DCIT, Bangalore V. M/s Hotel Parag Limited, Bangalore

ITA 471/BANG/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 51282 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 5 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-09-2011
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 26-09-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 08-04-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: HARSHA PRAKASH CITII
• Assessee Lawyers: V CHANDRASHEKAR PAGE OF
• Keywords: Capital asset; Depreciation; Business expenditure; Revenue expenditure; Capital expenditure
• Section: 12

Judgement Text

PAGE 1 OF 16 ITA NOS.471/BANG/2010 & 495/BANG/2010 1 IN THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH B BEFORE SHRI N K SAINI, ACCOUNTANT MEMBER AND SHRI GEORGE GEORGE K, J.M ITA NO.471/BANG/2010 (ASSESSMENT YEAR 2006-07) THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-11(4), BANGALORE. - APPELLANT VS M/S HOTEL PARAG LIMITED, THE CAPITOL, NO.3, RAJBHAVAN ROAD, BANGALORE-1. - RESPONDENT PAN NO.AAACH 4777J ITA NO.495/BANG/2010 (ASST. YEAR 2005-06) M/S HOTEL PARAG LIMITED, THE CAPITOL, NO.3, RAJBHAVAN ROAD, BANGALORE-1. - APPELLANT VS THE ASST. COMMISSIONER OF INCOME-TAX, CIRCLE-11(4), BANGALORE. - RESPONDENT DATE OF HEARING : 26/09/2011 DATE OF PRONOUNCEMENT : 29/09/2011 APPELLANT BY : SHRI HARSHA PRAKASH, CIT- II RESPONDENT BY : SHRI V CHANDRASHEKAR, ADVOCAT E PAGE 2 OF 16 ITA NOS.471/BANG/2010 & 495/BANG/2010 2 ORD ER PER GEORGE GEORGE K : THESE APPEALS PREFERRED BY BOTH THE DEPARTMENT A ND THE ASSESSEE ARISE OUT OF THE SEPARATE ORDERS OF LE ARNED CIT(A)-I, BANGALORE DATED 11/1/2010 AND 08/01/2010 RESPECTIVE LY. THE DEPARTMENT APPEAL PERTAINS TO ASST. YEAR 2006-07 (IT A NO.471/10). THE ASSESSEES APPEAL PERTAINS TO ASST. YEAR 2005-06 (ITA NO.495/10). 2. IN DEPARTMENTS APPEAL, TWO ISSUES ARE INVOLVED, NAMELY, (I) WHETHER THE CIT(A) IS JUSTIFIED IN ALLOWING TH E DEDUCTION OF BALANCE DEPRECIATION/AMORTIZATION OF RS.2,82,64,428/- FOR THE CONCERNED ASST. YEAR AND (II) WHETHER THE ASSESSEE IS ENTITLED TO CLAIM DEDUCTION IN RESPECT OF DELAYED PAYMENT OF EMPLOYEES MONTHLY CONTRIBUTION TO PF AND ESI 2.1 IN ASSESSEES APPEAL, THE SOLITARY ISSUE INVO LVED IS WHETHER THE INCOME TAX AUTHORITIES ARE JUSTIFIED IN DISALLOWING THE AMORTIZATION OF BUILDING EXPENSES TO THE EXTENT OF RS.1,41,32,214/- FOR THE ASST. YEAR 2005-06. 2.2 SINCE THE ISSUES INVOLVED ARE INTER-CONNECTED/ INTER LINKED AND IT PERTAINS TO THE SAME ASSESSEE, THESE APPEALS ARE HEARD AND DISPOSED OFF TOGETHER BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE AND BREVITY. PAGE 3 OF 16 ITA NOS.471/BANG/2010 & 495/BANG/2010 3 3. THE COMMON ISSUE FOR BOTH THE ASST. YEARS IS REG ARDING DEPRECIATION/AMORTIZATION EXPENSES OF THE BUILDING. 