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TMI Blog2020 (4) TMI 854X X X X Extracts X X X X X X X X Extracts X X X X ..... h the consent of parties, the fact in appeal for Assessment Year 2010-11 is treated as lead case. The assessee has raised the following grounds of appeal: 1. The learned (IT (A) -Mumbai 49 has erred in confirming the disallowance of Rs. 1,11,30,167/- on account of amortization of the additional premium paid on the leasehold land. The appellant submits that the learned CIT(A) failed to appreciate that the claim made was for its legitimate business expenditure and ought to have been allowed. 2. The learned (IT (A) has erred in confirming the part addition under section 14A of the Income Tax Act after allowing prorata relief on account of investment made in Lift & Shift India Pvt. Ltd. 3. The (CIT (A) has erred in confirming the addition of Rs. 1,20,54, 127/ - under section 40(a)(ia) of the Income Tax Act towards amount paid to Saikrupa Foods Services Pvt. Ltd. 4. The learned (CIT(A)-Mumbai 49 has erred in confirming the disallowance of Rs. 8,20,356/- on account of professional charges paid to Mr. Bhagwan Madhha. 5. The appellant craves leave to alter, amend or add any grounds of appeal as may be necessary. Relief Claimed: 1. The disallowance of Rs. 1,11,30,167/- on acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Year 2006-07 to 2008-09 In ITA No. 2146 & 2148/Mum/2009 & 2283/Mum/2011 dated 20.11.2015. The ld. AR of the assessee further submits that on similar ground of appeal, the Tribunal directed the Assessing Officer to ax 1/25th share of club entrance fees in each year. 6. On the other hand, the ld. DR for the revenue submits that similar direction may be given to the Assessing Officer. 7. We have considered the rival submission of the parties and perused the material available on record. We have noted that during the year, the assessee received one time membership entrance fees of Rs. 3.11 crore (approx) as one time membership fees for life time membership of club (15 years). The Assessing Officer treated the said receipt as revenue receipt against the assessee's treatment for treating it as a capital receipt. We have noted that on similar ground of appeal, the co-ordinate bench of Tribunal in assessee's own case for Assessment Year 2006-07 to 2008-09 on similar set of fact passed the following order: 8. We have considered rival contentions and also deliberated on judicial pronouncements cited at bar in the context of factual matrix of the case. From the record we found that the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ious year, the assessee paid compensation of Rs. 3,33,90,500/- to the State Government. The State Government demanded this compensation from Natvar Parikh & Brothers for releasing the land from Urban Land Ceiling Authority (ULCA). The assessee claimed 1/3rd deduction paid on account of compensation by amortizing the lease premium for a period of three years. The Assessing Officer treated the leased premium paid by assessee as capital expenditure. The Assessing Officer also concluded that the cost incurred on land is always capital in nature unless assessee's engaged in dealing in land. Further, no depreciation allowable on such cost of land and therefore, no question for allowing amortization of such cost of land. The ld. AR of the assessee submits that the expenses were incurred for business purpose and was admissible under section 37. The utility of leased land prevails on little lease period. No new asset was added in the block of asset of assessee. The asset was already held by assessee. The case law relied by lower authorities in Panbari Tea Company Ltd. (57 ITR 400) is not applicable on the facts of the present case. In support of his submission, the ld. AR of the assessee re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... II(1) of the lease deed. Clause II(1) of the lease deed is reproduced below.' During the said terms to pay the rent hereinabove reserved in manner aforesaid AND ALSO to bear pay and discharge all existing and future rates, taxes, charges assessment duties impositions, outgoings and burdens of every description whatsoever payable by the Lessor to Government or Municipal Corporation in respect of the land, buildings structures and construction erected or to be erected thereon including urban immovable property tax and riot tax if any assessed charged or imposed upon the demised premises or upon the owners or occupiers in respect thereof or in respect of land or building erected thereon. The present taxes payable are Rs. 90,720/- (Rupees Ninety thousand Seven Hundred & twenty only) per year. In view of the above clause we have paid the additional premium of Rs. 3,33,90,500/- on behalf of the Lessor and amortized the same over the balance lease period of 3 years . As required by you we enclose herewith, the following documents as required by you pertaining to Payment made of Rs. 3,33,90,500/- towards additional premium levied by the competent authority of Urban Land Ceiling ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... embur was under the lease of Natvar Parikh & Brothers. The assessee developed its club on this plot. From the reply furnished by assessee, it is clear that lesser of assessee i.e. Natvar Parikh & Brothers, related party of assessee made an application to Urban Development Authority (UDA) to release the surplus vacant land from Urban Land & Ceiling Authority (ULCA). The UDA ordered to the owner/lesser of assessee to pay additional premium on the basis of rate in 2008-09. The assessee claimed that said plot was acquired by the assessee from its owner on lease. Thus, the owner requested the assessee to pay the additional premium on the basis of clause-II(i) of lease-deed. Clause-II of lease-deed is also reproduced by Assessing Officer from the reply of assessee, which we have extracted (supra). We have also perused the Clause-II(i) of lease-deed, copy of which is available at page no.8 of Paper Book and the same is correctly extracted by Assessing Officer. Perusal of Clause-II (i) disclosed that assessee to pay rent, to bear, pay and discharge existing and future rates, tax charged, computation, imposition and burden on every description whatsoever payable by lesser to Government or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nagement and conduct of the assessee's business to be carried on more effectively or more profitably while leaving the fixed capital untouched, the expenditure would be on revenue account, even though the advantage may endure for an indefinite future. In the instant case, the advantage which was secured by the assessee by making the expenditure in question was the securing of absolution or immunity from liability to pay municipal rates and taxes under normal conditions for a period of 15 years. If the liability had to be paid, the payments would have been on revenue account and, hence, the advantage secured was in the field of revenue and not capital. And as a result of the expenditure incurred, there was no addition to the capital assets of the assessee and no change in its capital structure. 18. With utmost regard to the decision of Hon'ble Supreme Court, in our humble view, the ratio of the decisions are not helpful to the assessee. In the present case, there is no obligation under lease agreement to pay amortization of lease premium by assessee to the super lesser. There is no evidence on record that the land which was released by UDA was under the occupation of assessee o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenditure. The Assessing Officer invoked the provision of Rule 8D and made the disallowance of direct expenditure under Rule 8D(2)(i) of Rs. 1739/- (same as disallowed by assessee). No disallowance on account of interest expenses under Rule 8D(2)(ii). However, the Assessing Officer made disallowance under Rule 8D(2)(iii) @ .5% of average value of investment and worked out the disallowance of Rs. 11,10,993/-. On appeal before the ld. CIT(A), directed not to consider the investment made in Lift and Shift India Pvt. Ltd., being made in group companies. And rest of the disallowance under Rule 8D(2)(iii) was affirmed. However, the Assessing Officer wrongly deducted Rs. 1739/- from disallowance of Rule 8D(2)(iii) which was directed to be rectified. Before us, the ld. AR of the assessee vehemently argued that only those investment which yielded the exempt income should be considered for considering the average value of investment for disallowance under Rule 8D(2)(iii). 22. Considering the decision of Special Bench of Delhi Tribunal in Vireet Investment Pvt. Ltd. (supra), we direct the Assessing Officer to re-compute the disallowance under Rule 8D(2)(iii) by considering only those inve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer holding that assessee failed to establish the nexus between the expenses and corresponding income without disputing the fact that services of Civil Engineer are integral part of civil construction activities. Considering the fact that professional charges paid to Civil Engineer are disallowed without bringing any adverse evidence on record and business of assessee is not in dispute, we direct the Assessing officer to delete the addition. In the result, this ground of appeal is allowed. 26. In the result, appeal of the assessee is partly allowed. ITA No. 5854/Mum/2015 for A.Y. 2011-12 by revenue 27. Ground No.1 relates to one time membership fees. We have noted that this ground of appeal is identical to the ground no.1 in appeal for A.Y. 2010-11 by revenue, wherein we have directed the Assessing Officer to the decision in assessee's own case for A.Y. 2006-07 to 2008-09 in ITA No. 2146 & 2148/Mum/2009 and ITA No. 2283/Mum/2011. Thus, the Assessing Officer is directed to follow the same direction. 28. Ground No.2 relates to disallowance under section 14A. This ground of appeal is similar to the ground no.2 in assessee's appeal for A.Y. 2010-11, wherein we have directed the A ..... 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