2015 (11) TMI 1880

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....ee engaged in running hotels had filed its return of income for the impugned assessment year declaring total income of Rs.8,42,64,776/-. During the course of assessment proceedings it was noted by the AO that assessee had a business expenditure of Rs.2,24,70,345/- towards covering of open drainages near its hotel premises. Submission of the assessee was that the drainage was running along a common area belonging to BBMP. As per the assessee, open drainage was over-flowing with sewage water resulting in bad smell and mosquito menace. Further as per the assessee, guests of the hotel were complaining of the unhealthy atmosphere which necessitated it to take steps to overcome this problem. As per the assessee, BBMP was not prepared to cover the....

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....gmented its capital structure through the outgo. As per the Ld. CIT (A) no income earning apparatus was created. Further he also noted that assessee could never use it for its own business operations. He held the expenditure to be a revenue out go and deleted the disallowance. 06. Now before us, Ld. DR strongly assailing the order of CIT (A) submitted that laying of slabs on drainage running through the property of the assessee did bring enduring benefits to the assessee. Even if no capital asset as such was brought into existence, the slab over the drain could have been used by the assessee for parking the cars, since one side of the drain was assessee's hotel building and the other side was the car parking. Thus according to him, CIT (A)....

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....n 194H of the Act stood attracted. As per the AO, relationship between the bank and the merchant was established under the merchant contract and hence contention of the assessee that bank was acting on behalf of card holder was incorrect. AO also noted that CBDT vide Notification No.56/2012, dt.13.12.2012 exempted seven services from the rigors of deduction of tax at source with effect from 01.01.2013 and hence according to the AO, prior to that date, such payments fell within section 194H of the Act. Since the assessee had not deducted tax, AO had applied section 40(a)(ia) of the Act and made a disallowance of Rs.1,46,13,188/-. 11. In its appeal before the CIT (A), argument of the assessee was that what was released by the banks was the n....