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TMI Blog2019 (9) TMI 148X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on facts and circumstances of the case and in law in upholding the action of assessing officer in making addition of Rs. 1,37,71,043 on account of allowance of depreciation on golf-course as "building" as against the same being considered as "plant and machinery" by the appellant. 1.1 That the CIT (A)/assessing officer erred on facts and circumstances of the case and in law in not appreciating that classification of golf course could not be changed in subsequent year when claim of depreciation @ 25% on golf course as 'plant' stood allowed/ accepted in the past assessment years, i.e., 1998-99 to 2000-01 and succeeding assessment years, i.e., 2006-07 to 2009-10. 1.2 That the CIT (A)/assessing officer erred on facts and circumstances of the case and in law in not appreciating that the classification of block of asset which has been allowed/accepted and merely carried forward from earlier years cannot be modified in current year 1.3 That the CIT(A) erred on facts and circumstances of the case and in law in holding that golf course has not manufactured or produced anything so as to classify it as a 'plant and machinery'. 2. Without prejudice, if the golf course is treated as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... further appeal against the said order, the ld CIT(A), vide order dated 31.12.2018 upheld the order of the ld assessing officer restricting depreciation on golf course @ 10%. The CIT(A) held that no doubt the assessee is generating revenue from the players for playing golf and allowing its golf course, but it cannot be said that the assessee has manufactured or produced anything. Thus, assessee is in appeal before us. 5. The ld AR submitted that aforesaid action of the assessing officer/CIT(A)in restricting the depreciation to 10% is bad in law and not sustainable for the reasons elaborated hereunder: a) Tribunal vide order dated 15.06.2016 merely remanded/remitted the matter to AO for fresh consideration i. As stated supra, in the first round of proceedings, the Hon'ble Tribunal restored the issue whether depreciation is admissible @25% as plant or @10% as building, to the file of the assessing officer for de-novo consideration and to examine the details of construction on the 300 acres of land converting it into a golf course, which were not filed before the assessing officer in the first round of proceedings. The relevant extract of the findings of the Tribunal are reproduce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the factual observations noted by the ld. CIT (A) for putting the golf course in the category of plant. Since the issue has not been adjudicated by the ld. CIT(A) in a proper manner, therefore, this issue is restored to the file of the AO for a fresh adjudication after affording due opportunity of being heard to the assessee and without being prejudiced from earlier orders and our observations in this order. 48. We may also point out that to support the case of the AO, the ld. CIT-DR has placed reliance on plethora of decisions including the decision of Hon'ble Supreme Court in the case of CIT Vs. Anand Theatre [supra], CIT Vs. Gwalior Rayon Silk Mfg. Mills 196 ITR 149 [SC] and decision of Hon'ble High Court of Delhi in the case of Moradabad Toll Road Co. Vs. ACIT [2014] 52 Taxmann.com 21 [Delhi] to establish that golf course is not a plant and machinery and it is to be categorized as a building and on the other hand, the ld. AR has placed reliance on the case of decision of Hon'ble Supreme Court in the case of CIT Vs. Karnataka Power Corpn. 247 ITR 268 [SC], Scientific Engineering House P. Ltd Vs. CIT 157 ITR 86 [SC] and decision in the case of Victory ITA No. 35 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that Tribunal simply set-aside/ remitted the issue to the file of the assessing officer to decide it afresh. In these circumstances, any prima-facie observation/finding recorded by the Tribunal in the earlier para, which was, in fact, based on limited examination of details of construction of golf-course, it is respectfully submitted, stood obliterated for all intents and purposes. He placed reliance in this regard is placed on the judgment of the Hon'ble Supreme Court in the case of Hukam Singh v. State of Haryana and Another: 2019 SCC Online SC 159, wherein the Apex Court clarified similar issue and held that once the matter is remanded for fresh consideration, any observation in the judgment stands obliterated and the authorities are required to consider the issue afresh. In that case, review petition was filed before the Hon'ble Court called upon it to clarify the meaning and purport of the following passage from its earlier ruling in the case of Haryana State Industrial Development Corporation Ltd. vs. UDAL (2013) 14 SCC 506: "32. We also find merit in the argument of the learned counsel for the landowners that while fixing market value of the acquired land the learned Singl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d not be held as binding. The Court observed that: "8. As regards the last submission, paragraph 32 of the decision in Haryana State Industrial Development Corporation Ltd.2 recorded the submission of the learned counsel that on the basis of sale deed Ext.PW 9/A, the value ought to be higher than Rs. 37,40,000/- per acre. The matter was not finally decided by this Court and was remitted in paragraph 34 for fresh consideration "uninfluenced by the observations contained in this judgment". We do not agree with the submission that the landowners were assured of minimum compensation at the level of Rs. 37,40,000/- per acre. In fact, in tune with the observation that fresh consideration is uninfluenced by any of the observations contained in the judgment, the matter was left open and the assessment had to be done de novo. We, therefore, reject the submission." (Emphasis supplied) v. Similarly, the Hon'ble Supreme Court in the case of Kanaklata v. State (NCT of Delhi) and Others: 6 SCC 617, held that if an order passed by the court is set aside, the observations and findings recorded therein also get obliterated for all intents and purposes. The Court further held that in some cases, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rehension in the mind of the complainant which cannot be lightly brushed aside. We must hasten to add that we are not in the least suggesting that the Presiding Officer of the trial court is totally incapable of adopting a fair approach while passing a fresh order but then the question is not whether the Judge is biased or incapable of rising above the earlier observations made by her. The question is whether the apprehension of the complainant is reasonable for us to direct a transfer. Justice must not only be done but must seem to have been done. A lurking suspicion in the mind of the complainant will leave him with a brooding sense of having suffered injustice not because he had no case, but because the Presiding Officer had a preconceived notion about it. On that test we consider the present to be a case where the High Court ought to have directed a transfer. Inasmuch as it did not do so, we have no option but to interfere and direct transfer of the case to another court". (emphasis supplied) vi. Similarly, in the present case, the Tribunal, he submitted, simply set-aside/ remitted the issue to the file of the assessing officer for fresh consideration and thus, any prima-faci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... then, in subsequent year, the same asset cannot be classified as "building" or vice versa. Pertinently, the block concept of depreciation was introduced by the Taxation Laws (Amendment and Miscellaneous Provisions) Act, 1986 with effect from 1-4-1988. Circular No. 469 dated 23 September 1986: 162 ITR (St) 21 explained the scheme of depreciation on block of assets. It was clarified that in the block concept, individual identity of the asset is lost, and depreciation is allowed with reference to the entire block. In view of the above, he submitted that depreciation is to be allowed on the block of asset at specified percentage on the written down value of the block of asset. The written down value of the block of asset is the value of block of asset at the beginning of the previous year as increased or decreased by the addition or deletion in the previous year. Hence, once an asset goes into the block of asset and the same is allowed by the assessing officer in the previous year, the asset loses its individual identity and become part of the block. In the succeeding years, the assessing officer has to allow depreciation on the block of asset as being brought forward. c) Golf cours ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 30.10.2001 Order u/s 143(3) dated 29.3.2004 4th year of claim, allowed originally by the assessing officer. Subsequently, the case was reopened and the issue was set aside by the Tribunal vide order dated 15.6.2016 for denovo consideration. 2002-03 31.10.2002 Return processed u/s 143(1) vide intimation dated 27.2.2003 5th year, claim of depreciation stood accepted, as under: as under: - Depreciation claimed in return - Tax Audit Report - Intimation u/s 143(1) 2003-04 27.11.2003 Order u/s 143(3) dated 28.2.2006 6th year of claim. The case was re-opened and the issue was set aside by the Tribunal vide order dated 15.6.2016 for denovo consideration. He further submitted that , in regular assessment under section 143(3) vide order dated 29.03.2004 for assessment year 2001-02, the claim of depreciation was accepted after duly considering the replies dated February' 2004 and 15.3.2004 filed by the appellant. He submitted that vide letter filed in February 2004, the appellant furnished detailed break-up of additions to golf course (refer pages 112-118 of Paper book - Vol I). He referred that Vide letter dated 15th March' 2004, the appellant certified that no depreciatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is contentions. i. He first referred to decision of Delhi Bench of the Tribunal in the case of DCIT v. Jaypee Greens Ltd. : ITA Nos. 3545 to 3547/Del/2009, wherein on exactly similar facts, the Tribunal considering golf course as a plant, was pleased to allow depreciation @25% observing that the assessing officer has himself allowed depreciation at that rate in the past [refer pages 33-38 of case laws paper book]. He submitted that in that case, the assessee was engaged in the business of running and operating a golf course in Greater Noida on which the assessee claimed depreciation @ 25%. The assessing officer held that golf course and also hospitality services is not covered in the block of 'plant', but it is covered in the asset 'building' which is used by the hotels for hospitality services on which the depreciation @20% is allowable. Hence, the assessing officer rejected the assessee's claim of depreciation @25% for assessment year 2002-03 and 2003-04 and substituted it for 20%. For assessment year 2005-06, the AO allowed depreciation applicable for the cost of building @10% and rejected the claim of @25%. On further appeal, the CIT(A) decided the issue i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... present case, we do not find any change in the circumstances of the case facts or law. Under the circumstances, we refer to Hon'ble Jurisdictional High Court decision in the case CIT vs. Dalmia Promoters Developers (P) Ltd. 281 ITR 346 wherein it was held that when there is absence of any material change in the facts and law, the view taken for earlier year cannot be disturbed. In the present case, we find that no such material change has been brought out before us. Since the depreciation @25% on the said asset has been allowed for A.Y. 2001-02, we do not see any reason to disturb the rate to 20% as applied by the AO. Accordingly, we uphold the order of the ld. CIT(A) to allow the depreciation @25%. 2.6 In the result, all the revenue's appeals are dismissed. (Emphasis supplied) ii. He further placed reliance in this regard on the decision of the Delhi Bench of the Tribunal in the case of ACIT v. CLC Global Ltd. : ITA No. 2288/Del/2008, wherein it has been held that once the assessing officer has, on exactly similar facts, allowed depreciation on goodwill in the immediately preceding year, there is no reason to take a different stand for the succeeding year and to disa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... specifically excludes from its ambit tea bushes, livestock, buildings or furniture and fittings. He referred to decision of Supreme Court in the case of Scientific Engineering House Pvt Ltd v. CIT: 157 ITR 86, wherein the meaning of term 'plant' was explained. He submitted that legal principles that emerge from the aforesaid decision may be culled out as under: (a) Plant in its ordinary sense includes any apparatus, article or object fixed or movable, live or dead, used by a businessman for carrying on his business; (b) Plant include any article/ apparatus used by a businessman for carrying on business and it is not necessarily confined to an apparatus which is used for mechanical operations or processes or is employed in mechanical or industrial business; (c) In order to qualify as plant, the article must have some degree of durability. The Court, thus, summed up by holding that test is whether the article is a tool of trade with which assessee carries on his business and if the answer is in the affirmative, it will be a plant . He submitted that applying the aforesaid tests, the Golf course constructed by the appellant, it is submitted, qualifies as 'plant' and i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion and other technical requirements as per the rules of the game of golf. The construction of golf course involves various plants and equipment referred above. Further, the fact that the appellant spent an aggregate sum of Rs. 22.57 crores for construction of Golf course during the financial years 1997-98 to 2000-01 speaks volume of the specialized nature and the advanced technology/ expertise that goes into constructing the Golf course (Refer pictorial representation of the specialized nature of Golf course placed at pages 74-111 of the Paper book - Vol 1). d) In light of the aforesaid, it is respectfully submitted that Golf course has to be treated as 'plant' and is, therefore, entitled to deprecation @ 25% as applicable to 'plant', more particularly in the light of the legal position discussed herein. e) Similarly, in the present case, in the business of Golf course, developing a golf course, for running the business of operating a golf course is, it is submitted, an essential/ indispensable part of/ and is used as a tool of business. Therefore, applying the functional test laid down in various decisions, Golf Course expense has to be, and it is submitted, regarded as `plan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ally designed for rearing/breeding of the prawns, they have to be treated as tools of the business of the assessee and the depreciation was admissible on these ponds. We, thus, decide the question in favour of the assessee and as a consequence, appeals of the Revenue are dismissed and that of the assessee are allowed." (Emphasis supplied) g) Kind attention, in this regard, is also invited to the decision of the Bombay High Court in the case of CIT V. Hydro Electric Power Supply Co. Ltd: 122 ITR 288 wherein the Court held dam constructed by the assessee engaged in the business of generation of electric power to be 'plant'. Similarly, wet dock of a dockyard in the case of CIT V. Mazagon Dock Limited: 191 ITR 460 (Bom.) and swimming pool of a caravan park operator in the case of Cooke V. Beach Station Caravans Limited: (1974) 3 All ER 159 have been held to be 'plant'. In the case of Shyam Enterprises v CIT: 349 ITR 418 (All), the High Court, applying the functional test, had held that the building of special cooling chambers in a cold storage plant, being constructed in a specific process and manner, is eligible for depreciation as applicable on a 'plant'. definition of plant, The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deleted in toto. The LD AO reiterated the findings given in original assessment and allowed depreciation on golf course @ 10% by treating the same as 'building'. On further appeal against the said order, the CIT(A), vide order dated 31.12.2018 upheld the order of the assessing officer restricting depreciation on golf course @ 10%. The CIT(A) held that no doubt the assessee is generating revenue from the players for playing golf and allowing its golf course, but it cannot be said that the assessee has manufactured or produced anything. The aforesaid conclusion of the CIT(A) is, it is submitted, contrary to the functional test laid down by the Courts. The CIT(A) failed to appreciate that manufacture/ production is not necessary to treat an asset as "plant". So long as functional test of a plant is satisfied, the asset would qualify as plant. Further, reliance placed by the CIT(A) on the decision in the case of CIT v. Anand Theatres: 244 ITR 192 (SC) is, it is submitted, totally misplaced since the Supreme Court in the later case in CIT V. Karnataka Power Corporation: 247 ITR 268 (SC) clarified that the decision and observation in Anand Theatres (supra) was limited to buildings used f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f which business activities were carried on amounted to a plant but where the structure played no part in carrying on these activities but merely constituted a place where they were carried on, then it is a building and it is not a plant. He therefore submitted that in the present case the players play golf on the golf course but the golf course as such does not play any part in carrying on the playing activity of the assessee. He further countered the argument of the learned authorised representative that the issue squarely covered in favour of the assessee in case of GP greens Ltd in ITA number 3545/del/2009, wherein the coordinate bench vide order dated 9/3/2010 has not due to adjudicate the issue as to whether the depreciation is allowable on golf course treating the same as plant or not. He therefore submitted that the ratio of said decision does not apply to the facts of the case. He further submitted that in case of the assessee itself the coordinate bench restore the issue of depreciation of golf course to the AO to examine the facts which were not produced before the AO including details of construction on 300 acres of land et cetera. He therefore submitted that the learne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rse has not been categorized in the schedule of depreciation and the main dispute between the assessee and the revenue is that the assessee is seeking to place the golf course in the category of plant and machinery whereas the Revenue wants to treat the same as building. 46. At this juncture, we may point out that we are not in agreement with the conclusion drawn by the id. CIT(A) that a piece of land having some landscaping for playing golf such as various level undulation, holes, small ponds etc construed a super structure which- can be categorized as a plant and machinery. If this view is accepted then every landscaping having some special features for the purpose of its intended use would become plant and machinery and every construction of building for the purpose of sports would be converted into plant and machinery. It is pertinent to note that for creation of golf course, landscaping is done for in various levels and some holes, ponds and walking path is created but in our humble understanding this kind of piece of land converted into a golf course by creating some specialized facilities for playing golf cannot be put in the category of plant and machinery. 47. In view ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s issue requires detailed verification and examination at the end of the AO after affording due opportunity of hearing to the assessee and without being prejudiced from the earlier assessment and first appellate order. Needless to say that the AO would examine all material facts on this issue and after considering the mandate of the relevant provisions of the Act as well as the ration of decisions relied upon by both the parties shall decide the issue afresh in accordance with law." 6.3 Accordingly, the AO, after considering the issue, has taken the depreciation on Golf course @ 10% as applicable to building only, rejecting the claim of AO in the assessment order under appeal with the following remarks:- "5.4 From the details of the expenses, the assessee was not able to justify as to how these expenses make Golf Course a Plant. These are simple expenses related to landscaping and construction. If the argument of the assessee is accepted, then every land with some kind of landscaping or every building used for some king of sports activity would be converted into Plant & Machinery. Further, simply because some special controlling equipment are attached, it will not take out of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rts, Pull Carts etc. In view of the above discussion depreciation on the Golf Course is limited to 10%" 6.4 I have examined the contention of the appellant, the assessment order and direction by the Hon'ble ITAT. 6.5 It is evident that no depreciation has been claimed on land but only the add-ons on the land has been taken to consider as plant and "machinery by the appellant, which was taken as building by the AO. It is also observed that in the depreciation chart as per the IT Act and Rules, no such category has been mentioned related to depreciation on golf course. No direct ruling or any case laws has been brought to the notice by appellant, to say that golf course is plant and machinery. The case laws relied upon are on different issues all together. The issue in this case is decided looking to the fact and circumstances of this case only. Accordingly, this has to be examined with reference to the activities of the appellant company. 