2018 (12) TMI 287 - AT - Income Tax

Appeals allowed for various assessment years, directing reassessment on specific disallowances

Narangs International Hotels Private Ltd. Versus ACIT-1 (2), Mumbai

Narangs International Hotels Private Ltd. Versus ACIT-1 (2), Mumbai - TMI Issues Involved:1. Disallowance out of travelling expenses2. Disallowance of penalties and fine3. Disallowance out of vehicle expenses4. Disallowance of expenses incurred for Pali Hill Bungalow5. Claim for deduction u/s 80IA6. Disallowance u/s 14A r.w.s. 8D7. Non-consideration of expenses disallowed in earlier years and claimed as deductions in A.Y. 2006-078. Additional ground of appeal concerning claim of deduction u/s 80HHD9. Short deduction of TDS and non-applicability of provisions of Section 40(a)(ia)10. Disallowance u/s 43B of the 1961 Act with respect to payment of additional property tax (Chennai)Detailed Analysis:1. Disallowance out of travelling expenses:The tribunal noted that the AO disallowed Rs. 3,19,386/- on the grounds that the expenses related to the travel of spouses/family members of directors were not proven to be wholly and exclusively for business purposes. The CIT(A) upheld this disallowance based on previous decisions. The tribunal restored the issue to the AO for fresh adjudication, noting that the CIT(A) had followed a decision for AY 2005-06, which itself was set aside by the tribunal.2. Disallowance of penalties and fine:The AO disallowed Rs. 1,56,449/- for penalties and fines, considering them penal payments. The CIT(A) upheld this disallowance. The tribunal restored the issue to the AO for fresh adjudication, directing the AO to analyze each expense to determine if it is penal or compensatory in nature.3. Disallowance out of vehicle expenses:The AO disallowed Rs. 90,000/- for vehicle expenses, reasoning that personal use by directors was not ruled out. The CIT(A) upheld this disallowance based on previous decisions. The tribunal restored the issue to the AO for fresh adjudication, noting that the CIT(A) had followed a decision for AY 2005-06, which was set aside by the tribunal.4. Disallowance of expenses incurred for Pali Hill Bungalow:The AO disallowed Rs. 5,00,000/- for expenses related to the Pali Hill Bungalow, citing personal use by directors. The CIT(A) upheld this disallowance based on previous decisions. The tribunal restored the issue to the AO for fresh adjudication, noting that the CIT(A) had followed a decision for AY 2005-06, which was set aside by the tribunal.5. Claim for deduction u/s 80IA:The AO disallowed the claim of Rs. 75,85,911/- u/s 80IA due to the late filing of the return. The CIT(A) upheld this disallowance. The tribunal restored the issue to the AO for fresh adjudication, directing the assessee to prove that there was a supervening impossibility of performance due to litigation, which delayed the filing of the return.6. Disallowance u/s 14A r.w.s. 8D:The AO made a disallowance of Rs. 16,102/- u/s 14A. The CIT(A) restricted this to 10% of the dividend income. The assessee did not press this ground before the tribunal, and it was dismissed as not pressed.7. Non-consideration of expenses disallowed in earlier years and claimed as deductions in A.Y. 2006-07:The CIT(A) dismissed this ground as not pressed. The tribunal also dismissed it as not pressed.8. Additional ground of appeal concerning claim of deduction u/s 80HHD:The assessee raised an additional ground concerning the disallowance of Rs. 1,27,79,045/- u/s 80HHD. The tribunal admitted this ground and restored the issue to the AO for fresh adjudication, directing the AO to verify if the conditions of Section 80HHD were met.9. Short deduction of TDS and non-applicability of provisions of Section 40(a)(ia):The assessee did not press this ground for AY 2008-09, and it was dismissed as not pressed. The tribunal's decision for AY 2006-07 applies mutatis mutandis to AY 2008-09.10. Disallowance u/s 43B of the 1961 Act with respect to payment of additional property tax (Chennai):The assessee raised an additional ground for AY 2009-10 concerning the disallowance of Rs. 32,10,870/- for additional property tax paid on 10.12.2008. The tribunal allowed this deduction, noting that the payment was made and should be allowed as per Section 43B. The tribunal's decision for AY 2006-07 applies mutatis mutandis to AY 2009-10.Conclusion:The appeals for AY 2006-07, 2007-08, 2008-09, and 2009-10 are partly allowed for statistical purposes, with several issues restored to the AO for fresh adjudication.