3.1 BRIEFLY STATED THE FACTS IN RELATION TO THE ABO VE ISSUE ARE AS FOLLOWS:- THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF HOSPITALITY RUNNING A HOTEL. IN THE RETURN OF INCOM E FILED FOR THE ASST. YEARS 2005-06 AND 2006-07, THE ASSESSEE HAD CLAIMED EXPENDITURE UNDER THE HEAD AMORTIZATION OF LEASEHOLD AMOUNTIN G TO RS.1,41,32,214/- FOR EACH OF THE ASST. YEARS. THE A SSESSEE COMPANY HAD CONSTRUCTED A HOTEL BUILDING ON A LEASEHOLD LAN D. AS PER THE LEASE AGREEMENT, THE LEASE WAS FOR A PERIOD OF 25 YEARS FR OM 1992 TO 2017. THE LEASE RENT WAS RS.5000/- PER MONTH. ACCORDING TO THE LEASE AGREEMENT, ON TERMINATION OF THE LEASE, THE LAND AL ONG WITH THE BUILDING WILL BE REVERTED BACK TO THE LESSOR AND TH E LESSOR NEED NOT PAY ANY COMPENSATION TO THE LESSEE ON ACCOUNT OF TRAN SFER. THE ASSESSEE COMPANY IN THE PAST YEAR HAD ALL ALONG BEEN CLAIMING DEPRECIATION ON THE BUILDING AND THE SAME WAS ALLOW ED BY THE INCOME TAX AUTHORITIES. BUT DURING THE PREVIOUS YEAR RELEV ANT TO THE ASST. YEAR 2005-06 (31/3/2005), THE ASSESSEE RECEIVED NOTI CE FROM THE LESSOR FOR VACATING THE LEASEHOLD PREMISES ON ACCOU NT OF NON PAYMENT OF DUES AND VIOLATION OF LEASE CONDITIONS. THE LEA SE WAS FINALLY TERMINATED DURING THE ASST. YEAR 2006-07. ON TERMIN ATION OF THE LEASE, THE ASSESSEE COMPANY APPORTIONED THE REMAININ G WRITTEN DOWN PAGE 4 OF 16 ITA NOS.471/BANG/2010 & 495/BANG/2010 4 VALUE (WDV) OF THE LEASEHOLD BUILDING AS ON 1/4/200 4 EQUALLY BETWEEN THE ASST. YEAR 2005-06 AND 2006-07. 3.2 FOR THE ASSESSMENT WHICH WAS COMPLETED FOR TH E ASST. YEAR 2005-06 (VIDE ORDER DATED 28.12.2007), THE AO H ELD THAT THE LEASE WAS TERMINATED ONLY DURING THE PREVIOUS YEAR RE LEVANT TO THE ASST. YEAR 2006-07, THEREFORE, THE ASSESSEE COMPANY W AS THE OWNER OF THE BUILDING AND AMORTIZATION OF RS.1,41,32,214/ - CLAIMED FOR THE ASST. YEAR 2005-06 WAS DISALLOWED. HOWEVER, THE DEP RECIATION ON BUILDING WAS ALLOWED AT 10%. 3.3 FOR THE ASST. YEAR 2006-07, THE AO HELD THAT TH E BUILDING WAS HANDED OVER TO THE LAND OWNER ON TERMI NATION OF THE LEASE AGREEMENT AND SINCE THE OWNERSHIP OVER THE ASSET DI D NOT REST WITH THE ASSESSEE COMPANY, THE DEPRECIATION CANNOT BE ALL OWED. THE CLAIM OF AMORTIZATION OF RS.1,41,32,214/- WAS ALSO DISALL OWED, AS ACCORDING TO THE AO, THE REMAINING WDV CANNOT BE AMORTIZED, A S IT IS A CAPITAL LOSS. HE CALCULATED SHORT TERM CAPITAL GAINS AND A LLOWED THE ASSESSEE COMPANY TO CARRY FORWARD THE SHORT TERM CAPITAL LOSS. 4. AGGRIEVED BY THE ASSESSMENTS, THE ASSESSEE CARRI ED THE MATTER IN APPEAL FOR BOTH THE ASST. YEARS BEFORE THE FIRST APPELLATE AUTHORITY. 5. BEFORE THE FIRST APPELLATE AUTHORITY, ELABORATE WRITTEN SUBMISSION WAS FILED WHICH IS REPRODUCED BY THE CIT( A) IN HIS IMPUGNED ORDER FROM PAGES 5 TO 9 (ASST. YEAR 2006-0 7). PAGE 5 OF 16 ITA NOS.471/BANG/2010 & 495/BANG/2010 5 6. THE GIST OF ASSESSEES ARGUMENTS IS AS FOLLOWS: - I) THE ASSESSEE WAS ADVISED TO WRITE-OFF THE BALA NCE WDV AS ON 1/4/2004 AMOUNTING TO RS.2,82,64,428/- OV ER A PERIOD OF TWO YEARS, NAMELY, YEAR ENDING 31/3/2005 AND 31/3/200 6 AS A REVENUE EXPENDITURE, SINCE THE NOTICE FOR TERMINATI ON OF LEASE WAS RECEIVED BEFORE THE FINALIZATION OF ACCOUNTS FOR TH E YEAR ENDING 31/3/2005 AND THE LEASE WAS