9911796707
TMI Blog2023 (5) TMI 729X X X X Extracts X X X X X X X X Extracts X X X X ..... ional High Court as discussed herein above, we are of the considered opinion that CIT(A) has rightly upheld the reopening of the assessment, which needs no interference. Depreciation on electrical installations to 10% as against the claim of assessee of 15% - HELD THAT:- As assessee s contention that the electrical installation should be considered as Plant is fortified by the judgment of Hon ble Jurisdictional High Court in the case of Geetha hotel Pvt Ltd [ 2001 (9) TMI 58 - MADRAS HIGH COURT] and consequently ground are decided in favour of the assessee in terms of our observation herein above. Disallowance of depreciation on non-compete fee under intangible assets @ 25% - HELD THAT:- The Hon ble Bombay High Court in the case of Piramal Glass Limited [ 2019 (6) TMI 891 - BOMBAY HIGH COURT] while dealing with this issue of allowability of depreciation u/s 32 of the Income Tax Act on non-compete fee relied on the Gujarat High Courts Decision in the case of Ferromatic Milacron India (P.) Ltd. [ 2018 (10) TMI 1955 - GUJARAT HIGH COURT] has held depreciation is allowed on non compete fee and accordingly no question of law arises. The Hon ble jurisdictional High Court of Madras in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isions of Income Tax Act r.w. DTAA between India and respective countries and the foreign entities. These grounds are allowed for statistical purposes. Disallowance of the expenses u/s.14A by applying Rule 8 of the I.T.Rules,1963 towards earning of the dividend income - HELD THAT:- In order to arrive at the quantum of disallowance or non-disallowance, it is required to examine the status of investment during the relevant financial year by the assessee also the utilization of the investment which has yielded exempted income during the year. As the observation of the ld. CIT(A) that necessary financial information like fund flow statements were not produced by the assessee before the AO as well as before the ld. CIT(A). Therefore, the disallowance made by the ld. AO was upheld by the ld. CIT(A). All the information required to arrive at the figure of disallowance u/s.14A or to examine the applicability of provisions of section 14A of the Act by the AO, so as to verify and to reach at a conclusion that if the financial information of the assessee are suggesting any disallowance in terms of provisions of Section 14A or not. We, therefore, restore this matter back to the file of AO to r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urrender deed executed by the assessee, in consideration in the present appeal will fall under the category of transfer eligible for provisions of Long Term Capital Gains. However, copy of lease deed and surrender deed were not placed before us for perusal of the terms and conditions of the same, also on perusal of the order of the ld. CIT(A) it is transpired that the required information / evidences were not adequately submitted by the assessee. Therefore, in the interest of natural justice, we restore this matter also back to the files of AO to examine the relevant documents and to allow the assessee benefit of the provisions of capital gain applying the provisions available under the Income Tax Act prevailing at the time of relevant assessment year, keeping in consideration the principal of law laid down in the cases referred to supra and as instructed by CBDT vide its circular referred to herein above. Addition made on deferred income of advance received from members - HELD THAT:- Since, the departmental representative has not furnished any information to substantiate their contention raised in grounds of the present appeal that the department has not accepted the relied upon o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of the Supreme Court in the case of CIT V. Kelvinator India Limited, reported in 320 ITR 561 (SC). 3. The Commissioner of the Income tax (Appeals) erred in confirming the restriction of depreciation claimed on electrical installations to 10% as against 15% claimed by the appellant. 3.1 The Commissioner of the Income tax (Appeals) ought to have appreciated that the electrical installations installed are primarily Air Conditioners, Refrigerators, Generators, etc. and have classified under plant and machinery. Other items such as Bulbs, Holders, Adaptors and small wiring works have been classified as electrical fittings and are included under Furniture and Fittings eligible for depreciation @ 10%. 3.2 The Commissioner of the Income tax (Appeals) ought to have appreciated that the above electrical installations are to be reckoned as plant and machinery and not in the nature of electrical fittings to be capitalized under furniture and fittings. Hence the claim of the appellant that the depreciation @ 15% should be allowed. 4. The Commissioner of the Income tax (Appeals) erred in confirming the disallowance of depreciation on non-compete fee @ 25% amounting to Rs.50,00,000/-. 4.1 The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing at 15% and on noncompete fee @25%, thus in absence of any fresh material reopening of assessment was not justified and the reponing was only on the basis of change of opinion. Objections of the assessee were considered by the AO but have not accepted, finally the proposed disallowances were confirmed for Rs. 23,88,822/- and Rs. 50,00,000/- towards Excess claim of depreciation on Electrical Fitting by 5% and Depreciation @25% on non-compete fee, respectively. Aggrieved by the order of AO u/s 143(3) r.w.s. 147 of the Act, assessee preferred an appeal before the Ld CIT(A), but no success. 5. Now, the assessee being aggrieved with the order of Ld CIT(A), is in appeal before us. 6. We have heard the ld. authorized representatives of both the parties, perused the orders of the lower authorities, the material available on record and have considered the judicial pronouncements that have been relied upon by the assessee as well as department in order to substantiate their respective contentions. 7. Ground no 1 is general in nature thus needs no separate adjudication. 8. Ground no 2, 2.1 2.2 regarding the objection of the assessee that the reopening of assessment u/s 147 of the Act was b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions that: The Act provides complete machinery for the assessment/reassessment of tax, imposition of penalty and for obtaining relief in respect of any improper orders passed by the Revenue Authorities, and the assessee could not be permitted to abandon that machinery and to invoke the jurisdiction of the High Court under Article 226 of the Constitution when he had adequate remedy open to him by an appeal to the Commissioner of Income Tax (Appeals). The Writ Court ought not to have entertained the Writ Petition filed by the assessee, wherein he has only questioned the correctness or otherwise of the notices issued under Section 148 of the Act, the re-assessment orders passed and the consequential demand notices issued thereon. 12. Finally, Hon ble Madras High Court in the Mobis India Ltd. (supra), has held that: It is not in dispute that as against the impugned proceedings, the assessee is having efficacious remedy of appeal under section 246A before the Commissioner (Appeals) and without exhausting the same, the assessee has approached the Court and hence, the instant writ petition is not maintainable. 13. In view of forgoing discussion in the case of Mobis India Ltd.(supra), we d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were considered by the Assessing officer and a final assessment order was passed on 31.03.2014 for the assessment year 2010-2011. 