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2020 (4) TMI 854 - AT - Income TaxCharacterization of income - One time membership entrance fees as one time membership fees for life time membership of club (15 years) - AO treated the said receipt as revenue receipt against the assessee’s treatment for treating it as a capital receipt - HELD THAT:- Considering the decision in the case of E.D. Sasoon, [1954 (5) TMI 2 - SUPREME COURT], Madras Industrial Corporation Ltd. [1997 (4) TMI 5 - SUPREME COURT], Calcutta Co. Ltd. [1959 (5) TMI 3 - SUPREME COURT] and in the case of Rotork Controls India Pvt. Ltd. [2009 (5) TMI 16 - SUPREME COURT] it was held that membership fee received for 33/25 years was liable to spread over the period of time for which such fee is received. Respectfully following the same, we direct the AO to tax following the earlier orders of ITAT i.e [2015 (11) TMI 1810 - ITAT MUMBAI] Disallowance on account of amortization of additional premium paid on lease hold land - HELD THAT:- As in Associated Cement Co. Ltd. [1988 (5) TMI 2 - SUPREME COURT] held that it is material to consider is the nature of the advantage in a commercial sense and it is only where the advantage is in the capital field that the expenditure would be disallowable on an application of this test. If the advantage consists merely in facilitating the assessee's trading operations or enabling the management and conduct of the assessee's business to be carried on more effectively or more profitably while leaving the fixed capital untouched, the expenditure would be on revenue account, even though the advantage may endure for an indefinite future. In the instant case, the advantage which was secured by the assessee by making the expenditure in question was the securing of absolution or immunity from liability to pay municipal rates and taxes under normal conditions for a period of 15 years. If the liability had to be paid, the payments would have been on revenue account and, hence, the advantage secured was in the field of revenue and not capital. And as a result of the expenditure incurred, there was no addition to the capital assets of the assessee and no change in its capital structure. With utmost regard to the decision of Hon’ble Supreme Court, in our humble view, the ratio of the decisions are not helpful to the assessee. In the present case, there is no obligation under lease agreement to pay amortization of lease premium by assessee to the super lesser. There is no evidence on record that the land which was released by UDA was under the occupation of assessee or is part of business asset, in other word it was a part and partial of the plot of land leased to assessee. Thus, the ratio of the decision of Hon’ble Apex Court is not applicable on the present case. In the result, ground of appeal raised by assessee is dismissed. Disallowance under section 14A r.w.r. 8D - HELD THAT:- On appeal before the ld. CIT(A), directed not to consider the investment made in Lift and Shift India Pvt. Ltd., being made in group companies. And rest of the disallowance under Rule 8D(2)(iii) was affirmed. Assessing Officer wrongly deducted ₹ 1739/- from disallowance of Rule 8D(2)(iii) which was directed to be rectified. Before us, the ld. AR of the assessee vehemently argued that only those investment which yielded the exempt income should be considered for considering the average value of investment for disallowance under Rule 8D(2)(iii). Considering the decision of Special Bench of Delhi Tribunal in Vireet Investment Pvt. Ltd. [2017 (6) TMI 1124 - ITAT DELHI] we direct the AO to re-compute the disallowance under Rule 8D(2)(iii) by considering only those investment which yielded exempt income. Needless to direct that before computing the disallowance, the Assessing Officer shall grant opportunity to the assessee. This ground of appeal is party allowed. However, we may make it clear that in case any other investment made in group concern and generated exempt income be also considered for taking average value of investment, if those investment yielded exempt income as per the decision of Special Bench of Vireet Investment (supra). Professional Fees Payment - disallowance of professional fees paid to Bhagwan Madhav on the ground that no projects were undertaken by assessee during the Assessment Year under consideration - CIT(A) affirmed the action of Assessing Officer that professional charges paid for housing developed project in the past cannot be accepted for reasons that assessee failed to establish against which professional charges were incurred and that assessee failed to establish the nexus - HELD THAT:- Assessee is engaged in construction activities. The services of Civil Engineer are integral part of civil project construction activities. The Assessing Officer has not made any investigation about the genuineness of payment and services rendered by the Civil Engineer. The Assessing Officer simply disallowed the charges paid to Civil Engineer by taking view that project is yet to start. Similarly, the ld. CIT(A) the action of Assessing Officer holding that assessee failed to establish the nexus between the expenses and corresponding income without disputing the fact that services of Civil Engineer are integral part of civil construction activities. Considering the fact that professional charges paid to Civil Engineer are disallowed without bringing any adverse evidence on record and business of assessee is not in dispute, we direct the Assessing officer to delete the addition. In the result, this ground of appeal is allowed.
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