DCIT 8(3), MUMBAI V. SUN-N-SAND HOTELS P. LTD, MUMBAI

ITA 5210/MUM/2013

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0100 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 11 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-06-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 25-05-2015
• Assessment Year: 2011-2012
• Appeal Filed On: 23-07-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR A K NAYAK
• Keywords: Capital asset; Opportunity of being heard; Tax effect; Revenue expenditure; Capital expenditure
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E, MUMBAI BEFORE SHRI G.S.PANNU, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO.5210/MUM/2013 (ASSESSMENT YEAR 2011-12) THE DY. COMMISSIONER OF INCOME TAX 8(3), ROOM NO.217, AAYKAR BHAVAN,M.K.ROAD, MUMBAI 400020 ...... APPEL LANT VS. M/S. SUN-N-SAND HOTELS P. LTD. 39, JUHU BEACH, MUMBAI 400 049 PAN:AAACS5521P .... RESP ONDENT C.O.NO.248/MUM/2014 (ARISING OUT OF ITA NO.5210/MUM/2013, A.Y.2011-12.) M/S. SUN-N-SAND HOTELS P. LTD. 39, JUHU BEACH, MUMBAI 400 049 PAN:AAACS5521P .. CROSS OBJE CTOR VS. THE DY. COMMISSIONER OF INCOME TAX 8(3), ROOM NO.217, AAYKAR BHAVAN,M.K.ROAD, MUMBAI 400020 ... APPELLANT IN APP EAL APPELLANT BY : DR.A.K.NAYAK RESPONDENT BY : SHRI PRAKASH JOTWANI DATE OF HEARING : 20/06/2017 DATE OF PRONOUNCEMENT : 23/06/2017 ORDER PER G.S.PANNU,A.M: THE CAPTIONED APPEAL BY THE REVENUE AND CROSS O BJECTION BY THE ASSESSEE PERTAINING TO THE ASSESSMENT YEAR 2011-1 2 ARE DIRECTED AGAINST 2 ITA NO.5210/MUM/2013 C.O NO.248/MUM/2014 (ASSESSMENT YEAR 2011-12) ORDER PASSED BY THE CIT(A)-18, MUMBAI DATED 10/05 /2013, WHICH IN TURN, ARISES OUT OF ORDER PASSED BY THE ASSESSING OFFIC ER UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) DATED 08/02/2013. 2. ONE COMMON ISSUE INVOLVED IN THE APPEAL OF THE R EVENUE AS WELL AS THE CROSS OBJECTION FILED BY THE ASSESSEE IS IN REL ATION TO THE DISALLOWANCE UNDER SECTION 14A OF THE ACT. IN THIS CONTEXT, THE RELEVANT FACTS ARE THAT ASSESSEE DETERMINED THE DISALLOWANCE UNDER SECTION 14A OF THE ACT ORIGINALLY AT RS.48,05,361/-, BUT IN THE COURSE OF ASSESSMENT PROCEEDINGS, ASSESSEE PUT-FORTH A DISALLOWANCE OF RS.32,03,556/- PRIMARILY CONTENDING THAT THE VALUE OF AVERAGE INVESTMENTS ADOPTED FOR T HE PURPOSES OF RULE 8D(2)(III) OF THE INCOME TAX RULES, 1962( IN SHORT THE RULES) WAS REQUIRED TO BE REDUCED BY THE AMOUNT OF INVESTMENT STATED TO BE MADE IN THE PARTNERSHIP FIRMS OF M/S. METROPILIS HOTELS AND M/S . JEWEL OF INDIA. THE ASSESSING OFFICER DID NOT ACCEPT THE SAID PLEA AND RETAINED THE DISALLOWANCE UNDER SECTION 14A OF THE ACT AT RS.48,05,361/-. TH E CIT(A) ACCEPTED THE PLEA OF THE ASSESSEE THAT THE BALANCE STATED IN THE CURR ENT ACCOUNT OF THE TWO PARTNERSHIP FIRMS, IN WHICH ASSESSEE WAS A PARTNER, WAS REQUIRED TO BE EXCLUDED FOR THE PURPOSES OF CALCULATING AVERAGE I NVESTMENT FOR APPLYING RULE 8D(2)(III) OF THE RULES AND THAT ONLY CAPITAL CONTRIBUTION TO THE PARTNERSHIP FIRMS WAS REQUIRED TO BE CONSIDERED. I N TERMS OF SUCH DECISION, THE DISALLOWANCE UNDER SECTION 14A OF THE ACT WAS REDUCED TO RS.32,03,556/-, THUS, A RELIEF OF RS.16,01,805/- WAS GRANTED BY THE CIT(A), WHICH HAS BEEN CHALLENGED BY THE REVENUE IN ITS AP PEAL BEFORE US. 3 ITA NO.5210/MUM/2013 C.O NO.248/MUM/2014 (ASSESSMENT YEAR 2011-12) 3. PER CONTRA, IN TERMS OF THE CROSS OBJECTION FILE D, ASSESSEE HAS RAISED AN ADDITIONAL GROUND FURTHER ASSAILING THE DETERMI NATION OF DISALLOWANCE UNDER SECTION 14A OF THE ACT AT RS.32,03,556/-. 3.1 IN THE ABOVE BACKGROUND RIVAL COUNSELS HAVE BE EN HEARD. AT THE TIME OF HEARING, IT WAS A COMMON POINT BETWEEN THE PARTI ES THAT SO FAR AS THE TAX EFFECT INVOLVED IN THE DISPUTE RAISED BY THE REVENU E IS CONCERNED, THE SAME IS BELOW THE LIMIT PRESCRIBED BY THE CBDT. THE CBD T VIDE CIRCULAR NO.21/2015 DATED 10/12/2015 HAS REVISED THE MONETAR Y LIMITS FOR FILING OF APPEALS BY THE DEPARTMENT BEFORE THE TRIBUNAL RETRO SPECTIVELY. SINCE THE TAX EFFECT IN DISPUTE IN THE CAPTIONED APPEAL IS ST ATED TO BE BELOW THE MONETARY LIMIT OF RS.10.00 LACS SPECIFIED IN THE CB DT CIRCULAR DATED 10/12/2015 (SUPRA), THE SAME IS DISMISSED AS NOT MA INTAINABLE. WE HOLD SO. 4. COMING TO THE CROSS OBJECTION, THE LD.REPRESENTA TIVE FOR THE ASSESSEE POINTED OUT THAT THERE WAS A SMALL DELAY OF 24 DAYS IN FILING IT AND IN THIS CONTEXT HE REFERRED TO AN AFFIDAVIT BY THE COMPETE NT OFFICER OF THE ASSESSEE COMPANY DATED 02/06/2016 AVERRING THE REASONS FOR T HE DELAY. THE LD.REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT THE DELAY IS FOR BONAFIDE REASONS AND THAT THE SAME BE CONDONED. 5. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESE NTATIVE HAS NOT OPPOSED THE PLEA OF THE ASSESSEE FOR CONDONATION OF DELAY. CONSIDERING THE FACT THAT THE REASONS HAVE BEEN AVERRED BY AN AF FIDAVIT AND BONAFIDES OF THE REASONS CANVASSED BY THE ASSESSEE HAVE NOT BEEN ASSAILED, THEREFORE, THE DELAY IN FILING OF THE CROSS OBJECTION IS HEREB Y CONDONED. 4 ITA NO.5210/MUM/2013 C.O NO.248/MUM/2014 (ASSESSMENT YEAR 2011-12) 6. WITH REGARD TO THE DISALLOWANCE UNDER SECTION 14 A OF THE ACT, THE LD. REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT IN ADDITION TO THE INVESTMENTS IN PARTNERSHIP FIRMS, ASSESSEE HAD ALSO MADE INVESTMENTS IN CLASSIC CITI INVESTMENT P. LTD. RS.44,99,99,900/- AND SUN& SAND INVEST & FIN CO. P LTD. COMPANY LTD. RS.99,49,900/-, WHICH WAS STRATEGIC INVESTMENTS AND THAT THE SAME ARE ALSO LIABLE TO BE EXCLUDED FOR CALCULATING THE AMOUNT OF AVERAGE INVESTMENTS FOR THE PURPOSES OF APPLYING