M/s. Boulder Hills Leisure Pvt.Ltd, Hyderabad V. Addl.CIT, Range-1, Hyderabad

ITA 746/HYD/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61901 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 1 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-06-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 27-04-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: A K SATAPATHY
• Assessee Lawyers: A V RAGHURAM
• Keywords: Depreciation
• Section: 143(3); 263; 63

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NO. 746/HYD/2011 ASSESSMENT YEAR : 2007-08 BOULDER HILLS LEISURE PVT. LTD., APPELLANT HYDERABAD (GIR/PAN B-813/AACCB5076C) VS. ADDL. COMMISSIONER OF INCOME- TAX, RESPONDENT RANGE 1, HYDERABAD APPELLANT BY : MR. A.V. RAGHURAM RESPONDENT BY : MR. A.K. SATAPATHY DATE OF HEARING : 25/04/2012 DATE OF PRONOUNCEMENT : 0 8/06/2012 ORDER PER ASHA VIJAYARAGHAVAN, J.M.: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF THE CIT-I, HYDERABAD, DT. 03/03/2011, PASSED U/S 263 OF THE ACT, FOR THE ASSESSMENT YEAR 2007-08 . 2. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF CONSTRUCTION, RUNNING AND MAINTENANCE OF GOLF COUR SE. ASSESSEE IS IN JOINT VENTURE WITH ANDHRA PRADESH I NDUSTRIAL INFRASTRUCTURAL CORPORATION LTD. (APIIC) HOLDING 26 % STAKE IN THE EQUITY. THE BALANCE IS HELD BY EMAAR THROUG H ITS SUBSIDIARY. APIIC HAS ALLOTTED APPROXIMATELY 235 AC RES OF LAND ON LEASEHOLD BASIS FOR A PERIOD OF 66 YEARS TO THE ASSESSEE. THE LEASE DEED MENTIONS THAT THE ASSESSE E HAS TO ITA NO. 746/HYD/11 M/S BOULDER HILLS LEISURE P. LTD. 2 CREATE BUILDINGS, PERMANENT AND SEMI-PERMANENT FOR SPORTS/RECREATIONAL FACILITIES INCLUDING GOLF ACADE MY, DIVING RANGE, GOLF CLUB HOUSE AND COUNTRY CLUB ON THE LEAS ED LAND. AS PER PARA 4 OF THE LEASE DEED ASSESSEE HAS TO PAY LEASE RENT TO APIIC AS UNDER:- A) 2% OF GROSS ANNUAL REVENUE FOR 33 YEARS ` B) 3% OF GROSS ANNUAL REVENUE FOR 33 YEARS GROSS ANNUAL REVENUE IS DEFINED IN THE LEASE DEED A S REVENUE GENERATED BY ASSESSEE FROM VARIOUS GOLF COU RSE COMPONENTS (INCLUDING THE CLUB HOUSE) BUT EXCLUDING REVENUE FROM SALE OF MEMBERSHIP AND OTHER LONG TERM REVENUE. THE FACILITIES WOULD RETURN BACK TO APIIC AFTER THE LEASE PERIOD. SUBSEQUENT TO THE LEASE DEED ASSESSEE HAS CREATED ASSETS AND INFRASTRUCTURE LIKE BUILDINGS RE QUIRED TO DEVELOP A 18 HOLE GOLF COURSE ETC. ON THIS LAND THR OUGH THE EQUITY AND BORROWED FUND. 3. IT WAS SATED BY THE ASSESSEE THAT THE REVENUE TO THE ASSESSEE WAS TO COME FROM THE BUYERS OF APARTMENT, VILLA AND VILLA PLOTS AT THE INTEGRATED PROJECT. BUT DUE TO UNEXPECTED GLOBAL RECESSION, THE RESIDENTIAL DEVELO PMENT COMPRISING VILLA, VILLA PLOTS, APARTMENTS AND TOWNH OUSES COULD NOT BE STARTED/COMPLETED AS ORIGINALLY SCHEDU LED. THE ASSESSEE FURTHER STATED THAT IT HAS EXECUTED ASSIGN MENT DEED DATED 3 RD NOVEMBER, 2006 WITH EMAAR MGF LAND LIMITED TRANSFERRING THE ENTIRE BUSINESS OF ASSESSEE INCLUD ING LEASEHOLD RIGHTS OVER THE PROJECT LAND OF 235 ACRES ALONG WITH THE INFRASTRUCTURE DEVELOPED OVER THIS LAND. I T WAS ALSO STATED BY THE ASSESSEE THAT EMAAR MGF LAND LTD. IS A COMPANY SPECIALIZED IN CREATING INTERNATIONAL STAND ARD INFRASTRUCTURE DEVELOPMENTS. A COPY OF THE ASSIGNME NT DEED ITA NO. 746/HYD/11 M/S BOULDER HILLS LEISURE P. LTD. 3 IS FILLED. THE SAME WOULD REVERT BACK TO THE ASSESS EE AFTER THE LEASE PERIOD. 4. THE ASSESSEE RETURNED LOSS OF RS. 3,88,81,800/- AFTER CLAIMING DEPRECIATION OF RS. 3,60,93,017/-. THE ASS ESSMENT WAS COMPLETED U/S 143(3) OF THE ACT, BY THE ASSESSI NG OFFICER AFTER EXAMINING THE FACTS. THE ASSESSING OF FICER CONCLUDED THAT THE BUSINESS OF THE COMPANY HAD STAR TED AND HENCE HE DID NOT DISALLOW PERSONAL, ADMINISTRATIVE AND OTHER EXPENSES. DURING THE COURSE OF ASSESSMENT PROCEEDIN GS THE ASSESSEE HAD FILED A DETAILED NOTE WITH REGARD TO B USINESS ACTIVITY VIDE LETTER DATED 05/10/2009 WHEREIN IT WA S STATED THAT THE ASSESSEE WAS ENGAGED IN DEVELOPING, DESIGN ING, MAINTAINING AND OPERATING A GOLF CLUB HOUSE AT BOUL DER HILLS BESIDES OTHER RERCREATIONAL FACILITIES. 5. THE CIT U/S 263 OF THE ACT, HELD THAT THE ORDER OF THE ASSESSING OFFICER WAS ERRONEOUS AS WELL AS PREJUDIC IAL TO THE INTERESTS OF THE REVENUE AND THE ASSESSMENT IS TO B E SET ASIDE FOR THE VERIFICATION ON THE ISSUES RELATING T O THE CLAIM OF DEPRECIATION, EXPENDITURE THAT IS TO BE CAPITALI ZED, EXPENDITURE THAT IS TO BE CONSIDERED AS PRIOR PERIO D EXPENDITURE, EXAMINATION OF ALLOWABILITY OF EXPENDI TURE IN THE ABSENCE OF REVENUE RECEIPTS AND ALSO APPLICABIL ITY OF APEX COURT JUDGMENT IN 227 ITR 172 IN THE CASE OF M /S TUTICORIN ALKALI CHEMICALS LTD. 6. THE ASSESSEE IS AGGRIEVED AND PREFERRED AN APPEA L BEFORE US AGAINST THE ORDER OF THE CIT PASSED U/S 2 63 OF THE ACT. ITA NO. 746/HYD/11 M/S BOULDER HILLS LEISURE P. LTD. 4 7. THE LEARNED COUNSEL FOR THE ASSESSEE SHRI A.V. RAGHURAM ARGUED THAT MERELY BECAUSE THERE IS NO REC EIPT FROM THE ACTIVITY OF RUNNING THE GOLF CLUB THE BUSI NESS CANNOT BE SAID TO HAVE NOT COMMENCED. THE BUSINESS HAS BEEN SET UP AND READY EVEN THOUGH IT HAS NOT BEEN U SED IN THE SENSE THAT THE INCOME HAS NOT BEEN GENERATED BY USING THE CLUB BY THE CLIENTS. THE LEARNED COUNSEL FOR TH E ASSESSEE, THEREFORE, RELIED ON THE DECISIONS, 1,2,3 PAGE 54 OF THE PAPER BOOK. AND SUBMITTED THAT THE ASSESSING OFFICER IN COMPUTING THE LOSS HOLDING THE BUSINESS AS COMME NCED BASED ON THE SUBMISSIONS MADE BY THE ASSESSEE IS CO RRECT AND HENCE, THE REVISION MADE BY THE CIT U/S 263 IS ERRONEOUS. 8. THE LEARNED DR SHRI A.K. SATAPATHY RELIED ON THE ORDER OF THE CIT. 9. WE HAVE HEARD THE ARGUMENTS OF BOTH THE PARTIES AND PERUSED THE RECORD AS WELL AS THE ORDER FIND THAT A T PAGE 17 OF THE PAPER BOOK, THE ASSESSEE IN HIS RETURN OF IN COME HAS CLAIMED LOSS FROM BUSINESS AT RS. 50,020,948/- AND HAS SET OFF THE OTHER INCOME OF RS. 11,139,164/- UNDER THE HEAD INCOME FROM OTHER SOURCES AND CLAIMED A LOSS OF RS. 38,881,784/-. THE ASSESSING OFFICER IN HIS ORDER OF ASSESSMENT HAS DISALLOWED CLAIM OF DEPRECIATION 3,68,93,017/- AND DETERMINED LOSS OF RS. 2788761/-. THIS LOSS OF RS. 27,88,761/- HAS BEEN ARRIVED AT AFTER T AKING INTO ACCOUNT INCOME OF INTEREST FROM DEPOSITS BEING 1,11,39,164/-. IT IS TO BE NOTED THAT THE ASSESSEE ITSELF IN THE COMPUTATION OF INCOME HAS CLAIMED 1,11,39,164/- UNDER THE HEAD INCOME FROM OTHER SOURCES AND, HENCE, TH E APPLICABILITY OF THE APEX COURT JUDGEMENT IN 227 IT R 172 IN ITA NO. 746/HYD/11 M/S BOULDER HILLS LEISURE P. LTD. 5 THE CASE OF TUTICORIN ALKALIS CHEMICALS HAS BEEN RI GHTLY APPLIED BY THE CIT IN HIS ORDER U/S 263. HENCE, WE CONFIRM THE ORDER OF THE CIT PASSED U/S 263 AND DISMISS THE ASSESSEES APPEAL. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMIS SED. PRONOUNCED IN THE OPEN COURT ON 08/06/2012. SD/- SD/- (CHANDRA POOJARI) (ASHA VIJAYARAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED: 6 TH JUNE, 2012 KV COPY TO:- 1) M/S BOULDER HILLS LEISURE P. LTD., BOULDER HILLS GOLF & COUNTRY CLUB, OPPORTUNITY. ISB INDIAN SCHOOL OF BUSINESS, MANIKONDA VILLAGE, GACHIBOWLI, HYDERAB AD 500 032. 2) ADDL. CIT, RANGE 1, HYDERABAD 3) THE CIT-I, HYDERABAD 4) THE DEPARTMENTAL REPRESENTATIVE, I. T.A.T., HYDERABAD .