TaxTMI 
TaxTMI 
2011 (9) TMI 636
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.... taking into consideration the return of income filed belatedly on 27-12-2001 claimed as revised return whereas no such claim had been made in the original return of income. 3. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law in allowing deduction u/s 80-IA(4F)/80-IB(10) in respect of three projects whereas in the cases of two projects, the Chartered Accountants in their statutory report have certified that these two projects commenced before 01-10-1998 and for which the assessee company is not entitled for any deduction under section 80-IA(4F)/80-IB(10). 4. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law in allowing deduction u/s 80-IA(4F)/80-IB(10) whereas the assessee company had already made expenditure of Rs. 103,01,73,852/- up to 31-3-1998 and small expenditure of Rs. 9,61,17,965/- had been made in the previous year thus showing that substantial expenditure had already been incurred on the projects. 5. The appellant craves leave to add, alter or amend any/ all of the grounds of appeal before or during the course of the hearing of the appeal." 3. Learned DR supports the order of AO. ....
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....s issued by the appropriate authority and, therefore, deduction could not be disallowed in respect of such houses. (b) The construction of all the housing projects effectively commenced after the statutory date of 1-10-1998 and therefore, deduction u/s 80-IB(10) was rightly claimed and allowed in the original assessment proceedings. 4.6. On appeal against the captioned order passed by the AO u/s 143(3)/250 for A.Y. 1999-2000, the CIT(A), while following the aforesaid decision of ITAT in the assessee's own case for A.Y. 2000-01 and 2001-02, allowed the appeal in favour of the assessee and upheld the claim of deduction u/s 80-IB(10) on merits by holding as under: "On perusal of the details filed and careful consideration of all facts and circumstances of the case, the case of the appellant during the year is squarely covered by the order of Hon'ble ITAT 'A' Bench (ITA no. 1922 and 1923/Del/2005) for Assessment year 2000-01 and 2001-02 of the assessee. 6.3. In view of the above discussion and different judicial pronouncements as cited above particularly following the decision of ITAT Delhi 'A' Bench in the case of the said assessee for Assessment year 2000-01 and 20....
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.... is not right in holding that AO failed to make enquiries or to apply his mind and allowed deduction under section 80IB(10) of the Act. We therefore vacate his order and restore that of the AO. It is, however, except for the construction found to be in excess built up area over 1000 sq. ft. as aforesaid and in respect of which the assessee would not entitled to deduction." 5.1. Respectfully following the ITAT order in assessee's own case, we uphold the order of CIT(A) on this issue. In the result, revenue's appeal being ITA no. 4277/Del/09 for A.Y. 1999-2000 is dismissed. ITA no. 3192/Del/08 (Assessee's appeal for A.Y. 2001-02: 6. This is assessee's appeal against CIT(A)'s order dated 27-8-2008 relating to A.Y. 2001-02. 7. Ground nos. 1 to 6 raise one issue in respect of denial of deduction u/s 80-IB(10); Ground no. 7 relates to charging of interest u/s 234B and withdrawal of interest u/s 244A. 7.1. The assessee has also sought to raise an additional ground which is as under: "Without prejudice, that on facts and circumstances of the case, the expenditure by way of payment of Rs. 18,75,195/- to RHW Hotel Management Services Ltd. on account of consultation/ develop....
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....rging of interest u/s 234B/ 2441 of the Act is consequential in nature. The AO shall recalculate the charging of interest, if any, while giving appeal effect to appellate order. 11. Additional ground about expenditure by way of payment to RHW Hotel Management Services Ltd. shall be considered along with appeal for A.Y. 2002-03. ITA no. 4595/Del/05 ( Assessee's appeal for A.Y. 2002-03): 12. This is assessee's appeal against CIT(A)'s order dated 20-9-2005 relating to A.Y. 2002-03. Effective grounds of appeal are as under: "1. That on the facts and circumstances of the case and in law, the CIT(A)-I has erred in treating the expenses of Rs. 46,55,750/- incurred on consultation/ development fee paid to franchiser companies as capital expenditure and in not providing deductions as revenue expenditure claimed u/s 37(1) of the Income Tax Act, 1961. The action of the CIT(A)-I being arbitrary, erroneous, unwarranted and unjust must be quashed with directions for reckoning the same as revenue outgoing. 2. That on the facts and circumstances of the case and in law, the CIT(A)-I has erred in law and on the facts in not giving his judgment regarding withdrawal of interest allowed ....
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....ad not commenced operations, during that year. 14.5. In the return of income for the relevant assessment year, the aforesaid expenses, including payment of Rs. 18,75,195 made in the assessment year 2001-02, were claimed as revenue expenditure by the assessee. 14.6. In the assessment order, the assessing officer disallowed the aforesaid expenditure on the following grounds: 1. Since the consultancy fee was paid to RHW Hotel Management during the financial year 2000-01, the assessing officer observed that the said payment was made prior to commencement of restaurant business (commenced during the relevant previous year) and was, therefore, not an allowable revenue expenditure; 2 The expenses were capital in nature since the same resulted in acquisition of capital asset in the nature of technical know-how and franchise from the vendors, as also the assessee had obtained advantage of enduring nature by starting a new business of restaurant through know-how acquired from vendors. 14.7. The CIT(Appeals) upheld the action of the assessing officer and held that the impugned expenditure was capital in nature, since the same as it resulted in benefit of enduring nature ....
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.... 314 (SC) - Shriram Refrigeration Industries Ltd. v. CIT 127 ITR 746(Del) - Triveni Engineering Works Ltd. v. CIT 136 ITR 340 (Del) - Shriram Refrigeration Industries Ltd. v. CIT: 127 ITR 746(Del) - Triveni Engineering Works Ltd. v. CIT:136 ITR 340 (Del) - Addl. CIT v. Shama Engine Valves Ltd.:138 ITR 216 (Del) - CIT v. Bhai Sunder Dass & Sons P. Ltd.:158 ITR 195 (Del) - CIT v. Tata Engineering & Locomotive Co. Pvt. Ltd. 123 ITR 538 (Bom) - Bajaj Tempo Ltd. v. CIT 207 ITR 1017 (Bom) - CIT v. Avery India Ltd. 207 ITR 813 (Cal) - CIT v. Madras Rubber Factory Ltd. 212 ITR 443 (Mad) - SRP Tools Ltd. v CIT: 237 ITR 684(Mad) - CIT v Southern Pressings (p) Ltd.: 242 ITR 67(Mad) - CIT v. Power Build Ltd: 244 ITR 19 (Guj) - CIT v Gujarat Carbon Ltd. : 254 ITR 294(Guj) - CIT v. Kirloskar Tractors Ltd.: 98 Taxman 112 (Bom.) - CIT v Swaraj Engines Ltd. : 154 Taxmann 243(P & H) - CIT v Zaverchand Gaekwad (P) Ltd. : 202 CTR 94(Guj.) - CIT v JCT Electronics Ltd. : 203 CTR 315(P &H) - CIT v. Kanpur Cigarettes (....
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....mmon fund. 14.16.Reliance is placed on the following decisions: - Produce Exchange Corporation 77 ITR 739 (SC) - Setabganj Sugar Mills Ltd. vs. CIT : 41 ITR 272 (SC) - CIT vs. Prithvi Insurance Co. Ltd.: 63 ITR 632 (SC) - Hoogly Trust (P) Ltd. v CIT 73 ITR 685 (SC) - L.M. Chhabda & Sons vs. CIT : 65 ITR 638 (SC) - Standard Refinery & Distillery Ltd. v. CIT: 79 ITR 589 (SC) - CIT v. Monnet Industries Limited : 221 CTR (Del) 266, 14.17. In view of the above, if there is unity of control and interlacing of funds between the new venture and the existing business, the new venture is regarded as extension of existing business, even if the new venture constitutes an entirely different activity. 14.18. In the case of assessee, the new business of opening and running of restaurants was commenced under the control and supervision of the existing management of the assessee only. There was complete interlacing of funds between existing business of construction of housing projects and the new activity of setting-up and operating restaurants. The various expenses incurred towards acquisition of assets and those of rev....
