D.C.I.T. Cir - 8,Kolkata, Kolkata V. M/s Oberoi Hotels Pvt Ltd., Kolkata

ITA 321/KOL/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 100061 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 9 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-11-2015
• Appeal Filed By: Department
• Bench Allotted: C
• Assessment Year: 2009-2010
• Appeal Filed On: 14-02-2013
• Court: TRIBUNAL
• Department Lawyers: G MALLIKARJUNA
• Assessee Lawyers: R N BAJORIA
• Keywords: Business income; Double taxation relief; Earning of tax free income; Additional evidence; Wholly owned subsidiary; Deemed dividend
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: KOL KATA [BEFORE SHRI MAHAVIR SINGH, JM & SHRI M. BALAGANES H, AM] I.T.A NO.192/KOL/2013 ASSESSMENT YEAR: 2009-10 OBEROI HOTELS PRIVATE LIMITED VS. DEPUTY COMMISS IONER OF INCOME-TAX, (PAN: AAACO3408K) CIRCLE-8, KOLKATA. ( APPELLANT ) ( RESPONDENT ) & I.T.A NO.321/KOL/2013 ASSESSMENT YEAR: 2009-10 DEPUTY COMMISSIONER OF INCOME-TAX, VS. OBEROI HOTE LS PRIVATE LIMITED CIRCLE-8, KOLKATA. (APPELLANT) (RESPONDENT) DATE OF HEARING: 17.11.2015 DATE OF PRONOUNCEMENT: 20.11.2015 FOR THE ASSESSEE: SHRI R. N. BAJORIA, ADVOCATE FOR THE REVENUE: SHRI G. MALLIKARJUNA, CIT, DR ORDER PER SHRI MAHAVIR SINGH, JM: BOTH THESE CROSS APPEALS BY ASSESSEE AND REVENUE AR E ARISING OUT OF ORDER OF CIT(A)-VIII, KOLKATA IN APPEAL NO.187/CIT(A)-VIII/K OL/11-12 DATED 19.11.2012. ASSESSMENT WAS FRAMED BY JCIT(OSD), CIR-8, KOLKATA U/S. 143(3) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR ASS ESSMENT YEAR 2009-10 VIDE HIS ORDER DATED 15.12.2011. 2. THE FIRST ISSUE IN THIS APPEAL OF ASSESSEE IS AS REGARDS TO THE ORDER OF CIT(A) RESTRICTING THE DISALLOWANCE MADE BY AO BY INVOKING THE PROVISIONS OF SECTION 14A OF THE ACT READ WITH RULE 8D OF THE I. T. RULES, 1962 (HER EINAFTER REFERRED TO AS THE RULES) FOR EXEMPTED INCOME @ 1/2%. FOR THIS, ASSESSEE HAS RAI SED FOLLOWING GROUND NOS.1, 2 AND 3: 1. FOR THAT THE CIT(A) ERRED IN CONFIRMING THE DIS ALLOWANCE UNDER SECTION 14A OF THE ACT UNDER RULE 8D(2)(III) OF THE ACT. 2. FOR THAT NO EXPENSES HAVING BEEN INCURRED FOR TH E PURPOSE OF EARNING THE DIVIDEND INCOME AND THERE BEING NO PROXIMATE AND DOMINANT NE XUS WITH THE INVESTMENT IN SHARES OF EIH LIMITED WHICH WAS MADE IN THE EARLIER YEARS AND NOT IN THE YEAR UNDER CONSIDERATION, THE CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE AS MADE BY THE AO. 2 ITA NOS.192 & 321/K/2013 OBEROI HOTELS PVT. LTD. AY 2009-10 3. FOR THAT THE DISALLOWANCE UNDER RULE 8D(III) OF THE INCOME TAX RULE 1962 (RULES) AT % OF THE AVERAGE VALUE OF HOLDING OF INVESTMENT IS ILLEGAL, WITHOUT JURISDICTION AND AUTHORITY OF LAW. THE DISALLOWANCE AS CONFIRMED BY CIT(A) UNDER RULE 8D(III) OF THE RULES IS BEYOND THE DISALLOWANCE PERMITTED UNDER SE CTION 14A OF THE ACT AND NO SUCH DISALLOWANCE COULD BE MADE ON A NOTIONAL BASIS WHIC H IS NOT WITH REFERENCE TO ANY EXPENDITURE INCURRED WHETHER DIRECTLY OR INDIRECTLY . 3. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE CLAIM ED TO HAVE FOLLOWING EXEMPTED INCOME: SHARE OF PROFIT IN PARTNERSHIP FIRM RS. 5 5,932/- DIVIDEND FROM MUTUAL FUNDS RS. 8,70,776/- DIVIDEND ON SHARES RS.169,445,830/- TOTAL RS.170,372,538/- THE ASSESSEE SUO MOTO OFFERED DISALLOWANCE U/S. 14A OF THE ACT READ WITH RULE 8D OF THE RULES OUT OF INTEREST EXPENSES AMOUNTING TO RS.13, 92,21,233/- PAYABLE TO VARIOUS LENDING AGENCIES AND ALSO DE MAT CHARGES OF RS.1,85,159/-. THE AO WITHOUT RECORDING ANY SATISFACTION STRAIGHTAWAY APPLIED FORMULA UNDER RUL E 8D(2)(III) OF THE RULES AND MADE FURTHER DISALLOWANCE OF RS.82,93,735/-. THE CIT(A) ALSO CONFIRMED THE ACTION OF AO MECHANICALLY. AGGRIEVED ASSESSEE CAME IN APPEAL BE FORE TRIBUNAL. 4. AT THE TIME OF HEARING BEFORE US, LD. COUNSEL FO R THE ASSESSEE SUBMITTED THAT THE ISSUE IS COVERED BY THE ORDER OF THE TRIBUNAL IN AS SESSEES OWN CASE FOR AY 2007-08 AND 2008-09 VIDE ORDER DATED 15.10.2015, WHEREIN THE TR IBUNAL VIDE PARA 7 HAS HELD AS UNDER: 7. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUG H FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE ASSESSEE COMPANY HAS ALREAD Y IDENTIFIED AND DISALLOWED INTEREST ON LOAN AMOUNTING TO RS.14,21,35,269/- AND DE MAT CHAR GES AT RS.6,85,115/- UNDER THE PROVISIONS OF SECTION 14A OF THE ACT READ WITH RULE 8D OF THE RULES BEING EXPENSES RELATABLE TO EARNING OF EXEMPTED INCOME. THE ASSES SEE HAS EARNED TOTAL EXEMPT INCOME AT RS.14,96,64,407/- AND DISALLOWANCE WAS MADE BY INVO KING THE PROVISIONS OF SECTION 14A READ WITH RULE 8D OF THE RULES AT RS.14,28,20,364/- . WE FURTHER FIND THAT THE ASSESSEE HAS ALREADY IDENTIFIED THE EXPENDITURE RELATABLE TO EAR NING OF EXEMPTED INCOME BUT COULD NOT FIND ANY OTHER EXPENDITURE DEBITED IN THE P&L ACCOU NT WHICH HAD NEXUS WITH EARNING OF EXEMPTED INCOME. EVEN FROM THE ORDER OF AO OR THAT OF THE CIT(A), WE COULD NOT FIND THAT THERE IS ANY SPECIFIC ITEM OF EXPENDITURE IS RELATE D TO EARNING OF EXEMPT INCOME. UNLESS THERE IS A DIRECT OR PROXIMATE CONNECTION BETWEEN T HE EXEMPT INCOME AND THAT OF THE EXPENDITURE INCURRED, THE PROVISIONS OF SECTION 14A READ WITH RULE 8D OF THE RULES CANNOT BE ATTRACTED OR INVOKED. IT IS ALSO A FACT THAT TH ERE IS NO FRESH INVESTMENT MADE BY THE ASSESSEE DURING THE YEAR AND THESE INVESTMENTS ARE PRIMARILY MADE IN GROUP COMPANIES WITH THE INTENTION TO ACQUIRE AND RETAIN CONTROLLIN G STAKES AND EVEN DIVIDEND IS RECEIVED THROUGH ECS. THIS PRACTICE ASSESSEE IS FOLLOWING CO NSISTENTLY AND THE SAME HAS NOT BEEN DISPUTED IN THE PAST ASSESSMENTS. NOW IT IS WELL S ETTLED THAT EVEN AFTER INSERTION OF RULE 8D OF THE RULES, THE AO MUST SATISFY HIMSELF THAT THE CLAIM OF EXPENDITURE MADE BY ASSESSEE IS INCURRED BEFORE INVOKING THIS PROVISION. THE AO HA S SIMPLY GIVEN A FINDING THAT SOME EXPENDITURE MIGHT HAVE BEEN INCURRED FOR EARNING TH IS EXEMPTED INCOME THEREBY RULE 8D OF THE