The DCIT, Circle-2(1)(2), Ahmedabad V. M/s. Karnavati Club Ltd., Ahmedabad

ITA 2381/AHD/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 8264 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 2 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-10-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 11-08-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NIDHI SRIVASTAVA
• Keywords: Corroborative evidences; Capital receipt; Revenue expenditure; Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH AHMEDABAD BEFORE, SHRI S. S. GODARA, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER ITA NO. 2381/AHD/2015 (ASSESSMENT YEAR: 2012-13) ASST. COMMISSIONER OF INCOME TAX, CIR. 2(1)(2), ABAD, 1 ST FLOOR, NAVJIVAN TRUST BUILDING, AHMEDABAD 380 009 APPELLANT VS. M/S. KARNAVATI CLUB LTD., SARKHEJ GANDHINAGAR HIGHWAY, AHMEDABAD RESPONDENT PAN: AAACK7865Q /BY REVENUE : NIDHI SRIVASTAVA, CIT D.R. /BY ASSESSEE : SULABH PADSHAH, A.R. /DATE OF HEARING : 05.10.2017 /DATE OF PRONOUNCEMENT : 12.10.2017 ORDER PER S. S. GODARA, JUDICIAL MEMBER THIS REVENUES APPEAL FOR ASSESSMENT YEAR 2012-13 A RISES AGAINST THE CIT(A)-2, AHMEDABADS ORDER DATED 27.05.2015 IN CAS E NO. CIT(A)- 2/291/DC.CIR.2(1)(2)/2014-15, IN PROCEEDINGS U/S. 1 43(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT. 2. THE REVENUES FIRST SUBSTANTIVE GROUND AVERS THA T THE CIT(A) HAS ERRED IN LAW AS WELL AS ON FACTS IN REVERSING ASSESSING OFFI CERS ACTION TREATING ASSESSEES ENTRANCE FEE OF RS.16,18,59,750/- RECEIVED FROM ITS MEMBERS AS ITS INCOME IN THE NATURE OF REVENUE RECEIPT IN THE IMPUGNED ASSESSMEN T YEAR. WE FIND THAT THE ITA NO. 2381/AHD/15 [ACIT VS. M/S. KARNAVATI CLUB L TD.] A.Y. 2012-13 - 2 - ASSESSING OFFICER HAD REJECTED ASSESSEES ACCOUNTIN G TREATMENT GIVEN TO ITS ABOVE ENTRANCE FEE TO BE A CAPITAL RECEIPT. HE WAS OF TH E VIEW THAT THE ABOVE AMOUNT WAS NON REFUNDABLE ENTITLING ITS MEMBERS CONCERNED TO U SE ALL THE CLUB AMENITIES. HE FURTHER REJECTED ASSESSEES RELIANCE PLACED ON PREC EDING ASSESSMENT YEARS FINDINGS ON THE VERY ISSUE RIGHT UP TO THIS TRIBUNAL AS WELL AS HONBLE JURISDICTIONAL HIGH COURT. ALL THIS RESULTED IN THE IMPUGNED ENTRANCE FEE BEING TREATED AS REVENUE RECEIPT OF THE RELEVANT PREVIOUS YEAR LEADING TO AD DITION IN QUESTION OF RS.16,18,59,750/-. 3. THE CIT(A) ACCEPTS ASSESSEES ARGUMENTS AS UNDER : 2.3. DECISION: I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE, THE ASSESSMENT ORDER AND THE WRITTEN SUBMISSION OF THE APPELLANT. THE AO HAS MAD E THE ADDITION OF RS. 16,18,59,750/- BEING ENTRANCE FEES RECEIVED AS INCOME OF THE APPEL LANT COMPANY. THE APPELLANT ON THE OTHER HAS STATED THAT THE MATTER IS COVERED AND ALR EADY DECIDED IN FAVOR OF ASSESSEE BY HON'BLE ITAT IN ITS OWN CASE IN ITA NO. 26827A/2000 FOR A.Y. 1994-95, ITA NO. 23377A/2002 FOR A.Y. 1998-99, ITA NO. 93/A/2012 FOR A.Y. 