TMI Blog2015 (2) TMI 1026X X X X Extracts X X X X X X X X Extracts X X X X ..... However considering the fact that the CIT(A) as per section 251(1)(a) of the Act has the powers only to confirm, reduce, enhance or anull the assessment and specifically does not have the power to set aside as per the Finance Act, 2001 w.e.f 01.06.2001. Accordingly finding ourselves in agreement with the directions given, we substitute the same by our similar direction to the AO as the Statute bars the CIT(A) to set aside the issue to the AO. The impugned order is modified to this extent. Decided in favour of revenue for statistical purposes. - I.T.A .No.-5197/Del/2013, C.O.-192/Del/2014 - - - Dated:- 20-2-2015 - Smt. Diva Singh And Sh. J. S. Reddy,JJ. For the Appellant : Sh. Gaurav Dudeja, Sr. DR For the Respondent : Sh. Gautam Jain, FCA Sh. Piyush Kumar Kamal, Adv. ORDER Per Diva Singh, JM This is an appeal filed by the Revenue against the order dated 12.07.2013 of CIT(A)-X, New Delhi pertaining to 2004-05 assessment year on the following grounds:- 1. Whether Ld. CIT(A) was correct on facts and circumstances of the case and in law in holding that amended provision of Section 36(1)(III) of the I.T.Act was not applicable in the case of the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l CIT and the views of the A.O. in this regard can be summarized as follows: (a) It has been stated that the assessee company took over the assets and liabilities of Ashok Yatri Niwas vide agreement dt. 08-10- 2002 with the Government of India. The lease for the hotel premise was granted for a period of 99 years from 08-10-2002 on an annual lease rental. After taking over the hotel from 08-10- 2002, the assessee company ran the hotel till 30-06-2003, after which the hotel operations were stopped. During this period of 01-04-2003 to 30-06-2003 the receipts from room sale and other misc. income was shown at ₹ 23,30,058/-. (b) It was observed that as on 31-03-2004, there was an outstanding balance of secured term loans amounting to ₹ 23,33,08,137/-. Apart from the secured term loans the company also took unsecured loans from its holding company M/s Moral Trading and Investment Ltd. (MTIL). The opening balance of MTIL was ₹ 39.33 crores whereas the closing balance as on 31-03-2004 was ₹ 10.25 crores. It was observed that the sales had gone down during this year substantially and the interest in the P L A/c had gone up substantially compared to earlier y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apital account and the same should be considered as expenditure pending capitalization. In view of this submission of the assessee, the amount of ₹ 1,38,91,736/- was not allowed as a revenue expense but was treated to be capitalized. (f) With regard to the interest paid to holding company, MTIL, also keeping in view to amended proviso to section 36(1)(iii) since the assessee was not in a position to explain how this interest should be allowed as a revenue expense, the amount of ₹ 95,09,228/- was disallowed as a revenue expense and was directed to be capitalized. In this regard, the A.O. also pointed In this regard, the AO also pointed out that after examining the ledger account of MTIL it was observed that there were certain expenses where expenses had been incurred for capital purposes and also disallowed ₹ 95,09,228/- as interest paid to MTIL, since the amount of loan was used for capital purposes. Accordingly, both these disallowances were made on similar arguments that in view of the amended proviso to section 36(1)(iii), these amounts could not be allowed as a revenue expense. 3. A perusal of the impugned order further shows that it was contended on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... meeting working requirements or were in respect of assets which were already in use upto 31.03.2003. It was also submitted that no deduction in respect of interest paid on the sum of ₹ 1,24,80,507/- had been claimed and the interest in the same amounting of ₹ 13,25,326/- have been capitalized in the accounts for 2004-05 A.Y and the amount of ₹ 1,40,40,661/- had been claimed as revenue expenditure on the basis of utilization of these funds for existing assets and for working capital requirements. Considering the same the issue was decided by the CIT(A) hold as under:- 3.3. After going through the facts of the case, observations of the assessing officer and submissions of the A. R. of the appellant as well as the directions of the Hon'ble ITAT, there are three intere-related issues in the various grounds taken by the A.R. of the appellant. The primary issue raised by the A. R. of the appellant relates to disallowance of interest on loans which have been treated to be capital in nature by the assessing officer. At the time of filing the appeal before the CIT(A), the appellant has primarily emphasized the disallowance of ₹ 95,09,228/- out of ₹ 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 004 from the lOB for purposes of renovation and upgradation in July, 2003, for the purpose of acquiring new assets, and since this was covered in the amended proviso of section 36(1)(iii) of the I.T. Act, the interest on this amount had been capitalized by the appellant on its own. In this regard, the A.R. of the appellant has also argued that depreciation on the various assets which were borrowed against the loan taken over lOB / MTIL had been allowed by the department in A.Y. 2003-04, except a depreciation of ₹ 1,24,80,507/- being amounts spent on capital work-in-progress upto 31-03-2003. (c) After carefully considering this contention of the A.R. of the appellant, it appears that the term loan taken from MTIL and lOB, on which the interest amount had been disallowed by the assessing officer is related to existing assets of the appellant company on which depreciation has also been allowed in the earlier assessment order. The two interest amounts which had been disallowed namely ₹ 95,09,228/- and ₹ 1,38,91,736/- pertained to existing assets of the company which had been taken over by the appellant in the earlier year. It, therefore, appears that the amended p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... siness activities on account of renovation of the hotel. The hotel business had been activated after renovation and the same had been reflected by the appellant from A.Y. 2008-09 onwards for which the assessment orders u/s 143(3) had also been submitted. From the submission of the A. R. of the appellant, it is clear that if the business has been continued after renovation, it cannot be treated as closure of business and, therefore, the interest amount for this period of 9 months from the assessment year cannot be disallowed on this account. The cases relied upon by the A.R. of the appellant CIT v. Northern India Iron Steel Co. Ltd. (1995) 211 ITR 370,375,376, 377 (Del), ITAT Chandigarh (SMC) Bench dt. 30-07-2001 of Metal products of India) (in IT Appeal No. 748 to 751 (Chd) of 1992), Vishal International Production v. lAC (1993) 46 ITD 312 (Del), CIT v. Calikultty (K.B.)(1969) 73 ITR 553 (SC). (e) After carefully considering the arguments of the A.R. of the appellant and the factual matrix of the present case, the A.O. is directed to verify the facts regarding the fixed assets related to the term loans from MTIL and IOB as on 31-03-2003. If the contention of the A.R. of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee who pointed out that since the issues require verification at the level of the AO, there was no need to file appeal before the ITAT. On considering the application of the assessee the Ld. SR. DR on the delay had no objection however it was his general request that the issue be restored to the AO without the directions given by the CIT(A). 6. We have heard the rival submissions and perused the material available on record. A perusal of the impugned order shows that the CIT(A) after the submissions of the assessee at pages 6-9 has further summed up these submissions alongwith arguments at pages 10-12 and after re-addressing the facts at pages 13 to 17 in para 3.3 sub-para (a-d) has given the directions to the AO in sub-para (e) to verify the factual assertions. On a consideration of the directions contained which have been reproduced in the earlier part of this order, we find no infirmity in the direction given. However considering the fact that the CIT(A) as per section 251(1)(a) of the Act has the powers only to confirm, reduce, enhance or anull the assessment and specifically does not have the power to set aside as per the Finance Act, 2001 w.e.f 01.06.2001. Accordi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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