14. When the very same materials which were furnished, scrutinised, considered and a decision is taken, there is no reason for initiation of reopening proceedings and therefore, the respondents have miserably failed to establish that there is a tangible material for invoking Section 147 of the Act. Thus, the very initiation is in violation of the essential ingredients contemplated under Section 147 of the Act. Regarding the other grounds raised for reopening, depreciation claimed for the unit at Kolkatta Bantala (SEZ), the petitioner has stated that the said issue was also elaborately considered. 16. Regarding the grounds raised for 60% dis-allowance instead of 40% as claimed by the petitioner-Assessee, the judgment in the case of Deputy Commissioner of Income Tax vs. Cognizant Technology Solutions India Pvt Ltd (petitioner's case) [pronounced on 10.02.2012 in ITA No.1921/Mds/2010], the Income Tax Appellate Tribunal, Chennai Bench, in paragraph-5, held in favour of the petitioner as under:- 5. We have considered the rival submissions. It is noticed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment. Therefore, the Courts are expected to be cautious while considering the ground of change of opinion. It is always possible to misunderstand the concept of change of opinion. To make it very clear, change of opinion is that the issue, intricacies in accounts on a particular material or issues adjudicated and an assessment order is passed and the very same intricacy or issue wherein a clear finding has been arrived by the Assessing Authority cannot be a ground for reopening of assessment. However, from and out of the same issue and on the same material, if the Assessing Authority identified some under-assessment or the other reasons as contemplated under Section 147 of the Act, then reopening is permissible. Therefore, materials may be one and the same, issue may be one and the same and in respect of final conclusion, if there was any non-consideration resulted escapement in the original assessment order and the Assessing Authority found that there was an under-assessment, which resulted loss of revenue, then also reopening of assessment is certainly possible. Under these circumstances, mere comparison of issues already adjudicated in the original assessment proceedings alway ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osal of objections in the impugned proceedings dated 02.11.2015, this Court has no hesitation in arriving a conclusion that the respondents have established the reasons to believe for reopening of assessment, which is a precondition contemplated under Section 147 of the Act. Further adjudications with reference to the disputed facts are to be done during the course of reopening proceedings and the High Court cannot venture into an adjudication of such disputed facts with reference to the intricacies in accounting system based on certain original documents in the writ proceedings under Article 226 of the Constitution of India. The power of judicial review under Article 226 of the Constitution of India is to ensure that the processes through which a decision is taken by the Competent Authority in consonance with the provisions of the Act, but not the decision itself. This being the scope of power of judicial review, the High Court is not expected to adjudicate certain disputed facts with reference to original documents and evidences, which is to be done by the Competent Original Authority and thereafter by the Appellate Authority in the manner known to law. Once the adjudications are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ard to restriction of depreciation on electrical installations to 10% as against the claim of assessee of 15%. 21. Ld AR has drew our attention to para B.1 of their submissions on the issue with regard to restriction of depreciation on electrical installations to 10% as against the claim of assessee of 15% before the Ld AO while objecting on the reasons to reopening, placed before us on page 25-26 of Assessee s Paper Book, the same is extracted herein below for consideration: - B.1 Claim of depreciation @ 15% on electrical fittings : B.1.1 We wish to submit that electrical installations installed at our resorts are primarily Air Conditioners. Refrigerators, Generators, etc. and have been classifi d~Tm3er Plant Machinery. Items such as Bulbs, Folders, Adaptors and small wiring works have been classified as electrical fittings and are included under Furniture's Fittings Eligible for depreciation @10%. B.1.2 We submit that the above electrical installations are to be reckoned as Plant Machinery for the purpose of our business and are not in the nature of electrical fittings to be capitalized under Furniture Fittings. We also wish to submit that, being in the business of providing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... impossible to decide the nature and utility of the assets which are the key factors for deciding the rate of depreciation. Ld DR drew our attention to Para 8.2 of the order of Ld CIT(A), wherein it was observed that the details regarding the electrical fittings were not produced by the AR of the assessee before the AO during the assessment proceedings, further, Ld CIT(A) has observed that the breakup of the additions made to electrical equipment contains addition on account of ceiling fans, exhaust fans and pedestal fans on which a higher depreciation of 15% was claimed. Ld CIT(A) finds that the addition made by the Ld AO is sustainable and thus upheld the same. It was therefore submitted by the LD CITDR to affirm the decision of Ld CIT(A) on this ground. 23. We have considered the rival contentions, submissions and the judicial pronouncements pressed to service for consideration. Admittedly, as observed by the Ld CIT(A) no details relating to electrical installation were submitted by the assessee before the Ld AO, however, apparently while filing the objection on reopening the assessee has narrated the details of installations in para B.1.4 extracted herein before. If any further ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espect to considering the Electrical Installation and sanitary fittings as building on the question of law raised by the assessee that Whether, on the facts and in the circumstances of the case, the Tribunal is justified in law in disallowing the claim for initial depreciation under s. 32(1)(v) of the IT Act, 1961, in respect of electrical installations and sanitary fittings embedded in the hotel building itself ? is, therefore, answered in favour of the Revenue and against the assessee. The above question was decided against the assessee but at the same time it was also held that The sanitary fittings and the electrical installations, therefore, are clearly plant . Respectfully following the observations of the Hon ble Madras High Court in the case of Geetha Hotels (P) Ltd. (supra), which was relied upon by the assessee in its objections on reasons for reopening but the same was not contravened or distinguished by the Ld AO while disposing the objections of the assessee in present case vide letter dated 23.10.2014 neither any observation have been offered by the Ld CIT(A) on the same. We therefore are of the considered opinion that assessee s contention that the electrical install ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e agreement, the transferor had transferred all its rights, copy rights, trade marks in respect of the word 'pentasoft' as well as the training and development division exclusively to be exploited by the assessee. In order to strengthen those