RAJASTHAN RAJYA SAHKARI KRAYA VIKRAYA SANGH LTD., Jaipur V. ASSISTANT COMMISSIONER OF INCOME TAX, Jaipur

ITA 251/JPR/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 3667 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 2 month(s) 6 day(s)
• Appeal Type: Income Tax (International Taxation) Appeal
• Pronouncement Date: 29-04-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Appeal Filed On: 22-02-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: V K JAIN
• Keywords: Capital asset; Depreciation; Business expenditure; Revenue expenditure; Set aside
• Section: 37(1)

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH FOT; IKY JKO] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM VK;DJ VIHY LA- @ ITA NO. 251/JP/2018 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2013-14 RAJASTHAN RAJYA SAHKARI KRAYA VIKRAYA SANGH LTD., 4, BHAWANI SINGH ROAD, JAIPUR. CUKE VS. THE ACIT, CIRCLE-6, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AAAAR 0279 B VIHYKFKHZ@ APPE LLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI V.K. JAIN (C.A.) JKTLO DH VKSJ LS @ REVENUE BY : SHRI AJAY MALIK (ADDL. CIT) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 16/05/2018 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT: 22/05/2018 VKNS'K@ ORDER PER: VIJAY PAL RAO, J.M. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 28.12.2017 OF LD. CIT(A), JAIPUR FOR THE ASSESSMENT YEAR 2013-14. THE ASSESSEE HAS RAISED THE FOLLOWING GROUND UNDER AS U NDER:- 1. THAT THE LEARNED CIT(APPEALS) ERRED IN CONFIRMI NG ADDITION OF RS. 1,00,00,000/- ON ACCOUNT OF DISALLOWANCE OF CON TRIBUTION OF RS. 1 CRORE TOWARDS RAJASTHAN BHAWAN, MUMBAI. THE S AME IS ALLOWABLE EXPENDITURE AND ADDITION OF RS. 1,00,00,0 00/- DESERVES TO BE DELETED. ITA NO. 251/JP/2018 RAJASTHAN RAJYA SAHKARI KRAYA VIKRAYA SANGH LTD. AC IT 2 2. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE CONTRIBUTED A SUM OF RS. 1 CRORE TO RAJASTHAN BHAWAN MUMBAI AT MU MBAI AND THE SAME WAS DEBITED TO THE P & L ACCOUNT. THE AO WAS O F THE VIEW THAT THE SAID AMOUNT OF RS. 1 CRORE BEING CONTRIBUTION O F THE RAJASTHAN BHAWAN MUMBAI IS NOT COVERED U/S 37(1) OF THE ACT AND ACCORDINGLY, PROPOSED TO DISALLOWANCE THE SAID AMOUNT. THE ASSES SEE SUBMITTED THAT THE CONTRIBUTION WAS MADE TOWARDS THE CONSTRUCTION OF RAJASTHAN BHAWAN, MUMBAI AGAINST WHICH THE EMPLOYEES OF THE A SSESSEE WILL BE ENTITLED TO STAY IN THE PREMISES AT NOMINAL AND CON CESSIONAL CHARGES. THEREFORE, THE ASSESSEE CLAIMED THAT THOUGH THE OWN ERSHIP OF THE ASSET DOES NOT VEST WITH THE ASSESSEE HOWEVER, THE ASSET CREATED BY THE CONTRIBUTION WOULD RESULT IN BUSINESS ADVANTAGE OF THE ASSESSEE AS THE EMPLOYEES OF THE ASSESSEE WOULD BE PERMITTED TO USE THE PREMISES AT CONCESSIONAL AND NOMINAL CHARGES. THE AO DID NOT AC CEPT THIS