TMI Blog2011 (2) TMI 1559X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 82,17,495/- as compensation to the staff of the cargo division on account of its closure and debited the same to the Profit and Loss Account. The Assessing Officer took the view that the payment cannot be allowed as a deduction since it pertained to the business of amalgamating company, namely, Sita World Travel (India) Limited. The assessee submitted that the cargo division was completely closed during the relevant accounting year on account of losses and that the closure took place after the amalgamation, which took effect from 01.04.2000 as per the orders of the Hon ble High Court in the company application. It was also submitted that the cargo division was closed by the assessee on account of losses suffered and because it was found commercially unviable to continue the same. It was pointed out that the payment of compensation to the staff of the said division was in compliance with section 25FFF of the Industrial Disputes Act, under which the employees were entitled to three months average pay if the undertaking is closed on account of circumstances beyond the control of the employer. The Assessing Officer, however, was not satisfied with the reasons given by the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eld that the payment was allowable under section 37(1) of the Act. As regards the quantum of the expenses, he observed that the limit prescribed by the Industrial Disputes Act is only the minimum and an assessee was free to pay more than the minimum. He accordingly directed the Assessing Officer to allow the payment as a deduction. 4. The revenue is in appeal to contend that there was no information as to the date of the payment and, therefore, this aspect needs verification. On the other hand, the learned counsel for the assessee submitted that the amount was actually paid during the relevant previous year and after the judgment of the Supreme Court in the case of K Ravindranathan Nair vs. CIT (2001) 247 ITR 178 (SC), such payments cannot be disallowed if actually paid. Our attention was drawn to pages 1 to 10 of the paper book, which contained the details relating to the payment of compensation. Attention was also drawn to pages 208 to 253 of the paper book, which are copies of the documents placed before the CIT(A). It was submitted on the basis of these documents that the CIT(A) has taken the correct decision. 5. We have carefully considered the facts and the rival conten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... part of the assessee s business. The other objection of the Assessing Officer is that the expenses were incurred not in connection with the carrying on of the assessee s business but for closure of the business. This objection is also not acceptable because the decision to close the cargo division had already been taken by Sita World Travel (India) Limited and the liability to pay off the staff of the said division became the liability of the assessee by virtue of the amalgamation order, which liability was discharged by the assessee by actual payment. It cannot therefore be said that the payment was not made in the course of the carrying on of the business of the assessee. In this view of the matter we do not find any infirmity in the decision of the CIT(A). We uphold the same and dismiss the ground. 6. The second ground relates to the deduction allowable under section 80HHD of the Act, amounting to ₹ 12,61,21,998/-. The brief facts in this connection may be noted. The assessee was requested to justify the deduction by furnishing the relevant details. The assessee submitted that it complied with all the conditions of section 80HHD inasmuch as it was an Indian company and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 28.10.2002 which is beyond the relevant previous year. Thus these two certificates issued by the Tourism Ministry were also found to be of no assistance to the assessee. 9. The assessee then filed a certificate issued by the International Air Transport Association (IATA). As this certificate only mentioned that the assessee has met with the provisional standards laid down by IATA and since IATA was not a Government agency and has not approved the assessee as a tour operator, this certificate was also held not to be of any use to the assessee. 10. For the above reasons the Assessing Officer disallowed the claim for deduction under section 80HHD of the Act. 11. On appeal, the CIT(A) held that since the assessee is a recognized tour operator / travel agent and is recognized by the Government of India, Department of Tourism and Culture, it was entitled to the deduction under section 80HHD of the Act. He therefore directed the Assessing Officer to verify the assessee s claim and submit a remand report. In the remand report the Assessing Officer submitted that Sita World Travel (India) Limited had amalgamated with the assessee company on the orders of the High Court with effect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duction is available under sub-section (1) of section 80HHD in computing the total income. The question whether the assessee is a travel agent or not within the meaning of Explanation (a) below the section need not detain us because if the assessee is a tour operator, that would be sufficient compliance for obtaining the deduction. Sub-section (1) of section 80HHD requires that the assessee should be an approved tour operator and for this purpose the prescribed authority for granting approval, under Rule 18BBA(5) of the Income Tax Rules, 1962, is the Director General, Directorate General