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TMI Blog2011 (12) TMI 116X X X X Extracts X X X X X X X X Extracts X X X X ..... of. Lastly, requirements of Order XLI, Rule 27 are not satisfied. The application is dismissed. On 28th February, 2011 while admitting the present appeal under Section 260A of the Income Tax Act, 1961 (Act, for short) in the case of Mira Kulkarni, the appellant, the following substantial question of law was framed: "Whether the Tribunal was correct in law and on facts in holding that expenses incurred by the appellant wholly and exclusively for the purposes of the hotel business and allowable under section 37(1) of the Income Tax Act, 1961 were not allowable solely for the reason that the agreement between the parties did not contain a stipulation for the incurring of the same by the appellant?" 2. The appeal pertains to the assessment year 2003-04. 3. The appellant is an individual and a part owner of property situated at Anand Kashi Farms, Post Pffice Gular Dogi, Zila Tehri Garwal, Uttaranchal. A portion of the property, pursuant to an agreement dated 1st April, 1999 with Neemrana Hotels Private Limited, is being used as a hotel. The appellant- assessee is entitled to minimum guaranteed amount of Rs.90, 000/- per quarter or 30% of the gross ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellant had carried out repairs of the staircase in the property leading to the banks of the river Ganges and the expenditure incurred was business expenditure and, therefore, was rightly allowed by the CIT (Appeals). It is further submitted that the maintenance of the staircase was not the responsibility and was not undertaken by the second party, i.e., Neemrana Hotels Pvt. Limited, to the agreement dated 1st April, 1999. 9. Section 37(1) of the Act reads as follows:- "(1) Any expenditure (not being expenditure of the nature described in sections 30 to 36 and not being in the nature of capital expenditure or personal expenses of the assessee), laid out or expended wholly and exclusively for the purposes of the business or profession shall be allowed in computing the income chargeable under the head "Profits and gains of business or profession." Section 37 (1) postulates that the expenditure should be laid out or expended wholly or exclusively for the purpose of business. The two conditions, wholly or exclusively are conjoint and not disjunctive. This means that the expenditure should have been incurred for the purpose of business. It should be really inciden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the property of and belong to "The Party of the Second Part". If the assets so created be immovable property/assets or any alteration to them, in that event at the expiry or termination of the agreement they shall become the property of "The Party of the First Part". If the assets so created, be moveable assets then in that event these shall belong at all times to "The Party of the Second part" and on the expiry/termination of the agreement "The Party of the Second Part" shall have the right to remove the same subject to the prior right of "The Party of the First Part" to purchase the same at a mutually agreed price, provided however that "The Party of the Second Part" shall not be entitled to remove or take away the assets in the nature of fixed fittings and other installations, the removal of which is likely to cause irreparable or heavy damage to the buildings. The Party of the Second Part" shall at its costs, repair any and all damages that may be caused to the building in the process of the removing of the assets." 5.2 THE PARTY OF THE SECOND PART'S COVENANT a. All charges or taxes with regard to the running of the business of the said hotel including the char ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vate Limited to examine the question whether expenditure of Rs.4,83,221/-, was incurred wholly and exclusively for purpose of business and to find out why the said expenditure was incurred. M/s Neemrana Hotels Private Limited in their reply stated that as per the agreement, they were liable to carry out repair and maintenance of the property used for the hotel. They had further stated that the property was jointly used by both parties as per the enclosed map and open spaces were used by the appellant to grow agricultural produce. A double storeyed structure was under the appellant's occupation for her residence and office. It was further stated that no new construction was carried out during the financial year 2002-03, which is relevant to the assessment in question. 14. Keeping in view the aforesaid factual matrix, the tribunal after examining the relevant clauses of the agreement and the reply given by M/s Neemrana Hotels private Limited has upheld the addition made by the Assessing Officer and reversed the order passed by the CIT (Appeals) in respect of Rs 4,83,221/-. 15. Article 1.1 of the agreement not only refers to the constructed hotel portion but states tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; 16. With regard to the foreign air travel, again the findings recorded by the tribunal are findings of fact. It was noticed that the assessee had travelled to Paris and London on a personal visit and it has been held that the expenditure was not business expense. We do not find any reason to interfere with the said finding. We may note that as per the agreement, marketing, advertisement and reservations etc. were to be undertaken by and was the responsibility of Neemrana Hotels Private Limited. There is no evidence or material placed on record as to how the said expense was connected with or for the purpose of business income. The last expense claimed is on account of salary and local conveyance. The tribunal in this regard has referred to the clauses of the agreement and observed that the running of the hotel, including salary to the hotel staff etc. was the responsibility of M/s Neemrana Hotels Private Limited. To verify the claim made by the appellant that as an owner and party to the agreement she was incurring the said expenses, M/s Neemrana Hotels Private Limited was asked to provide details of duration, nature and frequency of supervision/inspection carried by the appella ..... X X X X Extracts X X X X X X X X Extracts X X X X
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