Income Tax Appellate Tribunal - Chennai
Oriental Hotels Ltd., Chennai vs Department Of Income Tax on 31 July, 2007
IN THE INCOME TAX APPELLATE TRIBUNAL
BENCH 'B' CHENNAI
Before Shri Abraham P. George, Accountant Member and
Shri George Mathan, Judicial Member
.....
I.T.A. No. 2314/Mds/2007
Assessment Year :2003-04
M/s. Oriental Hotels Ltd., The Assistant Commissioner of
Paramount Plaza, v. Income-tax,
47, Mahatma Gandhi Road, Company Circle-V(1),
Nungambakkam, Chennai-600 034. Chennai.
(PAN:AAACO 0728N)
AND
I.T.A.No. 1974/Mds/2008
Assessment year : 2004-05
The Deputy Commissioner v. M/s. Oriental Hotel Ltd.,
of Income-tax, Nungambakkam,
Company Circle-V(1), Chennai. Chennai-600 034.
(Appellants) (Respondents)
Assessee by : Shri R. Vijayaraghavan
Department by : Shri P.B. Sekaran
ORDER
PER GEORGE MATHAN, JUDICIAL MEMBER :
ITA 2314/Mds/2007 is an appeal filed by the assessee against the order of the learned CIT(Appeals)-V, Chennai in appeal No. 89/2006-07 dated 31-7-2007 for the assessment year 2003-04 and ITA No. 1974/Mds/2008 is an appeal filed 2 I.T.A. Nos. 1974/Mds/2008& 2314/Mds/07 by the Revenue against the order of the learned CIT(Appeals)-V, Chennai in appeal No.658/06-07 dated 22-2-2008 for the assessment year 2004-05. As both the appeals relate to the same assessee and have identical issues, the same are disposed of by this common order.
2. Shri P.B. Sekaran, CIT-DR represented on behalf of the Revenue and Shri R. Vijayaraghavan, Advocate represented on behalf of the assessee.
3. I.T.A.No. 1974/Mds/2008: In this appeal, the Revenue has raised the following grounds :
"1. The order of the learned CIT(A) is contrary to law and facts of the case.
2.1. The learned CIT(A) erred in directing the Assessing Officer to modify the computation of deduction u/s 80HHD by excluding the guarantee commission and operating receipts from the quantum of total turnover (it ought to be 'total receipts of the business') in the prescribed formula. 2.2. Having regard to the finding given by the Assessing Officer that the guarantee commission was for guarantee extended to M/s. Taj Maldives Pvt. Ltd. in respect of bank loan and the operating receipts was for technical and management services for operation of hotels, the learned CIT(A) ought to have seen that the receipts on the impugned two items are nothing but receipts of the hotel business of the assessee. 2.3. The learned CIT(A) failed to appreciate that the denominator in the prescribed formula for computation of deduction u/s. 80HHD being classified as 'total receipts of the 3 I.T.A. Nos. 1974/Mds/2008& 2314/Mds/07 business carried on by the assessee', the impugned two items of receipt are to be included in the denominator in the prescribed formula.
2.4. The learned CIT(A) ought to have seen that the decisions rendered in the context of Sec. 80HHC will not be applicable to Sec. 80HHD, since, both the sections are not 'pari materia' to each other, owing to the fact that the legislature has used the words 'total receipts of the business' in Sec. 80HHD(3) to categorise the denominator part of the formula unlike the term 'total turnover of business' used in Sec. 80HHC(3). 3.1. The learned CIT(A) erred in directing the Assessing Officer to grant depreciation at the rate of 25% on the electrical fittings which form an integral part of the plant and machinery. 3.2. The learned CIT(A) failed to appreciate that electrical fittings is specifically mentioned alongwith furniture and fittings in S.No.II of the depreciation table, which is eligible for depreciation at 15% and hence, having regard to the legal principle, 'generalia specialibus non derogant', the learned CIT(A) ought to have upheld the action of the Assessing Officer. 4.1. The learned CIT(A) erred in holding that project expenses in respect of project at Coimbatore would be an allowable business expenditure.
