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2018 (12) TMI 1338 - HC - Income TaxDisallowance of deputation and other cost - addition on reliance of report of Special Auditors appointed u/S. 142(2A) - expenditure nexus with the business - Held that:- Both the Commissioner of Income Tax (Appeals) as well as the Tribunal have come to the concurrent finding and noted that the expenditure incurred in both assessment years was held allowable by the Special Auditor. This was for the reason that the expenditure was incurred in running of hotel and therefore, incurred wholly for the purpose of business. The Tribunal was satisfied that there was a nexus between the expenditure incurred of ₹ 7.56 crores and the business of running hotel of the respondent. Thus, dismissal of the Revenue's appeal. Disallowance of Hotel Management fees and sales & management fees - Held that:- IT(A) and the Tribunal have come to concurrent findings of the fact that the expenses on account of hotel management fees and sales and marketing fees were allowable expenses having been incurred for the purpose of business. This was on the basis of examination of the record which was also duly supported by the Special Auditor's report holding that these expenses have been incurred for running of hotel business of the respondent – assessee. This, correct findings of fact is not shown to be perverse so as to warrant interference. Disallowance of depreciation on intangible asset which was claimed by the assessee - Tribunal upheld the deletion of depreciation on intangible assets by upholding the finding of the CIT(A) that it is undisputed that the intangible assets were purchased as slump sale and fell under block of assets on which depreciation is allowable @ 25% - Held that:- We find that both the CIT (A) as well as the Tribunal found on facts that the hotel business cannot be carried out without necessary licenses, permits and approvals. Thus, the proposition canvassed by by the Revenue that intangible assets in the nature of permits, licenses & approvals are not required for carrying on the business of hotel not found to be correct by both the CIT(A) and the Tribunal. It is not disputed that the intangible assets viz. permits, licenses and approvals fall within the meaning of intangible assets under Section 32 of the Act. Addition on account of royalty as income on accrual basis - assessee company is following mercantile system of accounting - Held that:- We find that both the CIT(A) and the Tribunal on examination of the records, found that there was no question of any accrual of ₹ 10 lakh as royalty during subject assessment year as the respondent had not rendered any services to claim the amount of ₹ 10 lakh during the subject assessment year. The respondent had recorded services to the extent of ₹ 50 lakh during the year and accounted the same as income. The view of the CIT(A) and the Tribunal on the facts as existing is a very plausible view. No substantial question of law raised.
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