Creative Travel Pvt. Ltd., V. ACIT, Ward-3(1),

ITA 546/DEL/2005

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 81885 (ITAT-DELHI)
• Duration Of Justice: 9 year(s) 8 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-10-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: H
• Next Hearing Date: 19-08-2014
• Assessment Year: 2001-2002
• Appeal Filed On: 04-02-2005
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SAMEER SHARMA
• Assessee Lawyers: SALIL AGARWAL; SHAILESH GUPTA
• Keywords: Business income; Depreciation; Capital expenditure
• Section: 143(3)

Judgement Text

CREATIVE TRAVEL SERVICES PVT LTD AY 1999-2000, 2000-01 AND 2001-02 PAGE 1 OF 19 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : H N EW DELHI [CORAM : IC SUDHIR JM AND PRAMOD KUMAR AM] ITA NO. 545 /DEL/ 2005 ASSESSMENT YEAR 1999-2000 CREATIVE TRAVEL SERVICES PVT LTD ...APPEL LANT 27-30, CREATIVE PLAZA, NANAKPURA, MOTI BAGH NEW DELHI 110 021 [ PAN : AAACC0874D] VS INCOME TAX OFFICER WARD 3(3), NEW DELHI ..RESPONDENT ITA NO. 797/DEL/ 2008 ASSESSMENT YEAR 2000-01 CREATIVE TRAVEL SERVICES PVT LTD ...APPEL LANT 27-30, CREATIVE PLAZA, NANAKPURA, MOTI BAGH NEW DELHI 110 021 [ PAN : AAACC0874D] VS ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 3(1), NEW DELHI ...RESPONDENT ITA NO. 546 /DEL/ 2005 ASSESSMENT YEAR 2001-02 CREATIVE TRAVEL SERVICES PVT LTD ...APPEL LANT 27-30, CREATIVE PLAZA, NANAKPURA, MOTI BAGH NEW DELHI 110 021 [ PAN : AAACC0874D] VS ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 3(1), NEW DELHI ...RESPONDENT APPEARANCES BY: SALIL AGARWAL AND SHAILESH GUPTA FOR THE APPELLANT SAMEER SHARMA FOR THE RESPONDENT DATE OF CONCLUDING THE HEARING: AUGUST 26, 2014 DATE OF PRONOUNCING THE ORDER: OCTOBER 20, 2014 CREATIVE TRAVEL SERVICES PVT LTD AY 1999-2000, 2000-01 AND 2001-02 PAGE 2 OF 19 O R D E R ASSESSMENT YEAR 1999-2000 1. BY WAY OF THIS APPEAL, THE ASSESSEE APPELLANT HA S, ON VARIOUS GROUNDS AS SET OUT LATER IN THIS ORDER, CHALLENGED CORRECTNESS OF LEARNED CIT(A)S ORDER DATED 20 TH DECEMBER, 2004, IN THE MATTER OF ASSESSMENT UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961, FOR THE ASSESSMENT YEAR 1999- 2000. 2. IN THE FIRST GROUND OF APPEAL, THE ASSESSEE HAS RAISED THE FOLLOWING GRIEVANCE:- THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-V, NEW DELHI [ THE CIT(A)] HAS ERRED IN DISALLOWING DEPRECIATION AMOUNTING TO RS.2 ,662/- IN RESPECT OF VASANT VIHAR FLAT LEASED OUT BY THE APPELLANT. 3. LEARNED COUNSEL FOR THE ASSESSEE, HOWEVER, SUBMI TS THAT HE DOES NOT WISH TO PURSUE THIS GRIEVANCE. THIS GROUND OF APPEAL, TH US, IS TO BE TREATED AS DISMISSED FOR WANT OF PROSECUTION. WE DO SO. 4. GROUND NO.1 IS DISMISSED. 5. IN GROUND NO.2, THE ASSESSEE HAS RAISED THE FOLL OWING GRIEVANCE: THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN SUSTAINING THE DISALLOWANCE OF DEPRECIATION AND EXPENDITURE INCURRED ON REPAIR & MAINTENANCE AMOUNT ING TO RS.2,37,316/- AND RS.27,801/- RESPECTIVELY, IN RESP ECT OF FLAT OWNED BY CREATIVE TRAVEL SERVICES PVT LTD AY 1999-2000, 2000-01 AND 2001-02 PAGE 3 OF 19 THE APPELLANT USED FOR THE PURPOSES OF BUSINESS DUR ING THE RELEVANT PREVIOUS YEAR. 6. SO FAR AS THIS GRIEVANCE OF THE ASSESSEE IS CONC ERNED, THE RELEVANT MATERIAL FACTS ARE LIKE THIS. DURING THE COURSE OF ASSESSMEN T PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE IS CLAIMING DEPR ECIATION ON FLAT AS WELL AS ON FURNITURE AND FIXTURES FITTED THEREIN