ACIT, New Delhi V. M/s. Claridges Hotels Pvt. Ltd., New Delhi

ITA 5848/DEL/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 3447 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-11-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 06-06-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 30-10-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AND CROSS OBJECTIONS
• Keywords: Depreciation; Business expenditure; Search and seizure; Earning of tax free income; Bad and doubtful debts
• Section: 143(3); 153A; 14A; 37(1); 28

Judgement Text

INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F: NEW DELHI BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NOS.:- 5848, 5849/DEL /2014 ASSESSMENT YEARS: 2009-10, 2010-11 ACIT CENTRAL CIRCLE-13, NEW DELHI. VS. CLARIDGES HOTELS PVT. LTD. 12, AURANGZEB ROAD NEW DELHI PAN AAACC0022B (APPELLANT) (RESPONDENT) CO NOS.:- 160 & 161/DEL /2015 (IN ITA NOS. 5848/DEL/2014, 5849/DEL/2014) ASSESSMENT YEARS: 2009-10, 2010-11 CLARIDGES HOTELS PVT. LTD. 12, AURANGZEB ROAD NEW DELHI PAN AAACC0022B VS. ACIT CENTRAL CIRCLE -13 NEW DELHI (APPELLANT) (RESPONDENT) ORDER PER AMIT SHUKLA, J.M. THE AFORESAID APPEALS HAVE BEEN FILED BY THE REVENU E AND CROSS OBJECTIONS BY THE ASSESSEE AGAINST SEPARATE IMPUGNED O RDER OF EVEN DATE 11.8.2014, PASSED BY LD. CIT (APPEALS)-I, NEW D ELHI FOR THE DEPARTMENT BY: SMT. PARAMITA TRIPATHY, CIT (DR) ASSESSEE BY : SHRI SAMEER GUPTA, ADVOCATE DATE OF HEARING 02/11/2017 DATE OF PRONOUNCEMENT 10/11/2017 ITA NOS. 5848,5849/DEL/2014 CO NOS. 160, 161/DEL/2015 ACIT VS. CLARIDGES HOTELS PVT. LTD. 2 QUANTUM OF ASSESSMENT PASSED UNDER SECTION 153A READ WITH SECTION 143(3) FOR THE ASSESSMENT YEARS 2009-10 AND 2010-11. 2. SINCE COMMON ISSUES ARE INVOLVED IN ALL THE A PPEALS ARISING OUT OF IDENTICAL SET OF FACTS, THEREFORE, THE SAME WERE HEARD TOGETHER AND HAVE BEEN DISPOSED OF BY WAY OF THIS CONSOLIDATED ORDER. WE WILL FIRST TAKE UP REVENUES APPEAL AND CROSS OBJECTION FOR THE ASSESSMENT YEAR 2009-10. IN THE GROUNDS OF APPEAL THE REVENUE HA S RAISED FOLLOWING GROUNDS:- 1. THE ORDER OF LD. CIT (A) IS NOT CORRECT IN LAW AND FACTS. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE L D. CIT (A) HAS ERRED IN LAW IN DELETING THE DISALLOWANCE OF RS.9,71,73,724/- MADE BY AO ON ACCOUNT OF DISALLOWA NCE U/S 14A READ WITH RULE 8D OF THE INCOME TAX ACT. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE L D. CIT (A) HAS ERRED IN LAW IN DELETING THE ADDITION OF RS.13, 03,519/- OUT OF TOTAL ADDITION OF RS.33,03,519/- MADE BY AO ON ACCOUNT OF DISALLOWANCE OF DEPRECIATION AND CAR RUN NING EXPENSES. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE L D. CIT (A) HAS ERRED IN LAW IN DELETING THE ADDITION OF RS.7,7 5,338/- OUT OF TOTAL ADDITION OF RS.18,80,396/- MADE BY AO ON ACCOUNT OF BAD DEBTS WRITTEN OFF. WHEREAS IN THE CROSS OBJECTION, THE ASSESSEE HAS RAISE D FOLLOWING GROUNDS:- 1. THAT THE ORDER U/S 153A OF THE ACT DATED 29.3.2014 PASSED BY THE LD. A.O. IS BAD ON FACTS AND IN LAW. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LD. CIT(A) HAS ERRED IN NOT CONSIDERING THAT THE ADDITI ONS WERE MADE U/S 153A DESPITE THE FACT THAT THERE WAS NO INCRIMI NATING DOCUMENT FOUND DURING THE COURSE OF SEARCH. 3. THAT THE LD. CIT(A) HAS ERRED IN SUSTAINING THE DIS ALLOWANCE OF BAD DEBTS OF RS. 11,05,058/- CLAIMED AS BUSINESS EX PENDITURE AS ITA NOS. 5848,5849/DEL/2014 CO NOS. 160, 161/DEL/2015 ACIT VS. CLARIDGES HOTELS PVT. LTD. 3 THE TRADING ADVANCE BECOME IRRECOVERABLE AND WRITTE N OFF IN BOOKS OF ACCOUNTS. 4. THAT THE ON THE FACTS AND CIRCUMSTANCE OF THE CASE, THE LD. CIT(A) HAS ERRED IN ADJUDICATING THE GROUND OF ADDITION OF AN AD HOC AMOUNT OF RS. 20,00,000/- IN RESPECT OF ALLEGED EXP ENSES ON RUNNING AND MAINTENANCE OF CARS. 3. A SEARCH AND SEIZURE OPERATION WAS CARRIED OU T U/S 132(1) AT RESIDENTIAL AND BUSINESS PREMISES OF SHRI SURESH NAN DA, HIS FAMILY MEMBERS AND HIS BUSINESS ASSOCIATES ON 24.2.2012. T HE ASSESSEE COMPANY WAS ALSO COVERED UNDER THE SAID SEARCH ON TH E SAME DATE. THE COMPANY IS RUNNING BUSINESS OF RUNNING THE HOTEL S UNDER THE NAME AND STYLE OF M/S. CLARIDGES HOTELS PVT. LTD. B RIEF QUA THE FIRST ISSUE RAISED IN REVENUES APPEAL ARE THAT IN THE CASE OF THE ASSESSEE COMPANY ORIGINAL ASSESSMENT WAS COMPLETED U/S 143(3) ON 16.12.2011, WHEREIN THE DISALLOWANCE U/S 14A FOR SU MS AMOUNTING TO RS.9,74,27,932/- WAS MADE, OUT OF WHICH RS. 5,45,57, 395/- WAS DELETED BY THE LD. CIT(A). IN THE ASSESSMENT PROCEEDI NGS INITIATED VIDE NOTICE ISSUED U/S 153A, THE A.O. HAS AGAIN MADE THE S AID DISALLOWANCE U/S 14A READ WITH RULE 8D AND COMPUTED T HE DISALLOWANCE U/S 14A AT RS. 9,71,73,724/-. 4. LD. CIT (APPEAL) IN THE IMPUGNED ORDER HAS DELETE D THE SAID ADDITION ON THE GROUND THAT IN THE ORIGINAL ASSESSMEN T PROCEEDINGS ALREADY A DISALLOWANCE OF RS. 4,28,70,537/- HAS BEE N SUSTAINED AND THEREFORE, AGAIN ADDING THE ENTIRE DISALLOWANCE IS UN CALLED FOR. 5. AFTER HEARING BOTH THE PARTIES AND ON PERUSAL O F THE IMPUGNED ORDERS, ONE VERY IMPORTANT FACT WHICH IS PERMITTING THR OUGH IS THAT, DURING THE YEAR ASSESSEE HAS NOT EARNED ANY EXEMPT IN COME AND THIS FACT HAS BEEN NOTED BY THE AO ALSO IN THE IMPUGNED ASSE SSMENT ORDER AS WELL AS BY THE LD. CIT(A) IN THE IMPUGNED ORDER. THE ASSESSEE HAD ITA NOS. 5848,5849/DEL/2014 CO NOS. 160, 161/DEL/2015 ACIT VS. CLARIDGES HOTELS PVT. LTD. 4 RELIED UPON CERTAIN DECISIONS BEFORE BOTH THE AUTHORI TIES CONTENDING THAT, IF THERE IS NO EXEMPT INCOME, THEN NO DISALLOWAN CE U/S 14A CAN BE MADE. THIS FACT IS BORNE OUT FROM THE DISCUSSIONS APPEARING ON PARA 4.1 OF THE LD. CIT (A) ORDER. WHENCE ASSESSEE H AS NOT EARNED ANY EXEMPT INCOME, THEN NO DISALLOWANCE U/S 14A CAN BE MA DE IN THIS YEAR IN VIEW OF THE RATIO AND PRINCIPLE LAID DOWN BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CHEMINVEST LTD. VS. ACIT, REPORTED IN 378 ITR 33 (DEL) . THUS, ON THIS GROUND ALONE, WE HOLD THAT THE DISALLOWANCE U/S 14A READ WITH RULE 8D FOR S UMS AMOUNTING TO RS. 9,71,73,724/- CANNOT BE SUSTAINED AND IS DIRECT ED TO BE DELETED. 6. SO FAR AS THE ISSUE RAISED IN GROUND NO. 3, I. E., DELETION OF ADDITION OF RS. 13,03,519/- OUT OF TOTAL ADDITION OF R S. 33,03,519/- ON ACCOUNT OF DISALLOWANCE OF DEPRECIATION AND CAR RUNNI NG EXPENSES, THE BRIEF FACTS ARE THAT DURING THE COURSE OF SEARCH, CERTA IN CARS WERE FOUND FROM THE RESIDENCE OF SHRI SURESH NANDA AS WE LL AS SHRI SANJEEV NANDA, WHO WERE THOUGH NOT THE DIRECTOR IN THE COMPANY BUT DIRECTLY AND INDIRECTLY HAD CONTROL IN THE ASSESSEE COMPANY. AC CORDINGLY, THE A.O. ISSUED SHOW CAUSE NOTICE AS TO WHY THE DEPRECIAT ION CLAIMED IN RESPECT OF THESE CARS SHOULD NOT BE DISALLOWED. THE DE TAILS OF THE CARS HAVE BEEN GIVEN IN PARA 6 OF THE ASSESSMENT ORDER. T HE ASSESSEE IN RESPONSE TO SHOW CAUSE NOTICE SUBMITTED THAT, THE CLARI DGES HOTEL WAS UNDERGOING EXTENSIVE RENOVATION OF ITS HOTEL AND THERE W ERE SEVERE CONSTRAINT OF PARKING SPACE AND PENDING SUCH RENOVATIO N, THESE CARS WERE TEMPORARILY PARKED AT THE RESIDENCE OF SHRI SURE SH NANDA WHO RESIDES NEARBY AT 4, PRITHVIRAJ ROAD AND BOTH BEING NON-RESIDENT MOSTLY STAYED ABROAD AND THEREFORE, THEIR PARKING SPAC E WAS USED. THE A.O. HELD THAT NEITHER SHRI SURESH NANDA NOR SHRI SANJ EEV NANDA OFFERED ANY INCOME FOR LETTING OUT THEIR PREMISES FOR PARKING OUT THE CARS OF M/S CLARIDGES HOTEL AND THUS, HE HELD THAT THES E CARS CANNOT ITA NOS. 5848,5849/DEL/2014 CO NOS. 160, 161/DEL/2015 ACIT VS. CLARIDGES HOTELS PVT. LTD. 5 BE SAID TO BE WHOLLY AND EXCLUSIVELY USED FOR THE PUR POSE OF ASSESSEES BUSINESS AND ACCORDINGLY, HE DISALLOWED THE DEPRECIA TION AND ALSO MADE LUMP SUM AMOUNT OF RS. 20 LACS ON ACCOUNT OF RE PAIRS AND MAINTENANCE AND EXPENSES RELATED TO THESE CARS. IN THI S MANNER, DISALLOWANCE OF RS. 33,03,519/- WAS MADE. 7. LD. CIT(A) FIRST OF ALL, AFTER VERIFYING THE FAC TS ON RECORD HELD THAT THE MOTOR VEHICLES WERE OWNED BY THE ASSESSEE COMPANY AND SHRI SURESH NANDA AND HIS SON SHRI SANJEEV NANDA HELD MA JORITY STAKE DIRECTLY OR INDIRECTLY IN THE ASSESSEE COMPANY. HE FU RTHER HELD THAT THERE IS NO EVIDENCE TO ESTABLISH THAT MOTOR CARS WERE N OT USED FOR THE PURPOSE OF ASSESSEES BUSINESS AND EVEN IF THE VEHIC LES WERE PARKED AT THE RESIDENCE OF TWO MAJORITY STAKE-HOLDERS OR IT HAS BEEN USED BY THEM. IN ABSENCE OF SUCH EVIDENCE, THEN IT IS PRESUME D THAT THE CARS HAVE BEEN USED FOR THE PURPOSE OF BUSINESS OF THE ASS ESSEE COMPANY. IN ANY CASE DEPRECIATION HAS TO BE ALLOWED TO THE OWNE R WHO HAS LEGAL RIGHT ON THE ASSET AND HAS BEEN USED FOR ITS BUSINESS PURPOSE. THUS, HE ALLOWED THE CLAIM OF DEPRECIATION. SO FAR AS THE D ISALLOWANCE OF RS. 20 LACS IS CONCERNED THE LD. CIT (A) HELD THAT NO SUCH DISALLOWANCE HAS BEEN MADE IN THE ASSESSMENT ORDER WHICH PRIMA FAC IE APPEARS TO BE INCORRECT FINDING AS THE A.O. HAS MADE SPECIFIC DI SALLOWANCE OF RS. 20 LACS AS PER DISCUSSION APPEARING AT PARAS 4 AND 5 OF THE ASSESSMENT ORDER WHICH READS AS UNDER:- THE REPLY OF THE ASSESSEE COMPANY HAS BEEN EXAMINE D AND HAS BEEN FOUND NON TENABLE IN VIEW OF THE FACT THAT MR. SURESH