Income Tax Appellate Tribunal - Mumbai
Starcity Entertainment P.Ltd, Mumbai vs Dcit Cc 4(2), Mumbai on 30 June, 2017
आयकर अपील य अ धकरण, मुंबई यायपीठ, 'एच',मुंबई।
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES "H", MUMBAI ी जो ग दर संह, या यक सद य एवं ी जी. मंजूनाथ, लेखा सद य, के सम Before Shri JOGINDER SINGH, Judicial Member, and Shri G. MANJUNATHA, Accountant Member ITA NOs.236, 1523 & 4387/Mum/2013 Assessment Year: 2009-10, 2010-11 & 2011-12 Starcity Entertainment Pvt. DCIT, Ltd. बनाम/ CC-4(2), 4 Floor, Raheja Centre Point, th Room No.1918, Vs. 19th Floor, CST Road, 294, Vidya Nagari Marg, Air India Building, Santacruz (East), Nariman Point, Mumbai-400098 Mumbai-400021 ( नधा!"रती/Assessee) (राज व /Revenue) PAN No.:-AACS8292D ITA NO.5551/Mum/2016 Assessment Year: 2012-13 Starcity Entertainment Pvt. DCIT, Ltd. बनाम/ CC-4(2), 4th Floor, Raheja Centre Point, Room No.1918, Vs. CST Road, 294, 19th Floor, Vidya Nagari Marg, Santacruz Air India Building, (East), Nariman Point, Mumbai-400098 Mumbai-400021 ( नधा!"रती/Assessee) (राज व /Revenue) PAN No.:-AACS8292D 2 ITA Nos.236, 1523, 4387/Mum/2013 & ITA No. 5551/Mum/2016 Starcity Entertainment Pvt. Ltd.
नधा!"रती क ओर से / Assessee by Dr. K. Shivaram & Shri Rahul Hakani राज व क ओर से / Revenue by Shri M.C. Omi Ningshan-DR ु वाई क+ तार,ख / Date of Hearing :
सन 27/06/2017
आदे श क+ तार,ख /Date of Order: 27/06/2017
आदे श / O R D E R
Per Joginder Singh (Judicial Member)
This bunch of four appeals is by the assessee for Assessment Years 2009-10 to 2012-13, challenging the respective orders of the Ld. First Appellate Authority, Mumbai, dated 06/11/2012, 22/01/2013, 19/04/2014 and 07/06/2016.
2. First, we shall take up the appeal in ITA No.236/Mum/2013 for Assessment Year 2009-10, wherein, the first revised ground pertains to confirming the disallowance of business expenses like administrative and financial expenses amounting to Rs.22,30,779/-, without appreciating the fact that the assessee is a corporate entity, carrying on its business and the impugned expenses were incurred wholly and exclusively for the business of the assessee.
2.1. During hearing, the ld. counsel for the assessee, Dr. K. Shivaram, along with Shri Rahul Hakani, contended that the issue has not been deliberated upon by the Ld. Assessing Officer in a justified manner by explaining that 3 ITA Nos.236, 1523, 4387/Mum/2013 & ITA No. 5551/Mum/2016 Starcity Entertainment Pvt. Ltd.
the assessee is owner of the land and normal business expenses has to be allowed. Our attention was invited to page-26 of the paper book by submitting that the assessee has to maintain the corporate entity and the bifurcation of the expenses, provided by the assessee, has not gone into. Our attention was invited to para-4.1 (page-3 of the assessment order). The ld. counsel relied upon the decision of the Tribunal in the case of M/s Multi Act Relay Enterprises Ltd. (ITA No.7274/Mum/2011), order dated 28/08/2015 (pages 162 to 167 of the paper book). It was also submitted that the assessee is in the business of construction, since long, for which our attention was invited to the assessment order for Assessment Year 1996-97. On the other hand, the Ld. DR, Shri M.C. Omi Ningshan, though defended the addition but did not controvert the assertion of the Ld. counsel for the assessee that the issue has not been deliberated in a required manner in the assessment order.
2.2. We have considered the rival submissions and perused the material available on record. The facts, in brief, are that the assessee company was incorporated on 16/12/1999, having the business of construction, real estate, etc. The assessee company completed various residential projects like Raheja Residency in Vashi and Starcity Theater and office premises in Mahim. The office premises were claimed to be rented out to Finflow 4 ITA Nos.236, 1523, 4387/Mum/2013 & ITA No. 5551/Mum/2016 Starcity Entertainment Pvt. Ltd.
Investments Pvt. Ltd. by leave and license agreement dated 30/08/2007 (pages 62 to 86 of the paper book). Pursuant to this agreement, the assessee entered into amenity agreement with the said party (pages87 to 100 of the paper book). The assessee granted long lease of 999 years of the Starcity Theater to Movie Time Cineplex Pvt. Ltd., vide lease deed dated 14/08/2007 by way of slump sale. However, the office premises of the above theater were retained by the assessee along with right to make further construction on the theater. During the year, the assessee received lease rent of Rs.49,62,000/- and amenity charges of Rs.40,50,000/-. The assessee offered lease rent as income from house property and amenities charges as business income. At page-26 of the paper book, there is bifurcation of the expenses, which has not been considered by the ld. Assessing Officer in a required manner. The Ld. Assessing Officer has observed that the assessee company has diverted its surplus funds and on purchase of cars. It has also been observed that assessee company is not charging interest on its advances. We find that the Mumbai Bench of the Tribunal, identically, it the case of M/s Multi Act Realty Enterprises Ltd. vs Income Tax Officer (ITA No.7274/Mum/2011), order dated 28/08/2015, considering various decisions, wherein, it was held that whether income has been earned or not and whether the ultimate benefit has accrued immediately or not, the expenses incurred shall be allowable if the same had been incurred for business or 5 ITA Nos.236, 1523, 4387/Mum/2013 & ITA No. 5551/Mum/2016 Starcity Entertainment Pvt. Ltd.
commercial expediency (Para-6 onwards of the aforesaid order dated 28/08/2015). The decision from Hon'ble Gujarat High Court in CIT vs Sardar Sarovar Narmada Nigam Ltd. 364 ITR 477 (Guj.) was also considered along with the decision of the Tribunal in the case of M/s DHL express (I) Pvt. Ltd. (124 TTJ 108). The assessee also gets shelter from the decision of the Tribunal dated 07/03/2017 in the case of M/s Zears Developers Pvt. Ltd. (ITA No.3891/Mum/2015), wherein, identical facts were considered. It seems that the issues has been mixed up, consequently, considering the factual matrix and the various case laws discussed in the aforesaid order of the Tribunal dated 28/08/2015, we remand this issue to the file of the Ld. Assessing Officer to examine the claim of the assessee and adjudicate the same afresh in accordance with law. The assessee is at liberty to substantiate its claim for which due opportunity of being heard be provided to the assessee, thus, this ground of the assessee is allowed for statistical purposes.
3. The next revised ground pertains to not allowing claimed depreciation of Rs.35,54,096/-. The contention of the ld. Counsel is that once the car was purchased and added to the block of asset, the depreciation has to be allowed. It was contended that the car was used/purchased for business purposes. On a query from the Bench in whose name, the car was purchased, it was explained by the Ld. 6 ITA Nos.236, 1523, 4387/Mum/2013 & ITA No. 5551/Mum/2016 Starcity Entertainment Pvt. Ltd.
counsel that the car is in the name of the assessee company. Reliance was placed upon the decision of the Tribunal in the case of DCIT vs Boskalis Dredging India Pvt. Ltd. (2012) 53 SOT 17 and CIT vs M/s Sonic Biochem Extractions Pvt. Ltd. (ITA No.2088 of 2013) (Bom.). On the other hand, the Ld. DR, contended that the car were not used for business purposes and no construction activity were carried out in the impugned year by the assessee.