ACTUALLY TERMINATED DURI NG THE YEAR ENDING 31/3/2006. II) THE ASSESSEE COMPANY ALSO FOUND FAULT WITH THE CONCLUSION DRAWN BY THE AO AT PARA 4.3 OF HIS ORDER (ASST. YEAR 2006- 07) WHEREIN IT IS STATED THUS:- 4.3 BUT IN THE INSTANT CASE THE FACTS ARE DIFFERENT. HERE THE HOTEL BUILDING NEVER BELONGED TO THE LESSOR. ON THE LAND TAKEN ON LEASE A NEW BUILDING CAME UP IE THE HOTEL CAME UP AND IN THE LEASE DEED IT IS NOWHERE MENTIONED THAT ANY BUILDING THAT WOULD BE CONSTRUCTED ON THE LAND WOULD BE AUTOMATICALLY BECOME THE PROPERTY OF THE LESSOR. IT WAS SUBMITTED THAT THE CONCLUSION DRAWN BY THE AO UPON READING THE LEASE AGREEMENT IS QUITE CONTRARY TO THE COVENAN TS CONTAINED THEREIN. THE LEASE DEED CLEARLY STATES THAT ANY STRUC TURE THAT STANDS ON THE LEASE LAND WOULD BE TRANSFERRED TO THE LESSO R ON THE TERMINATION OF THE LEASE AND THE LESSOR WOULD NOT P AY COMPENSATION TOWARDS THE SAME. PAGE 6 OF 16 ITA NOS.471/BANG/2010 & 495/BANG/2010 6 III) IT WAS FURTHER SUBMITTED THAT THE EXPENDITUR E INCURRED IN SUCH A SITUATION IN RESPECT OF THE BUIL DING OUGHT TO BE TREATED AS REVENUE EXPENDITURE AND NOT AS A CAPITAL EXPENDITURE IRRESPECTIVE OF THE FACT THAT THE SAME HAS BEEN ERR ONEOUSLY TREATED AS A CAPITAL EXPENDITURE IN THE PAST. FOR THIS PROP OSITION, THE ASSESSEE RELIED ON THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF CIT V MADRAS AUTO SERVICES PVT. LTD. 233 ITR 468 AND THE DECISION OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF CIT V TVS LEAN LOGISTICS 293 ITR 432. IV) TO SUM UP, IT WAS ARGUED THAT THE ASSESSEE IS NOT ENTITLED TO ANY COMPENSATION TO THE EXPENSES INCURRE D BY HIM AND THE ASSET IN QUESTION BECOMES THE ABSOLUTE PROPERTY OF T HE LESSOR ON DETERMINATION OF THE LEASE PERIOD AND THEREFORE, TH E EXPENSES INCURRED BY THE ASSESSEE ARE CLEARLY AND PURELY REVEN UE IN NATURE AND THE SAME OUGHT TO BE ALLOWED AS REVENUE EXPENDITURE . 7. THE CIT(A) DISMISSED THE CLAIM OF THE ASSESSEE TO AMORTISE THE WDV TO THE EXTENT OF RS.1,41,32,214/- IN THE ASST. YEAR 2005-06, ON THE GROUND THAT THE ASSESSEE WAS IN POS SESSION OF THE LEASEHOLD PROPERTY DURING THIS YEAR. HOWEVER, FOR TH E ASST. YEAR 2006-07, THE ENTIRE WDV AS ON 1/4/2004 I.E. RS.2,82 ,64,428/- WAS ALLOWED AS A DEDUCTION. THE RELEVANT FINDING OF TH E CIT(A) READS AS FOLLOWS:- PAGE 7 OF 16 ITA NOS.471/BANG/2010 & 495/BANG/2010 7 6.3 THE ABOVE WAS CAREFULLY CONSIDERED. IT IS AN ADMITTED FACT THAT THE APPELLANT WAS CLAIMING DEPRECIATION UNDER THE HEAD BUSINESS IN EARLIER YEARS AND ALSO ALLOWED BY THE DEPARTMENT. SINCE THE LEASE TERMINATED, THE LAND AS WELL AS THE BUSINESS ASSET WAS HANDED OVER TO THE LESSOR AND THEREFORE THE REST OF THE WDV WAS CLAIMED AS DEPRECIATION. SUCH CLAIM, I CONSIDER, DESERVES T O BE ALLOWED ON THE GROUND THAT SUCH EXPENDITURE IS NOT CAPITAL BUT REVENUE, I.E. SPENT FOR THE PURPOSE OF BUSINESS SETTING UP, RUNNING AS WELL AS EXPANSION OF HOTEL BUSINESS. THE AO WHILE DOING ASSESSMENT FOR AY 2005-06 HAS POINTED OUT THAT THE HOTEL BUILDING HAS BEEN