NANDA AS WELL AS MR. SANJEEV NANDA ARE NOT THE DIRE CTORS IN THE ASSESSEE COMPANY AND OFFICIALLY THEY HAVE NOT BEEN PROVIDED ANY CAR BY THESE COMPANIES. IT IS IMPORTANT TO MENTION HERE THAT NEITHER MR. SU RESH NANDA NOR MR. SANJEEV NANDA HAS OFFERED ANY INCOME FOR LETTING OUT THEIR PREMISES FOR PARKING OF CARS BY M/S. CLAR IDGES HOTELS ITA NOS. 5848,5849/DEL/2014 CO NOS. 160, 161/DEL/2015 ACIT VS. CLARIDGES HOTELS PVT. LTD. 6 PVT. LTD. IN VIEW OF THE FACTS, IT CAN BE STATED TH AT THESE CARS CANNOT BE SAID TO BE WHOLLY & EXCLUSIVELY FOR THE P URPOSE OF THE BUSINESS. THE ASSESSEE HAS FURNISHED OF DEPRECIATIO N CLAIMED BUT HAS NOT FURNISHED THE EXPENSES RELATED TO FUEL, MAI NTENANCE, DRIVER SALARIES ETC. IN THE ABSENCE OF DETAILS A LU MP SUM AMOUNT OF RS. 20 LACS IS CONSIDERED AS EXPENSE RELATED TO THE SE CARS FOR THEIR RUNNING IN ADDITION TO DEPRECIATION CLAIMED. THEREF ORE, DEPRECIATION CLAIMED BY THE COMPANY ON THESE CARS W AS DISALLOWED AND EXPENSE OF RS. 20 LACS IS BEING ADDE D TO THE TOTAL INCOME OF THE ASSESSEE. THE PENALTY PROCEEDINGS U/S 271(1)(C) ARE BEING INITIATED SEPARATELY. (DISALLOWANCE OF RS. 33,03,519/-) 8. AFTER HEARING BOTH THE PARTIES AND ON THE PERUSAL O F THE RELEVANT FINDING GIVEN IN THE IMPUGNED ORDER, WE FIND THAT SO FAR AS THIS DISALLOWANCE OF DEPRECIATION IS CONCERNED THERE IS NO DISPUTE THAT THESE CARS ARE ASSETS OF THE ASSESSEE COMPANY WHICH HA VE BEEN SHOWN AS PART OF THE FIXED ASSETS IN THE BALANCE SHEET. MOST OF THE CARS ARE APPEARING AS WDV IN THE SCHEDULE OF FIXED ASSETS AND DEPRECIATION HAS BEEN CLAIMED AT RS. 13,03,519/-. ONCE THE CARS ARE O WNED BY THE ASSESSEE COMPANY AND IS FOUND TO PART OF FIXED ASSETS THEN, OSTENSIBLY DEPRECIATION HAS TO BE ALLOWED. THE ASSESSEE BEFORE THE AO AS WELL AS BEFORE THE LD. CIT (A) HAS CATEGORICALLY SUBMITTED TH AT SINCE RENOVATION WORK WAS CARRIED OUT AT HOTEL PREMISES, THER EFORE, THESE CARS WERE PARKED AT THE RESIDENCE OF SHRI SURESH NAND A AND HIS SON SHRI SANJEEV NANDA WHO HELD MAJORITY STAKE DIRECTLY O R INDIRECTLY IN THE ASSESSEE COMPANY. MERE PARKING OF CARS AT THE PRE MISES OF THESE PERSONS, CANNOT IPSO FACTO LEAD TO AN INFERENCE THAT THE DEPRECIATION HAS TO BE DISALLOWED WHICH OTHERWISE ARE THE ASSETS OF THE ASSESSEE COMPANY. ASSESSEE HAD ALSO SUBMITTED THAT THESE CARS WER E USED PURELY AND WHOLLY FOR THE PURPOSE OF HOTEL BUSINESS A ND IN ABSENCE OF ITA NOS. 5848,5849/DEL/2014 CO NOS. 160, 161/DEL/2015 ACIT VS. CLARIDGES HOTELS PVT. LTD. 7 REBUTTAL OF THIS EXPLANATION, DEPRECIATION CANNOT BE DIS ALLOWED AND ACCORDINGLY, WE HELD LD. CIT (A) HAS RIGHTLY ALLOWE D DEPRECIATION. 