M/s CHL Ltd., New Delhi V. DCIT, New Delhi

ITA 326/DEL/2017

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 6920 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 8 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-10-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 19-01-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ASHIMA NEB SR DR
• Assessee Lawyers: L N MALIK CA SH SATISH KHOSLA
• Keywords: Depreciation; Business expenditure; Earning of tax free income; Revenue expenditure; Rule 8D
• Section: 143(3); 14A; 37(1)

Judgement Text

PAGE | 1 , IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH, B NEW DELHI ! ! ! ! $ $$ $ $ $$ $ $ $$ $ $ $$ $ %&% %&% %&% %&% ' ' ' ' BEFORE MS. SUSHMA CHOWLA, JUDICIAL MEMBER & DR. B.R.R.KUMAR, ACCOUNTANT MEMBER ! ! ! !$ $$ $ / ITA NO:- 326/DEL/2017 (( (( (( (( / ASSESSMENT YEAR: 2012-13 CHL LTD., HOTEL THE SURYAA, NEW FRIENDS COLONY, NEW DELHI-110025. PAN-AAACC2587M ........... )* /APPELLANT VS DCIT, CIRCLE-6(1), NEW DELHI. . +,)* / RESPONDENT )*-.% / APPELLANT BY : SH. L.N.MALIK, CA, SH. SATISH KHOSLA, ADV. & SH. MANISH MALIK, ADV. +,)*-.% / RESPONDENT BY : MS. ASHIMA NEB, SR.DR -/0& / DATE OF HEARING : 03.10.2019 12-/0& / DATE OF PRONOUNCEMENT: 16 .10.2019 % % % % / ORDER PER SUSHMA CHOWLA, JM: THE APPEAL FILED BY ASSESSEE IS AGAINST ORDER OF CI T(A)-2, NEW DELHI, DATED 28.10.2016 PASSED U/S 143(3) OF THE INCOME T AX ACT, 1961 RELATING TO ASSESSMENT YEAR 2012-13. ITA NO:326/DEL/2017 ASSESSMENT YEAR: 2012-13 PAGE | 2 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS IN THI S APPEAL:- 1. THAT THE LD. COMMISSIONER OF INCOME-TAX (APPEA LS) GROSSLY ERRED ON FACTS AND IN LAW IN SUSTAINING THE DISALLO WANCE OF RS. 1,36,85,065/- MADE U/S. 14A OF THE I.T. ACT, 1961 R EAD WITH RULE 8D OF THE I.T. RULES, 1962. 2. THAT THE LD. COMMISSIONER OF INCOME-TAX (APPEAL S) GROSSLY ERRED ON FACTS AND IN LAW IN SUSTAIN THE DISALLOWAN CE OF RS. 55,27,111/- HOLDING EXPENDITURE TO BE CAPITAL IN NA TURE AS AGAINST THE CLAIM OF THE APPELLANT COMPANY TO BE REVENUE IN NATURE. 3. THAT THE LD. COMMISSIONER OF INCOME-TAX (APPEAL S) GROSSLY ERRED ON FACTS AND IN LAW IN SUSTAINING THE DISALLO WANCE OF RS. 8,07,800/- UNDER THE HEAD PERSONAL EXPENDITURE AS A GAINST THE CLAIM OF THE APPELLANT COMPANY TREATING THIS EXPENDITURE AS BUSINESS EXPENDITURE. 4. THAT THE APPELLANT CRAVES, LEAVE TO ADD, AMEND OR ALTER ANY GROUNDS OF APPEAL EITHER BEFORE OR AT THE TIME OF H EARING OF APPEAL. 3. THE FIRST ISSUE RAISED BY THE ASSESSEE IS AGAINS T THE DISALLOWANCE MADE U/S 14A OF THE INCOME TAX ACT, 1961 (IN SHORT ACT) AT RS.1,36,85,065/-. THE LD.AR FOR THE ASSESSEE AT TH E OUTSET POINTED OUT THAT THE DISALLOWANCE IF ANY, U/S 14A OF THE ACT CO ULD NOT EXCEED THE EXEMPT INCOME WHICH WAS RS.2,61,000/- DURING THE YE AR. IN THIS REGARD, HE PLACED RELIANCE ON THE RATIO LAID DOWN BY HONBL E DELHI HIGH COURT IN THE CASE OF JOINT INVESTMENT P.LTD. VS CIT 372 ITR 694 (DEL.). 