TMI Blog2018 (4) TMI 699X X X X Extracts X X X X X X X X Extracts X X X X ..... onsidering 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 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 (2013 (11) TMI 963 - ITAT DELHI). - Decided against assessee. Addition on account of income from ‘Dilli Haat.’ - Held that:- The twin conditions of objects and nature of activity, it clearly emerges that both the tests are satisfied inasmuch as the object of the assessee company is to promote tourism by providing entertainment to tourists through cultural events etc. Further, the nature of the business activity of the assessee unmistakably deciphers that it cannot be carried out without letting out stalls on regular frequency to different craftsmen. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 treating the same as covered under Section 40(a)(ia) - Held that:- Disallowance under Section 40(a)(ia) would be called for only if the assessee fails to deduct tax at source. If, however, deduction of tax at source is made but under a wrong section or there is some calculation mistake in the amount deduction of tax at source, the provision of Section 40(a)(ia) cannot be attracted. As the case of the assessee is that of short deduction of tax at source due to non charging of 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. Disallowance u/s 40(a)(ia) on account of short deduction of tax at source - Held that:- Facts of this ground are similar to those of las ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ount. 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, relying on the Tribunal order for the assessment year 1996-97, argued that the surplus generated from the sale of country liquor and transferred to TIUF along with interest thereon etc., was not chargeable to tax on the ground of diversion of income by overriding title. The Assessing Officer did not concur with the view taken by the assessee by noticing that the amount transferred to TIUF was in the nature of capital expenditure being construction of flyovers and pedestrian crossings. Following the view taken in earlier years, the Assessing Officer held that a sum of ₹ 26.62 crore transferred to TIUF was application of income and, further, a sum of ₹ 6.63 crore received from other corporations etc., credited directly to TIUF, was liable to be included in the total income. This is how, addition o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ince 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. The amount was transferred to TIUF on the mandate of the State Government of Delhi, which amount was required to be spent by the assessee for construction of road infrastructure in Delhi etc. The Delhi Government, while granting the business of liquor retail trade to the assessee, mandated that the assessee shall be required to spend ₹ 5 per bottle collected from the sales proceeds of the liquor towards construction of road infrastructure. The assessee did not offer the said amount to tax considering the same as diversion by overriding title. In the same manner, the amount of construction expenses incurred by the assessee out of TIUF was also not claimed as deduction u/s 37 of the Act. This position flowed out of the Tribunal order dated 27.10.2000 for the assessment year 1996-97 in w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 made in respect thereof. 10. The factual matrix of this ground is that the assessee made a provision for leave encashment amounting to ₹ 48,30,282/- in its books of account as per the actuarial valuation report for the A.Y. 2004-05 which was claimed as deduction only to the extent of leave encashment actually paid. The remaining amount was offered for taxation. No claim was raised before the ld. CIT(A) for grant of deduction for the remaining amount, which was suo motu disallowed by the assessee. Now, it is through the above additional ground that the assessee has requested for grant of deduction in the light of the judgment in the case of Exide Industries Ltd., and Anr vs. Union of India , holding insertion of clause (f) to section 43B as constitutional and ult ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnot 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 from Dilli Haat. 14. Briefly stated, the factual matrix is that the assessee disclosed a sum of ₹ 2,36,15,290/- as Rental income/Fee for craft stalls. In addition to that, revenue from Entry tickets amounting to ₹ 1,56,99,815/- from Dilli Haat was also disclosed. Gross revenue from the activity of Dilli Haat was shown at ₹ 4,30,39,511/-. After claiming total expenses of ₹ 2,41,17,120/-, the assessee declared income from Dilli Haat at ₹ 1,89,22,390/- chargeable under the head Profits and gains of business or profession. The Assessing Officer observed that the assessee constructed certain permanent structures as well as temporary constructions on the land leased from NDMC by Dilli Haat and rented it to se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ongal 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 and stores, stalls, space for banks, restaurants and food courts along with open area earmarked for walkways, amphitheatres and open theatres for entertainment, fashion shows and cultural programmes. As consideration to NDMC for lease of the land, the assessee has to pay a sum of ₹ 1,50,000/- per annum as licence fee plus 50% of sales of entry tickets of Dilli Haat per annum, which amount for the instant year stands at ₹ 1.56 crore. Coming back to the factual position relevant for the year under consideration, it