ACIT, Cirlce-2(2), Hyd, Hyderabad V. Hyderabad Race Club, Hyd, Hyderabad

ITA 295/HYD/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 5864 (ITAT-HYDERABAD)
• Duration Of Justice: 9 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-12-2016
• Appeal Filed By: Department
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 14-03-2016
• Court: TRIBUNAL
• Department Lawyers: K V N CHARYA
• Keywords: Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO. ASST. YEAR APPELLANT RESPONDENT 295/HYD/2016 2010-11 THE ASST. COMMISSIONER OF INCOME TAX, CIRCLE-2(2) HYDERABAD M/S. HYDERABAD RACE CLUB, HYDERABAD [PAN: AAACH2773C] 296/HYD/2016 2011-12 297/HYD/2016 2010-11 M/S. HYDERABAD RACE CLUB, HYDERABAD [PAN: AAACH2773C] THE ASST. COMMISSIONER OF INCOME TAX, CIRCLE-2(2) HYDERABAD 298/HYD/2016 2011-12 THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-2(2) HYDERABAD FOR REVENUE : SHRI K.V.N. CHARYA, CIT-DR FOR ASSESSEE : SHRI K.C. DEVDAS, AR DATE OF HEARING : 08-12-2016 DATE OF PRONOUNCEMENT : 30-12-2016 O R D E R PER B. RAMAKOTAIAH, A.M. : THESE ARE CROSS-APPEALS BY REVENUE AND ASSESSEE FOR AYS. 2010-11 AND 2011-12 ARISING OUT OF THE SEPARATE BUT CO MMON ORDERS OF COMMISSIONER OF INCOME TAX (APPEALS)-9, H YDERABAD DATED 01-12-2015 AND 31-12-2015 RESPECTIVELY. HYDERABAD RACE CLUB :- 2 -: 2. BRIEFLY STATED, ASSESSEES IS A COMPANY ENGAGED IN THE BUSINESS OF MAINTAINING AND OPERATION OF HORSE RACE- COURSE AND RUNNING VARIOUS RACES. IT FILED ITS RETURN OF INCOME, DECLARING INCOME OF RS. 22,15,03,214/- FOR AY. 2010-11 AND RS . 19,81,75,309/- FOR AY. 2011-12 IN THE RESPECTIVE DUE DATES. IN THE CONSEQUENTIAL SCRUTINY ASSESSMENTS COMPLETED BY THE ASS ESSING OFFICER (AO), AS IN EARLIER YEARS, AO MADE A DISALL OWANCE OF 15% AD-HOC DISALLOWANCE OUT OF RACE WINNING PAYMENTS OF L ESS THAN RS. 2,500/- AMOUNTING TO DISALLOWANCE OF RS. 52,64,73,81 8/- IN AY. 2010-11 AND RS. 63,65,05,974/- FOR AY. 2011-12. TH E AO RECORDS IN THE ORDER THAT INSTEAD OF PRODUCING THE REQUIRED IN FORMATION, ASSESSEE IS RELYING ON THE ORDERS OF THE ITAT IN EAR LIER YEARS THAT THE ENTIRE DATA WAS COMPUTERISED. AO MADE DISALLOWANCE ON THE REASON THAT DEPARTMENT HAS NOT ACCEPTED THE CONTENTIONS OF THE TRIBUNAL AND THE MATTER IS PENDING BEFORE THE HON'BLE HIGH COURT. WHEN APPEALED, LD.CIT(A) DELETED THE DISALLOWANCE STA TING AS UNDER: 4.1 I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS O F THE ASSESSEE AND THE FACTS OF THE CASE. GROUND. NO. 1 RELATES TO ADHOC DISALLOWANCE OF 15% OF RACE WINNING PAYMENTS OF LESS THAN 2,500/- A MOUNTING TO RS. 52,64,73,818/- THE ASSESSING OFFICER HAS OBSERVED T HAT AN AMOUNT OF RS. 350,98,25,431/- WAS PAID AS BETTING PRIZE MONEY