2008-09. THE APPELLANT HAS FURTHER STATED THAT IDENTICAL ISSUE HAS BEEN DECIDE D IN FAVOR OF APPELLANT BY HON'BLE CIT(A) FOR A.Y. 2011-12. IT IS NOTED THAT THE SIMILAR ISSUE HAS BEEN DECIDED BY ME IN THE CASE OF THE APPELLANT FOR THE A.Y. 2011-12 IN APPEAL NO. CIT(A) -VIII/DCIT/CIR. 4 7340/13-14 DATED 16/06/2014. FOR THE SAKE OF CLARITY, THE FINDINGS G IVEN BY ME IN PARA-3.3 ARE REPRODUCED HERE UNDER: - 'I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE, THE ASSESSMENT ORDER AND THE WRITTEN SUBMISSION OF THE APPELLANT. THE AO HAS MAD E THE ADDITION OF THE ENTRANCE FEE CHARGED BY THE CLUB FOR ENROLMENT OF ITS MEMBER . THE APPELLANT HAS CLAIMED THAT THE ENTRANCE FEE RECEIVED WAS ONE TIME FEE AND ONLY MEMBERS WERE ELIGIBLE TO USE THE FACILITIES OF THE CLUB AND THE ENTRANCE FEE SO RECEIVED WAS NON-REFUNDABLE. THE AO WAS OF THE OPINION THAT THE BENEFIT OF MUTUA LITY IS NOT AVAILABLE TO THE APPELLANT. IT HAS BEEN MENTIONED BY THE AO THAT IN A.Y 1996 -97 SIMILAR ADDITION WAS MADE AND ACCORDINGLY THE ADDITION WAS BEING MAD E IN THIS YEAR. IT HAS BEEN BROUGHT TO MY NOTICE THAT THE ISSUE IS COVERED BY THE EARLIER ORDERS OF HONOURABLE ITAT AHMEDABAD IN THE CASE OF THE APPELL ANT ITSELF. HONOURABLE ITAT HAS HELD THAT THE ENTRANCE FEE IS NOT CHARGEABLE TO TAX. THE HONOURABLE ITAT HAS DECIDED THE ISSUE IN FAVOUR OF THE APPELLANT IN ITA NUMBER 2486/AHD/2012 FOR A,Y 2009 - 10. IT IS NOTED FROM THE ABOVE MENTIONED FACTS THAT THE ISSUE IS COVERED IN FAVOUR OF THE APPELLANT BY THE DECISIONS OF HONOURABLE ITAT IN EA RLIER YEARS. RESPECTFULLY FOLLOWING THE JUDGEMENT OF HONOURABLE ITAT AHMEDABA D IN THE CASE OF THE APPELLANT, THE ADDITION MADE BY THE AO IS DIRECTED TO BE DELETED. ITA NO. 2381/AHD/15 [ACIT VS. M/S. KARNAVATI CLUB L TD.] A.Y. 2012-13 - 3 - THE GROUND OF APPEAL IS ACCORDINGLY, ALLOWED.' AS THE FACTS ARE SIMILAR, FOLLOWING THE FINDING GI VEN BY ME IN EARLIER ASSESSMENT YEAR THE DISALLOWANCE MADE BY THE AO IS DIRECTED TO BE DELETED SUBJECT TO VERIFICATION AS MENTIONED ABOVE. THE GROUND OF APPEAL IS ACCORDINGLY, ALLOWED . 4. WE HAVE GIVEN OUR THOUGHTFUL CONSIDERATION TO RI VAL SUBMISSIONS. CASE FILE INDICATES THAT HONBLE JURISDICTIONAL HIGH COURTS DECISION IN TAX APPEAL NO. 46 OF 2012 DECIDED ON 01.08.2016 AS WELL AS A CO-ORDINAT E BENCH ORDER IN ASSESSEES CASE ITSELF IN PRECEDING ASSESSMENT YEAR APPEAL ITA NO.2 470/AHD/2014 DECIDED ON 21.06.2017 HAVE ALREADY ADJUDICATED THE VERY ISSUE IN ASSESSEES FAVOUR TREATING THE RECEIPTS IN QUESTION TO BE CAPITAL RECEIPTS THAN RE VENUE IN NATURE. LEARNED DEPARTMENTAL REPRESENTATIVE FAILS TO DISPUTE ALL TH ESE LEGAL DEVELOPMENTS. WE THEREFORE REJECT REVENUES INSTANT FIRST SUBSTANTIV E GROUND. 