3.1. We have considered the rival submissions and perused the material available on record. The facts, in brief, are that the assessee purchased a motor car at the fag end of the financial year i.e. one day before year ending. The Ld. Assessing Officer disallowed the depreciation on the plea that it was not use for business purposes. The stand of the assessee is that even if it is ready for use and kept in the block of asset then depreciation has to be allowed. Considering the totality of facts, we are of the view that the depreciation, as a general principle, represents the diminution in the value of a capital asset, when applied to the purpose of making profit or gain. The object is to get the true picture of the real income of the business. The term 'depreciation' as understood in commercial circles as well as within the meaning of accounting practice means wear and tear of the asset used for the purpose of earning revenue on user of the asset. The concept of depreciation is that any asset, on account of normal wear and tear, is required to be 7 ITA Nos.236, 1523, 4387/Mum/2013 & ITA No. 5551/Mum/2016 Starcity Entertainment Pvt. Ltd.
replaced at a point of time in future The position in law is well settled that depreciation allowance is a provision for normal wear and tear of asset which have been used during the previous year in earning income, which is brought to tax. Depreciation is nothing but decrease in the value of the property through wear and tear, deterioration or obsolescence and allowance is made for the purpose of book keeping, accountancy, etc. It is the exhaustion of the effective live of the fixed asset owing to use or wear and tear. It may be computed as that part of cost of asset, which will not be recovered when the asset is finally put out of use. The object of providing for depreciation is to spread the expenditure, incurred in acquiring the asset, over its effective life time. The provision as to depreciation in a taxing law like Income Tax Act contain elements of incentives and are also informed by consideration of policy of the tax and do not reflect purely economy criteria relevant to the determination of the depreciation. It is noted that for and from Assessment Year 2002-03, by virtue of provision w.e.f. 01/04/2002, explanation-5 to section 32(1)(ii) was inserted by the Finance Act, 2001(14 of 2001) declaring that the provision of section 32(1) shall apply 'whether or not the assessee has claimed the deduction in respect of depreciation in computing the total income.' Thus, for and from the Assessment Year 2002-03, it has been made mandatory to allow depreciation to an assessee even though he has not claimed deduction in respect of depreciation. The 8 ITA Nos.236, 1523, 4387/Mum/2013 & ITA No. 5551/Mum/2016 Starcity Entertainment Pvt. Ltd.
scheme of section 32 has provided different rates of depreciation for building, machinery, plant or furniture, ships building used for hotels, airplanes and other items mentioned therein. The Supreme Court decision in CIT vs Poddar Cement Pvt. Ltd. (1997)_ 226 ITR 625 (SC) is under the Income Tax Act is to be considered as trend setter in the concept of ownership. Assistance from the law laid down therein can be taken for finding out the meaning of the term 'owned as accruing in section 32(1) of the Act, Maysore Minerals vs CIT (1999) 239 ITR 775, 778, 780 (SC), CIT vs WEP Peripherals Ltd. (2014) 362 ITR 508 (Karn.) and CIT vs Jawahar Kala Kendra (2014) 362 ITR 515 (Raj.). Another decision from Hon'ble Madras High Court in A.M.P. Mudaliyar vs CIT 228 ITR 454, 459 (Mad.) throws light on the explanation 'owned by the assessee'. Following the Madras decision (228 ITR 454), it was held by Hon'ble Bombay High Court in CIT vs Taxspin Engineering and Maufacturing Works (2003) 263 ITR 345, 356 (Bom.) that there is no requirement that the assessee should continue to hold the depreciable asset till the end of relevant previous year or in other words, remains owner of the depreciable asset for entire previous year. In CIT vs Salkia Transport Associates (1983) 143 ITR 39 (Kal.), wherein, buses were taken on hire and had to be replaced by the assessee at its own cost by new buses, which were registered in the name of the original owner, the assessee was held to be the owner of the asset concern. In another decision following the 9 ITA Nos.236, 1523, 4387/Mum/2013 & ITA No. 5551/Mum/2016 Starcity Entertainment Pvt. Ltd.
decision from Delhi High Court in Addl. CIT vs General Industries Corporation (1985) 155 ITR 430 (Del.) in CIT vs Nagpur Golden Transport Company 233 ITR 389, 390 (Del.), it was held that the assessee was entitled to get depreciation on trucks purchased by it on higher purchase basis.
