TaxTMI 
TaxTMI 
2015 (1) TMI 157
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.... capital through the FDI route, as well as through three Indian companies, namely, Paradigm Hotels Pvt. Ltd. (PHPL), Shantideep Hotels Pvt. Ltd. (SHPL) and Shantideep Foods Pvt. Ltd (SFPL), as share capital/foreign currency (FC) loans. The three Indian companies were later amalgamated with the appellant company through a scheme duly approved by the Hon'ble Delhi High Court vide its order dated 21.6.2007 (with effect from 1.8.2006). In lieu of the FC loans, UBSM was allotted further equity in the appellant company. UBSM is owned by 3 companies - namely Infotech Services Ltd. based in Channel Islands having 20% stake in the appellant company; and Paranal Finance and Mid East Consortium based in British Virgin Islands having 80% stake in the appellant company. Infotech is owned by Mr. Suresh Nanda whereas Paranal and Mid East are owned by one Mr. Hamilton Andrews, a British national. The additions made on account of share application/capital and related issues for various years in the case of the appellant are as under:- A.Y. Amount (Rs.) Investing Company Mode of Payment 2004-05 7,05,00,000 PHPL Share application 2005-06 140,02,18,500 49,26,00,....
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....on 25.04.2007 operative from 01st August, 2006 the said Company was amalgamated with Claridges Hotel Pvt. Ltd. However, till then the said Paradigm Hotels Pvt. Ltd. continued to file its return of income and was subjected to tax in India. The above mentioned documents in fact fully established the fact that Paradigm Hotel had, without any doubt, made the said payments, but had the requisite financial resources to enable it to do so. 1.3 That in complete disregard of all the above mentioned evidence placed before the A.O. by which the appellant fully discharged the burden cast on it by Section 68 of the Income-tax Act, 1961 the A.O. made an addition of the sum on the basis of patently fallacious and irrelevant reasoning, and nothing but mere surmise and conjecture:- The A.O. at para 4.3, page 9 of his order states "it is evident that Mr. Suresh Nanda has used the Mauritius route to bring his unaccounted money into the India Companies to avoid disclosure." Para 4.4 of the Order reads "looking to the Balance Sheet and Profit and Loss Account of Universal Business Solution Ltd. and Paradigm Hotels Pvt. Ltd., it is clear that the Companies do not have significant income. They have....
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.... Citi Bank, New Delhi. 6,10,87,500 2. 06.11.2004 269352 Citi Bank, New Delhi. 52,96,59,000 3. 15.03.2005 003710 Citi Bank, New Delhi. 80,94,72,000 Total: 140,02,18,500 The assessee during the course of assessment proceedings, in order to establish the genuineness of the credit and to discharge the burden cast on it by Section 68 of the Income-tax Act, 1961, filed the following: 1. Certificate of Incorporation of Star Hospitality Corporation dated 26.11.2002. 2. Amended Certificate of incorporation on change of name from Star Hospitality Corporation to Universal Business Solution Ltd. dated 14.01.2003. 3. Mauritius Tax Residence Certificate issued to Star Hospitality Corporation dated 24.01.2003. 4. Mauritius Tax Residence Certificate issued to Universal Business Solutions Ltd. dated 27.1.2009 for the assessment years from 05.11.2004 to 04.11.2008. 5. Letter dated 15.09.2009 from Barclay Bank, Mauritius showing statement of funds remitted to Claridges Hotel Pvt. Ltd. towards share capital. 6. Banker's Reference Letter dated 24.06.2008 from Barclay Bank, Mauritius. 7. Balance Sh....
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....d Shantideep Hotels Pvt. Ltd. The shares in the Indian companies in turn were held by M/s. Universal Business Solutions, a company incorporated in Mauritius. The shareholders of this company were Infotech Services Ltd., Channel Islands (Mr. Suresh Nanda holding a controlling stake in this company), Paranal Finance, BVT and Mid East Consortium, BVI. The Assessing Officer was also provided with the details showing that Infotech Services LTd. had only a 20% stake in UBS, 80% being held by Paranal Finance and Mideast Consortium, and that Mr. S. Nanda had no interest or shares in the other two companies i.e. Paranal Finance or Mid East Consrotium. The assessing authority was also informed by Mr. Suresh Nanda that one Mr. Hamilton Andrews, a British National held the controlling stake in the other two companies i.e. Paranal and Mid East, and that Mr. Nanda did not hold any stake in these companies. A duly notarized Affidavit of Mr. Hamilton, giving the details of his residential address and his affirmation on oath that he controlled the two companies i.e. Paranal and Mid Easst was also placed before the two companies i.e. Paranal and Mid East was also placed before the assessing authorit....
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.... payment to Y2 Space Pte. Ltd. Singapore was made. The Learned CIT(DR) submitted further that UBSM was not having sufficient funds to invest. The contention of the Learned AR on the other hand remained that the documents furnished by the assessee before the authorities below are sufficient to establish the identity, genuineness and creditworthiness to justify the action of the Learned CIT(Appeals) in deleting the additions. 6. Reiterating the common contentions as discussed hereinabove, the Learned CIT(DR) for the appeal for assessment year 2007-08, submitted further that during the year an amount of Rs. 17,94,15,000 was received by the assessee from Universal Business Solution Ltd. Mauritius (UBSM). The assessee company has been bringing unaccounted money after crediting to inter-mediatory including UBSM and the true source of funds has not been disclosed to the income-tax authorities. Since the assessee company is the ultimate beneficiary of unaccounted funds, the Assessing Officer was justified in making the additions in question. 7. Since the parties choose to argue the appeal for the assessment year 2007-08 as a lead year covering more issues we heard it first. Learned A....
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....not belong to the assessee company. The Assessing Officer contemplates that unexplained income is not of the assessee and referred contents of para No. 4.3 to 4.5 at page Nos. 8 & 9 of the assessment order. He pointed out further that in para No. 4 to 4.6 at page No. 10 of the assessment order, the Assessing Officer contradicts himself that unexplained income is of the assessee. Learned AR submitted that the issue raised is also covered by the order dated 12.4.2013 of the ITAT in ITA Nos. 4932 & Ors./Del/2011 in the case of Russian Technology Centre Pvt. Ltd. for the assessment year 2007-08. In that case, following ratio has been arrived at: i) CBDT Circular No.5 (F.No. 73A/2(69)-IT (A-II) dt. 20.2.1969- "money brought by Non residents for investments for other purposes is not liable to Indian Income-tax. ......if money has been brought into India through banking channels.......no questions at all are asked by the ITOs as to the origin of the money or assets brought in" (Relevant para at Pg 112/PB1). ii) Money received through banking channels: (para 11 of Pg 114/PB1) The moneys have come to the assessee company through banking channels as is evident from FIRC, which....
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....Delhi) (para 11.3 at Pg no. 116/PB1), while examining issue in question in light of CBDT Circular No.5 dt. 20th Feb. 1969 and the decision of Finlay Corporation Ltd. (supra) held as under: "In the light of the above decision of the Tribunal, and circular No.5 of CBDT, we are of the view that the action of the Revenue authorities is bringing to tax the sum of Rs. 2,83,111,550 cannot be sustained. We have already held that the assessee is a tax resident of Mauritius. There is no basis for coming to a conclusion that any income of the assessee accrued, arose or was received in India. In these circumstances, we direct that the addition made be deleted. Ground Nos. 2 to 2.3 raised by the assessee are allowed". 9. Learned AR submitted that facts about the source of source of share application money in the case of assessee has been established in the case of Sh. Suresh Nanda (supra) decided by the ITAT. In that case, sources of income have been elaborately explained. The ITAT in its order in that case has held that UBSM is not a benami company. On the basis of documents submitted, the ITAT held as "we do not find any logic in the Assessing Officer making an addition of this amount i....
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....ed by Finance Act, 2012 w.e.f. 01.04.2013. As per this proviso, the section now provide that in case of a closely held company if the amount credited is by way of share application money, share capital, share premium or any such amount by whatever name called, the explanation offered for the credit will not be considered to be satisfactory unless the company which received the sum offers explanation about the source of money in the hands of such shareholder (being a resident) or persons making payments towards issue of shares. 13. Learned AR submitted that the order of the Assessing Officer is passed on conjectures or surmises and presumption that the money is the undisclosed income of the assessee company. No evidence is available in this regard with the department. In support, he placed reliance on the decision of the Hon'ble Supreme Court in the case of Omar Sallay Mohd Sait vs. CIT (1959) 37 ITR 151 (S.C) holding that on no account whatever should the ITAT base its findings on suspicion, conjecture or surmises nor should it act on no evidence at all or on improper rejection of material and relevant evidence or partly on evidence and partly on suspicion, conjecture or sur....
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....l and credited to share capital account or share premium account of the appellant. (ii) Issue identical as that of Russian Technology Centre (P) Ltd. The Learned CIT(Appeals) deleted the said addition following the Hon'ble ITAT in the case of Russian Technology Centre Pvt. Ltd. (Order of the Hon'ble ITAT at Pg. 102 to 122/P.B). 14.1 The Learned CIT(DR) submitted in rejoinder that the decision relied upon by the learned AR having distinguishable facts are not helpful to the assessee. 15. Now, we have to examine as to whether the assessee had been able to furnish proof of existence of the investors, their creditworthiness and genuineness of the transaction, which an assessee is required to establish to get rid of the application of the provisions under section 68 of the Incometax Act, 1961. We have discussed the relevant facts on the issue hereinabove. In nutshell, the Assessing Officer made addition of Rs. 17,94,15,000 being share application money received from Universal Business Solution (A Company Incorporated in Mauritius - in short 'UBSM') and Rs. 86,72,88,128 through three Indian companies, namely, Paradigm Hotels Pvt. Ltd. (PHPL), Shanti Deep Hotel....
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.... without giving any further details of either source or creditworthiness thereof. Hon'ble High Court upheld the addition made by the authorities below on the basis that explanation offered by the assessee about nature and source of amount deposited in bank was not satisfactory. Hon'ble Delhi High Court in the case of CIT vs. Divine Leasing & Finance Ltd. (supra) relied upon by the Learned CIT(DR) has been pleased to hold that the assessee must prove identity of shareholder and creditworthiness of shareholder and genuineness of the transaction. Again in the case of CIT vs. Youth Construction Pvt. Ltd. (supra), relied upon by the Learned CIT(DR), Hon'ble Delhi High Court has been pleased to express the similar view with observation that factual aspects, surrounding circumstances of the case have to be taken into consideration while dealing with case in a holistic manner dealing with the entire evidence relied upon and having regard to the report of Investigation Wing, the manner in which entries were made in the bank account, the statement. The Hon'ble High Court has also discussed several leading decisions in this regard including the decision of Hon'ble Supreme ....
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....11.2008. 5. Letter dated 24.06.2008 from Barclay Bank, Mauritius confirming that the UBSL is maintainign satisfactory account. 6. Letter dated 15.09.2009 from Barclay Bank, Mauritius shwoing statement of funds aggregating US $ 4,74,50,000 remitted to Claridges Hotel Pvt. Ltd. w.e.f. 29.10.2004 to 09.10.2007 towards share capital. 7. Certificate dated 12.10.2009 from Chartered Accountants confirming the shareholidng pattern of Universal Business Solutions Ltd. from 31.03.2004 to 31.03.2007. 8. Certificate dated 04.11.2009 from Chartered Accountant confirming the investments and loan receivables reflected in the balance sheets of Universal Business Solutions Ltd. from 31.03.2004 to 31.3.2007. 9. Audited balance sheet and income statement as on 31.3.2004 to 31.03.2007 and a certificate dated 28.10.2009 from Chartered Accountant on borrowings reflected in the respective balance sheets of Universal Business Solutions Ltd. 21. We find from the above documents that the assessee had furnished proof of existence of the investor, proof that the money have come from the investor and has also provided financial statement of the investors, details of the investments by the inv....