5. THE REVENUES SECOND SUBSTANTIVE GROUND SEEKS TO REVIVE DISALLOWANCE OF RS.28,96,940/- @ 10% OF ASSESSEES REPAIR AND MAINT ENANCE EXPENSES INCURRED IN THE RELEVANT PREVIOUS YEAR INVOLVING A GROSS FIGURE OF RS.2,89,69,409/-. THE RELEVANT HEADS ARE BUILDING EXPENDITURE, CLEANING/M AINTENANCE, REPAIRS/MAINTENANCE, FURNITURE REPAIRS AND MAINTENA NCE AND AIR CONDITIONERS MAINTENANCE. THE ASSESSING OFFICER INVOKED THE IMP UGNED DISALLOWANCE @10% THEREBY TREATING THE SAID COMPONENT TO BE CAPITAL E XPENSES AND REST 90% AS REVENUE EXPENDITURE. 6. CASE FILE INDICATES THAT THE CIT(A) FOLLOWS HIS FINDINGS ON IDENTICAL ISSUE IN PRECEDING ASSESSMENT YEAR AS UNDER: 3.3. DECISION: I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE, THE ASSESSMENT ORDER AND THE WRITTEN SUBMISSION OF THE APPELLANT. THE AO HAS MA DE THE DISALLOWANCE OF RS.28,96,940/- BEING 10% OF THE REPAIRS AND MAINTENANCE EXPENSES O F RS. 1,97,63,862/-. THE APPELLANT ON THE OTHER HAS STATED THAT THE AO WAS NOT AT ALL CORRECT IN TREATING THE 10% OF REPAIRS AND MAINTENANCE EXPENSES AS CAPITAL EXPENDITURE PAR TICULARLY WHEN DETAILED EXPLANATIONS AND SUPPORTING EVIDENCES WERE PROVIDED TO A.O. IT I S FURTHER STATED THAT THE A.O. HAS ERRED IN CONCLUDING THAT REPAIRS & MAINTENANCE EXPENDITUR E HAVE ENDURING BENEFIT FOR THE ITA NO. 2381/AHD/15 [ACIT VS. M/S. KARNAVATI CLUB L TD.] A.Y. 2012-13 - 4 - APPELLANT'S BUSINESS. IT HAS FURTHER RELIED ON FOLL OWING DECISIONS OF HON'BLE HIGH COURTS IN THE CASE OF; (I) CIT V. VISHAL PAPER INDUSTRIES (PU NJAB & HARYANA HIGH COURT) 36 TAXMAN.COM 19 & (II) CIT V. SAGAR TALKIES (KARNATAK A HIGH COURT) 173 TAXMAN 12. THE APPELLANT HAS STATED THAT MATTER IS ALSO COVERED & DECIDED IN FAVOUR OF ASSESSEE BY HON'BLE CIT(A) FOR A.Y. 2011-12 BY HIS ORDER DATED 16/06/2014. IT IS NOTED THAT THE SIMILAR ISSUE HAS BEEN DECIDE D BY ME IN THE CASE OF THE APPELLANT FOR THE A.Y. 2011-12 IN APPEAL NO. CIT(A) -VIII/DCIT/CIR. 4/340/13-14 DATED 16/06/2014. FOR THE SAKE OF CLARITY, THE FINDINGS G IVEN BY ME IN PARA-3.3 ARE REPRODUCED HERE UNDER: - 'I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE, THE ASSESSMENT ORDER AND THE WRITTEN SUBMISSION OF THE APPELLANT. THE AO HAS MAD E A DISALLOWANCE OF 10% OF TOTAL REPAIRS AND MAINTENANCE EXPENSES OF RS.1.97 C RORES. IT HAS BEEN HELD BY HER THAT CERTAIN EXPENSES, OUT OF THE EXPENSES CLAIMED BY THE APPELLANT AS REVENUE EXPENSES, WERE NOT IN THE NATURE OF CURRENT REPAIRS AS THE SAME WERE IN RESPECT OF CIVIL WORKS DONE DURING THE YEAR. SHE ACCORDINGLY, HELD THAT 10% OF THE REPAIRS AND MAINTENANCE EXPENSES INCURRED BY THE APPELLANT DURING THE YEAR WERE IN THE NATURE OF CAPITAL EXPENSES AND DISALLOWANCE WAS MAD E TO THAT EXTENT. THE APPELLANT ON THE OTHER HAND HAS SUBMITTED THAT THE AO WAS NOT JUSTIFIED IN TREATING 10% OF EXPENSES AS CAPITAL AS DETAILED EXP LANATION AND SUPPORTING EVIDENCES WERE GIVEN TO HER. THE APPELLANT HAS NOT DERIVED ANY ENDURING BENEFIT OUT OF THOSE REPAIRS. ON CAREFUL CONSIDERATION OF ENTIRE FACTS RELATED TO THE ISSUE IT IS