CONTENTION OF THE ASSESSEE AND DISALLOWED THE SAID CLAIM OF RS. 1 CRORE. ON APPEAL, THE LD. CIT(A) CONFIRMED THE DISALLOWAN CE MADE BY THE AO AS TO CLAIM OF THE ASSESSEE. HENCE, THE ASSESSEE HA S FILED THE PRESENT APPEAL. ITA NO. 251/JP/2018 RAJASTHAN RAJYA SAHKARI KRAYA VIKRAYA SANGH LTD. AC IT 3 3. WE HAVE HEARD THE LD. AR AS WELL AS THE LD. DR AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THE LD. DR HAS STR ONGLY RELIED UPON BY THE ORDER OF ASSESSING OFFICER AND SUBMITTED THAT T HE CONTRIBUTION MADE BY THE ASSESSEE DOES NOT FALL UNDER THE PROVISIONS OF SECTION 37(1) OF THE ACT AND FURTHER, IT IS ON CAPITAL ACCOUNT. THE LD. DR HAS FURTHER CONTENDED THAT THE ASSET BEING THE RAJASTHAN BHAWAN , MUMBAI DOES NOT BELONG TO THE ASSESSEE AND THE OWNERSHIP IS NOT VESTED WITH THE ASSESSEE THEREFORE, ANY EXPENDITURE TOWARDS CONSTRU CTION OF SUCH ASSET CANNOT BE ALLOWED AS BUSINESS EXPENDITURE. 4. ON THE OTHER HAND, THE LD. AR OF THE ASSESSEE HA S SUBMITTED THAT THIS ISSUE HAS BEEN CONSIDERED AND DECIDED BY THIS TRIBUNAL IN VARIOUS CASES INCLUDING IN THE CASE OF RAJASTHAN RENEWAL EN ERGY AS WELL AS M/S RAJASTHAN STATE INDUSTRIAL DEVELOPMENT & INVESTMENT CORP. LTD. VS. DCIT IN ITA NO. 311/JP/2014, 420/JP/2014, 323/JP/20 16, CO. NO. 07/JP2016, ITA NO. 313/JP/2014, 421/JP/2014, 93/JP/ 2015, 207/JP/2015, 94/JP/2015, 208/JP2015 VIDE ORDER DATE D 23.02.2018. HE HAS FURTHER SUBMITTED THAT AS PER THE ORDER DATED 2 4.10.2017 THE GOVERNMENT OF RAJASTHAN HAS ALLOWED THE ASSESSEE A REBATE OF 50% FOR STAY IN THE RAJASTHAN BHAWAN MUMBAI AT MUMBAI. HE H AS FILED A COPY OF THE SAID ORDER DATED 24.10.2017. ITA NO. 251/JP/2018 RAJASTHAN RAJYA SAHKARI KRAYA VIKRAYA SANGH LTD. AC IT 4 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WEL L AS THE RELEVANT MATERIAL ON RECORD. AT THE OUTSET WE NOTE OF THE CO ORDINATE BENCHES OF THIS TRIBUNAL IN CASE OF M/S RAJASTHAN STATE INDUST RIAL DEVELOPMENT & INVESTMENT CORP. LTD. VS. DCIT (SUPRA) HAS CONSIDER ED AND DECIDED AN IDENTICAL ISSUE IN PARA 36 AS UNDER:- 36. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WEL L AS RELEVANT MATERIAL ON RECORD. AT THE OUTSET WE NOTE THAT THIS TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2003-04 WHILE CONSIDERING AN ISSUE OF THE EXPENDITURE INCUR RED TOWARDS THE CONTRIBUTION MADE TO THE CONSTRUCTION OF GUEST HOUSE IN DELHI VIDE ORDER DATED 21.08.2007 IN ITA NO. 324/JP2006 H AS HELD IN PARA 12 AS UNDER:- 12. CONSIDERING THE ABOVE SUBMISSIONS, WE ARE OF T HE VIEW THAT UNDISPUTEDLY ASSESSEE WAS NOT THE OWNER OF THE FOUR ROOMS IN THE GUEST HOUSE OF THE STATE GOVERNMENT AT CHANAKYAPURI IN NEW DELHI AND THE ASSESSEE WAS ONLY ENTITLED TO USE THO SE FOUR ROOMS ALLOTTED TO IT FOR STAYING OF ITS OFFICIALS VISITIN G DELHI. ASSESSEE HAS NO RIGHT TO SELL, ALTER OR AMEND THOSE ALLOTTED ROO M. THE GUEST HOUSE WAS UNDISPUTED NEITHER PURCHASED NOR CONSTRUC TED BY THE ASSESSEE. THE MAINTENANCE OF THESE ROOMS WERE ALSO IN THE HANDS OF THE STATE GOVERNMENT WHO HAS BEEN CHARGING THE SAME ON ANNUAL BASIS FROM THE ASSESSEE. THUS IN A SENSE ONLY THE FACILITIES TO USE THOSE ALLOTTED FOUR ROOMS TO THE ASSESSEE WERE PURCHASED ON A LUMP-SUM PAYMENT. IT IS AN ESTABLISH ED POSITION OF LAW THAT IN A CASE OF OWNERSHIP AGAINST IMMOVABL E PROPERTY, THE UNCONDITIONAL INTEREST IN ABSOLUTE TERM WITH FR EEDOM TO SELL, ALIENATE ECT. IS TRANSFERRED BY THE SELLER TO THE P URCHASER, WHICH IS ADMITTEDLY NOT THE CASE OVER HERE. UNDER THESE CIRC UMSTANCES WE ARE OF THE VIEW THAT THE LD. CIT(A) HAS RIGHTLY COM E TO THE CONCLUSION THAT NO CAPITAL ASSETS HAVE BEEN CREATED TO THE ITA NO. 251/JP/2018 RAJASTHAN RAJYA SAHKARI KRAYA VIKRAYA SANGH LTD. AC IT 5 ASSESSEE BUT ONLY A PRIVILEGE OR A RESERVATION OF F OUR ROOMS WERE MADE ON PERMANENT BASIS TO THE ASSESSEE. THEREFORE, THE PROVISIONS OG GUEST HOUSE AT DELHI WAS IN THE NORMA L COURSE OF BUSINESS AND EXPENDITURE INCIDENTAL TO IT IS OF REV ENUE NATURE. THE LD. CIT(A) HAS RIGHTLY OBSERVED FURTHER THAT TH E AO HAS NOT APPRECIATED THE FACTS PROPERLY THAT TOTAL EXPENDITU RE OF RS. 40,00,000/- WAS DEFERRED IN FIVE EQUAL INSTALMENTS AND ONLY RS. 8,00,000/- WAS DEBITED IN A.Y. 2003-04. THUS, THE E NTIRE ADDITION OF RS. 40,00,000/- NEED TO BE DELETED AND THE CLAIM OF DEPRECIATION ALLOWED BY THE AO AT RS. 2,00,000/- IS ALSO TO BE ADDED BACK IN THE COMPUTATION OF INCOME AS PER THE FIRST APPELLATE ORDER. WE CONCUR WITH THE VIEW OF LD. CIT (A) WHICH ALSO FINDS SUPPORT FROM THE DECISIONS OF HONBLE DELHI H IGH COURT IN JTHE CASE OF NESET HOLDINGS (P) LTD. V/S CIT(SUPRA) WHEREIN ONE TIME PAYMENT WAS ALLOWED AS REVENUE EXPENDITURE WH ERE SUCH PAYMENT IS MEANT FOR REDUCING THE OVERALL REVENUE E XPENDITURE OF THE ASSESSEE. THE GUEST HOUSE IN THE PRESENT CASE W AS REQUIRED ONLY FOR RUNNING THE BUSINESS AND WORKING OF THE AS SESSEE FOR BETTER INTER-ACTION WITH THE GOVERNMENT OF INDIA AN D VARIOUS FINANCIAL ORGANIZATIONS. THE FIRST APPELLATE ORDER BEING COMPREHENSIVE AND REASONS ONE, WE ARE NOT INCLINED TO INTERFERE THEREWITH. THE SAME IS UPHELD. THE GROUND NO. 2 IS THUS REJECTED. WE FURTHER NOTE THAT AS PER LETTER DATED 24.10.2017 THE GOVERNMENT OF RAJASTHAN HAS ALLOWED THE ASSESSEE A REBATE OF 75% OF TARIFF OF THE ROOM FOR STAYING OF THE EMPLOY EES/OFFICERS OF THE ASSESSEE. THE COORDINATE BENCH OF THIS TRIBUNAL IN CASE OF RAJASTHAN RENEWAL ENERGY CORPORATION LTD. VS. DCIT VIDE ORDER DATED 18.08.2017 IN ITA NO. 159& 202/JP/2015 AND OT HERS WHILE CONSIDERING AN IDENTICAL ISSUE HAS HELD IN PARA 55 AS UNDER:- 55. WE HAVE HEARD THE RIVAL CONTENTIONS AND PURSUE D THE MATERIAL AVAILABLE ON RECORD. IT IS NOT DISPUTED T HAT THE CONTRIBUTION TOWARDS CONSTRUCTION OF RAJASTHAN BHAW AN HAS BEEN MADE AS DIRECTED AND AUTHORIZED BY THE STATE GOVERN MENT, BEING ITA NO. 251/JP/2018 RAJASTHAN RAJYA SAHKARI KRAYA VIKRAYA SANGH LTD. AC IT 6 THE OWNER AND SHAREHOLDER OF THE ASSESSEE COMPANY. THE QUESTION IS THEREFORE NOT ABOUT THE AUTHORIZATION B EFORE INCURRENCE OF THE SAID EXPENDITURE. THE QUESTION I S WHETHER THE SAID EXPENDITURE HAS BEEN INCURRED BY THE ASSESSEE COMPANY FOR THE PURPOSES OF ITS BUSINESS OR NOT. THE ONUS IS O N THE ASSESSEE COMPANY TO ESTABLISH THE SAID FACT. THE LD AR HAS SUBMITTED THAT THE ASSESSEE COMPANY HAS WRITTEN TO THE GOVERNMENT OF RAJASTHAN TO PROVIDE ACCOMMODATION FACILITIES IN TH E RAJASTHAN BHAWAN TO ITS OFFICERS ON THEIR VISIT TO MUMBAI, HO WEVER, THERE IS NOTHING ON RECORD TO SUPPORT THE SAID CONTENTION. WE ARE ACCORDINGLY SETTING ASIDE THE MATTER TO THE FILE OF THE AO TO EXAMINE THE SAID CONTENTION AND THE EXAMINE THE MAT TER A FRESH. IN THE RESULT, THE GROUND OF THE ASSESSEE IS ALLOWE D FOR STATISTICAL PURPOSES. THUS, THE TRIBUNAL BY CONSIDERING THE ACCOMMODATION FACILITY IN THE GUEST HOUSE AS RELEVANT FACTOR SET ASIDE THE IS SUE TO THE RECORD OF THE AO TO EXAMINE THE ACCOMMODATION FACIL ITY AVAILABLE TO THE ASSESSEE IN RAJSTHAN BHAWAN AT MUMBAI. 36. SINCE THIS LETTER DATED 24.10.2017 WAS NOT AVAI LABLE BEFORE THE COORDINATE BENCH IN CASE OF RAJASTHAN RENEWAL E NERGY CORPORATION LTD. (SUPRA) THEREFORE, THE AO WAS ASKE D TO EXAMINE THE FACT. HOWEVER, IN VIEW OF THE SAID LETTER DATED 24.10.2017 IT IS CLEAR THAT THE ASSESSEE GOT THE REBATE OF 75% AS WE LL AS THE RIGHT TO USE THE ACCOMMODATION BY ITS OFFICERS/EMPLOYEES VISITING AT MUMBAI. ACCORDINGLY, IN VIEW OF THE EARLIER DECISIO N OF THIS TRIBUNAL IN ASSESSEES OWN CASE AS WELL AS IN VIEW OF THE FACT THAT THE ASSESSEE HAS RECEIVED THE BENEFIT IN THE SHAPE OF ACCOMMODATION AGAINST THE SAID EXPENDITURE FOR CONS TRUCTION OF RAJASTHAN HOUSE WE HOLD THAT THE CLAIM OF THE ASSES SEE IS AN ALLOWABLE EXPENDITURE U/S 37(1) OF THE ACT. ITA NO. 251/JP/2018 RAJASTHAN RAJYA SAHKARI KRAYA VIKRAYA SANGH LTD. AC IT 7 THUS, IN VIEW OF THE DECISION OF THIS TRIBUNAL ON THE SAME ISSUE, WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE ORDER OF TH E LD. CIT(A) QUA THIS ISSUE. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT ON 22/05/2018 SD/- SD/- FOE FLAG ;KNO FOT; IKY JKO (VIKRAM SINGH YADAV) (VIJAY PAL RAO) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 22/05/2018. * SANTOSH. VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- RAJASTHAN RAJYA SAHKARI KRAYA VIKRAY A SANGH LTD., JAIPUR 2. IZR;FKHZ@ THE RESPONDENT- ACIT, CIRCLE-6, JAIPUR. 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR. 6. XKMZ QKBZY@ GUARD FILE {ITA NO. 251/JP/2018} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR