Income Tax Appellate Tribunal - Mumbai
Dcit 8(3), Mumbai vs Sun-N-Sand Hotels P. Ltd, Mumbai on 23 June, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCH "E", MUMBAI
BEFORE SHRI G.S.PANNU, ACCOUNTANT MEMBER
AND
SHRI PAWAN SINGH, JUDICIAL MEMBER
ITA No.5210/Mum/2013
(Assessment Year 2011-12)
The Dy. Commissioner of Income Tax 8(3),
Room No.217, Aaykar Bhavan,M.K.Road,
Mumbai 400020 ...... Appellant
Vs.
M/s. Sun-N-Sand Hotels P. Ltd.
39, Juhu Beach, Mumbai 400 049
PAN:AAACS5521P .... Respondent
C.O.NO.248/Mum/2014
(Arising out of ITA No.5210/Mum/2013, A.Y.2011-12.)
M/s. Sun-N-Sand Hotels P. Ltd.
39, Juhu Beach, Mumbai 400 049
PAN:AAACS5521P .. Cross Objector
Vs.
The Dy. Commissioner of Income Tax 8(3),
Room No.217, Aaykar Bhavan,M.K.Road,
Mumbai 400020 ... Appellant in appeal
Appellant by : Dr.A.K.Nayak
Respondent by : Shri Prakash Jotwani
Date of hearing : 20/06/2017
Date of pronouncement : 23/06/2017
ORDER
PER G.S.PANNU,A.M:
The captioned appeal by the Revenue and cross objection by the assessee pertaining to the assessment year 2011-12 are directed against 2 ITA No.5210/Mum/2013 C.O No.248/Mum/2014 (Assessment Year 2011-12) order passed by the CIT(A)-18, Mumbai dated 10/05/2013, which in turn, arises out of order passed by the Assessing Officer under section 143(3) of the Income Tax Act, 1961 (in short 'the Act') dated 08/02/2013.
2. One common issue involved in the appeal of the Revenue as well as the Cross Objection filed by the assessee is in relation to the disallowance under section 14A of the Act. In this context, the relevant facts are that assessee determined the disallowance under section 14A of the Act originally at Rs.48,05,361/-, but in the course of assessment proceedings, assessee put-forth a disallowance of Rs.32,03,556/- primarily contending that the value of average investments adopted for the purposes of Rule 8D(2)(iii) of the Income Tax Rules, 1962( in short 'the Rules) was required to be reduced by the amount of investment stated to be made in the partnership firms of M/s. Metropilis Hotels and M/s. Jewel of India. The Assessing Officer did not accept the said plea and retained the disallowance under section 14A of the Act at Rs.48,05,361/-. The CIT(A) accepted the plea of the assessee that the balance stated in the current account of the two partnership firms, in which assessee was a partner, was required to be excluded for the purposes of calculating average investment for applying Rule 8D(2)(iii) of the Rules and that only capital contribution to the partnership firms was required to be considered. In terms of such decision, the disallowance under section 14A of the Act was reduced to Rs.32,03,556/-, thus, a relief of Rs.16,01,805/- was granted by the CIT(A), which has been challenged by the Revenue in its appeal before us.
3 ITA No.5210/Mum/2013 C.O No.248/Mum/2014(Assessment Year 2011-12)
3. Per contra, in terms of the Cross Objection filed, assessee has raised an additional Ground further assailing the determination of disallowance under section 14A of the Act at Rs.32,03,556/-.
3.1 In the above background rival Counsels have been heard. At the time of hearing, it was a common point between the parties that so far as the tax effect involved in the dispute raised by the Revenue is concerned, the same is below the limit prescribed by the CBDT. The CBDT vide Circular No.21/2015 dated 10/12/2015 has revised the monetary limits for filing of appeals by the Department before the Tribunal retrospectively. Since the tax effect in dispute in the captioned appeal is stated to be below the monetary limit of Rs.10.00 lacs specified in the CBDT Circular dated 10/12/2015 (supra), the same is dismissed as not maintainable. We hold so.
4. Coming to the Cross Objection, the Ld.Representative for the assessee pointed out that there was a small delay of 24 days in filing it and in this context he referred to an affidavit by the Competent Officer of the assessee company dated 02/06/2016 averring the reasons for the delay. The Ld.Representative for the assessee pointed out that the delay is for bonafide reasons and that the same be condoned.
5. On the other hand, the Ld. Departmental Representative has not opposed the plea of the assessee for condonation of delay. Considering the fact that the reasons have been averred by an affidavit and bonafides of the reasons canvassed by the assessee have not been assailed, therefore, the delay in filing of the Cross Objection is hereby condoned.
4 ITA No.5210/Mum/2013 C.O No.248/Mum/2014(Assessment Year 2011-12)
6. With regard to the disallowance under section 14A of the Act, the Ld. Representative for the assessee pointed out that in addition to the investments in partnership firms, assessee had also made investments in Classic Citi Investment P. Ltd. - Rs.44,99,99,900/- and Sun& Sand Invest & Fin Co. P Ltd. Company Ltd.- Rs.99,49,900/-, which was strategic investments and that the same are also liable to be excluded for calculating the amount of average investments for the purposes of applying Rule 8D(2)(iii) of the Act . In this context, the Ld.Representative for the assessee relied upon the decision of the Tribunal in the case of assessee itself for assessment year 2008-09, wherein vide order in ITA No.2041/Mum/2014 dated 12/04/2016 such proposition has been upheld and the Assessing Officer has been directed to exclude the amount of strategic investment for working out the value of average investments for the purposes of Rule 8D(2)(iii) of the Rules. The Ld.Representative for the assessee conceded that the said aspect of the matter is a fresh plea and was not hitherto raised before the lower authorities, but since the relevant facts with regard to the issue are available on record and it is supported by the decision of the Tribunal, the same be admitted for adjudication. The Ld.Representative for the assessee also pointed out that assessee would have no objection if the matter is remanded back to the file of Assessing Officer to be examined afresh in the light of the proposition upheld by the Tribunal in its order dated 12/04/2016(supra) in the case of the assessee itself.
7. The Ld. Departmental Representative has not opposed the plea of the assessee for remanding the matter back to the file of the Assessing Officer.
5 ITA No.5210/Mum/2013 C.O No.248/Mum/2014(Assessment Year 2011-12)
8. We have carefully considered the rival submissions. Ostensibly, the plea raised by the assessee is a fresh plea which was not before the lower authorities. So, however, it is also pertinently clear that the proposition sought to be canvassed has been taken into consideration by the CIT(A) also, though in the context of investment in partnership firm. Presently, the case made out by the assessee is that the same proposition is applicable in the context of investment made in the aforesaid two corporate entities, which are group concerns. We find that while upholding the proposition canvassed by the assessee, the CIT(A), inter-alia, referred to the decision of the Hon'ble Bombay High Court in the case of CIT vs. Delite Enterprises dated 26/02/2009. Under these circumstances and considering that the plea sought to be raised does not involve any investigation of fresh facts, the same is liable to be admitted. Undoubtedly, the said plea was not before the lower authorities, and thus, the same is liable to be restored to the file of Assessing Officer who shall consider the same appropriately in accordance with law. Needless to mention, the Assessing Officer shall allow the assessee a reasonable opportunity of being heard and thereafter pass a fresh order as per law. Thus, on this aspect assessee succeeds for statistical purposes.
9. In its Cross Objection, assessee has raised another additional fresh plea, which for claim of deduction under section 80-IA(4) (iv)(a) of the Act in respect of profits derived from its undertaking set up in Sangli, Maharashtra for the generation of Wind Mill Power. The said claim was hitherto not made either before the Assessing Officer or even before the CIT(A). At the time of hearing, Ld.Representative for the assessee pointed out that the said 6 ITA No.5210/Mum/2013 C.O No.248/Mum/2014 (Assessment Year 2011-12) undertaking was set up in the previous year relevant to the assessment year 2006-07, but the claim is being made for the first time in assessment year 2011-12, since assessee is permitted to claim the benefit for any consecutive period of 10 years comprised in the period of 15 years, beginning from the year in which the undertaking begins to generate power.
