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TMI Blog2012 (2) TMI 673X X X X Extracts X X X X X X X X Extracts X X X X ..... e of hearing, both the parties have agreed that this issue is covered by the consolidated order of the Tribunal dated 18.11.2011 passed in I.T.A. Nos. 2194 to 2199/Mds/2010 in assessment years 2002-03 to 2007- 08, wherein the Tribunal had restored the matter back to the file of Assessing Officer and following the same, in this year also the issue may be decided accordingly. 5. We have heard the rival submissions, perused the materials available on record. We find that the Tribunal in the assessment years 2002-03 to 2007-08 has held as under: 12. Before us, the Revenue disputed the findings of the ld. CIT(A) to the extent the ld. CIT(A) held that the rental income derived by the assessee is to be assessed under the head profit and gains of business . Thus, the only issue, which requires adjudication by us is that the rental income derived by the assessee from letting out is to be assessed under the head income from House Property or under the head Profit and Gains of business or profession . 13. The ld. DR relied upon the order of the Assessing Officer and submitted that the facilities provided by the assessee were provided by any owner of the house property and were i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... We find that the copy of the aforesaid letter dated 01.08.2001 is placed at page 1 to 2 of the paper book filed by the assessee. The said letter reads as under: No. 15(8)/2001-IP ID Government of India Ministry of Commerce and Industry Department of Industry Policy Promotion Secretariat for Industrial Assistance Investment Promotion and Infrastructure Development Cell Udyog Bhavan, New Delhi 110 011 Dated: August 01, 2001 To, M/s R.R.lndustries limited, 94-95, Block- VI, 4 I.T.A. No.1256/M/11 THIRU-VI-KA-INDUSTRIAL ESTATE, Guindy, Chennai - 600 032. Sub: Application for setting up of Industrial Park (SIA Regn No.08/SIA/IP/2001 dated 25.06.2001) under the scheme notified by this Ministry (S.O. No. 1201 (E) dated 01.12.99). Ref: Your application dated 21.06.2001 acknowledged vide SIA Ref. No. No.08/SIA/IP/2001 dated 25.06.2001 and subsequent clarifications vide letters dated 02.07.2001, 12.07.2001 and 16.07.2001. Sir, I am directed to refer to your application on the above mentioned subject and to convey the approval of the Government of India to your proposal for setting up of an Industrial park, in terms of the scheme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orm enclosed with this letter. 5. The conditions mentioned in para I above, are as per the proposal made by the undertaking and are within the provisions of the scheme notified by this Department vide S.O.No. 1201(E) dated 01.12.1999. The conditions in para I and others included in this letter should be adhered to. The Government may withdraw the above approval in case of failure to comply with any of the conditions. 6. You are requested to confirm acceptance of the above terms conditions to the undersigned within one months of the issuance of this letter. Yours faithfully, Signed/- (Ashish Sharma) Desk officer Tel: No: 011- 3018356 Fax: No: 011- 301 1770 Copy to: I. Joint Secretary (TPL-II). C.B.D.T., Ministry of Finance, Department of Revenue, North Block, New Delhi (2 copies), along with a copy of the original application dated 21.06.2001 and subsequent letters as detailed on page I. 2. Chief Secretary. Govt. of Tamil Nadu. Fort St. George, Chennai - 600009. 3. Guard File. Signed/- (Ashish Sharma) Desk officer 16. Thus, a perusal of the above shows that the assessee was only granted approval for setting up of an industrial park. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The assessee not only constructed vaults of special design and special doors and electric fittings, but it also rendered other services to the vault-holders. It installed fire alarm and was incurring expenditure for the maintenance of fire alarm by paying charges to the municipality. Two railway booking offices were opened in the premises for the dispatch and receipt of film parcels. This, it appears to us, is a valuable service. It also maintained a regular staff consisting of a secretary, a peon, a watchman and a sweeper, and apart from that it paid for the entire staff of the Indian Motion Picture Distributors' Association an amount of ₹ 800 per month for services rendered to the licensees. These vaults could only be used for the specific purpose of storing of films and other activities connected with the examination, repairs, cleaning, waxing and rewinding of the films. 9.2.1. Further, an identical issue to that of the present one had cropped up before the earlier Hon ble Bangalore Bench in the case of Global Tech Park (P) Ltd. v. ACIT - reported in (2008) 119 IT) (Bang) 421 - wherein it was observed that The assessee having been incorporated with the sol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Bhoopalam Commercial Complex and industries Pvt. Ltd. [262 ITR 517 (Kar)]. In that case, the issue, in brief, was that the assessee was a Private Limited Company and one of its directors had taken certain extent of lands situated at Bangalore on a long term lease of 36 years under a registered lease-deed and executed a registered deed of transfer In favour of the assessee-company transferring his leasehold rights. Subsequently, the assesseecompany built a commercial complex on the said land and allotted the same to various parties and earned income there-from. For the year 1985-86 and 86-87, the assessee filed its returns of income showing losses for which the AO completed the assessments making minor adjustments in computing the losses. The CIT initiated suo motto proceedings u/s 263 and after such proceedings directed the AO to make fresh assessments computing the income from rentals received from the commercial complex under the head Income 'from house property. On an appeal by the assessee, the Tribunal held that the income derived by the assessee could have been assessed only as income from business and not under the head Income from house property . Accordin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ayable was Inclusive of all charges whereas the Issue on hand is entirely on different footing, namely, the assessee had developed about 4.7 million square foot of a technology park in a sprawling area of more than 55 acres by providing various amenities such as roads, street lights, drainage facilities, gardens, high connectivity facilities such as telecommunication towers, sewerage and water treatment tanks, water treatment plants to attain the status of a Soft-ware Technology Park whereas in the case of Shambhu Investment P. Ltd., the immovable was a tiny property and the so called amenities provided to the occupants only as against the amenities provided In a STP to feed a special purpose. Letting out of a building In a STP is incidental whereas the fact in the case of Sambhu Investment was rather predominant and, thus, Sambhu Investment case cannot, at any stretch of Imagination, be equated with that of the present assessee. 