TMI Blog2018 (12) TMI 327X X X X Extracts X X X X X X X X Extracts X X X X ..... available on record. Evidently all these expenses are towards creation of a new asset or for enhancing the capacity of the existing asset and thus same are in the nature of capital expenditure. We do not find any error in the finding of the Ld. CIT(A) on this issue. Disallowing carry forward of the unabsorbed depreciation claimed by the assessee - Held that:- We find that depreciation in the year under consideration was added back by the assessee in the computation of the income and thus we do not understand how the assessee is claiming carry forward of the said depreciation as unabsorbed depreciation. On perusal of the grounds of appeal raised before the Ld. CIT(A), we find that the issue of disallowing carry forward of unabsorbed depreciation was raised in ground No. 2. CIT(A) has also reproduced the submission of the assessee in the impugned order, where the assessee itself has not pressed for adjudication of the ground No. 2. Thus it is evident that CIT(A) has not adjudicated the ground in view of the ground not pressed by the assessee. In the circumstances, we do not find any error in the order of the Ld. CIT(A) on the issue in dispute and accordingly, we dismiss the ground ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acts and in law in upholding disallowance of expenditure to the extent of ₹ 53,00,209, on the ground that the same should be capitalized to the cost of building. 1.1 That the CIT(A) erred on facts and in law in not providing adequate opportunity of being heard to the appellant before affirming the above disallowance. 1.2 That the CIT(A) erred on facts and in law in not appreciating that aforesaid expenditure could not be capitalized inasmuch as the same represents the amount paid to consultants whose architectural plans/ concepts were rejected by the appellant. 2. That on the facts and circumstances of the case, the ClT(A) erred in not adjudicating the ground relating to action of the assessing officer in not allowing carry forward of unabsorbed depreciation claimed by the appellant on the ground that during the year under consideration, assets were not used for business purposes. The appellant craves leave to add, alter, amend or vary the above grounds of appeal before or at the time of hearing. 3. Briefly stated facts of the case are that the assessee company filed return of income for year under consideration on 13/10/2010 declaring total loss of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... overnment dues paid as rates and taxes amounting to ₹ 26, 51,000/-are allowable as the same were incurred for keeping the company in existence. The Ld. that Assessing Officer noted that depreciation of ₹ 48,29,23,000/-was already disallowed and headed back to the income by the assessee thus the balance amount of expenditure computed as ₹ 1,77,66,000/-was held as disallowable. The Assessing Officer also denied carry forward of the unobserved depreciation in absence of any business activity and assets not being used for the purpose of the business. Aggrieved with the finding of the Assessing Officer, the assessee filed appeal before the Ld. CIT(A) and reiterated its claim that the business of Hotel activity was suspended temporarily and various expenses were incurred to maintain the corporate structure, preserve and maintain the assets, the infrastructure and maintain all the licenses for the operation of the Hotel and thus expenses were incurred wholly and exclusively for the purpose of the business. The assessee relied on number of decisions. The assessee submitted that all the conditions of section 37(1) of the Act, were duly complied with by the assessee and thu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. CIT(A) held the expenses amounting to ₹ 53,00,209/- paid to consultants as disallowable under section 37(1) of the Act being capital expenditure and the balance expenses of ₹ 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 incidentals are also essential for preserving and maintaining the hotel property owned by the appellant company are also bare minimum expenses required for maintaining the company and its assets. It was held in Birla Cotton Spinning Weaving Mills Ltd. vs. CIT [64 ITR 568, 584 (Cal.)] that business includes day-to-day running of the business, preservation of business and protection of its assets and property from expropriation, coercive process or hostile title, payment of statutory dues and taxes and things incidental to carrying on business and expenses relating thereto were allowable business expenses. Thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 exclusively for the purpose of the business though there was a temporary lull in the business. The Ld. counsel further submitted that in subsequent assessment years 2013-14 and 2014-15 no disallowance has been made by the Assessing Officer himself. In support of the contention that expenditure incurred for the purpose of the business is on allowable deduction even though same does not result in the running of the income, the Ld. counsel relied on the decisions of Hon ble Supreme Court in the case of CIT versus Malayalam Plantation Ltd 53 ITR 140 and CIT versu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tilation system and basement work-related total structure, which are held as capital expenditure. The assessee is contesting that the expenditure of ₹ 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 ₹ 53,00,209/- as capital expenditure: 1. Planning and concept design in 3-D expenses for Project Island at lands End Bandra amounting to ₹ 31,93,926/- paid to a Stackins International Ltd. 2. Architectural services expenses amounting to ₹ 19,11,058/- paid to HN Portman and associate., Inc. 3. Designing and ventilation system expenses amounting to ₹ 1,12,500/-paid to Bagati Enterprises. 4. Expenses on Advice on basement work at SeaRock Hotel amounting to ₹ 82,725/- paid to Hapan. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 also responded again without any evidence that the assessee was on the look out for a partner and/or for a take over/amalgamation options as the costs of renovation are prohibitive and the assessee is managing to keep and protect its corporate entity alive and carrying out whatever renovations the financial position permits. We find that all these arguments based on probabilities and possibilities are of no relevance. What is relevant is that all necessary licenses etc. required to k ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er. 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 Officer in assessment order passed under section 143(3) of the Act. 4.10 In view of the aforesaid discussion and respectfully following the decision of the Tribunal (supra), we uphold the finding of the Ld. CIT(A) in holding the expenses of ₹ 1,24,65,791/- as business expenditure. 4.11 The ground No. 2 of the appeal of the Revenue as well as Ground Nos. 1 to 1.2 of the appeal of the assessee are accordingly dismissed. 5. In ground No. 2 of the appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 respectively. The grounds of appeal of the Revenue are reproduced as under: 1. The order of Ld. CIT (A) is not correct in law and on facts. 2. On the facts and circumstances of the case the Ld. CIT (A) has erred in law in deleting the addition of ₹ 15,84,54,621/- on account of disallowance of expenseclaimed by the assessee company in the P L A/c for the year under considerati ..... X X X X Extracts X X X X X X X X Extracts X X X X
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