10. At the time of hearing, the judgment of the Hon'ble Bombay High Court in the case of Ultratech Cement Ltd. vs. Addl. CIT, (2017) 81 taxmann.com 74 (Bom) was referred to which clearly clinches the controversy against the assessee. In somewhat similar circumstances, in the case of Ultratech Cement Ltd. (supra), Hon'ble High Court upheld the action of the Tribunal in denying the admission of a ground seeking benefit under section 80IA(4)(iv)(a) of the Act for the first time before the Tribunal. Notably, the plea for admission of additional Ground was rejected because the necessary evidence supporting the claim of the assessee was not on record. In fact, the Hon'ble High Court noted that the mere fact that in a subsequent year, claim was allowed by the Assessing Officer would not be a factor to entertain a fresh plea at the level of the Tribunal in another year. Be that as it may, following the ratio of Hon'ble Bombay High Court in the case of Ultratech Cement Ltd. (supra), the plea of the assessee for deduction under section 80IA(4)(iv)(a) of the Act is held to be unadmitted and accordingly, the same is dismissed.
11. The only other issue remaining in the cross objection is with respect to a disallowance of Rs.5,13,382/- made by the Assessing Officer out of 7 ITA No.5210/Mum/2013 C.O No.248/Mum/2014 (Assessment Year 2011-12) expenditure claimed by the assessee being incurred for current repairs of its Hotel at Shirdi as capital expenditure.
12. In this context, the relevant facts are that the Assessing Officer disallowed the expenditure holding that it was incurred on account for acquiring Centrifugal Blower & 15 HP Motor for kitchen exhaust system. The claim of the assessee was that the expenditure was in the nature of repairs and that there was no independent new asset acquired and, therefore, it was allowable as a revenue expenditure. The CIT(A) has also upheld the stand of the Assessing Officer, against which assessee is in appeal before us.
13. Before us, the Ld. Representative for the assessee has reiterated the submissions made before the lower authorities to point out that the expenditure was incurred in the course of repairs carried out to the kitchen exhaust system in the assessee's hotel at Shirdi. The Ld. Representative for the assessee pointed out that before the lower authorities the assessee had also relied upon the judgment of the Madras High Court in the case of Dasaprakash Hotel,114 ITR 210(Mad) for the proposition that the renovation expenditure incurred in a hotel is allowable as a revenue expenditure. With regard to the decision of the CIT(A), the Ld. Representative for the assessee pointed out that the case laws relied upon by him are inapplicable in the facts of the present case, because in the present case, the item in question i.e. Centrifugal Blower & 15 HP Motor was used for kitchen exhaust system and it was not an item of independent use. Therefore, it was not a case of acquisition of an independent asset as such.
8 ITA No.5210/Mum/2013 C.O No.248/Mum/2014(Assessment Year 2011-12)
14. On the other hand, the Ld. Departmental Representative pointed out that the expenditure was capital in nature since item purchased provided an enduring benefit.
15. We have carefully considered the rival submissions. As the factual matrix brings out, the item in question has been used as a part of the kitchen exhaust system of assessee's hotel. In this factual background, it is clear that the use of the Centrifugal Blower & 15 HP Motor is a part and parcel of the kitchen exhaust system. It has been explained that the expenditure has been incurred with the objective of maintaining existing kitchen exhaust system. Therefore, under these facts the expenditure is to be viewed in the nature of repairs and renovation of a pre-existing business and not for acquisition of an independent capital asset. In this view of the matter, we set-aside the order of the CIT(A) and direct the Assessing Officer to allow the said expenditure as revenue expenditure. Thus, on this aspect assessee succeeds.
16. In the result, whereas the appeal of the Revenue is dismissed, the cross objection of the assessee is partly allowed, as above.
Order pronounced in the open court on 23/06/2017.
Sd/- Sd/-
(PAWAN SINGH) (G.S. PANNU)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Mumbai, Dated 23/06/2017
Vm, Sr. PS
9
ITA No.5210/Mum/2013
C.O No.248/Mum/2014
(Assessment Year 2011-12)
Copy of the Order forwarded to :
1. The Appellant ,
2. The Respondent.
3. The CIT(A)-
4. CIT
5. DR, ITAT, Mumbai
6. Guard file.
BY ORDER,
//True Copy//
(Dy./Asstt. Registrar)
ITAT, Mumbai