Sabre Travels Technologies Private Limited, Bangalore V. The Income Tax Officer, Ward- 6(1)(1), Bangalore

MA 36/BANG/2021

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 8951 (ITAT-BANGALORE)
• Duration Of Justice: 4 month(s) 24 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 03-08-2021
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 10-03-2021
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: K R VASUDEVAN
• Keywords: Depreciation; Revenue expenditure; Capital expenditure
• Section: 254(2); 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, VICE PRESIDENT AND SHRI B.R. BASKARAN, ACCOUNTANT MEMBE R M.P.NO.36/BANG/2021 ( ARISING OUT OF I T (TP) A NO. 6 98 /BANG/201 6 ) ASSESSMENT YEAR : 20 11 - 12 M/S. SABRE TRAVEL TECHNOLOGIES PVT. LTD., 2ND FLOOR, NAVIGATOR BUILDING, INTERNATIONAL TECH PARK, WHITEFIELD ROAD, BENGALURU-560066. PAN: AA I C S 5777 P VS. ITO, WARD 6(1)(1), BENGALURU. RESPONDENT/ PETITIONER APPELLANT/RESPONDENT APPELLANT BY : SHRI. K. R. VAS UDEVAN, ADVOCATE RESPONDENT BY : SHRI. PRIYADARSHI MISHRA , A DDL.CIT(DR)(ITAT), BENGALURU. DATE OF HEARING : 3 0 .0 7 .2021 DATE OF PRONOUNCEMENT : 03 .0 8 .2021 O R D E R N.V.VASUDEVAN, VICE-PRESIDENT: THIS IS A MISCELLANEOUS PETITION (MP) FILED BY THE ASSESSEE UNDER SECTION 254(2) OF THE INCOME TAX ACT, 1961 (ACT) PRAYING FOR RECALL OF THE ORDER DATED 04.09.2020 FOR THE LIMITED PURPOSE OF ADJUDICATING GROUND NO.14 RAISED BY THE ASSESSEE IN ITS APPEAL IT(IT)A NO.698/BANG/2016. 2. GROUND NO.14 RAISED BY THE ASSESSEE AND THE DECISION OF THE TRIBUNAL ON THE SAME READS AS FOLLOWS: 19. ANOTHER CORPORATE TAX ISSUE THAT REMAINS FOR CONSIDERATION IN ASSESSEE'S APPEAL IS GR.NO. B 1 WHICH READS AS FOLLOWS:- M.P.NO.36/BANG/2021 (ARISING OUT OF IT(TP)A NO.698/BANG/2016) PAGE 2 OF 6 'B. CORPORATE TAX 14. DISALLOWANCE OF LEASE RENTALS CLAIMED AS REVENUE EXPENDITURE -- RS.14,965,386 A. THE LEARNED AO ERRED IN LAW BY DISALLOWING LEASE RENTALS PAID BY THE APPELLANT DURING FINANCIAL YEAR 2010-11. B. THE LEARNED AO ERRED IN DISALLOWING THE LEASE RENTALS WHILE PASSING THE FINAL ORDER WHEN THE SAME WAS NEITHER DISALLOWED IN THE DRAFT ASSESSMENT ORDER NOR BY THE HON'BLE DRP. C. NOTWITHSTANDING AND WITHOUT PREJUDICE TO THE ABOVE, THE LEARNED AO HAS ERRED IN TREATING THE LEASE RENTAL PAYMENTS MADE BY THE APPELLANT AS CAPITAL EXPENDITURE. D. THE LEARNED AO HAS ERRED IN NOT APPRECIATING THE FACT THAT THE APPELLANT HAS PAID LEASE RENTALS TOWARDS FIT-OUTS PROVIDED BY THE LESSOR. E. NOTWITHSTANDING AND WITHOUT PREJUDICE TO THE ABOVE, THE LEARNED AO OUGHT TO HAVE GRANTED CONSEQUENTIAL ALLOWANCE OF DEPRECIATION SHOULD THE CLAIM OF LEASE RENTAL PAYMENTS BE TREATED AS CAPITAL EXPENDITURE.' 20. IN THE EARLIER AY I.E., AY 2010-11, THE ASSESSEE HAD TAKEN A PREMISE ON LEASE AND PAID LEASE RENT OF RS.3,79,39,583 WHICH WAS DEBITED TO THE P&L ACCOUNT. IN THE COMPUTATION OF TOTAL INCOME, THE ASSESSEE CLAIMED DEDUCTION OF A SUM OF RS.1,64,45,484 TOWARDS FIT-OUTS WHICH IS PAYABLE IN EMIS OVER A PERIOD OF 5 YEARS WHICH WAS NOT DEBITED TO THE P&L A/C. THE IT(TP)A NOS. 403 & 698/BANG/2016 SAID SUM WAS CAPITALIZED IN THE BOOKS AS LEASE RENTALS. IN THE PROCEEDINGS BEFORE THE AO FOR AY 2010-11, THE ASSESSEE SUBMITTED WITH REGARD TO THE AFORESAID DEDUCTION AS FOLLOWS:- 'I) DEDUCTION ON ACCOUNT OF LEASE RENTALS PAID DURING THE YEAR AMOUNTING TO RS.16,445,484 IN THIS REGARD, THE COMPANY WOULD LIKE TO SUBMIT THAT IT HAS TAKEN OFFICE PREMISES ON RENT FROM INFORMATION TECHNOLOGY PARK LIMITED (ITPL). THE COMPANY HAS ENTERED INTO A LEASE AGREEMENT WITH ITPL WHEREBY ITPL HAS AGREED TO PROVIDE FIT-OUTS TO THE RENTED PREMISES AS PER THE REQUIREMENTS OF THE COMPANY. THE LEASE RENTALS FOR SUCH FIT-OUTS SHALL BE PAYABLE IN EQUAL MONTHLY INSTALMENTS FOR A PERIOD OF FIVE YEARS AFTER WHICH THE COMPANY SHALL NOT BE LIABLE TO PAY ANY MONTHLY RENTALS TO ITPL ON ACCOUNT OF FIT-OUT CHARGES. THE LEASE RENTALS PAID TO ITPL TOWARDS SUCH FIT-OUTS HAS NOT BEEN DEBITED TO THE PROFIT AND LOSS ACCOUNT. ACCORDINGLY. THE COMPANY HAS CLAIMED THE LEASE RENTAL PAID TO ITPL AMOUNTING TO RS. 16,445,484 TOWARDS SUCH FIT-OUT CHARGES AS REVENUE EXPENDITURE IN THE COMPUTATION OF INCOME. THE COPIES OF LEASE RENTAL AGREEMENT ARE ENCLOSED AS ANNEXURE 1.' 21. THE AO, HOWEVER, CAME TO THE CONCLUSION THAT THE PAYMENT WAS CAPITAL IN NATURE AND THEREFORE CANNOT BE ALLOWED AS A DEDUCTION. THE SAME WAS ACCORDINGLY ADDED TO TOTAL INCOME OF THE ASSESSEE. THE DRP ON THIS ISSUE M.P.NO.36/BANG/2021 (ARISING OUT OF IT(TP)A NO.698/BANG/2016) PAGE 3 OF 6 CONCURRED WITH THE VIEW OF THE AO THAT THE EXPENDITURE IN QUESTION WAS CAPITAL EXPENDITURE BUT HOWEVER HELD THAT ASSESSEE CAN CLAIM DEPRECIATION ON THE AMOUNT DISALLOWED. ON FURTHER APPEAL BY THE ASSESSEE, THE TRIBUNAL REMANDED THE ISSUE TO THE AO FOR CONSIDERATION AFRESH OF THE NATURE OF EXPENSES IN THE LIGHT OF DETAILS OF THE EXPENSES TO BE FURNISHED BY THE ASSESSEE. 