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....aid down in the Income-tax Act, 1961 does not permit the inclusion of the very same income in the hands of the present assessee and taxing the same on an substantive basis. We concur with this contention of the learned AR. The contentions of the learned AR also remained that the facts about the source of source of share application money in the case of assessee has been established in the case of Shri Suresh Nanda decided by the ITAT in ITA No. 2236/Del/2013 & Ors. Having gone through this decision, we find that the source of income have been elaborately explained in the case of Shri Suresh Nanda before the ITAT in the appeal for the assessment year 2004-05, 2005-06 and 2008-09. In that case, the documents furnished are relating to evidence showing that money belongs to UBSM and not to Shri Suresh Nanda. The UBSM is an independent entity and is not a company of Shri Suresh Nanda. Incorporation Certificate, Memorandum and Articles of UBSM were filed with tax residency certificate that the UBSM is a tax resident of Mauritius, shareholding of UBSM, confirmation by shareholders of UBSM. The ITAT in that case vide para No. 7.4.4 has held that UBSM is not a benami company and in the same....
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....Assessing Officer making an addition of this amount in the name of the company. 7.4.5 Coming to documents found during the course of search we examine the same and hold as follows:- (i) Annexure A 26 supports the claim of the assessee on the issue of share holding and further that the assessee does not control UBS Ltd. Mauritius. (ii) Annexure A-8 at pages 17 to 34 does not support the conclusion of the Assessing Officer that UBS Ltd. Mauritius is controlled by the assessee. On the other hand it demonstrates that the assessee is a major shareholder of Infotech Services, which is turn holds only 20% of shareholding of UBS Ltd., Mauritius. The Balance 80% of the share holding of UBS Ltd. is hold by the parties who are not related, much less controlled by the assessee. (iii) Annexure A 8 also supports the claim of the assessee that Infotech Services Ltd. holds 20% of UBS Ltd. Mauritius. The claim of the assessee that the letter in question refers to second round of financial requirements of UBS Ltd., Mauritius and that Info Services Ltd. was required to contribute 20% of share of finance of UBS Ltd. Mauritius and that this was met through interim dividend declared by M/s. ....
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....ly been invested from unaccounted income of the assessee. The dividend earned by the assessee from the company controlled by him i.e. M/s. UBS Trading FZC was invested in M/s. UBS Ltd. Mauritius, through Infotech Services Ltd. In view of this factual matrix, we uphold the order of the Learned CIT(Appeals). Hence we do not go into the legal submissions made by the assessee that whoever alleges fraud, has to prove it; (b) the burden of proof lies on the person alleging benami transactions; (c) that the assessee has discharged the burden of proof that lie on it; (d) that sources of source need not be established". 22. We note from the above reproduced paragraph No. 7.4.5 of the decision in the case of Shri Suresh Nanda that the ITAT has held that Shri Suresh Nanda is the major shareholder of Infotech Services, which, in turn, holds only 20% of the shareholding of UBSM. The balance 80% of the shareholding of UBSM is held by the parties who are not related, much less, controlled by Shri Suresh Nanda. 23. We also find that an identical issue under almost similar heads has been decided by the ITAT in the case of Russian Technology Centre Pvt. Ltd. (supra). In that case, Russian Tech....
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....ents submitted. It further held that there is no logic in the Assessing Officer's making an addition of the amount in the balance sheet of Claridges Hotels Pvt. Ltd. i.e. the present assessee. The ITAT also held that the shareholders of UBSM have filed letters of confirmation as regards the ownership. We have reproduced relevant extracts of this order of the ITAT in previous paragraphs. 25. The ITAT in the case of Russian Technology Centre Pvt. Ltd. (supra) has held that the availability of balance sheet, certificate of incorporation, confirmations and certificate of good standing etc. filed by the assessee in respect of shareholder establish that they are non-resident entity having independent and legal existence. The money have come to assessee through banking channel as is evident from FIRC, which also mentions the purpose of remittance and also the particulars of remitting bank. FIPB approval that too with a liberty to collect share capital up to Rs. 600 crores and ROC compliance, etc., clearly indicates the stand of the assessee. The ITAT thus came to the conclusion that the plethora of the evidence filed by the assessee amounts to discharge of primary burden casts on t....
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.... of non-resident under sec. 5(2). Therefore, the issue whether the income of non-resident is taxable or notice still to be decided with reference to the provisions of s. 5(2) and, the provisions of s.68 or 69 cannot enlarge the scope of s. 5(2). What is not taxable under s. 5(2) cannot be taxed under the provisions of s. 68 or s. 69. Under s. 5(2), the income accruing or arising outside India is not taxable unless it is received in India. Similarly, if any income is already received outside India, the same cannot be taxed in India merely on the ground that it is brought in India by way of remittances. For example, there may be appearing an entry of cash credit in the name of a person of USA by way of loan received through cheque and deposited in the bank account maintained at any city n USA. Such money, being received outside India, cannot be taxed under s. 5(2) unless it is proved that such money is relatable to the income accrued or arising in India. Therefore, the same cannot be taxed under s. 68 merely on the ground that assessee fails to prove the genuineness and source of such cash credit. Therefore, we are of the considered view that provisions of s. 68 or 69 would be applic....
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....65,0180 51,45,57,6 52,12,07.86 3. Loan given by to Shantideep Foods Pvt. Ltd. 2.17.,642 21,76.420 16,34,00.4 17.05.76.91 Total 165,94,07.35 (b) Allotment of Equity Shares at a premium to UBSL as the Shareholder of PHPL, SHPL & SFPL, in respect of Share Application Money: Rs. 1,18,38,405/- from UBSL to PHPL, SHPL and SFPL in various years. Sl. No. Particulars No of Shares Face Value Premium Share 1. UBSL given amount to for Share Application 5,866 58,660/- 45,38,821/- 45.97,481/- 2. UBSL given amount to for Share Application 3,375 33,750/- 26,1 1,409 26,45.159/- 3. UBSL given amount to for Share Application 5,866 58,660/- 45,38,821 45.97,48 Total: 1,51.070/- 1.16,89.051/- 1.18.40.121/- (c) Issue of shares to UBSL in lieu of their share holding of PHPL, SHPL & SFPL in the exchange ratio approved by the hon'ble High Court i.e. 4,237 shares of the face value of Rs. 10/- each of Claridges Hotel Pvt. Ltd. were issued. That the addition of the impugned amount, made by invoking the reasons or Sec....
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....tius, Channel Island, British Virgin Islands, etc., into properties and businesses in India. On the other hand, we have the Revenue and other authorities investigating suspected role of Sh. Suresh Nanda and his associates/concerns in defence deals in India. There is evidence of link between Sh. Suresh Nanda and his associates to the investments made in India and Indian companies. That is neither denied nor disputed However, in my considered opinion there is no evidence yet to link the investments and the alleged kick-backs in the defence deals in India. I have already held, in several group/connected cases (Sh. Suresh Nanda, Dr. MV Rao etc.) that the enquiries with Mauritius and other foreign jurisdictions need to be pursued. Fresh enquiries also need to be made with Singapore, Channel Islands, BVI, etc., wherever necessary, to establish the link, if any. As and when such link is established, the income can be taxed as income accruing/arising in India. Else, it cannot be taxed. Hon'ble Supreme Court of India, in Union of India Vs. Kamlakshi Finance Corporation Ltd. AIR 1992 S.C 711 and Khalid Automobiles vs. Union of India [4 SCC (Suppl.) 653] has laid down that the doctrine of....
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....undisclosed sources. The Learned CIT(Appeals) discussing the evidence filed by the assessee explaining the source has held vide para No. 6.2 of the order that the expenditure made by UBSM on behalf of the assessee company, cannot be treated as unexplained expenditure of the assessee under sec. 69C of the Act. The explanation of the assessee about the source has been discussed in para No. 6.1 of the first appellate order, which has not been successfully rebutted by the Revenue, we thus do not find reason to interfere therewith. The same is upheld. 30.2 Since facts on the issue are similar (except the quantum of the amount involved) in the remaining assessment years, we following the above findings uphold the action of the Learned CIT(Appeals) on this issue, by which he has deleted the addition made under sec. 68 of the Income-tax Act, 1961 on account of undisclosed cash credit. The related ground Nos. 2 & 3 for assessment year 2004-05, ground No.2 for assessment year 2005-06, 2006-07, 2007-08 and 2009-10 of the appeal preferred by the Revenue are thus rejected. 31. Ground and objection relating to disallowance made under sec.14A: The Assessing Officer made disallowances und....
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....T(Appeals) has allowed the relief. 32. In support of the grounds, Learned DR has basically placed reliance on the assessment order. 33. Learned AR on the other hand supported the first appellate order on the issue and rejoined with the submissions that Rule 8D has no application in the other assessment years except assessment year 2008-09 and 2009-10, when the operation of the said Rule came in effect. Learned AR placed reliance on the following decisions: a) CIT Vs. Shivam Motors Pvt. Ltd. in ITA No.88 of 2014 (Hon'ble Allahabad High Court) dated 22.11.2013. b) CIT Vs. Corrtech Engergy Pvt. Ltd. (2014) 223 Taxmann 130 (Guj.); c) CIT vs. M/s. Lakhani Marketing in ITA No. 970 of 2008 (Hon'ble Punjab & Haryana High Court) ; d) Maxopp Investment Ltd. vs. CIT 247 CTR 162 (Del.) ; e) IACT vs. Bareilly Corporation Bank 27 ITD 1 (Del.); & f) CIT vs. Smt. Godawari Sarraf 113 ITR 589 (Bom.). 33.1 Learned AR submitted that the Assessing Officer has misplaced reliance on the decision of ACIT vs. Chen Invest Ltd. reported in 317 ITR 8. In the said case, the ITAT has observed that the disallowance under sec. 14A can be made even if there is no exempt income ge....
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.... Controlling Interest Details of interest bearing and non interest bearing funds (Amount in):- Particulars A.Y. 2005-06 A.Y. 2006-07 A.Y. 2007-08 A.Y. 2008-09 A.Y. 2009-10 Non Interest bearing funds Share Capital - - 8,049,810 30,430,000 30,547,000 Share capital pending allotment - - 1,671,788,128 - - Share Application Money - - 89,365,100 - - Reserve & Surplus - - 11,837,701,367 13,493,313,000 13,531,970,000 Total - - 13,606,904,405 13,523,743,000 13,562,517,000 1360.69 Cr. 1352.37 Cr 1356.25 Cr. Interest bearing Funds Loan Funds - - 965,291,350 913,666,000 511,699,000 Total 965,291,350 913,666,000 511,699,000 96.53 Cr. 91.37 Cr. 51.17 Cr. Remarks Pg 20 of P.B. Pg 9 of P.B. Pg 73 of P.B. Investment made 1,376,227,969 2,822,992,989....
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....ab & Haryana High Court in CIT, Faridabad vs. M/s. Lakhani Marketing Incl., ITA No. 970/2008, decided on 02.04.2014 , made reference to two earlier decisions of the same Court in CIT vs. Hero Cycles Ltd., [2010] 323 ITR 518 and CIT vs. Winsome Textile Industries Ltd., [2009] 319 ITR 204 to hold that section 14A cannot be invoked when no exempt income was earned. The second decision is of the Gujarat High Court in CIT-I Vs. Corrtech Energy (P) Ltd. [2014] 223 Taxman 130 (Guj.) . The third decision is of the Allahabad High Court in Income Tax Appeal No. 88 of 2014, CIT (II) Kanpur vs. M/s. Shivam Motors (P) Ltd. decided on 05.05.2014 . In the said decision it has been held: "As regards the second question, Section 14A of the Act provides that for the purposes of computing the total income under the Chapter, no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income which does not form part of the total income under the Act. Hence, what Section 14A provides is that if there is any income which does not form part of the income under the Act, the expenditure which is incurred for earning the income is not an allowable deduction. For the yea....
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....ct expenditure at Rs. 16,60,619. Since in this year also, there is no exempt income, we following the above decision hold that no disallowance in question was justified. The ground No.2 of the appeal of the department is thus rejected and objection Nos. 2 to 2.2 of cross objection are allowed. In the assessment year 2007-08, Learned CIT(Appeals) following its decision in earlier year i.e. other than assessment years 2008-09 and 2009-10 that the amount of expenditure disallowed would have to be restricted to the exempt income has deleted the disallowance of Rs. 9,26,97,023 made under sec. 14A of the Income-tax Act, 1961, with this finding that there is no dividend income in the assessment year 2007-08. In absence of rebuttal of this fact, we are not inclined to interfere with the action of Learned CIT(Appeals). The same is upheld. Ground No. 3 (Revenue) is accordingly rejected. In the assessment year 2004-05, Learned CIT(Appeals) has restricted the disallowance of expenditure to the exempt income. In the result, he has given relief of Rs. 35,17,809 out of the disallowance of Rs. 41,20,767 made by the Assessing Officer. In that year, the Assessing Officer had disallowed Rs. 35,17,809....
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....ce of depreciation of Rs. 1,30,963 claimed on health equipment installed at the residence of the Managing Director of the assessee hotel. 42. Heard and considered the arguments advanced by the parties. 43. The authorities below have disallowed and sustained the disallowance on the basis that the equipments for physical fitness fitted at the residence of the MD was for personal use and not for the business purposes of the assessee. Contention of the learned AR remained that it was purchased to keep at MD's residence as per the corporate policy that all its executives should undergo physical regimen to enable them to perform more efficiently in the Hotel Industry. Under these facts, we find it fit to set aside the matter to the file of the Assessing Officer to examine the fact as to whether the provided facility was part of the perquisite and decide the issue afresh after affording opportunity of being heard to the assessee. Objection is allowed for statistical purposes. 44. The assessee has also questioned first appellate order on the issue of validity of proceedings under sec. 153A and/or 143(2) but the same has not been pressed, the related ground of the appeals prefe....
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.... expenditure incurred in the relevant year was the more than income, thus, even in terms of sec. 40A(2b), the said payment being bona fide, the genuine and for the services rendered should have not been disallowed. The learned AR submitted that the parents company had paid fee on behalf of the assessee. The authorities below have not denied the existence of the agreement on the basis of which the agreed amount was paid as fee. UBSM had also incurred expenses and TDS Wing of the Department had given certificate vide which TDS was to be deducted. There is no diversion of funds. The learned AR pointed out further that in the assessment year 2004-05, it was allowed by the Learned CIT(Appeals). 46. Learned CIT(DR) on the other hand tried to justify the orders of the authorities below. For the assessment year 2004-05, the Learned CIT(DR) submitted that in the assessment year 2004-05, the disallowance has been deleted by the Learned CIT(Appeals) ignoring this fact that no grievance was there. 47. Considering the above submissions, we find that the Learned CIT(Appeals) in the assessment year 2005-06 has sustained the addition, with this noting that in the assessment year 2004-05, the....
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....ction No. 4 of the cross-objection. 49. The Assessing Officer has dealt with this issue in para Nos. 9 to 9.2 at page Nos. 13 & 14 of the assessment order, as per which the bill of expenses indicates that the claimed expenses were not in the form of repair and maintenance. The Assessing Officer observed that these expenses were in the form of substantial addition to the exceeding fixed assets of the company. In other words, the Assessing Officer was of the view that the expenses claimed were capital in nature and cannot be allowed as an expenditure to the profits and loss account. Learned CIT(Appeals) has dealt with the issue in para Nos. 7.2 at page No. 37 of the first appellate order. He has approved the action of the Assessing Officer in this regard. The contentions of the learned AR remained that while making the disallowance the authorities below have disregard the details and other evidence produced. He submitted that the assessee is engaged in the business of running a hotel and thus incurs expenses towards the repairs and maintenance of the various assets and equipments located in the said premises. During the assessment year, the assessee had incurred Rs. 69,45,108 as r....