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TMI Blog2022 (7) TMI 165X X X X Extracts X X X X X X X X Extracts X X X X ..... verified by the ld. CIT(A). The reasons for declining the gross profit along with rooms available, rooms occupied, percentage of room rate, room revenue and F B revenue [page 25 26 of the order of the ld. CIT(A)] has been duly furnished substantiating the decline in receipts, incurring expenses of direct receipts such as electricity, water, staff, music and entertainment which have been and to be provided irrespective of the percentage of occupancy. Thus, having gone through the entire facts, we hereby decline to interfere with the reasoned order of the ld. CIT(A). Addition on account of Deemed Dividend - CIT- deleted the addition - HELD THAT:- The provisions of section 2(22)(e) of the Act are not applicable in the present case as the assessee is not a shareholder in the companies from which advance has been received during the year. As evident from the aforesaid table showing shareholding pattern, the assessee is not a shareholder in M/s AIPL M/s GSL. In case of GSL, viz., GSHPL do not hold shares in assessee company, clearly bringing it outside the scope of Section 2(22) (e) of the Act. - both the advances could not have been added in the hands of assessee company, be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee of 15.24% is quite low compared to the average GP of the four above mentioned hotels of 28.25% and estimated the GP @ 28% and made an addition of Rs.6.24 Cr. to the income of the assessee. 4. Aggrieved the assessee filed appeal before the ld. CIT(A) who deleted the addition. Afflicted the revenue filed appeal before us. 5. Heard the arguments of both the parties and perused the material available on record. 6. As per letters dated 23.12.2016, 28.12.2016 and 29.12.2016, the reduction in the gross profit is primarily due to reduction in room revenue. During the assessment year, 29 rooms from the Cabana division were shut down for repair and renovation and 8 rooms from the other wing were also taken up for renovation. The spa was also under renovation. There were only 93 rooms in the inventory out of the total number of 130 rooms available. The room revenue has come down from Rs. 29.54 crores to Rs. 22.33 crores in the current assessment year. Spa, Pool and the star restaurant namely Sevilla was also under renovation. Revenue from food and beverages had also went down. A property which is older will require greater maintenance and will necessarily have to price itself ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vice charges have been paid off to the employees and to others. 9. With regard to the service charges received from customers claimed to be paid to staff ledger accounts of service charges, salary sheets of staff, IDS certificates, salary sheets of casual staff, bills of event manager etc. were filed during assessment proceedings. The service charge is recovered from the customers in respect of banquets and restaurants. The total service charge collected during the year was Rs. 1,27,95,272/-. The breakup of payment made is as under: Sl. No. Description Amount 1. F B service charge in salary to staff 75,99,510 2. Service charge to casual staff 12,71,855 3. Service charge to Event Manager for casual banquet service staff and KST 34,38,44 Total 1,23,09,810 10. With regard to non-filing of complete books of accounts, the AO requisitioned the books of accounts on 27.12.2016 and the same were produced on 28.12.2016 in a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fees; (iv) the decline in turnover is only 18.87% while the GP declined by 46.69% though the GP of the hotels of same category are in the range of 24% to 32% ; and, (v) the appellant failed to produce complete books of account alongwith relevant bills. 14. From the record, it is observed that the entire details of complimentary expenses have been mentioned at para 4.2.4.3 page no. 26 to 31 of the order of the ld. CIT(A) giving the complete details of the particulars, designation, cost price of the complimentary and also the various divisions. 15. With regard to service charges, the entire details and the method of accounting charges, and the amount of the services charges paid of Rs.1.23 Cr. have been duly mentioned at para 31 32 of the order of the ld. CIT(A). 16. With regard to the internal audit fees, the details have been filed by letter dated 29.05.2016. Copy of the ledger has been submitted before the AO as verified by the ld. CIT(A). The reasons for declining the gross profit along with rooms available, rooms occupied, percentage of room rate, room revenue and F B revenue [page 25 26 of the order of the ld. CIT(A)] has been duly furnished substantiating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, M/s AIPL and M/s GSL, is as under: 23. During the assessment proceedings, the Assessing Officer made protective additions amounting to Rs. 12.50 Crores in the hands of the assessee and substantive additions to be made in the hands of M/s Universal Business Solutions Limited (M/s UBSL), a 100% holding company of the Respondent on the ground that the transactions constituted deemed dividend in the hands of M/s UBSL as per the provisions of section 2(22)(e) of the Act. 24. On appeal, the Id. CIT(A) deleted the aforesaid addition and held that since the assessee is not a registered shareholder either in M/s AIPL or M/s GSL, the deeming provisions of section 2(22)(e) of the Act were not applicable in the case under consideration. The observations of the Id. CIT(A) are as under: Thus, while loan or advance to the appellant company, in my opinion, would be covered and considered as advance or loan to the shareholder of the appellant company, an advance or loan to shareholder of the company making such advance or loan could be considered as deemed dividend or any loan or advance to a 'concern' in which the shareholder is a member or a partner and in which he ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the aforesaid table showing shareholding pattern, the assessee is not a shareholder in M/s AIPL M/s GSL. In case of GSL, viz., GSHPL do not hold shares in assessee company, clearly bringing it outside the scope of Section 2(22) (e) of the Act. The provisions of section 2(22)(e) of the Act states as under: (e) any payment by a company, not being a company in which the public are substantially interested, of any sum (whether as representing a part of the assets of the company or otherwise) made after the 31st day of May, 1987, by way of advance or loan to a shareholder, being a person who is the beneficial owner of shares (not being shares entitled to a fixed rate of dividend whether with or without a right to participate in profits) holding not less than ten per cent of the voting power, or to any concern in which such shareholder is a member or a partner and in which he [has a substantial interest (hereafter in this clause referred to as the said concern) or any payment by any such company on behalf, or for the individual benefit, of any such shareholder, to the extent to which the company in either case possesses accumulated profits. 27. Therefore, both the advan ..... X X X X Extracts X X X X X X X X Extracts X X X X
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