22. IN AY 2011-12 THAT IS THE ASSESSMENT YEAR WHICH IS SUBJECT MATTER OF THIS APPEAL, THE ASSESSEE CLAIMED DEPRECIATION ON THE WRITTEN DOWN IT(TP)A NOS. 403 & 698/BANG/2016 VALUE [WDV] OF THE LEASE RENTALS CAPITALIZED IN AY 2010- 11 IN RESPECT OF WHICH DRP FOR AY 2010-11 DIRECTED THE AO TO ALLOW DEPRECIATION. IT WAS A CONSEQUENTIAL CLAIM BASED ON THE OUTCOME ON THE ISSUE OF LEASE RENTALS FOR AY 2010-11. THE AO IN HIS DRAFT ASSESSMENT ORDER DATED 30.3.2015 DID NOT DISALLOW THE CLAIM OF THE ASSESSEE FOR DEDUCTION ON ACCOUNT OF DEPRECIATION. ON OBJECTIONS BY THE ASSESSEE BEFORE DRP, THE DRP DIRECTED THE AO TO GIVE EFFECT TO DIRECTIONS OF DRP FOR AY 2010-11 AND ALLOW DEPRECIATION. THE AO IN HIS FINAL ASSESSMENT ORDER WHICH IS SUBJECT MATTER OF THIS APPEAL DISALLOWED A SUM OF RS.1,49,65,386 INSTEAD OF ALLOWING DEPRECIATION ON WDV OF THE SUM OF RS.1,64,45,484/- AS DIRECTED BY THE DRP. THE SUM OF RS.1,49,65,386 WAS ARRIVED AT BY THE AO BY REDUCING A SUM OF RS.14,80,094 FROM THE OPENING WDV OF LEASE RENTALS OF RS.1,64,45,484/-. THE APPROACH OF THE AO IN THE FINAL ORDER OF ASSESSMENT IS NOT ACCORDANCE WITH LAW AND IN COMPLIANCE WITH THE DIRECTIONS OF THE DRP. AS PER DIRECTIONS OF DRP, THE AO SHOULD HAVE ALLOWED DEDUCTION ON ACCOUNT OF DEPRECIATION OF RS.14,80,094. WE HOLD AND DIRECT ACCORDINGLY AND ALLOW GROUND 14 RAISED BY THE ASSESSEE. OTHER GROUNDS OF APPEAL ARE EITHER CONSEQUENTIAL OR WERE NOT ARGUED. 3. IN THIS MP, IT IS THE PLEA OF THE ASSESSEE THAT THE ASSESSEE HAD RAISED GROUNDS OF APPEAL, INTER ALIA, AGAINST THE ACTION OF THE AO IN DISALLOWING THE LEASE RENTALS EXPENDITURE OF RS.1,49,65,386/- BY TREATING THE SAME AS CAPITAL EXPENDITURE, THE ASSESSEE HAD RAISED GROUNDS OBJECTING TO THE DISALLOWANCE, BOTH ON FACTS AND ON LEGAL PRINCIPLES (GROUND NO 14 IN THE FORM 36). AS AN ALTERNATE PLEA {GROUND NO. 14 (E)}, THE ASSESSEE HAD RAISED THE GROUND THAT EVEN IF THE LEASE RENTALS ARE TO BE TREATED AS CAPITAL EXPENDITURE, CONSEQUENTIAL DEPRECIATION ON THE SAME IS TO BE ALLOWED. IT IS THE PLEA OF THE ASSESSEE IN THIS MP THAT WHILE THE ORDER OF THE TRIBUNAL HAS SPECIFICALLY RULED ON THE ALTERNATE PLEA OF GRANTING DEPRECIATION, THE SUBSTANTIVE ISSUE THAT THE DISALLOWANCE OF THE LEASE RENTALS IS TO BE QUASHED, BOTH ON FACTS AND LEGAL PRINCIPLES, DOES NOT APPEAR TO HAVE BEEN SPECIFICALLY ADJUDICATED, EVEN THOUGH A GENERAL FINDING HAS BEEN RECORDED. ACCORDING TO THE ASSESSEE, THIS MISTAKE, APPARENT FROM THE RECORD, M.P.NO.36/BANG/2021 (ARISING OUT OF IT(TP)A NO.698/BANG/2016) PAGE 4 OF 6 SEEMS TO CONVEY THE IMPRESSION THAT THE DISALLOWANCE OF THE LEASE RENTALS BY TREATING IT