Income Tax Appellate Tribunal - Delhi
Manor Hotels Pvt. Ltd., New Delhi vs Department Of Income Tax
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH 'E
'E' : NEW DELHI
BEFORE SHRI G.D.AGRAWAL,
G.D.AGRAWAL, VICE PRESIDENT AND
SHRI CHANDRA MOHAN GARG,
GARG, JUDICIAL MEMBER
ITA No.2606/Del/2011
No.2606/Del/2011
Assessment Year : 2003-
2003-04
M/s Manor Hotels (P) Ltd., Vs. Deputy Commissioner of
77, Friends Colony (West),
(West), Income Tax,
New Delhi - 110 065. Circle-
Circle-6(1),
PAN : AAACM8572G. New Delhi.
(Appellant) (Respondent)
ITA No.2277/Del/2011
No.2277/Del/2011
Assessment Year : 2003-
2003-04
Joint Commissioner of Vs. M/s Manor Hotels (P) Ltd.,
Income Tax, 77, Friends Colony (West),
Circle-
Circle-6(1), New Delhi - 110 065.
New Delhi.
Delhi. PAN : AAACM8572G.
(Appellant) (Respondent)
Assessee by : Shri S.D.Kapila, Shri Pravesh
Sharma, Advocates and
Shri Shailender Bajaj, CA.
Revenue by : Smt.Leena Srivastava, Sr.DR.
ORDER
PER G.D.AGRAWAL, G.D.AGRAWAL, VP :
The appeal by the assessee is directed against the order of learned CIT(A)-IX, New Delhi dated 14th January, 2011 for the AY 2003-
04.
2. Ground No.1 of the assessee's appeal is of general nature and needs no adjudication.
3. Ground No.2 of the assessee's appeal reads as under:-
2 ITA-2606 & 2277/D/2011 "That the ld.CIT(A) IX erred both in facts and in law in sustaining the disallowance of interest of Rs.4,78,243/-
computed on old outstanding advances without appreciating that the advances given were for bonafide business consideration and commercial expediency."
4. At the time of hearing before us, both the parties fairly agreed that in the immediately preceding year i.e. AY 2002-03 vide order dated 11th April, 2008 in assessee's own case in ITA No.1651/Del/2006, this issue is set aside to the file of the Assessing Officer and therefore, for the year under consideration also, this issue may be restored to the file of the Assessing Officer. In view of the above submission of both the parties as well as keeping in view the order of the ITAT for AY 2002-03, we set aside the orders of authorities below on this point and restore the matter to the file of the Assessing Officer to be readjudicated as per the direction of the ITAT for AY 2002-03.
5. Ground No.3 of the assessee's appeal reads as under:-
"3.a That the ld.CIT(A) IX erred both in facts and in law in confirming the disallowance of Rs.42,34,016/- being 1/10th of renovation expenses of the business premises incurred in earlier years, claimed as deferred revenue expenditure.
3.b That the ld.CIT(A) IX erred both in facts and in law in not allowing alternative ground of claim of depreciation on renovation expenses on the business premises incurred in earlier years, which were capital in nature."
6. At the outset, it was pointed out by the learned counsel that this issue is also decided by the ITAT against the assessee for AY 2002-03. However, subsequent to the decision of the ITAT, Hon'ble Jurisdictional High Court in the case of CIT Vs. Industrial Finance Corporation of India Ltd. - [2010] 228 CTR (Del) 132 held that the deferred revenue 3 ITA-2606 & 2277/D/2011 expenditure can be spread over and allowed in number of years at the option of the assessee if the principle of matching concept is satisfied. The learned counsel submitted that the assessee took on lease the property for running the hotel for the period of 9 years and 9 months. That thereafter, during the FY 1999-2000, the assessee incurred total expenditure of `4.23 crores. Since the assessee will get the benefit of the expenditure during the entire period of lease which was 9 years and 9 months, therefore, the above expenditure was treated as deferred revenue expenditure and 10% thereof was claimed as deduction year after year. Assessment year 2001-02 was the first year in which such deduction was claimed and it was allowed by the Revenue. Again in AY 2001-02, the expenditure was allowed by the Assessing Officer. That in AY 2002-03, the expenditure was disallowed which was sustained by the ITAT. In AY 2003-04, again the expenditure is disallowed and the matter is before the ITAT, i.e., the present appeal. Thereafter, in all the subsequent years, the Revenue has allowed the expenditure. Thus, out of the ten years, except in AY 2002-03 & 2003-04, in all the years, the expenditure is allowed by the Revenue itself. That in the case of Industrial Finance Corporation of India Ltd. (supra), Hon'ble Jurisdictional High Court held as under:-
"23. Thus, the first thing which is to be noticed is that though the entire expenditure was incurred in that year, it was the assessee who wanted the spread over. The Court was conscious of the principle that normally revenue expenditure is to be allowed in the same year in which it is incurred, but at the instance of the assessee, who wanted spreading over, the Court agreed to allow the assessee that benefit when it was found that there was a continuing benefit to the business of the company over the entire period.
