AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2019 (9) TMI 148
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....ed 31/12/2018- "1. That the CIT(A) erred on facts and circumstances of the case and in law in upholding the action of assessing officer in making addition of Rs. 1,37,71,043 on account of allowance of depreciation on golf-course as "building" as against the same being considered as "plant and machinery" by the appellant. 1.1 That the CIT (A)/assessing officer erred on facts and circumstances of the case and in law in not appreciating that classification of golf course could not be changed in subsequent year when claim of depreciation @ 25% on golf course as 'plant' stood allowed/ accepted in the past assessment years, i.e., 1998-99 to 2000-01 and succeeding assessment years, i.e., 2006-07 to 2009-10. 1.2 That the CIT (A)/assessing officer erred on facts and circumstances of the case and in law in not appreciating that the classification of block of asset which has been allowed/accepted and merely carried forward from earlier years cannot be modified in current year 1.3 That the CIT(A) erred on facts and circumstances of the case and in law in holding that golf course has not manufactured or produced anything so as to classify it as a 'plant and m....
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....lowed depreciation on golf course @ 10% by treating the same as 'building'. On further appeal against the said order, the ld CIT(A), vide order dated 31.12.2018 upheld the order of the ld assessing officer restricting depreciation on golf course @ 10%. The CIT(A) held that no doubt the assessee is generating revenue from the players for playing golf and allowing its golf course, but it cannot be said that the assessee has manufactured or produced anything. Thus, assessee is in appeal before us. 5. The ld AR submitted that aforesaid action of the assessing officer/CIT(A)in restricting the depreciation to 10% is bad in law and not sustainable for the reasons elaborated hereunder: a) Tribunal vide order dated 15.06.2016 merely remanded/remitted the matter to AO for fresh consideration i. As stated supra, in the first round of proceedings, the Hon'ble Tribunal restored the issue whether depreciation is admissible @25% as plant or @10% as building, to the file of the assessing officer for de-novo consideration and to examine the details of construction on the 300 acres of land converting it into a golf course, which were not filed before the assessing officer in the....
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....achinery or building. Therefore, conclusion of the ld. CIT (A) is not sustainable as we are unable to see any basis for the factual observations noted by the ld. CIT (A) for putting the golf course in the category of plant. Since the issue has not been adjudicated by the ld. CIT(A) in a proper manner, therefore, this issue is restored to the file of the AO for a fresh adjudication after affording due opportunity of being heard to the assessee and without being prejudiced from earlier orders and our observations in this order. 48. We may also point out that to support the case of the AO, the ld. CIT-DR has placed reliance on plethora of decisions including the decision of Hon'ble Supreme Court in the case of CIT Vs. Anand Theatre [supra], CIT Vs. Gwalior Rayon Silk Mfg. Mills 196 ITR 149 [SC] and decision of Hon'ble High Court of Delhi in the case of Moradabad Toll Road Co. Vs. ACIT [2014] 52 Taxmann.com 21 [Delhi] to establish that golf course is not a plant and machinery and it is to be categorized as a building and on the other hand, the ld. AR has placed reliance on the case of decision of Hon'ble Supreme Court in the case of CIT Vs. Karnataka Power Corpn. 2....
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....ering the fact that details of construction of golf course were not considered by the assessing officer in the first round. He submitted that Tribunal simply set-aside/ remitted the issue to the file of the assessing officer to decide it afresh. In these circumstances, any prima-facie observation/finding recorded by the Tribunal in the earlier para, which was, in fact, based on limited examination of details of construction of golf-course, it is respectfully submitted, stood obliterated for all intents and purposes. He placed reliance in this regard is placed on the judgment of the Hon'ble Supreme Court in the case of Hukam Singh v. State of Haryana and Another: 2019 SCC Online SC 159, wherein the Apex Court clarified similar issue and held that once the matter is remanded for fresh consideration, any observation in the judgment stands obliterated and the authorities are required to consider the issue afresh. In that case, review petition was filed before the Hon'ble Court called upon it to clarify the meaning and purport of the following passage from its earlier ruling in the case of Haryana State Industrial Development Corporation Ltd. vs. UDAL (2013) 14 SCC 506: "32. We....
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.... with the specific direction that the High Court shall not be influenced by the observations made by the Supreme Court, such passing observation at paragraph 32 could not be held as binding. The Court observed that: "8. As regards the last submission, paragraph 32 of the decision in Haryana State Industrial Development Corporation Ltd.2 recorded the submission of the learned counsel that on the basis of sale deed Ext.PW 9/A, the value ought to be higher than Rs. 37,40,000/- per acre. The matter was not finally decided by this Court and was remitted in paragraph 34 for fresh consideration "uninfluenced by the observations contained in this judgment". We do not agree with the submission that the landowners were assured of minimum compensation at the level of Rs. 37,40,000/- per acre. In fact, in tune with the observation that fresh consideration is uninfluenced by any of the observations contained in the judgment, the matter was left open and the assessment had to be done de novo. We, therefore, reject the submission." (Emphasis supplied) v. Similarly, the Hon'ble Supreme Court in the case of Kanaklata v. State (NCT of Delhi) and Others: 6 SCC 617, held that if an o....
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.... wholly misconceived nor can it be dubbed as forum shopping in disguise. The earlier order passed by the trial court is so strongly worded that it could in all likelihood give rise to a reasonable apprehension in the mind of the complainant which cannot be lightly brushed aside. We must hasten to add that we are not in the least suggesting that the Presiding Officer of the trial court is totally incapable of adopting a fair approach while passing a fresh order but then the question is not whether the Judge is biased or incapable of rising above the earlier observations made by her. The question is whether the apprehension of the complainant is reasonable for us to direct a transfer. Justice must not only be done but must seem to have been done. A lurking suspicion in the mind of the complainant will leave him with a brooding sense of having suffered injustice not because he had no case, but because the Presiding Officer had a preconceived notion about it. On that test we consider the present to be a case where the High Court ought to have directed a transfer. Inasmuch as it did not do so, we have no option but to interfere and direct transfer of the case to another court". (emphasi....