RULES WAS INVOKED. THERE IS NO SATISFACTION RE CORDED BY THE AO FOR INVOKING RULE 8D 3 ITA NOS.192 & 321/K/2013 OBEROI HOTELS PVT. LTD. AY 2009-10 OF THE RULES DESPITE THE FACT THAT THE ASSESSEE HAS DISCLOSED HUGE EXPENDITURE FOR EARNING OF EXEMPTED INCOME AND THE SAME WAS DISALLOWED HIMSELF , THE CORRECTNESS OF WHICH IS NOT IN DOUBT. THE ASSESSEE HAS ENCLOSED DETAILS OF INVEST MENT MADE IN GROUP CONCERNS AND SUBSIDIARY COMPANIES IN ITS PAPER BOOK AT PAGE 8 AN D DETAILS OF DIVIDEND INCOME EARNED AT PAGE 13. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTAN CES, WE ARE OF THE VIEW THAT THE AO HAS NOT RECORDED ANY SATISFACTION ABOUT THE CORRECTNESS OR OTHERWISE OF THE ACCOUNTS OF THE ASSESSEE WHEREIN THE ASSESSEE HIMSELF HAS MADE DISA LLOWANCE OF EXPENSES RELATABLE TO EARNING OF EXEMPTED INCOME AND SECONDLY, WE ARE ALS O OF THE VIEW THAT THE PRIMARY OBJECT OF INVESTMENT OF ASSESSEE IS FOR HOLDING CONTROLLIN G STAKE IN GROUP CONCERNS AND NOT FOR EARNING OF INCOME OUT OF THAT INVESTMENT. IN BOTH T HE EVENTUALITIES, NO DISALLOWANCE CAN MADE U/S. 14A OF THE ACT READ WITH RULE 8D OF THE R ULES. ACCORDINGLY, THIS ISSUE OF ASSESSEES APPEAL IS ALLOWED. ON QUERY FROM THE BENCH, LD. SR. DR COULD NOT CONTR OVERT THE ABOVE SUBMISSION OF THE ASSESSEE BY PRODUCING ANY CONTRARY MATERIAL IN THIS REGARD. HENCE, WE ALLOW THIS GROUND OF APPEAL OF ASSESSEE, SINCE THIS ISSUE IS COVERED BY THE DECISION CITED SUPRA. 5. THE NEXT ISSUE IN THIS APPEAL OF ASSESSEE IS AS REGARDS TO CONFIRMING THE DISALLOWANCE OF RS.3,378/- BEING THE PROVISION FOR LEAVE ENCASHMENT. FOR THIS, ASSESSEE HAS RAISED FOLLOWING GROUND NO. 4: 4. FOR THAT THE CIT(A) ERRED IN CONFIRMING THE DIS ALLOWANCE OF RS.3,378/- BEING THE PROVISION FOR LEAVE ENCASHMENT. 6. AT THE TIME OF HEARING BEFORE US, LD. COUNSEL FO R THE ASSESSEE SUBMITTED THAT THE ISSUE IS COVERED BY THE ORDER OF THE TRIBUNAL IN AS SESSEES OWN CASE FOR AY 2007-08 AND 2008-09 VIDE ORDER DATED 15.10.2015, WHEREIN THE TR IBUNAL VIDE PARA 10 HAS HELD AS UNDER: 10. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THRO UGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT LD. COUNSEL FOR THE ASSESSEE ST ATED THAT THE DEDUCTION ON ACCOUNT OF PROVISION OF LEAVE ENCASHMENT WAS MADE ON THE BASIS OF THE JUDGMENT OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF EXIDE INDU STRIES LTD. VS. UNION OF INDIA (2007) 292 ITR 470, BUT HE FAIRLY CONCEDED THAT SUBSEQUENTLY H ON'BLE SUPREME COURT HAS STAYED THIS JUDGMENT OF HON'BLE JURISDICTIONAL HIGH COURT VIDE ORDER 08-05-2009 BY FOLLOWING OBSERVATIONS:- PENDING HEARING AND FINAL DISPOSAL OF THE CIVIL AP PEALS, DEPARTMENT IS RESTRAINED FROM RECOVERING PENALTY AND INTEREST WHICH HAS ACCR UED TILL DATE. IT IS MADE CLEAR THAT AS FAR AS THE OUTSTANDING INTEREST DEMAND AS O F DATE IS CONCERNED, IT WOULD BE OPEN TO THE DEPARTMENT TO RECOVER THAT AMOUNT IN CA SE CIVIL APPEAL OF THE DEPARTMENT IS ALLOWED. WE FURTHER MAKE