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....mmenced operations during the relevant previous year, the aforesaid expenditure was claimed business deduction in the return of income for the relevant assessment year, therefore, the said expenditure was allowable expenditure in A.Y. 2001-02. 14.22. Without prejudice to the above, in the event it is held that the expenditure is allowable deduction in the assessment year 2001-02, it is respectfully prayed that the said expenditure may kindly be directed to be allowed as deduction in the assessment year 2001-02, in view of the additional ground of appeal raised by the assessee in both assessment years. 15. Learned DR on the other hand contends that the assessee's own statement it further diversified into hospitality business, clinches the issue that it was a new business. The assessee's construction business and hospitality business are separate and independent. The assessee's presence in construction business, does not imply that it was in the business of hospitality. Consequently, on this first proposition itself the expenditure is in respect of a new business. 15.1. On second proposition, the payment incurred by assessee is in respect of acquiring knowledge and us....
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....e. M/s RHW Hotel Management Services Ltd., agreed on a formula for two types of fee. The amount in question for A.Y. 2001-02 & 2002-03 was on account of providing of technical know-how and expert knowledge prior to the commencement. By own admission of assessee it was not engaged into hospitality business and diversified from business of construction of buildings. In these circumstances, we see no infirmity in the order of CIT(A), holding that the restaurant business was a new business and expenditure was for setting up the same and the expenses were not allowable as business in nature. We uphold CIT(A)'s order. Assessee's ground no. 1 for A.Y. 2002-03 and additional ground in respect of assessment years 2001-02 & 2002-03 are dismissed. 16.2. Apropos ground no. 2, learned counsel for the assessee contends that interest u/s 244A is consequential in nature. About sec. 234D it is pleaded that these provisions have been inserted by the Finance Act, 2003 w.e.f. 1- 6-2003 and therefore the provisions, being prospective in operation, applies from A.Y. 2004-05 onwards and does not apply to the prior year under consideration. Reliance in this regard is placed on the ratio of decisions in....
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....city Board and its acceptance by the assessee. 21.2. The Gujarat High Court in the case of Saurashtra Cement & Chemical Industries V. CIT 213 ITR 523 held that merely because an expense relates to a transaction of an earlier year, it does not become a liability payable in the earlier year, if the liability was determined and crystallized in the year in question on the basis of maintaining accounts on the mercantile basis. Reliance is placed on following decisions: - Saurashtra Cement & Chemical Industries V. CIT 213 ITR 523 (Guj.); - S.P. Jaiswal Estaes (P) Ltd. v. CIT 214 ITR 558 (Cal.); - CIT v. India Foils Ltd. 200 ITR 259 (Cal.); - CIT v. Shriram Pistons & Rings Ltd. 220 CTR 404 (Del.) 21.3. It is further submitted that assessee is subject to uniform rate of tax in both the assessment years viz. 2000-01 & 2001-02. In view of the same, the issue of allowability of impugned expenditure in the relevant year or preceding year is a revenue neutral exercise. 21.4. Reliance in this regard, is placed on the following decisions wherein it has been held that Revenue should not agitate issues relating to allowability of expenditure in one y....
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....ase for A.Y. 2004-05 also has decided identical issue in favour of the assessee, by following observations: 3. The assessee is in the business of real estate, development of mini townships, promotion, development and construction of houses, flats, villas and commercial complexes etc. The assessee, in the course of its business, was in possession of various commercial and residential flats and spaces etc. which were laying in its stock as on 31-3-2003. According to the department, the assessee had not disclosed any income from house property. Notional annual letting value was determined by the AO and was brought to tax. It may be stated that identical issue arose in assessee's own case in A.Y. 1988-89 to 1997-98 as also in A.Y. 2001-02. Different Benches of the ITAT in all those years have deleted like addition. In the light of the discussions made in earlier orders of the ITAT, the issue is decided in favour of the assessee. Accordingly, the revenue's appeal is dismissed. The order of the CIT(A) being in conformity with earlier order of ITAT, the same may be upheld. 28. We have heard rival submissions and perused the record. Respectfully following ITAT order in asse....