rights transfer under the said composite agreement, there was a non-compete clause by virtue of which, the transferor was restrained from using the same trade mark, copyrights etc., in favour of the assessee. Therefore, the non-compete clause under the agreement should be read as a supporting clause to the transferor of the copy rights and patents rather to strengthen the commercial right, which was transferred in favour of the assessee. (Emphasis supplied) The High Court also observed that ... non-compete, at best could be a commercial right because that right is relatable to the transfer of trade mark, copy rights and patents Therefore, the view taken by the Commissioner of Income Tax (Appeals) in this regard is acceptable. (Emphasis supplied) We submit that your goodselfs contention that there is no transfer of IPR's to the assessee under the non-compete agreement is not valid. Your goodself will appreciate that the Madras High ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ture. Based on findings in the case of Carborandum and Asianet (supra), It was submitted by the Ld AR that, if the expenditure is treated as not for enduring benefit or not in capital nature but as revenue expenditure than the income offered for tax in ITR will come down below the returned income, thereby the present case shall fall under the realm of provisions of section 152(2) of the Act, since, in such a situation the income of the assessee will be assessed at a sum lower than the assessed income as was assessed in the original assessment and therefor the assessee is entitled to claim that the proceedings under section 147 of the Act shall be dropped, thus the Ld AR prayed to set aside the assessment reopened U/s 147 of the Act. 29. Contrary to the contention of the ld. AR, Ld. CIT-DR assailed that depreciation on the amount paid as fee for non-compete cannot be allowed to the assessee treating the same as intangible asset. Ld. CITDR has relied upon the decision of the coordinate bench of the ITAT Delhi Bench of the Tribunal in the case of Sagar Ratna Restaurants (P.) Ltd., reported in [2022] 139 taxmann.com 897 (Delhi-Trib), wherein the Tribunal has held that, Non-compete fee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pete fee. We are also aware of the fact that Hon ble Delhi High Court in the case of M/s Sharp Business Systems (India) Pvt, Ltd. reported in (2012) 27 taxmann.com 50 (Delhi), has held that payment for non-compete fee is not a depreciable intangible asset as defined under the Act and, thus, would not qualify for depreciation. The Hon ble Gujarat High Court in the case of Ferromatic Milacron India (P.) Ltd., reported in [2018] 99 taxmsann.com 194 (Gujarat), has held that depreciation is allowable on non-compete fee. The Hon ble Bombay High Court in the case of Piramal Glass Limited, while dealing with this issue of allowability of depreciation u/s 32 of the Income Tax Act on non-compete fee relied on the Gujarat High Courts Decision in the case of Ferromatic Milacron India (P.) Ltd. has held depreciation is allowed on non compete fee and accordingly no question of law arises. The Hon ble jurisdictional High Court of Madras in the case of Carborandum Universal Ltd. reported in [2012] 26 taxmann.com 268 (Madras)[10-09-2012], has held that where assessee made payment as non-compete fee for purpose of business of assessee, expenditure was on revenue count. Similar finding was given by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 40/- u/s 40(a)(i) the payments made to nonresidents towards rooms facilities and amenities for non-deduction of TDS. 3.1 The Commissioner of Income Tax (Appeals) ought to have appreciated that the payments made to Heritage Bird and Hutchinson Co, who are tax residents in Malaysia and Thailand respectively have provided time share membership. The payment made is towards the Annual management/subscription fees which is part of the membership agreement towards use of the Resorts in their respective countries outside India and hence not taxable in India 3.2 The Commissioner of Income tax (Appeals) erred in not appreciating the fact that these payments constitute BUSINESS PROFITS of the non-residents and therefore, liability of tax in India does not arise in the assessee s case. 3.3 The commissioner of Income tax (Appeals) erred in not appreciating that these are payments towards use of properties located outside India and hence are not subject to TDS provisions. 3.4 Without prejudice to the above, the CIT(A) has erred in not appreciating the fact that the payments, even if construed as FTS, were made in respect of services utilized in a business outside India and for purpose of making ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng company which is not taxable under the Indian Income Tax Act. 5.3 Without prejudice to the above, the CIT(A) has failed to note no technical knowledge, know-how, skill etc were made available to the assessee as mandated by Article 13(4)(c) of the India-UK DTAA for the payments to be construed as FTS. Hence the payments were only BUSINESS PROFITS under Article? taxable in UK and not India 6. The Commissioner of Income tax(Appeals) erred in confirming the disallowance of the expenses of Rs.77,20,903/- relatable to earning the dividend income u/s 14A by applying Rule 8D. 6.1 The Commissioner of Income Tax (Appeals) ought to have appreciated that assessee earned dividend income only from investments in mutual funds made out of surplus funds available with it. 6.2 The Commissioner of Income tax (Appeals)ought to have appreciated that u/s.14A only the actual expenditure incurred for the purpose of earning exempt income should be disallowed. All the investments have been made by assesee s own fund and the appellant has not incurred any expenditure for earning the dividend income. 6.3 The Commissioner of Income Tax (Appeals)ought to have appreciated that loans were borrowed specifically ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udication. 37. Ground Nos.2, 2.1, 2.2 2.3 are regarding treating the expenditure incurred towards interior decoration, extension and renovation of buildings as capital expenditure. 38. At the outset, ld. AR of the assessee submitted that similar issue in assessee s own case was decided by the coordinate bench of the Tribunal in ITA Nos.1339 1227/Mds/2013, wherein it was held that, the CIT(A) confirmed the expenditure on civil, electrical, carpentry and plumbing work done in a leasehold building as capital expenditure. In these circumstances, we are of the opinion that the ld. CIT(A) was justified in directing the AO to allow the expenditure which was in revenue field and disallow the claim of the expenditure which was in capital field. Since the issue was decided by restoring the same for readjudication to the file of the AO by the ITAT in assessee s own case, it was requested to restore the same to the file of AO for the year under consideration also. 39. Ld. CIT-DR vehemently supported the order of the ld. CIT(A). 