IT CLEAR THAT THE ASSESSEE WOULD, D URING THE PENDENCY OF THIS CIVIL APPEAL, PAY TAX AS IF SECTION 43B(F) IS ON THE STAT UE BOOK BUT AT THE SAME TIME IT WOULD BE ENTITLED TO MAKE A CLAIM IN ITS RETURNS. IN VIEW OF THE ABOVE, LD. COUNSEL FOR THE ASSESSEE FAIRLY STATED THAT LET HON'BLE SUPREME COURT DECIDE THE ISSUE AND BY THAT TIME THE MATTER CAN BE REMITTED BACK TO THE FILE OF AO FOR 4 ITA NOS.192 & 321/K/2013 OBEROI HOTELS PVT. LTD. AY 2009-10 FRESH ADJUDICATION IN TERM OF THE DECISION OF HON'B LE SUPREME COURT. ON THIS, LD. CIT DR HAS NOT OBJECTED TO THE SAME. ACCORDINGLY, WE SET ASIDE THIS ISSUE TO THE FILE OF THE AO TO AWAIT THE DECISION OF HON'BLE SUPREME COURT AND DEC IDE THE ISSUE ACCORDINGLY. THIS ISSUE OF ASSESSEES APPEAL IS REMITTED BACK TO THE FILE O F AO AND ALLOWED FOR STATISTICAL PURPOSES. ON QUERY FROM THE BENCH, LD. SR. DR COULD NOT CONTR OVERT THE ABOVE SUBMISSION OF THE ASSESSEE BY PRODUCING ANY CONTRARY MATERIAL IN THIS REGARD. HENCE, FOLLOWING THE DECISION CITED SUPRA, WE SET ASIDE THIS ISSUE TO THE FILE OF AO TO AWAIT THE DECISION OF HONBLE SUPREME COURT AND DECIDE THE ISSUE ACCORDINGLY. THE REFORE, THIS ISSUE OF ASSESSEES APPEAL IS REMITTED BACK TO THE FILE OF AO AND ALLOW ED FOR STATISTICAL PURPOSES. 7. THE NEXT COMMON ISSUE IN BOTH THE APPEALS OF ASS ESSEE AND REVENUE IS AS REGARDS TO PROPORTIONATE DISALLOWANCE OF LEGAL AND PROFESSIONA L FEES AND AUDITORS REMUNERATION. FOR THIS, ASSESSEE HAS RAISED FOLLOWING GROUND NOS. 5 A ND 6 AND REVENUE HAS RAISED FOLLOWING GROUND NO. 2: ASSESSEES GROUND NOS. 5 & 6: 5. FOR THAT THE CIT(A) ERRED IN HOLDING THAT THE P ROPORTIONATE LEGAL AND PROFESSIONAL FEES AND AUDITORS REMUNERATION SHOULD ALSO BE DEDUCTED WHILE COMPUTING THE INCOME FROM FOREIGN MANAGEMENT FEES RECEIVED FROM MENA HOUSE OB EROI, EGYPT. 6. FOR THAT THE CIT(A) FAILED TO APPRECIATE THAT T HE LEGAL AND PROFESSIONAL FEES AND AUDITORS REMUNERATION WAS NOT INCURRED FOR EARNING THE SAID INCOME FROM MINA HOUSE OBEROI, EGYPT AND AS SUCH COULD NOT BE DISALLOWED O N PROPORTIONATE BASIS. REVENUES GROUND NO. 2: 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION MADE BY THE AO REGARDING PRO RATA EXPENDITURE FOR EARNING MANAGEMENT FEES. 8. BRIEF FACTS ARE THAT DURING THE YEAR UNDER CONSI DERATION ASSESSEE RECEIVED A SUM OF RS.5,06,73,892/- AS MANAGEMENT FEE FROM HOTEL MENA HOUSE OBEROI, EGYPT, UAR. THE ASSESSEE ALLOCATED PRO-RATA EXPENSES AMOUNTING TO R S.16,41,082/- TOWARDS EARNING OF THIS INCOME AND BALANCE RECEIPT OF RS.4,90,32,810/- WAS CLAIMED AS EXEMPT UNDER ARTICLE 24(1) OF INDO-UAR DTAA. THE AO WAS OF THE VIEW THA T IN VIEW OF AGREEMENT, OBEROI HOTELS PVT. LTD., AS A WHOLE, IS REQUIRED TO PROVID E SERVICES FOR WHICH THE ASSESSEE HAS NOT ALLOCATED THE EXPENSES AND FOR WHICH NO SEPARATE AC COUNTS ARE MAINTAINED. ACCORDING TO HIM, AS PER SCHEDULE 16 AND 19 FORMING PART OF P&L ACCOUNT, THE FOLLOWING EXPENSES HAVING PROXIMATE AND DOMINATE NEXUS