ACIT, New Delhi V. M/s. Godavari Shilpkala Hospitality Pvt. Ltd., New Delhi

ITA 4249/DEL/2016

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 3349 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 02-08-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMIT KATOCH SENIOR
• Keywords: Earning of tax free income; Capital expenditure; TDS
• Section: 14A; 37(1); 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C : NEW DELHI) BEFORE SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER AND SHRI K. NARASIMHA CHARY, JUDICIAL MEMBER ITA NO.4249/DEL./2016 ASSESSMENT YEAR : 2012-13 DY. COMMISSIONER OF INCOME-TAX, VS. M/S. GODAVAR I SHILPKALA HOSPITALITY CIRCLE 10 (1), NEW DELHI. PVT. LTD., ROOM NO.314, CLARIDGES HOTEL, AURANGZEB ROAD, PLOT NO.12, NEW DELHI 110 011. (PAN : AADCG0213B) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI AMIT KATOCH, SENIOR DR RESPONDENT BY : SHRI AJAY WADHWA, ADVOCATE DATE OF HEARING : 13.08.2019 DATE OF ORDER : 28.08.2019 O R D E R PER K. NARASIMHA CHARY, JM : AGGRIEVED BY THE ORDER DATED 18.05.2016 IN APPEAL N O.282/15- 16/CIT(A)-4 PASSED BY LEARNED COMMISSIONER OF INCOM E-TAX (APPEALS)-4, NEW DELHI {FOR SHORT LD.CIT(A)} FOR ASSESSMENT YE AR 2012-13, REVENUE FILED THIS APPEAL ON THE FOLLOWING GROUNDS :- 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE, THE LD. CIT(A) IS JUSTIFIED IN NOT UPHOLDING DISALLOWAN CE OF RS.2,68,36,592/- UNDER SECTION 14A OF THE INCOME TA X, 1961 (THE ACT) WITHOUT CONSIDERING LEGISLATIVE INTEND OF INTR ODUCING SECTION 14A BY THE FINANCE ACT 2001 AS CLARIFIED BY THE CBD T CIRCULAR NO.5/2014 DATED 10.02.2014. 2. WHETHER ON FACTS AND ON CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) IS JUSTIFIED IN NOT UPHOLDING D ISALLOWANCE OF RS.2,68,36,592/- UNDER SECTION 14A OF THE ACT WITHO UT CONSIDER A ITA NO.4249/DEL./2016 2 LEGAL PRINCIPLES THAT ALLOWABILITY OF EXPENDITURE U NDER THE ACT IS NOT CONDITIONAL UPON THE EARNING OF THE INCOME AS U PHELD BY HON'BLE SUPREME COURT IN CASE OF CIT VS. RAJENDRA P RASAD MOODY [1978] 115 ITR 519. 3. WHETHER ON FACTS AND CIRCUMSTANCES OF THE CASE A ND LAW, THE LD. CIT(A) IS JUSTIFIED IN DELETING THE ADDITIO N OF RS.66,75,874/- BY IGNORING THE PROVISIONS OF SECTIO N 37(1) OF THE I.T. ACT, 1961. 4. WHETHER ON FACTS AND CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) IS JUSTIFIED IN DELETING THE AD DITION OF RS.66,75,874/-, WHEREAS THE AUDITOR HAS ALSO BEEN C ERTIFIED LEASE RENT EXPENDITURE AS CAPITAL EXPENDITURE. 2. INSOFAR AS THE GROUNDS NO.1 & 2 ARE CONCERNED, ALL THROUGH THE PROCEEDINGS, THE CONTENTION OF THE ASSESSEE IS THAT THE ASSESSEE DID NOT EARN ANY EXEMPT INCOME DURING THE IMPUGNED ASSESSMENT YEAR. IT WAS SO PLEADED BEFORE THE LD. AO AND ALSO BEFORE THE LD. CIT (A). LD. AO HAD TAKEN A VIEW THAT THE INVESTMENT GUIDELINES PROVIDED BY THE ULTI MATE HOLDING COMPANY OF THE ASSESSEE ARE FOR INVESTMENT OF TEMPORARY SURPLU S FUNDS AND IT REQUIRES MEETING OF CERTAIN EXPENDITURE AND, THEREFORE, NON- EARNING OF ANY DIVIDEND INCOME IS OF ANY CONSEQUENCE. 3. LD. CIT (A) HOWEVER WHILE FOLLOWING THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CHEMINVEST LTD. VS. CIT 378 ITR 33 (DELHI) HELD THAT SECTION 14A WILL NOT APPLY IF NO EXEMPT INCOME IS RECEIVED OR RECEIVABLE DURING THE RELEVANT PREVIOUS YEAR. 4. IT IS NOT EXPLAINED BEFORE US AS TO HOW THE DECI SION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CHEMINVEST LTD. (SUPRA) IS NOT APPLICABLE TO THE FACTS OF THE CASE. SINCE THE LD. CIT (A) FOLLOWED THE BINDING PRINCIPLE OF HONBLE JURISDICTIONAL HIGH COURT WHIC H IS LATER IN POINT OF