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TMI Blog2022 (8) TMI 1209X X X X Extracts X X X X X X X X Extracts X X X X ..... - assessee justified payment of interest @ 24% stating that the debentures could not be redeemed on the date of maturity and it was constrained to roll over the maturity for further period after accepting the terms and condition that the interest shall be paid at rate of 24% - AO was not convinced with the explanations of the assessee and accordingly, he restricted the interest rate on Debentures @ 12% - HELD THAT:- We notice that the Tribunal has deleted an identical disallowance made in AY 2010-11 following the decision rendered by Jaipur bench of Tribunal passed [ 2016 (7) TMI 1657 - ITAT JAIPUR] wherein it was observed that the revenue has not placed any material under identical facts and circumstances that the fair market rate of interest is lower than what the assessee has claimed. It was further held that the AO has to give a finding having regard to fair market rate. Accordingly, it was held that the AO could not have made disallowance u/s 40A(2)(a) of the Act. We notice that the Hon ble Bombay High Court, vide its order [ 2021 (12) TMI 22 - BOMBAY HIGH COURT] , has upheld the view expressed by the co-ordinate bench in AY 2010-11. In the years under consideration also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (AM) And Shri Rahul Chaudhary (JM) Assessee by Shri Vijay Mehta Department by Shri Achal Sharma ORDER Per B.R.Baskaran (AM) :- The Revenue has filed these appeals relating to A.Y. 2012-13 to 2016-17 challenging the orders passed by learned CIT(A)-8, Mumbai. 2. Since some of the issues in these appeals are identical in nature, they were heard together and are being disposed of by this common order, for the sake of convenience. 3. The assessee was formerly known as Tulip Hospitality Services limited. It is engaged in the hotel business. 4. The first common issue contested by the Revenue in all the five years relates to depreciation on FSI. The assessee had paid a sum of Rs. 68.16 lakhs during the financial year relating to A.Y. 2005-06 for acquiring FSI at a cost of Rs. 3,40,81,320/-. The assessee included above said amount in block of asset and claimed depreciation @ 25% on the total cost of Rs. 3.40 crore. The AO noticed that the depreciation claim on the above asset had been rejected by the Assessing Officer in the earlier years. However, Ld CIT(A) had allowed depreciation @ 10% on the actual payment of Rs.68.16 lakhs. During the year under c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7. Since the learned CIT(A) has followed the decision rendered by the Tribunal on this issue, we do not find any reason to interfere with his decision in all the five years under consideration. 8. Next common issue contested by the revenue in all the five years relates to disallowance of depreciation on intangible assets. The assessee had claimed depreciation on intangible assets, which were in the nature of licenses, franchises and other business and commercial rights. The Assessing Officer noticed that the said depreciation had been disallowed by him in the earlier years. Accordingly, the Assessing Officer disallowed the depreciation claimed on intangible assets in all the five years under consideration. 9. Learned CIT(A) noticed that an identical issue has been adjudicated by the ITAT, Mumbai in assessee s own case in ITA No. 4783 5571/Mum/2008 dated 11.3.2015 relating to A.Y. 2004-05, wherein the Tribunal had allowed claim of the assessee. Following the decision of the Tribunal. the learned CIT(A) deleted the disallowance made in all five years under consideration. 10. We have the parties and perused the record. We noticed that learned CIT(A) has extracted the or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g accepted the fact that intangible assets were acquired by appellant on slump sale basis , in such a case of acquisition of an undertaking as a going concern, the composite consideration cannot be bifurcated between various assets heeds to be accepted. The allocation of cost of acquisition for each block of assets in a fair and reasonable manner permitted by law has to be accepted. 10.6 The second proposition that the appellant had not used the intangible assets in their business cannot be accepted as the hotel business could not have been carried out without these license permits. The Assessing Officer has also not denied these facts. Therefore, the Assessing Officer's contention on this proposition that intangible assets were not used for the appellant's business also fails. 