WITH THE SERVIC ES OF HOTEL MENA HOUSE OBEROI, EGYPT, UAR: 5 ITA NOS.192 & 321/K/2013 OBEROI HOTELS PVT. LTD. AY 2009-10 ITEMS OF EXPENSES AMOUNT DEBITED TO P&L A/C. SALARY, WAGES, ETC. RS. 2,03,37,983/- STAFF WELFARE EXPENSES RS. 8,61,893/ - ADVERTISEMENT, PUBLICITY & OTHER PROMOTIONAL EXPEN SES RS. 79,22,248/- PASSAGE & TRAVELLING RS. 22,46,726/- PRINTING & STATIONERY RS. 3,47,940/ - POSTAGE, TELEGRAM & TELEPHONE RS. 4,2 5,511/- GENERAL CHARGES RS. 27,35,836/- AUDITORS REMUNERATION RS. 19,20,000 /- LEGAL, PROFESSIONAL & CONSULTANCY FEES RS .2,61,97,774/- TOTAL ALLOCABLE EXPENSES RS.6,29,95,911/- THEREFORE, PRORATE EXPENSES = RS.6,29,95,911 X (5, 06,73,892/35,26,90,532) = RS.90,51,130/- AGGRIEVED, ASSESSEE FILED APPEAL BEFORE CIT(A), WHO ADDED BACK RS.46,43,429/- TO THE BUSINESS INCOME OF THE ASSESSEE INSTEAD OF RS.90,51 ,130/- BY OBSERVING AS UNDER: I HAVE GONE THROUGH THE SAID WRITTEN SUBMISSION, WHEREIN THE APPELLANT HAD OFFERED TO TAX RS.38,97,588/-. ON PERUSAL, I DO NOT FULLY AGREE W ITH THE REVISED WORKING OF THE APPELLANT AS I FIND THAT THE APPELLANT IN ITS WORKING AS PER ANN EXURE-II, DID NOT CONSIDER AT ALL THE LEGAL AND PROFESSIONAL FEES AND ALSO THE AUDITORS REMUNE RATION. I DO NOT AGREE WITH THE APPELLANT THAT THESE TWO ITEMS OF EXPENDITURE HAVE NO NEXUS W ITH THE EARNING OF FOREIGN MANAGEMENT FEES FROM MENA HOUSE OBEROI, EGYPT. ACCORDINGLY, I CONSIDER A PART OF THE LEGAL AND PROFESSIONAL FEES AND THE AUDITORS REMUNERATION AN D REWORK THE PROPORTIONATE EXPENDITURE RELATABLE TO FOREIGN EARNING. A DETAILED WORKING IS PROVIDED IN THE ANNEXURE-A T O THIS ORDER. THEREFORE, AS PER THE DETAILED WORKING, I DIRECT THE AO TO CONSIDER THE A MOUNT OF RS.46,43,429/- AS RELATABLE TO TAX FREE FOREIGN INCOME FROM EGYPT AND ADD BACK RS.46,4 3,429/- TO THE BUSINESS INCOME OF THE APPELLANT INSTEAD OF RS.90,51,130/- AS CONSIDERED I N THE ASSESSMENT ORDER. THUS, THIS GROUND OF APPEAL IS PARTLY ALLOWED. AGGRIEVED, REVENUE IS NOW IN APPEAL BEFORE TRIBUNAL . 9. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. BEFORE US LD. COUNSEL FOR THE ASSESSEE ONLY CONTESTED THE EXPENSES ON ACCOUNT OF LEGAL AND PROFESSIONAL FEE AT RS.14,73,581/- AND AU DITORS REMUNERATION AT RS.11.75 LAC DO NOT HAVE ANY NEXUS WITH THE EARNING OF MANAGEMENT F EE FROM MENA HOUSE OBEROI HOTEL, EGYPT, URA. ACCORDINGLY, HE URGED THAT THESE TWO E XPENSES SHOULD BE ALLOWED EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OF ASSESSEE . FROM THE SCHEDULE OF LEGAL AND PROFESSIONAL FEE, IT CAN BE SEEN THAT EXPENSES WERE MAINLY INCURRED FOR WORLDWIDE TRADEMARK REGISTRATION OF OBEROI AND TRIDENT LOGOS, WHICH HAVE NO NEXUS WITH THE EARNING OF MANAGEMENT FEES FOR OPERATING HOTELS. A CCORDING TO US, IN SUCH A SCENARIO THE LEGAL AND PROFESSIONAL FEE CANNOT BE ATTRIBUTED TO EARNING OF MANAGEMENT FEE FROM MENA HOUSE OBEROI HOTEL, EGYPT, URA. EVEN OTHERWISE, DU RING THIS YEAR, NO LEGAL SERVICE WAS PROVIDED TO THIS