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TMI Blog2018 (12) TMI 1338X X X X Extracts X X X X X X X X Extracts X X X X ..... examination of the record which was also duly supported by the Special Auditor's report holding that these expenses have been incurred for running of hotel business of the respondent – assessee. This, correct findings of fact is not shown to be perverse so as to warrant interference. Disallowance of depreciation on intangible asset which was claimed by the assessee - Tribunal upheld the deletion of depreciation on intangible assets by upholding the finding of the CIT(A) that it is undisputed that the intangible assets were purchased as slump sale and fell under block of assets on which depreciation is allowable @ 25% - Held that:- We find that both the CIT (A) as well as the Tribunal found on facts that the hotel business cannot be carried out without necessary licenses, permits and approvals. Thus, the proposition canvassed by by the Revenue that intangible assets in the nature of permits, licenses & approvals are not required for carrying on the business of hotel not found to be correct by both the CIT(A) and the Tribunal. It is not disputed that the intangible assets viz. permits, licenses and approvals fall within the meaning of intangible assets under Section 32 of the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cumstances of the case and in law, the Hon'ble Tribunal was justified in deleting the addition made by AO on account of royalty of ₹ 10,00,000/- as income on accrual basis while the assessee company is following mercantile system of accounting? 4. As the facts and law involved in both the appeals are admittedly similar, for the purpose of this order, we shall refer to the facts from Income Tax Appeal No. 835 of 2016 relating to A.Y. 2004-05. 5. Regarding Q. No. (1) :- (a). The respondent assessee is engaged in the hotelling business. During the course of the assessment proceedings, a Special Auditor under Section 142(2A) of the Act was appointed. The Special Auditor's report held that the amount claimed as expenditure of ₹ 7.56 crores on account of deputation and other costs as reasonable, necessary and justified to run the business of the respondent. Thus, an admissible expenditure. However, the assessing officer did not accept the same on the ground that the same was in arrangement arrived at between the respondent assessee and M/s. Cox Kings (I) Pvt Ltd (CKIL). Thus, by assessment order dated 23.8.2007 under Section 143(3) of the Act, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (a). The respondent is engaged in hotelling business. It appointed Tulip Hotel (P) Ltd to manage its hotel. It claimed expenses of ₹ 79.93 lacs being the aggregate of Hotel Management Fees (Rs. 61.93 lacs) and sales and market expenses (Rs. 18 lacs) paid to Tulip Hotel (P) Ltd. During the assessment proceedings, a Special Auditor under Section 142(2A) of the Act was appointed. The special auditor on investigation held that in terms of the agreement with Tulip Hotel (P) Ltd, 3% of the gross revenue to be paid as hotel management fees comes to ₹ 59.30 lacs and the same is allowable. It also held that sales and marketing expenses of ₹ 18 lacs is also allowable. However, the assessing officer had in scrutiny assessment proceedings disallowed the entire ₹ 79.93 lacs in the agreement of hotel management fees and sales marketing fees claimed by the respondent assessee. This by an order dated 23.8.2007 vide Section 143(3) of the Act. (b) Being aggrieved, the respondent carried the issue in appeal to the Commissioner of Income Tax (Appeals) [CIT(A)]. By order dated The CIT(A), by its order, deleted disallownace of ₹ 77,30,425/, the CIT(A) found that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tangible assets on the ground that the respondent-assessee could not establish that the intangible assets were used for the purpose of business. Therefore, holding that the respondent - assessee did not fulfill the requirement of Section 32 of the Act by assessment order dated 23.8.2007 passed under Section 143(3) of the Act. (b) Being aggrieved, the respondent filed an appeal to the CIT(A). The claim for deprecation of intangible assets was allowed by the CIT(A). This was by following its earlier order in respect of the same assessee for the A.Y. 2003-04 where also that deprecation was allowed on intangible assets i.e permits and licenses. This as the facts and law in the subject assessment year was found to be the same as for A.Y. 2003- 04. Thus, disallowance of deprecation of ₹ 8.67 crores done by the assessing officer was deleted while allowing the appeal by its order dated 15.3.2008. (c) Being aggrieved by the order of CIT(A), the Revenue filed an appeal on this issue before the Tribunal. By the impugned order, the Tribunal upheld the deletion of depreciation on intangible assets by upholding the finding of the CIT(A) that it is undisputed that the intangible a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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