FOR WHICH NO DETAILS OF PAYEES COULD BE FURNISHED BY THE ASSESSEE. HENCE, I N THE ABSENCE OF DETAILS THE GENUINENESS OF PAYMENTS WAS UNVERIFIABL E AND HENCE ADHOC DISALLOWANCE @ 15% AMOUNTING TO RS. 52,64,73,818/- WAS MADE. DURING THE COURSE OF APPELLATE PROCEEDINGS THE ASSESSEE CO NTENTED THAT THE BETTING MONIES RECEIVED AND PAYMENTS MADE WERE NEIT HER INCOME NOR EXPENDITURE TO THE ASSESSEE AS IT WAS ACTING AS MER E FACILITATOR OF THE BETTING MONIES KEEPING ITS COMMISSION AND APPLICABL E TAXES. THE ASSESSEE FURTHER SUBMITTED THAT ALTERNATIVELY EVEN IF SUCH A MOUNT IS CONSIDERED TO EXPENDITURE, THE SAME IS NOT LIABLE FOR DISALLOWANC E RELYING ON THE FOLLOWING JUDGEMENTS OF THE HON'BLE ITAT IN THE ASS ESSEE OWN CASE FOR EARLIER YEARS. HYDERABAD RACE CLUB :- 3 -: '(I) ITA NO 313/HYD/2011 FOR THE A Y 2004-05 (II) ITA NO. 312/HYD/2011 FOR THE A Y 2005-06 (III) ITA NO. 1059/HYD/2011 FOR THE A Y 2006-07 (IV) ITA NO. 1425/HYD/2011 FOR THE A Y 2007-08 (V) ITA NO. 120/HTD/2012 FOR THE A Y 2008-09 DT. 16 .07.2012 (VI) ITA NO. 108/HYD/2013 FOR THE A Y 2009-10 DT. 3 0.04.2013' 4.2 I HAVE PERUSED THE ABOVE ORDERS OF THE HON'BLE ITAT HYDERABAD FOR THE A.YS. 2004-05 TO 2009-10. THE RELEVANT PORT ION OF THE ORDER DT. 30.04.2013 FOR THE A.Y. 2009-10 IN ITA NO. 108/HYD/ 2013 IS REPRODUCED AS UNDER: '7. WE HAVE CONSIDERED RIVAL SUBMISSIONS OF THE PARTI ES AND PERUSED THE MATERIAL ON RECORD. ON PERUSAL OF THE DOCUMENTS SUBM ITTED BEFORE UNDER SECTION WE FIND THAT IDENTICAL ISSUE OF AD HOC DISALL OWANCES OF 15% CAME UP FOR CONSIDERATION BEFORE THE IT APPELLATE TRIBUNAL, HYDE RABAD BENCH IN CASE OF THE VERY SAME ASSESSEE RIGHT FROM THE A Y 2004-05. THE CO ORDINATE BENCH OF THGIS TRIBUNAL IN A SENES OF ORDERS HAVE DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. IN THE LATEST ORDER PASSED FOR THE A Y 2008-09 IN ITA NO . 120/HYD/2012 DT. 16.07.2012. THE TRIBUNAL FOLLOWING ITS EARLIER ORDER DELETED THE ADDITION BY OBSERVING AS UNDER.-' '5. WE HAVE HELD THE ARGUMENTS OF BOTH THE PARTIES, PERUSED THE RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW, WE FIND THAT THIS ISSUE IS C OVERED BY THE ORDER OF THE ITAT, HYDERABAD BENCHES IN ASSESSEE'S OWN CASE FOR A Y 2007-08 VIDE IN ITA NO. 1425/HYD/2011 VIDE PAGES 2 TO 11 OF THE ORDER AND AT PARA 8, THE TRIBUNAL HELD AS FOLLOWS: WE FIND THE EARLIER ORDER OF THE ITAT HAVE ELABORATE LY DEALT WITH THE ISSUE THE DEPARTMENT HAS NOT BROUGHT ANYTHING TO SHOW THAT THE FAC TS OF THE CASE ARE ANY DIFFERENT FROM THAT FOR THE A.Y 2004-05 AND 2005 -06 COVERED BY THE ITAT ORDER. THE ACTIVITY OF THE ASSESSEE IS SUCH THAT THEY H AVE TO DEAL DAILY WITH NUMEROUS INDIVIDUALS IN A SHORT SPAN OF TIME WHEN THE BATTINGS