4. In the present appeal, there is no dispute to the fact that the motor car was purchased by the assessee for business purposes of the assessee company, the capital assets/motor car was shown in the books as asset of the company, accordingly, in our view, assessee is the owner of the asset, therefore, the ratio laid down in following cases supports the case of the assessee :-
a. CIT vs Poddar Cements Pvt. Ltd. (Supra), b. CIT vs Daudayal Hotels Pvt. Ltd.) (2006) 282 ITR 132 (Guj.).
c. CIT vs Crown Products (2008) 304 ITR 106 (Guj.) d. CIT vs Gujarati Samaj (2012) 349 ITR 559 (MP).
We are of the view that depreciation on the applicable rates, during the relevant time, has to be allowed to the assessee. In the case of DCIT vs Boskalis Dredging India Pvt. Ltd. (2012) 53 SOT 17 (Mumbai ITAT); (2012) 23 taxman.com 4 (Mumbai) held that if the same could not be used during the relevant Assessment Year still depreciation has to be allowed. The Hon'ble jurisdictional High Court 10 ITA Nos.236, 1523, 4387/Mum/2013 & ITA No. 5551/Mum/2016 Starcity Entertainment Pvt. Ltd.
vide order dated 17/11/2015 in the case of CIT vs M/s Sonic Biochem Extraction Pvt. Ltd. (ITA No.2088 of 2013) made an elaborate discussion and duly mentioned the aforesaid decision of the Tribunal in 53 SOT 17 decided the issue in favour of the assessee. The ratio laid down in CIT vs Dilip Singh Sardar Singh Bagga 201 ITR 995 (Bom.) supports our view. It is also not the case of the Revenue that the directors also claimed depreciation resulting into double depreciation. The depreciation was claimed by the assessee company only. Considering the foregoing discussion, we direct the ld. Assessing Officer to grant depreciation on the motor car to the assessee on applicable rates at the relevant time, thus, this ground of the assessee is allowed.
5. The next ground pertains to amenities charges, received of Rs.40,50,000/- as income from house property, istead of business income is concerned, the ground was not pressed by the Ld. Counsel for the assessee, therefore, this ground is dismissed as not pressed. ' This appeal of the assessee is partly allowed for statistical purposes.
6. Now, we shall take up the appeal for Assessment Year 2010-11 (ITA No.1523/Mum/2013), wherein, first ground pertains to disallowing business expense/administrative and financial expenses amounting to Rs.16,40,882/-. This ground was argued to be identical to ground no.1 of ITA 11 ITA Nos.236, 1523, 4387/Mum/2013 & ITA No. 5551/Mum/2016 Starcity Entertainment Pvt. Ltd.
No.236/Mum/2013. The Ld. DR also consented that the issue is identical. Thus, considering the discussion made in the preceding paras of this order (in ITA No.236/Mum/2013), on identical reasoning, we restore this issue to the file of the Ld. Assessing Officer and thus allowed for statistical purposes.
7. The next ground pertains to depreciation of Rs.30,24,621/-. This issue was also argued to be identical by both sides. We have discussed the issue of depreciation in the earlier paras of this order, therefore, on the same reasoning, this ground of the assessee is allowed.
8. The next ground pertains to treating the amenities charges of Rs.40,50,262/- as income from house property instead of business income, claimed by the assessee, was not pressed by the ld. counsel for the assessee, therefore, this ground is dismissed as not pressed.
This appeal is partly allowed for statistical purpose.
9. So far as, ITA No.4387/Mum/2014 for Assessment Year 2011-12 is concerned, the revised ground no.1 pertains to business expenses like administrative and financial expenses of Rs.13,80,453/-, is concerned, it is covered by identical ground, discussed hereinabove, therefore, on the same reasoning, is allowed for statistical purposes.
12ITA Nos.236, 1523, 4387/Mum/2013 & ITA No. 5551/Mum/2016 Starcity Entertainment Pvt. Ltd.