9. LASTLY, COMING TO THE ISSUE OF DELETION OF BAD DE BT OF RS. 7,75,338/- BY LD. CIT(A) AS RAISED IN GROUND NO. 4, THE BRIEF FACTS ARE THAT ASSESSEE COMPANY HAD CLAIMED SUM OF RS. 18,80,39 6/- AS DEDUCTION IN RESPECT OF BAD DEBT IN RETURN OF INCOME IN THE ORIGINAL ASSESSMENT ORDER PASSED BY THE AO, VIDE ORDER DATED 1 6.12.2011. THE SAID AMOUNT WAS DISALLOWED AND OUT OF THE SAID AMOUNT THE LD. CIT(A) HAS ALLOWED THE DEDUCTION TO THE EXTENT OF RS. 7,75,338 /-. THE AO HOWEVER REPEATED THE SAID ADDITION WHILE FRAMING THE ASSESSMENT U/S 153A ON THE GROUNDS THAT ASSESSEE COULD NOT PRODUCE THE DOCUMENTARY EVIDENCE OF THE BAD DEBTS. LD. CIT (A) FOL LOWING THE EARLIER APPELLATE ORDER IN THE PROCEEDINGS U/S 143(3 ) HELD THAT THE BAD DEBT AMOUNTING TO RS. 7,75,338/- IS TO BE ALLOWED, WHE REAS THE BALANCE AMOUNT OF RS. 11,05,058/- CANNOT BE ALLOWED A S IT WAS IN THE NATURE OF TRADE ADVANCES AND ASSESSEE COULD NOT PRODU CE ANY EVIDENCE. 10. AFTER HEARING BOTH THE PARTIES ON THIS ISSUE, WE FIND THAT THE ASSESSEE HAD STATED THAT AMOUNT TREATED AS BAD DEBT AMO UNTING TO RS. 7,75,338/- HAD BEEN DULY OFFERED TO TAX IN THE EARLIER YEARS FOR WHICH YEAR WISE DETAILS OF INCOME OFFERED ALONGWITH THE COPY OF LEDGER ACCOUNT WAS SUBMITTED BEFORE THE AO AS WELL AS BEFORE T HE LD. CIT(A). WHEN THIS FACT IS NOT DISPUTED THAT THE SAID AMOUNT HAS BEEN OFFERED TO TAX IN THE EARLIER YEAR AND ASSESSEE HAS WRITTEN-OFF THE SAID AMOUNT FROM ITS ACCOUNT IN THIS YEAR, THEN AS PER THE LAW BAD D EBTS WRITTEN-OFF HAS TO BE ALLOWED IN THIS YEAR AND ASSESSEE DOES NOT HAVE TO PROVE THAT THE AMOUNT HAS BECOME BAD. SO FAR AS THE TRADE ADVANCE OF RS. 11,05,058/- WAS CONCERNED, THE SAME WAS MADE TO M/S. PASIO ITA NOS. 5848,5849/DEL/2014 CO NOS. 160, 161/DEL/2015 ACIT VS. CLARIDGES HOTELS PVT. LTD. 8 INDUSTRIES (S) PTE LTD. FOR SUPPLY OF RAW MATERIAL, COO KING ITEMS ETC., WHO HAD FAILED TO EXECUTE THE ORDER. DESPITE THE BEST EF FORTS BY THE ASSESSEE, ORDER COULD NOT BE EXECUTED NOR COULD THE A MOUNT BE RECOVERED. HENCE, THE ASSESSEE HAS WRITTEN OFF THE SAID SUM. SO FAR AS THE ISSUE OF ALLOWING OF BAD DEBT AMOUNTING TO RS. 7, 75,338/-, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LD. CIT(A), B ECAUSE THE AMOUNT WRITTEN OFF AS BAD DEBT HAS BEEN ADMITTED TO BE OFFERED TO TAX IN THE EARLIER YEARS AND IT HAS BEEN WRITTEN OFF FROM THE BOOK S OF ACCOUNTS IN THIS YEAR AND HENCE, THE CONDITIONS AS LAID DOWN U/S 3 6(2) READ WITH SECTION 36(1)(VII) STANDS SATISFIED AND THEREFORE, THE BAD DEBT WRITTEN OFF HAS TO BE ALLOWED AS DEDUCTION. ACCORDINGLY GROU ND NO. 4 RAISED BY THE REVENUE IS DISMISSED. 11. IN THE RESULT APPEAL OF THE REVENUE IS DISMI SSED. 12. IN GROUND NO. 3 AND 4 OF ASSESSEES CROSS OBJ ECTION, THE ASSESSEE HAS RAISED THE ISSUE OF DISALLOWANCE OF BAD DEBT OF RS. 11,05,058/- AND ADHOC DISALLOWANCE OF RS. 20 LACS M ADE BY THE AO ON ACCOUNT OF RUNNING AND MAINTENANCE OF CARS. SO FAR AS THE ISSUE OF DISALLOWANCE OF BAD DEBT IS CONCERNED, AS NOTED ABOVE , THE ASSESSEE HAS GIVEN A TRADE ADVANCE OF RS. 11,05,058/- TO M/S. PASIO INDUSTRIES (S) PTE LTD FOR SUPPLY OF RAW MATERIAL, COOKING ITEMS ETC. HOWEVER THE SAID COMPANY FAILED TO EXECUTE THE ORDER PLACED WITH IT AND DESPITE BEST EFFORTS MADE BY THE ASSESSEE COMPANY THE ORDER C OULD NOT BE EXECUTED. ACCORDINGLY, THE SAID AMOUNT WAS WRITTEN-OFF IN THE ACCOUNTS AS UNRECOVERABLE. THE ASSESSEES CASE HAS B EEN THAT THE SAID AMOUNT