40. We have considered the rival contentions and perused the material available on record. Since the issue in assessee s own case was already decided in ITA No.1339 122 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ., chargeable under sections 4, 5 and 9 - Held, yes - Whether section 195(2) is not a mere provision to provide information to ITO(TDS) so that department can keep track of remittances being made to non-residents outside India; rather it gets attracted to cases where payment made is a composite payment in which certain proportion of payment has an element of 'income' chargeable to tax in India and payer seeks a determination of appropriate proportion of sum chargeable - Held, yes. 43. Ld AR also drew our attention to the submissions made by assessee on various disallowances made u/s 40(a)(i) before the Ld CIT(A) which reads as under:- 3. Disallowance of Maintenance charges for Resorts u/s.40(a)(i) of Rs.1,52,41,240/-: The above charges were paid towards maintenance of resorts located in Malaysia and Thailand. The services were rendered outside and the income does not deemed to accrue or arise in India under sec. 9(1). The payments represent the business profits of the non-residents and are not taxable in India. Hence, no tax is deductible u/s.195 of the Act. Even assuming it is FTS, then as per sec.9(1)(vii)(b) the resort maintenance fees are payable in respect of services ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties, nature of payments made and also the assessee was unable to substantiate its claim. Thus, the ld. CIT-DR submitted that the issues should be restored to the file of AO for thorough examination and analysis so as to arrive at a logical conclusion as to whether TDS u/s.195 of the Act would be applicable on this transaction or not. The ld. CIT-DR also agitated that the income received by foreign entities from the assessee were in the nature of income of fee for technical services. 45. Ld CITDR further drew our attention to the disallowances made u/s 40(a)(i) by AO after observing as under :- 8. Disallowance u/s 40(a)(i) of IT Act 8.1 On perusal of the notes of the accounts for the year ended on 31.03.2011 it was observed that the assessee made payments in foreign currency for various expenditures. Hence, the assessee was asked to furnish the details of the above payments and the corresponding TDS details as per the provisions of section 195 of the Income tax act also asked to show cause if there is any default in TDS compliance, why the above amount should not be disallowed as per the provisions of Section 40(a)(i) of the Incometax Act. 8.2 The assessee company vide letter dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ove payments for the purpose of Royalty or Fees for technical services, shall be taxable only in India irrespective of the PE of the non resident and irrespective of the place in which the service was rendered. The relevant explanation to section 9(1)(vii) of the IT Act is reproduced below: ' [Explanation. For the removal of doubts, it is hereby declared that for the purposes of this section, income of a non-resident shall be deemed to accrue or arise in India under clause (v) or clause (vi) or clause (vii) of sub-section (1) and shall be included in the total income of the nonresident, whether or not. (i) the non-resident has a residence or place of business or business connection in India; or (ii) the non-resident has rendered services in India.] 8.6 Hence, as per the above facts and legal positions explained, the above foreign remittances which are effected without making TDS are being disallowed and added to the total income of the current year by invoking the provisions of section 40(a)(i) of the Income-tax Act. Disallowance : Rs. 1,52,41,240 (9756621 + 5484619) 8.7 It is further observed that the assessee made the following payments towards professional services. Payments ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deducted on an expense of Rs.3,78,938. For the remaining amount of Rs. 1,60,37,640, the assessee stated in the note that Marketing expenses shown above where no tax has been deducted are not taxable as entire marketing service is rendered outside India . 8.11 The assessee's submissions are general in nature and do not provide the true nature of services rendered by each party and also not substantiated with relevant evidences. This office vide notice U/s. 142(1) of the Act dated 8.1.2014, the assessee company was specifically asked to furnish party wise breakup of foreign currency payments and to give reasons for each case where tax not deducted. The relevant portion of notice u/s 142(1) of the Act dated 8.1.2014 is reproduced below: c. In respect of foreign remittances made by the company, please furnish complete breakup details, viz., name address of the recipient, nature and mode of payment and details of TDS. If tax not deducted, please give the reasons thereof. 8.12 However, the assessee has not given the nature of marketing services rendered by the foreign entities. As per the provisions of Section 9(1 )(vii) of the Act, any payment made for the purpose of rendering consu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act is reproduced below: [Explanation. For the removal of doubts, it is hereby declared that for the purposes of this section, income of a non-resident shall be deemed to accrue or arise in India under clause (v) or clause (vi) or clause (vii) of sub-section (1) and shall be included in the total income of the nonresident, whether or not, (i) the non-resident has a residence or place of business or business connection in India; or (ii) the non-resident has rendered services in India.] 8.15 Hence, as per the above facts and legal positions explained, the above foreign remittance towards marketing expenses made without TDS, is being disallowed and added to the total income of the current year as per the provisions of section 40(a)(i) r.w.s. 195 of the Income-tax Act. Disallowance : Rs.1,60,37,640 46. Ld CITDR also shown us the observations of Ld CIT(A) on various disallowance u/s.40(a)(i) of the Act., reads as under: 8.2 Explanation 2 to Section 9( 1 )(vii) reads as under: Explanation 2. -For the purposes of this clause, fees for technical services means any consideration (including any lump sum consideration) for the rendering of any managerial, technical or consultancy services (i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... strued as FTS. Hence the payments were BUSINESS PROFITS under Article 7 taxable only in the foreign country and not in India. 9.2 There is no dispute that these payments were made towards Professional services, Advisory services and Consultancy services. The Assessing Officer concluded that these services come under Fee for technical services 9.3 The appellant contested that these payments were Business Profits of the non-residents not taxable in India However, the assessee did not furnish the party wise breakup of foreign currency payments and evidence in support of the nature of services rendered for which the payments were made. In the absence of evidence in support of the ground of appeal, the disallowance u/s 40(a)(i) is upheld. 10 Disallowance of Payments made towards marketing expenses at UK u/s.40(a)(i) Of Rs.1,60,37,640/-: 10.1 In the grounds of appeal the appellant contested as under: 6.1 The Assistant commissioner of Income tax, LTD erred in disallowing Rs. 1,60,37,640/- the payments made towards Marketing Expenses at UK u/s 40(a)(i) of the Act. 6.2 The Assistant Commissioner of Income tax has erred in not appreciating the fact that non-resident does not have any Permane ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee which is not making any statement nor are certified that whether all such information are furnished before the revenue authorities to adjudicate the issue lawfully. Since the ld. AR has discussed that the relaxation in DTAA are available to the assessee on the services rendered by the foreign entities to it which was opposed by or challenged by the ld. CIT-DR with drawing attention to other clauses of the same DTAA or contented that the averment of the appellant regarding nature of services cannot be accepted for the reason that the payments made falls under different article than what the assessee is claiming. The assessee s contention that the income derived by the foreign authorities were in the nature of income from immovable property or are in the nature of business profits, therefore, no TDS has to be made. However after deliberations, during the course of hearing, learned counsel of both the sides have fairly admitted that certain details which were necessary to adjudicate this issue were neither called for by the department nor the assessee has furnished the same. We, therefore, are of the considered view that all these issues raised by the assessee regarding disallo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest and other expenditure as being attributed to exempt income without establishing any nexus as being attributable to exempt income and also without giving any cogent reason to detail justification and the correctness of the claim of the assessee in respect of such expenditure which does not form part of the total income under this Act. The assessee placed reliance on the decision of Hon ble Delhi High Court in the case of ACB India Ltd. reported in (2015) 62 taxmann.com 71(Delhi), wherein the Hon ble High Court has held as under :- Section 14A of the Income-tax Act, 1961 read with rule 8D of the Income-tax Rules, 1962 - Expenditure incurred in relation to income not included in total income (Computation of) - Assessment year 2008-09 - While determining disallowance under section 14A and adding same to assessee's income, Assessing Officer instead of adopting average value of tax exempt investment, had chosen to factor in total investment itself - Commissioner (Appeals) recorded value of investment attributable to dividend and found same to be constituting less than 1 per cent of total scheduled fund - Whether such value of investment was required to be adopted and thereaf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng exempt income there can be no disallowance under Section 14A of the Act. Therefore, it was the prayer of the ld. AR that disallowance made u/s.14 of the Act of Rs.77,20,903/- deserves to be vacated. 52. Ld. CIT-DR, on the other hand, has vehemently supported the orders of the ld. AO and ld.CIT(A). Ld. CIT-DR drew our attention to para 11.2 to 11.5 of the ld. CIT(A) s order, extracted hereunder, wherein the reason for disallowance by AO and why the same was upheld by the ld. CIT(A) was explained in detail. Accordingly, the ld. CIT-DR submitted that the disallowance u/s.14A of the Act deserves to be upheld. 11.2 The assessee claimed that the surplus and own funds were invested to earn exempt income. Hon'ble High Court of Bombay in the case of Godrej Boyce Mfg. Co. Ltd., while upholding the constitutional validity of Sec.l4A(2) (3), accepted the contention of revenue that Rule 8D(2)(ii) has been inserted since it would have been difficult to allocate the actual quantum of borrowed funds that have been used for making tax free investments and that Rule 8D(2)(iii) has been inserted to attribute part of administrative and management expenditure to tax-exempt income. It even distin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arning exempt income, statute has provided for presumptive expenditure and, thus, assessing authority has to apply rule 8D. 11.4 The assessee further claimed that the investments made into subsidiaries are strategic investments made for acquiring control in the subsidiary. However, in [2016] 72 taxmann.com 102 (Karnataka) United Breweries Ltd vs Deputy Commissioner of Income-tax, Central Circle- 2(3), Bangalore, the hon'ble High Court of Karnataka held - Section 14A is applicable even where motive in acquiring shares is to obtain controlling interest in companies. 11.5 For the reasons stated above all the grounds of appeal with respect to the disallowance u/s 14A are dismissed and the disallowance u/s 14A is upheld. 53. We have considered the rival submissions, perused the material available on record and the judicial pronouncements submitted for our perusal. The contention of the ld. AR of the assessee before us is that no expenditure has been incurred in relation to income which does not form part of total income or relatable to earning the dividend income for which no disallowance u/s.14A r.w.sr.8D can be made. It was also the contention of the assessee that investments were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 54. Ground No.7 is regarding restricting the claim of assessee on depreciation on electrical equipments to 10% against the claim of the assessee as 15%. This ground is similar to the ground No.3 of appeal of the assessee for A.Y.2009-2010 in ITA No.936/CHNY/2018, wherein we have allowed depreciation claimed by the assessee following the judgment of Hon ble Jurisdictional High Court in the case of Geetha hotel Pvt Ltd (supra). Thus, this ground of assessee is also allowed in view of our reasonings given in the appeal of the assessee in ITA No.936/CHNY/2018 in ground No.3. This ground No.7 of the assessee is allowed. 55. Thus, appeal of the assessee in ITA No.937/CHNY/2018 is partly allowed for statistical purposes. ITA No.938/CHNY/2018 (Assessee s appeal for A.Y.2011-2012) 56. In this appeal, the assessee has raised the following grounds :- 1. The order of The Commissioner of Income tax (Appeals) is contrary to law, facts and circumstances of the case. 2. The Commissioner of Income tax (Appeals) erred in confirming the disallowance of Long Term Capital Loss amounting to Rs.1,08,38,402/-. 2.1 The Commissioner of Income tax (Appeals) erred in holding the lease premium was amortized ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re is not disallowance qualified. iv) Further we would like to state that, even if there is a disallowance it cannot be the asset Value as the same is not an expense by a capital spend. It was capitalized in the books of accounts as confirmed by your good self in the show cause notice. Hence there was no claim as expense from the income to qualify for disallowance. If at all disallowance can be to the extent of amortization; if claimed in the income tax return. v) We had clarified with relevant copies of the return that no amortizaition was clamed and that we ad reversed the amortization value as per books of accounts while computing tax liability for the relevant year .. 58. However, the contention of the assessee was disowned by the AO observing as under :- 8. The above submission filled by the assessee company has been carefully considered and found not acceptable for the following reason, The said loss of Rs. 1,08,38,402/- has claimed in P .L has current loss, whereas in the facts of the case, the assessee had taken lease of the property from M/s. Mahindra World City Developers on 28.03.2007 for Rs.2,55 crores for a period of 99 years. On 14,02.2011, the said lease right was ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was reversed by handing over the land and getting back the money passed as lease premium. Effectively, this is a cancellation of existing arrangement of lease and cannot partake the character of transfer of leasehold rights by the assessee for valuable consideration giving rise to capital gain or loss, The transaction has been necessitated as a result of the change in the business plan and represents an aborted business plan. As such there is no transfer giving rise to capital gain or loss and therefore the assessee's claim of capital loss of Rs.2.55 crores accepted in the original assessment is ignored and there is no claim of carry forward of such loss. Hence the claim of capital loss to the tune of Rs.1,08,38,402/- is not allowed to carry forward to the subsequent assessment years. 59. The assessee challenged before the ld. CIT(A) wherein without success disallowance made by the AO was sustained by the ld. CIT(A) with the following observations :- 7.2 The assessee had taken lease of the property from M/s. Mahindra World City Developers on 28,03.2007 for Rs.2.55 crores for a period of 99 years- On 14.02,2011, the said lease right was cancelled and received back the; amount pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stock-in-trade in its balance-sheet - However, in relevant year in which assessee surrendered tenancy right of said property to owner for certain consideration, it showed property-in-question as capital asset - Thus, assessee claimed loss incurred on surrender of tenancy right as capital loss - Assessing Officer as well as Commissioner (Appeals) held that loss-in-question was business loss - On further appeal, Tribunal noticed that assessee was engaged in business of purchase and sale of property on ownership basis; and that there was no transaction involving purchase or sale of tenancy rights, except one in question - Tribunal further observed that treatment given by assessee in its books of account for earlier years was patently wrong and, thus, such wrong treatment could not be held against assessee when it was apparent that tenancy right was a capital asset in assessee's hand - Accordingly, Tribunal allowed assessee's claim - Whether transaction in dispute, i.e., acquisition/surrender of a tenancy right, could not, in law, acquire a different character because of wrong treatment accorded to it in books of account of assessee - Held, yes - Whether, therefore, impugned or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribed to in view of the observation of the AO in para 5 of its order that the assessee company has paid Rs.2.55 crores as non-refundable premium and further incurred Rs.10.25 lakhs as registration charges for obtaining the leasehold rights of the land. The assessee had obtained the rights over the land with a business plan to develop hotel infrastructure facility on such land. Subsequently on 14.02.2011, the assessee company vide Deed of Surrender, dropped the plan to set up a Hotel Infrastructure in the leased land and surrendered the leasehold rights. 65. As per settled position of law, A lease deed is a legal document that outlines the terms under which one party agrees to rent property from another party. A lease deed for 99 years is a long-term lease that controls the transfer of land and its uses. A surrender deed is a legal document that transfers ownership of property from one party to another. It is used when the lessee ceases to have an interest in the property and comes into a mutual agreement with the lessor. The surrender deed can be used to reverse the lease deed for 99 years by transferring ownership back to the lessor. When a lease deed is surrendered before the end ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... capital gain applying the provisions available under the Income Tax Act prevailing at the time of relevant assessment year, keeping in consideration the principal of law laid down in the cases referred to supra and as instructed by CBDT vide its circular referred to herein above.. Needless to say, the assessee shall be provided with reasonable opportunity of being heard and to furnish necessary information / evidence in its defense. Thus, this ground of assessee is partly allowed for statistical purposes. 67. Thus, appeal of the assessee is allowed for statistical purposes. ITA No.939/CHNY/2018 (Assessee s appeal for A.Y.2012-2013) 68. In this appeal, the assessee has raised the following grounds :- 1. The order of The Commissioner of Income Tax (Appeals) is contrary to law, facts and circumstances of the case. 2. The Commissioner of Income Tax (Appeals) erred in holding that the expenditure incurred towards interior decoration, extension and renovation of buildings is capital expenditure. 2.1 The Commissioner of Income Tax (Appeals) ought to have appreciated that the expenditure incurred on lease hold land is not capital expenditure and is allowable as revenue expenditure. 2.2 The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... K u/s 40(a)(i) of the Act. 4.1 The Commissioner of Income tax (Appeals) has erred in not appreciating the fact that non-resident does not have any Permanent Establishment (PE) in India and also that entire services were provided by the non-residents outside India and hence is not taxable under Act. 4.2 The Commissioner of Income tax (Appeals) ought to have appreciated that payments made by the assessee were BUSINESS PROFITS of the non-resident marketing company which is not taxable under the Indian Income Tax Act. 4.3 Without prejudice to the above, the CIT(A) has failed to note no technical knowledge, know-how, skill etc were made available to the assessee as - dated by Article 13(4)(c) of the India-UK DTAA for the payments to be construed as FTS. Hence the payments were only BUSINESS PROFITS under Article? taxable in UK and not India 5. The Commissioner of Income tax (Appeals) erred in confirming the disallowance of the expenses of Rs.77,54,324/- relatable to earning the dividend income u/s 14A by applying Rule 8D. 5.1 The Commissioner of Income Tax (Appeals) ought to have appreciated that assessee earned dividend income only from investments in mutual funds made out of surplus f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Income tax (Appeals) ought to have appreciated that the above electrical installations are to be reckoned as plant and machinery and not in the nature of electrical fittings to be capitalized under furniture and fittings. Hence the claim of the appellant that the depreciation @ 15% should be allowed. 7. The Commissioner of Income tax (Appeals) erred in confirming the disallowance of the depreciation on Noncompete Fee Amounting to Rs.21,09,375/- 7.1 The Commissioner of Income tax(Appeals) ought to have appreciated that appellant has paid non-compete fees to AGS Hotels Resorts Private for a consideration of Rs.2,00,00,000/-. This agreement was entered pursuant to the purchase of the hotel business of AGS Hotels by the appellant. 7.2 The Commissioner of the Income tax (Appeals) ought to have appreciated that non-compete fee is an intangible asset eligible for depreciation u/s 32(1 )(ii). The Appellant relies on the decision of the Supreme Court in the case of Techno Shares and Stocks Ltd Vs. CIT, reported in 327 ITR 323 (SC) and the Madras High Court Decision in the case of Pentasoft Technologies Ltd Vs. DCIT, reported in 264 CTR (Mad) 187. 7.3 The commissioner of Income tax (Appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /CHNY/2018, wherein we have allowed depreciation claimed by the assessee following the judgment of Hon ble Jurisdictional High Court in the case of Geetha hotel Pvt Ltd (supra). Thus, this ground of assessee is also allowed in view of our reasonings given in the appeal of the assessee in ITA No.936/CHNY/2018 in ground No.3. This ground No.7 of the assessee is allowed. 74. Ground No.7 to 7.4 relates to disallowance of non-compete fee. This ground is similar to the ground No.4 of appeal of the assessee for A.Y.2009-2010 in ITA No.936/CHNY/2018, wherein we have allowed this ground of assessee following the judicial precedence laid down by the Hon ble jurisdictional High Court of Madras and we have held that the depreciation on non-compete fee which was disallowed by the ld. AO and upheld by the ld. CIT(A) was an erroneous finding and the same deserves to be reversed and we do so. In view of our observations made in the appeal of the assessee for A.Y.2009-2010, these ground in the appeal of the assessee are allowed. ITA No.940/CHNY/2018 (Assessee s appeal for A.Y.2013-2014) 75. In this appeal, the assessee has raised the following grounds :- 1. The order of The Commissioner of Income T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 9(1 )(vii)(b) of the Act. 3.5 The Commissioner of Income tax (Appeals) ought to have appreciated that the question of deduction of tax arises only when the payments are chargeable to tax in India and not otherwise as laid down by the Supreme Court in GE India P Ltd. vs. CIT (327 ITR 456 SC) 4. The Commissioner of Income tax (Appeals) erred in confirming the disallowance of the expenses of Rs.76,08,876/- relatable to earning the dividend income u/s 14A by applying Rule 8D(iii). 4.1 The Commissioner of Income Tax (Appeals) ought to have appreciated that assessee earned dividend income only from investments in mutual funds made out of surplus funds available with it. 4.2 The Commissioner of Income tax (Appeals) ought to have appreciated that u/s.14A only the actual expenditure incurred for the purpose of earning exempt income should be disallowed. All the investments have been made by assesee s own fund and the appellant has not incurred any expenditure for earning the dividend income. 4.3 The Commissioner of Income Tax (Appeals) ought to have appreciated that investments made into subsidiaries are strategic investments made for acquiring control in the subsidiary and no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iation on UPS to 15% as applicable to plant and machinery. 6.1 The Commissioner of Income tax(Appeals) ought to have appreciated that the UPS attached to computer form an intrinsic part of computer system and helps to preserve the data in case of power failure. Hence they are entitled to depreciation as applicable to computers at 60%. 6.2 The proposition that all peripherals that function along with computer are classifiable as computer for the purpose of depreciation is supported by the following judicial precedents: Nestle India Ltd Vs DCIT - 111 TTJ 498 (Del) ITO vs. Samiran Majumdar (2006) 98 ITD 119 (Koi) Bisquare Technologies (P) Ltd Vs ITO - 21 SOT 503 (Del) CIT Vs Orient Ceramics Industries Ltd - 3 ITR (Trib) 246 (Del) Expediators International (India) P td Vs Addi.CIT - 118 TTJ 652 (Del) 6.3 Without prejudice, if the UPS are held as not forming part of the computer system they were entitled to depreciation @ 80% as energy saving devices 7. The Appellant craves leave to add to, alter, amend or delete the above grounds of appeal 76. Ground Nos. 1 7 are general in nature. 77. Ground Nos.2 to 2.3 regarding the expenditure claimed by the assessee is allowable as revenue expendi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l has been taken by the assessee for allowing of 80% depreciation on UPS but since the same was merged with ground NO.6 i.e. depreciation on non-compete fee, therefore, it smees that same is left the attention of the ld. CIT(A) and, thus, no observations was offered by the ld. CIT(A) on this issue. On perusal of the assessment order for the financial year 2013-2014 passed on 29.12.2016, no addition on account of restricting the depreciation on UPS was found. The addition on account of restriction has been upheld or adjudicated, since the substantial issues arose in these appeals were restored back to the files of the AO, we, therefore, of the view that the issue deserves to be restored to the file of AO for adjudication and we do so. Liberty is granted to the assessee to file necessary details before the AO. The AO is directed to adjudicate the same as per law. ITA NO.941/CHNY/2018 (Assessee s appeal for A.Y.2014-2015) 83. In this appeal, the assessee has raised the following grounds :- 1. The order of The Commissioner of Income Tax (Appeals) is contrary to law, facts and circumstances of the case. 2. The Commissioner of Income Tax (Appeals) erred in holding that the expenditure in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the question of deduction of tax arises only when the payments are chargeable to tax in India and not otherwise as laid down by the Supreme Court in GE India P Ltd. vs. CIT (327 ITR 456 SC) 4. The Commissioner of Income tax (Appeals) erred in confirming the disallowance of the expenses of Rs.69,68,703/- relatable to earning the dividend income u/s 14A by applying Rule 8D(iii). 4.1 The Commissioner of Income Tax (Appeals) ought to have appreciated that assessee earned dividend income only from investments in mutual funds made out of surplus funds available with it. 4.2 The Commissioner of Income tax (Appeals) ought to have appreciated that U/S.14A only the actual expenditure incurred for the purpose of earning exempt income should be disallowed. All the investments have been made by assesee's own fund and the appellant has not incurred any expenditure for earning the dividend income. 4.3 The Commissioner of Income Tax (Appeals) ought to have appreciated that investments made into subsidiaries are strategic investments made for acquiring control in the subsidiary and no dividend income earned from the subsidiaries. 4.4 The Commissioner of Income tax (Appeals) ought to have appre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Therefore, following the reasoning given in the appeal of assessee for A.Y.2011-2012, we also restore this issue to the file of AO with a direction to disallow the claim of the expenditure which was in the capital field and allow the expenditure which was in the revenue field. These grounds are partly allowed for statistical purposes. 86. Ground Nos. 3 to 3.5 are relating to disallowance made u/s.40(a)(i) of the Act. This issue has already been decided by us in ground Nos.3 to 3.5, 4 to 4.4 and 5 to 5.3 of the appeal of the assessee for A.Y.2011-2012 in ITA No.937/Chny/2018, wherein we have restored the issue to the file of AO for readjudication in accordance with the provisions of Income Tax Act r.w.DTAA between India and respective countries and the foreign entities. In view of our reasoning given in the appeal of assessee for A.Y.2011-2012, these grounds are also allowed for statistical purposes. 87. Ground Nos.4 to 4.5 are relating to disallowance made u/s.14A read with rule 8D. This issue has already been decided by us in ground Nos.6 to 6.8 of the appeal of the assessee for A.Y.2011-2012 in ITA No.937/CHNY/2018, wherein we have restored the issue to the file of AO to readju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of deduction of tax arises only when the payments are chargeable to tax in India and not otherwise as laid down by the Supreme Court in GE India P Ltd. vs. CIT (327 ITR 456 SC) 3. The Commissioner of Income Tax (Appeals) erred in holding that the expenditure of Rs.6,40,06,635/- incurred during construction pending allocation as incurred towards repairs / renovation. 3.1 The Commissioner of Income Tax (Appeals) ought to have appreciated that the expenditure relates to expansion of the same business and not starting a separate line of business and hence an allowable expenditure. 3.2 The Commissioner of Income Tax (Appeals) ought to have appreciated that similar claim was allowed by the Hon'ble Income Tax Appellate Tribunal in ITA No 1761 /Mds/2011 for AY 2005-06. 4. The Appellant craves leave to add to, alter, amend or delete the above grounds of appeal 91. Ground Nos. 1 4 are general in nature. 