AND THAT, IN RESPONSE TO HIS REQUISITION FOR FURTHER INFORMATION, IT HAS BEEN, INTER ALIA, STATE D BY THE ASSESSEE THAT DEPRECIATION SHOULD NOT BE DISALLOWED AS THE FLAT I S USED FOR THE PURPOSES OF BUSINESS. THE ASSESSING OFFICER WAS OF THE VIEW THA T THE STAND SO TAKEN BY THE ASSESSEE IS SELF CONTRADICTORY INASMUCH AS, ON ONE HAND, THE ASSESSEE HAS OFFERED TAXABILITY OF RENT RECEIVED FROM THE FLAT UNDER THE HEAD INCOME FROM HOUSE PROPERTY, AND, ON THE OTHER HAND, ASSESSEE CLAIMS THAT THE SAID FLAT WAS USED FOR BUSINESS PURPOSES. IT WAS IN THIS BACKDROP THAT THE CLAIM OF DEPRECIATION WAS DISALLOWED. AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LEARNED CIT(A) BUT WITHOUT ANY SUCCESS. EVEN THOUGH ASSESSE E DID SPECIFICALLY POINT OUT, IN SECOND GROUND OF APPEAL BEFORE THE CIT(A), THAT THE DISALLOWANCE WAS UNDER A WRONG NOTION AS THE ASSESSEE HAS TWO FLATS I.E. ONE IN VASANT LOK, WHICH IS RENTED OUT AND OTHER AT SAKET, WHICH IS USED FOR BUSINESS PURPOSES, LEARNED CIT(A) SIMPLY BRUSHED ASIDE THIS CONTENTION ON THE GROUND THAT THIS ISSUE HAS NOT BEEN RAISED BEFORE THE AO AT THE TIME OF ASSESSMENT, FOR THE REASONS BEST KNOWN TO THE ASSESSEE AND THAT, FOR THIS REASON, IT IS NOT POS SIBLE TO CONSIDER A FRESH MATERIAL CREATIVE TRAVEL SERVICES PVT LTD AY 1999-2000, 2000-01 AND 2001-02 PAGE 4 OF 19 IN RESPECT OF THIS ISSUE AT THIS STAGE. THE DISALLO WANCE WAS THIS UPHELD. THE ASSESSEE IS NOW IN SECOND APPEAL BEFORE US. 7. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTUAL MATRIX OF THE CASE AS ALSO THE APPLICABLE LEGAL POSITION. 8. IN OUR CONSIDERED VIEW, LEARNED CIT(A) WAS CLEA RLY IN ERROR IN DECLINED TO DEAL WITH, ON MERITS, THIS SIMPLE AND PURELY FACTUA L ASPECT OF THE MATTER. THE FACT THAT THESE CLARIFICATIONS WERE NOT GIVEN AT THE ASS ESSMENT STAGE IS IRRELEVANT BECAUSE NEITHER THERE WAS ANY SPECIFIC REQUISITION FOR THIS INFORMATION, NOR THE ASSESSEE CAN BE EXPECTED TO CLARIFY ON THE DOUBTS L URKING IN THE MIND OF THE AO UNLESS DOUBTS ON THAT ISSUE ARE PUT TO THE ASSESSEE . THAT PRECISELY IS THE REASON OF ISSUING SPECIFIC SHOW CAUSE NOTICES, OR PUTTING SPE CIFIC QUESTIONS TO THE ASSESSEE IN THAT RESPECT, WHEN A DISALLOWANCE IS PROPOSED ON THE BASIS OF INFERENCES DRAWN BY THE ASSESSING OFFICER. THE APPROACH OF THE CIT(A ), IF WE MAY SAY SO, HAS BEEN SOMEWHAT SUPERFLUOUS. ON MERITS, WE FIND THAT AS EV IDENT FROM THE DETAIL FILED BEFORE US, THE ASSESSEE HAS TWO DIFFERENT FLATS O NE AT SAKET, AND THE OTHER AT VASANT VIHAR. SO FAR AS THE DEPRECIATION IS CONCERN ED, IT HAS BEEN CLAIMED ONLY FOR SAKET FLAT WHICH IS USED FOR BUSINESS PURPOSES. THE RENTAL INCOME IS FROM THE OTHER FLAT, I.E. VASANT LOK FLAT BUT THEN NO DEPREC IATION SEEMS TO HAVE BEEN CLAIMED IN RESPECT OF THE SAME. THE SAME IS THE CAS E WITH REGARD TO BUILDING REPAIRS AND MAINTENANCE. THE VERY FOUNDATION OF DIS ALLOWED, THEREFORE, SEEMS TO CREATIVE TRAVEL SERVICES PVT LTD AY 1999-2000, 2000-01 AND 2001-02 PAGE 5 OF 19 BE DEVOID OF ANY LEGALLY SUSTAINABLE MERITS. HOWEVE R, AS LEARNED D.R. HAS BEEN FAIR ENOUGH TO SUGGEST, THE NIGHT COURSE WILL BE TO REMIT THE MATTER TO THE FILE OF THE AO FOR LIMITED PURPOSES OF VERIFICATION OF THIS FACTUAL ASPECT, AND IF THE FACTS SO CLAIMED ARE INDEED CORRECT, ALLOW THE DEPRECIATI ON CLAIM. WE, THEREFORE, REMIT THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR STRICTLY LIMITED PURPOSES OF THE AFORESAID FACTUAL VERIFICATION. 