ITO, New Delhi V. M/s. Wild India Resorts Kanha Pvt. Ltd., New Delhi

ITA 2570/DEL/2012

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 0043 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 11 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-05-2015
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: H
• Next Hearing Date: 05-05-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 28-05-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: J P CHANDRAKAR
• Assessee Lawyers: MAHESH SAHAI

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : H : NEW DELHI BEFORE SHRI R.S. SYAL, AM AND SHRI H.S. SIDHU, JM ITA NO.2570/DEL/2012 ASSESSMENT YEAR : 2008-09 ITO, WARD 18(3), CR BUILDING, NEW DELHI. VS. WILD INDIA RESORTS KANHA PVT. LTD., 39, SHAHPUR JAT, NEW DELHI. PAN: AAACW5735F (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI MAHESH SAHAI, FCA DEPARTMENT BY : SHRI J.P. CHANDRAKAR, SR. DR DATE OF HEARING : 05.05.2015 DATE OF PRONOUNCEMENT : 06.05.2015 ORDER PER R.S. SYAL, AM: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A) ON 15.3.2012 IN RELATION TO THE ASSESSME NT YEAR 2008-09. ITA NO.2570/DEL/2012 2 2. THE FIRST GROUND IS AGAINST THE DELETION OF ADDI TION OF RS.7,65,084/- ON ACCOUNT OF ADVANCES RECEIVED FROM CUSTOMERS NOT SHOWN AS INCOME. 3. SUCCINCTLY, THE ASSESSEE RUNS A RESORT AT BAIHAR . A SUM OF RS.7,65,084/- WAS SHOWN AS ADVANCES FROM CUSTOMERS, WHICH WAS NOT OFFERED AS INCOME. ON BEING CALLED UPON TO EXPLAIN AS TO WHY SUCH ADVANCES BE NOT TAKEN AS THE INCOME FOR THE YEAR, T HE ASSESSEE STATED THAT THESE AMOUNTS WERE IN THE NATURE OF ADVANCES WHICH WERE CONSIDERED AS INCOME FOR THE SUBSEQUENT YEAR ON THE GUESTS ACTUAL LY PUTTING IN STAY IN THE PERIOD RELEVANT TO APRIL, 2008 TO MARCH, 2009. NOT CONVINCED, THE AO MADE ADDITION FOR THE SAID SUM OF RS.7,65,084/-, WHICH CAME TO BE DELETED IN THE FIRST APPEAL. 4. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SING THE RELEVANT MATERIAL ON RECORD, IT IS OBSERVED THAT THE ASSESSE E IS RUNNING A RESORT AT BAIHAR AND A SUM OF RS.7.65 LAC WAS SHOWN AS `ADVA NCES FROM CUSTOMERS AGAINST THEIR STAY TO BE MADE IN THE SU BSEQUENT FINANCIAL YEAR. UNDER THE MERCANTILE SYSTEM OF ACCOUNTING, T HE EVENT OF RECOGNIZING INCOME IS WHEN SUCH INCOME ACCRUES AND NOT WHEN A SUM IS ITA NO.2570/DEL/2012 3 RECEIVED AS AN ADVANCE. THE ASSESSEE HAS MADE OUT A CASE THAT THIS AMOUNT OF RS.7.65 LAC RECEIVED IN THE INSTANT YEAR ACTUALLY RELATED TO THE STAY BY GUESTS TAKING PLACE IN THE SUBSEQUENT YEAR, WHEN SUCH AMOUNT WAS OFFERED FOR TAXATION. HOWEVER, NO SUCH DETAILS CO-RELATING ADVANCES RECEIVED IN THE CURRENT YEAR WITH THE STAY OF GUEST S TAKING PLACE IN THE SUBSEQUENT YEAR, HAS BEEN PLACED ON RECORD. IN OUR