92. Ground Nos.2 to 2.4 are relating to disallowance made u/s.40(a)(ia) of the Act. This issue has already been decided by us in ground Nos.3 to 3.5, 4 to 4.4 and 5 to 5.3 of the appeal of the assessee for A.Y.2011-2012 in ITA No.937/CHNY/2018, wherein we have restored the issue to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eld that the entire amount of time share membership fee receivable by the assessee up front at the time of enrolment of a member was not the income chargeable to tax in the initial year on account of contractual obligation that was fastened to the receipt to provide services in future over the term of contract. The observations of the Special Bench of the Tribunal are as under :- 28. It has been argued on behalf of the assessee that the main reason to spread the balance amount of membership fees over the tenure of membership is that it has to incur heavy expenditure for the upkeep and maintenance of its various resorts. However, we are not impressed with this argument. Separate charges are collected for maintenance and for use of utilities and therefore, the matching concept cannot be pressed into service so far as membership fee is concerned. No doubt, it will be the constant endeavour of the assessee to go on adding new resources which will be available to the existing members also. To that extent one can say that some portion of the membership fees will go to finance new properties. But membership fee is essentially a consideration for the right to occupy a resort for one week i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e averment in the affidavit to the effect that once the agreement is signed, there is no service left to be rendered by the assessee. This argument has to be rejected. The department itself admits, that the assessee is bound to provide accommodation for one week in a year during the tenure of the membership. Secondly, by saying that no service is left to be rendered, what the assessee means to say is that there is no taxable event under the Service Tax laws once a person becomes member. Therefore, the reliance of the department on the affidavit has no substance at all. 29.We again revert to the aspect of liability. In this connection, the judgment of the Supreme Court in the case of Rotork Controls India (P.) Ltd. (supra) is quite useful. Of course, we are conscious of the fact that that case pertained to provision for warranties, nonetheless, certain principles enunciated therein are quite apt for the case on hand as well. In the said case, the assessee had made provision for warranties. The Madras High Court in their judgment in CIT v. Rotork Controls India Ltd. [2007] 293 ITR 311 denied deduction of the provision for warranties on the ground that the liability was not certain. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e made reasonable provision every year which would meet the matching concept also. Let us see how it is not possible. In the case of Rotork Controls (supra), the Supreme Court has observed that a provision is recognised when: (a) an enterprise has a present obligation as a result of a past event; (b) it is probable that an outflow of resources will be required to settle the obligation; and (c) a reliable estimate can be made of the amount of the obligation. If these conditions are not met, no provision can be recognised. In the present case, we have already observed in the preceding paragraphs that the assessee has a present obligation as a result of a past event. Thus, the first condition is satisfied. We have also observed that outflow of resources is probable to settle the obligation. The second condition is also satisfied. However, considering the nature of activity, it is the third condition which is difficult to satisfy. The demand for accommodation by the members is essentially tourism oriented. Tourism, in turn, depends on several factors. They may be social, political, climatic and so on. If wedding season is in full swing, tourism can get affected. If there is some commot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted picture of the profits of a particular year. It is this distortion we have talked about in the earlier part of this paragraph. The only difference is that in the case of Madras Industrial Investment Corpn. (supra), the distortion was supposed to be on account of expenditure, in the present case the distortion is on account of the entire income being accounted in the year of receipt. Earlier, we have also discussed as to how difficult it is to estimate the liability which is likely to be incurred in future, more so in the absence of any scientific basis or historical data. Therefore, the only way to minimise the distortion is to spread over a part of the income over the ensuing years. At this juncture, we may deal with one of the arguments made on behalf of the assessee and the intervener. It was argued that accounting for the whole of the income in one year would give a distorted view of the profits of the company which will be against the true and fair principle required for the annual accounts. Well, the distortion the ld. counsel talked about was vis-a-vis the presentation of published accounts whereas the distortion the Supreme Court talked about and which we are inclined t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowed the claim of the assessee regarding depreciation @60% on UPS holding it as part of computer. In this regard, the findings of the ld. CIT(A) are as under :- 5. I have heard the contention of the AR and perused the grounds of appeal, assessment order, written submission and material available on record. My observations in respect of the grounds raised by the appellant are as follows: 6. Addition of Advance received from members Rs.185,14,41,408/-: 6.1 In the grounds of appeal the appellant contested as under: 2.1 The Assistant Commissioner of Income tax, LTU erred in treating a sum of Rs.185,14,41,408 received during the year from the customers/New members, being a part of the membership fees relatable to the- contracted membership periods as income of the year under appeal. 5.1 . The Assistant Commissioner of income tax, LTU ought to have appreciated that the assessee has been consistently following an accepted method of accounting in respect of such fees by offering 60% of the fees received from the members as income in the year of which the member is admitted and the balance 40% is equally spread over the balance membership period, which consistently reflects the correct inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded in the case of M/s Ashok Leyland (supra) by allowing the depreciation @60% on UPS in favour of the assessee, we do not see any reason to interfere in the findings so recorded by the ld. CIT(A) in this regard. Thus, we uphold the same and dismiss this ground of revenue. 104. Thus, the appeal of the revenue in ITA No.942/CHNY/2018 is dismissed. ITA Nos.943 944/CHNY/2018 1089/CHNY/2018 (Department s appeal for AYs. 2012-2013, 2013-2014 2014-2015). 105. The sole issue involved in all the three appeals of the revenue is with regard to department s grievance against the finding of the Ld CIT(A) that The CIT(A) has failed to appreciate the fact that the department has not accepted the relied upon order of ITAT in the assessee s own case in ITA No. 2412 to 2416/Mds/2005 dated 26.05.2010 in granting of relief to the assessee from disallowances made by the Ld AO towards advance received by the assessee during the respective years from customers / new members, being part of the membership fee relatable to the contracted membership periods as income of the year under appeal, relying on the decision in assessee s own case in ITA No.2412 to 2416/MDS/2005, order dated 26.05.2010. Since, this ..... X X X X Extracts X X X X X X X X Extracts X X X X
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