NOTED THAT THE EXPENSES WERE INCURRED FOR RENOVATION OF CLUB AND O THER CIVIL WORKS SUCH AS REPLACEMENT OF TILES AND RENOVATION OF ACTIVITY CEN TERS. IN EARLIER YEARS ALSO THAT THE APPELLANT CLUB HAS FOLLOWED THE PRACTICE OF BOO KING SIMILAR EXPENSES AS REVENUE ITEMS. IT IS FURTHER NOTED THAT THE EXPENDI TURE IS NOT IN THE NATURE WHICH WOULD LEAD TO PERMANENT OR ENDURING BENEFIT TO THE APPELLANT CLUB. THE APPELLANT CLUB IS A POPULAR CLUB AND LOT OF MEMBERS WERE USIN G VARIOUS FACILITIES OF THE CLUBS WHICH RESULTS IN WEAR AND TEAR OF THE EXISTING ASSE TS OF THE CLUB WHICH NECESSITATES FREQUENT REPAIRING. IT IS FURTHER NOTED THAT THE AO HAS NOT POINTED OUT ANY SPECIFIC ITEM OF EXPENDITURE WHICH HAS RESULTED INTO ENDURIN G BENEFIT AND IS IN THE NATURE OF CAPITAL EXPENDITURE INCURRED BY THE APPELLANT. I N VIEW OF THESE FACTS AND CIRCUMSTANCES, THE DISALLOWANCE MADE BY THE AO CANN OT BE SUSTAINED. THE SAME IS THEREFORE, DIRECTED TO BE DELETED. THE GROUND OF APPEAL IS ACCORDINGLY, ALLOWED.' AS THE FACTS ARE SIMILAR, FOLLOWING THE FINDING GI VEN BY ME IN EARLIER ASSESSMENT YEAR THE DISALLOWANCE MADE BY THE AO IS DIRECTED TO BE DELETED SUBJECT TO VERIFICATION AS MENTIONED ABOVE. THE GROUND OF APPEAL IS ACCORDINGLY, ALLOWED. 7. HEARD BOTH SIDES. THERE IS HARDLY ANY DISPUTE T HAT THE ASSESSING OFFICER HIMSELF HAS ACCEPTED 90% OF THE IMPUGNED EXPENDITUR E TO BE OF REVENUE EXPENSES. WE THEREFORE SEE NO REASON AS TO HOW HE COULD TREAT BALANCE 10% OF THE VERY HEADS AS CAPITAL EXPENDITURE IN ABSENCE OF ANY SPECIFIC E VIDENCE. IT FURTHER EMERGES THAT ITA NO. 2381/AHD/15 [ACIT VS. M/S. KARNAVATI CLUB L TD.] A.Y. 2012-13 - 5 - THE ABOVE CO-ORDINATE BENCH DECISION (SUPRA) HAS AL READY REJECTED REVENUES SIMILAR ARGUMENT QUA THE VERY ISSUE. WE THEREFORE SEE NO REASON TO ADOPT A DIFFERENT APPROACH IN THE IMPUGNED ASSESSMENT YEAR. THIS SECOND SUBSTANTIVE GROUND IS ALSO DECLINED. 8. THIS LEAVES US WITH REVENUES LAST SUBSTANTIVE G ROUND THAT THE CIT(A) OUGHT NOT TO HAVE REVERSED ASSESSING OFFICERS ACTION DIS ALLOWING TRAFFIC ISLAND EXPENSES OF RS.1,88,434/-. LEARNED COUNSEL REPRESENTING FIL ES BEFORE US A CHART INDICATING ASSESSEES REPAIR AND MAINTENANCE EXPENSES TO HAVE INCLUDED THE IMPUGNED AMOUNT. THE CIT(A) ALSO ACCEPTS ITS PLEA THAT IT IS A CASE OF DOUBLE DISALLOWANCE OF THE VERY AMOUNT. THIS CLINCHING FINDING WAS UNREBUTTED FROM REVENUES END. WE ACCORDINGLY AFFIRM LOWER APPELLATE FINDINGS QUA THI S LAST ISSUE AS WELL. 9. THIS REVENUES APPEAL IS DISMISSED. [PRONOUNCED IN THE OPEN COURT ON THIS THE 12 TH DAY OF OCTOBER, 2017.] SD/- SD/- ( MANISH BORAD ) ( S. S. GODARA) ACCOUNTANT MEMBER JUDICIAL M EMBER AHMEDABAD: DATED 12/10/2017 TRUE COPY S.K.SINHA / COPY OF ORDER FORWARDED TO:- / REVENUE 2 / ASSESSEE ! / CONCERNED CIT 4 !- / CIT (A) ( )*+ ,--. . /0 / DR, ITAT, AHMEDABAD 1 +23 / GUARD FILE. BY ORDER / . // . /0