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TMI Blog2004 (8) TMI 329X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that in the tax audit report, guest house expenses had been reflected at nil. However, on examination of accounts of the assessee, it was noticed that the assessee was maintaining a guest house at East of Kailash, New Delhi which was termed as transit house. The AO mentioned that in the assessment order for 1993-94, the above transit house had been considered as guest house and that view had been upheld in the appeal. The AO noticed that the assessee incurred expenditure of Rs. 1,02,000 for rent, Rs. 22,963 for food expenses, Rs. 5,466 for telephone expenses and Rs. 16,800 towards salary, Rs. 9,859 for electricity and Rs. 5,550 as arrears of rent and the total expenditure worked out to Rs. 1,62,638. The AO estimated the depreciation for furniture provided in the premises on Rs. 5,000 as was done in the preceding order and disallowed total sum of Rs. 1,67,638 under s. 37(4) of IT Act, 1961. 5. The assessee carried the matter to the learned CIT(A) and submitted that it was having two manufacturing plants at Yamunanagar and Malanpur while the corporate office was situated at New Delhi. As such, its employees had to commute from plant to corporate office for various meetings and d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o placed on the following case laws wherein it was held that the expenses which are covered by ss. 30 to 36 of IT Act, 1961, are not subject to disallowance under s. 37(4) r/w s. 37(1) of IT Act, 1961. (i) CIT vs. Chase Bright Steel Ltd. (ii) Century Spinning Manufacturing Co. Ltd. vs. CIT (1991) 99 CTR (Bom) 8 : (1991) 189 ITR 660 (Bom) 2. Res judicata may not be applicable to income-tax cases but rules of consistency do apply. It has been so held in the following case law : (a) Radhasoami Satsang vs. CIT (1991) 100 CTR (SC) 267 : (1992) 193 ITR 321 (SC) (b) CIT vs. A.R.J. Securities Printers (2003) 183 CTR (Del) 323 : (2003) 264 ITR 276 (Del) (c) Taraben Ramanbhai Patel Anr. vs. ITO (1995) 127 CTR (Guj) 187 : (1995) 215 ITR 323 (Guj) (d) CIT vs. Hindustan Motors Ltd. (1991) 192 ITR 619 (Cal) (e) Sardar Kehar Singh vs. CIT (1991) 92 CTR (Raj) 88 : (1992) 195 ITR 769 (Raj) (f) Dhansiram Agarwalla vs. CIT (1996) 130 CTR (Gau) 559 : (1996) 217 ITR 4 (Gau) (g) CIT vs. Godavari Corporation Ltd. (1984) 43 CTR (MP) 148 : (1985) 156 ITR 835 (MP). In view of the facts, circumstances and the case laws mentioned above, it is prayed that the appeal of the Revenue may ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2, in assessee's own case in ITA No. 1830/Del/1997 for asst. yr. 1993-94. Since there were divergent views not only on the various High Court levels but also at the level of the Tribunals, therefore, to overcome this situation, Special Bench had been constituted to resolve the problem in the Tribunal Delhi Bench 'B' in the case of Eicher Tractors Ltd. vs. Dy. CIT. The Special Bench of the Tribunal held as under: "With a serious attempt on the part of the Government to curb lavish expenditure on maintenance of guest houses, there was specific and avowed intention to disallow expenditure incurred after 28th Feb., 1970, on the maintenance of a guest house and Explns. (i) and (ii) to s. 37(4) and s. 37(5) were worded in the widest possible terms to include within their sweep every type of expenditure incurred on the maintenance of a guest house. Sec. 37(4)(ii) prohibited allowance of depreciation on a building used as a guest house as also depreciation on assets in a guest house and Expln. (ii) to s. 37(4) stated that expenditure incurred on maintenance of a guest house would include rent paid in respect of such accommodation. Secs. 30 and 31 deal with rent, repairs, etc., of buildi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the expression 'expenditure' as held by the Hon'ble Supreme Court in the case of Pandyan Insurance Co. Ltd. vs. CIT (1965) 55 ITR 716 (SC), yet these expressions find a place in sub-s. (4) of s. 37 which goes to show that allowance relating to depreciation has been covered in the sub-section intentionally. Thus, if viewed in the light of intention of the legislature, the deduction in respect of rent and depreciation is not allowable as per the provisions of ss. 37(4) and (5). In the circumstances, the expenditure relating to rent and allowance relating to depreciation pertaining to the guest house is not allowable. Thus, the tax authorities were justified in rejecting the claims on account of rent and repairs qua guest house." Since the facts of the present case are similar to the facts of the assessee's case and the order of Special Bench dt. 4th Oct., 2002, had been passed after the order of the Tribunal, Delhi Bench 'D', in assessee's own case for asst. yr. 1993-94 which was dt. 8th March, 2002. It is well-settled that "In the hierarchical system of Courts which exists in our country, it is necessary for each lower tier to accept loyally the decision of higher tier. Judi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in s. 37(1). The main general section dealing with rent is s. 30. This is with regard to rent for all buildings of the assessee in general. Rent for guest houses is specially excluded from claims of deduction by s. 37(4). Rent can never be claimed under the residuary provision engrafted by way of s. 37(1) when a special section already exists for it. Reading the general s. 30 and the special s. 37(4), there is no way but to allow the special section to prevail. If that were not done, it would never have any operation and any assessee could claim deductions for rent of guest houses notwithstanding the existence of specific contrary provisions in the Act prohibiting them." In our opinion, the ratio laid down by the Hon'ble Calcutta High Court is also squarely applicable to the facts of the present case. In that view of the matter also, we set aside the order of learned CIT(A) and restore the disallowance made by the AO. Since s. 30 of IT Act, 1961 is a general section and s. 37(4) is special section, therefore, latter should prevail and the learned CIT(A) had allowed relief only on the basis that rent, arrears of rent and depreciation on furniture were items covered under s. 30 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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