of Tourism, Government of India. At page 36 of the paper book, the assessee has placed a letter dated 04.02.1999 issued by the Government of India, Ministry of Tourism. It has been signed by one Vinod Kumar for Director General (Tourism). The letter is addressed to Sita World Travel (India) Limited and the subject is Grant of recognition as approved tour operator . The letter says that consequent to the aforesaid company confirming the acceptance of the regulatory terms and conditions, the Ministry of Tourism has decided to grant recognition to the company as approved tour operator with effect fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pect of which the deduction is to be allowed and credited to a reserve account to be utilized for the purposes of the business of the assessee in the manner laid down in the section. This condition is prescribed by section 80HHD(1)(a)(ii). The manner in which the reserve is to be utilized is prescribed in sub-section (4) of the section. According to this sub-section, the amount credited to the reserve account shall be utilized before the expiry of a period of five years next following the previous year in which the amount was credited to the reserve account. Clause (b) of the sub-section says that purchase of new cars and new coaches by tour operators already approved; will be considered as one of the permissible methods of utilization of the reserve. Sub-section (5) provides for the consequences of utilization of the reserve account in a manner not provided for by sub-section (4). The consequence is that the amount which is utilized contrary to the method prescribed by sub-section (4) shall be deemed to be the profits of the assessee s business and be charged to tax accordingly. 17. In the Balance Sheet the assessee had shown ₹ 3,77,87,554/- as amount transferred from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Assessing Officer on remand proceedings and therefore the CIT(A) directed the Assessing Officer to allow the claim. It is also to be noted that the value of cars used by the assessee s employees was found to be ₹ 1,66,73,393/- by the Assessing Officer during the remand proceedings and not ₹ 58,35,649/- as considered by the Assessing Officer. Thus not only the claim of ₹ 3,77,87,554/- was allowed by the CIT(A) but something more was also allowed, being the difference between the amount of ₹ 1,66,73,393/- and ₹ 58,35,649/-. 19. It is against the aforesaid decision of the CIT(A) that the revenue has come in appeal before the Tribunal. We have already noticed the statutory provisions. So far as the cars purchased by Sita World Travel (India) Limited is concerned, we are in agreement with the view taken by the CIT(A) that after amalgamation of that company with the assessee company with effect from 01.04.2000, it must be taken as if those cars were acquired by the assessee company and therefore the assessee s claim should be allowed. As regards the value of cars amounting to ₹ 64,26,133/- for which the relevant purchase and registration documents ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es which were considered to be revenue in nature were claimed under section 30 of the Act. The Assessing Officer did not accept the assessee claim, which was however accepted by the CIT(A). In our opinion, the architect fees by itself does not bring into existence any capital asset and should be considered as revenue in nature. Further the assessee itself has segregated the capital expenditure and capitalized the same. In our opinion, the CIT(A) was right in holding that the architect fee was allowable as revenue expenditure. 21. As regards renovation expenses paid to M/s Hemant Joshi Associates, they were paid for renovation of all the Mumbai properties of the assessee. The Assessing Officer took the entire expenditure as capital in nature. The CIT(A) has however held that the expenses did not bring into existence any asset of enduring nature. He has further held that the properties in question were rented properties and not owned by the assessee. This finding is not controverted. We accordingly confirm the decision of the CIT(A) on this point also. The ground is thus dismissed. 22. Ground No.5 is that the CIT(A) erred in holding that the expenditure of ₹ 24,00,022/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion on the said amount when it is held as capital expenditure . 27. So far as the first ground is concerned, the same is covered by the order of the Tribunal in the assessee s own case for the assessment year 2000-01 in ITA No: 6944/Mum/2004. In the said order dated 08.10.2010, in paragraph 8, the Tribunal has held that some of the aspects have not been examined at all including the nature of interest income and its connection, if any with the business, the nature of miscellaneous income, etc. The Tribunal has accordingly restored the matter to the Assessing Officer for fresh adjudication in the light of the judgments of the Hon ble Bombay High Court in the case of CIT vs. Asian Star Co. Ltd. (2010) 326 ITR 56 (Bom) and CIT vs. Shah Originals (2010) 327 ITR 19 (Bom). Since the facts are the same for the year under appeal, respectfully following the aforesaid order of the Tribunal, we restore the issue to the Assessing Officer for fresh adjudication with the same directions as were given by the Tribunal in the cited order. 28. So far as Ground No.2 is concerned, the same is also covered in the assessee s own case for the assessment year 2000- 01 vide order dated 18.08.2009. In ..... X X X X Extracts X X X X X X X X Extracts X X X X
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