ARE ON. THEY ACCEPT BETS AND SETTLE THE WINNING AMOUNTS TO THE WIN NING PUNTERS. IT WILL BE DIFFICULT TO MAINTAIN COMPLETE DETAILS ABOUT ALL THE PERSONS. THE ENTIRE PAYMENT WAS THROUGH COMPUTERIZED SYSTEM. THE PAYMENT WAS MADE TO THE PERSON HOLDING THE WINNING TICKET. THE DEPARTMENT HAS NOT BROU GHT TO OUT NOTICE OF ANY INSTANCE OF PAYMENT WHEN THERE WAS NO WINNING TI CKET. IN THE CIRCUMSTANCES, RESPECTFULLY FOLLOWING THE DECISION O F THE COORDINATE BENCH IN THE ASSESSEE'S OWN CASE WE DELETE THE AD HOC DISALLOWA NCE OF 10% OF THE TOTAL PAYMENT FOR WINNING BETS OF LESS THAN 2500/- EACH. THE APPEAL OF THE ASSESSEE ON THIS ISSUE IS ALLOWED' 6. SINCE THE ISSUE UNDER CONSIDERATION IS IDENTICAL TO THE ONE DECIDED BY THE CO-ORDINATE BENCH IN ASSESSEES OWN CASE FOR AY 2007-08 (SUPRA), RESPECT FULLY FOLLOWING THE SAME, WE SET ASIDE THE ORDER OF THE COMMISSIONER OF INCOME TAX (A) AND ALLOWED THIS GROUND OF APPEAL OF THE ASSESSEE. HYDERABAD RACE CLUB :- 4 -: SINCE THE ISSUE IN DISPUTE IS SQUARELY COVERED BY THE DECISION OF THE CO-ORDINATE BENCH AS REFERRED TO ABOVE, WE RESPECTFULLY FOLLOW T HE SAME AND UPHOLD THE ORDER OF THE COMMISSIONER OF INCOME TAX(A) IN DELETI NG THE ADDITION ON ACCOUNT OF AD HOC DISALLOWANCE MADE BY THE ASSESSING OFFICER. THE GROUNDS RAISED ARE DISMISSED.' HENCE, RESPECTFULLY FOLLOWING THE ORDERS OF THE JUR ISDICTIONAL ITAT IN THE ASSESSEE'S OWN CASE FOR EARLIER YEARS, THE ADHOC DI SALLOWANCE OF RS. 52,64,73,818/- IS DELETED. 2.1. SIMILAR ORDER WAS PASSED IN AY. 2011-12. REVE NUE IS AGGRIEVED ON THE ABOVE ISSUE AND RAISED THE FOLLOWING GROUNDS, WHICH ARE SIMILAR IN BOTH THE YEARS: 1. WHETHER, ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT(A) IS CORRECTS IN FOLLOWING THE DECISION OF THE APPELL ATE TRIBUNAL IN DELETING THE DISALLOWANCE OF 15% OF EXPENDITURE OF AD-HOC BA SIS WITHOUT APPRECIATING THE FACT THAT THERE IS A LACK OF EVIDE NCE SUPPORTING THE PAYMENTS ALLEGEDLY MADE (UPTO A LIMIT OF RS. 2,500/ - ? 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE THE CIT(A) IS CORRECT IN FOLLOWING THE ORDER OF THE APPELLATE TRI BUNAL THAT EXPENDITURE IN THE FORM OF PAYMENT ON WINNING TICKETS HAVE BEEN MA DE WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS EVEN IN T HE ABSENCE OF DETAILS OF NAMES OF THE PAYEES AND EVIDENCE OF PAYMENT CAN B E SAID TO BE BASED ON MATERIAL ON RECORD? 