24. What follows from the above is that normally the ordinary rule is to be applied, namely, revenue expenditure incurred in a particular year is to be allowed in that year.
4 ITA-2606 & 2277/D/2011 Thus, if the assessee claims that expenditure in that year, the IT Department cannot deny the same. However, in those cases where the assessee himself wants to spread the expenditure over a period of ensuing years, it can be allowed only if the principle of matching concept is satisfied, which upto now has been restricted to the cases of debentures."
7. From the above decision of Hon'ble Jurisdictional High Court, it is evident that if a revenue expenditure is incurred by the assessee, the option is with the assessee to claim the expenditure in the year in which the expenditure was incurred or if the assessee wants to spread the expenditure over the period of years which can be allowed if the principle of matching concept is satisfied. It is stated by the learned counsel that in the case of the assessee, there is no dispute that the principle of matching concept is satisfied because the benefit of the expenditure incurred in the year 1999-2000 would be available throughout the lease period. He, therefore, submitted that in view of the above decision of Hon'ble Jurisdictional High Court, the 1/10th of the renovation expenditure claimed by the assessee as deferred revenue expenditure should be allowed.
8. Learned DR, on the other hand, stated that the issue is squarely covered in favour of the assessee by the decision of ITAT in assessee's own case for AY 2002-03. The above decision of ITAT is accepted by the assessee. Therefore, it has become final. She further submitted that even otherwise, the contention of the assessee would require verification at the end of the Assessing Officer because before the Assessing Officer, it was never claimed by the assessee that deferred revenue expenditure is allowable on the principle of matching concept. She, therefore, submitted that either the order of the Assessing Officer should be sustained or the matter can be set aside to the file of the 5 ITA-2606 & 2277/D/2011 Assessing Officer for re-examining the issue in the light of the decision of Hon'ble Jurisdictional High Court.
9. We have carefully considered the submissions of both the sides and perused the material placed before us. Normally, for allowability of deferred revenue expenditure, there cannot be different decision in every year. The Revenue should either accept the assessee's claim of deferred revenue expenditure and accordingly allow the spread-over of deduction in number of years or reject the assessee's claim and allow the deduction for expenditure in the year in which expenditure was incurred. However, this is a peculiar case where the Revenue itself has taken a different stand in various years. In AY 2000-01 and 2001-02, the Revenue accepted the assessee's claim of allowability of 1/10th of renovation expenses. The order for AY 2001-02 is passed under Section 143(3). However, in the subsequent year in AY 2002-03 & 2003-04, the Revenue took a different stand and disallowed the expenditure. Again in the subsequent year, the expenditure is not disallowed. The ITAT has upheld the disallowance of 1/10th of renovation expenses in AY 2002-03. However, the decision of ITAT is dated 11th April, 2008 while the decision of Hon'ble Jurisdictional High Court in the case of Industrial Finance Corporation of India Ltd. (supra) is dated 4th September, 2009. Therefore, the benefit of the above decision of Hon'ble Jurisdictional High Court was not available to the ITAT while deciding the issue for AY 2002-03. In view of the above, we deem it proper to set aside the orders of authorities below on this point and restore the matter to the file of the Assessing Officer. We direct him to readjudicate this issue in the light of the decision of Hon'ble Jurisdictional High Court in the case of Industrial Finance Corporation of India Ltd. (supra). Needless to mention that he will allow adequate opportunity of being heard to the assessee.
6 ITA-2606 & 2277/D/2011
10. Ground No.4 of the assessee's appeal reads as under:-
"That the ld.CIT(A) IX erred both in facts and in law in restricting the depreciation on car given on hire @ 15% instead of 40% claimed in the Income tax return."
11. At the time of hearing before us, it was pointed out by the learned counsel that there is a typographical error in the above ground and depreciation allowed by the Assessing Officer was 20% and not 15%. Therefore, the above ground should be treated to be modified by substituting 20% instead of 15%. The same is accepted and the ground is deemed to be modified accordingly. However, on merits, the learned counsel did not seriously contest ground No.4 of the appeal. We, therefore, treat the same as not pressed and reject accordingly.
12. The assessee has raised an additional ground which reads as under:-
"That the ld.CIT(A) IX, Delhi erred both in facts and in law in sustaining the disallowance of consultancy of Rs.15,95,225/- paid to International Caterers Private Limited out of the total claim of Rs.47,39,225/-."