4.2. The learned CIT(A) failed to appreciate that the assessee itself vide its letter dated 9.8.2006 addressed to the Assessing Officer during the course of assessment proceedings had indicated that the project at Coimbatore did not fructify and the expenses in relation thereto were debited to P & L account. 4
I.T.A. Nos. 1974/Mds/2008& 2314/Mds/07 4.3. In the light of the facts of the case, having regard to the decision of the Hon'ble Madras High Court in the case of E.I.D. Parry (I) Ltd. v. CIT (257 ITR 253) and the decision of the Hon'ble Delhi High Court in the case of Triveni Engineering Works Ltd. v. CIT (232 ITR 639), the learned CIT(A) ought to have upheld the action of the Assessing Officer."
4. In regard to grounds No. 2.1 to 2.4 it was submitted by the learned DR that the assessee is in the business of operating hotels. It was the submission that when computing the deduction u/s. 80HHD of the Income Tax Act, 1961, the Assessing Officer had included the guarantee commission received by the assessee as also the operating receipts in the total turnover. It was the submission that the guarantee commission was on account of the commission received by the assessee for the guarantee given by the assessee to M/s. Taj Maldives Pvt. Ltd. and the operating fee was the receipts received by the assessee for the technical and management services rendered by the assessee in regard to the operation of the hotel owned by M/s. Taj Maldives Pvt. Ltd. It was the submission that M/s. Taj Maldives Pvt. Ltd which included permission to use the "Taj" brand name, deputing trained employees, assisting in policy making, budgetary control and institution of control and monitoring mechanisms. It was the submission that the guarantee commission and the operating fees received by the assessee were business receipts and consequently the same were liable to 5 I.T.A. Nos. 1974/Mds/2008& 2314/Mds/07 be included in the total receipts of the business. It was the submission that as per the provisions of section 80HHD(3) what is provided is the total receipts of the business carried on by the assessee and as the guarantee commission and the operating fee received by the assessee were in the nature of receipts of the business and was earned in the course of the business of the assessee, the same were liable to be treated as part of the turnover. It was the submission that the learned CIT(A) erred in holding that the same was excludable in view of the decision of the Hon'ble Supreme Court in the case of CIT v. K. Ravindranathan Nair reported in 295 ITR 228. It was the submission that the learned CIT(A) has misinterpreted the decision of the Hon'ble Supreme Court in the case of K.Ravindranathan Nair to say that the receipts entitled for the incentive deductions must have a close and immediate nexus to the activity eligible for deduction. It was the submission that the decision of the Hon'ble Supreme Court in the case of K. Ravindranathan Nair did not hold that such receipts was excludable from the total turnover. It was the submission that as per the said Supreme Court decision for the purpose of working out the formula and in order to avoid distortion in arriving at the export profits clause (baa) stood inserted to say that although incentive profits and independent incomes constituted part of the gross total income, they had to be excluded from gross total income because such receipts had no nexus with the export turnover. It was the submission that for the purpose of section 80HHD(3) the wordings were 6 I.T.A. Nos. 1974/Mds/2008& 2314/Mds/07 "bear to the total receipts of the business carried on the assessee" and not "the total turnover". It was the submission that the order of the learned CIT(A) was liable to be reversed.
5. In reply, the learned authorised representative submitted that this issue had come up for consideration for the assessment year 2001-02 and the Tribunal in its order in ITA No. 980/Mds/2006 dated 9-4-2009 had restored the issue to the file of the Assessing Officer for re-adjudication. He vehemently supported the order of the learned CIT(A).