CONCERN FOR EARNING OF MANAGEMENT FEES, HENCE, THERE IS NO NEXUS WITH 6 ITA NOS.192 & 321/K/2013 OBEROI HOTELS PVT. LTD. AY 2009-10 THE PROVIDING OF LEGAL SERVICES AND THAT OF EARNING OF MANAGEMENT FEES. SAME ARE THE ARGUMENTS FOR THE EXPENSES OF AUDITORS REMUNERATIO N. HENCE, WE AGREE WITH THE ARGUMENT OF LD. COUNSEL AND ALLOW THESE EXPENSES. AS REGARD S TO OTHER EXPENSES NO ARGUMENT WAS ADVANCED ON BEHALF OF ASSESSEE QUA ASSESSEES APPEA L. EVEN WE COULD NOT FIND ANY CONTRARY ARGUMENT ON THE EXPENSES ALLOWED BY CIT(A) FROM LD. DR. ACCORDINGLY, THE ISSUE OF REVENUES APPEAL IS DISMISSED AND THAT OF THE ASSESSEES APPEAL IS PARTLY ALLOWED. 10. THE NEXT ISSUE IN THIS APPEAL OF ASSESSEE IS AG AINST THE ORDER OF CIT(A) DIRECTING THAT THE ADDITION MADE U/S. 2(22)(E) OF THE ACT SHO ULD BE CONSIDERED AS CONFIRMED IF THE FACT OF ALLOTMENT OF SHARE IN SUBSEQUENT YEARS IS N OT PROVED. FOR THIS, ASSESSEE HAS RAISED FOLLOWING GROUND NO. 7: 7. FOR THAT THE CIT(A) ERRED IN HOLDING THAT THE ADDITION MADE UNDER SECTION 2(22)(E) OF THE ACT SHOULD BE CONSIDERED AS CONFIRMED IF THE FA CT OF ALLOTMENT OF SHARE IN SUBSEQUENT YEARS IS NOT PROVED. THE CIT(A) FAILED TO APPRECIA TE THAT THE SIMILAR POINT HAS BEEN SET ASIDE IN THE EARLIER YEARS TO THE AO FOR HIS ADJUDI CATION AND AS SUCH THE FINDING GIVEN BY HIM THAT THE ADDITION ON ACCOUNT OF DEEMED DIVIDEND AS CONSIDERED AND CONFIRMED IS ERRONEOUS AND ILLEGAL. 11. BRIEFLY STATED FACTS ARE THAT THE AO TREATED TH E ADVANCES OF RS.7.65 CR. AND RS.55,00,000/- RECEIVED BY ASSESSEE FROM OBEROI INV ESTMENT PVT. LTD. AND OBEROI PLAZA PVT. LTD. RESPECTIVELY AS DEEMED DIVIDEND U/S. 2(22 )(E) OF THE ACT. BEFORE THE AO, IT WAS ARGUED THAT IN RESPECT TO OBEROI INVESTMENT PVT. LT D., THAT SISTER CONCERN IS IN THE BUSINESS OF MONEY LENDING AND QUA THAT NDFC CERTIFICATE WAS PRODUCED BEFORE THE AO. IN RESPECT TO ADVANCE RECEIVED FROM OBEROI HOTELS PVT. LTD. IT WAS CLAIMED THAT THE ASSESSEE IS NOT SHAREHOLDER OF THE AFORESAID COMPANY IN TERM OF THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT BUT AO TREATED BOTH THE ADVANCES AS DEEMED DIVI DEND U/S. 2(22)(E) OF THE ACT. AGGRIEVED ASSESSEE PREFERRED APPEAL BEFORE CIT(A). THE CIT(A) ALSO CONFIRMED THE ACTION OF THE AO EXACTLY ON SIMILAR FACTS. AGGRIEV ED NOW, ASSESSEE IS IN SECOND APPEAL BEFORE TRIBUNAL. 12. AT THE TIME OF HEARING BEFORE US, LD. COUNSEL F OR THE ASSESSEE SUBMITTED THAT THE ISSUE IS COVERED BY THE ORDER OF THE TRIBUNAL IN AS SESSEES OWN CASE FOR AY 2007-08 AND 2008-09 VIDE ORDER DATED 15.10.2015, WHEREIN THE TR IBUNAL VIDE PARA 14 TO 16 HAS HELD AS UNDER: 14. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THRO UGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND FROM THE FINDINGS OF CIT(A) THAT HE HAS ADMITTED THE ADDITIONAL EVIDENCE 7 ITA NOS.192 & 321/K/2013 OBEROI HOTELS PVT. LTD. AY 2009-10 SUBMITTED BEFORE HIM IN THE SHAPE OF NBFC CERTIFICA TE OF OBEROI INVESTMENT PVT. LTD. AND REMANDED THE MATTER BACK TO THE FILE OF THE AO. NO W BEFORE US ALSO LD. SR. COUNSEL SHRI R. N. BAJORIA STATED THAT THE ISSUE CAN BE SET ASIDE T O THE FILE OF AO, WHO WILL CONSIDER THE CERTIFICATE OF NBFC OF OBEROI INVESTMENT PVT. LTD. AND ALSO MEMORANDUM OF ASSOCIATION OF THE LENDER COMPANY EXPLAINING THAT ONE OF THE OB JECTS IS TO CARRY ON MONEY LENDING BUSINESS. ONCE THERE IS MONEY LENDING BUSINESS, ACC ORDING TO LD. COUNSEL, THE ASSESSEE IS OUT OF THE MISCHIEF OF THE PROVISIONS OF SECTION 2( 22)(E) OF THE ACT I.E. THE DEEMED DIVIDEND. IN TERMS OF THE ABOVE, WE REMIT THE ISSUE TO THE FI LE OF AO TO RE-DECIDE AFTER CONSIDERING THE CLAUSES OF MEMORANDUM OF ASSOCIATION OF THE LENDER COMPANY AND ALSO NBFC CERTIFICATE OF OBEROI INVESTMENT PVT. LTD.. ACCORDINGLY, THIS ISSUE OF BOTH THE APPEALS ASSESSEE IS SET ASIDE AND ALLOWED FOR STATISTICAL PURPOSES. 15. SIMILAR IS THE ISSUE IN AY 2008-09 OF ASSESSEE S APPEAL IN ITA NO. 1030/KOL/2012 WHEREIN THE GROUND NO. 4 RAISED BY THE ASSESSEE REA DS AS UNDER: 4. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE LD. CIT(A) ERRED IN NOT DELETING THE ADDITIONS MADE U/S. 2(22)(E) OF TH E ACT BY THE ASSESSING OFFICER AMOUNTING TO RS.25,000,000/- ON ACCOUNT OF ADVANCE RECEIVED FROM OBEROI PLAZA PVT. LTD. AND RS.12,500,000/- FROM M/S. BOMBAY PLAZ A PVT. LTD. AND INSTEAD REFERRING THE ISSUE BACK TO THE ASSESSING OFFICER F OR FRESH ADJUDICATION. 16. WE FIND FROM THE FACTS OF THE CASE THAT THE AO APPLIED THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT IN CASE OF LOAN TAKEN BY ASSESS EE FROM OBEROI PLAZA PVT. LTD. AND BOMBAY PLAZA PVT. LTD. SINCE OBEROI PLAZA PVT. LTD. IS A 100% SUBSIDIARY OF THE ASSESSEE AND BOMBAY PLAZA PVT. LTD. IS A 100% SUBSIDIARY OF OBEROI PLAZA PVT. LTD. DURING THE COURSE OF APPELLATE PROCEEDINGS, THE ASSESSEE FILED FRESH EVIDENCE BEFORE CIT(A) IN THE SHAPE OF MEMORANDUM OF ASSOCIATION WHICH ESTABLISHE S THAT THE OBJECT ANCILLARY TO THE MAIN OBJECT INCLUDES MONEY LENDING, THUS, FOR BOTH THE COMPANIES THE BUSINESS INCLUDES LENDING OF MONEY/ADVANCE. THESE DOCUMENTS WERE NOT EXAMINED BY THE AO, HENCE, WE ARE OF THE VIEW THAT LET IT BE EXAMINED BY THE AO AND D ECIDE THE ISSUE AFRESH. ACCORDINGLY, THIS ISSUE OF BOTH THE APPEALS OF ASSESSEE AND ONE APPEA L OF REVENUE IS SET ASIDE TO THE FILE OF AO AND ALLOWED FOR STATISTICAL PURPOSES. ON QUERY FROM THE BENCH, LD. SR. DR COULD NOT CONTR OVERT THE ABOVE SUBMISSION OF THE ASSESSEE BY PRODUCING ANY CONTRARY MATERIAL IN THIS REGARD. HENCE, FOLLOWING THE DECISION CITED SUPRA, WE SET ASIDE THIS ISSUE TO THE FILE OF AO TO EXAMINE AFRESH AND DECIDE THE SAME. ACCORDINGLY, THIS ISSUE OF APPEAL OF ASSESSE E IS SET ASIDE TO THE FILE OF AO AND ALLOWED FOR STATISTICAL PURPOSES. 