AS CAPITAL EXPENDITURE HAS BEEN UPHELD BY THE TRIBUNAL AND ONLY THE CLAIM OF DEPRECIATION IS ALLOWED, WHICH IS IN VARIANCE WITH THE OBSERVATIONS MADE IN THE ORDER AND IS IN CONTRADICTION TO THE DECISION OF THE TRIBUNAL ON THE ISSUE, IN THE PETITIONER'S OWN CASE FOR A.Y 2010-11. THE MISTAKE, IF NOT CORRECTED, MAY RESULT IN PREJUDGING THE ISSUE, WHICH HAS BEEN REMANDED BACK TO THE A.0 FOR VERIFICATION, IN THE ORDER FOR A.Y 2010-11. 4. WE HAVE HEARD THE RIVAL SUBMISSION. THE AO IN THE DRAFT ORDER OF ASSESSMENT DID NOT DISALLOW EITHER DEPRECIATION OR ANY EXPENDITURE AS BEING CAPITAL EXPENDITURE. THE ASSESSEE, BEFORE DRP, RAISED THE FOLLOWING ISSUE IN ITS OBJECTION TO THE DRAFT ORDER OF ASSESSMENT : 1. GROUND OF OBJECTION CONSEQUENTIAL DEPRECIATION ON LEASED RENT. A) THE LEARNED ASSESSING OFFICER ('AO') HAS ERRED IN NOT ALLOWING CONSEQUENTIAL DEPRECIATION AMOUNTING TO RS. 14,80,094 ON WRITTEN DOWN VALUE OF LEASE RENTALS CAPITALIZED DURING THE AY 2010-11. B) THE LEARNED AO OUGHT TO HAVE GRANTED DEPRECIATION ON WRITTEN DOWN VALUE OF LEASE RENTALS IN ACCORDANCE WITH THE DIRECTIONS OF HON'BLE DRP FOR THE AY 2010-11. 5. ON THE ABOVE GROUNDS, THE ASSESSEE SUBMITTED THAT FOR PREVIOUS YEAR ENDED ON MARCH 31, 2010 RELEVANT TO AY 2010-11, THE ASSESSEE HAD CLAIMED DEDUCTION FOR LEASE RENTALS AMOUNTING TO RS. 1,64,45,484. THE AO HAD DISALLOWED THE CLAIM TREATING THE SAME AS CAPITAL EXPENDITURE. THE DRP UPHELD THE CONTENTION OF THE AO THAT THE EXPENSES ARE CAPITAL IN NATURE, HOWEVER TREATED THE SAME AS PART AND PARCEL OF BUILDING AND ACCORDINGLY, DIRECTED THE AO TO GRANT DEPRECIATION ON SUCH EXPENSES AT THE RATE OF 10%. FURTHER TO THE DIRECTIONS OF THE DRP, THE LEARNED AO HAD GRANTED DEPRECIATION ON THE LEASED RENTALS AMOUNTING TO RS. 16,44,548 FOR THE AY 2010-11. ACCORDINGLY, THE LEARNED AO OUGHT TO HAVE GRANTED DEPRECIATION ON WRITTEN DOWN VALUE OF LEASED RENTALS (CAPITALIZED) FOR THE AY 2011-12 AMOUNTING TO RS. 14,80,094. WORKINGS FOR COMPUTING THE DEPRECIATION IS PROVIDED IN THE TABLE BELOW: M.P.NO.36/BANG/2021 (ARISING OUT OF IT(TP)A NO.698/BANG/2016) PAGE 5 OF 6 PARTICULARS AMOUNT IN RS. LEASE RENTALS (CAPITALIZED) 1,64,45,484 LESS: DEPRECIATION FOR THE AY 2010 - 11 16,44,548 . WRITTEN DOWN VALUE AS ON APRIL 1 , 2011 1,48,00,936 LESS: DEPRECIATION FOR THE AY 2011 - 12 14, 80,094 WRITTEN DOWN VALUE AS ON APRIL 1, 2012 1,33,20,842 6. THE DRP GAVE THE FOLLOWING DIRECTION TO THE AO: DECISION THE AO IS HEREBY DIRECTED TO GRANT DEPRECIATION ON SUCH EXPENSES AT THE RATE OF 10% AS PER THE DIRECTION OF THE DRP IN AY 10-11. 