4. THE LD. DR FOR THE REVENUE PLACED RELIANCE ON TH E ORDERS OF THE AUTHORITIES BELOW. ITA NO:326/DEL/2017 ASSESSMENT YEAR: 2012-13 PAGE | 3 5. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED MATE RIAL AVAILABLE ON RECORD. THE FIRST ISSUE RAISED IN THE PRESENT APPE AL IS AGAINST THE DISALLOWANCE MADE U/S 14A OF THE ACT. AS AGAINST T HE DIVIDEND INCOME OF RS.2,61,000/- WHICH WAS CLAIMED AS EXEMPT INCOME UN DER THE PROVISIONS OF THE INCOME TAX ACT, THE ASSESSING OFFICER WORKED THE DISALLOWANCE U/S 14A OF THE ACT AT RS.1,36,85,065/-. THE HONBLE DE LHI HIGH COURT IN THE CASE OF JOINT INVESTMENT P.LTD. VS CIT (SUPRA) HAVE LAID DOWN THE PROPOSITION THAT DISALLOWANCE IF ANY, UNDER SECTION 14A OF THE ACT IS TO BE RESTRICTED TO THE AMOUNT TO TAX FREE INCOME. FOLLO WING THE SAID RATIO LAID DOWN BY THE HONBLE DELHI HIGH COURT, WE DIRECT THE ASSESSING OFFICER TO RESTRICT THE DISALLOWANCE U/S 14A OF THE ACT TO RS. 2,61,000/-. THUS, GROUND NO.1 RAISED BY THE ASSESSEE IS PARTLY ALLOWE D. 6. THE GROUND NO.2 IS AGAINST THE DISALLOWANCE OF R S.55,27,111/- HOLDING THE EXPENDITURE TO BE CAPITAL IN NATURE. 7. BRIEFLY FACTS RELATING TO THE ISSUE ARE THAT THE ASSESSEE HAD CLAIMED CERTAIN EXPENDITURE AS REVENUE EXPENDITURE IN ITS H ANDS. THE BREAK-UP OF THE EXPENDITURE IS AVAILABLE AT PAGE 5 OF THE ASSES SMENT ORDER. THE ASSESSEE CLAIMED THE SAID EXPENDITURE TO BE INCURRE D FOR CARRYING ON ITS BUSINESS AND HENCE, THE CLAIM U/S 37(1) OF THE ACT. THE TOTAL EXPENDITURE IS RS.61,41,968/-. THE ASSESSING OFFICER WAS OF TH E VIEW THAT INCURRING OF THE SAID EXPENDITURE HAD ENDURING BENEFIT TO THE AS SESSEE AND HENCE, WAS CAPITAL IN NATURE. HE DISALLOWED THE SAID EXPENDIT URE, BUT ALLOWED DEPRECIATION ON THE SAME AND HENCE, THE DISALLOWANC E AT RS.55,27,111/-. ITA NO:326/DEL/2017 ASSESSMENT YEAR: 2012-13 PAGE | 4 THE CIT(A) UPHELD THE SAME, AGAINST WHICH THE ASSES SEE IS IN APPEAL BEFORE US. 8. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE DETAILS OF THE EXPENDITURE DISALLO WED BY THE AUTHORITIES BELOW IS AS UNDER:- SL.NO. DATED ITEM/NAME AMOUNT(RS.) 1. 18-MAY-11 INSTALLATION CHARGES 3,03,325 2. 17-JUN-11 INSTALLATION CHARGES 55,150 3. 02.08.2011 SUPPLY AND INSTALLATION OF BOILER TUBES 6,27,932 4. 14.03.2012 ELECTRICAL WORK 1,55,040 5. 28.03.2012 ELECTRICAL WORK 24,19,456 6. 07-JUN-11 TEAK WOOD CHAIR 10,68,750 7. 07-JUN-11 NEW TOUGHED GLASS ENTRANCE DOOR 2,51,064 8. 07-JUN-11 ENTRANCE DOOR 2,51,064 9. 12.02.2012 PARTITION WORK 5,05,829 10. 27.08.2011 FABRICATION GI DUCTING 1,14,039 11. 13.01.2012 FCU INSTALLATION 1,03,983 12. 26.08.2011 ELECTRIC WORK 1,34,296 13. 14.03.2012 ELECTRICAL WORK 1,55,040 9. THE LD.AR FOR THE ASSESSEE POINTED OUT THAT ITEM NO.4 IN THE SAID LIST AND ITEM NO.13 IN THE SAID LIST DATED 14.03.20 12 IS SAME AND DOUBLE ADDITION HAS BEEN MADE IN THE HANDS OF THE ASSESSEE ON THIS ACCOUNT. ON PERUSAL OF THE TABULATED DETAILS IN THE ASSESSMENT ORDER, WE FIND MERIT IN THE PLEA OF THE ASSESSEE AND HOLD THAT DOUBLE DISAL LOWANCE HAS BEEN MADE ON ACCOUNT OF RS.1,55,080/-. SIMILARLY, ITEM NOS. 7 & 8 WHICH