6. We have considered the rival submissions. A perusal of the provisions of section 80HHD(3) clearly shows that the said provision is the computation provision for the deduction u/s. 80HHD. The said sub-section provides for the formula for the computation of the deduction. As per the said formula, the profits derived from the services provided to the foreign tourists is the amount which bears to the profits of the business as computed under the head "Profits and gains of business or profession" the same proportion as the receipts specified in sub-section (2) being the receipts which are brought into India by the assessee in regard to the services provided to the foreign tourists as reduced by the payments referred to under sub-section (2A), the resultant of which bear to the total receipts of the business carried on by the assessee. Thus the proportion is made on the basis of the total receipts of the business carried on by the assessee. A perusal of the provisions of section 80HHC(3) shows that the 7 I.T.A. Nos. 1974/Mds/2008& 2314/Mds/07 words used therein as "bears to the total turnover of the business carried on by the assessee". The Hon'ble Supreme Court in the case of K. Ravindranathan Nair has interpreted the term "bears to the total turnover of the business carried on by the assessee" to say that only such receipts which had no nexus with the export turnover were to be excluded. Applying the same principles it is noticed that the guarantee commission received by the assessee and the operating receipts received by the assessee are connected to the business of the assessee on which the assessee is claiming the deduction u/s. 80HHD of the Act. As the said receipts are in relation to the business carried on by the assessee the receipts from which the assessee is claiming the deduction 80HHD, the said two receipts are liable to be included in the total receipts received by the assessee. In the circumstances, the finding of the learned CIT(A) stands reversed and the grounds 2.1 to 2.4 of the Revenue's appeal stand allowed.
7. In regard to grounds 3.1 and 3.2 it was submitted by the learned DR that the issue was against the action of the learned CIT(A) in directing the Assessing Officer to grant depreciation @ 25% on the electrical fittings which form an integral part of the plant and machinery. It was the submission that the details of the same were not available and consequently the same was liable to be restored to the file of the Assessing Officer for re-adjudication after verifying as to whether the electrical fittings were stand alone fittings or they form part of 8 I.T.A. Nos. 1974/Mds/2008& 2314/Mds/07 the integral part of the plant and machinery. He vehemently supported the order of the Assessing Officer.
8. In reply, the learned authorised representative submitted that the electrical fittings on which depreciation had been claimed at 25% and allowed by the learned CIT(A) were in the nature of wires and other fittings which form an integral part of the plant and machinery. He vehemently supported the order of the learned CIT(A).
9. We have considered the rival submissions. A perusal of the order of the Assessing Officer as also that of the learned CIT(A) clearly shows that the nature of the electrical fittings have not been looked into by either of the authorities below. If the electrical fittings are stand alone items, then obviously depreciation on the same is to be granted at 15%. However, if they form integral part of the plant and machinery, then depreciation would be at 25%. As the details of the same are not available before us, we are of the view that this issue requires to be restored to the file of the Assessing Officer for re-adjudication after verifying the correct facts and we do so. In the circumstances, grounds 3.1 & 3.2 of the Revenue's appeal stand partly allowed for statistical purposes.
10. In regard to ground No.4.1, 4.2 & 4.3 it was submitted by the learned DR that the assessee had incurred a project development expenditure at Coimbatore. It was the submission that the assessee had subsequently abandoned the project. It was the submission that the expenditure was in the 9 I.T.A. Nos. 1974/Mds/2008& 2314/Mds/07 nature of architect fee and soil testing charges in regard to a project which the assessee had proposed to start at Coimbatore. It was the submission that the project had to be scrapped as the title to the land on which the project was to be started was held to be defective due to a Supreme Court order wherein it had been held that the seller had no title to the property. It was the submission that as the assessee had abandoned the project the claim of revenue expenditure was not allowed by the Assessing Officer and by relying upon the decision of the Hon'ble Madras High Court in the case of CIT v. Soft Beverages (P) Ltd. reported in 245 ITR 194 as also the decision of the Hon'ble Gujarat High Court in the case of Gujarat Mineral Development Corporation reported in 143 ITR 822 treated the loss as capital in nature. It was the submission that the learned CIT(A) had by relying upon the decision of the Hon'ble Madras High Court in the case of Seshasayee Paper And Boards reported in 243 ITR 421 as also the decision of the Hon'ble Rajasthan High Court in the case of CIT v. Anjani Kumar Compnay Limited reported in 259 ITR 114 directed the Assessing Officer to allow the loss as a revenue expenditure. It was the submission that the expenditure incurred by the assessee was capital in nature insofar as it was towards the soil testing and architect fee for the putting up of a building and consequently same was liable to be held as a capital expenditure and the loss thereon as a capital loss. The learned DR further relied upon the decision of the Hon'ble Madras High Court in the case of E.I.D. Parry (India) Ltd. v. CIT reported in 257 ITR 253. 10
I.T.A. Nos. 1974/Mds/2008& 2314/Mds/07
11. In reply, the learned authorised representative vehemently supported the order of the learned CIT(A). It was the submission that the expenditure incurred by the assessee was on account of an existing business and not of a new business.
