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2018 (4) TMI 699

assessee’s own case has held that the amount standing in TIUF and interest is not diverted at source by way of overriding title and has to be included in the taxable income of the assessee and, simultaneously, the expenditure incurred on construction of flyovers etc. is a revenue expenditure, which should be allowed as deduction. We cannot give effect to this judgment unless not only the question of allowing deduction as claimed through the additional ground is allowed, but also the inclusion of the amount in the total income, being the stand point of the Revenue, is also upheld. Since both the sides are fairly accepting this position, we are of the considered opinion that the ends of justice would meet adequately if the impugned order on this issue is set aside and the matter is restored to the file of Assessing Officer for considering the taxability and deductibility in terms of the aforesaid judgment of the Hon'ble Delhi High Court in the assessee’s own case. - Provision for leave encashment allowability - Held that:- The deduction cannot be allowed in terms of section 43B (f) on the making a mere provision unless the amount is actually paid. As the assessee has admittedly n .....

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ts exceeding the specified limit may be made to a person in a date otherwise by an account payee cheque or account bank draft. Clause (l) provides that “where the payment is made by an authorized dealer over a money changer against purchase of foreign currency or travellers cheque in the normal course of his business”. Since the instant transaction is duly covered under Rule 6DD(l), we hold that the learned CIT(A) was justified in deleting this disallowance. - Disallowance u/s 40(A)(7) on account of provision of gratuity - Held that:- CIT(A) has recorded that the assessee made payment towards approved gratuity fund before the due date of filing of return of income under Section 139(1) of the Act and thus the provisions of Section 43B are not attracted. This finding has not been controverted by the ld. DR. - Disallowance on account of late deposit of employer’s contribution to the provident fund - Held that:- It is seen as an admitted position that the assessee deposited the employees’ contribution towards EPF and ESIC before the due date u/s 139(1) of the Act - addition to be deleted. - Addition on payments made by the assessee to professional and contractors by treati .....

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in pursuance of the order of Delhi High Court in the case of assessee company. 3. Briefly stated, the facts of the case for the assessment year 2004-05 are that the assessee is a wholly owned Government company of the Government of NCT of Delhi. During the year under consideration, it was engaged in the business of tourism development, transportation, manufacturing and trading in Indian made foreign liquor and country liquor and civil engineering activities of construction on behalf of the Government of NCT of Delhi. The assessee debited a sum of ₹ 26,62,23,175/- to its Profit & Loss Account towards transfer to Transportation and Infrastructure Utilisation Fund (TIUF). Interest of ₹ 2,04,14,661/-, earned on surplus of this fund invested in banks etc., was directly credited to TIUF account. The assessee directly transferred a sum of ₹ 6,63,82,520/- in the TIUF as contribution from other corporations. Such amounts were not included in its total income. On being called upon to explain the true character and allowability of these expenses shown to have been transferred to TIUF account and also the chargeability of the aforesaid interest etc., the assessee, relyin .....

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also held that the amount standing in TIUF was not diverted at source by way of overriding title and was, therefore, liable to be included in the total income of the assessee. It is pursuant to this judgment of the Hon'ble Delhi High Court that the assessee has approached the Tribunal by means of the instant additional ground urging that deduction should be allowed u/s 37 towards construction of flyovers etc. from the TIUF. 5. In view of the foregoing factual and legal discussion, it is clear that pursuant to the judgment of the Hon'ble High Court, the raising of the additional ground has become eminent. As a matter of fact, not admitting the additional ground would amount to violating the judgment of the Hon ble jurisdictional High Court in assessee s own case, which is not possible. Since this ground raises a question of law arising from the facts which are already on record, we admit the additional ground for disposal on merits. 6. After considering the rival submissions and perusing the relevant material on record, it is noticed that the assessee transferred retail margin @ ₹ 5 per bottle collected in the year out of retail sale proceeds of country liquor to TIUF. .....