13. THE NEXT ISSUE IN THIS APPEAL OF REVENUE IS AGA INST THE ORDER OF CIT(A) IN ALLOWING ALV OF THE HOUSE PROPERTY BY REJECTING THE EXPECTED RENT AND ACCEPTING THE ACTUAL RENT RECEIVED BY THE ASSESSEE. FOR THIS, REVENUE HAS RA ISED FOLLOWING GROUND NO. 1: 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) ERRED IN ALLOWING THE ASSESSEES APPEAL REGARDING THE ALV OF THE HOUSE PROPERTY BY REJECTING THE EXPECTED RENT AND ACCEPTING THE ACTUAL RENT RECEIVE D BY THE ASSESSEE. 8 ITA NOS.192 & 321/K/2013 OBEROI HOTELS PVT. LTD. AY 2009-10 14. AT THE TIME OF HEARING BEFORE US, WE FIND THAT THE ISSUE IS COVERED BY THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR AY 2007-08 AND 2008-09 VIDE ORDER DATED 15.10.2015, WHEREIN THE TRIBUNAL VIDE PARA 23 HAS H ELD AS UNDER: 23. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THRO UGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE AO ERRED IN DETERMINING AN ARBITRARY ANNUAL VALUE OF PROPERTY BY HOLDING THAT SECTION 23 IS A DEEMING PROVISION AND DETERMINATION OF ANNUAL VALUE DOES NOT DEPEND ON ACTUAL REALIZATION OF RENT. THE AO WHILE APPLYING CLAUSE (A) OF SECTION 1 TO SECTION 23 IN THE ASSESSEE CASE FAILED TO APPRECIAT E THAT IN THE PRESENT CASE ACTUALLY LET OUT THE PROPERTY BEING A FARM HOUSE IS ON RENT TO EIH L IMITED AND IF A PROPERTY IS ACTUALLY LET OUT, THEN THE EXPECTATION OF ITS LETTING OUT BECOME S AN ACTUAL REALITY AND SUCH PROPERTY CANNOT BE EXPECTED TO LET FROM YEAR TO YEAR AT ANY FIGURE HIGHER THAN THE RENT WHICH IS BEING PRODUCED ACTUALLY BY THE PROPERTY IN QUESTION . HENCE, EVEN AS PER THE DEEMING PROVISION OF SECTION 23(L)(A), IN THE CASE OF LET O UT PROPERTY, ONLY THE ACTUAL RENT RECEIVED WAS REQUIRED TO BE CONSIDERED AS ANNUAL VALUE OF PR OPERTY. THE AO FAILED TO APPRECIATE SUCH ESTIMATION OF ANNUAL LETABLE VALUE AS PER PROV ISION OF SECTION 23(1)(A) WAS CALLED FOR ONLY IN CASE OF VACANT PROPERTY AND NOT WHERE THE P ROPERTY WAS ACTUALLY LET OUT SINCE IN THE CASE OF LET OUT PROPERTY, THE ASSESSEE WAS NOT ENTI TLED TO ANYTHING OVER AND ABOVE THE AGREED RENT. THE SAID ACTION OF THE AO HAS RESULTED IN TAXING NOTIONAL INCOME IN THE HANDS OF THE ASSESSEE, WHICH NEVER ACCRUED AND HENCE CANN OT BE BROUGHT TO TAX. ACCORDINGLY, WE ARE OF THE VIEW THAT THE CIT(A) HAS RIGHTLY DELETED THE ADDITION AND HENCE, WE CONFIRM THE ORDER OF CIT(A) ON THIS ISSUE. THIS COMMON ISSUE O F REVENUES APPEAL IS DISMISSED. HENCE, FOLLOWING THE DECISION CITED SUPRA, WE CONFI RM THE ORDER OF CIT(A) IN DELETING THE ADDITION. THEREFORE, THIS ISSUE OF REVENUES APPEA L IS DISMISSED. 15. IN THE RESULT, THE APPEAL OF REVENUE IS DISMISS ED AND THAT OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 16. ORDER IS PRONOUNCED IN THE OPEN COURT ON 20.11. 2015 SD/- SD/- (M. BALAGANESH) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 20TH NOVEMBER, 2015 JD. SR. P.S COPY OF THE ORDER FORWARDED TO: 1 . APPELLANT OBEROI HOTELS PRIVATE LIMITED, 4, MANGO E LANE, KOLKATA-700 001. 2 RESPONDENT DCIT, CIRCLE-8, KOLKATA. 3 . THE CIT(A), KOLKATA 4. 5. CIT KOLKATA DR, KOLKATA BENCHES, KOLKATA / TRUE COPY, BY ORDER, ASSTT. REGISTRAR .