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TMI Blog2018 (12) TMI 327X X X X Extracts X X X X X X X X Extracts X X X X ..... hi [in short "the Ld. CIT(A)" ] for assessment year 2011-12; the cross appeals having ITA No. 5435/del/2015 and ITA No. 5058/Del/2015 are directed against order dated 11/06/2015 passed by the Ld. Commissioner of Income-tax (Appeals)-23, New Delhi [in short the Ld. CIT(A)] for assessment year 2012-13. In these appeals, common issues are involved in identical set of circumstances and thus same were heard together and disposed off by way of this consolidated order for convenience. ITA No.4807/Del/2014 (Revenue's appeal) for AY: 2010-11 ITA No. 4654/Del/2014 (Asessee's appeal) for AY: 2010-11 2. First we take up the cross appeals of the Revenue and the assessee having ITA No.4807/Del/2014 and ITA No. 4654/Del/2014 respectively for assessment year 2010-11. The grounds of the appeal raised by the Revenue are reproduced as under: 1. The order of Ld. CIT(A) is not correct in law and facts. 2. On the facts and circumstances of the case the Ld. CIT(A) has erred in restricting the disallowance to Rs. 53,00,209/- and allowing a relief of Rs. 1,24,65,791/- made by Assessing Officer without appreciating the fact that the assessee company had not received any income from the business activ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g business loss may not be disallowed. The assessee contended that there was a temporary suspension of the business with the object of tiding over the crisis conditions and the expenses such as rent, security expense, repair and maintenance, electricity, insurance etc were incurred to maintain the corporate structure and preserve and maintain the assets/infrastructure as the company had to maintain all the licenses for operation of the Hotel. The assessee submitted that all the expenses were incurred wholly and exclusively for the purpose of the business, which are allowable as deduction. The assessee submitted that expenditure incurred to maintain and preserve the corporate structure is in allowable deduction in view of the following precedents: (i) CIT Vs. Rampur Timber Company Limited, 129 ITR 58(Allahabad HC) (ii) Nakodar Bus Services Private Ltd., 179 ITR 506 (Punjab HC) (iii) Chinai & Co. Private Ltd. Vs. CIT, 206 ITR 616 (Bom HC) (iv) Hindustan Chemicals Works Ltd. Vs. CIT, 124 ITR 561 (v) Birla Cotton Spinning and Weaving Mills Ltd. Vs. CIT, 64 ITR 568, 584 (Cal.) 3.1 The Assessing Officer, however, noted that in earlier assessment years 2005-06 to 2009-10 also s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsultancy charges for various works relating to the hotel and for representation before different authorities 6,316,372 1,016,163 3 Auditors remuneration 386,000 386,000 4 Personnel expenses 914,000 914,000 5 Security expenses 1,462,000 1,462,000 6 Power, fuel and water 859,000 859,000 7 Communication expenses 260,000 260,000 8 Travelling expenses 245,000 245,000 9 Insurance 162,000 162,000 10 Repairs and maintenance 62,000 62,000 11 Miscellaneous expenses 233,919 233,919 TOTAL 17,775,489 12,475,280 3.3 Out of the list of the expenses of Rs. 1,77,75,489/- the Ld. CIT(A) held the expenses amounting to Rs. 53,00,209/- paid to consultants as disallowable under section 37(1) of the Act being capital expenditure and the balance expenses of Rs. 1,24,65,791/- were allowed as business expenditure for preservation of business and protection of assets and property observing as under: "3.3 Of the above items, expenses on lease rent, auditors remuneration, personnel expenses, expenses on security of the property of the company, expenditure on power and water, travelling and communication, insurance and expenses on repairs and other incidental ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed out the activity of the Hotel operations and only earned income by way of interest, which has been offered under the head 'income from other sources' and thus expenditure other than the government dues should not be allowed to the assessee. 4.3 On the other hand, the Ld. counsel of the assessee submitted a paper-book containing pages 1 to 54 and , reiterated the submissions made before the lower authorities . He submitted that Hotel property owned by the assessee was damaged in bomb blast and it was in the process of reconstruction/renovation and the expenses have been incurred for consultancy in respect of reconstruction/renovation and maintenance of the building as well as retaining of various licenses issued to the hotel. According to him, it was only a temporary suspension of the business of the running of the Hotel and the expenses were incurred to preserve the assets of the business. He submitted that in the assessment year 2008-09, similar disallowance was made by the Assessing Officer, which has been deleted by the Ld. CIT(A) and on further appeal, the Tribunal dismissed the appeal of the Department holding that the expenditure incurred by the assessee was wholly exclus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been