12. We have considered the rival submissions. A perusal of the decision of the Hon'ble Madras High Court in the case of E.I.D. Parry (India) Ltd., referred to supra, clearly shows that in the said case the assessee wanted to set up a new project for the manufacture of methanol at Ennore. The assessee had incurred various expenditures and the project was subsequently abandoned. The Hon'ble Madras High Court held that it was clear from the assessee's own case that the expenditure was incurred for the purpose of setting up of a new project and the subsequent abandonment of that project did not on that score convert what was an expenditure in the nature of capital expenditure into a revenue expenditure. Applying the said principles to the case of the assessee herein, it is noticed that the expenditure incurred by the assessee was in relation to a new project at Coimbatore. True, the assessee is in the business of running hotel business. The project at Coimbatore is not an expansion or an extension of the hotel business of the assessee. Each hotel put up by the assessee is a different project insofar as some licences are required and separate sanctions have to be taken. The permissions and sanction for the project at Coimbatore are not an extension of the permission or the licence available to the assessee in regard to 11 I.T.A. Nos. 1974/Mds/2008& 2314/Mds/07 its business of running of hotels. As it is the project at Coimbatore which is a separate project as such, which has been abandoned and the expenditure incurred by the assessee on such project being the soil testing fee and architect's fee which are obviously for the purpose of putting up a building or a hotel which itself is a capital asset, the expenditure incurred is in the capital field and the loss on the abandonment also falls in the capital field. In the circumstances, grounds 4.1, 4.2 and 4.3 of the Revenue's appeal stand allowed and the order of the learned CIT(A) is reversed on this issue and that of the Assessing Officer restored.
13. In the circumstances, the appeal of the Revenue is partly allowed for statistical purposes.
14. ITA No. 2314/Mds/2007: In regard to the assessee's appeal in regard to grounds 2 and 3 it was submitted by the learned authorised representative that the grounds were against the action of the learned CIT(A) in confirming the disallowance of the assessee's claim of deduction u/s. 35D. It was fairly agreed by both the sides that the issue was held against the assessee in the assessee's own case in ITA Nos. 89, 90 and 1341/Mds/2003 dated 30-06- 2005 wherein in para 33 of the said order the co-ordinate Bench of this Tribunal has held as follows :
"33. We have heard the rival submissions on this issue. It transpires from the records that the assessee is in the 12 I.T.A. Nos. 1974/Mds/2008& 2314/Mds/07 business of hotel. As per the contention of the Department, hotel is not an industrial undertaking. The assessee's plea is that the CIT(Appeals) has allowed the expenditure on shares in one year under sec. 35D of the Act and the same should be subsequently allowed in all the years. We have gone through the decision of the Hon'ble Kerala High Court in Hotel & Allied Trades P. Ltd. (supra) which was subsequently affirmed by the Hon'ble Apex Court in 245 ITR 538 wherein it has held that hotel is not an industrial undertaking. Accordingly,. the issue is as to whether preliminary expenses incurred for raising funds through public issue should be allowed under sec. 35D of the Act or not. The deduction under sec. 35D of the Act is allowed only if the expenditure is in connection with expansion of industrial undertaking or setting up of a new industrial undertaking. The activity of hotel business does not involve an activity of setting up of an industry and employment of labour which is a condition precedent for an activity to be called industrial activity. We find that this issue is covered by the decision of the Hon'ble Supreme Court reported in 245 ITR 538. Respectfully following the said decision, we decide this issue against the assessee and in favour of the revenue."