is observed that the assessee organized various cultural activities throughout the year at Dilli Haat with a view to attract tourists. We have noticed above that the assessee conducts cul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 tourism and to attract tourists. Various cultural shows organized during the year at Dilli Haat are the means of attracting tourists. It goes without saying that no cultural show can be successfully organized unless stalls befitting the occasion are put up for offering craft products etc. to the tourists visiting Dilli Haat. We have also noticed above that the rent @ ₹ 200/- per day is charged for each craft stall for use of a designated area in Dilli Haat . There can be no entry to the Dilli Haat without payment of entry fee. It has been noticed above that the assessee is charging entry fee, which at the relevant time was ͅ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 laying down the twin conditions of objects and nature of activity, it clearly emerges that both the tests are satisfied inasmuch as the object of the assessee company is to promote tourism by providing entertainment to tourists through cultural events etc. Further, the nature of the business activity of the assessee unmistakably deciphers that it cannot be carried out without letting out stalls on regular frequency to different craftsmen. In the above hue, we have absolutely no doubt in our mind that income of ₹ 1.82 crore earned by the assessee from use of craft stalls on 15 days basis is Business i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 partly allowed for statistical purposes. Assessment Year-2005-06 25. 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 impugned order is set aside to this extent and the AO is directed to follow the mandate given above for the A.Y. 2004-05 and then decide the issue after allowing opportunity of hearing to the assessee. 26. The assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ised 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 assessee in its computation of total income and further no deduction was ever claimed in respect of the remaining amount of ₹ 2.52 lac. Under these circumstances, we set aside the impugned order to this extent and remit the matter to the file of the Assessing Officer for verifying the assessee s claim of not having claimed deduction of ₹ 2.52 lac and also added back a sum of ₹ 27.27 lac in the computation of income and then decide as per law. The assessee will be allowed a reasonable opportunity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 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 source by the assessee; and Airport Donijil Hotel for the same being a resident of Germany and not having any permanent establishment in India. The ld. CIT(A), however, sustained disallowance of ₹ 46,437/- and ₹ 87,187/-, being, payments made by the assessee to Sri Lanka Tourism Board and India Tourism. Both the sides have come up in appeal in support of their respective stands. 44. After considering the rival submissions and perusing the relevant material on rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de 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 adjudicate on the taxability or otherwise of this amount in the hands of Sri Lanka Tourism Board and the consequential disallowance u/s 40(a)(i) of the Act. The impugned order on this score is set aside and the Assessing Officer is directed to examine the nature of this amount and then see its taxability in the hands of Sri Lanka Tourism Board and the consequential disallowance under Section 40 (a)(i) of the Act. 49. As regards payment of ₹ 87,187/- to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 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 amount only if it is paid after the due date of filing of return of income under Section 139(1) of the Act. As the assessee made such payment before the due date, the learned CIT(A) deleted the addition. The Revenue is aggrieved against the deletion of addition. 56. After going through the necessary material and the orders of the authorities below in the light of the contentions urged by both the sides, it is clear that learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 reported incurring of leave encashment liability amounting to ₹ 52,70,005/-. The Assessing Officer did not entertain the assessee s contention that sum of ₹ 12,27,122/- was paid during the year. He, therefore, made disallowance of ₹ 52,70,005/- under Section 43B(f). The learned CIT(A) deleted the disallowance of ₹ 12,27,122/- by considering that this amount was paid by the assessee. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 then deciding the impact of such change on the income of the assessee before and after this change. 66. Ground no. 4 of the assessee s appeal is against confirmation of addition of ₹ 81,00,605/- on account of income from Dilli Haat . Facts are admittedly similar to the earlier years. Following the view taken hereinabove for the A.Y. 2004-05, we set aside the impugned order on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 rendered above for the A.Y. 2004-05. 75. Ground nos. 3 and 4 were not pressed by the learned AR. The same are, therefore, dismissed. 76. In the result, the appeal is partly allowed. Assessment Year 2009-10 77. The only issue in this appeal is against disallowance of expenses amounting to ₹ 57,92,087/- against the income relating t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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