RULE 8D(2)(III) OF THE ACT . IN THIS CONTEXT, THE LD.RE PRESENTATIVE FOR THE ASSESSEE RELIED UPON THE DECISION OF THE TRIBUNAL IN THE CAS E OF ASSESSEE ITSELF FOR ASSESSMENT YEAR 2008-09, WHEREIN VIDE ORDER IN ITA NO.2041/MUM/2014 DATED 12/04/2016 SUCH PROPOSITION HAS BEEN UPHELD A ND THE ASSESSING OFFICER HAS BEEN DIRECTED TO EXCLUDE THE AMOUNT OF STRATEGIC INVESTMENT FOR WORKING OUT THE VALUE OF AVERAGE INVESTMENTS FOR TH E PURPOSES OF RULE 8D(2)(III) OF THE RULES. THE LD.REPRESENTATIVE FOR THE ASSESSEE CONCEDED THAT THE SAID ASPECT OF THE MATTER IS A FRESH PLEA AND WAS NOT HITHERTO RAISED BEFORE THE LOWER AUTHORITIES, BUT SINCE THE RELEVAN T FACTS WITH REGARD TO THE ISSUE ARE AVAILABLE ON RECORD AND IT IS SUPPORTED B Y THE DECISION OF THE TRIBUNAL, THE SAME BE ADMITTED FOR ADJUDICATION. T HE LD.REPRESENTATIVE FOR THE ASSESSEE ALSO POINTED OUT THAT ASSESSEE WOULD H AVE NO OBJECTION IF THE MATTER IS REMANDED BACK TO THE FILE OF ASSESSING OF FICER TO BE EXAMINED AFRESH IN THE LIGHT OF THE PROPOSITION UPHELD BY TH E TRIBUNAL IN ITS ORDER DATED 12/04/2016(SUPRA) IN THE CASE OF THE ASSESSEE ITSELF. 7. THE LD. DEPARTMENTAL REPRESENTATIVE HAS NOT OPPO SED THE PLEA OF THE ASSESSEE FOR REMANDING THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER. 5 ITA NO.5210/MUM/2013 C.O NO.248/MUM/2014 (ASSESSMENT YEAR 2011-12) 8. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. OSTENSIBLY, THE PLEA RAISED BY THE ASSESSEE IS A FRESH PLEA WHICH W AS NOT BEFORE THE LOWER AUTHORITIES. SO, HOWEVER, IT IS ALSO PERTINENTLY C LEAR THAT THE PROPOSITION SOUGHT TO BE CANVASSED HAS BEEN TAKEN INTO CONSIDER ATION BY THE CIT(A) ALSO, THOUGH IN THE CONTEXT OF INVESTMENT IN PARTNERSHIP FIRM. PRESENTLY, THE CASE MADE OUT BY THE ASSESSEE IS THAT THE SAME PROPOSITI ON IS APPLICABLE IN THE CONTEXT OF INVESTMENT MADE IN THE AFORESAID TWO COR PORATE ENTITIES, WHICH ARE GROUP CONCERNS. WE FIND THAT WHILE UPHOLDING T HE PROPOSITION CANVASSED BY THE ASSESSEE, THE CIT(A), INTER-ALIA, REFERRED T O THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. DELITE ENT ERPRISES DATED 26/02/2009. UNDER THESE CIRCUMSTANCES AND CONSIDER ING THAT THE PLEA SOUGHT TO BE RAISED DOES NOT INVOLVE ANY INVESTIGAT ION OF FRESH FACTS, THE SAME IS LIABLE TO BE ADMITTED. UNDOUBTEDLY, THE SAID PLEA WAS NOT BEFORE THE LOWER AUTHORITIES, AND THUS, THE SAME IS LIABLE TO BE RESTORED TO THE FILE OF ASSESSING OFFICER WHO SHALL CONSIDER THE SAME APPRO PRIATELY IN ACCORDANCE WITH LAW. NEEDLESS TO MENTION, THE ASSESSING OFFIC ER SHALL ALLOW THE ASSESSEE A REASONABLE OPPORTUNITY OF BEING HEARD A ND THEREAFTER PASS A FRESH ORDER AS PER LAW. THUS, ON THIS ASPECT ASSES SEE SUCCEEDS FOR STATISTICAL PURPOSES. 