7. THE AO IN THE FINAL ORDER OF ASSESSMENT GAVE EFFECT TO THE DIRECTION OF THE DRP AS FOLLOWS: 4. ASSESSEE CLAIMED EXPENDITURE OF RS. 1,64,45,480/- ON LEASE RENTALS, IDENTIC,F. ISSUE HAS ARISEN IN THE A Y 2010-11 ALSO, WHEREIN IT WAS CLEARLY HELD THAT THT EXPENDITURE IS ASSESSEE OF CAPITAL IN NATURE. CONSIDERING THE ASSESSEE OBJECZZ DRP HAS DIRECTED THE AO TO ALLOW DEPRECIATION AT 10% FOR THE A Y 201041_ HOWEVER IN A Y 2011-12 ALSO ASSESSEE'S CLAIMED THE EXPENDITURE OF RS. 1,64,45,480/- TOWARDS LEASE RENTALS. CONSIDERING THE ASSESSEE'S OBJECTIONS, DRP HAS DIRECTED THE A.0 TO GRANT DEPRECATION AT THE RATE OF 10% RELYING ON OWN ORDER FOR THE A Y 2010-11. ACCORDINGLY, DEPRECIATION OF LEASE RENTAL IS WORKED OUT AS UNDER:- PARTICULARS AMOUNTS(RS.) LEASE REN TALS 1,64,45,484/- LESS: DEPRECIATION FOR THE A Y 2010 - 11 16,44,548/ - WRITTEN DOWN VALUE AS ON APRIL 1,2011 1,48,00,936/- LESS: DEPRECIATION FOR THE A Y 2011 - 12 14,80,094/ - WRITTEN DOWN VAL UE AS ON APRIL 1,2012 1,33,20,842/ - ACCORDINGLY, DISALLOWANCE OF LEASE RENTAL WORKED OUT AT RS. 1,49,65,386/- (RS. 1,64,45,480 RS.14,80,094) AND ADDED TO THE TOTAL INCOME. M.P.NO.36/BANG/2021 (ARISING OUT OF IT(TP)A NO.698/BANG/2016) PAGE 6 OF 6 8. THUS, THE MISTAKE IN THE FINAL ORDER OF ASSESSMENT AGAINST WHICH GROUND NO.14 WAS RAISED BY THE ASSESSEE WAS THAT INSTEAD OF ALLOWING RS.14,80,094/- AS DEPRECIATION, THE AO ERRONEOUSLY DISALLOWED A SUM OF RS.1,49,65,386/- AND ADDED THE SAID SUM TO THE TOTAL INCOME OF THE ASSESSEE. THE TRIBUNAL, WHILE ADJUDICATING THE SAID ISSUE, HAS RIGHTLY HELD IN PARA 22 OF ITS ORDER THAT THE AO SHOULD ALLOW DEDUCTION OF A SUM OF RS.14,80,094/- AS DEPRECIATION INSTEAD OF DISALLOWING A SUM OF RS.1,49,65,386/-. THERE IS NO MISTAKE MUCH LESS A MISTAKE APPARENT ON THE FACE OF THE RECORD. THESE IS NO ALTERNATE PLEA AND THERE COULD BE ONLY ONE PLEA I.E., TO ALLOW DEPRECIATION OF RS.14,80,094/- AND DELETE THE ADDITION OF RS.1,49,65,386/- WHICH THE TRIBUNAL HAS ALLOWED. THE ALLEGATIONS IN THE MP ARE ALL ON THE BASIS OF SURMISES AS TO WHAT THE AO WOULD DO WHILE GIVING EFFECT TO THE ORDER OF THE TRIBUNAL. THIS MP IS DEVOID OF ANY MERIT AND THE SAME IS DISMISSED. 9. IN THE RESULT, THE MP IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTION PAGE. SD/- SD/- SD/- BANGALORE, DATED: 03.08.2021. /NS/* COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR ITAT, BANGALORE. ( B. R. BASKARAN ) ( N. V. VASUDEVAN) ACCOUNTANT MEMBER VICE PRESIDENT