9911796707
TMI Blog2011 (11) TMI 19X X X X Extracts X X X X X X X X Extracts X X X X ..... whether deletion of disallowance of 80% of the expenses and depreciation amounting to Rs.53,18,761/- is correct? 3. The assessing officer had held that income of Rs.13,27,855/- and Rs.1,20,000/- (total Rs.14,47,855/-) received from Neemrana Hotels Private Limited (NHPL, for short) towards and on account of Pondicherry and Ramgarh properties were rental income. The assessing officer observed that these properties were being run as hotels by NHPL and possession of the properties was transferred to them, while ownership remained with the assessee. The reasoning given by the assessing officer is as under:- "A perusal of the above depicts that the Ramgarh and Pondicherry properties were let out by the assessee to M/s Neemrana Hotels (P) Ltd but the arrangement was made in a manner so that the income of the same treated as "Income from business & Profession" in the hands of the assessee e. in order to claim the expenditure and the huge depreciation thereon. Since, the property has been let out by the assessee, possession has also been transferred, ownership remained with the assessee and business run by Neemrana Hotels Private Limited. All these facts clearly fit the case to tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on filed by the assessee under Section 154 remained pending till the matter was taken up and heard in appeal by the Commissioner of Income Tax (Appeals) [CIT (Appeals), for short]. 5. The respondent assessee filed detailed grounds of appeal and written submissions before the CIT (Appeals). The assessing officer was asked to furnish a remand report. The respondent assessee before the CIT (Appeals) pointed out that he was owner of the properties at Matherana, Pondicherry and one property at Ramgrah, while the fourth property at Ramgarh was taken on lease from the Uttrakhand Government. Further he had constructed 14 rooms at Pondicherry to be run as a hotel and 7 rooms in the two properties at Ramgarh to be run as hotels. All the rooms were fully furnished having all facilities including air conditioners, generators, crockery, EPABX machines, fax machines, refrigerator, telephone facilities, computers, televisions, bed sheets, blankets, bath towels, face towels, provisions for meals/beverages etc. 6. The respondent's stand was that NHPL had been permitted to operate and manage these hotels but NHPL was not a tenant in possession of the properties. No lease deed had been execu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the license agreement between the appellant and M/s. Nimrana Hotels (P) Ltd as a -sham agreement without any cogent finding. except that the appellant is incurring huge expenses and claiming huge depreciation. Even otherwise the AO has made the addition without arriving at any definite conclusion as it has been observed by the AO In the assessment order that certain enquiries are pending on this issue and the assessment has to be completed by 31.3.2006 and therefore. "the stand taken by the assessee is not accepted subject to pending verification at later stage." The above facts and circumstances reflect that there is no conclusive evidence to show that the appellant`s income should tall under the heed income from house property and not business income. In fact all the facts and circumstances point towards the income of the appellant being income from business and profession. Therefore, under the circumstances it is held that the income of Rs. 14,47,855/- cannot be treated as income from house property. Further it has been pointed out that while adding the income of Rs. 14,47,855/- to the income from house property. The AO has not reduced the same from business income shown ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ping in view the natural justice and the fair play, 20% of all the expenses other than depreciation is being allowed to the assessee by treating that the same might have incurred for the purposes of the business only. This clearly shows that the AO is herself not entirely sure about the stand taken by her. It appears that the disallowance has been made without any cogent reason, Further no basis has been brought out in the assessment order as to why the proportion of 80%:20% has been applied. Since it is clear that the various properties are being used for the purpose of the appellants hotel business, the disallowance of these expenses @ 80% does not appear to be justified. These expenses are related to the claming(sic) of the appellant's business income. These expenses are related to the earning of the appellants business income Hence the disallowance made by the AO deserves to be deleted." 10. In the appeal preferred by the Revenue before the tribunal, the following grounds were raised :- "1. On the facts and circumstances of the case and in law, the CIT(a) has erred in deleting the addition of Rs.3,69,864/- on account of staff ties and other expenses which are not related to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... head 'income from business or profession' and not under the head 'income from house property'. The reasoning given by the assessing officer is cryptic and she has not considered the relevant aspects. On the basis of findings recorded by her, it is not possible to hold that the finding of fact recorded by the CIT (Appeals)/tribunal are unfounded or unreasonable. In any case, the said findings are not perverse and are based on documents and material placed on record. The reasoning is cogent and well explained. Therefore, we do not find that any question of law arises on the first aspect and we are not inclined to frame any substantial question of law whether the income earned by the respondent assessee is taxable under the head 'income from house property'. 13. Once it is held that the income from the three properties is taxable under the head 'income from business or profession' depreciation has to be allowed under the provisions of Section 32 of the Act. Similarly, disallowance of 80% from the expenses deleted by the CIT(Appeals)/tribunal has been explained and supported by cogent reasoning. The CIT (Appeals) has rightly pointed out that there was a confusion in the mind o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e discrepancies in the Rent Note which clearly gives rise to a perfect case for application of section 69C, hence the amount of expenditure to the tune of Rs.1,34,400/- is disallowed. Penalty proceedings u/s 271(1)(c) is initiated on this point for furnishing of wrong particulars. (Disallowance Rs.1,34,400/-)" 15. The aforesaid reasoning is laconic and has to be rejected as perverse. The CIT (Appeals) examined the said aspect and has rightly recorded that the addition cannot be sustained. The rent was deposited in the bank account of Dugal Brothers and even tax at source was deducted. The respondent was not the owner of the property. The assessing officer did not hold that Dugal Brothers were not owners. Once payment of rent was not disputed and admitted, signature on rent note becomes inconsequential. Oral tenancy is legal and recognized. The respondent had paid security service charges per quarter to the Security Agency appointed by the Welfare Association of Nizamuddin (East). Thus, the respondent assessee had paid Rs.2,400/- in addition to rent of Rs.1,32,000/-. The aforesaid order of the CIT (Appeals) was affirmed by the tribunal. We fail to understand why and on want ground ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e treated as loans and advances, Hence the AO was not correct in treating these receipts as deemed dividend u/s. 2(22)(e)." 20. The tribunal has rightly dismissed the appeal of the Revenue. In fact there is hardly any justification and reason for the assessing officer to make these huge additions. Appeal on this ground is dismissed. D. Disallowance of Rs.1,89,201/- on account of business development expenses incurred on production of Opera. 21. After hearing the learned counsel for the parties, the following substantial question of law is framed:- - Whether the tribunal was right in allowing the appeal of the assessee and deleting addition of Rs.1,89,201/- on account of business development expenses for production of Opera? 22. The assessing officer had disallowed the said expense on the ground that the assessee's daughter had participated in an opera but this did not justify and cannot be regarded as a business expense. The total cost of the Opera of Rs.80 lakhs was borne by Delhi Symphony Society and the respondent assessee was not in the business of Opera production etc. There was no need for the assessee to incur the said expenditure. Referring to the explanation of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