9. IN ITS CROSS OBJECTION, ASSESSEE HAS RAISED ANOT HER ADDITIONAL FRESH PLEA, WHICH FOR CLAIM OF DEDUCTION UNDER SECTION 80 -IA(4) (IV)(A) OF THE ACT IN RESPECT OF PROFITS DERIVED FROM ITS UNDERTAKING SET UP IN SANGLI, MAHARASHTRA FOR THE GENERATION OF WIND MILL POWER. THE SAID CL AIM WAS HITHERTO NOT MADE EITHER BEFORE THE ASSESSING OFFICER OR EVEN BE FORE THE CIT(A). AT THE TIME OF HEARING, LD.REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT THE SAID 6 ITA NO.5210/MUM/2013 C.O NO.248/MUM/2014 (ASSESSMENT YEAR 2011-12) UNDERTAKING WAS SET UP IN THE PREVIOUS YEAR RELEVAN T TO THE ASSESSMENT YEAR 2006-07, BUT THE CLAIM IS BEING MADE FOR THE FIRST TIME IN ASSESSMENT YEAR 2011-12, SINCE ASSESSEE IS PERMITTED TO CLAIM THE B ENEFIT FOR ANY CONSECUTIVE PERIOD OF 10 YEARS COMPRISED IN THE PERIOD OF 15 YEARS, BEGINNING FROM THE YEAR IN WHICH THE UNDERTAKING BEGINS TO GENERATE PO WER. 10. AT THE TIME OF HEARING, THE JUDGMENT OF THE HON 'BLE BOMBAY HIGH COURT IN THE CASE OF ULTRATECH CEMENT LTD. VS. ADDL . CIT, (2017) 81 TAXMANN.COM 74 (BOM) WAS REFERRED TO WHICH CLEARLY CLINCHES THE CONTROVERSY AGAINST THE ASSESSEE. IN SOMEWHAT SIMI LAR CIRCUMSTANCES, IN THE CASE OF ULTRATECH CEMENT LTD. (SUPRA), HON'BLE HI GH COURT UPHELD THE ACTION OF THE TRIBUNAL IN DENYING THE ADMISSION OF A GROUND SEEKING BENEFIT UNDER SECTION 80IA(4)(IV)(A) OF THE ACT FOR THE FIR ST TIME BEFORE THE TRIBUNAL. NOTABLY, THE PLEA FOR ADMISSION OF ADDITIONAL GROUN D WAS REJECTED BECAUSE THE NECESSARY EVIDENCE SUPPORTING THE CLAIM OF THE ASSESSEE WAS NOT ON RECORD. IN FACT, THE HON'BLE HIGH COURT NOTED TH AT THE MERE FACT THAT IN A SUBSEQUENT YEAR, CLAIM WAS ALLOWED BY THE ASSESSING OFFICER WOULD NOT BE A FACTOR TO ENTERTAIN A FRESH PLEA AT THE LEVEL OF TH E TRIBUNAL IN ANOTHER YEAR. BE THAT AS IT MAY, FOLLOWING THE RATIO OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF ULTRATECH CEMENT LTD. (SUPRA), THE PLEA OF THE ASSESSEE FOR DEDUCTION UNDER SECTION 80IA(4)(IV)(A) OF THE ACT IS HELD TO BE UNADMITTED AND ACCORDINGLY, THE SAME IS DISMISSED. 11. THE ONLY OTHER ISSUE REMAINING IN THE CROSS OBJ ECTION IS WITH RESPECT TO A DISALLOWANCE OF RS.5,13,382/- MADE BY THE ASSESS ING OFFICER OUT OF 7 ITA NO.5210/MUM/2013 C.O NO.248/MUM/2014 (ASSESSMENT YEAR 2011-12) EXPENDITURE CLAIMED BY THE ASSESSEE BEING INCURRED FOR CURRENT REPAIRS OF ITS HOTEL AT SHIRDI AS CAPITAL EXPENDITURE. 12. IN THIS CONTEXT, THE RELEVANT FACTS ARE THAT TH E ASSESSING OFFICER DISALLOWED THE EXPENDITURE HOLDING THAT IT WAS INCU RRED ON ACCOUNT FOR ACQUIRING CENTRIFUGAL BLOWER & 15 HP MOTOR FOR KITC HEN EXHAUST SYSTEM. THE CLAIM OF THE ASSESSEE WAS THAT THE EXPENDITURE WAS IN THE NATURE OF REPAIRS AND THAT THERE WAS NO INDEPENDENT NEW ASSET ACQUIRE D AND, THEREFORE, IT WAS ALLOWABLE AS A REVENUE EXPENDITURE. THE CIT(A ) HAS ALSO