SHOULD BE ALLOWED EITHER AS BUSINESS EXPENDITU RE OR AS A BUSINESS LOSS. HOWEVER, THE LD. CIT (A) HAS HELD THAT SINCE THIS ISSUE HAS BEEN DECIDED AGAINST BY THE LD. CIT (A) IN THE OR IGINAL QUANTUM PROCEEDINGS AND THE MATTER IS SUBJUDICE BEFORE THE TR IBUNAL, THEREFORE, ITA NOS. 5848,5849/DEL/2014 CO NOS. 160, 161/DEL/2015 ACIT VS. CLARIDGES HOTELS PVT. LTD. 9 HE HAS UPHELD THE SAID ADDITION. IT IS NOT IN DISPUTE THA T THE AMOUNT OF RS. 11,05,058/- IS A TRADE ADVANCE GIVEN DURING TH E COURSE OF BUSINESS AND FOR BUSINESS PURPOSE WHICH HAD BECOME IRRECOVERABLE. IN THIS SITUATION, OSTENSIBLY SUCH AN AMOUNT HAS TO BE ALLOWED EITHER AS BUSINESS EXPENDITURE U/S 37(1) OR AS A BUSINESS LOSS WHILE COMPUTING THE PROFIT AND GAINS U/S 28 READ WITH SECTION 29, BECAUSE SUCH A TRADE ADVANCE WAS GIVEN DURING THE COURSE OF T HE RUNNING OF THE BUSINESS. THUS, THE SAID AMOUNT THOUGH MAY NOT BE AL LOWED AS BAD DEBT BUT HAS TO BE ALLOWED AS BUSINESS LOSS. ACCO RDINGLY, WE HOLD THAT THE AMOUNT OF TRADE ADVANCE WRITTEN OFF IN THIS YEAR HAS TO BE ALLOWED AND CONSEQUENTLY, GROUND NO. 3 IS ALLOWED. 13. SO FAR AS THE ISSUE OF ADHOC DISALLOWANCE OF RS. 20 LACS IN RESPECT OF EXPENSES OF RUNNING AND MAINTENANCE OF CAR S, AS DISCUSSED IN THE DEPARTMENTAL APPEAL, THE ASSESSEE OWNS VARIOUS CARS WHICH ARE PART OF FIXED ASSETS AND IS BEING USED FOR THE PURPOSE OF HOTEL BUSINESS OF THE ASSESSEE. THE AO WHILE MAKING THE DISALLOWANC E HAS MADE PURELY ADHOC DISALLOWANCE WITHOUT PIN POINTING ANY SP ECIFIC NATURE OF EXPENDITURE WHICH CAN BE SAID TO BE NOT FOR THE PURPOS E OF BUSINESS. IN THE CASE OF THE COMPANY, WHICH IS RUNNING A FIVE S TAR HOTEL AND USING CARS FOR ITS HOTEL BUSINESS AND MAINTAINING ALL THE RECORDS, THE AO HAS TO POINT OUT AS TO WHICH PART OF THE EXPENDITURE DE BITED ARE NOT BEEN VERIFIABLE. SIMPLY BECAUSE CARS WERE PARKE D FOR TEMPORARY PERIOD AT THE PREMISES OF PROMOTERS, IT DOES NOT MEAN IT WERE USED FOR NON-BUSINESS PURPOSE. SUCH AN ADHOC DISALLOWANCE CA NNOT BE SUSTAINED. LD. CIT (A) HAS NOT EXAMINED THIS ISSUE AT A LL AND GAVE A WRONG FINDING OF FACT THAT AO HAS NOT MADE ANY SUCH DIS ALLOWANCE. ACCORDINGLY, WE DIRECT THE DELETION OF SUCH ADHOC DISA LLOWANCE MADE BY THE A.O. ITA NOS. 5848,5849/DEL/2014 CO NOS. 160, 161/DEL/2015 ACIT VS. CLARIDGES HOTELS PVT. LTD. 10 14. SINCE WE HAVE ALREADY DECIDED THE ISSUES O N MERITS, THEREFORE, THE LEGAL GROUND RAISED VIDE GROUND NOS. 1 AND 2 IN THE CROSS OBJECTION HAVE BECOME PURELY ACADEMIC AND THE SAME ARE NOT BEIN G ADJUDICATED AND ARE TREATED AS INFRUCTUOUS. 15. NOW WE TAKE UP THE REVENUES APPEAL AS WELL AS C ROSS APPEAL OF THE ASSESSEE FOR ASSESSMENT YEAR 2010-11, WHEREIN THE FOLLOWING GROUNDS HAVE BEEN RAISED:- 1. THE ORDER OF LD. CIT (A) IS NOT CORRECT IN LAW AND FACTS. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE L D. CIT(A) HAS ERRED IN LAW IN DELETING THE ADDITION OF RS. 2,42,26,220/- MADE BY A.O. ON ACCOUNT OF DISALLOWAN CE U/S 14A READ WITH RULE 8D OF THE INCOME TAX ACT. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE L D. CIT(A) HAS ERRED IN LAW IN DELETING THE ADDITION OF RS. 12 ,54,115/- OUT OF TOTAL ADDITION OF RS. 32,54,115/- MADE BY A. O. ON ACCOUNT OF DISALLOWANCE OF DEPRECIATION AND CAR RUN NING EXPENSES. 16. SO FAR AS THE DISALLOWANCE MADE U/S 14A, HEREIN IN THIS YEAR ALSO IT IS AN ADMITTED FACT THAT NO EXEMPT INCOME HAS B EEN EARNED BY THE ASSESSEE AND THIS FACT HAS BEEN NOTED BY THE A.O. IN PARA 5.1 OF THE ASSESSMENT ORDER SO. HOWEVER IN THIS YEAR, THE ASSE SSEE HAS SUO- MOTO DISALLOWED SUM OF RS. 2,78,38,017/- WHICH HAS BEEN ENHANCED TO RS. 5,20,64,236/- BY THE A.O. AND ACCORDINGLY, NE T ADDITION OF RS. 2,42,26,219/- HAS BEEN MADE. LD. CIT (A) HAS DELETE D THE SAID DISALLOWANCE AFTER OBSERVING AND HOLDING AS UNDER:- 4.4 I FIND THAT THE APPELLANT HAD ITSELF DISALLO WED AN AMOUNT OF RS. 2,78,38,017/- ON ACCOUNT OF APPLICATION OF RULE 8D IN THE COMPUTATION OF INCOME. THE REVENUE, ON THE OTHER HA ND, HAS WORKED OUT THE DISALLOWANCE TO AN AMOUNT OF RS. 5,2 0,64,236/- AND ADDED THE DIFFERENCE OF RS. 2,42,26,219/- TO TH E RETURNED INCOME OF THE APPELLANT. APPLYING THE DECISION TAKE N BY ME IN A.Y. ITA NOS. 5848,5849/DEL/2014 CO NOS. 160, 161/DEL/2015 ACIT VS. CLARIDGES HOTELS PVT. LTD. 11 2009-10, THE DISALLOWANCE WORKS OUT TO RS. 2,58,28, 769/-. SINCE THE APPELLANT HAD ITSELF DISALLOWED AN AMOUNT HIGHE R THAN THE DISALLOWANCE TO BE MADE, AS PER THE DECISION TAKEN BY ME IN A.Y. 2009-10, OR RESTRICTING IT TO THE EXTENT OF EXEMPT DIVIDEND INCOME AS HAS BEEN HELD BY SEVERAL COURTS LATELY (CITED BY LD. AR), THERE IS NO NEED TO DISTURB THE COMPUTATION FILED BY THE APPELLANT REGARDING THIS MATTER, ADMITTING RS. 2,78,38,017/- AS DISALLOWABLE. THERE IS NO NEED TO ADJUDICATE THE LE GAL, AND ADDITIONAL, GROUNDS OF APPEAL IN VIEW OF ACCEPTANCE OF HIGHER DISALLOWANCE BY THE APPELLANT. THERE IS NO CASE FOR MECHANICAL APPLICATION OF RULE 8 D AND THEREFORE FURTHER ADDIT ION OF RS. 2,42,26,219/- MADE BY THE REVENUE TO THE RETURNED I NCOME IS DELETED. THIS GROUND OF APPEAL IS DECIDED IN THESE TERMS. 17. AFTER CONSIDERING THE RIVAL SUBMISSIONS, ON CE IT IS AN ADMITTED FACT THAT ASSESSEE HAS NOT EARNED ANY EXEMPT INCOME, THEN IN VIEW OF THE JUDGMENT OF HONBLE JURISDICTIONAL HIGH COURT IN T HE CASE OF CHEMINVEST LTD. VS. ACIT REPORTED IN 378 ITR 33 NO DISALLOWANCE U/S 14A CAN BE MADE. THUS, DISALLOWANCE MADE BY THE AO OVER AND ABOVE THE AMOUNT OFFERED BY THE ASSESSEE IS DIRECTED TO BE DELETED AND ONLY THE AMOUNT SUO-MOTTO EXPENSE DISALLOWED BY THE ASSESSEE SHALL REMAIN SUSTAINED. IN THE RESULT GROUND NO. 1 RAISED BY THE REVENUE IS DISMISSED. 