9. GROUND NO.2 IS THUS, ALLOWED FOR STATISTICAL PUR POSES IN THE TERMS INDICATED ABOVE. 10. ON GROUND NO.3, THE ASSESSEE HAS RAISED THE FOL LOWING GRIEVANCE:- THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A)HAS ERRED IN SUSTAINING THE CHARACTERIZATION OF INTEREST INCOME EARNED BY THE APPELLANT AMOUNTING TO RS.36,07,149/- AS INCOME FROM OTHER SOURCES. 11. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS , THE ASSESSING OFFICER NOTICED THAT THE ASSESSE HAS SHOWN INTEREST INCOME OF RS 36.07,149 BUT IT HAS BEEN TREATED AS BUSINESS INCOME, RATHER THAN INCOME FROM OTHER SOURCES. EVEN WHEN IT WAS POINTED OUT TO HIM THAT THIS ISSUE IS D ECIDED IN FAVOUR OF THE ASSESSEE, HOLDING THAT ON THE FACTS OF THIS CASE IT IS INDEED REQUIRED TO BE TREATED AS BUSINESS INCOME, YET HE PROCEEDED TO TREAT IT AS INCOME FROM OTHER SOURCES. AGGRIEVED, MATTER WAS CARRIED IN APPEAL BEFORE THE CIT(A) BUT WITHOUT ANY SUCCESS. THE ASSESSEE IS NOT SATISFIED AND IS IN AP PEAL BEFORE US. CREATIVE TRAVEL SERVICES PVT LTD AY 1999-2000, 2000-01 AND 2001-02 PAGE 6 OF 19 12. LEARNED COUNSEL FOR THE ASSESSEE POINTS OUT THA T THIS ISSUE IS COVERED BY DECISIONS OF THE TRIBUNAL, IN ASSESSEES OWN CASE, FOR EARLIER ASSESSMENT YEAR. AS NOTED IN PARAGRAPH 6.1. AND 6.2 OF THE TRIBUNALS O RDER DATED 22.5.2009, IT WAS CONTENDED BY THE ASSESSEE THAT RESERVE FUND, REQUIR ED BY THE STATUTE, WERE SEPARATELY KEPT IN THE BANK ACCOUNTS AND AS THIS IN COME AROSE FROM SUCH BANK DEPOSITS, THE SAME WAS REQUIRED TO BE TREATED AS BU SINESS INCOME. THIS ISSUE WAS REMITTED TO THE FILE OF THE AO FOR FRESH EXAMINATIO N IN THE LIGHT OF THE FACTS STATED BY THE ASSESSEE, AND, IN THE COURSE OF THESE REMAND ED PROCEEDINGS, THE AO HIMSELF GAVE A FACTUAL FINDING THAT THE INTEREST INCOME WAS REQUIRED TO BE TREATED AS BUSINESS INCOME. ONCE ASSESSING OFFICER HIMSELF TAK ES THIS STAND, ON AN APPRECIATION OF PECULIAR FACTS OF THIS CASE, IT SHO ULD NOT BE OPEN TO DISTURB THIS FACTUAL FINDING ON THE SET OF FACTS IN A SUBSEQUENT YEAR. 13. LEARNED DEPARTMENTAL REPRESENTATIVE PLACED HIS RELIANCE ON THE ORDERS OF THE AUTHORITIES BELOW. 14. WE SEE MERITS IN THE PLEA OF THE LEARNED COUNSE L. ONCE THE AO HIMSELF HAS GIVEN A FACTUAL FINDING, ON THE SAME SET OF FACTS W HICH PERMEATE THROUGH DIFFERENT ASSESSMENT YEARS, IT CANNOT BE OPEN TO HIM TO TAKE A DIFFERENT STAND WITHOUT POINTING OUT THE CHANGE IN FACTS WARRANTING SUCH A VARIATION IN STAND. NO SUCH FACTS ARE POINTED OUT TO US. IN THIS VIEW OF THE MA TTER, AND IN VIEW OF THE ACCEPTED PAST CASE HISTORY, WE UPHOLD THE GRIEVANCE OF THE A SSESSEE. THE AO HIMSELF HAS CREATIVE TRAVEL SERVICES PVT LTD AY 1999-2000, 2000-01 AND 2001-02 PAGE 7 OF 19 ACCEPTED THAT THIS AMOUNT, ON THE PECULIAR FACTS OF THIS CASE, IS REQUIRED TO BE TREATED AS BUSINESS INCOME, AND THERE ARE NO DISTIN GUISHING FEATURES IN THE YEAR BEFORE US. THE AO IS, THEREFORE, DIRECTED TO TREAT THIS INCOME OF RS 36,07, 149 AS BUSINESS INCOME. 15, GROUND NO. 3 IS THUS ALLOWED. 16. IN GROUND NOS. 4 AND 5, THE ASSESSEE HAS RAISED THE FOLLOWING GRIEVANCES: THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF FARM EXPENSES AND DEPRECIATION ON AGRICULTURE ASSETS AMOUNTING TO RS. 46,100/- & RS.2,712/- RESPECTIVELY. THAT ON THE FACTS & CIRCUMSTANCES OF THE CASE AND I N LAW, THE LEARNED CIT(A) HAS ERRED IN SUSTAINING THE ADDITION OF EX-G RATIA PAYMENTS MADE TO THE EMPLOYEES AMOUNTING TO RS.20,805/-. 17. AS LEARNED COUNSEL FOR THE ASSESSEE DID NOT PRE SS THESE GROUNDS OF APPEAL, THE SAME ARE DISMISSED FOR WANT OF PROSECUTION. 18. GROUND NOS. 4 AND 5 ARE THUS DISMISSED. 19. IN GROUND NO. 6, THE ASSESSEE HAS RAISED THE FO LLOWING GRIEVANCE: THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN SUSTAINING THE DISALLOWANCE OF RS.2,09,734/- OUT OF THE TOTAL BUILDING REPAIR & MAINTENANCE EXPENDITURE INCURRED DURING THE RELEVANT PREVIOUS YEAR. CREATIVE TRAVEL SERVICES PVT LTD AY 1999-2000, 2000-01 AND 2001-02 PAGE 8 OF 19 20. SO FAR AS THIS GRIEVANCE OF THE ASSESSEE IS CON CERNED, THE RELEVANT MATERIAL FACTS ARE AS FOLLOWS. DURING THE COURSE OF THE SCRU TINY ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT OUT OF EXPENSES OF RS 3,01,052 INCURRED BY THE ASSESSEE ON BUILDING REPAIRS AND MAINTENANCE, AND C LAIMED TO BE REVENUE EXPENSES IN NATURE, EXPENSES TO THE TUNE OF RS 2,91 ,734 ARE IN FACT CAPITAL EXPENDITURE IN NATURE. THESE EXPENSES WERE STATED T O HAVE BEEN INCURRED ON BRICK WORK, CEMENT AND MARBLE ETC. THE ASSESSING OF FICER ALSO DEPUTED AN INSPECTOR FOR ON SITE INSPECTION, AND BASED INTER ALIA ON THE INSPECTORS OPINION THAT THESE EXPENSES ARE CAPITAL EXPENSES, THE AO DI SALLOWED RS 2,91,734 AS CAPITAL EXPENDITURE. AGGRIEVED, ASSESSEE CARRIED TH E MATTER IN APPEAL BEFORE THE CIT(A) BUT WITHOUT ANY SUCCESS. THE CIT(A) WAS OF THE VIEW THAT, IN VIEW OF THE INSPECTORS REPORT AND IN VIEW OF THE FACTS SET OUT IN THE ASSESSMENT ORDER, THE EXPENDITURE IS CLEARLY CAPITAL EXPENDITURE IN NATUR E. THE ASSESSEE IS NOT SATISFIED AND IS IN FURTHER APPEAL BEFORE US. 21. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED TH E MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF A PPLICABLE LEGAL POSITION. 22. WE HAVE NOTED THAT THE ASSESSEE HAD ACCEPTED TH AT THE EXPENSES OF RS 1,55,000, REPRESENTED BY BILL DATED 11.4.98 COPY PLACED BEFORE US AT PAGE 31 OF THE PAPER-BOOK, WERE CAPITAL EXPENSES IN NATURE. W HATEVER OBSERVATIONS HAVE CREATIVE TRAVEL SERVICES PVT LTD AY 1999-2000, 2000-01 AND 2001-02 PAGE 9 OF 19 BEEN MADE BY THE AUTHORITIES BELOW APPLY TO THE EXP ENSES COVERED BY THIS BILL AS IT DEALS WITH CONSTRUCTION OF ONE ROOM IN CEMENT M ORTAR, RCC ROOF, REINFORCEMENT OF RCC, CENTERING AND SHUTTERING, OUTSIDE AND INSID E PLASTER ETC ETC. AS FOR THE REMAINING EXPENSES, DETAILS OF WHICH ARE PLACED BEF ORE US AT PAGE 29 AND 30 OF THE PAPER-BOOK, THESE EXPENSES HAVE BEEN INCURRED F OR ROUTINE REPAIRS AND MAINTENANCE. NO SPECIFIC DEFECTS HAVE BEEN POINTED OUT IN THE SAME. ACCORDINGLY, WE ARE OF THE CONSIDERED VIEW THAT THE DISALLOWANCE OF CAPITAL EXPENDITURE SHOULD BE RESTRICTED TO RS 1,55,000. THE ASSESSEE GETS THE RELIEF ACCORDINGLY. 23. GROUND NO. 6 IS THUS PARTLY ALLOWED. 24. IN GROUND NO. 7, THE ASSESSE HAS RAISED THE FOL LOWING GRIEVANCE: THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN SUSTAINING THE DISALLOWANCE OF RS,26,610/- OUT OF THE TOTAL COMMUNICATION EXPENDITURE INCURRED DURING THE RELEVANT PREVIOUS YEAR 25. IN THE COURSE OF THE ASSESSMENT PROCEEDINGS, TH E ASSESSING OFFICER DISALLOWED 1/4 TH OF TELEPHONE EXPENSES ON THE GROUND THAT THESE ARE TREATED AS PERSONAL EXPENSES. IN APPEAL, LEARNED CIT(A) HAS CO NFIRMED THE SAME. THE ASSESSEE IS AGGRIEVED AND IS IN FURTHER APPEAL BEFO RE US. 26. HAVING HEARD THE RIVAL CONTENTIONS AND HAVING P ERUSED THE MATERIAL ON RECORD, WE ARE UNABLE TO FIND ANY LEGALLY SUSTAINAB LE BASIS FOR THE IMPUGNED CREATIVE TRAVEL SERVICES PVT LTD AY 1999-2000, 2000-01 AND 2001-02 PAGE 10 OF 19 DISALLOWANCE. AS LEARNED COUNSEL RIGHTLY POINTS OUT THE ASSESSEE IS A COMPANY, AND, FOLLOWING HONBLE GUJARAT HIGH COURTS JUDGMEN T IN THE CASE OF SAYAJI IRON & ENGINEERING COVS CIT (253 ITR 709), NO PART OF SUCH EXPENDITURE IN THE HANDS OF THE COMPANY CAN BE TREATED AS PERSONAL OR NON BUSIN ESS EXPENDITURE. WE UPHOLD THE GRIEVANCE OF THE ASSESSEE, AND DIRECT THE AO TO DELETE THIS DISALLOWANCE AS WELL. 27. GROUND NO. 7 IS THUS ALLOWED. 28. GROUND NOS. 8, 9 AND 10 ARE AS FOLLOWS: THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN SUSTAINING THE EXCLUSION OF POC KET EXPENSES OF RS.34,93,070/- FROM THE TOTAL FOREIGN EXCHANGE RECE IPTS EARNED BY THE APPELLANT FOR THE PURPOSES OF COMPUTING DEDUCTION U NDER SECTION 80HHD OF THE INCOME TAX ACT, 1961 (THE ACT). THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE REDUCTION OF ADV ANCE MONIES AMOUNTING TO RS.25,33,698/- FOR THE PURPOSES OF COM PUTING DEDUCTION UNDER SECTION 80HHD OF THE ACT. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ADOPTION OF TOTA L RECEIPTS OF RS.17,22,60,914/- FOR THE PURPOSES OF COMPUTING DED UCTION UNDER SECTION 80HHD OF THE ACT. 29. LEARNED COUNSEL FAIRLY CONCEDES THAT THESE ISSU ES ARE COVERED AGAINST THE ASSESSEE BY TRIBUNALS ORDERS IN ASSESSEES OWN CAS E FOR THE EARLIER YEARS. THESE GROUNDS OF APPEAL ARE, ACCORDINGLY, DISMISSED AS NO T PRESSED. CREATIVE TRAVEL SERVICES PVT LTD AY 1999-2000, 2000-01 AND 2001-02 PAGE 11 OF 19 30. GROUND NOS. 8, 9 AND 10 ARE DISMISSED AS SUCH. 31. IN THE RESULT, APPEAL FOR THE ASSESSMENT YEAR 1 999-2000 IS PARTLY ALLOWED IN THE TERMS INDICATED ABOVE. ASSESSMENT YEAR 2000-01 32. THIS APPEAL, FILED BY THE ASSESSEE, IS DIRECTED AGAINST THE ORDER DATED 19 TH NOVEMBER 2007 PASSED BY THE CIT(A) IN THE MATTER OF ASSESSMENT UNDER SECTION 143(3) R.W.S. 147 OF THE INCOME TAX ACT, 1961, FOR THE ASSESSMENT YEAR 2000-01. 33. IN THE FIRST GROUND OF APPEAL, THE ASSESSEE HAS RAISED THE FOLLOWING GRIEVANCE: THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN SUSTAINING THE DISALLOWANCE OF RS.50,000/- BEING THE AMOUNT OF DEPRECIATION ON FURNITURE & FIXTURE WHILE CONFIRMING THE INCOME OF HIRING OF FURNITURE & FIXTURE RS.2,80,800 /- UNDER THE HEAD INCOME FROM OTHER SOURCES. 34. LEARNED REPRESENTATIVES FAIRLY AGREE THAT WHATE VER WE DECIDE FOR THE ASSESSMENT YEAR 1999-2000 WILL EQUALLY APPLY TO THI S ASSESSMENT YEAR AS WELL. FOR THE REASONS SET OUT EARLIER IN THIS ORDER, WE H AVE REMITTED THIS ISSUE TO THE FILE OF THE AO FOR LIMITED VERIFICATION IN THE TERM S SET OUT IN PARAGRAPH 8 ABOVE. CREATIVE TRAVEL SERVICES PVT LTD AY 1999-2000, 2000-01 AND 2001-02 PAGE 12 OF 19 THE SAME FATE AND THE SAME OBSERVATIONS WILL APPLY FOR THIS ASSESSMENT YEAR AS WELL. THE MATTER IS, ACCORDINGLY, RESTORED TO THE F ILE OF THE AO. 35. GROUND NO. 1 IS THUS ALLOWED FOR STATISTICAL PU RPOSES. 36. IN GROUND NO. 2, THE GRIEVANCE RAISED BY THE AS SESSEE IS AS FOLLOWS: THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-VI, NEW DELHI HAS ERRED IN UPHOLDING THE ADDITION OF RS.2,53,697/- UNDER THE H EAD REPAIR & MAINTENANCE, THIS ADDITION WAS MADE BY THE LD. AO O N THE ESTIMATE BASIS OF 25% OF THE TOTAL EXPENDITURE. THIS KIND OF ADDITION ON ESTIMATE BASIS HAS NO PLACE IN THE INCOME-TAX ACT WHICH MAY KINDLY BE DELETED. 37. THIS DISALLOWANCE WAS MADE BY THE ASSESSING OFF ICER, IN THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS, ON THE ASSUMPTION THAT A PART OF THE BUILDING REPAIRS AND MAINTENANCE EXPENSES WAS WITH RESPECT T O LET OUT BUILDING, AND, ACCORDINGLY AN ADHOC DISALLOWANCE OF 25% WAS MADE O UT OF TOTAL BUILDING REPAIRS AND MAINTENANCE EXPENSES OF RS 10,14,789. THE ASSES SEE CARRIED THE MATTER IN APPEAL AND CONTENDED THAT NO PART OF THE REPAIRS AN D MAINTENANCE EXPENSES WAS WITH REGARD TO THE FLAT LET OUT. LEARNED CIT(A), HO WEVER, CONFIRMED THE ACTION OF THE AO BY RELYING ON HIS ORDER FOR THE IMMEDIATELY PRECEDING ASSESSMENT YEAR. THE ASSESSEE IS NOT SATISFIED AND IS IN FURTHER APP EAL BEFORE US. CREATIVE TRAVEL SERVICES PVT LTD AY 1999-2000, 2000-01 AND 2001-02 PAGE 13 OF 19 38. HAVING HEARD THE RIVAL CONTENTIONS AND HAVING P ERUSED THE MATERIAL ON RECORD, WE ARE OF THE CONSIDERED VIEW THAT THIS ISS UE ALSO DESERVES TO BE RESTORED TO THE FILE OF THE AO, FOR THE LIMITED VERIFICATION IN TERMS OF PARAGRAPH 8 EARLIER AS WAS DONE IN THE ASSESSEES CASE FOR IMMEDIATELY PRECEDING ASSESSMENT YEAR. THE OBSERVATIONS MADE BY US FOR THAT ASSESSMENT YEA R WILL APPLY MUTATIS MUTANDIS FOR THIS ASSESSMENT YEAR AS WELL. IN CASE NO PART OF THE BUILDING MAINTENANCE AND REPAIRS EXPENSES INCLUDE EXPENSES O N THE LET OUT BUILDING, THE DISALLOWANCE IS TO BE DELETED. WE ORDER SO. 39. GROUND NO. 2 IS THUS ALLOWED FOR STATISTICAL PU RPOSES IN THE TERMS INDICATED ABOVE. 40. IN GROUND NO. 3, THE ASSESSEE HAS RAISED THE FO LLOWING GRIEVANCE: THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED COMMISSIONER HAS ERRED IN SUSTAINING THE EXCLUSION OF POCKET EXPENSES OF RS.27,05,420/- FROM THE TOTAL FOREIGN EXCHANGE R ECEIPTS EARNED BY THE APPELLANT FOR THE PURPOSES OF COMPUTING DEDUCTION U NDER SECTION 80HHD OF THE ACT. THE PRAYER IS, THE ABOVE AMOUNT M AY KINDLY BE INCLUDED FOR THE COMPUTATION OF DEDUCTION U/S. 80HH D AS THE SAME IS EARNED FROM FOREIGN TOURISTS & IN FOREIGN EXCHANGE. 41. LEARNED COUNSEL FAIRLY CONCEDES THAT THIS ISSUE IS COVERED AGAINST THE ASSESSEE BY TRIBUNALS ORDERS IN ASSESSEES OWN CAS E FOR THE EARLIER YEARS. THIS GROUND OF APPEAL ARE, ACCORDINGLY, DISMISSED AS NOT PRESSED. 42. GROUND NO. 3 IS THUS DISMISSED. CREATIVE TRAVEL SERVICES PVT LTD AY 1999-2000, 2000-01 AND 2001-02 PAGE 14 OF 19 43. IN THE RESULT, THE APPEAL FOR THE ASSESSMENT YE AR 2000-01 IS PARTLY ALLOWED IN THE TERMS INDICATED ABOVE. ASSESSMENT YEAR 2001-02 44. THIS APPEAL, FILED BY THE ASSESSEE, IS DIRECTED AGAINST THE ORDER DATED 20 TH DECEMBER 2004, PASSED BY THE CIT(A) IN THE MATTER O F ASSESSMENT UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961, FOR THE ASSESSM ENT YEAR 2001-02. 45. IN THE FIRST AND SECOND GROUNDS OF APPEAL, THE ASSESSE HAS RAISED THE FOLLOWING GRIEVANCE: THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-V, NEW DELHI [ THE CIT(A)] HAS ERRED IN DISALLOWING DEPRECIATION ON FURNITURE & FI XTURE AND IN THE RESPECT OF LET OUT PROPERTY AMOUNTING TO RS.40,000/ - AND RS.1,04,981/- RESPECTIVELY THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE AMO UNTING TO RS.2,83,965/- OUT OF THE TOTAL BUILDING REPAIR & MA INTENANCE EXPENDITURE INCURRED DURING THE RELEVANT PREVIOUS Y EAR. 46. SO FAR AS THIS GRIEVANCE OF THE ASSESSEE IS CON CERNED, THE RELEVANT MATERIAL FACTS ARE AS FOLLOWS. DURING THE COURSE OF THE SCRU TINY ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT, ACCORDING TO TH E ASSESSEE, TOTAL DEPRECIATION IN CREATIVE TRAVEL SERVICES PVT LTD AY 1999-2000, 2000-01 AND 2001-02 PAGE 15 OF 19 RESPECT OF LET OUT PROPERTY WAS CLAIMED AT RS 1,04, 981 BUT NO EXPENSES HAVE BEEN INCURRED FOR THE RELATED MAINTENANCE AND REPAIRS. T HE AO DISALLOWED THIS DEPRECIATION OF RS 1,04,981 IN RESPECT OF THE BUILD ING LET OUT, 25% FOR THE BUILDING REPAIRS AND MAINTENANCE EXPENSES WHICH CAM E TO RS 2,83,964 ESTIMATED FOR THE LET OUT FLAT AND DEPRECIATION ON FURNITURE AND FIXTURE, ON ESTIMATE BASIS IN RESPECT OF THE LET OUT FLAT, AT RS 40,000. AGGRIEVE D, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A) BUT WITHOUT ANY SUCCESS, T HE ASSESSEE IS NOT SATISFIED AND IS IN FURTHER APPEAL BEFORE US. 47. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED TH E MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF T HE APPLICABLE LEGAL POSITION. 48. IT HAS BEEN CONTENDED BEFORE US THAT SO FAR AS DEPRECIATION ON FURNITURE AND FIXTURE IS CONCERNED, THIS IS ONLY RS 11,404 AS PER DETAILS ON PAPER BOOK PAGE 57. IT IS ALSO CONTENDED THAT NO PART OF THE B UILDING REPAIRS AND MAINTENANCE EXPENSES PERTAIN TO THE LET OUT FLAT. HOWEVER, THE SE ARE FACTUAL THINGS WHICH NEED TO BE VERIFIED ON THE SAME LINES AS IN EARLIER YEAR S ABOVE. IF NO PART OF THE REPAIRS AND MAINTENANCE EXPENSES RELATE TO THE LET OUT FLAT , OBVIOUSLY THERE CANNOT BE ANY OCCASION FOR DISALLOWANCE. THE DEPRECIATION FIGURES ARE ALSO SUBJECT TO VERIFICATION. FOR THIS FACTUAL VERIFICATION, THE M ATTER IS REMITTED TO THE FILE OF THE AO AND ION CASE THE FACTS SO SATED ARE CORRECT, THE IMPUGNED DISALLOWANCES WILL HAVE TO BE DELETED. WE ORDER SO. CREATIVE TRAVEL SERVICES PVT LTD AY 1999-2000, 2000-01 AND 2001-02 PAGE 16 OF 19 49. GROUND NOS. 1 AND 2 ARE THUS ALLOWED FOR STATIS TICAL PURPOSES. 50. IN GROUND NO. 3, THE ASSESSEE HAS RAISED THE FO LLOWING GRIEVANCE: THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A)HAS ERRED IN CONFIRMING THE DISALLOWANCE OF F ARM EXPENSES AND DEPRECIATION ON AGRICULTURE ASSETS AMOUNTING TO RS. 51,788/- AND RS.2,275/- RESPECTIVELY. 51. LEARNED COUNSEL, HOWEVER, STATED THAT HE DOES N OT WISH TO PRESS THIS GROUND OF APPEAL. ACCORDINGLY, IT IS DISMISSED FOR WANT OF PROSECUTION. 52. GROUND NO. 3 IS THUS DISMISSED. 53. IN GROUND NO. 4, THE ASSESSEE HAS RAISED THE FO LLOWING GRIEVANCE: THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN SUSTAINING THE DISALLOWANCE OF RS.17,01,352/- OUT OF THE TOTAL COMMISSION PAID TO THE DIRECTORS DURING T HE RELEVANT PREVIOUS YEAR. 54. SO FAR AS THIS GRIEVANCE IS CONCERNED, THE RELE VANT MATERIAL FACTS ARE LIKE THIS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSE HAS PAD COMMISSION OF RS 34,02,703 TO THE DIRECTORS, AS AGAINST RS 10,53,103 PAID IN THE IMMEDIATELY PRECEDING ASSE SSMENT YEAR, WHEREAS THE RECEIPTS HAVE ONLY GONE UP FROM RS 3.38 CRORE IN TH E PRECEDING YEAR TO RS 4.59 CRORES IN THE CURRENT YEAR. HE FURTHER NOTED THAT A TOTAL OF 2% OF TURNOVER IS BEING GIVEN TO THE DIRECTORS WHICH IS NOT FOR THE BUSINESS EXPEDIENCY BUT ONLY CREATIVE TRAVEL SERVICES PVT LTD AY 1999-2000, 2000-01 AND 2001-02 PAGE 17 OF 19 BECAUSE THEY ARE DIRECTORS OF THE COMPANY. IN ANY E VENT, ACCORDING TO THE AO, INCREASE IN COMMISSION WAS NOT COMMENSURATE WITH BE NEFITS TO THE ASSESSEE. ACCORDINGLY, HE DISALLOWED 50% OF THESE EXPENSES, W HICH WORKED OUT TO RS 17,01,352, ON ACCOUNT OF COMMISSION PAID TO THE DIR ECTORS. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A) BUT WITHOUT ANY SUCCESS. THE ASSESSEE IS NOT SATISFIED AND IS IN SECOND APPEAL BEFORE US. 55. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED TH E MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF A PPLICABLE LEGAL POSITION. 56. WE FIND THAT THE COMMISSION SO PAID TO THE DIR ECTORS HAVE BEEN ALLOWED TO THE DIRECTORS ALL ALONG AND COORDINATE BENCHES OF T HIS TRIBUNAL, AS ALSO HONBLE HIGH COURT, HAVE HELD THE SAME TO BE ALLOWABLE. CO PIES OF HONBLE HIGH COURTS ORDERS APPROVING THE STAND OF THE COORDINATE BENCHE S FOR THE ASSESSMENT YEARS 2005-06, 2002-03, 2007-08 AND 2006-07 HAVE BEEN PLA CED ON RECORD. IN ANY CASE, NO BASIS IS GIVEN AS TO WHY ONLY 50% OF EXPEN DITURE IS TO BE ALLOWED IT IS PURELY IN ESTIMATE BASIS AND WITHOUT LEGALLY SUSTAI NABLE FOUNDATION. THE DISALLOWANCE IS THUS MADE CONTRARY TO SETTLED POSIT ION IN THIS REGARD. WE HAVE ALSO NOTED THAT ACCORDING TO THE CIT(A), THE COMMIS SION WORKS OUT TO 4% BUT THIS COMPUTATION PROCEEDS ON THE FALLACIOUS ASSUMPTION T HAT THE GROSS AMOUNT, ON WHICH COMMISSION IS WORKED OUT, IS THE SAME AMOUNT AS IS SHOWN IN THE PROFIT AND LOSS ACCOUNT; LEARNED COUNSEL HAS DEMONSTRATED TO US THAT THE COMMISSION IS CREATIVE TRAVEL SERVICES PVT LTD AY 1999-2000, 2000-01 AND 2001-02 PAGE 18 OF 19 WORKED OUT ON THE BASIS OF TOTAL OF 2% ONLY. IT I S ONLY A CASE OF PARTIAL DISALLOWANCE WHICH ESSENTIALLY IMPLIES, IN PRINCIPL E, THAT SERVICES ARE RENDERED AND IT IS ONLY THE QUANTUM OF PAYMENT WHICH IS DISP ROPORTIONATE. HOWEVER, NO MATERIAL IS BROUGHT ON RECORD, SAVE AND EXCEPT FOR THE SWEEPING GENERALISATIONS AND VAGUE REMARKS, TO SUBSTANTIATE THAT THE PAYMENT IS EXCESSIVE. IN VIEW OF THESE DISCUSSIONS, AS ALSO BEARING IN MIND ENTIRETY OF TH E CASE, WE ARE OF THE CONSIDERED VIEW THAT THE DISALLOWANCE OF RS 17,01,352, ON ACCO UNT OF COMMISSION PAID TO DIRECTORS, ALSO DESERVES TO BE DELETED. 57. GROUND NO. 4 IS THUS ALLOWED. 58. IN GROUND NO. 5, THE ASSESSEE HAS RAISED THE FO LLOWING GRIEVANCE: THAT ON THE FACTS & CIRCUMSTANCES OF THE CASE AND I N LAW, THE LEARNED CIT(A) HAS ERRED IN SUSTAINING THE CHARACTERIZATION OF INTEREST INCOME EARNED BY THE APPELLANT AMOUNTING TO RS.41,41,900/- AS INCOME FROM OTHER SOURCES. 59. THE SAME ISSUE CAME UP FOR OUR ADJUDICATION IN THE ASSESSMENT YEAR 1999- 2000 WHICH WE HAVE DEALT WITH EARLIER IN THIS ORDER IN PARAGRAPH 14 ABOVE. LEARNED REPRESENTATIVES FAIRLY AGREE THAT WHATEVER IS DECIDED FOR THE ASSESSMENT YEAR 1999-2000 WILL EQUALLY APPLY FOR THIS ASSESSME NT YEAR AS WELL. FOLLOWING THE VIEW SO TAKEN FOR THE ASSESSMENT YEAR 1999-2000, WE UPHOLD THE ASSESSEES GRIEVANCE IN THIS YEAR AS WELL. THE OBSERVATIONS MA DE IN PARAGRAPH 14 ABOVE SHALL EQUALLY APPLY HERE AS WELL. ACCORDINGLY, THE INCOME OF RS 41,41,900 WILL BE TAXED UNDER THE HEAD BUSINESS INCOME. CREATIVE TRAVEL SERVICES PVT LTD AY 1999-2000, 2000-01 AND 2001-02 PAGE 19 OF 19 60. GROUND NO. 5 IS THUS ALLOWED. 61. NO OTHER GROUNDS OF APPEAL WERE PRESSED BEFORE US IN THIS ASSESSMENT YEAR. THE APPEAL OF THE ASSESSEE, FOR THE ASSESSMENT YEAR 2001-02 IS THUS PARTLY ALLOWED IN THE TERMS INDICATED ABOVE. TO SUM UP, AL L THE APPEALS ARE PARTLY ALLOWED IN THE TERMS INDICATED ABOVE. PRONOUNCED IN THE OPEN COURT TODAY ON 20 TH DAY OF OCTOBER, 2014. SD/- SD/- I C SUDHIR PRAMOD KUMAR (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) NEW DELHI, 20 TH DAY OF OCTOBER 2014 COPIES TO : (1) THE ASSESSEE (2) THE ASSESSING O FFICER (3) CIT (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ETC ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL ACTDELHI BENCHES, NEW DELHI