2019 (9) TMI 148 - ITAT DELHI

Rate of depreciation on golf-course - “building” OR “plant and machinery” - According to the revenue authorities, it is a building and not a plant whereas the assessee contends that it is a plant - HELD THAT:- Coordinate bench in case of Deputy Commissioner of Income Tax vs. JP greens Ltd [2010 (3) TMI 1248 - ITAT DELHI] , on identical facts and circumstances considered golf course as plant and depreciation at the rate of 25% was allowed holding that assessing officer himself has allowed depreciation at that rate in past in that particular case.

The decision relied upon by the learned CIT DR that Toll Road does not qualify as a plant for higher rate of depreciation as held in the Moradabad Toll Road Co Ltd vs. Asst Commissioner of income tax [2014 (11) TMI 354 - DELHI HIGH COURT] was decided as ‘road’ was specifically considered as part of building in the part A of appendix 1 of The Income tax Rules 1962. Thus, the fact of that case is distinguishable. Further, it was not stated before us that revenue has not accepted the decision of the coordinate bench in DCIT vs. JP greens Ltd where golf course was held to be plant. Therefore, it stands concluded that golf course is a plant looking to the nature of business of the assessee. Further, the judicial precedents 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.

Disallowing the expenses on account of golf course on repairs and maintenance - HELD THAT:- It is a fact that assessee has submitted the details of such expenses. 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 find any infirmity in the order of the learned CIT – A in deleting the above disallowance.

Addition u/s 41(1) - HELD THAT:- CIT-A noted that a sum of INR 1 54606/– was disallowed by the assessee in assessment year 2000 – 01, ₹ 2886114 in assessment year 2001 – 02 and ₹ 3333882/– in assessment year 2003 – 04 and therefore he held that the assessee itself has disallowed the above sum amounting in all INR 2 6374602/– in the earlier years and therefore out of the sum of INR 80 416051/– a sum of INR 6 374602 is not following under the provisions of section 41 (1). He therefore held that the addition made by the learned assessing officer to that extent of INR 6 374602/– is not sustainable. We do not find any infirmity in the order of the learned CIT – A to that extent. Further with respect to the disallowance of INR 2 041449/– of the balance sum sustained by the learned CIT – A, the assessee could not show that whether these expenditure have already been disallowed by the assessee in the earlier years or not and therefore in absence of such details, 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/–

Addition of security deposit received - Accrual of income - advance receipt of golf course membership fee - HELD THAT:- Merely because the income, which is pertaining to subsequent years, is received by the assessee in earlier years does not become the income of the earlier years under section 5 of the income tax act in case of either business income or u/s 28. Hence, according to us, the membership fee income of the assessee should be chargeable to tax in the year to which it pertains. Therefore, we reverse the finding of the learned CIT – A in holding that that a sum of INR 3 5288416 received as golf course membership fee is chargeable to tax as income. As such, it is the claim of the assessee that subsequently such income has already been offered for taxation therefore for the year to which it pertains. Therefore, we direct the learned assessing officer to tax the above income as Income for the impugned assessment year to which it pertains to. Therefore, if the assessee has offered the income, to the year to which it pertains to, the addition is required to be deleted.

Taxability of the security deposit against the golf course membership fee - HELD THAT:- The identical issue arose before the honourable Gujarat High Court in principal Commissioner of income tax vs. Gulmohar Green Golf and country club Ltd [2016 (12) TMI 1559 - GUJARAT HIGH COURT] 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 above, 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

Disallowance of bad debt/advances written off in the normal course of the business - HELD THAT:- 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 the learned CIT – A, in principle, that the advances given for the purchase of capital goods he further written off in this year is a capital expenditure. With respect to the allowability of bad debts, there is no infirmity in the order of the CIT – A mentioned in his order that such advances should have been shown as income in the earlier years. - Decided against assessee

Undisclosed income on sale of land - HELD THAT:- In the case of CIT v. George Henderson And Co. Ltd. [1967 (4) TMI 18 - SUPREME COURT] 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.

Long-term capital gain on transfer of ownership of ITC Ltd - above addition has been made subject to the exact details of the date on acquisition cost of the land on protective basis and on substantive made a basis the addition has been made in assessment year 2001 – 02 and 2003 – 04 on the basis of agreement to sale dated 16th/2/2001 and 17/3/2003 - HELD THAT:- As the revenue could not point out that what is the trigger point of taxing the above amount in this year and further in which year the transfer of the capital asset has happened, the above addition has rightly been deleted by the learned CIT – A. In view of this we do not find any infirmity in the order of the learned CIT – A deleting the protective addition

Addition on account of interest disallowances - HELD THAT:- No 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

Penalty u/s 271(1)(c) - Defective notice - HELD THAT:- None of the twin charges have been struck off by the learned assessing officer in notice dated 18/05/2007. Honourable Delhi High Court in M/S. SAHARA INDIA LIFE INSURANCE COMPANY, LTD. [2019 (8) TMI 409 - DELHI HIGH COURT] as per paragraph number 21 of that order has also upheld the view of the coordinate bench that notice issued by the learned assessing officer would be bad in Law if it did not specify under which limb of section 271 (1) (c), penalty proceedings had been initiated.

Advance membership fees chargeable to tax in this year or not - HELD THAT:-w e hold that membership fees received by the assessee as advance 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 of the appeal of the assessee is allowed.