TRANSFERRED TO THE LESSOR IN AY 2006-07. IN VIEW OF THIS FINDING OF FACT THAT THE HOTEL BUILDING WAS EFFECTIVELY TRANSFERRED TO THE LESSOR ON 31.3.2006 I HOLD THAT THE APPELLANT CAN BE TREATED AS THE EFFECTIVE OWNER IN POSSESSION OF THE HOTEL DOING HOTEL BUSINESS FOR THE ENTIRE AY 2005-06 AND THEREFORE ENTITLED FOR CLAIM OF DEPRECIATION OR EVEN AMORTIZATION OF THE REST OF THE WDV I.E. RS.2,82,64,428/- IN THIS ASSESSMENT YEAR ONLY. IN VIEW OF THIS I DING THE ALTERNATE CLAIM OF THE APPELLANT THAT THE ENTIRE BALANCE OF DEPRECIATION/AMORTIZATION OF RS.2,82,64,428/- BE ALLOWED IN THIS YEAR ONLY AS THE EFFECTIVE TRANSFER TOOK PLACE ON 31.3.2006 JUSTIFIED. 8. THE REVENUE BEING AGGRIEVED FOR THE ASST. YEAR 2 006-07 AND THE ASSESSEE BEING AGGRIEVED FOR THE ASST. YEAR 2005-06 ARE IN APPEAL BEFORE US. 9. THE LEARNED AR REITERATED THE CONTENTIONS RAISE D BEFORE THE INCOME TAX AUTHORITIES. HE ALSO RELIED ON THE JUDGEMENT OF THE PAGE 8 OF 16 ITA NOS.471/BANG/2010 & 495/BANG/2010 8 HONBLE DELHI HIGH COURT IN THE CASE OF CIT V BHARA T ALUMINIUM CO. LTD. (2010) (187 TAXMAN 111). 10. THE LEARNED DR, ON THE OTHER HAND, SUBMITTED T HAT THE CIT(A) HAS ERRED IN HOLDING THAT THE EXPENDITURE CL AIMED UNDER THE HEAD AMORTIZATION OF LEASEHOLD IS TO BE ALLOWED A S A REVENUE EXPENDITURE. IT WAS SUBMITTED THAT THE SAME IS CLE ARLY IN THE NATURE OF CAPITAL LOSS AND NOT ALLOWABLE AS A REVENUE EXPE NDITURE. IT WAS ALSO CONTENDED THAT THE CIT(A) HAS ERRED IN CONCLUDING T HAT THE ASSESSEE COMPANY IS ENTITLED TO CLAIM DEPRECIATION/AMORTIZATI ON OF THE ENTIRE WDV AMOUNTING TO RS.2,82,64,428/- IN THE ASST. YEAR 2006-07 THOUGH THE SAME WAS AMORTISED BY THE ASSESSEE OVER A PERIOD OF 2 YEARS. 11. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS, DILIGENTLY PERUSED THE RELEVANT CASE RECORDS AND ALS O THE CASE LAWS OF VARIOUS JUDICIARIES RELIED ON DURING THE COURSE OF HEARING. 11.1. THOUGH THE REVENUE HAD VEHEMENTLY ARGUED THAT THE AMORTIZED SUM WAS CLEARLY IN THE NATURE OF A CAPITAL LOSS, IT HAD, HOWEVER, NEITHER PRODUCED ANY CLINCHING EVIDENCE NOR CITED THE CIRCUMSTANCES UNDER WHICH IT HAS BEEN BRANDED SO. O N THE OTHER HAND, THE APPELLANT HAD VALIANTLY ARGUED THAT IT HAD , IN FACT, ENTITLED ONLY TO UTILIZE THE BUILDING FOR THE PURPOSES OF ITS BUSINESS AS LONG AS THE LEASE WAS IN EXISTENCE AND THE LESSOR WOULD BEC OME THE ABSOLUTE OWNER OF THE BUILDING ON THE EXPIRY OR THE TERMINATI ON OF THE SAID LEASE DEED. PAGE 9 OF 16 ITA NOS.471/BANG/2010 & 495/BANG/2010 9 11.2. WE SHALL NOW TURN OUR ATTENTION TO THE JUDIC IAL VIEW ON THE ISSUE. CIT V. MADRAS AUTO SERVICE (P) LTD (1998) 233 ITR 4 68 (SC): IN THIS CASE, THE ASSESSEE IN THE BUSINESS OF SAL E OF MOTOR PARTS UNDER AN AGREEMENT OF LEASE OBTAINED CERTAIN PREMIS ES FOR A PERIOD OF 39 YEARS AND ACCORDING TO THE TERMS AND CONDITION S OF THE LEASE, IT HAD DEMOLISHED THE EXISTING PREMISES AT ITS OWN COS T AND PUT UP A NEW BUILDING THEREON. THE ASSESSEE WAS REQUIRED TO PAY R ENT RANGES FROM RS.1000/MONTH TO RS.2000/MONTH AS