2.2. ON PERUSAL OF THE ORDERS OF CIT(A) AND THE ORDE RS OF THE AO, WE DO NOT SEE ANY REASON TO INTERFERE WITH THE SAI D ORDER OF THE CIT(A), AS LD.CIT(A) HAS FOLLOWED THE ORDERS OF THE C O-ORDINATE BENCH OF ITAT IN ASSESSEES OWN CASE IN EARLIER YEA RS. SINCE THE FACTS AND REASONS ARE BEING SAME, WE APPROVE THE ORDE R(S) OF THE CIT(A). IN FACT THE GROUND RAISED BY REVENUE ITSELF I S LITTLE MISLEADING IN THE SENSE THAT IT IS QUESTIONING WHETHER C IT(A) IS CORRECT IN FOLLOWING THE DECISION OF THE ITAT. WE MU ST STATE THAT CIT(A) IS CORRECT IN FOLLOWING THE DECISION AS IN THE JUDICIAL HIERARCHY, THE ORDERS OF THE HIGHER FORUM HAS TO BE F OLLOWED. THE HYDERABAD RACE CLUB :- 5 -: JURISDICTIONAL HIGH COURT (HON'BLE ANDHRA PRADESH HIG H COURT WAY BACK IN THE YEAR 1987) IN THE CASE OF STATE OF ANDHRA PRADESH VS., COMMERCIAL TAX OFFICER [169 ITR 564], HAD EXPLAINED THE IMPORTANCE OF A PRECEDENT WHEREIN IT OBSERVED THAT A BINDING DECISION OF A SUPERIOR AUTHORITY IS BOUND TO BE FOL LOWED BY A LOWER AUTHORITY AND NOT FOLLOWING SUCH A DECISION WOULD C AUSE GRAVE PREJUDICE TO AN ASSESSEE . RESPECTFULLY FOLLOWING THE SAME, WE DO NOT SEE ANY REASON TO ENTERTAIN THE GROUNDS RAISED BY THE REVENUE. ACCORDINGLY, THE GROUNDS ARE REJECTED. 3. COMING TO ASSESSEES APPEALS, THE ISSUE IS THAT AO HAS REDUCED THE DEPRECIATION RATE CLAIMED AT 60% TO 15%. A SSESSEE CLAIMED DEPRECIATION AT 60% ON ELECTRONIC DISPLAY SYS TEM WHICH WAS CONSIDERED AS ELECTRONIC EQUIPMENT BY THE AO. ASSESSEE CONTENDED THAT ELECTRONIC DISPLAY SYSTEM IS AN INSEPARA BLE PART OF THE COMPUTER SYSTEM DESIGNED AND OPERATED TO DISPLAY THE COMPUTER RESULTS OF THE HORSE RACING EVENTS. ASSESSEE RELIED ON THE FOLLOWING CASE LAW IN SUPPORT OF ITS CONTENTIONS: I. CRABTREE INDIA LTD., (2010) [38 SOT 479 (DELHI)]; II. EXPEDITORS INTERNATIONAL (INDIA)(P) LTD., (2008) [118 TTJ 652 (DELHI TRIBUNAL)]; III. ORIENT CERAMICS & INDUSTRIES LTD., [358 ITR 49] (DELHI HIGH COURT); IV. BSES YAMUNA POWER LTD [ITA NO. 1267 DT. 31-08-2010 OF DELHI HIGH COURT]; V. SAMIRAN MAJUMDAR [98 ITD 119] (KOLKATA TRIBUNAL); VI. USHODAYA ENTERPRISES LTD., [33 TAXMANN.COM 381] (HYDERABAD-TRIBUNAL); HYDERABAD RACE CLUB :- 6 -: VII. USHODAYA ENTERPRISES LTD., [ITA NO. 1241/HYD/2008 & 591/HYD/2010 BY THE HYDERABAD BENCH OF THE TRIBUNAL] 4. LD.CIT(A) HOWEVER, DID NOT AGREE WITH ASSESSEE, STATING AS UNDER: 5.2. I HAVE PERUSED THE ASSESSMENT ORDER AND ALSO THE SUBMISSIONS OF THE ASSESSEE AND IT IS SEEN THAT THE DISPLAY SYSTEM IS LOCATED ON THE RACE TRACK WHICH IS AN ELECTRONIC EQ UIPMENT AND CANNOT BE CLASSIFIED AS COMPUTERS FOR THE PURPOSES OF CLAIMIN G DEPRECIATION. HENCE THE ASSESSING OFFICER IS RIGHT IN RESTRICTING THE D EPRECIATION TO 15% INSTEAD OF 60%. FURTHER, THE FACTS OF THE CASE LAWS RELIED UPON BY THE ASSESSEE ARE DIFFERENT FROM THE FACTS OF THE INSTANT CASE. IN THE CASES CITED BY THE ASSESSEE THE CLAIM OF HIGHER DEPRECIATION WAS ALLOW ED FOR COMPUTER ACCESSORIES SUCH AS PRINTERS, SCANNERS ETC. IN THE INSTANT CASE THE DEPRECIATION CLAIMED IS FOR ELECTRONIC DISPLAY SYST EM WHICH IS NOT ELIGIBLE FOR DEPRECIATION @ 60%. THEREFORE, THE DISALLOWANC E MADE OF RS. 25,24,708/- IS UPHELD. 