ONESTAR MERCANTILE CO. P. LTD (FORMERLY KNOWN AS FRESCA FINE DININGNP. LTD), MUMBAI V. DCIT 5(1), MUMBAI

ITA 4769/MUM/2008

• Counselvise Citation: 476919914 RSA 2008
• Duration Of Justice: 2 year(s) 9 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-05-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 10-05-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 21-07-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RK GUPTA
• Assessee Lawyers: M D INAMDAR
• Keywords: Depreciation
• Section: 143(3); 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, C, MUMBAI BEFORE S/SHRI D.K.AGARWAL (JM) AND RAJENDRA SINGH ( A.M ) ITA NO.4769/MUM/2008 (ASSESSMENT YEAR: 2004-05) ONESTAR MERCANTILE COMPANY PVT.LTD, (FORMERLY KNOWN AS FRESCA FINE DINING PVT.LTD), PENINSULA SPENTA, 2 ND FLOOR, MATHURADAS MILL COMPOUND, SENAPATI BAPAT MARG, LOWER PAREL, MUMBAI-400013. PAN:AAACF3506D DY. COMMISSIONER OF INCOME TAX,5(1), MUMBAI. APPELLANT V/S RESPONDENT APPELLANT BY : SHRI M.D.INAMDAR RESPONDENT BY : SHRI R.K.GUPTA O R D E R PER D.K.AGARWAL (JM) THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 3.6.2008 PASSED BY THE LEAR NED COMMISSIONER OF INCOME TAX (A) FOR THE ASSESSMENT YEAR 2004-05. 2. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT TH E ASSESSEE-COMPANY IS ENGAGED IN THE BUSINESS OF RUNN ING RESTAURANT, FILED RETURN DECLARING LOSS OF RS.1,80 ,55,794/-. HOWEVER, THE ASSESSMENT WAS COMPLETED AT A BOOK PROFIT/LOSS UNDER SECTION 115JB OF THE INCOME TAX A CT, 1961 (THE ACT) AT LOSS RS.2,23,46,422/- VIDE ORDER DATED 6.12.2006 ITA NO.4769/MUM/2008 (ASSESSMENT YEAR: 2004-05) 2 PASSED UNDER SECTION 143(3) OF THE ACT. ON APPEAL, THE LEARNED COMMISSIONER OF INCOME TAX (A) FOLLOWING TH E APPELLATE ORDER FOR THE ASSESSMENT YEARS 2001-02 AN D 2002- 03 DISMISSED THE ASSESSEES APPEAL. 3. BEING AGGRIEVED BY THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (A), THE ASSESSEE IS IN APPEAL BEFORE US. 4. GROUND NOS. I AND II ARE AGAINST THE SUSTENANCE OF DISALLOWANCE OF DEPRECIATION. 5. THE BRIEF FACTS ON THE ABOVE ISSUE ARE THAT IT WAS OBSERVED BY THE AO THAT THE ASSESSEE HAS CLAIMED DEPRECIATION ON THE ASSETS PURCHASED FROM M/S PIRA MAL HOLDINGS LTD. IN EARLIER YEARS. IT IS SEEN THAT IN THE EARLIER YEARS I.E. ASSESSMENT YEAR 2001-02 ONWARDS, THE DEPRECIATION CLAIMED ON THESE ASSETS HAVE BEEN DIS ALLOWED HOLDING THAT THE TRANSFER OF ASSETS IN THE HANDS O F THE ASSESSEE-COMPANY WAS NOT VALID WHICH HAS ALSO BEEN UPHELD BY THE LEARNED COMMISSIONER OF INCOME TAX (A). FOLL OWING THE SAME VIEW, THE AO DISALLOWED THE DEPRECIATION I N THE YEAR UNDER CONSIDERATION ALSO. ON APPEAL, THE LEA RNED COMMISSIONER OF INCOME TAX (A) ALSO FOLLOWING THE A PPELLATE ORDER FOR THE ASSESSMENT YEARS 2001-02 AND 2002-03 UPHELD THE DISALLOWANCE MADE BY THE AO. ITA NO.4769/MUM/2008 (ASSESSMENT YEAR: 2004-05) 3 6. AT THE TIME OF HEARING, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITS THAT THE ISSUE STANDS COVERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE BY THE DECISI ON OF THE TRIBUNAL IN ASSESSEES OWN CASE IN M/S FRESCA FINE DINING PVT.LTD. V/S DCIT IN ITA NOS.5210/MUM/2005 (AY-2001 -02), 1060/MUM/2007 (AY-2002-03), 2002/MUM/2008 (AY-2003- 04) AND 691/MUM/2009 (AY-2005-06), ORDER DATED 11.3.20 11, WHEREIN IT HAS BEEN HELD THAT THE ASSESSEE IS ENTIT LED TO DEPRECIATION. HE ALSO PLACED ON RECORD A COPY OF THE SAID ORDER OF THE TRIBUNAL. 7. ON THE OTHER HAND, THE LEARNED DR SUPPORTS THE O RDERS OF THE AO AND THE LEARNED COMMISSIONER OF INCOME T AX (A). 