CRAFTED IN THE LE ASE DEED WITH A CONDITION THAT THE ASSESSEE WAS THE RIGHT TO BE A T ENANT FOR A PERIOD OF 39 YEARS UNDER THE EXISTING LEASE. ACCORDINGLY, THE ASSESSEE INVESTED CERTAIN AMOUNTS FOR CONSTRUCTING THE SAID BUILDING AND CLAIMED THE EXPENDITURE IN THE RELEVANT ASSESSMENT YEARS AS CAPITAL LOSS AND IN THE ALTERNATIVE, CLAIMED DEDUCTION OF T HE PAYMENTS AS BUSINESS EXPENDITURE OR AS EXTRA RENT FOR THE LEASE . WHEN THE ISSUE WENT BEFORE THE TRIBUNAL, IT HAD HELD THAT THE EXPE NDITURE OF THE SAID AMOUNTS FOR THE CONSTRUCTION OF A NEW BUILDING WAS IN THE NATURE OF BUSINESS EXPENDITURE FOR PROPER CARRYING ON OF TH E BUSINESS OF THE ASSESSEE WHICH WAS UPHELD BY THE HIGH COURT. WHEN TH E ISSUE REACHED BEFORE THE HONBLE APEX COURT, IT WAS HELD, AMONG OTHERS, THAT RIGHT FROM INCEPTION, THE BUILDING WAS OF THE OWN ERSHIP, OF THE LESSOR. THEREFORE, BY SPENDING THIS MONEY, THE ASSESSEE DID NOT ACQUIRE ANY CAPITAL ASSET. THE ONLY ADVANT AGE WHICH THE ASSESSEE DERIVED BY SPENDING THE MONEY WAS THAT IT GOT THE LEASE OF A NEW BUILDING AT A LOW RENT. FROM THE BUSINESS POINT OF VIEW, PAGE 10 OF 16 ITA NOS.471/BANG/2010 & 495/BANG/2010 10 THEREFORE, THE ASSESSEE GOT THE BENEFIT OF REDUCED RENT. THE HIGH COURT HAD, THEREFORE, RIGHTLY CONSIDERED THIS AS OBTAINING A BUSINESS ADVANTAGE. THE EXPENDITURE WAS, THEREFORE , TO BE TREATED AS REVENUE EXPENDITURE. INCIDENTALLY, THE HONBLE MADRAS HIGH COURT IN ITS RULING IN CIT V. TVS LEAN LOGISTIC LTD REPORTED IN (2007) 293 ITR 432 (MAD) HELD, AMONG OTHERS, THAT THE ASSESSEE DID NOT ACQUIRE A CAPITAL ASSET BUT HAD PUT UP A CONSTRUCTION OF THE BUILDING ONLY FOR BUSINESS ADVANTAGE WITH THE RESULT THAT THE ENTIRE CONSTRUCTION COST WAS ADMISSIBLE AS REVENUE EXPENDITURE. 11.3. IN CONFORMITY WITH THE RATIOS LAID DOWN BY THE HONBLE COURTS REFERRED ABOVE, WE ARE OF THE FIRM VIEW THAT THE LD. CIT (A) WAS JUSTIFIED IN HIS OBSERVATION THAT (AT THE COST OF REPETITION) 6.3 .. IN VIEW OF THIS FINDING OF FACT THAT THE HOTEL BUIL DING WAS EFFECTIVELY TRANSFERRED TO THE LESSOR ON 31.3.2 006, I HOLD THAT THE APPELLANT CAN BE TREATED AS THE EFFECTIVE OWNER IN POSSESSION OF THE HOTEL DOING HOTEL BUSINESS FOR TH E ENTIRE FY 2005-06 AND, THEREFORE, ENTITLED FOR CLAIM OF DEPRE CIATION OR EVEN AMORTIZATION OF THE REST OF THE WDV I.E., RS.2,82,64,428/- IN THIS ASSESSMENT YEAR ONLY. IN VIEW OF THIS, I FIND THE ALTERNATE CLAIM OF THE APPELLANT THAT TH E ENTIRE BALANCE OF DEPRECIATION/AMORTIZATION OF RS.2,82,64, 428/- BE ALLOWED IN THIS YEAR ONLY AS THE EFFECTIVE TRANSFER TOOK PLACE ON 31.3.2006 JUSTIFIED. PAGE 11 OF 16 ITA NOS.471/BANG/2010 & 495/BANG/2010 11 11.4 MOREOVER, THE JUDGEMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT V BHARAT ALUMINIUM CO. LTD. (187 TAXMAN 111) IS MORE OR LESS IDENTICAL TO THE FACTS OF THIS CASE. IN THAT CASE, THE ASSESSEE WAS A GOVERNMENT SECTOR UNDERTAKING. IT P UT UP ITS POWER PLANT AT KORBA FOR GENERATION OF ELECTRICITY FOR ITS ALUMINIUM PLANT. IT HAD ENTERED INTO AN AGREEMENT WITH ANOTHER