4.1. IT WAS THE SUBMISSION THAT THE ASSETS WERE PURCHASE D IN FY. 2007-08 RELEVANT FOR AY. 2008-09 AND DEPRECIA TION WAS ALLOWED AT 60%. SAID EQUIPMENT WAS ALLOWED AS A COMP UTER SYSTEM IN AYS. 2008-09 AND 2009-10. WHAT ASSESSEE HA S CLAIMED IN THE IMPUGNED YEARS IS NOTHING BUT DEPRECIATION ON W DV. IN SUPPORT, LD. COUNSEL PLACED ON RECORD THE ORIGINAL IN VOICES, CLAIM OF DEPRECATION IN EARLIER YEARS AND THE ORDERS OF THE AUTHORITIES TO SUBSTANTIATE THAT THESE ASSETS WERE ALLOWED DEPRECIATION A T 60% IN EARLIER YEARS. 5. AFTER CONSIDERING THE RIVAL CONTENTIONS AND PERUSIN G THE ORDERS ON RECORD, WE ARE OF THE OPINION THAT ACTION O F THE AO IS NOT JUSTIED. IF THE DEPRECIATION WAS ALLOWED AT 60%, CATEGO RISING SUCH EQUIPMENT AS COMPUTER SYSTEMS IN EARLIER YEARS ON 2 008-09 AND 2009-10, AO CANNOT RE-CLASSIFY THEM IN THE BLOCK OF ASSETS HYDERABAD RACE CLUB :- 7 -: CONCEPT IN A LATER YEAR. HE IS BOUND TO GRANT DEPRECIA TION AT 60% ONLY. APART FROM THAT EVEN THOUGH THE ASSETS INVOLVED IS A DISPLAY SYSTEM, WHICH CAN BE CATEGORISED AS A COMPUTER MONITO R AS THE RESULTS ARE PROJECTED ON THE BIG SCREEN IN THE RACE CO URSE GROUND. THESE ARE PART OF THE DISPLAY SYSTEM CONTROLLED BY COMP UTERS. IN VIEW OF THAT, WE FIND MERIT IN ASSESSEES CONTENTIONS. FOLLOWING THE PRECEDENCE ON THE ISSUE, AS RELIED ON BY ASSESSEE IN VARIOUS CASES, WE UPHOLD ASSESSEES CONTENTIONS THAT THE DISPLAY SYSTEM WAS ENTITLED FOR DEPRECIATION AT 60%. IF AT ALL REVENUE WA NT TO EXAMINE THE RATE OF DEPRECIATION, THE SAME COULD HAVE BEEN EX AMINED IN AY. 2008-09 I.E., WHEN THE SAID ASSET WAS PURCHASED A ND INCLUDED IN THE BLOCK OF THE ASSETS. SINCE ASSESSEE WAS ALREAD Y GETTING DEPRECIATION AT 60%, ON THE PRINCIPLES OF CONSISTENCY D EPRECIATION 60% IS TO BE ALLOWED IN THE IMPUGNED ASSESSMENT YEARS AS WELL. IN VIEW OF THAT, AO IS DIRECTED TO GRANT DEPRECIATION AT 60% ON THE WDV AS CLAIMED. GROUNDS OF ASSESSEE ARE ALLOWED. 6. IN THE RESULT, APPEALS OF REVENUE ARE DISMISSED AND APPEALS OF ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH DECEMBER, 2016 SD/- SD/- (P. MADHAVI DEVI) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMB ER HYDERABAD, DATED 30 TH DECEMBER, 2016 TNMM HYDERABAD RACE CLUB :- 8 -: COPY TO : 1. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-2( 2), HYDERABAD. 2. THE ASST. COMMISSIONER OF INCOME TAX, CIRCLE-2(2 ), HYDERABAD. 3. M/S. HYDERABAD RACE CLUB, 16-10-1/A/1, RACE COUR SE ROAD, MALAK PET, HYDERABAD. 4. CIT (APPEALS)-9, HYDERABAD. 5. PR.CIT-2, HYDERABAD. 6. D.R. ITAT, HYDERABAD. 7. GUARD FILE.