9.4. Taking into account the facts and circumstances of the issue, we are, therefore, of the firm view that the case laws on which the Revenue placed reliance cannot come to its rescue. 19. Thus, from the reading of the aforesaid decisions, we find ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e readjudicating the issue afresh. 22. In the result, all the appeals of the Revenue are allowed for statistical purposes. 6. We respectfully following the decision of this Tribunal quoted above, set aside the order of the ld. CIT(A) and remit the issue back to the file of the Assessing Officer for the assessment year 2008-09 also for readjudication afresh as per the directions of the Tribunal given in the above quoted order after allowing sufficient opportunity of hearing to the assessee. Thus, this ground of appeal of the Revenue is allowed for statistical purpose. 7. In ground No. 3 of the appeal, the grievance of the Revenue is that the ld. CIT(A) erred in directing the Assessing Officer to allow the expenses claimed by the assessee towards valuation of real estate portfolio and towards issue of Initial Public Offer, holding them as revenue expenditure. 8. The brief facts of the case are that the Assessing Officer was of the view that the expenditure towards payment of consultation fee of ₹ 24,71,920/- for valuation of the real estate portfolio for new project and consultancy charges paid to a merchant banker for an IPO of ₹ 10,13,840/- are capital in n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as the argument that the Special Bench of the Tribunal in the case of Amway India vs. DCIT prescribed three tests to decide the nature of expenditure, which are tests of enduring benefit, ownership test and the functional test. By applying these tests, it would emerge that the expenditure incurred on valuation and consultancy charges paid to merchant bankers do not bring about an asset of an enduring nature giving benefits to the assessee in the years to come. 10. The ld. CIT(A), after taking into consideration the above arguments of the assessee, deleted the additions made on both the counts by observing as follows: 6. I have considered the arguments of the learned Authorised Representative. It appears that the assessing officer was under the mistaken impression that these expenditure incurred by the appellant for a new project of the appellant company. However the facts demonstrated by the learned Authorised Representative show that it is not so. I agree with the contentions of the learned Authorised Representative that these expenses were incurred on revenue account only. The assessing officer has not disputed the incurring of the expenditure by the appellant in the cours ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... some profitmaking asset for purpose of its business, which would be of enduring nature, it could be said that expenditure was capital in nature. Held, yes. As the above mentioned case law is squarely applicable here, the said expenditure towards consultancy charges requires to be disallowed. The assessee has incurred Miscellaneous Expenditure of ₹ 10,13,840. This amount relates to consultancy charges paid to a Merchant Banker, M/s. Collins Stewart INGA for the purpose of starting a new project and planned for an IPO to raise funds. The assessee has dropped the project and treated the expenditure as revenue and has written it off. Following the rationale of the decision in M/s. EID Parry Ltd of Madras High Court in 257 ITR 253, the same is required to be disallowed. He also relied on the decision of the Hon ble Bombay High Court in the case of CIT vs. J.K. Chemicals Ltd. 207 ITR 985 (Bom.). He further argued that the expenditure has been claimed by the assessee under section 37 of the Income Tax Act. His argument was that under this section, expenditure incurred wholly for the purposes of the business of the assessee was allowable deduction to the assessee. The asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowance and held them as revenue in nature and finding that the same were not incurred for any new project. 15. The ld. DR contended that as the said expenditures were incurred for a new project and therefore, the ld. CIT(A) was not justified in deleting the same. 16. However, the ld. DR could not give any detail of the alleged new project. He could not state what was the new project, which was envisaged to be undertaken by the assessee. The ld. DR also could not point out how the expenditure resulted in any enduring benefit to the assessee so as to fall under the capital field. 17. Further, no material could be brought before us to show that the aforesaid expenditures were incurred for any non-business purposes. 18. On the other hand, the ld. AR of the assessee, submitted that valuation report was obtained for the purpose of bank loan, which was availed by the assessee for its business purposes. Further, the IPO was also considered for the existing business only. As the expenditures in question were incurred out of commercial expediency and were not for acquiring any capital asset of enduring nature, the ld. CIT(A) was fully justified in allowing the deduction for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chinery of the assessee were kept and maintained in a good state of efficiency for their work and functioning and valuation of these, done by the assessee, in the circumstances, must be regarded as expenses incurred wholly and exclusively for the purpose of the business. We uphold the Tribunal's order allowing this head of claim for deduction. 23. Further, the Mumbai Bench of ITAT in the case of Nimbus Communications Ltd. (supra) held as under: 11. On a careful consideration of the facts and circumstances of the case, as incurring of the expenditure in question was for the purpose of rising capital by way of public issue and as the public issue got aborted, we are of the humble opinion that the expenditure is in the revenue field. For an expenditure to be considered for amortisation under section 35D, it should be in the capital field. An expenditure which is incurred in the revenue field is allowable under section 37 of the Act. The Assessing Officer at para 6 of the assessment order has not come to a conclusion that the expenditure in question has not been incurred. After collecting the details from the assessee, he concluded that there being no change in the subscrib ..... X X X X Extracts X X X X X X X X Extracts X X X X
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