In the circumstances as it is noticed that the issue is identical and as no new facts have been placed before us, respectfully following the decision of the co- 13
I.T.A. Nos. 1974/Mds/2008& 2314/Mds/07 ordinate Bench of this Tribunal, grounds No.2 and 3 of the assessee's appeal stand dismissed.
15. In regard to grounds 4 to 7 of the assessee's appeal it was submitted by the learned authorised representative that the issue was against the action of the learned CIT(A) in holding that the interest income is to be excluded without appreciating that the entire interest income arose on account of the business transaction and hence constituted business income. It was fairly agreed by both the sides that the issue was squarely covered against the assessee in para 12.4 of the decision of the co-ordinate Bench of this Tribunal in the assessee's own case in ITA No. 252/Mds/99 dated 30-06-2005 wherein it has been held as follows:
"12.4. This interest income from lending to the subsidiary companies is not derived from the business as held by the Apex Court in Pandian Chemicals (supra). There is no direct or minimum nexus with the assessee's business as the interest is earned from other sources. Respectfully following the decision of the Apex Court cited supra, we hold that the interest income earned from lending to the subsidiary companies of the assessee is nothing but income from other sources and it has no connection whatsoever with the business income. In view of this, we decide this issue against the assessee and in favour of the revenue. With regard to the alternative plea of the assessee that the interest receipts are to be excluded then the corresponding expenditure incurred, including on borrowings for earning this income should also be excluded. We are of the view 14 I.T.A. Nos. 1974/Mds/2008& 2314/Mds/07 that if this has already claimed in the profit as business expenditure and it is allowed, then it should not be allowed from interest receipts, in other words, netting of income cannot be done and if it is not allowed, then it should not be allowed from interest receipts. Accordingly, we set aside the matter to the file of the Assessing Officer who will examine the accounts of the assessee and in terms of the above directions, he will decide this issue."
In the circumstances, respectfully following the decision of the co-ordinate Bench of this Tribunal and as no fresh facts have been placed before us, the grounds 4 to 7 of the assessee's appeal stand dismissed and the order of the learned CIT(A) on this issue stands confirmed.
16. In regard to grounds 8 and 9 it was submitted by the learned authorised representative that the issue was against the action of the learned CIT(A) in confirming that the amount received by the assessee from M/s British Airlines towards settlement of the bills of stay of their crew is not to be included in the foreign exchange receipts of the assessee for the purpose of section 80HHD. It was fairly agreed by both the sides that this issue was squarely covered against the assessee by the decision of the co-ordinate Bench of this Tribunal in ITA No. 252/Mds/1999 dated 30-06-2005 vide para 27, wherein it has been held as follows :
"27. We have considered the submissions of both the parties on this issue. It is a fact that crews of various 15 I.T.A. Nos. 1974/Mds/2008& 2314/Mds/07 airlines stayed in the hotels. We have observed from the records that this claim was not made in its original assessment. The assessee has raised this issue at the time of re-assessment for the first time. Moreover, the assessee has not produced the disclaimer certificate in accordance with the provisions of sub-sec. (2A) of sec. 80HHD of the Act and there is no evidence to show that the crews of various foreign airlines are tourists but they have come as employees of the airlines and this particular section is applicable to the foreign tourists or tour operators and the assessee shall receive from these tourists the amount in convertible foreign exchange or the assessee shall comply the requirement specified in explanation 1 to sec. sub-sec.1 of sec. 80HHD of the Act. Further, Para 4 of the Board's Circular No. 731 which reads as follows disentitles the claim of the assessee:
"The matter has been examined.