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....nor the Revenue has any mandate/ authority to subsequently, remove the asset from a particular block and reclassify/ reenter the same in some other block. To put it simply, once an asset is classified as block of "plant", then, in subsequent year, the same asset cannot be classified as "building" or vice versa. Pertinently, the block concept of depreciation was introduced by the Taxation Laws (Amendment and Miscellaneous Provisions) Act, 1986 with effect from 1-4-1988. Circular No. 469 dated 23 September 1986: 162 ITR (St) 21 explained the scheme of depreciation on block of assets. It was clarified that in the block concept, individual identity of the asset is lost, and depreciation is allowed with reference to the entire block. In view of the above, he submitted that depreciation is to be allowed on the block of asset at specified percentage on the written down value of the block of asset. The written down value of the block of asset is the value of block of asset at the beginning of the previous year as increased or decreased by the addition or deletion in the previous year. Hence, once an asset goes into the block of asset and the same is allowed by the assessing officer in the ....
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....imed allowed by the assessing officer in regular assessment as under: - Depreciation claimed in return - Tax Audit Report - Assessment u/s 143(3) Reassessment proceedings subsequently initiated on a different issue, were quashed by ITAT vide order dated 21.05.2015. 2001-02 30.10.2001 Order u/s 143(3) dated 29.3.2004 4th year of claim, allowed originally by the assessing officer. Subsequently, the case was reopened and the issue was set aside by the Tribunal vide order dated 15.6.2016 for denovo consideration. 2002-03 31.10.2002 Return processed u/s 143(1) vide intimation dated 27.2.2003 5th year, claim of depreciation stood accepted, as under: as under: - Depreciation claimed in return - Tax Audit Report - Intimation u/s 143(1) 2003-04 27.11.2003 Order u/s 143(3) dated 28.2.2006 6th year of claim. The case was re-opened and the issue was set aside by the Tribunal vide order dated 15.6.2016 for denovo consideration. He further submitted that , in regular assessment under section 143(3) vide order dated 29.03.2004 for assessment year 2001-02, the claim of depreciation was accepted after duly considering the replies ....
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....7 to 2009-10. Therefore he submitted that it is totally absurd to take a different position in some of the middle assessment years, more so, when that would be totally contrary to the fundamental principle of depreciation being allowed on the WDV of the relevant block. e) He further referred to several Judicial Precedents to support his contentions. i. He first referred to decision of Delhi Bench of the Tribunal in the case of DCIT v. Jaypee Greens Ltd. : ITA Nos. 3545 to 3547/Del/2009, wherein on exactly similar facts, the Tribunal considering golf course as a plant, was pleased to allow depreciation @25% observing that the assessing officer has himself allowed depreciation at that rate in the past [refer pages 33-38 of case laws paper book]. He submitted that in that case, the assessee was engaged in the business of running and operating a golf course in Greater Noida on which the assessee claimed depreciation @ 25%. The assessing officer held that golf course and also hospitality services is not covered in the block of 'plant', but it is covered in the asset 'building' which is used by the hotels for hospitality services on which the depreciatio....
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....s allowed depreciation as applicable to building @10%. It is settled law that Tribunal cannot take away the relief that AO has given. Now further we find that on the same set of facts in assessee's own case, the impugned asset was treated as plant for A.Y. 2001-02 by the AO himself and depreciation @25% was allowed. The assessment was done u/s 143(3) of the IT Act. In the present case, we do not find any change in the circumstances of the case facts or law. Under the circumstances, we refer to Hon'ble Jurisdictional High Court decision in the case CIT vs. Dalmia Promoters Developers (P) Ltd. 281 ITR 346 wherein it was held that when there is absence of any material change in the facts and law, the view taken for earlier year cannot be disturbed. In the present case, we find that no such material change has been brought out before us. Since the depreciation @25% on the said asset has been allowed for A.Y. 2001-02, we do not see any reason to disturb the rate to 20% as applied by the AO. Accordingly, we uphold the order of the ld. CIT(A) to allow the depreciation @25%. 2.6 In the result, all the revenue's appeals are dismissed. (Emphasis supplied) ....
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....urgical equipment used for the purposes of the business or profession but does not include tea bushes or livestock or buildings or furniture and fittings" On perusal of the above definition, it is submitted that an inclusive definition of `plant' has been given in section 43(3) of the Act to include ships, vehicles, books, scientific apparatus and surgical instruments used for the purpose of business or profession. The definition specifically excludes from its ambit tea bushes, livestock, buildings or furniture and fittings. He referred to decision of Supreme Court in the case of Scientific Engineering House Pvt Ltd v. CIT: 157 ITR 86, wherein the meaning of term 'plant' was explained. He submitted that legal principles that emerge from the aforesaid decision may be culled out as under: (a) Plant in its ordinary sense includes any apparatus, article or object fixed or movable, live or dead, used by a businessman for carrying on his business; (b) Plant include any article/ apparatus used by a businessman for carrying on business and it is not necessarily confined to an apparatus which is used for mechanical operations or processes or is employed in....
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....iture on creation of lakes; (d) Expenditure towards electrification; (e) Expenditure towards creation of stores, medical centers, etc. (f) Expenditure towards procuring technical know-how for development of golf course; (g) Indirect day-to-day business expenses allocated to the cost of golf course; (h) Other miscellaneous earthmoving, leveling expenses, etc. c) On perusal of the aforesaid, it will be kindly appreciated that the Golf course is a highly specialized and complex plant constructed on the land requiring levels of undulation and other technical requirements as per the rules of the game of golf. The construction of golf course involves various plants and equipment referred above. Further, the fact that the appellant spent an aggregate sum of Rs. 22.57 crores for construction of Golf course during the financial years 1997-98 to 2000-01 speaks volume of the specialized nature and the advanced technology/ expertise that goes into constructing the Golf course (Refer pictorial representation of the specialized nature of Golf course placed at pages 74-111 of the Paper book - Vol 1). d) In light of the aforesaid, it i....
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....d 14.10.2004 of the High Court, which is decided in favour of the assessee, the High Court has specifically mentioned that the prawns are grown in specially designed ponds. Further, this very contention that these are natural ponds has been specifically rejected as not correct. Moreover, from the order passed by the Assessing Officer we find that this was not the reason given by the Assessing Officer to reject the claim. Therefore, finding of fact on this aspect cannot be gone into at this stage. 6. We find that the judgment dated 14.10.2004 rightly rests this case on 'functional test' and since the ponds were specially designed for rearing/breeding of the prawns, they have to be treated as tools of the business of the assessee and the depreciation was admissible on these ponds. We, thus, decide the question in favour of the assessee and as a consequence, appeals of the Revenue are dismissed and that of the assessee are allowed." (Emphasis supplied) g) Kind attention, in this regard, is also invited to the decision of the Bombay High Court in the case of CIT V. Hydro Electric Power Supply Co. Ltd: 122 ITR 288 wherein the Court held dam constructed....
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....ll) • Moidu's Medicare (P) Ltd v. CIT : ITA Nos. 1261, 1262, 1310 of 2009 (Ker.) • Maharashtra State Road Development Corpn. Ltd. v. ACIT: 128 TTJ 32 (Mum. Trib) i) Similarly, in the present case, in the business of Golf course, developing a golf course, for running the business of operating a golf course is, it is submitted, an essential/ indispensable part of/ and is used as a tool of business. Therefore, applying the functional test laid down in various decisions, Golf Course expense has to be, it is submitted, regarded as `plant 'and is eligible for depreciation @ 25%. Accordingly, the addition made by the assessing officer and upheld by the CIT(A) calls for being deleted in toto. The LD AO reiterated the findings given in original assessment and allowed depreciation on golf course @ 10% by treating the same as 'building'. On further appeal against the said order, the CIT(A), vide order dated 31.12.2018 upheld the order of the assessing officer restricting depreciation on golf course @ 10%. The CIT(A) held that no doubt the assessee is generating revenue from the players for playing golf and allowing its golf course, but it cannot be said that....
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....lhi High Court in case of 52 taxmann.com 21 in brother but the toll road Co Ltd vs. the assistant Commissioner of income tax. He further relied upon the decision of CIT vs. that my local 82 ITR 44 of the honourable Supreme Court and 243 ITR 81. He further submitted that in Anand the theatre the honourable Supreme Court held that the building used for running a hotel or carrying on cinema theatre and not be held to be a plant. In case of Raj Malhotra, the honourable Supreme Court held that the building in which water was run was not the plant. In the case of Dr P Venkata of the Supreme Court held that if it was found that the building or structure constituted an apparatus or a tool of the taxpayer by means of which business activities were carried on amounted to a plant but where the structure played no part in carrying on these activities but merely constituted a place where they were carried on, then it is a building and it is not a plant. He therefore submitted that in the present case the players play golf on the golf course but the golf course as such does not play any part in carrying on the playing activity of the assessee. He further countered the argument of the learned aut....
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.... of CIT Vs. Anand Theatre is not applicable and then jump to a conclusion that the business of the assessee is to invite players for playing the golf and charging the fee for that and thus the field so prepared was a business operated used by the assessee for carrying on its business of playing golf. In the last lines, without specifically pointing out as to whether the golf course that is a piece of land with many levels of undulation, holes, small ponds etc can be categorized as a plant and machinery and not as a building. The Id. CIT(A) jumped to a conclusion that the assessee's claim of depreciation @ 25% is allowed which is not a proper and justified approach for a quasi-judicial authority. We may point out that golf course has not been categorized in the schedule of depreciation and the main dispute between the assessee and the revenue is that the assessee is seeking to place the golf course in the category of plant and machinery whereas the Revenue wants to treat the same as building. 46. At this juncture, we may point out that we are not in agreement with the conclusion drawn by the id. CIT(A) that a piece of land having some landscaping for playing golf such a....
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....it is not a building. Interestingly, no cited decision relied by both the parties are related to golf course. Therefore, facts regarding this issue have to be dealt in respect of golf course of 300 acres land and how it became plant and machinery attracting 25% depreciation. The AO has to examine these details to ascertain the issue between the parties as stated above. We also note that the assessee in its written submissions before the authorities below as well as before the Tribunal has submitted the details of construction on the 300 acres of land converting it into a golf course, but these details have not been submitted before the AO and the AO could not get an opportunity to verify and examine the same. Therefore, in our considered opinion, this issue requires detailed verification and examination at the end of the AO after affording due opportunity of hearing to the assessee and without being prejudiced from the earlier assessment and first appellate order. Needless to say that the AO would examine all material facts on this issue and after considering the mandate of the relevant provisions of the Act as well as the ration of decisions relied upon by both the parties shall d....
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....ach to the playground cannot be referred as Plant but would be covered in "Building" within the meaning of Section 32 as the worked "building" specifically includes roads, bridges etc. 5.9 Moreover, when we come to the basic question as why depreciation is allowed, because every tangible asset depreciates. It is off. passage of time causes physical assets to wear, tear and otherwise lose value; depreciation & designed to capture that loss of value over a tangible asset's useful life. Through depreciation, a company is able to capture and spread out costs over the long-term. In the context of the above definition also, the Golf Course cannot be considered as Plant but Building only. 5.10 Furthermore, the assessee is already taking depreciation separately on sporting items like Golf Carts, Pull Carts etc. In view of the above discussion depreciation on the Golf Course is limited to 10%" 6.4 I have examined the contention of the appellant, the assessment order and direction by the Hon'ble ITAT. 6.5 It is evident that no depreciation has been claimed on land but only the add-ons on the land has been taken to consider as plant and "machinery b....