IS AGAINST THE INVOICE DATED 07.06.2011 HAS BEEN CONSIDERED BY THE ASSESSING OFFICER TWICE, RESULTING IN DOUBLE ADDITION. HENCE , WE DELETE THE SUM OF RS.2,51,064/- ON THIS ACCOUNT. ITA NO:326/DEL/2017 ASSESSMENT YEAR: 2012-13 PAGE | 5 10. THE LD.AR FOR THE ASSESSEE FURTHER FAIRLY SUBMI TTED THAT ITEM NO.6 I.E. PURCHASE OF TEAKWOOD CHAIR TOTALING TO RS.10,6 8,730/- IS TO BE CAPITALIZED IN THE HANDS OF THE ASSESSEE. IN REPLY TO QUERY OF THE BENCH, LD.AR FOR THE ASSESSEE POINTED OUT THAT EXPENDITUR E OF RS.6,27,932/- WAS AGAINST SUPPLY AND INSTALLATION OF BOILER TUBES I. E. IT WAS REPAYMENT OF THE EARLIER BOILER TUBES AND NO NEW ASSET CAME INT O EXISTENCE. SIMILAR WAS A PLEA IN RESPECT OF ELECTRIC WORK TOTALING TO RS.24,19,456/- VIDE INVOICE DATED 28.03.2012. THE LD.AR FOR THE ASSESS EE POINTED OUT THAT THE SAID ELECTRIC WORK WAS CARRIED OUT FOR RUNNING THE BUSINESS MORE EFFICIENTLY AND THIS EXPENDITURE WAS INCURRED ON DI FFERENT FLOORS OF THE UNIT OF THE ASSESSEE AND WAS REVENUE IN NATURE. 11. THE LD DR FOR THE REVENUE STRONGLY OBJECTED TO THE SUBMISSION OF THE ASSESSEE. 12. IN THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE VIEW THAT THE EXPENDITURE INCURRED BY THE ASSES SEE FOR SMOOTH RUNNING OF ITS BUSINESS IS TO BE ALLOWED AS REVENUE EXPENDITURE. FURTHER, BY INCURRING THE EXPENDITURE, NO NEW ASSET HAD COME INTO EXISTENCE AND HENCE, THERE IS NO MERIT IN MAKING THE AFORESAID DI SALLOWANCE IN THE HANDS OF THE ASSESSEE EXCEPT THE EXPENDITURE OF RS. 10,68,750/-. ACCORDINGLY, WE ALLOW THE EXPENDITURE AS REVENUE EX PENDITURE IN THE HANDS OF THE ASSESSEE AND DIRECT THE ASSESSING OFFI CER TO CAPITALIZE THE EXPENDITURE OF RS.10,68,750/- AND ALLOW DEPRECIATIO N ON THE SAME. HENCE, GROUND NO.2 RAISED BY THE ASSESSEE IS PARTL Y ALLOWED AS INDICATED. ITA NO:326/DEL/2017 ASSESSMENT YEAR: 2012-13 PAGE | 6 13. THE LAST ISSUE IN PRESENT APPEAL IS AGAINST THE DISALLOWANCE OF TRAVELLING EXPENDITURE TOTALING TO RS.8,07,800/-, H OLDING THE EXPENDITURE TO BE PERSONAL IN NATURE. IN THE HANDS OF THE ASSE SSEE, THE EXPENDITURE HAS BEEN INCURRED BY THE ASSESSEE ON THE TRAVELLING OF THE DIRECTORS AND OTHER EMPLOYEES OF THE ASSESSEE FOR FOREIGN TRAVEL TO GHANA, SOUTH AFRICA. THE SAID EXPENDITURE IS ON AIR TICKETS AND PURCHASE OF DOLLARS. THE ASSESSEE IS A LIMITED CONCERN AND THERE IS NO MERIT IN THE ORDERS OF THE AUTHORITIES BELOW IN MAKING THE AFORESAID DISALLOWA NCE ON ACCOUNT OF PERSONAL NATURE. WE REVERSE THE FINDINGS OF THE AU THORITIES BELOW AND ALLOW THE CLAIM OF THE ASSESSEE IN ENTIRETY. 14. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 16 TH DAY OF OCTOBER, 2019. SD/- SD/- (B.R.R.KUMAR) (SUSHMA CH OWLA) %& %& %& %& /ACCOUNTANT MEMBER /JUDICIAL MEMBER / ! DATED : 16 TH OCTOBER, 2019 . * AMIT KUMAR * %-+/45%4/6 COPY OF THE ORDER IS FORWARDED TO : 1. )* / THE APPELLANT; 2. +,)* / THE RESPONDENT; 3. 7 8 9 / THE CIT(A) 4. 4:;+/ / DR, ITAT, DELHI 5. ;(< 6 GUARD FILE. % % % % / BY ORDER, ,4/+/ // TRUE COPY // >?@ , ASSISTANT REGISTRAR, ITAT, DELHI