THE ACIT 9(1), MUMBAI V. M/S. ELEL HOTELS AND INVESTMENTS LTD, MUMBAI

ITA 7241/MUM/2007

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0950 (ITAT-MUMBAI)
• Duration Of Justice: 9 year(s) 4 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-05-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 24-04-2017
• Assessment Year: 2003-2004
• Appeal Filed On: 05-12-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR A K NAYAK
• Keywords: Search and seizure
• Section: 143(3); 153A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E, MUMBAI BEFORE SHRI SAKTIJIT DEY, JM & SHRI MANOJ KUMAR AGGA RWAL, AM ITA NO. 7241/MUM/2007 ASSESSMENT YEAR 2003-04 ACIT 9(1), MUMBAI VS. ELEL HOTELS AND INVESTMENTS LTD., SEA ROCK HOTEL, 9 TH FLOOR, B J ROAD, BANDRA (W) MUMBAI- 400 050 PAN AAACE2846D (APPELLANT) (RESPONDENT) APPELLANT BY : DR A K NAYAK, DR RESPONDENT BY : NONE DATE OF HEARING : 2 4 .0 4 .2017 DATE OF PRONOUNCEMENT : 03.05 .2017 O R D E R PER SAKTIJIT DEY, JUDICIAL MEMBER: THIS IS AN APPEAL BY THE DEPARTMENT AGAINST THE OR DER DATED 03.09.2007 OF LEARNED CIT(A)-IX, MUMBAI, FOR A.Y. 2 003-04. 2. THE ONLY GROUND RAISED BY THE DEPARTMENT IS IN R ELATION TO THE DELETION OF ADDITION OF AN AMOUNT OF ` .32,21,213/- TOWARDS LICENSE FEES RECEIVABLE FROM ITC LTD. 3. BRIEFLY, FACTS ARE THE ASSESSEE, A COMPANY, IS I N THE HOTEL BUSINESS. IN THE COURSE OF ASSESSMENT PROCEEDINGS FOR THE YEAR U NDER CONSIDERATION, THE AO NOTICED THAT ON 01.07.1986, THE ASSESSEE HAD ENT ERED INTO AN OPERATING LICENSE AGREEMENT WITH M/S. ITC LTD., AS PER WHICH ITC LIMITED WAS SUPPOSED ITA NO 7241/MUM//2007 ELEL HOTELS & INVESTMENTS LTD. 2 TO PAY THE ASSESSEE LICENSE FEES @23% OF THE GROSS TURNOVER OF SEA ROCK HOTEL IN EACH FINANCIAL YEAR. IT FURTHER PROVIDED, THE TURNOVER FOR EACH FINANCIAL YEAR HAS TO BE CERTIFIED BY THE AUDITORS AND SAME SHALL BE FINAL AND BINDING ON THE PARTIES. HE ALSO OBSERVED THAT AS P ER THE AGREEMENT ITC SHALL PAY LICENSE FEES IN ARREARS AND SUCH LICENSE FEES W ILL BECOME DUE AND PAYABLE TO THE ASSESSEE WHEN THE LICENSE FEES ACCUMULATED T O ` .1 CRORE AS PER THE CALCULATION BASED ON THE AGREEMENT. HOWEVER, THE A O FOUND THAT THE ASSESSEE HAS NOT OFFERED ANY INCOME ON ACCOUNT OF L ICENSE FEES RECEIVABLE FROM ITC LIMITED. WHEN CALLED UPON TO EXPLAIN, IT WAS SUBMITTED BY THE ASSESSEE THAT SINCE IT HAS NOT RECEIVED ANY PAYMENT FROM ITC, IT HAS NOT OFFERED SUCH INCOME. THE AO DID NOT ACCEPT ASSESSE ES CLAIM. HE WAS OF THE VIEW THAT THE ASSESSEE HAS TO OFFER INCOME FROM LIC ENSE FEES ON ACCRUAL BASIS. HE NOTED THAT IN F Y 2002-03, THE TOTAL TURNOVER FO R THE HOTEL UNDER CONSIDERATION WAS ` .1,40,05,275/-. BY APPLYING THE RATE OF 23%, THE A O WORKED OUT LICENSE FEES OF ` .32,21,213/- AND ADDED BACK TO THE INCOME OF THE ASSESSEE. THE ASSESSEE CHALLENGED THE ADDITION BE FORE THE CIT(A). 4. THE LEANED CIT(A) NOTICED THAT SIMILAR ADDITION MADE IN ASSESSEES OWN CASE FOR A.YS. 1997-98 AND 1995-96 HAVE BEEN DELETE D BY THE TRIBUNAL AND FOLLOWING THE SAME DELETED THE ADDITION MADE BY THE AO. 5. WHEN THE APPEAL WAS CALLED FOR HEARING NO ONE WA S PRESENT FOR THE ASSESSEE INSPITE OF SERVICE OF NOTICE THROUGH RPAD. THEREFORE, WE PROCEED TO ITA NO 7241/MUM//2007 ELEL HOTELS & INVESTMENTS LTD. 3 DISPOSE OF THE APPEAL EXPARTE, QUA THE ASSESSEE, AF TER HEARING THE LEARNED DR AND ON THE BASIS OF MATERIAL AVAILABLE ON RECORD. 6. THE LEARNED DR FAIRLY SUBMITTED BEFORE US THAT I N EARLIER A.YS THE TRIBUNAL HAS DELETED THE ADDITION MADE BY THE AO ON ACCOUNT OF LICENSE FEES RECEIVABLE FROM ITC LTD, WHICH HAS BEEN FOLLOWED BY THE CIT(A). HE FURTHER SUBMITTED THAT, IN FACT SIMILAR ADDITION WAS MADE I N THE IMPUGNED ASSESSMENT YEAR ALSO IN PROCEEDINGS INITIATED U/S. 153A OF THE ACT PURSUANT TO SEARCH AND SEIZURE OPERATION. THE LEARNED DR SUBMITTED, WHILE DECIDING THE ISSUE THE TRIBUNAL HAS DELETED THE ADDITION. IN THIS CONTEXT HE DREW OUR ATTENTION TO ORDER DATED 16.04.2010 IN ITA NOS. 4513, 4514/DEL/2 009 & ORS. 7. WE HAVE HEARD LEARNED DR AND PERUSED THE MATERIA L ON RECORD. IT IS EVIDENT FROM THE ORDER OF THE CIT(A) THAT IDENTICAL ISSUE AROSE IN ASSESSEES OWN CASE FOR A.YS. 1995-96 AND 1997-98 AND THE TRIB UNAL HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY DELETING THE ADD ITION. IN FACT, IN THE ASSESSMENT COMPLETED U/S. 143(3) R.W.S. 153A FOR TH E IMPUGNED ASSESSMENT YEAR, THE AO MADE ADDITION OF IDENTICAL AMOUNT ON A CCOUNT OF LICENSE FEES RECEIVABLE FROM ITC LTD. HOWEVER, THE TRIBUNAL WHI LE DECIDING THE ISSUE HAS UPHELD THE ORDER OF THE CIT(A) BY DELETING THE ADDI TION(SUPRA). THAT BEING THE CASE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A). THE GROUND RAISED IS DISMISSED. ITA NO 7241/MUM//2007 ELEL HOTELS & INVESTMENTS LTD. 4 8. IN THE RESULT, THE APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 3 RD DAY OF MAY 2017. SD/- SD/- (MANOJ KUMAR AGGARWAL) (SAKTIJIT DEY) ACCOUNTANT MEMBER JUD ICIAL MEMBER MUMBAI; DATED : 3 RD MAY, 2017 SA COPY OF THE ORDER FORWARDED TO : 1. THE APP ELL ANT. 2. THE RESPONDENT. 3. T HE CIT(A), MUMBAI 4. THE CIT 5. DR, E BENCH, ITAT, MUMBAI BY ORDER, //TRUE COPY// ( ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, MUMBAI