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....include tea bushes or livestock or buildings or furniture and fittings" 6.9 In the present case, the landscaping etc. are neither surgical equipments nor any scientific apparatus. The add-ons on the land for running of smooth play of golf such as landscaping, sprinklers, waterways, holes etc. are required for any such activity in the normal circumstance as the same is required for the maintenance of any building also. Therefore, putting up of various sophisticated or specialized item cannot be the basis for treating any golf course as plant and machinery. Therefore, the argument of the appellant that it has put up various value addition is not tenable. 6.10 Further, it is not directly related to the production or creation of any output but work as a support system and therefore, appropriately considered by AO as building and not the plant. It is also to be mentioned that the assessee is running a hotel and therefore, the residents of the hotel are also provided the facility to play golf. In such circumstance, the main objective is to increase the business of hotel by providing additional benefit / facility of golf. 6.11 The issue discussed in the case of ....
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....e claimed, for the assessment year 1983-84, that it was a "plant". His contention was rejected by the Income-tax Officer and by the Commissioner (Appeals). The Income-tax Appellate Tribunal found to the contrary. Applying the functional test, it held that the nursing home was a plant. The High Court affirmed that view. It said that a building used as a nursing home is not comparable with an ordinary building having regard to the number of persons using it, the manner of its use and the purpose for which it is used. The building was used to not only house patients and nurse them, but also to treat them, for which various kinds of equipment and instruments were installed. The most apposite decision in this context is that delivered by the Allahabad High Court in S. K. Tulsi and Sons v. CIT [1991] 187 ITR 685. Reference was made to an earlier judgment, where also the functional test approved by this court in several decisions was applied. It was held that if it was found that the building or structure constituted an apparatus or a tool of the taxpayer by means of which business activities were carried on, it amounted to a "plant" ; but where the structure played no part in th....
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.... the claim but the Tribunal held in favour of the assessee. Two Benches of the High Court took opposing views. On appeal to the Supreme Court , affirming the view of the Tribunal, that the High Court had specifically mentioned that the prawns were grown in specially designed ponds and the contention that these were natural ponds had been specifically rejected as not correct. Moreover, this was not the reason given by the Assessing Officer to reject the claim. Therefore, the finding of fact on this aspect could not be gone into at this stage. The functional test was applicable and since the ponds were specially designed for rearing or breeding of the prawns, they had to be treated as tools of the business of the assessee and the depreciation was admissible on these ponds as plant. 12. Further honourable Gujarat High Court in NIKO RESOURCES LTD. v. ASSISTANT COMMISSIONER OF INCOME-TAX (2017) 395 ITR 301 while deciding the issue whether the mineral oil well constitute plant as claimed by the assessee or building as claimed by the revenue, has held that Under section 32 of the Income-tax Act, 1961, depreciation allowance is, subject to the provisions of section 34 , permissible only....
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....nces considered golf course as plant and depreciation at the rate of 25% was allowed holding that assessing officer himself has allowed depreciation at that rate in past in that particular case. The decision relied upon by the learned CIT DR that Toll Road does not qualify as a plant for higher rate of depreciation as held by the honourable Delhi High Court in 52 taxmann.com 21 (Delhi) in the Moradabad Toll Road Co Ltd vs. Asst Commissioner of income tax was decided as 'road' was specifically considered as part of building in the part A of appendix 1 of The Income tax Rules 1962. Thus, the fact of that case is distinguishable. Further, it was not stated before us that revenue has not accepted the decision of the coordinate bench in DCIT vs. JP greens Ltd where golf course was held to be plant. Therefore, it stands concluded that golf course is a plant looking to the nature of business of the assessee. Further, the judicial precedents relied upon by the parties also only lays down the proposition established by the higher judicial forum supports the above view. In view of this, ground number 1 of the appeal of the assessee is allowed reversing the views of the lower authorities, hol....
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.... course is a plant. In view of this ground number 1 of the appeal is allowed for the similar reasons given by us in appeal for assessment year 2001 - 02. Ground number 2 being an alternative claim by the assessee is not required to be adjudicated in view of our decision in ground number 1 of above appeal. 18. Accordingly ITA number 1031/del/2019 filed by the assessee is allowed. Assessment year 2004-05 19. The learned Deputy Commissioner Of Income Tax, circle 4 (1), New Delhi has raised the following grounds of appeal in ITA No. 5582/Del/2010 for the Assessment Year 2004-05 against the order of the learned Commissioner Of Income Tax (Appeals) - VII, New Delhi dated 13/10/2010:- "1. The order of the learned CIT (APPEALS) is erroneous & contrary to facts & law.. 2. On the facts and in the circumstances of the case and in law, the Ld. CIT (Appeals) has erred in deleting the addition of Rs. 68,11,697/- made by the AO by disallowing the excess depreciation claimed by the assessee i.e. by directing the AO to allow depreciation on Golf Course @ 15% as against the 10% allowed by the AO. 2.1. The ld CIT (A) ignored the fact the Golf Course is building and....
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....t such estimate must be based on adequate and relevant material. He further held that in the instant case he do not find any adequate all relevant material based on which the expenses incurred by the assessee could be disallowed. Accordingly, he deleted the disallowance. The revenue challenged the above disallowance deletion as per ground number 3. 23. The learned CIT DR vehemently supported the order of the learned assessing officer and stated that the learned CIT - A has not given any finding that why he is disallowing the above expenditure when the assessee has failed to show the genuineness of the expenditure incurred. 24. Learned authorised representative submitted that the learned assessing officer has made an adopted disallowance is despite the assessee maintaining the complete details of the expenditure merely for the reason that there is an increase in the above expenditure vis-a-vis golf course income. He further submitted that assessee maintains the regular books of accounts, which are duly audited and certified by the tax audit. He further stated that the learned assessing officer has further failed to point out any specific defect in those details and merely beca....
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.... be regarded as taxable income of the appellant. 2.2 Further without prejudice that the CIT(Appeals) erred on facts and in law in not holding that the addition, if any, had to be restricted to security deposits received during the year amounting to Rs. 78.87.656 only. ~ 2.3 Further without prejudice that the CIT(Appeals) failed to appreciate that out of total deposit of Rs. 34,05,42,851, Rs. 3,52.88,416 was in the nature of advance membership fee, which had already been offered for tax by the appellant in the subsequent year(s). 3. Without prejudice, having held advance membership fee of Rs. 3,52,88,416 to be taxable in the year under appeal, the CIT(Appeals) erred on facts and in law in not directing the assessing officer to exclude advance membership fee of Rs. 3,52,88,416 from the taxable income of the appellant of the subsequent year(s) in which the said income had already been offered and subjected to tax. 4. That the CIT(Appeals) erred on facts and in law in confirming disallowance of Rs. 72,29,915 on account of bad debts/ advances written off in the normal course of business." 29. The revenue has raised the following grounds of appeal i....
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....7184511/-. Assessee preferred an appeal before the learned CIT - A who partly allowed the appeal of the assessee. Therefore, both the parties are in appeal before us. 31. We 1st take up the appeal filed by the assessee. The first ground of appeal is against the confirmation of the addition of INR 2 041449/- out of the total addition of INR 8 416051/- made by the AO under the provisions of section 41 (1) of the income tax act. The brief facts of the issue shows that in the computation of the total income the sum of INR 8 416051/- was claimed as provisions no longer required and written back. The allowances for which resulted in increased of the existing declared losses. On being confronted regarding that visibility of such claim, it was stated that such written back amount primarily consisted of various provisions, which were not allowed in the earlier years as per the income tax act. Therefore, it are written back and claimed as admission deduction during the previous year. The learned assessing officer verified the details in support of such claim and found that the said) was a emission on account of net balances of trading assets and liabilities which primarily consisted of bu....
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....e in the assessee has submitted a detailed chart assessment year -wise showing the provisions created, provisions debited, and additional provisions made an amount disallowed in the return of income. On the basis of the above analysis the learned CIT - A noted that a sum of INR 1 54606/- was disallowed by the assessee in assessment year 2000 - 01, Rs. 2886114 in assessment year 2001 - 02 and Rs. 3333882/- in assessment year 2003 - 04 and therefore he held that the assessee itself has disallowed the above sum amounting in all INR 2 6374602/- in the earlier years and therefore out of the sum of INR 80 416051/- a sum of INR 6 374602 is not following under the provisions of section 41 (1). He therefore held that the addition made by the learned assessing officer to that extent of INR 6 374602/- is not sustainable. We do not find any infirmity in the order of the learned CIT - A to that extent. Further with respect to the disallowance of INR 2 041449/- of the balance sum sustained by the learned CIT - A, the assessee could not show that whether these expenditure have already been disallowed by the assessee in the earlier years or not and therefore in absence of such details, the additio....
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....ficer also regarded the said amount as part of security deposit to make addition of the same, which is patently erroneous and has resulted in double taxation of the same amount. Further, the CIT(A), while approving the action of the assessing officer observed that since membership fees has been utilized for creation of fixed assets which in turn have been used by the members, deferment of income is therefore, not relevant in facts and circumstances of the case. In this regard, it is respectfully submitted that the aforesaid allegation of the CIT(A) is not tenable inasmuch as the CIT(A) failed to appreciate that: (a) membership fees is taxable on accrual basis and not on receipt basis; and (b) Since the appellant had already offered to tax the said amount in subsequent year(s), the same income cannot be taxed twice. As regards (a) above, it is submitted that it is quite elementary that in mercantile system of accounting, amount is taxed as income in the year in which the same accrues. The concept of "income" and its accrual is judiciously well settled and reference, in this regard, may be made to the following decisions. In the landmark decision rendered by the ....
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....mbers in subsequent years and hence the appellant has not contributed to its earning in the year under consideration. Therefore, advance membership fees could not be regarded as income accrued in favour of the appellant in the year under consideration. Applying the aforesaid principle, advance membership fees has been held to be taxable on pro-rata basis in the following decisions: • CIT vs. T. N. K. Govindarajulu Chetty : 165 ITR 231 (SC) - Held that interest received for 2 years is to be spread over according to the mercantile system of accounting • Rama Bai &Ors. V. CIT : 181 ITR 400 (SC) • CIT v. Dinesh Kumar Goel : 331 ITR 10 (Del.) • CIT v. Punjab Tractor Co-operative Muli-purpose Society Ltd. : 234 ITR 105 (P&H)- Amount received in advance under post warranty service charges, Held that amount pertaining to the year under consideration could only be taxed not the entire amount received • CIT v. Coral Electronics (P) Ltd. : 274 ITR 336 (Mad) • CIT v. Hindustan Computers Ltd. : 233 ITR 366 (All) • ACIT and DCIT vs. Mahindra Holidays and Resorts India Ltd: 131 TTJ 1 (ITAT (SB) - Chennai)) ....
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....eceipt but are revenue receipts and are taxable as income of the appellant. He further held that nature of such security deposit is whether refundable or non-refundable is immaterial. He further noted that though the assessee has offered the golf course membership fees of INR 3 5288416/- as income in subsequent years such deferment of income is not relevant on the facts and circumstances of the case of the appellant as the membership fees received by the assessee is also assessable as income for the assessment year in which it is received. He further noted that it is a fact that unless the security deposits and membership fees were paid by the members, the appellant would not have granted the membership of the golf club to those members. He therefore held that both this sum of the security deposit as well as the membership fee has correctly been charged by the learned assessing officer as income of the assessee. The learned CIT - A with respect to the entrance fees and membership fees has followed the decision of the honourable Supreme Court in case of Calcutta stock exchange Association Ltd 36 ITR 222 and Delhi stock exchange Association Ltd 41 ITR 495 wherein it has been held tha....
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....is the claim of the assessee that subsequently such income has already been offered for taxation therefore for the year to which it pertains. Therefore, we direct the learned assessing officer to tax the above income of INR 3 5288416 as Income for the impugned assessment year to which it pertains to. Therefore, if the assessee has offered the income, to the year to which it pertains to, the addition is required to be deleted. However, it is not known that how much income is pertaining to which year, therefore, we direct the assessee to show before the assessing officer about the taxability of this income in the subsequent years on accrual basis. The learned assessing officer may verify the same and if the income has been offered in subsequent years on accrual basis, the addition deserves to be deleted in this year. 40. With respect to the issue of taxability of the security deposit against the golf course membership fee of INR 3 11460578/-, the claim of the assessee is that such security deposit is refundable in nature. It is required to be refunded to the members at the end of the specified years or as per the terms of the membership. If the membership is refundable to the memb....
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....f amounting to Rs. 59,43,633. Insofar as bad debts written off is concerned, since evidence of fulfillment of conditions of section 36(1)(vii) of the Act was not furnished, the same was upheld. As regards, advances written off, the same was held to be towards capital expenditure and hence held to be not allowable as deduction. 42. The learned authorised representative submitted that The aforesaid action of the assessing officer in making disallowance of deduction claimed for bad debts/advances written off is not sustainable for the reasons elaborated in the note submitted as hereunder: "It is, at the outset, respectfully submitted that bad debts/advances written off by the appellant related to debts arising/advances made in earlier years. On perusal of the details placed at pages 98-103 of paper book, it will be noticed that the debts/ advances written off arose in the normal course of business and, therefore, write off of such debts based upon the commercial decision taken by the management of the appellant having regard to there being no chance of recovery out of the said debts/advances, were allowable as bad debt and/or loss incidental to the business. It is....
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....Abdul Razak & Co.: 136 ITR 825(Guj) • Salora International Ltd. v. JCIT: 129 Taxman 68 (Del.) • CIT V. Shreyans Industries Limited: 207 CTR 281 (P&H) • DCIT vs. M/s Edelweiss Capital Ltd.: ITA No: 3971/Mum/2009 (Mum ITAT) • CIT v. Claridges Investment & Finance Pvt. Ltd.: 18 SOT 390 (Mum ITAT) • ITO v. Gokaldas Pragji: 24 ITD 25 (Ahd. ITAT) • Gujarat Fluoro Chemicals Ltd. v. JCIT: 76 TTJ 313 (Ahd.) • Asst. CIT v. Shantilal Balabhai: 74 TTJ 506 (Ahd.) • ITO vs. Ashok Kumar Lalitkumar: 53 ITD 326 (Ahd.) It is further submitted that advances primarily related to tour expenses, advances for organizing party, advance for laundry services, advances to employees, advance for vehicle repair, advance for painting, etc., (refer details of expenses placed at pages 98-103 of the paper book). Therefore, it is not correct to hold that such advances were for procuring capital expenditure. That apart, even insofar as advances for procuring capital assets was considered, in the following decisions it has been held that where the asset does not come into existence, then the expen....
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....age number 98 - 103 of the paper book. On careful verification of these details, it is found that the expenses incurred by the assessee in the form of advances to various parties are for various expenditure of revenue nature. Certain advances were also given for material which if would have purchased would have been fallen in the category of repairs and maintenance. Certain amount of advances and security deposit is given to various parties are also for the purposes of pity services. However a sum of INR 3 47700 was also provided for the purchases of the computer. Further sum of INR 6 72119/- is also paid for purchase of computers. However, it is stated that no such computer is purchased but the amount is written off. It is not in dispute that assessee has purchased the computers but has not adjusted the advances. Therefore, undoubtedly, such advances were for purchase of capital assets, which have never been acquired by the assessee. To justify the claim of the allowability assessee has relied upon the decision of the honourable Delhi High Court in case of Indo Rama synthetics Ltd vs. Commissioner of income tax 333 ITR 18 (Del). We found that in that particular decision the claim ....
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....ficer in ITA number 4721/Del/2009 for assessment year 2005 - 06. 47. The first ground of appeal is general in nature and therefore it is dismissed. 48. The second ground of appeal is related to ground number 1 of the appeal of the assessee. This ground has already been decided while deciding the ground number 1 of the appeal of the assessee wherein we have held that there is no infirmity in the order of the learned CIT - A in deleting the disallowance of INR 6 374602/-. Hence, this ground of appeal is dismissed. 49. The ground number 3 is with respect to the deletion of addition of INR 1 95950000/- because of undisclosed income on sale of land. The learned assessing officer noted that profit and loss account of the assessee for the impugned assessment year reflects sale of land as a measure 31 canals (3.25 acres or 1550 0 yd²) for a consideration of Rs, 4 crores. The cost of the above land was INR 1 9071127/- and thus it resulted into taxable income of INR 2 0928872/-. The learned AO asked the assessee to justify the market price of such land through furnishing of comparable instances. The assessee did not furnish the same. Therefore the learned AO noted that in the c....
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....ration received has been shown which cannot be construed as the market value but must be taken to be the price bargained by the parties to the sale. He referred and relied upon the decision of the honourable Supreme Court in 66 ITR 622/- and 131 ITR 597. He further referred to the decision of the honourable Delhi High Court in 309 ITR 233 (Del) wherein it has been categorically held that the provisions of section 48 of the act does not have any reference to the market value but only to the consideration referred to in the sale deed as the sale price of the assets which have been transferred. He further referred to the plethora of the decision to support its contention. He therefore submitted that the learned CIT - A has correctly deleted the addition. 52. We have carefully considered the rival contention and perused the orders of the lower authorities. During the year under consideration, the assessee had, vide sale deed dated 26th May, 2004, transferred a plot of land admeasuring 31 canals 2 Marlas (about 3.89 acres), situated at Village Sukhrali, Tehsil & Dist. Gurgaon to M/s. Green Max Estates Pvt. Ltd., for total consideration of Rs. 4 crores . The cost of the said land was ....
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....ession 'the full value of consideration' as contemplated in section 48 of the Act does not have any reference to the market value but only to the consideration referred to in the sale deeds or other supporting evidences as the sale price of the assets which have been transferred. 6.2 In the instant case, no material has been confronted by the department, so as to suggest that the assessee paid consideration of Rs. 23,59,50,000/- i.e. Rs. 7.26 crores per acre multiplied by 3.25 acres in place of Rs. 4,00,00,000/- . In the instant case, all that the A.O. has done is to rely upon the hypothetical sale price, which does not show or prove that there is some underhand dealing & consideration has passed more than what is disclosed by the assessee. The sale consideration disclosed by the assessee, supported by documentary evidence cannot be .disbelieved merely on the basis of a hypothetical sale price adopted by the Assessing Officer. In view of the aforesaid discussion, I am of the considered view that the A.O. has failed to adduce evidence on record in support of understatement of the sale consideration by the assessee. Therefore, A.O. is directed to adopt me sale consideration ....
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.... satisfied, the revenue cannot ask the court to presume that the second condition too is fulfilled, because even in a case where the first condition of 15% difference is satisfied, the transaction may be a perfectly honest and bona fide transaction and there may be no understatement of the consideration. The fulfillment of the second condition has, therefore, to be established independently of the first condition and merely because the first condition is satisfied, no inference can necessarily follow that the second condition is also fulfilled. Each condition has got to be viewed and established independently before sub-s. (2) can be invoked and the burden of doing so is clearly on the revenue. It is well-settled rule of law that the onus of establishing that the conditions of taxability are fulfilled is always on the revenue and the second condition being as much a condition of taxability as the first, the burden lies on the revenue to show that there is an understatement of the consideration and the second condition is fulfilled. Moreover, to throw the burden of showing that there is no understatement of the consideration, on the assessee would be to cast an almost impossible bur....
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....ition has been made in assessment year 2001 - 02 and 2003 - 04 on the basis of agreement to sale dated 16th/2/2001 and 17/3/2003. The brief fact shows that assessee owns 238.25 acres of land in Haryana. Out of which the assessee on 16/02/2001 entered into an agreement to sale for sale of about 22.691 of land to ITC Ltd for a consideration of INR 450,000,000. Further, on 17/03/2003, the assessee further entered into an agreement to sale of 4.43 acres of land with ITC Ltd for a consideration of INR 90,000,000. Thus out of the total consideration of INR 5 4 crores the assessee only received 53,50,00,000 but continued to retain possession of the said land and the sale could not be affected in absence of various provisions from the government and regulatory bodies. Ultimately, the above agreements were cancelled and the entire money was refunded to the buyer. The learned assessing officer held that there is a transfer of land in assessment year 2001 - 02 and 2003 - 04 and consequently the assessee was liable to pay tax on capital gain in those relevant years. For assessment year 2001 - 02 and 2003 - 04 for the above additions were deleted by the learned CIT - A and the order of the lear....
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....during the year under consideration. As already mentioned above, the identical issue in the appellant's own case was decided in its favour by my predecessor-in- office in A. Y. 2001-02. As the facts and circumstances of the case are pari materia with the case of. The appellant in A.Y. 2001-02, for the reasons as discussed in the aforesaid order of my predecessor-in-office, this ground of appeal is allowed." 56. As the revenue could not point out that what is the trigger point of taxing the above amount in this year and further in which year the transfer of the capital asset has happened, the above addition has rightly been deleted by the learned CIT - A. In view of this we do not find any infirmity in the order of the learned CIT - A deleting the protective addition of Rs. 497184511/-. Thus, ground number 4 of the appeal is dismissed. 57. The ground number 5 of the appeal is with respect to the deletion of addition of INR 2 031305/- made by the learned assessing officer on account of interest disallowances. The above disallowance has been made by the learned assessing officer on the basis of the cash flow statement attached with the audited financial statements for the year e....
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....erein, we dismiss the ground number 6 of the appeal of the AO. 61. In view of this appeal number 4721/del/2009 for assessment year 2005 - 06 preferred by the learned assessing officer is dismissed. Penalty appeals u/s 271 (1) (c) for A Y 2005-06 Assessee and AO 62. For assessment year 2005 - 06, the penalty proceedings were initiated by the learned assessing officer u/s 271 (1) (C) of the act on completion of the assessment proceedings as well as before the first appellate authority. The learned AO levied the penalty u/s 271 (1) ( c) of the act as per the order dated 14/3/2011 of INR 1 28005767/- on several additions made by the learned assessing officer as under:- a. provision no longer written back of INR 8 416051/- b. undisclosed income on sale of land of INR 1 95950000/- c. treatment of security deposit of INR 3 40542851/- as income of the assessee d. disallowance of interest expenditure of INR 2 031305/- e. disallowance of bad debts of INR 7 229915/- f. disallowance of depreciation of INR 5 108772/- g. taxability of the long-term capital gain on protective basis of Rs. 497184511/- 63. Assessee pre....
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....(a) out of total provision of Rs.'84,16,051, provision of Rs. 63,74,602 was allowed by the CIT(A), and (b) the provision of Rs. 20.41,449 was sustained only due to non-availability of old records. 2.2 That the CIT (A) erred in holding that the appellant filed to prove the genuineness of its claim in respect of Rs. 20,41.449. 3. That the CIT(A) has erred on facts and in law in confirming the penalty imposed without appreciating that the appellant has been consistently incurring huge losses and has not been able to claim the set off of the said losses even till date, which clearly establishes the bonafide of the appellant." 67. The brief fact shows that the learned assessing officer levied the penalty of INR 128010000/- on all the additions made in the case of the assessee for assessment year 2005 - 06, the learned CIT - A on the issue of a. claim of the allowability of bad debts written off INR 7 229915/- upheld by the learned CIT - A and confirmed by us also in this order b. Taxability of sum of INR 2 041449/- u/s 41 (1) (a) of the act made by the learned assessing officer and confirmed by the first appellate authority and the coo....
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....t on the part of the assessee in not disclosing full particulars was attributable to reasonable clause. 70. With respect to the taxability of sum of INR 2 041449/- u/s 41 (1) (a) of the act which was claimed to be because of the non availability of the documentary evidences, it was submitted that the above sum was part of the liabilities returned back and the provision is no longer required of INR 8 752240/-. The learned assessing officer disallowed the same whereas the learned CIT - A upheld the disallowance of INR 2 041449/- holding that the balance sum of INR 6 374602/- was already disallowed by the assessee in the earlier assessment year and therefore the provisions of section 41 of the income tax act does not apply. Thus disallowance of INR 2 041449 was upheld. The same was also upheld by the coordinate bench. Therefore the levy of the penalty was contested before the learned CIT - AO in para number 7.1 of his order confirmed the same on the disallowance of INR 2 041449/-. 71. Before us, during the course of hearing, the assessee has preferred an application for admission of the additional ground invoking the rule 11 of the income tax (appellate tribunal's) rules, 1963 s....
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....he learned assessing officer, which is placed at page number 64 of the paper book wherein none of the twin charges have been struck off by the learned assessing officer in notice dated 18/05/2007. Therefore, the issue squarely covered in favour of the assessee by the decision of the Karnataka High Court against which the special petition has been dismissed in 242 taxman 180 by the honourable Supreme Court. Further recently the honourable Delhi High Court in [ITA number 475/2019 dated 2/8/2019] as per paragraph number 21 of that order has also upheld the view of the coordinate bench that notice issued by the learned assessing officer would be bad in Law if it did not specify under which limb of section 271 (1) (c), penalty proceedings had been initiated. In view of this, we allow the ground number 4 of the appeal of the assessee and direct the learned AO to delete the penalty u/s 271 (1) (c) of the act. 77. Accordingly we allow ITA number 4560/Del/2009 filed by the assessee for assessment year 2005 - 06 against the penalty sustained by the learned CIT - A. 78. The revenue has raised the following grounds of appeal in ITA No. 4849/Del/2011 for the Assessment Year 2005-06:- ....
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....ed by the assessee during the assessment year 2007 - 08 is income of the assessee. Therefore, the assessee is aggrieved with the order of the learned CIT - A has preferred this appeal. The assessee has raised the following grounds of appeal in ITA No. 653/Del/2011 for the Assessment Year 2007-08:- "1. That the CIT(A) erred on facts and in law in confirming the addition of Rs. 36,48,552 on account of membership fees and refundable security deposit received during the assessment year 2007-08. 1.1 That the CIT(A) erred on facts and in law in confirming the action of the assessing officer without appreciating that Rs. 33,81,750 was received as advance membership fees and was offered for tax on mercantile basis by the appellant in the subsequent year(s) to which the same relates. 1.2 That the CIT(A) failed to appreciate that the Rs. 2,66,762 was amount received on account of refundable security deposit owed by the appellant to its individual members and the same could not, therefore, be regarded as taxable income of the appellant." 82. Both the parties submitted before us that this issue is covered in the appeal of the assessee for assessment year 2005 - 06....
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.... therefore, be regarded as taxable income of the appellant. 1.3 That the CIT(A) erred in not adjudicating the alternative ground taken by the appellant to the effect that the assessing officer having assessed membership fees in the earlier assessment years, ought to have excluded the very same amount from the taxable income of the appellant for the year under appeal." 86. Identical issue has been dealt with by us in the appeal of the assessee for assessment year 2005 - 06 wherein we have held that membership fees received in advance by the assessee is chargeable to tax on the accrual basis to which it pertains to and the non-refundable security deposit received by the assessee is a capital receipt not chargeable to tax as income in the hands of the assessee. This is decided as per ground number 2 and 3 of the appeal of the assessee for that year. Both the parties confirmed that there is no change in the facts and circumstances of the case. Therefore, for the similar reasons we also hold that membership fees received in advance by the assessee is not an income in this year but is chargeable to tax in the year in which it has accrued to the assessee and as well as the non....
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....n of assessing officer in making an addition of Rs. 56,78,661/- on account of security deposits and membership fees received during the relevant assessment year. 1.1 That the CIT(A) erred on facts and in law in not appreciating that the amount received on account of refundable security deposit was amount owed to the members and the same could not, therefore, be regarded as taxable income of the appellant. 1.2 Without prejudice, the CIT(A) erred on facts and in law not excluding membership fees already taxed in assessment for the earlier year(s) from the taxable income of the appellant for the year under consideration." 92. Identical issue has been dealt with by us in the appeal of the assessee for assessment year 2005 - 06 wherein we have held that membership fees received in advance by the assessee is chargeable to tax on the accrual basis to which it pertains to and the non-refundable security deposit received by the assessee is a capital receipt not chargeable to tax as income in the hands of the assessee. This is decided as per ground number 2 and 3 of the appeal of the assessee for that year. Both the parties confirmed that there is no change in the facts ....