9.1. So far as, depreciation of Rs.37,91,005/-, u/s 32 of the Act, is concerned, this issue is also covered by the decision for earlier years, discussed in earlier paras of this order, therefore, on the same reasoning, this ground of the assessee is allowed.
This appeal is partly allowed for statistical purposes.
10. Now, we shall take the appeal for Assessment Year 2012-13 (ITA No.5551/Mum/2016), wherein, ground no. 1 to 4 pertains to audit fee, tax audit fee, legal fee, insurance, telephone expenses, salary to staff, lift maintenance expenses, etc. The crux of argument on behalf of the assessee is that the assessee is corporate entity and such expenses were needed for business purposes for continuation of the business as there was not stoppage of business. On the other hand, the Ld. DR contended that the business was stopped, therefore, such expenses were rightly denied. In reply, the Ld. counsel explained that there was merely lull in the business and the business was not discontinued.
10.1. We have considered the rival submissions and perused the material available on record. It is noted that the expenses were disallowed by the Assessing Officer on the plea that the assessee has not carried out any business activities during the year and only earning was way of leasing of building, computers, furniture and fixture, etc. It 13 ITA Nos.236, 1523, 4387/Mum/2013 & ITA No. 5551/Mum/2016 Starcity Entertainment Pvt. Ltd.
was also noticed that the assessee has shown interest income of Rs.15,29,577/- under the head business and claimed expenses to the tune of Rs.45,95,997/- including an amount of Rs.17,18,097/-, claimed as administrative and financial expenses and depreciation of Rs.28,77,900/- against this income. We find that the administrative and financial expenses, we have already sent to the file of the Ld. Assessing Officer to adjudicate afresh. So far as, depreciation is concerned, it has been allowed in the preceding paras of this order. Thus, considering the same reasoning so far as depreciation on car is concerned, on the same reasoning, the Ld. Assessing Officer is directed to allow the depreciation and the remaining expenses, if found to be incurred for business purposes/business exigencies, then considering the factual matrix, decide afresh in accordance with law. Thus, this ground is partly allowed for statistical purposes.
11. The last ground pertains to interest income of Rs.15,29,577/-, claimed to be declared by the assessee and overlooked by the Assessing Officer and consequently not allowing the expenses of Rs.36,17, 725/-. This ground was argued to be consequential to ground no. 1 to 4 (supra) of the impugned year. The Ld. DR defended the impugned order. Considering the totality of facts and the circumstances narrated before us, we remand this issue to the file of the Ld. Assessing Officer, to examine the claim of 14 ITA Nos.236, 1523, 4387/Mum/2013 & ITA No. 5551/Mum/2016 Starcity Entertainment Pvt. Ltd.
the assessee and then decide afresh in accordance with law. Thus, this ground of the assessee is allowed for statistical purposes.
This appeal of the assessee is partly allowed for statistical purposes.
Finally, the appeals are partly allowed for statistical purposes.
This order was orally pronounced in the open court in the presence of Ld. Representative from both sides at the conclusion of the hearing on 27/06/2017.
Sd/- Sd/-
(G. Manjunatha) (Joginder Singh)
लेखा सद#य / ACCOUNTANT MEMBER या$यक सद#य / JUDICIAL MEMBER
मब
ुं ई Mumbai; .दनांक Dated :-27/06/2017 f{x~{tÜ? P.S / नजी स चव आदे श क %$त'ल(प अ)े(षत/Copy of the Order forwarded to :
1. अपीलाथ2 / The Appellant
2. 34यथ2 / The Respondent.
3. आयकर आय6 ु त(अपील) / The CIT, Mumbai.
4. आयकर आय6 ु त / CIT(A)- , Mumbai
5. 7वभागीय 3 त न ध, आयकर अपील,य अ धकरण, मब ंु ई / DR, ITAT, Mumbai
6. गाड! फाईल / Guard file.
आदे शानस ु ार/ BY ORDER, स4या7पत 3 त //True Copy// उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपील य अ धकरण, मब ुं ई / ITAT, Mumbai,