DCIT, New Delhi V. M/s. United Hotel Ltd, New Delhi

ITA 943/DEL/2009

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 8460 (ITAT-DELHI)
• Duration Of Justice: 4 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 23-07-2009
• Assessment Year: 2004-2005
• Appeal Filed On: 13-03-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N K CHAND
• Assessee Lawyers: RUPESH J AIN
• Section: 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH H : NEW DELHI BEFORE SHRI RAJPAL YADAV, JM AND SHRI R.C.SHARMA, A M ITA NO.943/DEL/2009 ASSESSMENT YEAR : 2004-05 DY.COMMISSIONER OF INCOME TAX, CIRCLE-18(1), NEW DELHI. VS. M/S UNITED HOTEL LIMITED, THE AMBASSADOR HOTEL, SUJAN SINGH PARK, CORNWALLIS ROAD, NEW DELHI 110 003. PAN NO.AAACU0031C. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI N.K.CHAND, SR.DR. RESPONDENT BY : SHRI RUPESH JAIN, ADVOCATE. ORDER PER R.C.SHARMA, AM : THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A) DATED 22.12.2008 FOR AY 2004-05 WHEREIN FOLLOWING GROUNDS HAVE BEEN TAKEN BY THE REVENUE:- (I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, LD.CIT(A) HAS ERRED IN DELETING DISALLOWANCE OF RS.66,09,953/ - MADE BY THE AO ON ACCOUNT OF ANNUAL FEES PAID TO MEGAPODE AIRLINES LTD. (II) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, LD.CIT(A) HAS ERRED IN DELETING DISALLOWANCE OF RS.8,87,528/- MADE BY THE AO OUT OF TECHNICAL CONSULTANCY AND ADVISORY SERVICES FEE. (III) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, LD.CIT(A) HAS ERRED IN DELETING DISALLOWANCE OF RS.25,01,347/ - ON ACCOUNT OF COMMISSION PAID TO DIRECTORS. 2. WITH REGARD TO GROUND NO.1 BEING DISALLOWANCE MA DE ON ACCOUNT OF ANNUAL FEES PAID TO MEGAPODE AIRLINES LTD., WE FOUND THAT ASSESSEE COMPANY IS RUNNING A FIVE STAR HOTEL. FOR AVAILING FLYING HOURS ON LEAS E JET ACQUIRED BY MEGAPODE AIRLINES LTD., IT AGREED TO PAY ANNUAL FEES WHICH W AS DISALLOWED BY THE AO. THE ITA-943/D/2009 2 CIT(A) ALLOWED THE SAME BY OBSERVING THAT ISSUE IS COVERED BY THE ORDER OF ITAT FOR THE AY 2001-02, SINCE THERE WAS NO CHANGE IN TH E FACTS, ADDITION SO MADE WAS DELETED BY THE CIT(A), AGAINST WHICH THE REVENUE IS IN FURTHER APPEAL BEFORE US. 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PER USED. LEARNED AR PLACED ON RECORD THE ORDER OF ITAT IN ASSESSEES OWN CASE, ORDER DATED 31.1.2008 AND 10.7.2009 FOR THE AY 2001-02 AND 2000-01, AND SUBMI TTED THAT ISSUE WITH REGARD TO DISALLOWANCE OF RS.66.09 LAKHS MADE BY THE AO ON ACCOUNT OF ANNUAL FEE PAID TO MEGAPODE AIRLINES LTD. IS SQUARELY COVERED BY TH E ORDER OF ITAT FOR AY 2001- 01 AND 2002-03. WE HAVE GONE THROUGH THE ORDER OF THE ITAT FOR AY 2001-02 WHEREIN BY OBSERVING THAT AGREEMENT SO ENTERED BY T HE ASSESSEE WITH MEGAPODE AIRLINES LTD. WAS IN THE INTEREST OF BUSINESS AND T HE SAME WAS DULY EXPLAINED BEFORE THE LOWER AUTHORITIES. SINCE THE ASSESSEE W AS RUNNING A FIVE STAR HOTEL, TO GIVE BETTER FACILITIES TO ITS PREMIER CUSTOMERS, IT HAS ADDED FACILITY OF CHARTER FLYING. THE EXPENDITURE SO INCURRED WAS IN THE COURSE OF CA RRYING OF BUSINESS AND THE AGREEMENT WAS ENTERED INTO AS A COMMERCIAL EXPEDIEN CY AFTER DUE NEGOTIATION OF FLYING RATES AT CONCESSIONAL PRICE. ACCORDINGLY, T HE SAME WAS ALLOWABLE WHILE COMPUTING BUSINESS PROFIT U/S 37(1) OF THE IT ACT. 4. FOLLOWING WAS THE OBSERVATION OF THE TRIBUNAL IN THE AY 2002-03, ORDER DATED 10.7.2009:- THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE ORDER DATED 28.02.2008 OF THE LD.CIT(A). AS PER FIRST GROUND O F APPEAL THE REVENUE HAS CHALLENGED THE DECISION OF THE LD.CIT( A) IN ALLOWING THE ANNUAL ENTITLEMENT FEES OF RS.70,51,050/-. THE FIXED CHARGES OF RS.70,51,050/- PAYABLE BY THE ASSESSEE TO MEGAPODE AIRLINES LTD. WERE DISALLOWED IN ASSESSMENT YEAR 2002-03 BY THE A SSESSING OFFICER. THE LD.CIT(A) FOLLOWING THE ORDER OF ITAT DATED 31.01.2008 IN ITA NO.996/DEL/05 FOR ASSESSMENT YEAR 2001-02 ALLOWED THE CLAIM OF THE ASSESSEE AND DELETED THE A DDITION. AS DISCUSSED IN OUR ORDER FOR ASSESSMENT YEAR 2000-01 ABOVE, THE AFORESTATED DECISION OF THE ITAT HAS BEEN CONFIRMED BY THE HONBLE ITA-943/D/2009 3 HIGH COURT AS PER THEIR DECISION DATED 03.10.2008 ( SUPRA). WE, THEREFORE, SEE NO REASON TO INTERFERE WITH THE DECI SION OF THE LD.CIT(A) WHICH IS UPHELD. THIS GROUND OF APPEAL I S REJECTED. 5. IN VIEW OF ABOVE, GROUND NO.1 OF REVENUES APPEA L STANDS DISMISSED. 6. IN THE COURSE OF THE ASSESSMENT, AO HAS DISALLOW ED COMMISSION PAYABLE TO THE DIRECTORS. SIMILAR ISSUE HAS BEEN CONSIDERED B Y THE TRIBUNAL IN AY 2003-04, WHICH WAS PLACED ON RECORD. 7. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND GON E THROUGH THE ORDER OF THE TRIBUNAL. THE ISSUE WITH REGARD TO DELETION OF DIS ALLOWANCE OF RS.25.01 LAKHS ON ACCOUNT OF COMMISSION PAID TO THE DIRECTORS WAS ALS O COVERED BY THE ORDER OF THE TRIBUNAL DATED 10.7.2009 IN ASSESSEES OWN CASE, WH EREIN FOLLOWING ARE THE FINDINGS OF THE TRIBUNAL AT PARA 21:- 21. ON A CAREFUL CONSIDERATION OF THE ORDERS OF TH E LOWER AUTHORITIES, MATERIAL PLACED ON RECORD AND RIVAL SU BMISSIONS, WE ARE OF THE CONSIDERED OPINION THAT THE COMMISSION WAS A N INTEGRAL PART OF THE REMUNERATION TO DIRECTORS OF THE COMPANY AS PER THEIR TERMS OF APPOINTMENT AND LD.CIT(A) HAS RIGHTLY ALLOWED THE C LAIM OF THE ASSESSEE. THIS GROUND OF APPEAL IS, THEREFORE, REJ ECTED. 8. AS THE FACTS AND CIRCUMSTANCES DURING THE YEAR U NDER CONSIDERATION ARE IN PARI-MATERIA, RESPECTFULLY FOLLOWING THE SAME, WE D O NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) FOR DELETING THE DISALLOWANCE ON AC COUNT OF COMMISSION PAID TO THE DIRECTORS. 9. THE GROUND WITH REGARD TO DELETION OF ADDITION O F RS.8,87,528/- WHICH WAS MADE BY THE AO OUT OF TECHNICAL CONSULTANCY AND ADV ISORY SERVICES FEES, IS ALSO COVERED BY THE DECISION OF ITAT IN ASSESSEES OWN C ASE FOR AY 2003-04, WHEREIN FOLLOWING WAS THE OBSERVATION OF THE TRIBUNAL:- ITA-943/D/2009 4 WE HAVE CONSIDERED THE ISSUE IN VIEW OF THE ORDERS OF THE LOWER AUTHORITIES, MATERIAL PLACED ON RECORD AND RIVAL SU BMISSIONS. IN OUR CONSIDERED OPINION, LD.CIT(A) HAS RIGHTLY HELD THAT INTEREST AND DIVIDEND INCOME COULD NOT BE EXCLUDED FOR CALCULATI NG THE TECHNICAL SERVICES AND ADVISORY CHARGES BECAUSE THE INCOME UN DER OTHER SOURCES WAS INTEGRAL PART OF THE GROSS TOTAL INCOME , ON WHICH THE LIABILITY OF THE ASSESSEE UNDER THIS HEAD WAS TO BE CALCULATED. SIMILARLY, THE SERVICE TAX WAS PAID BY THE ASSESSEE TO THE INDIAN HOTELS COMPANY AS PER THE TERMS OF AGREEMENT ON ACC RUAL BASIS DURING THE RELEVANT ACCOUNTING PERIOD. THE CLAIM O F THE ASSESSEE IS, THEREFORE, CONSIDERED ADMISSIBLE. THE DECISION OF LD.CIT(A) TO DELETE THE ADDITION IN QUESTION IS UPHELD. THIS GR OUND OF APPEAL IS REJECTED. 10. AS THE FACTS AND CIRCUMSTANCES DURING THE YEAR ARE IN PARI-MATERIA, THE GROUND RAISED BY THE REVENUE STANDS DISMISSED. 11. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. DECISION PRONOUNCED IN THE OPEN COURT ON 31 ST JULY, 2009. SD/- SD/- (RAJPAL YADAV) (R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 31.07.2009. VK. COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT DEPUTY REGISTRAR