Cross Country Hotel Ltd., V. ITO, Ward-3(4),

ITA 2711/DEL/2004

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 3976 (ITAT-DELHI)
• Duration Of Justice: 5 year(s) 11 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-05-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 18-05-2010
• Assessment Year: 2000-2001
• Appeal Filed On: 04-06-2004
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Capital expenditure
• Section: 43B; 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B : NEW DELHI BEFORE SHRI A.D.JAIN, JM AND SHRI R.C.SHARMA, AM ITA NO.2711/DEL/2004 ASSESSMENT YEAR : 2000-01 M/S CROSS COUNTRY HOTELS LTD., D-16, OKHLA INDUSTRIAL AREA, PHASE-I, NEW DELHI. PAN NO.AAACC2846F. VS. INCOME TAX OFFICER, WARD-3(4), NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI R.S.SINGHVI, CA. RESPONDENT BY : SHRI SARBJEET SINGH, DR. ORDER PER R.C.SHARMA, AM : THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF CIT(A) DATED 24.3.2004, IN THE MATTER OF ORDER PASSED U/S 143(3) FOR THE AY 2000-01. 2. FIRST GRIEVANCE OF THE ASSESSEE RELATES TO DISAL LOWANCE OF DEDUCTION OF RS.8,28,545/- U/S 35D OF THE IT ACT. 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PER USED. FROM THE RECORD, WE FOUND THAT ASSESSEE HAS INCURRED PRELIMINARY EXP ENSES OF RS.82,95,815/- IN EARLIER YEARS, ELIGIBLE PROPORTIONATE AMOUNT OF 10% WAS CLAIMED EVERY YEAR U/S 35D AND THE SAME WAS ALLOWED. AY 2000-01, UNDER CO NSIDERATION, IS THE SIXTH YEAR WHEREIN SIMILAR AMOUNT OF DEDUCTION WAS CLAIME D U/S 35D BEING 1/10 TH OF THE ITA-2711/DEL/2004 2 TOTAL EXPENDITURE INCURRED. HOWEVER, AO DECLINED T HE CLAIM OF DEDUCTION BY OBSERVING THAT IT WAS CAPITAL EXPENDITURE. THERE I S NO DISPUTE TO THE WELL SETTLED LEGAL PROPOSITION THAT CAPITAL EXPENDITURE AS SUCH IS NOT ALLOWABLE AS A DEDUCTION WHILE COMPUTING PROFIT OF THE BUSINESS, BUT THE EXP ENDITURE WHICH IS IN THE NATURE OF EXPENSES ELIGIBLE FOR CLAIM OF DEDUCTION U/S 35D IS TO BE ALLOWED PROPORTIONATELY AS PER THE PROVISIONS OF SECTION 35 D(1). IN THE INSTANT CASE BEFORE US, SINCE THE EXPENDITURE WAS INCURRED PRIOR TO 31 ST MARCH, 1998, AND WHICH IS IN THE NATURE OF EXPENSES AS SPECIFIED UNDER SUB-SECTI ON (2) OF SECTION 35D, THE SAME IS ELIGIBLE FOR DEDUCTION AT THE RATE OF 10% EVERY YEAR. EVEN IN THE EARLIER YEARS, THE EXPENDITURE SO CLAIM WAS ALLOWED AND DURING THE YEAR UNDER CONSIDERATION ALSO, THE ASSESSEE HAS JUST CLAIMED PROPORTIONATE E XPENSES AMORTIZED DURING THE YEAR, DISALLOWANCE OF SAME WAS NOT JUSTIFIED. ACCO RDINGLY, WE DIRECT THE AO TO ALLOW THE SAME. 4. THE ASSESSEE IS ALSO AGGRIEVED BY DISALLOWANCE O F EMPLOYERS AND EMPLOYEES CONTRIBUTION TO PF AMOUNTING TO RS.3,38, 855/- AND RS.837/- ON ACCOUNT OF ESI CONTRIBUTION. THE LOWER AUTHORITIES HAVE DECLINED ASSESSEES CLAIM ON THE PLEA THAT AMOUNT WAS NOT PAID WITHIN THE STA TUTORY PERIOD PRESCRIBED UNDER THE RESPECTIVE ACT. THERE IS NO DISPUTE TO THE FAC T THAT BOTH THE PAYMENTS WERE MADE NOT ONLY BEFORE THE LAST DATE OF FILING THE RE TURN BUT WITHIN THE FINANCIAL YEAR ITSELF, THE DISALLOWANCE OF THE SAME IS NOT JUSTIFI ED. HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF P.M.ELECTRONICS 177 TAXMAN 1 HAD HELD THAT NO DISALLOWANCE U/S 43B CAN BE MADE IF THE SAME IS PAI D BEFORE LAST DATE OF FILING THE RETURN. HON'BLE SUPREME COURT IN THE CASE OF ALOME EXTRUSIONS HELD THAT AMENDMENT IN SECTION 43B BY THE FINANCE ACT, 2003 W AS RETROSPECTIVE FROM 1.4.1988, ACCORDINGLY PF & ESI PAYMENT MADE BEFORE THE LAST DATE OF FILING THE RETURN CANNOT BE DISALLOWED. ACCORDINGLY, RESPECTF ULLY FOLLOWING THE DECISIONS REFERRED ABOVE, WE DO NOT FIND ANY MERIT IN THE ORD ER OF THE CIT(A) FOR CONFIRMING THE DISALLOWANCE ON ACCOUNT OF DELAYED CONTRIBUTION OF PF AND ESI. AO IS DIRECTED TO ALLOW THE SAME. ITA-2711/DEL/2004 3 5. OTHER GROUNDS TAKEN IN THE APPEAL WERE NOT PRESS ED BY THE LEARNED AR, THEREFORE SAME ARE DISMISSED IN-LIMINE. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED IN PART, IN TERMS INDICATED HEREINABOVE. DECISION PRONOUNCED IN THE OPEN COURT ON 18 TH MAY, 2010. SD/- SD/- (A.D.JAIN) (R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 18.05.2010. VK. COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT DEPUTY REGISTRAR ITA-2711/DEL/2004 4