13. The only ground in the Revenue's appeal vide ITA No.2277/Del/2011 reads as under:-
"On the facts and in the circumstances of the case, and law, the ld.CIT(A) has erred in restricting the addition on account of consultancy charges to Rs.15,95,225/- as against Rs.47,39,225/- made by the Assessing Officer."
14. The facts of the case are that during the accounting year relevant to assessment year under consideration, the assessee claimed the deduction in respect of consultancy charges of 7 ITA-2606 & 2277/D/2011 `47,39,225/- paid to International Caterers Pvt.Ltd. The Assessing Officer disallowed the same. On appeal, learned CIT(A) restricted the disallowance to the extent of `15,95,225/-. The Revenue is aggrieved with the relief allowed while the assessee now by way of an additional ground has challenged the disallowance sustained.
15. At the time of hearing before us, it was stated by the learned counsel that the omission of not taking of the ground in the regular memorandum of appeal was an inadvertent mistake on the part of the assessee's counsel who prepared the original memorandum of appeal. When the assessee has filed appeal against the order of CIT(A) and has raised the ground in respect of all the disallowances/additions sustained by the CIT(A), there was no reason for not taking such a ground. He, therefore, submitted that the additional ground should be admitted.
16. Learned DR, on the other hand, opposed the admission of the additional ground.
17. After considering the arguments of both the sides and the facts of the case, we deem it proper to admit the additional ground. Accordingly, the same is admitted.
18. With regard to the merit of the disallowance of consultancy charges, it was stated by the learned DR that the CIT(A) allowed the relief to the assessee on the basis of the decision of Hon'ble Jurisdictional High Court in respect of a dispute between the assessee and International Caterers Pvt.Ltd. with regard to payment of consultancy charges. That the above decision of Hon'ble Jurisdictional High Court is dated 12th July, 2005 vide CP Nos.107 and 110/2004. The assessment proceedings were completed on 30th March, 2006 but the 8 ITA-2606 & 2277/D/2011 assessee never produced the said decision before the Assessing Officer. The same was produced for the first time before the learned CIT(A) who allowed the relief to the assessee on the basis of the said decision without confronting the same to the Assessing Officer and without allowing any opportunity to the Assessing Officer to express his opinion with reference to the said decision. He, therefore, submitted that the order of learned CIT(A) should be reversed and the disallowance made by the Assessing Officer should be restored or, in the alternative, the matter should be set aside to the file of the Assessing Officer for examination afresh in the light of the decision of Hon'ble Jurisdictional High Court.
19. The learned counsel for the assessee stated that the Assessing Officer disallowed the entire claim of consultancy charges on the ground that the assessee is not liable to make any payment to International Caterers Pvt.Ltd. because they have not provided any services. That International Caterers Pvt.Ltd. sued the assessee before the Hon'ble Jurisdictional High Court for recovery of the amount and in the above decision, Hon'ble Jurisdictional High Court agreed with International Caterers Pvt.Ltd. and held that they provided the services to the assessee and the assessee is liable to make the payment of consultancy charges to them. That the decision of Hon'ble Jurisdictional High Court is binding upon the assessee as well as the revenue authorities for computing the assessee's liability in respect of consultancy charges. Therefore, learned CIT(A) rightly relied upon the above decision for allowing the deduction of consultancy charges. He, however, stated that as per the decision of Hon'ble Jurisdictional High Court, the entire liability should have been allowed and the CIT(A) was not justified in sustaining part disallowance of consultancy charges. He, however, has no objection for setting aside the matter to the file of 9 ITA-2606 & 2277/D/2011 the Assessing Officer for readjudication in the light of above decision of Hon'ble Jurisdictional High Court.
20. We, therefore, set aside the orders of authorities below on this point and restore the matter to the file of the Assessing Officer. We direct him to allow the deduction of consultancy charges in the light of the decision of Hon'ble Jurisdictional High Court cited supra. Accordingly, the additional ground of the assessee's appeal and the only ground raised in the Revenue's appeal are deemed to be allowed.
21. In the result, the appeal of the assessee is deemed to be partly allowed while the Revenue's appeal is deemed to be allowed for statistical purposes.
Decision pronounced in the open Court on 14th June, 2013.
Sd/- Sd/-
(CHANDRA
CHANDRA MOHAN GARG)
GARG) (G.D.AGRAWAL)
JUDICIAL MEMBER VICE PRESIDENT
Dated : 14.06.2013
VK.
Copy forwarded to: -
1. Assessee : M/s Manor Hotels (P) Ltd.,
77, Friends Colony (West), New Delhi - 110 065.
2. Revenue : Joint Commissioner of Income Tax, Circle-
Circle-6(1), New Delhi.
3. CIT
4. CIT(A)
5. DR, ITAT Assistant Registrar