8. HAVING CAREFULLY HEARD THE SUBMISSIONS OF THE R IVAL PARTIES AND PERUSING THE MATERIAL AVAILABLE ON REC ORD, WE FIND THAT THERE IS NO DISPUTE THAT THE DEPRECIATIO N WAS DISALLOWED BY THE AO AND CONFIRMED BY THE LEARNED COMMISSIONER OF INCOME TAX (A) ON THE GROUND THAT I N THE EARLIER YEARS IT WAS DISALLOWED HOLDING THAT THE T RANSFER OF ASSETS IN THE HANDS OF THE COMPANY WAS NOT VALID. HOWEVER, THE TRIBUNAL IN THE ASSESSEES OWN CASE (SUPRA) AT PAGE 10 HAS HELD 11IN OUR OPINION, THERE WAS A VALID TRANSFER OF ASSETS BY PIRMAL HOLDINGS LTD., TO THE ASSESSEE COM PANY AS ON 31.3.2001 AND SINCE THE ASSESSEE HAD BECOME THE OWNER OF THE SAID ASSETS ON THAT DAY AND THE SAME WERE US ED FOR ITS ITA NO.4769/MUM/2008 (ASSESSMENT YEAR: 2004-05) 4 BUSINESS OF RUNNING THE RESTAURANT, IT WAS ENTITLED FOR DEPRECIATION AS CLAIMED.. . IN THE ABSENCE OF ANY DISTINGUISHING FEATURES BROUGHT ON RECORD BY THE RE VENUE, WE RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL HO LD THAT THE ASSESSEE IS ENTITLED TO THE DEPRECIATION ON THE ASS ETS PURCHASED FROM M/S PIRAMAL HOLDINGS LTD. THE GROU ND NOS. I AND II TAKEN BY THE ASSESSEE ARE THEREFORE ALLOWE D. 9. GROUND NO.III IS AGAINST THE SUSTENANCE OF DISAL LOWANCE OF LEASE RENT. 10. IT WAS OBSERVED BY THE AO THAT THE ASSESSEE HAS DEBITED RS.18,16,800/- AS LEASE PREMIUM TO THE PRO FIT AND LOSS ACCOUNT . THE AO NOTED THAT THE ASSESSEE HAS TO PAY A PREMIUM OF RS.1,09,00,000/- FOR ACQUIRING THE R IGHTS TO USE THE PREMISES FOR A PERIOD OF SIX YEARS. SINCE THE ASSESSEE IS A MEMBER OF THE SAME GROUP AS OF THE LE SSOR, CHARGES OF LEASE PREMIUM OF SUCH A HUGE AMOUNT WAS REQUIRED TO BE JUSTIFIED BY THE ASSESSEE. NO CONVIN CING REASON WAS GIVEN FOR SUCH CHARGE OF LEASE PREMIUM. THIS BEING SO FOLLOWING THE DECISION IN THE ASSESSEES O WN CASE FOR THE ASSESSMENT YEARS 2001-02, 2002-03 AND 2003 -04, THE AO DISALLOWED THE LEASE PREMIUM OF RS.18,16,8 00/- WHICH WAS ALSO UPHELD BY THE LEARNED COMMISSIONER OF INCOME TAX (A) FOR THE SAME REASONS.. ITA NO.4769/MUM/2008 (ASSESSMENT YEAR: 2004-05) 5 11. AT THE TIME OF HEARING, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITS THAT THIS ISSUE IS ALSO COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE TRIBUNAL (SUPRA) WHEREIN THE TRIBUNAL ON THE SIMILAR ISSUE DELETED THE DISA LLOWANCE MADE BY THE AO. 12. ON THE OTHER HAND, THE LEARNED DR SUPPORTS THE ORDERS OF THE AO AND THE LEARNED COMMISSIONER OF INCOME T AX (A). 13. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS O F THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND MERITS IN THE PLEA OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE TRIBUNAL IN THE ASSESSEES OWN C ASE (SUPRA) HAS DELETED THE SIMILAR DISALLOWANCE VIDE P ARAGRAPH 17 OF ITS ORDER DATED 11.3.2011 WHEREIN THE TRIBUN AL HAS HELD AS UNDER : 17 KEEPING IN VIEW THESE SUBMISSIONS MADE BY THE LEARNED COUNSEL FOR THE ASSESSEE, WE FIND THAT THE LEASE PREMIUM PAID BY THE ASSESSEE FOR THE USE OF PREMISES WAS REASONABLE AND THERE BEING NO CASE MAD E OUT BY THE AUTHORITIES BELOW TO SHOW THAT THE SAME WAS EXCESSIVE OR UNREASONABLE AS COMPARED TO THE PREVAI LING MARKET RATE, WE FIND NO JUSTIFIABLE REASON TO SUSTA IN THE DISALLOWANCE MADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE LEARNED CIT(A) ON THIS ISSUE. THE SAME IS, THEREFORE, DELETED ALLOWING GROUND NO. 4 OF THE ASSESSEES APPEAL. IN THE ABSENCE OF ANY DISTINGUISHING FEATURES BROUG HT ON RECORD BY THE REVENUE, WE RESPECTFULLY FOLLOWING T HE ORDER OF THE TRIBUNAL (SUPRA) HOLD THAT THE LEARNED COMMISS IONER OF ITA NO.4769/MUM/2008 (ASSESSMENT YEAR: 2004-05) 6 INCOME TAX (A) WAS NOT JUSTIFIED IN SUSTAINING THE DISALLOWANCE OF LEASE RENT OF RS.18,16,800/- AND A CCORDINGLY THE SAME IS DELETED. THE GROUND NO.III TAKEN BY TH E ASSESSEE IS, THEREFORE, ALLOWED. 14. IN THE RESULT, THE ASSESSEES APPEAL STANDS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 20 TH MAY,2011. SD S D (RAJENDRA SINGH ) (D.K.A GARWAL) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 20 TH MAY, 2011 SRL:12511 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT CONCERNED 4. CIT(A) CONCERNED 5. DR CONCERNED BENCH 6. GUARD FILED. TRUE COPY BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI