ACIT 18(1), MUMBAI V. JEWEL OF INDIA, MUMBAI

ITA 5546/MUM/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9547 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: J
• Next Hearing Date: 22-11-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 27-07-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ARUN G VERMA
• Keywords: Business income; Revenue expenditure; Capital expenditure
• Section: 143(3); 6

Judgement Text

, , , , IN THE INCOME TAX APPELLATE TRIBUNAL J BENCH, MUMBAI . . , , ! '# ! '# ! '# ! '# , ,, , $ $ $ $ % % % % BEFORE SHRI R.S. SYAL, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER . / ITA NO. 5546/MUM./2011 ( $' ( )( / ASSESSMENT YEAR : 200708 ) ASSTT. COMMISSIONER OF INCOME TAX CIRCLE18(1), PIRAMAL CHAMBERS LALBAUG, MUMBAI 400 012 .. *+ / APPELLANT ' V/S M/S. JEWEL OF INDIA DR. A.B. ROAD, NEHRU CENTRE WORLI, MUMBAI 400 018 .... ,-*+ / RESPONDENT * . / PERMANENT ACCOUNT NUMBER AAAFJ0334N $' (/! 0 1 / ASSESSEE BY : MR. ARUN G. VERMA 0 1 / REVENUE BY : MR. MOHIT JAIN ' 0 ! / DATE OF HEARING 22.11.2012 ' 23) 0 ! / DATE OF ORDER 30.11.2012 ' ' ' ' / ORDER ! '# ! '# ! '# ! '# , ,, , $ $ $ $ 4 4 4 4 / PER AMIT SHUKLA, J.M. THIS APPEAL PREFERRED BY THE REVENUE, IS DIRECTED A GAINST THE IMPUGNED ORDER DATED 12 TH MAY 2011, PASSED BY THE LEARNED COMMISSIONER (APPEALS)XXXI, MUMBAI, FOR THE QUANTU M OF ASSESSMENT PASSED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT), FOR ASSESSMENT YEAR 200708, ON THE FOLLOWIN G GROUNDS: JEWEL OF INDIA 2 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LEARNED CIT(A) HAS ERRED IN HOLDING THAT COMPENSATI ON PAID TO THE NEHRU CENTRE OF RS.57,00,000/- IS NOT IN THE NATURE OF GOODWILL, BUT COMPENSATION PAID FOR THE USE OF THE PREMISES AND H ENCE IS OF REVENUE IN NATURE, AS AGAINST THE VIEW OF THE ASSES SING OFFICER THAT SUCH PAYMENT IS MERELY A CAMOUFLAGE FOR GOODWILL WH ICH IS CAPITAL IN NATURE AND DISALLOWABLE. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LEARNED CIT(A) FAILED TO APPRECIATE THAT THE HONBL E HIGH COURT OF BOMBAY IN INCOME TAX APPEAL NO. 194 OF 2003 FOR THE A.Y 1997- 1998 HAD DIRECTED THE LOWER AUTHORITIES TO DECIDE T HE ISSUE OF GOODWILL ON MERITS AND THE ISSUE IS YET TO REACH FI NALITY. 2. AT THE OUTSET, BOTH THE PARTIES AGREED BEFORE US TH AT THE ISSUE INVOLVED IS COVERED BY THE EARLIER YEARS DECISION OF THE TRIBUNAL RENDERED IN ASSESSEES OWN CASE FOR ASSESSMENT YEARS 199798 TO 200607. 3. AFTER GOING THROUGH THE FINDINGS OF THE ASSESSING O FFICER AS WELL AS OF THE LEARNED COMMISSIONER (APPEALS), WE FIND THAT IN THE EARLIER YEARS, THE TRIBUNAL HAS DEALT WITH THE SIMILAR ISSUE AFTER DIS CUSSING THE ENTIRE FACTS. IN THE LATEST ORDER, THE TRIBUNAL, VIDE ORDER DATED 12 TH OCTOBER 2012, IN ITAS NO.2228 AND 2229/MUM./2011, FOR ASSESSMENT YEA RS 200506 AND 200607, AFTER NOTING THE FACTS OF THE EARLIER YEAR S ORDER OF THE TRIBUNAL, HAS OBSERVED AND HELD AS UNDER: 2. IN THE PRESENT CASE, THE ASSESSEE IS A PARTNERSH IP FIRM WHICH IS ENGAGED IN THE BUSINESS OF RUNNING A RESTAURANT AT NEHRU CENTRE AND PROVIDING CATERING SERVICES AND REFRESHMENT TO THE TOURIST AND CUSTOMERS VISITING THE PREMISES OF NEHRU CENTRE AND DISCOVERY OF INDIA AT WORLI, MUMBAI. THE RETURNS OF INCOME FOR T HE YEARS UNDER CONSIDERATION WERE FILED BY IT ON 28-10-2005 AND 31 -10-2006 DECLARING TOTAL INCOME OF RS.1,43,96,421/- AND RS.1 ,80,45,570/- FOR ASSESSMENT YEARS 2005-06 AND 2006-07 RESPECTIVE LY. IN THE PROFIT & LOSS ACCOUNTS FILED WITH THE SAID RETURNS, A SUM OF RS.1,14,00,000/- WAS DEBITED BY THE ASSESSEE ON ACC OUNT OF COMPENSATION PAID FOR PREMISES IN NAHRU CENTRE. IN THE EARLIER YEARS, SIMILAR EXPENDITURE ON ACCOUNT OF COMPENSATI ON PAID FOR PREMISES IN NEHRU CENTRE WAS CLAIMED BY THE ASSESSE E AND THE SAME WAS DISALLOWED IN THE ASSESSMENTS TREATING THE SAME AS CAPITAL IN NATURE HOLDING THAT IT WAS IN THE NATURE OF THE PAYMENT FOR GOODWILL. DURING THE COURSE OF ASSESSMENT PROCE EDINGS, IT WAS SUBMITTED ON BEHALF OF THE ASSESSEE IN ADDITION TO REITERATING THE SUBMISSIONS MADE IN THE EARLIER YEARS IN SUPP ORT OF ITS CLAIM FOR JEWEL OF INDIA 3 DEDUCTION ON ACCOUNT OF COMPENSATION PAID FOR PREMI SES IN NEHRU CENTRE ON MERIT, THAT A NEW AGREEMENT WAS ENTERED I NTO IN THE YEAR UNDER CONSIDERATION FOR THE USE OF PREMISES WH EREIN THE WORD COMPENSATION ONLY WAS USED AND NOT THE WORDS ROY ALTY, LICENSE FEES AND GOODWILL. THE AO DID NOT FIND THIS CHAN GE MADE IN THE RELEVANT AGREEMENT TO BE MATERIAL. ACCORDING TO HIM , THE NATURE OF PAYMENT STILL REMAINED THE SAME AS IT WAS IN THE EA RLIER YEARS WHEREIN IT WAS HELD THAT THE COMPENSATION PAID BY T HE ASSESSEE WAS IN THE NATURE OF CAPITAL EXPENDITURE BEING GOOD WILL AS THE SAME WAS PAID FOR PROTECTING AND SAFEGUARDING THE BUSINE SS OF THE ASSESSEE. HE HELD THAT THE ASSESSEE FIRM WAS CONDUC TING HOTEL BUSINESS IN THE PREMISES OF NEHRU CENTRE FOR THE LA ST 19 YEARS AND WAS PAYING COMPENSATION IN THE NATURE OF GOODWILL A ND ROYALTY TO NEHRU CENTRE ALTHOUGH IN THE NEW AGREEMENT ENTERED INTO DURING THE YEAR UNDER CONSIDERATION, THE WORD COMPENSATIO N ONLY WAS MENTIONED. FOLLOWING THE STAND TAKEN IN ASSESSEES OWN CASE FOR THE EARLIER YEARS, THE AO, THEREFORE, DISALLOWED TH E DEDUCTION CLAIMED BY THE ASSESSEE ON ACCOUNT OF COMPENSATION PAID FOR PREMISES TO NEHRU CENTRE TREATING THE SAME AS CAPIT AL EXPENDITURE IN BOTH THE YEARS UNDER CONSIDERATION IN THE ASSESS MENTS COMPLETED U/S 143(3). 3. AGAINST THE ORDERS PASSED BY THE AO U/S 143(3) F OR BOTH THE YEARS UNDER CONSIDERATION, APPEALS WERE PREFERRED B Y THE ASSESSEE BEFORE THE LEARNED CIT(APPEALS) WHO ALLOWED THE CLA IM OF THE ASSESSEE FOR DEDUCTION ON ACCOUNT OF COMPENSATION P AID FOR PREMISES TO NEHRU CENTRE FOLLOWING THE ORDER OF THE TRIBUNAL DATED 29-12-2009 IN ASSESSEES OWN CASE FOR ASSESSMENT YE ARS 1997-98, 1999-2000, 2001-02, 2003-04 AND 2004-05 WHEREIN IT WAS HELD THAT THE AMOUNT PAID BY THE ASSESSEE TO NEHRU CENTR E WAS NOT FOR ACQUISITION OF GOODWILL BUT THE SAME WAS FOR THE RI GHT TO USE THE PREMISES OWNED BY NEHRU CENTRE. IT WAS HELD BY THE TRIBUNAL THAT ALTHOUGH THE PAYMENT MADE BY THE ASSESSEE TO NEHRU CENTRE WAS CLASSIFIED AS ROYALTY, LICENSE FEES AND GOODWILL, T HE SAME WAS PAID AS COMPENSATION ONLY FOR THE USER OF THE PREMISES F OR THE RUNNING OF RESTAURANT. IT WAS HELD BY THE TRIBUNAL THAT THE ENTIRE AMOUNT PAID BY THE ASSESSEE AS COMPENSATION FOR PREMISES T O NEHRU CENTRE THUS WAS REVENUE EXPENDITURE WHOLLY AND EXCLUSIVELY INCURRED FOR THE PURPOSE OF ITS BUSINESS AND THE SAME WAS ALLOWA BLE AS DEDUCTION IN COMPUTING ITS BUSINESS INCOME. AGGRIEV ED BY THE RELIEF ALLOWED BY THE LEARNED CIT(APPEALS) TO THE ASSESSEE ON THIS ISSUE FOR BOTH THE YEARS UNDER CONSIDERATION, THE REVENUE HAS PREFERRED THESE APPEALS BEFORE THE TRIBUNAL. 4. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS OBSE RVED THAT A SIMILAR ISSUE WAS INVOLVED IN ASSESSEES OWN CASE F OR THE EARLIER YEARS AND THE TRIBUNAL VIDE ITS COMMON ORDER DATED 17-12-2009 PASSED FOR ASSESSMENT YEARS 1997-98, 1999-2000, 200 1-02, 2003- 04 AND 2004-05 IN ITA NO.2017/ MUM/2004, 3188/MUM/2 004, 5551/MUM/2004, 5374/MUM/2005 AND 3079/MUM/2008 HAS DECIDED THE SAME IN FAVOUR OF THE ASSESSEE HOLDING THAT JEWEL OF INDIA 4 IRRESPECTIVE OF THE NOMENCLATURE USED IN THE RELEVA NT AGREEMENT, THE ENTIRE AMOUNT PAID BY THE ASSESSEE TO NEHRU CEN TRE WAS TOWARDS COMPENSATION FOR THE USE OF THE PREMISES FO R RUNNING ITS RESTAURANT AND THE SAME BEING REVENUE EXPENDITURE I NCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF ASSESSEES BUSIN ESS WAS ALLOWABLE AS DEDUCTION IN COMPUTING THE BUSINESS IN COME OF THE ASSESSEE. RESPECTFULLY FOLLOWING THE SAID DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL, WE UPHOLD THE IMPUGNED ORDE RS OF THE LEARNED CIT(APPEALS) ALLOWING THE DEDUCTION CLAIMED BY THE ASSESSEE ON ACCOUNT OF COMPENSATION PAID TO NEHRU C ENTRE FOR USE OF PREMISES FOR THE PURPOSE OF ITS BUSINESS AND DIS MISS THESE APPEALS FILED BY THE REVENUE . 4. KEEPING IN VIEW THE AFORESAID DECISION OF THE TRIBU NAL IN ASSESSEES OWN CASE, THE GROUNDS RAISED BY THE REVENUE ARE DIS MISSED. 5. IT HAS ALSO BEEN BROUGHT TO OUR NOTICE THAT EARLIER YEARS ORDER OF THE TRIBUNAL HAS NOW BEEN AFFIRMED BY THE HON'BLE JURIS DICTIONAL HIGH COURT IN INCOME TAX APPEAL NO.343 OF 2011, JUDGMENT DATED 13 TH JANUARY 2012, AND SUBSEQUENT APPEAL NO.355, 495 AND 406 OF 2011. IN VIEW OF THE FACT THAT THE SAID ISSUE HAS NOW ATTAINED FINALITY FROM THE STAGE OF HONBLE HIGH COURT, THERE IS NO MERIT LEFT IN THE GROUNDS RAISED BY THE REVENUE. 6. $' (/!: 0 / 0 ! 67 8 6. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ' 0 3) 9 :'; 30 TH NOVEMBER 2012 3 0 < 8 ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH NOVEMBER 2012 SD/- . .. . . . . . R.S. SYAL ACCOUNTANT MEMBER SD/- ! ! ! ! '# '# '# '# $ $ $ $ AMIT SHUKLA JUDICIAL MEMBER MUMBAI, :' :' :' :' DATED: 30 TH NOVEMBER 2012 JEWEL OF INDIA 5 ' 0 ,$! = >=)! / COPY OF THE ORDER FORWARDED TO : (1) $' (/! / THE ASSESSEE; (2) / THE REVENUE; (3) ? () / THE CIT(A); (4) ? / THE CIT, MUMBAI CITY CONCERNED; (5) =B< ,$!$' , , / THE DR, ITAT, MUMBAI; (6)