CONSIDERED OPINION, IF THE AMOUNT RECEIVED IN THE INSTANT YEAR ACTUALLY PERTAINS TO STAY OF CUSTOMERS IN THE SUBSEQUENT YEAR, THEN, THE AMOUNT SHOWN IN THE BALANCE SHEET AS ADVANCE HAS TO BE TAKEN AS SUCH WITHOUT CO NSISTING OF ANY ELEMENT OF INCOME FOR THE CURRENT YEAR. IF, ON THE OTHER HAND, THE STAY OF CUSTOMERS ACTUALLY TOOK PLACE IN THE YEAR IN QUESTI ON, THEN, THE AMOUNT SHOULD BE TREATED AS INCOME. WE, THEREFORE, SET AS IDE THE IMPUGNED ORDER AND REMIT THE MATTER TO THE FILE OF AO FOR CO NSIDERING THE CO- RELATION BETWEEN THE ADVANCES AND STAY OF GUESTS AS INDICATED ABOVE. 5. THE ONLY OTHER GROUND WHICH SURVIVES IS AGAINST THE DELETION OF ADDITION OF RS.30,69,305/- OUT OF DIRECT AND ADMINI STRATIVE EXPENSES INCURRED AT THE DELHI REGISTERED OFFICE. ITA NO.2570/DEL/2012 4 6. THE FACTS RELATING TO THIS GROUND ARE THAT ON PE RUSAL OF THE ASSESSEES PROFIT & LOSS ACCOUNT, IT WAS NOTICED BY THE AO THAT THE ASSESSEE CLAIMED EXPENSES OF RS.52.62 LAC FOR ITS D ELHI OFFICE WHICH, INTER ALIA, INCLUDED DIRECT EXPENSES AMOUNTING TO RS.20,51,225 /- AND ADMINISTRATIVE EXPENSES OF RS.10,18,050/-. THE AO OBSERVED THAT THE ASSESSEE WAS RUNNING A RESORT AT BAIHAR AND NO ACT IVITY WAS CARRIED OUT AT DELHI OFFICE. HE, THEREFORE, REFUSED TO ACCEPT THE ASSESSEES CLAIM FOR DEDUCTION OF THESE EXPENSES TOTALING TO RS.30,69,30 5/-. THE LD. CIT(A) DELETED THE ADDITION. 7. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SING THE RELEVANT MATERIAL ON RECORD, IT IS OBSERVED THAT THOUGH THE ASSESSEE IS RUNNING A RESORT AT BAIHAR, BUT, ITS HEAD OFFICE IS IN DELHI, WHICH HAS NOT BEEN CONTROVERTED BY THE LD. DR. THERE CAN BE NO DENIA L OF THE FACT THAT CERTAIN EXPENSES ARE INCURRED BY HEAD OFFICE EVEN W ITHOUT CARRYING ON ANY BUSINESS ACTIVITY THEREFROM. THE LD. AR CONTEN DED THAT CERTAIN PURCHASES WERE MADE BY DELHI OFFICE AND RECORDED IN ITS BOOKS OF ACCOUNT WHICH ACTUALLY PERTAINED TO THE RUNNING OF RESORT AT BAIHAR. IT ITA NO.2570/DEL/2012 5 WAS CONTENDED THAT SIMILARLY OTHER EXPENSES INCURRE D BY THE DELHI OFFICE ALSO RELATE WHOLLY TO RESORT. IN OUR CONSIDERED OP INION, THE VIEW TAKEN BY THE LD. CIT(A) IN DELETING THE ADDITION IS UNIMP EACHABLE IN VIEW OF THE FACT THAT THE AO MADE ADDITION SIMPLY BY OBSERV ING THAT NO BUSINESS ACTIVITY WAS CARRIED OUT BY THE ASSESSEE AT DELHI O FFICE. WE, THEREFORE, UPHOLD THE VIEW TAKEN BY THE LD. CIT(A) ON THIS SCO RE. THIS GROUND IS NOT ALLOWED. 8. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. THE ORDER PRONOUNCED IN THE OPEN COURT ON 06.05.201 5. SD/- SD/- [H.S. SIDHU] [R.S. SYAL] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED, 06 TH MAY, 2015. DK ITA NO.2570/DEL/2012 6 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT AR, ITAT, NEW DELHI.