TMI Blog2020 (4) TMI 854X X X X Extracts X X X X X X X X Extracts X X X X ..... dvantage in a commercial sense and it is only where the advantage is in the capital field that the expenditure would be disallowable on an application of this test. If the advantage consists merely in facilitating the assessee's trading operations or enabling the management and conduct of the assessee's business to be carried on more effectively or more profitably while leaving the fixed capital untouched, the expenditure would be on revenue account, even though the advantage may endure for an indefinite future. In the instant case, the advantage which was secured by the assessee by making the expenditure in question was the securing of absolution or immunity from liability to pay municipal rates and taxes under normal conditions for a period of 15 years. If the liability had to be paid, the payments would have been on revenue account and, hence, the advantage secured was in the field of revenue and not capital. And as a result of the expenditure incurred, there was no addition to the capital assets of the assessee and no change in its capital structure. With utmost regard to the decision of Hon ble Supreme Court, in our humble view, the ratio of the decisions are not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ivities. The services of Civil Engineer are integral part of civil project construction activities. The Assessing Officer has not made any investigation about the genuineness of payment and services rendered by the Civil Engineer. The Assessing Officer simply disallowed the charges paid to Civil Engineer by taking view that project is yet to start. Similarly, the ld. CIT(A) the action of Assessing Officer holding that assessee failed to establish the nexus between the expenses and corresponding income without disputing the fact that services of Civil Engineer are integral part of civil construction activities. Considering the fact that professional charges paid to Civil Engineer are disallowed without bringing any adverse evidence on record and business of assessee is not in dispute, we direct the Assessing officer to delete the addition. In the result, this ground of appeal is allowed. - ITA No.2082/Mum/2015, ITA No.5034/Mum/2016, ITA No.1400/Mum/2017, ITA No.7521/Mum/2019, ITA No.7522/Mum/2019, ITA No.2708/Mum/2015, ITA No.5854/Mum/2015 - - - Dated:- 25-2-2020 - Shri R.C. Sharma, Accountant Member And Shri Pawan Singh, Judicial Member For the Appellant : Shri Madhur Agar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed the following grounds of appeal: Whether on the facts and in circumstances of the case and in law Ld. CIT(A) was justified in deleting the addition made on account of non refundable one time entrance fees collected by the company from members treating it as capital receipt, placing reliance on the case of Diners Business Services P Ltd. without appreciating the fact that the facts of this case are distinguishable from that of Diners Business Services P. Ltd. 3. Brief facts of the case are that the assessee is a company engaged in the construction activity, running Acers Club, Transportation etc, filed its return of income for Assessment Year 2020-11 declaring income of ₹ 5,53,88,980/-. The case was selected for scrutiny. The Assessing Officer after serving statutory notice under section 143(2) and 142(1) completed the assessment on 30.03.2013. The Assessing Officer while passing the assessment order made addition of ₹ 1,11,30,167/- claimed on account of amortization of lease premium, disallowance under section 14A of ₹ 11,09,292/-. Disallowance under section 40A(ia) of ₹ 1,20,54,127/-. Addition on account of membership fees of ₹ 3,11,78, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iod of time, whereas in the instant case after expiry of 25 years, member was to again pay entrance fee, therefore, facts of the instant case are distinguishable from the case of Dinners Business Services Pvt. Ltd (supra). In case where onetime membership is received for a specified period of time, the issue has been dealt by the ITAT Special Bench in the case of Club Mahindra Holidays, 40 DTR 1, wherein after considering the decision of Hon'ble Supreme Court in the case of E.D. Sasoon, 26 ITR 27, Madras Industrial Corporation Ltd., 225 ITR 802, Calcutta Co. Ltd. 37 ITR 1 and in the case of Rotork Controls India Pvt. Ltd., 314 ITR 62, it was held that membership fee received for 33/25 years was liable to spread over the period of time for which such fee is received. Respectfully following the same, we direct the AO to tax 1/25th share of fee in each year, rather than taxing the entire sum in the year of receipt itself. 8. Considering the decision of Tribunal in assessee s own case in earlier years as referred above. We direct the Assessing Officer to follow the order dated 20.11.2015 passed in ITA No. 2146 2147/Mum/2009. In the result, the appeal of the revenue is disposed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... set of assessee. The assessee in its reply dated 21.12.2012 filed before the Assessing Officer clearly stated that the owner of land i.e. Natvar Prikh Brothers, which are related party made an application to Urban Development Authority (UDA) to release the surplus vacant land from ULCA. The UDA ordered for payment of additional premium. Thus, it is clear from the fact that the land against which the alleged premium was paid was not a part of asset of assessee. The case law relied by ld. AR of the assessee is not applicable on the facts of the present case. 13. We have considered the submission of both the parties and perused the material available on record carefully. During the assessment, the Assessing Officer noted that the assessee claimed deduction for amortization of lease premium of ₹ 1,11,30,167/-. The assessee was asked to submit the detailed regarding the claim of said amortization of lease premium. The assessee filed its reply dated 21.12.2012. For appreciation of facts the contents of reply as recorded by Assessing Officer in para-4.2 of assessment order, is extracted below: The plot of land situated at Survey No. 411 B, Chembur is obtained by us under le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er by Deputy Collector (ULC) for payment of additional premium of .3,33,90,500/-. d. Copy of challan towards payment of additional premium of .3,33,90,500/- by Natvar Parikh co. Pvt. Ltd. e. Letter no NOC/ULC/D-5/6(1)/SR-7, 659, 658 dated 01.07.2009 for release of surplus vacant land after payment of the additional premium. 14. The reply of assessee was not accepted by Assessing Officer. The Assessing Officer concluded that monthly payment of lease rent is separately payable by assessee. The amount of lease premium cannot be said to be payment of rent in advance such would be in the nature of capital expenditure incurred for obtaining lease hold right where no amortization is allowable. The cost incurred for land always capital in nature unless assessee is engaged in dealing in land, no depreciation is allowable on cost of land and there is no question for allowing amortization of such cost of land. The Assessing Officer further held that expenditure for acquisition of lease or bringing into existence of asset or advantage of enduring benefit is capital expenditure. The ld. CIT(A) by taking view that premium was paid by assessee which was demanded from lesser for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioned in the clause itself. There is no condition in the leasedeed to pay any premium for release of surplus or vacant land from ULCA. The payment made for release of surplus land from ULCA is nowhere the liability of assessee. Moreover the said land which was allegedly released after the order of UDA was not the part of business asset and in possession of assessee. The assessee has not proved that the partial of land released by assessee was under the occupation of assessee for the purpose of its business. 16. We have perused the entire deed. The entire lease-deed does not prescribed or put any condition or obligation on the assessee for payment of lease premium on behalf of lesser. In our view, the assessee has paid the premium on behalf of its related party and the same cannot be claimed as revenue receipt. The case law relied by ld. AR of the assessee is not helpful to the assessee. In Empire Jute Co. Ltd. (supra), the Hon ble Supreme Court held that where there is no addition to or expansion of the profit-making apparatus of the assessee. The income earning machine remains what it was prior to the purchase of loom hours. The assessee is merely enabled to operate the prof ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relates to addition/disallowance under section 14A. The ld. AR of the assessee submits that the Assessing Officer while passing the assessment order made disallowance under section 14A r.w.r. 8D of ₹ 1109294/-. On appeal, the ld. CIT(A) directed to delete the investment made in Lift and Shift India Pvt. Ltd. being the investment made in group/subsidiary company while making disallowance under Rule 8D(2)(iii). The ld. AR submits that as per the decision of Special Bench of Delhi Tribunal in Vireet Investment Pvt. Ltd. [82 taxmann.com 415 (Del. SB), the investment which generated exempt income during the relevant Assessment Year should be considered for making disallowance. As the revenue has not filed any appeal against the order of ld. CIT(A), the investment made in Lift and Shift India Pvt. Ltd. should not be considered for making disallowance under Rule 8D(2)(iii) and accordingly, the Assessing Officer may be directed to consider only those investment which yielded exempt income during the year. 20. On the other hand, the ld. DR for the revenue supported the order lower authorities. 21. We have considered the submission of both the parties and perused the material av ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in case any other investment made in group concern and generated exempt income be also considered for taking average value of investment, if those investment yielded exempt income as per the decision of Special Bench of Vireet Investment (supra). 23. Ground No.4 relates to Professional Fees Payment of ₹ 8,20,356/-. The ld. AR of the assessee submits that the Assessing officer made disallowance of professional fees paid to Bhagwan Madhav on the ground that no projects were undertaken by assessee during the Assessment Year under consideration. The ld. AR submits that just because the assessee not commence any project during the Assessment Year, does not mean that expenses should be disallowed. 24. On the other hand, the ld. DR for the revenue supported the order of lower authorities. 25. We have considered the submission of both the parties and perused the order of lower authorities. We have noted that the Assessing Officer disallowed the expenses by taking view that housing project is yet to commence and same should be capitalized at the time of commencement of project. During the first appellate stage, the assessee stated that the professional charges were paid to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in assessee s appeal for A.Y. 2010-11. In the result, this ground of appeal is partly allowed. 29. In the result, appeal of revenue is partly allowed. ITA No. 5034/Mum/2016 by assessee for A.Y. 2012-13 ITA No. 1400/Mum/2017 by assessee for A.Y. 2013-14 ITA No. 7521/Mum/2019 by assessee for A.Y. 2014-15 ITA No. 7522/Mum/2019 by assessee for A.Y. 2015-16 30. In all aforesaid appeals except for A.Y. 2012-13, the assessee has raised two set of grounds of appeal. First set of grounds of appeal relates to one time membership fees and second set of grounds relates to disallowance under section 14A. In A.Y. 2012-13, all grounds of appeal relates to one time membership fees. 31. First set of grounds of appeal relates to one time membership fees. We have noted that this ground of appeal is identical to the ground no. 1 in revenue s appeal, wherein we have followed the decision of Tribunal for A.Y. 2006-07 to 2008-09, therefore, our order will apply mutatis mutandi. 32. Second set of grounds relates to disallowance under section 14A. The ld. AR of the assessee submits that he is not pressing the issue on disallowance under section 14A. Considering the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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