6.6 The golf course is a playground with various equipments such as sprinklers, holes, ponds and other add-ons incorporated therein to facilitate the sports of golf. It is stated to be highly sophisticated and value added equipments have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is also to be mentioned that the assessee is running a hotel and therefore, the residents of the hotel are also provided the facility to play golf. In such circumstance, the main objective is to increase the business of hotel by providing additional benefit / facility of golf. 6.11 The issue discussed in the case of CIT vs. Anand Theatre (supra) is clearly in the favour of revenue with respect to the facts relates to the appellant. Therefore, the same is accordingly followed where it is clearly mentioned that in such circumstance it has to be treated as building and not plant. 6.12 Therefore, looking to the facts and circumstances of the case and in law, where no specific rate of depreciation has been provided in the Act / Rules nor categorized golf course as plant and machinery, the landscaping and some structuring and fixtures done over land for the purpose of the sports to lure the client where no_ product is also demonstrated to have been manufactured but only facility is provided, this cannot be considered as plant and machinery. Accordingly, the appellant is not entitled for depreciation @ 25% but only treated as building as this is a super structure on the land, which i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by this court in several decisions was applied. It was held that if it was found that the building or structure constituted an apparatus or a tool of the taxpayer by means of which business activities were carried on, it amounted to a "plant" ; but where the structure played no part in the carrying on of those activities but merely constituted a place wherein they were carried on, the building could not be regarded as a plant. The Tribunal and the High Court in the instant case proceeded upon assumptions of what a nursing home should contain. This may not be altogether appropriate. What is to be determined is whether the particular nursing home building was equipped as to enable the assessee to carry on the business of a nursing home therein or whether it is just any premises utilized for that object. We find from the order of the Tribunal as also the assessment order that the assessee's nursing home is equipped to enable the sterilization of surgical instruments and bandages to be carried on. It is reasonable to assume in the circumstances, particularly having regard to the Tribunal's order, which states that the sterilization room covers about 250 sq. ft. that the nursing h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue whether the mineral oil well constitute plant as claimed by the assessee or building as claimed by the revenue, has held that Under section 32 of the Income-tax Act, 1961, depreciation allowance is, subject to the provisions of section 34 , permissible only in respect of certain assets specified therein, namely, buildings, machinery, plant and furniture owned by the assessee and used for the purpose of business. Section 43(3) defines "plant" in very wide terms. In order to qualify as plant the article must have some degree of durability. The test would be: does the article fulfill the function of a plant in the assessee's trading activity? Is it a tool of his trade with which he carries on his business ? If the answer is in the affirmative, it will be a plant. Thus, it was held that Tribunal was not right in law in treating the mineral oil wells as buildings for applying rate of depreciation under section 32 of the Act. The mineral oil wells constituted "plant" for purposes of section 32. 13. In the present case also before us, the golf course owned and used by the assessee for the purpose of the business as a tool of the business of the assessee. It is functioning like ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recedents relied upon by the parties also only lays down the proposition established by the higher judicial forum supports the above view. In view of this, ground number 1 of the appeal of the assessee is allowed reversing the views of the lower authorities, holding that golf course is a plant on which assessee is entitled to the depreciation at the rate of 25% under the income tax act. 14. In view of our decision in ground number 1 of the appeal, the second ground raised by the assessee, which was an alternative claim, does not survive, hence it is dismissed. 15. Accordingly, ITA number 1030/del/2019 for assessment year 2001 - 02, filed by the assessee is allowed. Assessment year 2003 - 04 16. The assessee has raised the following grounds of appeal in ITA No. 1031/Del/2019 for the Assessment Year 2003-04 against the order of the Commissioner of income tax (appeals) - 5, New Delhi dated 31/12/2018:- "1. That the CIT(A) erred on facts and circumstances of the case and in law in upholding the action of assessing officer in making addition of Rs. 60,54,840 on account of allowance of depreciation on golf-course as "building" as against the same being considered as "plant and mach ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee i.e. by directing the AO to allow depreciation on Golf Course @ 15% as against the 10% allowed by the AO. 2.1. The ld CIT (A) ignored the fact the Golf Course is building and not machinery and is not entitled for depreciation @ 15% applicable for machinery. 3. On the facts and circumstances of the case and in law, the Ld. CIT (Appeals) has erred in deleting the addition of Rs. 55,00,000/- made by the AO by disallowing the expenses on account of golf course and repair & maintenance expenses. 3.1. The Ld CIT(A) ignored the fact that there is abnormal increase in the expenses and decline in the income of the assessee. 4. The appellant craves leave to add, to alter, or amend any grounds of the appeal raised above at the time of hearing." 20. Ground number 1 and 4 of the appeal are general in nature, no arguments were advanced by the parties, and hence they are dismissed. 21. Ground number 2 of the appeal along with ground number 2.1 is with respect to the direction of the learned CIT - A to the learned assessing officer to allow depreciation on golf course at the rate of 15% considering it is planned against the depreciation at the rate of 10% allowed by the lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied by the tax audit. He further stated that the learned assessing officer has further failed to point out any specific defect in those details and merely because of the reason that there is an increase in the expenditure compared to the golf course income the disallowance has been made. He further referred to the order of the learned CIT - A and submitted that there is no infirmity in the order of the learned CIT - A deleting the above disallowance. 25. We have carefully considered the rival contention and perused the orders of the lower authorities on this issue. It is a fact that assessee has submitted the details of such expenses which are placed at page number 132 - 139 of the paper book. The books of the accounts of the assessee are duly audited and the learned assessing officer has also not pointed out any specific debate the defect in the details of such expenses. The merely because there is an increase in the expenditure compared to the golf course income the disallowance cannot be made. Further the assessing officer has also not established that those expenditure have not been incurred wholly and exclusively for the purposes of the business. In view of this we do not fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... off in the normal course of business." 29. The revenue has raised the following grounds of appeal in ITA No. 4721/Del/2009 for the Assessment Year 2005-06:- "1. The order of the learned CIT (APPEALS) is erroneous & contrary to facts & law. 2. On the facts and in the circumstances of the case and in law, the learned CIT (A) has erred in restricting the additions made by AO disallowing the expenses claimed on account of provisions no longer written back to Rs. 20,41,449/- as against the disallowance of Rs. 84,16,051/- made in the assessment order. 2.1. The Ld. CIT (A) ignored the fact that the disallowance of Rs. 84,16,051/- was made by AO in accordance of the provisions of section 41 (1) (a) of the I. T. Act. 3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs. 19,59,50,000/- made by the AO on account of undisclosed income on sale of land. 3.1. The Ld. CIT (A) ignored the fact that the AO has made addition on basis of sale consideration received by the assessee in earlier years on similar property. 4. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ily consisted of business advances, debtors, creditors and other provisions. Therefore according to him such) is clearly in the nature of remission of trading liabilities and have to be treated as profits chargeable to tax under the provisions of section 41 (1) of the income tax act. In view of this, the above addition was made. The assessee preferred the appeal before the learned CIT - A who considered the whole issue and found that the learned assessing officer nowhere brought on record anything to show that any allowance or deduction regarding any particular amount written back had been allowed in the earlier years. He further noted that the provision for bad and doubtful debts were already added back to the total income and offered by the assessee for taxation. After that on examination of the reconciliation of the provisions no longer required written back during the year under consideration with the copies of the computation of income for assessment year 2000 - 1, 2001 - 02 and 2003 - 04 he noted that INR 6 374602/- was already added back by the assessee of to its total income in earlier years. Therefore he deleted the above amount from the deduction and sustained the balance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the additions cannot be deleted. In view of this we find no infirmity in the order of the learned CIT - A in upholding the disallowance of INR 2 041449/-. Accordingly, ground number 1 of the appeal of the assessee and ground number 2 of the appeal of the revenue are dismissed. 35. Ground number 2 of the appeal of the assessee is with respect to confirmation of the addition of security deposit received by the appellant over the years amounting to INR 3 40542851/-. The appellant, in the course of carrying on the business of running and maintenance of golf course, popularly known as 'Classic Golf Course', receives membership fee from its members for use of golf course and the club facility. Broadly stated, there are two types of members, viz., individual member and corporate member. Every member admitted to membership signs the membership plan and is bound by the rules and regulations. In terms of the membership plan, every individual member is required to pay security deposit, membership entrance fee, advance membership fee, subscription fee, etc. A corporate member is, however, not required to pay any security deposit. In the audited financial statements for the year ended 31.03. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... D. Sassoon and Co. Ltd. v. CIT: 26 ITR 27, the question was raised as to when the commission for managing agency linked with annual net profits of the managed company accrues or arises. After deliberating on the concept of "accrual of income" as a whole, the Supreme Court laid down that income must be held to accrue at the point of time when the assessee contributed to its accruing or arising and a debt becomes due. The Supreme Court held as under: "...... It is clear therefore that income may accrue to an assessee without the actual receipt of the same. If the assessee acquires a right to receive the income, the income can be said to have accrued to him though it may received later on its being ascertained. The basis conception so that he must have acquired a right to receive the income. There must be a debt owned to him by somebody...... Unless and until there is created in favour of the assessee a debt due by somebody it cannot be said that he has acquired a right to receive the income or that income has accrued to him...... But in order that the income can be said to have accrued to or earned by the assessee it is not only necessary that the assessee must have contributed to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 338 (Hyd.) * T.K. International Ltd. v. ACIT : 91 ITD 481 (Cuttack) - * Consideration received towards sale of time share for 99 years - held taxable over the years in which assessee was to provide services and facilities As regards (b) above, it is emphatically reiterated that since the appellant had already offered to tax the said amount in subsequent year(s), the same amount cannot be taxed twice in the year under consideration merely because the amount received has been utilized for creation of fixed assets. For the aforesaid reasons, addition to the extent of Rs. 3,52,88,416, being advance membership fees offered to tax on pro-rata basis, is liable to be deleted." 37. The learned Commissioner of income tax Department representative vehemently relied upon the order of the learned CIT - A and the learned assessing officer. He extensively referred to the paragraph number 7 of the learned CIT - A and submitted that both these receipts are revenue in nature and therefore chargeable to tax in the end of the assessee in the year in which they received. He therefore submitted that there is no infirmity in the order of the lower authorities. 38. We have carefully considered the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecision of the Calcutta stock exchange Ltd and Delhi stock exchange Ltd. In Calcutta stock exchange Ltd the issue of the monthly fees received by the assessee. Therefore, it cannot be said that if the fees received which is pertaining to the year itself it cannot be said not to be the income of the assessee. In the case of the assessee, assessee has received advance membership fees for which the services were to be rendered in subsequent years and assessee has already offered such income in the subsequent years on accrual basis. It is not the case of the revenue that assessee has not offered golf course membership fees income in the year to which it pertains to. It is also not the case of the revenue that assessee provides all the services to the members in the year in which the membership fee is received, and in subsequent years, no services were rendered. The membership fees are chargeable to tax under the provisions of the business income. The assessee follows undisputedly, mercantile/accrual system of accounting. Therefore, income/expenses of the assessee are also required to be recorded as income only based on accrual system. Thus, whenever the Income accrues to the assessee i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sum at the end of the specified period or on happening of certain events. The identical issue arose before the honourable Gujarat High Court in principal Commissioner of income tax vs. Gulmohar Green Golf and country club Ltd 392 ITR 601 (2017) (Gujarat) wherein it was been held that the security deposit recovered from the members at the time of their enrolment as a member is refundable on occurrence of the contingency mentioned in the rules and regulation and bylaws, therefore it is required to be treated as a deposit, thus, a capital receipt. Therefore, it was held that it is not an income of the assessee. As in the case of the assessee also the security deposit is refundable hence respectfully following the decision of the honourable Gujarat High Court in 392 ITR 601, we also hold that the sum of refundable security deposit received from the members of the assessee is a capital receipt and cannot be charged to tax as income. Accordingly, we direct the learned assessing officer to delete the addition to the extent of refundable deposit received from the members. Accordingly, ground number 2 and 3 of the appeal of the assessee is partly allowed. 41. Now we come to ground number ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is submitted, allowable as trading loss under section 28 of the Act. Attention in this regard is invited to the decision of the Delhi Bench of the Tribunal in the case of Minda HUF v. JCT: 101 ITD 191. In that case the Tribunal was pleased to hold that the CIT (A) erred in not allowing the claim of the assessee in respect of the advances written off which had become irrecoverable. The relevant observations of the Tribunal are reproduced herein-below for ready reference: "We have carefully considered the entire material on record and the rival submissions. From the details furnished by the assessee in the paper book it is found that the assessee had given full details of each item. The amounts represented advances given to the parties. The advances were given during the course of business for supply of raw material etc. Either the material was not supplied or defective material was supplied. The amount became irrecoverable from the parties to whom the advances were made. Thus, the advances were totally connected with the business activities of the assessee. The learned CIT(Appeals) was not justified in observing that the amount of advance was not a trading loss. After seeing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... luminium Corporation ltd. v. CIT: 159 ITR 673 (Cal.) * CIT v. Graphite India Ltd. : 221 ITR 420 (Cal) * CIT v. Coromandal fertilizers: 247 ITR 417 (AP) * Enpro India Ltd. v. DCIT:113 Taxman 132 (Del. Trib.) * CIT v. Honda Siel Power Products Ltd. : ITA No. 758/2008 * Sutlej Industries Ltd. v. ACIT : 94 TTJ 108 (Del) It is thus submitted that merely because part of the advances related to acquisition of a capital asset could not have been the basis for disallowing the write off since no asset came into existence. In view of the aforesaid, it is respectfully submitted that the action of the assessing officer in not allowing deduction of the aforesaid sum of Rs. 72,29,915 is not tenable and, hence, calls for being reversed." 43. The learned departmental representative vehemently supported the order of the learned CIT - A and submitted that when the expenditure incurred by the assessee is for the purpose of advances paid for capital expenditure, they are not allowable as there u/s 37 (1) or u/s 28 of the income tax act. He further submitted that even as such, these expenditure are not incurred during the year but are advances. Unless the assessee proves that the assessee h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Del.) is also misplaced because the issue before the honourable court was with respect to the claim of allowability of a feasibility study report expenditure for the existing business which even otherwise would have been allowed as revenue expenditure. In the present case, advances for the capital goods such as computers et cetera would as such could not have been allowed to the assessee as revenue expenditure. We have also perused other judicial precedents also raised before us, however, we are not impressed to allow the claim of the assessee, as none of the decision cited before us relates to advances written off for purchase of a capital asset given in earlier years was involved. Further, for the claim of allowability u/s 28, loss should be of revenue nature. For the claim of allowability u/s 37 (1) of the act, the expenditure should be of revenue nature. Therefore, the prime condition that is required to be satisfied by the assessee is that that expenditure is revenue in nature. According to us the advances given for purchase of capital goods, cannot be considered to be revenue in nature, when they are written off. In view of this, we do not find any infirmity in the order of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e estimated sale price should have been Rs. 7.26 Crore per acre resulting into the sale consideration of INR 2 35950000/- instead of only INR 40,000,000 is shown by the assessee thus, he made an addition of INR 1 95950000/- as suppression of the sale consideration. The matter reached to the learned CIT - A who deleted the addition. Therefore, revenue is in appeal. 50. The learned departmental representative vehemently supported the order of the learned assessing officer and submitted that when the sale price of the plot of land earlier was stated to be much higher, the sale consideration shown by the assessee is definitely understated. He further submitted that assessee did not furnish the comparative sale instances. He further stated that assessee also failed to explain the understated price, which is highly incompatible with the actual sale made by the assessee in earlier. He therefore submitted that the addition made by the learned assessing officer should have been sustained by the learned CIT - A. 51. The learned authorised representative vehemently submitted that the assessing officer has made the addition based on the conjectures and surmises and false and baseless allegat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e written and oral submission(s) made on behalf of the appellant have been carefully considered. It has been the case of A.O. that the consideration shown by the appellant was not the real consideration, but this has been done without bringing on record any evidence- direct or inferential- in support of the same. It is a trite law that the onus to prove otherwise than the fact, lies on the person who alleges. It has been consistently held by the courts of laws that it is for the Revenue to establish that there has been an understatement of consideration by the assessee & the consideration actually received is more than the one disclosed before the tax authorities. In case the A.O. wants to make out a case that the assessee had received more consideration then he should have basic material and evidence in his hands, which suggest that the consideration exceeded the amount shown in the document. Reliance is placed on the decisions of the Supreme Court in CIT v. George Henderson Co Ltd(1967) 66 ITR 622(SC), CIT v. Gillanders Arbuthnot & Co (1973) 87 ITR 407(SC), K.P. Varghese v. ITO(1981) 131 ITR 597(SC), CIT V. Shivakami Co. (P) Ltd. (1986) 159 ITR 71 (SC) and CIT Vs. Godawari Corpn. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its bank with Standard Chartered Bank. On perusal of the sale deed, it will also be kindly noticed that the stamp duty of Rs. 32 lacs was paid on the total sale consideration of Rs. 4 crores, which had been duly accepted by the Stamp Authorities. Apart from the consideration of Rs. 4 crores received by the assessee, no other consideration was received the assessee from the buyer against sale of aforesaid land in Village Sukhrali, Tehsil & Dist. Gurgaon, Haryana. It is the emphatic submission of the assessee that the assessing officer proceeded solely on conjectures and surmises to make false and baseless allegation of suppression of sale consideration from sale of land at Village Sukhrali, Tehsil & Dist. Gurgaon. It is respectfully submitted that no evidence, whatsoever, has been brought on record by the assessing officer to substantiate the baseless allegation of receipt of sale consideration outside the books of accounts. Naturally, in the absence of any evidence of actual receipt of sale consideration outside the books of accounts by the assessee being brought on record, no addition could be made under the provisions of the Act. Hon Supreme Court in the case of K.P. Varghese v. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by any other amount unless there is positive evidence to establish any receipt/ movement of money over and above the stated consideration. In the case of CIT v. George Henderson And Co. Ltd.: 66 ITR 622 (SC), it is held that, the expression "full value of the consideration" could not be construed as the market value but must be taken to be the price bargained for by the parties to the sale. Further the assessee before the learned CIT - A has clearly stated that the comparable sale of land to ITC Ltd that the above agreement did not materialize and subsequently it was cancelled since the assessee was not able to obtain the required permission and it is still continues to be owned and possessed by the assessee. Even further, the comparison of the sale of the plot of land with the sale of flat in the adjoining area is not comparing apples with Apple but Apple with oranges. Thus, in absence of any corroborative evidence of having received the consideration higher than what has been stated in the sale deed and in the books of account, the addition made by the learned assessing officer is not in accordance with the law. In view of this, we do not find any infirmity in the order of the le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d on behalf of die appellant that the said issue is covered in favour of the appellant by the order of my predecessor-in-office in appellant's own case for assessment year 2001-02. 8.1 I have carefully considered the findings of the Assessing Officer and the written submissions made on behalf of the appellant. I find that the identical issue in the appellant's own case was decided in its favour by my predecessor-in-office in Appeal No. 141/2007-08 vide order dated 22-05-2009 for assessment year 2001-02 by holding that "In totality of all the facts and circumstances, I have come to the conclusion that in the present case there was neither sale nor transfer of possession as covered in clause (i) to (v) of section 2(47) of the Act. ......In view of the facts as discussed above, I do not find justification to bring Rs. 45 crores received by the appellant from I.T.C. as an Agreement to Sale of land measuring 22.69 acres to Capital Gains Tax. The same is directed to be deleted. " 8.2 On verification of the details furnished by the appellant during the appellate proceedings, it is found that the appellant continues to hold possession of the land and legal title over the land in ques ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een utilized for repayment of the old borrowings and interest thereon of INR 4.95 crores. He further held that the learned assessing officer has not brought on record anything to show that assessee has utilized the borrowed funds for non-business purposes. Thus, he deleted the above disallowance. 58. The learned departmental representative vehemently supported the order of the learned assessing officer whereas the learned authorised representative referred to the submission made before the learned CIT - A and findings recorded by him. 59. We have carefully considered the rival contention and perused the orders of the lower authorities. On careful reading of para number 9.1 of the order we do not find any infirmity in the order of the learned CIT - A wherein it has been held that that fresh borrowing of INR 7.75 crore were utilized for repayment of loan pertaining to earlier years and the purpose of the loan has been accepted by the learned assessing officer, the disallowance made by the learned assessing officer is not sustainable. We also do not find any infirmity in the order of the learned CIT - A mentioning the reasons for deletion of the disallowance in para number 9.1 of hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amounting to INR 3 40542851 as income chargeable to tax. Such appeal is preferred in ITA number 4849/Del/2011. 66. The assessee has raised the following grounds of appeal in ITA No. 4560/Del/2011 for the Assessment Year 2005-06 against the order of the learned Commissioner of income tax (appeals) -VII common New Delhi dated 16/8/2011 wherein the penalty levied by the learned assessing officer u/s 271 (1) (c) of the income tax act as per order dated 14/3/2011 of INR 12,80,05,767/- has been partly confirmed:- "1. That the CIT(A) erred on facts and in law in confirming the penalty imposed under section 271(1 )(c) of the Income Tax Act, 1961 ('the Act') on disallowance of deduction of bad debts / advances written off aggregating to Rs. 72,29,915 for alleged furnishing of inaccurate particulars of income. 1.1 That the CIT(A) erred on facts and in law in not appreciating that the claim made by the appellant was a bonafide claim and therefore, no penalty was leviable under section 271(1 )(c) of the Act. 1.2 That the CIT(A) erred in holding that the conduct of the appellant creates doubt about the bonafides and that there was no reasonable cause in not disclosing the full particula ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see is that the assessee has return of the above sum on the basis of the commercial decision taken by the management, as there are no chances of the recovery. The claim of the assessee is that it is a business loss or bad debts or allowability of expenditure u/s 37 (1) of the act. The assessee also submitted that assessee could not furnish the details because of the reason that operations of the assessee were closed in October 2006 on account of lockout due to labor disturbances further due to this the office of the assessee was vandalized by the labor union. Such facts were also demonstrated by the police complaint of the assessee dated 5/10/2006. In view of this, it was submitted that assessee has not been able to furnish certain documentary evidences before the lower authorities however, the commercial justification were given by the assessee. It was rejected. It was further stated that there is no requirement of proving that the debt has become bad during the year. The assessee submitted that bad debts amounting to INR 1 286282/- was confirmed for the reason that assessee failed to furnish the evidence of fulfillment of the condition. Further with respect to the writing of adva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsidered the rival contention and find that the above ground of appeal is purely legal in nature and no further facts are required to be investigated. Thus in the interest of justice, we admit the additional ground raised by the assessee which is related to the jurisdictional facts about the proper satisfaction as well as the initiation of the penalty proceedings by the learned assessing officer. 74. On the merits of the issue, the learned authorised representative referred to the copy of the notice dated 18/12/2007 issued u/s 271 (1) (c) of the act which is placed at page number 64 of the paper book wherein it has been stated that penalty proceedings have been initiated on the assessee for the concealment of the particulars of income or furnishing inaccurate particulars of such income. The learned authorised representative submitted that the penalty should be deleted on this ground itself. He further stated that the claim of the assessee is also supported by the decision of the honourable Karnataka High Court in 73 taxmann.com 241 against which the special petition has been dismissed by the honourable Supreme Court in 242 taxman 180. 75. The learned departmental representative ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deposit received during the year." 79. As we have already crash the penalty order passed by the learned assessing officer in ITA number 4560/Del/2011 holding that the notice issued by the learned assessing officer does not specify the charge on which the penalty is levied, on the basis of the decision of the honourable Karnataka High Court against which the special leave petition by the honourable Supreme Court is dismissed and also the decision of the honourable Delhi High Court on that issue, we do not find any merit on this issue in the appeal filed by the learned AO. Therefore the ITA number 4849/Del/2011 filed by the learned Asst Commissioner of income tax, New Delhi is dismissed. 80. Accordingly, in the penalty proceedings for assessment year 2005 - 06, the appeal of the assessee is allowed an appeal of the revenue is dismissed. AY 2007-08 81. For the assessment year 2007 - 08, assessee filed its return of income declaring loss of INR 6 8685141 on 27/10/2007. The assessment u/s 143 (3) of the act on 30/12/2009 determining the total income of the assessee assessing the total loss of INR 6 3950975/-. The learned assessing officer disallowed the depreciation on the golf cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e membership fees, and shall be chargeable to tax on the basis of the accrual income to which it pertains. For such verification as in assessment year 2005 - 06, we set aside the issue back to the file of the learned assessing officer. With respect to the issue of taxability of the non-refundable security deposit we have already hold that such receipt is not an income of the assessee. Accordingly, we hold for this year too that non-refundable security deposit received by the assessee is not an income chargeable to tax. Accordingly, ground number 1 of the appeal of the assessee is allowed. 84. In the result ITA number 653/del/2011 for assessment year 2007 - 08 filed by the assessee is allowed. Assessment Year 2008-09 85. The assessee has raised the following grounds of appeal in ITA No. 4098/Del/2011 for the Assessment Year 2008-09:- "1. That the CIT(A) erred on facts and in law in confirming the addition of Rs. 3,65,667 on account of membership fees and refundable security deposit received during the assessment year 2008-09. 1.1 That the CIT(A) failed to appreciate that Rs. 1,44,000/- was received as advance membership fees and was offered for tax on mercantile basis by the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the security deposit received by the appellant was a continuing legal obligation and the same could not be regarded as trading surplus/ income for the relevant assessment year." 89. Identical issue has been dealt with by us in the appeal of the assessee for assessment year 2005 - 06 wherein we have held that membership fees received in advance by the assessee is chargeable to tax on the accrual basis to which it pertains to and the non-refundable security deposit received by the assessee is a capital receipt not chargeable to tax as income in the hands of the assessee. This is decided as per ground number 2 and 3 of the appeal of the assessee for that year. Both the parties confirmed that there is no change in the facts and circumstances of the case. Therefore, for the similar reasons we also hold that membership fees received in advance by the assessee is not an income in this year but is chargeable to tax in the year in which it has accrued to the assessee and as well as the non- refundable security deposit received by the assessee is not income. Accordingly, ground number 1 of the appeal of the assessee is allowed. 90. In the result, appeal of the assessee for assessment year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... security deposit was amount owed to the members and the same could not, therefore, be regarded as taxable income of the appellant. 1.2 Without prejudice, the CIT(A) erred on facts and in law not excluding membership fees already taxed in assessment for the earlier year(s) from the taxable income of the appellant for the year under consideration." 95. Identical issue has been dealt with by us in the appeal of the assessee for assessment year 2005 - 06 wherein we have held that membership fees received in advance by the assessee is chargeable to tax on the accrual basis to which it pertains to and the non-refundable security deposit received by the assessee is a capital receipt not chargeable to tax as income in the hands of the assessee. This is decided as per ground number 2 and 3 of the appeal of the assessee for that year. Both the parties confirmed that there is no change in the facts and circumstances of the case. Therefore, for the similar reasons we also hold that membership fees received in advance by the assessee is not an income in this year but is chargeable to tax in the year in which it has accrued to the assessee and as well as the non-refundable security deposit re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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