mentioned in the finding of the Ld. CIT(A), which we have reproduced in earlier Paras of this order . The contention of the assessee is that these expenses are being incurred for preserving and maintaining the hotel property owned by the assessee company and therefore allowable as business expenditure in terms of section 37(1) of the Act. The Ld. CIT(A) has allowed the business expenditure except the amount of Rs. 53,00,209/- paid to consultant for planning and concept design, architecture services, designing AC and ventilation system and basement work-related total structure, which are held as capital expenditure. The assessee is contesting that the expenditure of Rs. 53,00,209/-is also in the nature of Revenue expenditure. The Revenue is contesting that no business activity has been carried out by the assessee for past many years and therefore the expenditure is not allowable as business expenditure. We find that the assessee has filed details of expenses ledgers in books of accounts along with vouchers of expenses. On page 30 of the paper book we find that detail of consultancy expenses is summarized. We find that the Ld. CIT(A) has held following amounts totaling to R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een extracted in para 2.2 of the assessment order. It has also been submitted that the assessee company has claimed that it has maintained all necessary licenses etc. required for the operation of a hotel. We pause here and find on going through the material available on record and considering the arguments of the Ld. Sr. DR. that nothing has been brought on record by the Revenue to show that the facts as narrated by the assessee before the Assessing Officer and not disputed by the Revenue are no longer true or have all along been an incorrect assertion of facts. We further find that referring to the details of the expenditure which have been extracted in the earlier part of this order the assessee has submitted that the expenses were bonafide and were necessary government dues which statutorily are required to be paid and have been necessarily incurred for keeping its business alive. We fail to comprehend the relevance of the facts reference to which has been made by the AO namely in the proceedings under section 153A read with section 143(3) in 2005-06 AY. The Revenue has submitted that business still has not commenced even today an argument unsupported by any fact. The ld.AR als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usiness it was held could not have been set up. We find on consideration of the principle laid down therein, on the facts available and the issue under consideration by the Court it is seen that it has no bearing on the facts of the present case. 8.2. Accordingly considering the judicial precedents relied upon and the facts and circumstances of the case, we find that the decision arrived at in the peculiar facts and circumstances of the case fully supports the impugned order. A temporary lull at a point of time in the business of the assessee in the absence of any fact or evidence to the contrary cannot lead to the conclusion in the peculiar facts and circumstances of the case that the business has permanently closed especially in view of the fact that as per the assertions of the assessee before the Assessing Officer that its licenses etc are being maintained and kept intact ensuring that the hotel is ready for operation. A fact which has not been disputed as license fees have been allowed by the AO himself." 4.9 We also note that in assessment year 2013 -14 and 2014- 15, the assessee claimed similar expenses as business expenditure and same have been allowed by the Assessing O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e "wholly and exclusively" for the purpose of business, has not been satisfactorily brought out by the assessee company. 3. That the department has not accepted the order of CIT(A) in A.Y. 2010-11 and department has preferred an appeal before Hon'ble ITAT on the issue. 4. The appellant craves leave to add, amend any/all the grounds of appeal before or during the course of hearing of the appeal. 8. The ground No. 1 and 4 of the appeal are general in nature and therefore we are not required to adjudicate upon. 9. The issue raised in ground Nos. 2 and 3 of the appeal is identical to the ground No. 2 of the appeal of the Revenue in assessment year 2010-11 except amount involved. Accordingly, to have consistency in our decision, following our finding on the issue in earlier Paras of this order, the ground numbers 2 and 3 of the appeal are dismissed. 10. In the result, the appeal of the Revenue for assessment year 2011-12 is dismissed. ITA No.5435/Del/2015(Revenues' appeal) for AY:2012-13 ITA No.5058/Del/2015(Assessee's appeal) for AY: 2012-13 11. In assessment year 2012-13, both the Revenue and the assessee have filed appeals, having ITA No. 5435/Del/2015 and 5058/Del/2015 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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