The condition for deduction u/s 80-O is that the receipt should be in convertible foreign exchange. When the commission is remitted abroad, it should be in a currency that is regarded as convertible foreign exchange according to FERA. The Board are of the view that in such cases the receipt of brokerage by a reinsurance agent in India from the gross premia before remittance to his foreign principals will also 16 I.T.A. Nos. 1974/Mds/2008& 2314/Mds/07 be entitled to the deduction u/s 90-O of the Act".
In view of the above discussion, the amount received from the British Airlines towards settlement of bills of stay of their crews cannot be included in foreign exchange receipts of the assessee for the purpose of computation of deduction under sec. 80HHD of the Act."
As it is noticed that the issue is squarely covered against the assessee in the assessee's own case, referred to supra, and as no fresh facts have been placed before us to differ from the view taken by the co-ordinate Bench of this Tribunal in the assessee's own case, the finding of the learned CIT(A) stands confirmed and consequently grounds 8 and 9 of the assessee's appeal stand dismissed.
17. In regard to grounds 9 and 10 it was submitted by the learned authorised representative that the issue was similar to the issue in the Revenue's appeal in ITA No. 1974/Mds/2008 and the arguments in relation to the guarantee commission and operating receipts were identical. It was the submission that in relation to the foreign exchange fluctuation and the provision written back it was submitted that the issue must be restored to the file of the Assessing Officer in line with the decision of the co-ordinate Bench of this Tribunal in the assessee's own case for the assessment year 2001-02 in ITA No.980/Mds/2006 dated 9-4- 2009.
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I.T.A. Nos. 1974/Mds/2008& 2314/Mds/07
18. In reply, the learned DR vehemently supported the order of the learned CIT(A).
19. We have considered the rival submissions. In relation to the issue of operating receipts and guarantee commission to be included in the total receipts of the business of the assessee for the purpose of computing the deduction u/s. 80HHD in the Revenue's appeal in ITA No. 1974/Mds/2008, supra, we have held that the same is liable to be included in the total receipts from the business. In the circumstances the finding of the learned CIT(A) on this issue stands confirmed.
20. In regard to the issue of foreign exchange fluctuation and provision written back as it is noticed that the issue is squarely covered by the decision of the co-ordinate Bench of this Tribunal in the assessee's own case for the assessment year 2001-02 in ITA No. 980/Mds/2006 dated 9-4-2009, the issues are restored to the file of the Assessing Officer for re-adjudication in line with the said decision. In the circumstances, grounds 9 and 10 of the assessee's appeal are partly allowed for statistical purposes.
21. In regard to ground No.11 it was submitted by the learned authorised representative that the issue was identical to the issue in ground Nos. 3.1 and 3.2 of the Revenue's appeal in ITA No. 1974/Mds/2008 in regard to the issue of depreciation on the electrical fittings. Both sides agreed that the decision in the Revenue's appeal in regard to grounds 3.1 and 3.2 in ITA No. 1974/Mds/2008 18 I.T.A. Nos. 1974/Mds/2008& 2314/Mds/07 would apply here also. As we have already restored this issue to the file of the Assessing Officer for verifying as to whether the electrical fittings are on stand alone fittings or an integral part of the plant and machinery and to re-decide the issue of depreciation after verifying the facts, the issue in this ground is also restored to the file of the Assessing Officer with identical directions.
22. In regard to grounds 12 to 14 of the assessee's appeal it was submitted by the learned authorised representative that the issues are against the disallowance of long term capital loss claimed by the assessee on the sale of shares of the assessee acquired in the course of amalgamation. It was submitted that M/s. Covelong Beach Hotels India Ltd. (CBHIL) was amalgamated to the assessee company on the basis of the judgment of the Hon'ble Madras High Court dated 20-06-2002 with effect from 1.4.2001. It was the submission that CBHIL held 38,944 equity shares of the assessee company. It was the submission that as per the Companies Act, a company cannot hold its own shares. Consequently on the amalgamation these shares held by CBHIL were sold by the assessee company through a trustee. It was the submission that the sale of the shares resulted in a long term loss which was claimed by the assessee. It was the submission that the Assessing Officer had held that the long term capital loss on the sale of the shares could not be granted in the hands of the assessee as the assessee was not the owner of the shares. It was the submission that there cannot be a situation where there is no owner of the 19 I.T.A. Nos. 1974/Mds/2008& 2314/Mds/07 shares. As per the order of amalgamation by the Hon'ble High Court of Madras the assessee became the owner of the shares on 1.4.2001. It was only on account of the provisions of the Companies Act the assessee could not hold the shares and the same had to be sold. It was the submission that the assessee by amalgamation had become the owner of the shares w.e.f. 1.4.2001 and the loss on the sale of the same was liable to be held as the long term capital loss in the hands of the assessee.
23. In reply, the learned DR submitted that the long term capital loss could not be allowed in the hands of the assessee as the assessee itself could not hold its own shares.
24. We have considered the rival submissions. A perusal of the scheme of amalgamation clearly shows that in the scheme of amalgamation it has been held that the shares in the assessee company held by CBHIL were to be sold through a trustee as the assessee could not hold the shares. This scheme of amalgamation has been approved by the Hon'ble High Court. By the amalgamation the assessee company has taken over all the assets and liabilities of CBHIL as on 1.4.2001 and the shares held by CBHIL in the assessee company are part of the assets which have been amalgamated. If it is held that the capital loss on the sale of the same cannot be allowed in the hands of the assessee company, then obviously there would be a violation of the scheme of amalgamation insofar as the assets have not been taken over in full. Even 20 I.T.A. Nos. 1974/Mds/2008& 2314/Mds/07 otherwise if this capital loss is not allowable in the hands of the assessee, the routing of the sale proceeds through the Profit & Loss Account of the assessee would also have to be reversed. This is not permissible. In any case, the scheme of amalgamation having been approved by the Hon'ble High Court of Madras and as per the scheme of the amalgamation the assessee having come into possession of all the assets and liabilities of CBHIL w.e.f. 1.4.2001 and the shares being part of the assets and liabilities which have been taken over by the assessee through the scheme of amalgamation, obviously the sale of the same would have to be held to be the income in the hands of the assessee. In the result, the loss arose on the sale of the same would also be a capital loss in the hands of the assessee. In the circumstances, the appeal of the assessee in regard to grounds 12 to 14 stands allowed.
25. In regard to ground No.15 of the assessee's appeal it was submitted by the learned authorised representative that the issue was against the levy of interest u/s. 234D of the Act. He relied upon the decision of the Delhi High Court in the case of CIT v. Jacabs Civil Incorporated reported in 235 CTR 123 (Del). It was submitted that the provisions of sec. 234D had been introduced only w.e.f. 1-6-2003 and consequently no interest under section 234D could be levied on the assessee.
26. In reply, the learned DR vehemently supported the order of the Assessing Officer and the learned CIT(A).
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27. We have considered the rival submissions. As it is noticed that the issue is squarely covered by the decision of the Hon'ble Delhi High Court in the case of Jacabs Civil Incorporated, referred to supra, respectfully following the decision of the Hon'bles Delhi High Court, the levy of interest u/s. 234D stands cancelled.
28. In the result, the appeal of the assessee is partly allowed for statistical purposes.
29. The order was pronounced in the court on 21/01/2011.
Sd/- Sd/-
(Abraham P. George) (George Mathan)
Accountant Member Judicial Member
Chennai,
Dated the 21stJanuary, 2011.
H.
Copy to: Assessee/AO/CIT (A)/CIT/D.R./Guard file