18. SO FAR AS THE ISSUE RAISED IN GROUND NO. 3 IS CONCERNED, THAT IS DEPRECIATION ON CARS AT THEIR WDV, ADMITTEDLY THIS ISSUE IS SIMILAR TO GROUND RAISED IN GROUND NO. 3 OF REVENUES APPEAL F OR THE ASSESSMENT YEAR 2009-10 AND THEREFORE, IN VIEW OF THE FINDING GI VEN THEREIN WHICH IS APPLICABLE ON THE FACTS IN THE PRESENT CASE MUTATIS MUTANDIS , WE HOLD THAT THE ADDITION MADE ON ACCOUNT OF DISALLOWANCE ON DEPRECIATION ON CARS BY THE AO CANNOT BE SUSTAINED AND THE SAME HAS RIGHTLY BEEN DELETED BY THE LD. CIT (A). THUS GROUND NO. 3 RAISED BY THE REVENUE IS DISMISSED. ITA NOS. 5848,5849/DEL/2014 CO NOS. 160, 161/DEL/2015 ACIT VS. CLARIDGES HOTELS PVT. LTD. 12 19. NOW COMING TO THE CROSS OBJECTION FILED BY THE ASSESSEE, SO FAR AS THE ISSUE RAISED IN GROUND NO. 3, AGAIN ADMITTEDLY IT IS SIMILAR TO THE GROUND RAISED BY THE ASSESSEE IN CROSS OBJECTION FOR ASSESSMENT YEAR 2009-10 AND THEREFORE, IN VIEW OF THE FINDING TH EREIN, WE HOLD THAT NO ADDITION ON ADHOC BASIS CAN BE MADE IN RESPECT OF RUNNING AND MAINTENANCE OF THE CARS. 20. LASTLY, SO FAR AS DISALLOWANCE OF DEPRECIATI ON OF RS. 1,75,048/- AS RAISED IN GROUND NO. 4 OF CROSS OBJECTION CLAIMED ON GYM EQUIPMENTS INSTALLED IN THE PREMISES OF MANAGING DIREC TOR, THE ASSESSEES CASE BEFORE THE A.O. AS WELL AS LD. CIT(A ) HAS BEEN THAT AS PER THE CORPORATE POLICY THE PROVISION OF FITNESS CENTR E HAS BEEN DONE FOR PURPOSES TO ENSURE EMPLOYEES TO STAY FIT AND HEALTHY AND IN ANY CASE IT CAN BE TREATED AS PERQUISITE IN HANDS OF MANAG ING DIRECTOR BUT CANNOT BE DISALLOWED IN THE HANDS OF THE ASSESSEE COMP ANY AND IN SUPPORT RELIANCE WAS PLACED ON VARIOUS DECISIONS. TH E AO AND LD. CIT (A) HAVE DISALLOWED THE DEPRECIATION ON THE GROUND THA T THOUGH OWNERSHIP BELONGS TO THE ASSESSEE BUT INSTALLATION OF THE EQUIPMENT AT RESIDENTIAL PREMISES OF THE DIRECTORS SHARE HOLDERS M AKES ITS USAGE PRIVATE WHICH CANNOT BE HELD TO BE FOR THE BUSINESS PUR POSE. 21. AFTER HEARING BOTH THE PARTIES, WE FIND THAT IT I S NOT IN DISPUTE THAT THE EQUIPMENT HAS BEEN BOUGHT BY THE COMPANY AND IS APPEARING AT THE FIXED ASSETS IN THE BALANCE SHEET OF THE ASSESSEE COMPANY AND SAID ASSETS HAS BEEN ACQUIRED DURING THE RUNNING OF H OTEL BUSINESS. THEN SIMPLY BECAUSE IT IS BEING USED BY MANAGING DIR ECTOR IT CANNOT BE HELD TO BE FOR PRIVATE USE SO AS TO WARRANT DISALLO WANCE OF DEPRECIATION. AT THE MOST IF ANY EQUIPMENT HAS BEEN PLA CED FOR EXCLUSIVE USE OF MANAGING DIRECTOR THE SAME SHOULD BE ADDED AS PERQUISITE IN THE HANDS OF THE SAID DIRECTOR BUT CANNO T BE DISALLOWED ITA NOS. 5848,5849/DEL/2014 CO NOS. 160, 161/DEL/2015 ACIT VS. CLARIDGES HOTELS PVT. LTD. 13 IN THE HANDS OF THE ASSESSEE COMPANY WHEN THIS ASSET AL READY FORMS PART OF THE BLOCK OF THE ASSETS AND DEPRECIATION HAS B EEN ALLOWED EARLIER. ACCORDINGLY, WE DO NOT FIND ANY REASON TO SU STAIN SUCH DISALLOWANCE AND THE SAME IS DIRECTED TO BE DELETED. 22. IN VIEW OF THE FINDINGS GIVEN ON MERITS, IS SUES RAISED IN GROUND NO. 1 AND 2 HAVE BECOME PURELY ACADEMIC AND SAME AR E NOT ADJUDICATED UPON ACCORDINGLY GROUND NO. 1 AND 2 ARE DISMISSED AND INFRUCTUOUS. 23. IN THE RESULT BOTH THE APPEALS OF THE REVENUE ARE D ISMISSED WHEREAS THE ASSESSEES CROSS OBJECTION ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 10 TH NOVEMBER, 2017. SD/- SD/- (PRASHANT MAHARISHI) (AMIT SHUKLA) ACCOUNTANT MEMBER JUDI CIAL MEMBER DATED: 10 /11/2017 VEENA COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI