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TMI Blog2011 (11) TMI 19X X X X Extracts X X X X X X X X Extracts X X X X ..... from the expenses deleted by the CIT(Appeals)/tribunal has been explained and supported by cogent reasoning. 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? - Held that:- The order of the tribunal is not clear and in fact contrary to the findings of the CIT (Appeals) as it has been held that they were in agreement with CIT (Appeals) and it is further stated that “we are not inclined to interfere”. This aspect requires fresh consideration and decision by the Tribunal. - Decided partly in favor of revenue. - Income Tax Appeal No. 338/2011 - - - Dated:- 8-11-2011 - MR. JUSTICE SANJIV KHANNA, MR. JUSTICE R.V. EASWAR, JJ. For Appellant: Mr. N.P. Sahni and Mr. Ruchesh Sinha, Advocates. For Respondent: Mr. Salil Kapoor, Mr. Sanat Kapoor and Mr. Vikas Jain, Advocates. SANJIV KHANNA, J. With the consent of the learned counsel for the parties, the present appeal under Section 260A of the Income Tax Act, 1961 (Act, for short) against the order of the Income Tax Appellate Tribunal (Tribunal, for short) dated 23rd April, 2010, relating to the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view the natural justice and the fair play, 20% of all the following expenses other than depreciation is being allowed to the assessee by treating that the same might have incurred for the purpose of the business only. Thus, the disallowance of the following expenses are being made: Staff Salaries Other Expenses (80%) 3,69,864/- Travelling Conveyance (80%) 7,499/- Postage, Telephone and Courier (80%) 72,730/- Rent Paid (80%) 1,07,520/- Rent received adjusted in rent paid (80%) 3,36,000/- Repair Maintenance (80%) 7,79,308/- Depreciation (Other thanMetharan Property) (as claimed by the assessee) 36,45,840/- 53,18,761/- 4. The assessing officer disallowed expenses to the extent of 80% under the head staff salary and other expenses; travelling and conveyance; postage, telegraph and courier; rent received adjusted against the rent paid; repair and maintenance; and depreciation. The assessing officer has further recorded that notice dated 8th March, 2006 under Section 131 of the Act was issued for summoning the Principal Officer/Managing Director of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ities carried out by the appellant and also on going through the judgments as stated by the appellant. It is seen that the appellant is receiving license fee from Nimrana Hotels (P) Ltd as revenue share for running of the property at Pondechery. It is also seen that the the appellant is involved in all the aspects of management and day to day running of the properties being used as hotels etc. It is also seen that the licence fee received by the appellant for various years is not a fixed sum of money as in the case of income from house property but it has been varying from year to year as it is based on a revenue sharing arrangement, which arises according to the receipts. It is also seen that the appellant has been substantially increasing the capacity of the hotels, income from which is being shared by the appellant and Mis. Nimrana Hotels (P) Ltd as per their terms and conditions. There does not seem to be any conclusive fact which could point towards the income received by the appellant to be in the nature of rental income The AO`s contention that the assessee has so arranged his affairs in the manner that income of the same be treated as income from business or profession so t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is disposes of the ground No. 2(b). 8. In view of the findings recorded above, the CIT (Appeals) went on to consider the second question of 80% disallowance in the expenditure by the assessing officer, under various heads mentioned above. It appears from the order of the assessing officer that 80% adhoc reduction on account of the expenses was made as income from the three properties had been treated and taxed as income from house properties . However, there is no discussion in the assessment order on what basis what principle expenses to the extent of 80% were disallowed. 9. CIT (Appeals) deleted the aforesaid additions recording as under:- After carefully examining the submissions of the appellant and other details submitted during the appellate proceedings, it is seen that the expenses amounting to Rs.53,18,761/- [including depreciation of Rs.36,45,840/-] are expenses relating to the business income of the appellant, It is clear that the appellant is carrying on the business of running hotels on various properties as discussed in the preceding paragraphs, It is also a matter of record that the appellant is using the premises at A-58 for his business purposes and the exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and in law, the CIT(A) has erred in deleting the addition of Rs.Rs.3,36,000/- (sic) on account of rent received adjusted in rent paid. 6. On the facts and circumstances of the case and in law, the CIT(A) has erred in deleting the addition of Rs.7,79,308/- on account of repairs maintenance. 7. On the facts and circumstances of the case and in law, the CIT(A) has erred in deleting the addition of Rs.36,45,840/- on account of depreciation. 8. On the facts and circumstances of the case and in law, the CIT(A) has erred in deleting the addition of Rs.1,34,400/- on account of discrepancy in rent note. 9. On the facts and circumstances of the case and in law, the CIT(A) has erred in deleting the addition of Rs.1,89,201/- on account of business development expenses incurred on producing opera. 10. On the facts and circumstances of the case and in law, the CIT(A) has erred in deleting the addition of Rs.115,14,506/- on account of deemed dividend u/s 2(22)(e) of the Act. 11. It is noticeable from the aforesaid grounds that the Revenue did not specifically challenge the finding of the CIT (Appeals) that income from the three properties was taxable under the head income from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces. No substantial question of law arises and the appeal on the said subject matter is dismissed. B. Whether the tribunal is right in upholding the order of the CIT (Appeals) deleting addition of Rs.1,34,400/- on account of discrepancy in the rent note? 14. Premises No. A-58, Nizamuddin (East), New Delhi 110 013, does not belong to the assessee and was taken on rent from Dugal Brothers. The assessee had produced a rent note dated 5th April, 2001, before the assessing officer, but addition of Rs.1,34,400/- was made on the ground that the rent note was signed by one of the owners and not by both owners who were equally receiving the rent and as per the books of accounts, the total rent paid was Rs.1,32,000/- but as per the profit and loss accounts/return, Rs.1,34,400/- was shown as rent paid. The reasoning given by the assessing officer to make the said addition reads as under:- 5. Service Charges from M/s Neemrana Motels (P) Ltd. Rs.4,20,000/- In this regard, vide questionnaire dated 30.01.2006, the assessee was show caused as under: As per your explanation, the service charges from M/s Neemrana Hotels Private Limited amounting to Rs.4,20,000/- has been credited to the Rent Pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the books of the assessee and were outstanding and, therefore, were in the nature of advances. 18. CIT (Appeals) deleted the said additions recording as under:- (a) The credit balance payable by NHPL was on account of licence fee which had to be paid in installments and the said credit balance had been recorded, but as per the terms of the licence deed, the licence fee was payable after the close of the year. The amount was the share of the respondent from gross profit earned by NHPL. (b) Amount payable to Fawn Trade Travels (P) Ltd. was on account of outstanding bills for various purchases and no loan or advance was given to the assessee. In fact the assessee had given loan to Fawn Trade Travel (P) Ltd. and outstanding balance as on 31/3/2003 was Rs.61,42,095/-. (c) The outstanding balance payable by Delhi Warehousing Pvt. Limited, was towards cheques in hand which were subsequently cleared. 19. CIT (Appeals) deleted the said additions recording as under:- After carefully examining the details, facts and submissions and the assessment order as discussed above, it is seen that the amounts treated. As deemed dividend by the AO are neither advances nor loans given to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is clear that the said expense was disallowed. The CIT (Appeals) had recorded as under:- These submissions of the appellant are very general-in nature and the AO has given a finding in the assessment order that it was organized with a view to promote the career of the appellant`s daughter who is a soprano. Under these circumstances the allowing of this expenditure as revenue expenditure does not seem justified. Further the AO has observed that the Balance Sheet of Delhi Symphony Society was not tiled by the appellant for necessary verification. In addition the AO has correctly pointed out that the business of the assessee does not envisage the staging of Opera productions etc. Keeping in view the above facts and circumstances, it is held that this expenditure of Rs. 1,89,201/- has been rightly disallowed by the AO and is accordingly upheld. However, it is held that the 80% disallowance made by the AO separately in this regard will be deleted as the same expenditure cannot be disallowed twice. 23. Tribunal in this regard has held as under:- 7. We have heard both sides. The CIT(A) has discussed this issue in para 10 of his order. All these expenses were incurred on produ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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