TIME TO THE DECISION OF LD. AO, WE ARE OF THE CONSIDERED OP INION THAT THE COURSE ITA NO.4249/DEL./2016 3 ADOPTED BY THE LD. CIT (A) CANNOT BE FOUND FAULT WI TH. WE, THEREFORE, UPHOLD THE FINDING OF THE LD. CIT (A) ON THE ASPECT OF THE NON-APPLICATION OF SECTION 14A IN CASES WHERE THERE WAS NO EXEMPT INCOME DURIN G THE RELEVANT PREVIOUS YEAR. 5. NOW, COMING TO GROUND NO.3, IT RELATES TO THE DI SALLOWANCE OF RS.66,75,874/- ON ACCOUNT OF LEASE RENT PAID. LD. AO DISALLOWED THE SAME RELYING ON THE OBSERVATIONS OF THE TAX AUDIT REPORT WHEREIN AUDITORS HAVE STATED THAT THE LEASE RENT HAS BEEN CAPITALIZED IN THE BOO KS OF ACCOUNT DURING THE RELEVANT PREVIOUS YEAR AND THE ASSESSEE HAD CLAIMED THE EXPENSES AS REVENUE IN THE COMPUTATION OF INCOME WHILE FILING THE RETURN. 6. IT IS ADMITTED FACT THAT DURING THE RELEVANT PRE VIOUS YEAR, THE ASSESSEE WAS RUNNING THE BUSINESS OF CATERING SERVICE AND MA NDAP KEEPING SERVICES. SUCH A FACT IS VERIFIED BY THE FIRST APPELLATE AUTH ORITY FROM THE AUDITED BALANCE SHEET WHEREIN THE REVENUE FROM THE OPERATIONS WAS S HOWN AS RS.2,03,08,588/-. THE ASSESSEE EXPANDED THE BUSINESS BY OPENING A HOT EL IN BHARATPUR IN RESPECT OF WHICH IT ENTERED INTO A LEASE RENT WITH H.H. MAH ARAJ VISHVENDRA SINGH AT BHARATPUR. TDS UNDER SECTION 194-I OF THE INCOME-T AX ACT, 1961 (THE ACT) WAS DEDUCTED ON THE LEASE RENT PAID. 7. ON THE SET OF FACTS, LD. CIT (A) FOUND THAT OPEN ING A HOTEL IS MERELY THE EXTENSION OF THE BUSINESS OF THE ASSESSEE AS IS EVI DENT FROM THE COMMON MANAGEMENT AND AFFAIRS OF THE EXISTING BUSINESS AS WELL AS THE NEW PROJECT AT BHARATPUR. THE UTILIZATION OF THE COMMON POOL OF F UNDS WAS ALSO FOUND BY THE LD. CIT (A). IN THESE CIRCUMSTANCES, LD. CIT (A) W HILE APPLYING THE DECISION OF HONBLE APEX COURT IN TAPARIA TOOLS LTD. VS. JCIT (2015) 372 ITR 605 HELD THAT AN EXPENSE WHICH IS REVENUE IN NATURE CAN BE CLAIMED AS DEDUCTION ITA NO.4249/DEL./2016 4 U/S 37(1) OF THE ACT REGARDLESS OF THE TREATMENT GI VEN BY THE ASSESSEE IN THEIR BOOKS OF ACCOUNT. SINCE THE EXPENSES WERE MET IN R ESPECT OF AN EXISTING BUSINESS WHICH WAS EXPENDED BY WAY OF TAKING LEASE OF THE PREMISES FROM MAHARAJ VISHVENDRA SINGH AT BHARATPUR, LD. CIT (A) FOUND THAT THEY ARE REVENUE IN NATURE AND FOLLOWING THE DECISIONS REPOR TED IN CIT VS. SRF LTD. (2015) 372 ITR 425; CIT VS. MODI INDUSTRIES (1993) 200 ITR 341 (DELHI); CIT VS. RELAXO FOOTWEARS LTD. (2007) 293 ITR 231 (D ELHI); JAY ENGINEERING WORKS LTD. VS. CIT (2007) 212 CTR 562 (DELHI); AND CIT VS. GAJA ADVISORS (P.) LTD. (2014) 367 ITR 726 (DELHI) , LD. CIT (A) HELD THAT SINCE THE FACTS ARE COVERED BY THESE JUDGMENTS, ASSESSEE IS ENTITLED TO RELIEF AND ACCORDINGLY GRANTED THE RELIEF TO THE ASSESSEE. IT IS NOT EXPL AINED BEFORE US AS TO ANY DISCREPANCY IN THE FACTS FOUND BY THE LD. CIT (A) A ND SINCE THE EXPENSES ARE INCURRED WHILE CONDUCTING THE BUSINESS THOUGH IT WA S EXPENDED FURTHER BY WAY OF LEASE AT BHARATPUR, THEY ARE REVENUE IN NATURE A ND ASSESSEE IS ENTITLED TO CLAIM DEDUCTION U/S 37 (1) OF THE ACT. ON THIS SCO RE ALSO, WE FIND THE REASONING GIVEN BY THE LD. CIT (A) IS IMPECCABLE AN D THERE IS NO REASON TO INTERFERE WITH THE IMPUGNED ORDER. 8. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S THEREFORE DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON THIS 28 TH DAY OF AUGUST, 2019. SD/- SD/- (PRASHANT MAHARISHI) (K. NARASIMHA CHARY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 28 TH DAY OF AUGUST, 2019 TS ITA NO.4249/DEL./2016 5 COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-40, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.