UPHELD THE STAND OF THE ASSESSING OFFICER, AGAINST WHICH ASSES SEE IS IN APPEAL BEFORE US. 13. BEFORE US, THE LD. REPRESENTATIVE FOR THE ASSES SEE HAS REITERATED THE SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES TO PO INT OUT THAT THE EXPENDITURE WAS INCURRED IN THE COURSE OF REPAIRS C ARRIED OUT TO THE KITCHEN EXHAUST SYSTEM IN THE ASSESSEES HOTEL AT SHIRDI. THE LD. REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT BEFORE THE LOWER AUTH ORITIES THE ASSESSEE HAD ALSO RELIED UPON THE JUDGMENT OF THE MADRAS HIGH CO URT IN THE CASE OF DASAPRAKASH HOTEL,114 ITR 210(MAD) FOR THE PROPOSIT ION THAT THE RENOVATION EXPENDITURE INCURRED IN A HOTEL IS ALLOWABLE AS A R EVENUE EXPENDITURE. WITH REGARD TO THE DECISION OF THE CIT(A), THE LD. REPRE SENTATIVE FOR THE ASSESSEE POINTED OUT THAT THE CASE LAWS RELIED UPON BY HIM A RE INAPPLICABLE IN THE FACTS OF THE PRESENT CASE, BECAUSE IN THE PRESENT CASE, THE ITEM IN QUESTION I.E. CENTRIFUGAL BLOWER & 15 HP MOTOR WAS USED FOR KITCHEN EXHAUST SYSTEM AND IT WAS NOT AN ITEM OF INDEPENDENT USE. THER EFORE, IT WAS NOT A CASE OF ACQUISITION OF AN INDEPENDENT ASSET AS SUCH. 8 ITA NO.5210/MUM/2013 C.O NO.248/MUM/2014 (ASSESSMENT YEAR 2011-12) 14. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESE NTATIVE POINTED OUT THAT THE EXPENDITURE WAS CAPITAL IN NATURE SINCE IT EM PURCHASED PROVIDED AN ENDURING BENEFIT. 15. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS. AS THE FACTUAL MATRIX BRINGS OUT, THE ITEM IN QUESTION HAS BEEN US ED AS A PART OF THE KITCHEN EXHAUST SYSTEM OF ASSESSEES HOTEL. IN THIS FACTUA L BACKGROUND, IT IS CLEAR THAT THE USE OF THE CENTRIFUGAL BLOWER & 15 HP MOTOR IS A PART AND PARCEL OF THE KITCHEN EXHAUST SYSTEM. IT HAS BEEN EXPLAINED THAT THE EXPENDITURE HAS BEEN INCURRED WITH THE OBJECTIVE OF MAINTAINING EXI STING KITCHEN EXHAUST SYSTEM. THEREFORE, UNDER THESE FACTS THE EXPENDITU RE IS TO BE VIEWED IN THE NATURE OF REPAIRS AND RENOVATION OF A PRE-EXISTING BUSINESS AND NOT FOR ACQUISITION OF AN INDEPENDENT CAPITAL ASSET. IN T HIS VIEW OF THE MATTER, WE SET-ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE AS SESSING OFFICER TO ALLOW THE SAID EXPENDITURE AS REVENUE EXPENDITURE. THUS, ON THIS ASPECT ASSESSEE SUCCEEDS. 16. IN THE RESULT, WHEREAS THE APPEAL OF THE REVENU E IS DISMISSED, THE CROSS OBJECTION OF THE ASSESSEE IS PARTLY ALLOWED, AS ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 23/06/2017. SD/- SD/- (PAWAN SINGH) (G.S. PANNU) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED 23/06/2017 VM , SR. PS 9 ITA NO.5210/MUM/2013 C.O NO.248/MUM/2014 (ASSESSMENT YEAR 2011-12) COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT , 2. THE RESPONDENT. 3. THE CIT(A)- 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI