ORDER OF ASSESSMENT U/S 143(3) OF THE ACT ON 20 TH AUGUST 2006. 30. CASE RECORDS CLEARLY SHOW THAT THE ISSUE AS TO WHETHER LICENSE FEE OF RS 11 CR PAID BY THE APPELLANT WAS AN ASCERTAINED LIABILITY OR NOT HAS ALREADY BEEN EXAMINED BY THE LD AO IN THE ORIGINAL ASSESSMENT PROCEEDINGS. F URTHER IN THE ORIGINAL ASSESSMENT PROCEEDINGS THE LD AO WAS EVEN MADE AWARE OF NOTE 2 (III) APPENDED TO THE AUDITED ACCOUNTS AS IS CLEAR FROM HIS QUESTIONNAIRE DATED 3 0 TH JANUARY 2006. IF THIS BE SO, THEN THE REASSESSMENT PROCEEDINGS CLEARLY FALL WITHIN TH E AMBIT OF CHANGE OF OPINION AND ARE THEREFORE ARE BAD IN LAW. RECENTLY HONBLE FULL BENCH OF JURISDICTIONAL HIGH 34 ITA NO.771, 787 & 1107/DEL./2012 ITA NO.218 & 386/DEL./2013 COURT IN CASE OF USHA INTERNATIONAL LTD REPORTED IN 348 ITR 485(DEL) HAS HELD AS UNDER: 11. ACCORDINGLY, WE HOLD THAT THE FOLLOWING OBSERV ATIONS IN CONSOLIDATED PHOTO & FINVEST LTD. (SUPRA) DO NOT REFLECT THE CORRECT LEG AL POSITION: 'IN THE LIGHT OF THE AUTHORITATIVE PRONOUNCEMENTS O F THE SUPREME COURT REFERRED TO ABOVE, WHICH ARE BINDING UPON US AND TH E OBSERVATIONS MADE BY THE HIGH COURT OF GUJARAT WITH WHICH WE FIND OURSEL VES IN RESPECTFUL AGREEMENT, THE ACTION INITIATED BY THE ASSESSING OF FICER FOR REOPENING THE ASSESSMENT CANNOT BE SAID TO BE EITHER INCOMPETENT OR OTHERWISE IMPROPER TO CALL FOR INTERFERENCE BY A WRIT COURT. THE ASSESSIN G OFFICER HAS IN THE REASONED ORDER PASSED BY HIM INDICATED THE BASIS ON WHICH INCOME EXIGIBLE TO TAX HAD IN HIS OPINION ESCAPED ASSESSMENT. THE A RGUMENT THAT THE PROPOSED REOPENING OF ASSESSMENT WAS BASED ONLY UPO N A CHANGE OF OPINION HAS NOT IMPRESSED US. THE ASSESSMENT ORDER DID NOT ADMITTEDLY ADDRESS ITSELF TO THE QUESTION WHICH THE ASSESSING OFFICER PROPOSE S TO EXAMINE IN THE COURSE OF REASSESSMENT PROCEEDINGS. THE SUBMISSION OF MR. VOHRA THAT EVEN WHEN THE ORDER OF ASSESSMENT DID NOT RECORD ANY EXP LICIT OPINION ON THE ASPECTS NOW SOUGHT TO BE EXAMINED, IT MUST BE PRESU MED THAT THOSE ASPECTS WERE PRESENT TO THE MIND OF THE ASSESSING OFFICER A ND HAD BEEN HELD IN FAVOUR OF THE ASSESSEE IS TOO FAR-FETCHED A PROPOSI TION TO MERIT ACCEPTANCE. THERE MAY INDEED BE A PRESUMPTION THAT THE ASSESSME NT PROCEEDINGS HAVE BEEN REGULARLY CONDUCTED, BUT THERE CAN BE NO PRESU MPTION THAT EVEN WHEN THE ORDER OF ASSESSMENT IS SILENT, ALL POSSIBLE ANG LES AND ASPECTS OF A CONTROVERSY HAD BEEN EXAMINED AND DETERMINED BY THE ASSESSING OFFICER. IT IS TRITE THAT A MATTER IN ISSUE CAN BE VALIDLY DETE RMINED ONLY UPON APPLICATION OF MIND BY THE AUTHORITY DETERMINING TH E SAME. APPLICATION OF MIND IS, IN TURN, BEST DEMONSTRATED BY DISCLOSURE O F MIND, WHICH IS BEST DONE BY GIVING REASONS FOR THE VIEW WHICH THE AUTHO RITY IS TAKING. IN CASES WHERE THE ORDER PASSED BY A STATUTORY AUTHORITY IS SILENT AS TO THE REASONS FOR THE CONCLUSION IT HAS DRAWN, IT CAN WELL BE SAID TH AT THE AUTHORITY HAS NOT APPLIED ITS MIND TO THE ISSUE BEFORE IT NOR FORMED ANY OPINION. THE PRINCIPLE THAT A MERE CHANGE OF OPINION CANNOT BE A BASIS FOR REOPENING COMPLETED ASSESSMENTS WOULD BE APPLICABLE ONLY TO SITUATIONS WHERE THE ASSESSING OFFICER HAS APPLIED HIS MIND AND TAKEN A CONSCIOUS DECISION ON A PARTICULAR MATTER IN ISSUE. IT WILL HAVE NO APPLICATION WHERE THE ORDER OF ASSESSMENT DOES NOT ADDRESS ITSELF TO THE ASPECT WHICH IS THE BASIS FOR REOPENING OF THE ASSESSMENT, AS IS THE POSITION IN THE PRESENT CASE. IT IS IN THAT VIEW INCONSEQUENTIAL WHETHER OR NOT THE MATERIAL NECESSA RY FOR TAKING A DECISION WAS AVAILABLE TO THE ASSESSING OFFICER EITHER GENER ALLY OR IN THE FORM OF A REPLY TO THE QUESTIONNAIRE SERVED UPON THE ASSESSEE . WHAT IS IMPORTANT IS WHETHER THE ASSESSING OFFICER HAD BASED ON THE MATE RIAL AVAILABLE TO HIM TAKEN A VIEW. IF HE HAD NOT DONE SO, THE PROPOSED R EOPENING CANNOT BE ASSAILED ON THE GROUND THAT THE SAME IS BASED ONLY ON A CHANGE OF OPINION.' 12. THE SAID OBSERVATIONS HAVE BEEN RIGHTLY HELD TO BE CONTRARY TO THE FULL BENCH DECISION OF THE DELHI HIGH COURT IN KELVINATOR OF I NDIA LTD. (SUPRA) IN EICHER LTD. 35 ITA NO.771, 787 & 1107/DEL./2012 ITA NO.218 & 386/DEL./2013 (SUPRA). THE SAID DECISION IN EICHER LTD. (SUPRA ) MAKES REFERENCE TO THE DECISION OF KLM ROYAL DUTCH AIRLINES V. ASSTT. CIT [2007] 292 I TR 49/ 159 TAXMAN 191 (DELHI). KLM ROYAL DUTCH AIRLINES CASE (SUPRA) DEAL S WITH SOME OTHER ISSUES ON WHICH WE DO NOT EXPRESS OR MAKE ANY OBSERVATION APP ROVING OR DISAPPROVING. SOME OF THESE ASPECTS HAVE BEEN CONSIDERED AND EXPL AINED IN OTHER DECISIONS IN LIGHT OF THE JUDGMENT OF THE SUPREME COURT IN THE C ASE OF RAJESH JHAVERI STOCK BROKERS (P.) LTD. (SUPRA). 13. IT IS, THEREFORE, CLEAR FROM THE AFORESAID POSI TION THAT: (1) REASSESSMENT PROCEEDINGS CAN BE VALIDLY INITIAT ED IN CASE RETURN OF INCOME IS PROCESSED UNDER SECTION 143(1) AND NO SCRUTINY ASSE SSMENT IS UNDERTAKEN. IN SUCH CASES THERE IS NO CHANGE OF OPINION; (2) REASSESSMENT PROCEEDINGS WILL BE INVALID IN CAS E THE ASSESSMENT ORDER ITSELF RECORDS THAT THE ISSUE WAS RAISED AND IS DECIDED IN FAVOUR OF THE ASSESSE. REASSESSMENT PROCEEDINGS IN THE SAID CASES WILL BE HIT BY PRINCIPLE OF 'CHANGE OF OPINION'. (3) REASSESSMENT PROCEEDINGS WILL BE INVALID IN CAS E AN ISSUE OR QUERY IS RAISED AND ANSWERED BY THE ASSESSEE IN ORIGINAL ASSESSMENT PRO CEEDINGS BUT THEREAFTER THE ASSESSING OFFICER DOES NOT MAKE ANY ADDITION IN THE ASSESSMENT ORDER. IN SUCH SITUATIONS IT SHOULD BE ACCEPTED THAT THE ISSUE WAS EXAMINED BUT THE ASSESSING OFFICER DID NOT FIND ANY GROUND OR REASON TO MAKE A DDITION OR REJECT THE STAND OF THE ASSESSEE. HE FORMS AN OPINION. THE REASSESSMENT WIL L BE INVALID BECAUSE THE ASSESSING OFFICER HAD FORMED AN OPINION IN THE ORIG INAL ASSESSMENT, THOUGH HE HAD NOT RECORDED HIS REASONS. ABOVE RATIO PROPOUNDED BY THE JURISDICTIONAL HIGH C OURT IS CLEARLY APPLICABLE TO THE INSTANT CASE. 31. WE MOREOVER OBSERVE THAT THERE IS ALSO NO FAILU RE OR OMISSION ON PART OF APPELLANT TO DISCLOSE MATERIAL FACTS TO THE LD AO. THIS IS A JURISDICTIONAL PRECONDITION, WHICH MUST BE SATISFIED AS PER PROVISO TO SECTION 1 47 OF THE ACT. FACTS RELIED UPON BY THE LD AO IN SUPPORT OF HIS REASONS TO BELIEF I.E N OTE NO. 2(III) WAS DULY CONSIDERED BY HIM DURING THE COURSE OF ORIGINAL ASSESSMENT. NO FRESH FACTS HAVE ALSO COME TO THE KNOWLEDGE OF LD AO JUSTIFYING A FRESH INITIATION OF ACTION U/S 147 OF THE ACT. IT IS TRITE LAW THAT WHEN A SPECIFIC QUERY RAISED BY THE AO IS REPLIED TO BY THE ASSESSEE DURING THE COURSE OF ORIGINAL ASSESSMENT THEN IT CA NNOT BE SAID THAT THERE IS ANY FAILURE 36 ITA NO.771, 787 & 1107/DEL./2012 ITA NO.218 & 386/DEL./2013 OR OMISSION ATTRIBUTABLE TO THE ASSESSE. JURISDICTI ONAL HIGH COURT IN CASE OF HARYANA ACRYLIC MFG REPORTED IN 308 ITR 38(DEL) HAS HELD AS UNDER: .. EXPLANATION I TO SECTION 147 ALSO MAKES IT CLEAR TH AT MERE PRODUCTION BEFORE THE ASSESSING OFFICER OF ACCOUNT BOOKS OR OTHER EVIDENCE FROM WHICH MATERIAL EVIDENCE COULD, WITH D UE DILIGENCE HAVE BEEN DISCOVERED BY THE ASSESSING OFFICER, WILL NOT NECESSARILY AMOUNT TO DISCLOSURE WITHIN THE MEANING OF THE SAID PROVIS O. THIS EXPLANATION, HOWEVER, DOES NOT MEAN THAT PRODUCTION OF ACCOUNT B OOKS AND OTHER EVIDENCE FROM WHICH MATERIAL EVIDENCE COULD WITH DU E DILIGENCE HAVE BEEN DISCOVERED BY THE ASSESSING OFFICER WILL NOT ' IN ANY EVENT' AMOUNT TO DISCLOSURE WITHIN THE MEANING OF THE SAID PROVIS O. THE SAID EXPLANATION ONLY STIPULATES THAT SUCH EVIDENCE WILL NOT NECESSARILY 'AMOUNT TO DISCLOSURE' WITHIN THE MEANING OF THE SA ID PROVISO. HOWEVER, WE NEED NOT LABOUR ON THIS ASPECT ANY FURTHER INASM UCH AS WE FIND THAT IN THIS CASE, THE ASSESSING OFFICER HAD MADE SPECIF IC QUERIES, INTER ALIA, WITH REGARD TO THE SHARE APPLICATION MONEY OF RS. 5 LAKHS RECEIVED FROM HALLMARK HEALTHCARE LIMITED. THE PETITIONER HAD SUP PLIED, IN THE COURSE OF THE ORIGINAL ASSESSMENT PROCEEDINGS ALL T HE RELEVANT DOCUMENTS SUCH AS THE SHARE APPLICATION MONEY FORM, CONFIRMATION FROM THE APPLICANT AND THE BANK STATEMENT RELATING TO THE RECEIPT OF THE CHEQUE NO. 201845 DATED 17-10-1997 FROM HALLMARK HE ALTHCARE LIMITED. IT IS ONLY THEREAFTER THAT THE ASSESSMENT WAS COMPLETED BY THE ASSESSING OFFICER ON 7-3-2001. WE HAVE ALREADY NOTE D ABOVE THAT IN THE ASSESSMENT ORDER ITSELF, THE ASSESSING OFFICER HAS RECORDED THAT THE DETAILS AS REQUIRED WERE FILED AND VERIFIED. THIS I N ITSELF INDICATES THAT THE ASSESSING OFFICER HAD APPLIED HIS MIND TO THE I SSUE OF THE SHARE APPLICATION MONEY AND HAD ACCEPTED THE ASSESSEE'S C LAIM AFTER DUE VERIFICATION. 32. FOR THE REASONS STATED ABOVE WE CONCUR WITH THE SUBMISSION MADE BY THE APPELLANT THAT THE ASSUMPTION OF JURISDICTION U/S 1 47 OF THE ACT IN THIS INSTANT CASE BY ISSUANCE OF NOTICE U/S 148 DATED 26 TH FEBRUARY 2010 IS BAD IN LAW. GROUND NOS 1 TO 1.2 ARE THEREFORE ALLOWED. 33. AS A RESULT APPEAL OF ASSESSE IN ITA NO. 771/DE L/2012 IS ALLOWED. 37 ITA NO.771, 787 & 1107/DEL./2012 ITA NO.218 & 386/DEL./2013 34. TO CONCLUDE, APPEALS FILED BY REVENUE IN ITA NO S.1107/DEL/2012 AND 218/DEL/2013 ARE DISMISSED. APPEAL FILED BY ASSESSE E IN ITA NOS.787/DEL/ 2012 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES, WHEREAS AP PEALS FILLED BY ASSESSEE IN ITA NOS.386/DEL/2013 AND 771/DEL/2012 ARE ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON THIS 5 TH DAY OF FEBRUARY, 2016. SD/- SD/- (PRASHANT MAHARISHI) (A.T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 5 TH DAY OF FEBRUARY, 2016 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-VIII, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.