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e and has to be included in the taxable income of the assessee and, simultaneously, the expenditure incurred on construction of flyovers etc. is a revenue expenditure, which should be allowed as deduction. We cannot give effect to this judgment unless not only the question of allowing deduction as claimed through the additional ground is allowed, but also the inclusion of the amount in the total income, being the stand point of the Revenue, is also upheld. Since both the sides are fairly accepting this position, we are of the considered opinion that the ends of justice would meet adequately if the impugned order on this issue is set aside and the matter is restored to the file of Assessing Officer for considering the taxability and deductibility in terms of the aforesaid judgment of the Hon'ble Delhi High Court in the assessee s own case. 9. Another additional ground has been raised by the assessee which is relevant for assessment year 2004-05. This additional ground reads as under:- That under the facts and circumstances of the case, the provision for leave encashment amounting to ₹ 48,30,282/- be allowed while computing total income irrespective of the actual payment ma .....

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of the Hon'ble Calcutta High Court s judgment in Exide Industries. It has further been held by the Hon'ble Supreme Court that : the assessee would, during the pendency of this Civil Appeal, pay tax as if Section 43B(f) is on the Statute Book but at the same time it would be entitled to make a claim in its returns.' In view of the clear enunciation of law by the Hon'ble Supreme Court, we are of the considered opinion that the deduction cannot be allowed in terms of section 43B (f) on the making a mere provision unless the amount is actually paid. As the assessee has admittedly not made the payment of the amount in question and claimed deduction on the basis of provision, we are of the considered opinion that the assessee s contention cannot be accepted on this score. Similar view has been taken by the Delhi Tribunal in DLF Home Developers Ltd. vs. ACIT (ITA No. 2559/Del/2013) vide order dated 31.10.2013. In view of the foregoing discussion, we dismiss this additional ground raised by the assessee. 13. The only issue raised by the assessee in its Memorandum of Appeal for the A.Y. 2004-05 is against confirmation of addition of ₹ 69,10,955/- on account of income f .....

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e company are : to develop tourism and to provide entertainment to tourists by way of cultural shows, tourist complexes, entertainment and amusement parks, dances, music concerts, ballets, films, shows, sports and games, son-et-lumiere spectacles and others . Thus, it is evident from the object clause of the assessee company that it was set up, inter alia, to develop tourism by providing entertainment to tourists by way of cultural shows etc. A copy of the brochure of Dilli Haat has been placed on page 47 of the paper book, which shows that Dilli Haat is like a village fair bustling in the heart of India s capital metropolis. It lists certain month-wise popular events/festivals at Dilli Haat , which include Lohri/Pongal in January, Dilli Haat anniversary celebrations in March, Bihu/Baisakhi in April, Sharbat Mela in May so on and so forth. Here, it is significant to mention that the idea of Dilli Haat was mooted by the Ministry of Tourism, Government of India in 1994 and land measuring about 6 acres was leased to the assessee from New Delhi Municipal Corporation, initially for ten years and, then, renewed from time to time. On such leased out land, the assessee constructed shops an .....

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may be clearly indicated in the bio-data of the helper/assistant. No helper/assistant is allowed to assist you at Dilli Haat without attestation of his/her bio-data from this office. (iv) You must keep your identity card cum passbook in the stall during the entire exhibition period and must produce the same, whenever demanded by any officer/officials of the office of the Development Commissioner (Handicrafts) or inspection team. (v) Neither you nor any of your family members must have participated in any program at Dilli Haat during the last three months. 16. There are other selection letters for participants on the same terms and conditions as have been set out above. It is this rental income @ ₹ 200/- per day per participant for a period of 15 days, which for the year has swelled to ₹ 1,82,14,880/-. The question is whether this amount of ₹ 1.82 crore for use of craft stalls out of total rental income of ₹ 2.36 crore is chargeable under the head Profits and gains of business or profession as claimed by the assessee or Income from house property as held by the authorities below? We have noticed above that Dilli Haat was set up with the main object to promote .....

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iness income or Income from house property. The Hon'ble High Court held such income to be Business income . 18. Recently, the Hon'ble Supreme Court in Chennai Properties and Investments Ltd. vs. CIT (2015) 373 ITR 673 (SC), considered the case of a company whose main object was to acquire the properties and to let them out. The assessee rented out such properties and earned rental income therefrom, which was offered as income from business. The Assessing Officer treated the same as rental income. When the matter finally came up before the Hon'ble Supreme Court, their Lordships noticed that the main object of that assessee was to hold the properties and earn income by letting them out. Approving the stand of the assessee, the Hon'ble Supreme Court held that the income from letting out of the property was Business income . It noted certain relevant facts for deciding whether income from letting out is a Business income or Income from house property as including nature of activities of the assessee and the objects of the company. 19. When we examine the facts of the instant case on the benchmark of the ratio decidendi in the above judgment from the Hon ble Summit Court .....

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, which is a mandatory condition for computing income under the head Income from house property and rule of consistency etc. 22. Turning to the remaining amount of ₹ 54.00 lac, we find that the same consists of ₹ 41.00 lac, being, income from space rented on regular basis and ₹ 12.99 lac, being, licence fee for allowing activities of food court, souvenir shops, bank and PCO. This amount of ₹ 54 lac has been earned by the assessee from the letting out of its permanent structures. The same cannot be equated with income of ₹ 1.82 crore discussed above, being, licence fee for use of craft stalls on 15 day basis. The ld. AR was fair enough not to contest the taxability of ₹ 54.00 lac as income held by the lower authorities to be falling under the head Income from house property. 23. To sum up, we hold that income of ₹ 1.82 crore be considered as Business income and ₹ 54.00 lac as Income from house property. The Assessing Officer is directed to allow necessary deductions against these incomes as per law, after allowing a reasonable opportunity of being heard to the assessee. 24. In the result, appeal of the assessee for the A.Y. 2004-05 is .....

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remaining rental income as falling under the head Income from house property . The Assessing Officer is directed to allow deductions against the above incomes in consonance with our directions given for the A.Y. 2004-05 above. 31. In the result, the appeal is partly allowed for statistical purposes. Assessment Year 2006-07 32. The first additional ground taken by the assessee for the A.Y. 2004-05 regarding the diversion of income and the consequential stand of the Revenue for not allowing deduction of the expenses, raised for the instant year as well, is hereby disposed off accordingly. The AO is directed to decide this issue afresh in terms of direction given above. 33. The next issue is against confirmation of disallowance of ₹ 29,79,842/- under Section 40 (a) of the Act. Considering the tax audit report of the assessee, in which a sum of ₹ 29.79 lac was shown as inadmissible under Section 40 (a)(i) of the Act, the Assessing Officer made the disallowance. The learned CIT(A) sustained such disallowance. 34. We have heard both the sides and perused the relevant material on record. The ld. AR stated that that a sum of ₹ 27.27 lacs was suo motu added back by the ass .....

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s against deletion of disallowance of ₹ 43,21,182/- out of disallowance of ₹ 44,54,806 made by Assessing Officer under Section 40(a)(i)/(ia) of the Act. Ground no. 2 of the assessee s appeal is related to the ground taken by the Revenue in which sustenance of part addition has been challenged. 43. Factual aspects of these grounds are that the Tax audit report indicated disallowance of ₹ 44,54,842/- under Section 40(a)(i) of the Act. On being called upon to explain as to why this disallowance was not made in the computation of total income, the assessee submitted that in most of the cases, the assessee either obtained TDS exemption certificates under Section 195 or the payments did not require deduction at source as these were made to the Government. Not convinced with the assessee s submissions, the A.O. made an addition of ₹ 44,54,842/- u/s 40(a) of the Act. The learned CIT(A) deleted the disallowance in respect of payments made to E4 Entertainment and M/s Brisc International in view of certificates obtained from income tax department not requiring any deduction from tax at source; Vivek Sadana in view of the fact that the tax was properly deducted at sourc .....

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) can be made. 47. In so far as the payment of ₹ 46,437/- made to Sri Lanka Tourism Board is concerned, we find that the assessee s contention of Sri Lanka Tourism Board being the Government and hence not requiring any deduction of tax at source in terms of Section 196 of the Act, is not substantiated. Section 196 of the Act clearly provides that notwithstanding anything contained in the earlier provision of this Chapter, no deduction of tax shall be made by any person from any sum payable, inter alia, to the the Government . Sri Lanka Tourism Board is a separate Board constituted under the laws of Sri Lanka and hence cannot be considered as the Government of Sri Lanka . We, therefore, reject the contention raised by the learned AR on this score. 48. As regards, the nature of payment, the learned AR contended that this amount was paid for exhibition in Sri Lanka and hence no income can be said to have accrued in India requiring deduction for tax at source. We find that no contention in this regard was made before the authorities below. Since the Assessing Officer as well as CIT(A) have made/sustained the addition without discussing nature of income, we are unable to adjudicat .....

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(l) provides that where the payment is made by an authorized dealer over a money changer against purchase of foreign currency or travellers cheque in the normal course of his business . Since the instant transaction is duly covered under Rule 6DD(l), we hold that the learned CIT(A) was justified in deleting this disallowance. 54. Ground no. 5 of the Revenue s appeal is against deletion of disallowance of ₹ 88,09,548/- made by Assessing Officer under Section 40(A)(7) of the Act on account of provision of gratuity. 55. The facts of this ground are that the assessee made a provision of gratuity amounting to ₹ 88.09 lac. The Assessing Officer held that the amount was disallowable under Section 40A(7) as its payment was made after the close of the year. The learned CIT(A) held that Section 40A(7)(b) clearly provides that no disallowance will be made under this section if the provision is made towards an approved gratuity fund. Since the provision was made by the assessee towards an approved gratuity fund, the learned CIT(A) held that the provision of Section 40A(7) were not attracted. He further observed that disallowance under Section 43B can be made in respect of such amo .....

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e case of CIT v. Aimil Limited [(2010) 321 ITR 508 (Delhi)] has allowed deduction in respect of employees share when the amount was paid before the due date. When we consider these two judgments, it becomes patent that both the employer s and employees contribution are allowable as deduction if the amount of provident fund etc., though belatedly, but is paid before the due date of filing of return u/s 139(1) of the Act. 60. Adverting to the facts of the instant case, it is seen as an admitted position that the assessee deposited the employees contribution towards EPF and ESIC before the due date u/s 139(1) of the Act. Respectfully following the aforenoted judgment of the Hon ble jurisdictional High Court, we order for the deletion of the addition sustained in the first appeal on account of late deposit of employees contribution to the Provident fund. Following the above judgments, we also uphold the impugned order on deleting the addition on account of late deposit of employer s contribution. 61. Ground no. 7 of the Revenue s appeal and ground no. 5 raised by the assessee are against disallowance under Section 43B on account of provision of the leave encashment. Tax auditor reporte .....

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Revenue. On the other hand, the learned DR submitted that the assessee has itself claimed deduction for loss of IITTM-D its return for the A.Y. 2012-13 on the premise that it was its own loss. On a specific query, the learned AR submitted that some change took place in the arrangement on 1.4.2009 as a result of which the income/loss of IITTM-D became that of the assessee. The Revenue is aggrieved in its appeal for the A.Y. 2012-13 against the allowability of loss of IITTM-D against the assessee s income. Though the appeal for the A.Y. 2012-13 is also fixed before the Tribunal today itself, the learned AR was not prepared with the matter and sought an adjournment. In view of the fact that loss of IITTM Delhi has been incorporated in the assessee s profit and loss account for the A.Y. 2012- 13, what transpired on 1.4.2009, in so far as a running of IITTM-D is concerned, is relevant. Necessary details about the changes made from 1.4.2009 are not readily available with leaned AR. We, therefore, set aside the impugned order on this issue and send the matter back to the file of the Assessing Officer for examining the assessee s contention about the change taking place from 1.4.2009 and .....

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surcharge and not a case of non deduction of tax at source, we hold that the provision of Section 40(a)(ia) cannot be magnetized and consequently no disallowance is warranted. The impugned order is set aside to this extent. This ground is allowed. 70. In the result, both the appeals are partly allowed for statistical purposes. Assessment Year 2008-09 71. The first issue raised in this appeal is against disallowance under Section 40(a)(ia) amounting to ₹ 96,761/- on account of short deduction of tax at source. 72. Facts of this ground are similar to those of last ground of the assessee s appeal for the A.Y. 2007-08. Here also, the assessee did deduct tax at source, but such tax withholding was without proper surcharge which resulted into overall short deduction of tax at source. Following the view taken hereinabove, we allow this ground of appeal. 73. Next ground is against addition of ₹ 31,11,525/- made by Assessing Officer on account of income from Dilli Haat . 74. Here again, we find that this issue has been dealt with by us elaborately in the assessee s appeal for the A.Y. 2004-05. We direct the Assessing Officer to decide it afresh in the light of our order rendere .....

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