10.7 The third proposition of the Assessing Officer that the condition precedent referred to in section 32 have not been fulfilled cannot be accepted as the invaluable permits license, approvals for the purpose of operating hospitality business squarely falls within the purview of the definition of intangible assets given in explanation 3 of section 32 of the Act. 10.8 In this regard, yet an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iso to sub-section (xiii) - (xiv)' indicates that sub-section (xiii) is applicable only where any transfer of capital assets or intangible assets has been effected by a firm to a company as a result of succession of the firm by a company. The provisions of sub-section (xiv) is applicable only where a sole proprietary concern is succeeded by company. Thus, it may please be noted that in our case, no transfer has taken place from a firm to a company nor the said business of hotel was a proprietary concern succeeded by a company. Thus, the applicability of these said subsection i.e. (xiii) (xiv) of section 47 is, therefore, totally ruled out in our case. Another provision i.e. section 170 is also not applicable to the facts of our case as the said provisions are applicable only where a business has been succeeded otherwise than on death. The phenomenon of death in the said provisions clearly shows that the provisions of section 170 are applicable only where business is being run either by individual or Karta of HUF, because the phenomenon of death occurs only in these two types of cases., No death will occur to a company firm which could only be either liquidated or dissolved r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the explanations of the assessee and accordingly, he restricted the interest rate on Debentures @ 12%. Accordingly, he disallowed the excess interest amount in all the five years under consideration. 12. The Ld CIT(A) noticed that an identical disallowance made in AY 2010-11 has been deleted by the Tribunal in the assessee s own case in ITA No.1851/Mum/2014 dated 16.03.2017. Following the same, the Ld CIT(A) deleted the disallowance made in all the five years under consideration. 13. We heard the parties on this issue and perused the record. We notice that the Tribunal has deleted an identical disallowance made in AY 2010-11 following the decision rendered by Jaipur bench of Tribunal passed in ITA No. 760/JP/2015, wherein it was observed that the revenue has not placed any material under identical facts and circumstances that the fair market rate of interest is lower than what the assessee has claimed. It was further held that the AO has to give a finding having regard to fair market rate. Accordingly, it was held that the AO could not have made disallowance u/s 40A(2)(a) of the Act. We notice that the Hon ble Bombay High Court, vide its order dated 22nd November, 2021 pass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lying on Section 40A(2) of the Act. Moreover, it is not a case of tax evasion in as much as it is not the Revenue's case if the rate would have been less the assessee's profit would have been more. As could be seen from the assessment order itself respondent had filed return of income for Assessment Year 2010-2011, which is the year in question, declaring loss at Rs.31,88,44,909/- and the return of income had been processed under Section 143 (1) of the Act. We find support for this view from the judgment of the Division Bench of this Court (Panaji Bench) in Commissioner of Income Tax V/s. VS. Dempo and Co. P. Ltd. . 8 In our view, the Tribunal has not committed any perversity or applied incorrect principles to the given facts and when the facts and circumstances are properly analysed and correct test is applied to decide the issue at hand, then, we do not think that question as pressed raises any substantial question of law. 14. In the years under consideration also, the AO has not given any finding having regard to the fair market rate. The Ld A.R further submitted that the assessee has been continuously incurring losses and the said losses could not be set off by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he orders passed by Ld CIT(A) in deleting the disallowance in all the years. 17. Now, we shall take individual issues urged by the assessee in certain years. The individual issue urged in AY 2012-13 relates to the disallowance made out of travelling expenses. The AO noticed that the assessee has claimed travelling expenses of Rs.18,41,075/-. Since no details like proof of payment, nature and allowability of travelling expenses were furnished, the AO disallowed entire claim. The Ld CIT(A), however, restricted the disallowance to 50%. 18. We heard the parties on this issue and perused the record. The Ld A.R submitted that the assessee has incurred travelling expenses for the purpose of business only. Hence no disallowance is called for out of travelling expenses. On the contrary, the Ld D.R submitted that the assessee has failed to furnish the details and hence the disallowance has been made. We notice that the AO has made disallowance only in AY 2012-13 and in all other years, the claim has been allowed. Since the assessee has failed to furnish the details, some disallowance is called for. We find that the disallowance of 50% made by Ld CIT(A) is reasonable. Accordingly, we up ..... X X X X Extracts X X X X X X X X Extracts X X X X
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