PUBLIC S ECTOR CORPORATION, VIZ. NTPC, WHICH, ALSO HAD ITS POWER PLANT AT KORBA , TO SHARE FACILITIES FOR COAL HANDLING, DEMINERALIZATION UNIT FOR WATER, FACILITY FOR USING HED AND HFO OILS INCLUDING CREATING SYSTEM FOR COAL CARRYING ETC., AVAILABLE WITH NTPC AT KORBA AND CONTRIBUTED A SUM OF RS.22.68 CRORES TO NTPC AS ITS SHARE OF CAPITAL EXPENDITURE FOR SHARING COMMON FACILITIES CREATED BY NTPC. THE SAID INFRAST RUCTURE FACILITIES WERE CREATED ON THE LAND BELONGING TO NTPC AND OWNE RSHIP AND TITLE OF THE SAME VESTED IN NTPC. ON THE AFORESAID SUM OF R S.22.68 CRORES, THE ASSESSEE HAD CLAIMED DEPRECIATION TILL THE ASSE SSMENT YEAR 1994- 95. THEREAFTER, BECAUSE OF THE SUGGESTION AND DIRE CTION GIVEN BY THE COMPTROLLER AND AUDITOR GENERAL (CAG) TO IT TO FOLL OW THE GUIDELINES STIPULATED BY THE INSTITUTE OF CHARTERED ACCOUNTANT S OF INDIA (ICAI) UNDER THE GUIDANCE NOTE NO.10, IT DECIDED TO CHANGE THE ACCOUNTING POLICY AND TO WRITE OFF THE BALANCE EXPENDITURE OF R S.15.07 CRORES OVER A PERIOD OF FIVE YEAR, I.E. AT THE RATE OF RS.3 .76 CRORES PER YEAR. THEREFORE, THE ASSESSEE, IN THE RETURN OF INCOME FO R THE RELEVANT ASSESSMENT YEAR, AMORTISED THE BALANCE EXPENDITURE O F RS.15.07 CRORES OVER A PERIOD OF FIVE YEARS AND CLAIMED RS.3 .76 CRORES AS BUSINESS EXPENDITURE. THE AO DISALLOWED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT THE SAME WAS COVERED UNDER THE PROV ISIONS OF SECTION PAGE 12 OF 16 ITA NOS.471/BANG/2010 & 495/BANG/2010 12 32. HE HELD THAT THE AMOUNT OF RS.22.68 CRORES WAS CONTRIBUTED BY THE ASSESSEE TO NTPC TOWARDS CAPITAL EXPENDITURE IN CURRED BY THE NTPC IN LAYING INFRASTRUCTURE FACILITIES FOR COAL HA NDLING SUPPLY AND BY DOING SO, THE ASSESSEE HAD OBTAINED A LONG TERM USA GE OF PERMANENT ASSETS AND, THEREFORE, THE EXPENDITURE IN QUESTION WAS NOT A REVENUE/BUSINESS EXPENDITURE. ON APPEAL, THE COMMI SSIONER (APPEAL) HELD THAT EVEN AFTER THE CONTRIBUTION OF MONEY TO NT PC, THE ASSESSEE HAD NOT ACQUIRED THE OWNERSHIP OF ANY TANGIBLE ASSET S SO AS TO BE ENTITLED TO THE CLAIM OF DEPRECIATION. HE FURTHER HELD THAT THE ENTIRE BALANCE EXPENDITURE OF RS.15.07 CRORES WAS INCURRED WHOLLY AND EXCLUSIVELY FOR THE CONDUCT OF ITS BUSINESS; AND THA T SINCE THE DEPARTMENT HAD ITSELF ALLOWED RS.7.61 CRORES (RS.22 .68 15.07 CRORES) IN THE EARLIER YEAR, IT COULD NOT TAKE CONTRARY VIEW THAT THE EXPENDITURE WAS NOT ALLOWABLE. HE THEREFORE HELD T HAT THE ENTIRE EXPENDITURE OF RS.15.07 CRORES WAS ALLOWABLE AS BUS INESS EXPENDITURE U/S 37(1). HE ALSO HELD THAT AS THE EXPENDITURE WA S TO PROVIDE AN ENDURING BENEFIT, IT COULD BE SPREAD OVER A PERIOD OF FIVE YEARS. THE COMMISSIONER (APPEALS), THEREFORE, ALLOWED THE EXPE NDITURE OF RS.3.76 CRORES AS REVENUE/BUSINESS EXPENDITURE. ON FURTHER APPEAL, THE TRIBUNAL UPHELD THE ACTION OF THE COMMISSIONER( APPEALS). 11.5. ON REVENUES APPEAL, THE HONBLE HIGH COURT HELD - THE EXPENDITURE OF RS.22.68 CRORES WAS OF REVENUE NATURE. NO DOUBT, TILL THE ASST. YEAR 1994- 95, THE PART OF THE EXPENDITURE OF RS.22.68 CRORES WAS ALLOWED EVERY YEAR AND IT WAS LOOSELY CALLED AS DEPRECIATION. WHAT COULD BE SAID WAS THAT THE PAGE 13 OF 16 ITA NOS.471/BANG/2010 & 495/BANG/2010 13 REVENUE EXPENDITURE WAS ALLOWED EVERY YEAR AT THE RATES ON WHICH DEPRECIATION WAS ALLOWED. SINCE THAT WAS WRONG PRACTICE ADOPTED, THE CAG RIGHTLY ADVISED THE ASSESSEE TO CHANGE THE ACCOUNTING METHOD TO BRING IT IN TUNE WITH THE ICAI GUIDELINES. WHAT WAS DONE FROM THE RELEVANT ASST. YEAR WAS THAT IT WAS THE CORRECT STEP AS IT SHOULD HAVE BEEN TAKEN IN ACCORDANCE WITH LAW. THEREFORE, THE IMPUGNED ORDER OF THE TRIBUNAL WAS JUSTIFIABLE . 11.6. BOTH THE AO AND THE CIT(A) HAS CATEGORICALLY FOUND THAT THE LEASE WAS TERMINATED DURING THE PREVIOUS YEAR R ELEVANT TO THE ASST. YEAR 2006-07 AND HENCE, THE ENTIRE WDV HAS BEE N CORRECTLY DEDUCTED IN THE SAID ASST. YEAR, THOUGH THERE IS NO SPECIFIC PRAYER TO THAT EFFECT BY THE ASSESSEE BEFORE THE CIT(A). THE CIT(A) IS CORRECT IN HOLDING THAT THE ENTIRE WDV CAN BE ALLOW ED IN THE CONCERNED ASST. YEAR, NAMELY 2006-07 IN VIEW OF EXPLA NATION 2 TO SECTION 251 OF THE ACT. MOREOVER, THE ISSUE OF AMO RTIZATION OF EXPENSES IS INTERLINKED FOR BOTH THE ASST. YEARS 20 05-06 AND 2006-07 AND THE ASSESSEE IN HIS GROUND OF APPEAL BEFORE THE CIT(A) FOR ASST. YEAR 2005-06 HAD RAISED AN ALTERNATIVE PLEA THAT THE ENTIRE WDV OUGHT TO HAVE BEEN ALLOWED AS DEDUCTION IN ASST. YEA R 2005-06. ACCORDINGLY, THIS GROUND OF APPEAL OF THE REVENUE IS DISMISSED AND WE AFFIRM THE FINDING/CONCLUSION OF THE CIT(A). 11.7. BEFORE PARTING WITH, WE WOULD LIKE TO REITER ATE THAT THE LD. A R DURING THE COURSE OF HEARING URGED THAT THE RULING OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT V. BHAR AT ALUMINIUM CO. PAGE 14 OF 16 ITA NOS.471/BANG/2010 & 495/BANG/2010 14 LTD (2010) 187 TAXMAN 111 (DEL) IS DIRECTLY APPLICAB LE TO THE FACTS OF THE ISSUE IN THE APPELLANT CASE FOR THE AY 2005-06 AND, THUS, THE APPELLANT WAS WITHIN ITS REALM TO CLAIM AMORTIZATIO N OF BUILDING TO THE EXTENT OF RS.1.41 CRORES FOR THE AY 2005-06.. 11.8. IN THE PRESENT CASE, THE CONTENTION OF THE A PPELLANT WAS ALL ALONG THAT DUE TO BREACH OF THE TERMS AND CONDI TIONS OF THE LEASE DEED, THE LEGAL NOTICE FOR TERMINATION OF THE LEASE PERIOD WAS RECEIVED ON 31.3.2005 AND THE LEASE STOOD DETERMINE D SHORTLY THEREAFTER, THAT MEAN TO SAY, THE APPELLANT WAS IN A CTUAL POSSESSION OF THE SAID BUILDING AS ON 31.3.2005 WHEREAS IN THE CASE CITED BY THE APPELLANT, THAT ASSESSEE HAS BEEN ENJOYING THE INFRA STRUCTURE FACILITIES PROVIDED BY NTPC UNINTERRUPTEDLY EVEN AFTE R THE AY 1994- 95 [ THERE WAS NO TERMINATION OF LEASE AS IN THE CA SE OF THE PRESENT APPELLANT], EVEN THOUGH THE HIGHEST HIERARCHY IN AUD ITING - NAMELY, CAG -HAD SUGGESTED TO ADOPT THE GUIDELINES STIPULAT ED BY ICAI. HOWEVER, IN THE PRESENT CASE, THE TERMINATION OF TH E LEASE DEED CAME INTO EFFECT IN THE AY 2006-07 AND, THUS, IN OUR VIE W, THE APPELLANT CANNOT TAKE SANCTUARY IN THE DELHI HIGH COURTS RULI NG TO ITS STRIDE WHICH IS ENTIRELY ON A DIFFERENT FOOTING. THEREFORE, WE ARE OF THE FIRM VIEW THAT THE AUTHORITIES BELOW WERE IN THEIR SPHERE TO RIGHTLY DENY THE APPELLANTS CLAIM OF AMORTIZATION OF BUILD ING TO THE EXTENT OF RS.1.41 CRORES FOR THE AY 2005-06. 12. IN THE RESULT, GROUND NOS.2 & 3 RAISED BY REVEN UE IN ITA NO.471/10 & GROUND NOS.2 & 3 RAISED BY THE ASSESSEE IN ITA NO.495/10 ARE DISMISSED. PAGE 15 OF 16 ITA NOS.471/BANG/2010 & 495/BANG/2010 15 13. GROUND NOS.4 AND 5 IN ITA NO.471/10 (REVENUE S APPEAL) RELATE TO THE ISSUE WHETHER DEDUCTION CAN BE CLAIME D IN RESPECT OF DELAYED PAYMENT OF EMPLOYEES MONTHLY CONTRIBUTION TO P F AND ESI. 13.1 THE AO IN THE COURSE OF SCRUTINY ASSESSMENT NO TICED THAT THE ASSESSEE HAD NOT REMITTED THE CONTRIBUTION TO THE PF ACCOUNT AND ESI WITHIN THE DUE DATE FOR THE MONTHS OF NOVEM BER, 2005 AND DECEMBER, 2005 AND JANUARY, 2006 TO THE EXTENT OF RS .1,23,432/- AND RS.16,511/-. THE ABOVE AMOUNTS WERE DISALLOWED BY THE AO. 13.2 BEFORE THE FIRST APPELLATE AUTHORITY, IT WAS S UBMITTED THAT THE STATUTORY LIABILITIES ARE PAID BY THE ASSES SEE BEFORE THE DUE DATE OF FILING OF THE RETURN OF INCOME U/S 139(1) O F THE ACT AND THE ISSUE IN QUESTION IS SQUARELY COVERED BY THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF SABARI ENT ERPRISES 213 CTR 12 AND THE DECISION OF THE HONBLE APEX COURT IN THE C ASE OF VINAY CEMENTS 213 CTR 268. 13.3 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUS ED THE MATERIAL ON RECORD. AT THE OUTSET, WE WOULD LIKE T O REITERATE THAT IN LIEU OF THE PROVISO TO S.43B OF THE ACT AND ALSO T HE JUDICIAL PROCLAMATION OF THE HONBLE APEX COURT AS WELL AS T HE JURISDICTIONAL HIGH COURT CITED SUPRA, IT IS PERMISSIBLE, IF THE P AYMENTS WERE MADE BY THE APPELLANT BEFORE THE DUE DATE OF SUBMISSION O F THE RETURN OF INCOME U/S 139(1) OF THE ACT EVEN IF CONTRIBUTIONS WERE PAID BEYOND THE DUE DATES UNDER THE RESPECTIVE STATUTORY ENACTME NTS. PAGE 16 OF 16 ITA NOS.471/BANG/2010 & 495/BANG/2010 16 13.4. HOWEVER, DURING THE COURSE OF HEAR ING, THOUGH IT WAS VOUCHED THAT THE APPELLANT HAD PAID ALL THE STATUTO RY LIABILITIES BEING PF AS WELL AS ESI CONTRIBUTIONS WITHIN THE DUE DATE FOR FILING OF ITS RETURN OF INCOME U/S 139(1) OF THE ACT, NO PROOF HA S BEEN FORTH- COMING. IN VIEW OF THE ABOVE AND IN THE INTERESTS OF EQUITY, THIS ISSUE IS REMITTED BACK ON THE FILE OF THE AO WITH A DIREC TION TO LOOK INTO THE EVIDENCE WHICH SHALL BE FURNISHED BY THE APPELLA NT AND TO TAKE CORRECTIVE STEP, IF THE ASSESSEES CLAIM IS FOUND T O BE IN ORDER. IT IS ORDERED ACCORDINGLY. 14. IN THE RESULT (I) THE ASSESSEES APPEAL FOR THE AY 2005-06 IS DISMISSED; & (II) THE REVENUES APPEAL FOR THE AY 2006- 07 IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. THE ORDER PRONOUNCED ON THE 29 TH DAY OF SEPTEMBER, 2011 AT BANGALORE. SD/- SD/- (N K SAINI) (GEORGE GEORGE K) ACCOUNTANT MEMBER JUDICIAL MEMBER COPY TO : 1. THE REVENUE 2. THE ASSESSEE 3. THE C IT CONCERNED. 4. THE CIT(A) CONCERNED. 5. DR 6. GF MSP/ BY ORDER ASST. REGISTRAR, ITAT, BANGALORE.