CIT vs. HOTEL EXCELSIOR LTD

rl. .rJ+ zJ-tf o/" L5.07.201n Present: Mr. Anupam Tripathi, Sr. SLanding Counsel for the . Revenue. +cM APPI-. L2337/2OU. Exemption allowed subject to just e><ception. Application stands disposed of. : rTA 838/20In Four issues are raised in this appeal., The first issue relates to the penalty/damages paid by the assessee to NDMC after acquiring the property i.e. Hotel l(anishlca under the disinvestment policy of Govt. of India and claim of depreciation thereof has been decided irr favour of the assessee and against the Revenue in ITA 83712011 decided on 14tnJuly, 2011. The second issue pertains to the depreciation @ 60% as claimed by the assessee as against 25o)', which according to the Revenue is correct rate, This issue also dtands decided against the Revenue by this Court in Comrnissianer af lncame Tax Vs. ESES Yarnana pawer Lt'd.( ITA i*267l2}1 0 decided on 3l't August, 2010). The third issue is in respect of a suffr of TI,22,2551- disallowecl by the Assessing Officer on account of lare deposit o'f PF and of t 1-3,5921- on account of unpaid bonus disallowed by the Assessing Officer under Section 438 of the Income-J-ax Act (hereina'l'ter would ', ( 2011:DHC:14688-DB

a be referred to as'the Act'). lt is nbt in dispute that the aforesaid : payment was made by filing the returns.:ln such circumstances, as decided by this Court in a number of cases, such an experrditure ) was allowable expenditure. The last issue concerns the interest of {1,16,201/- earned by i. the assessee on FDR which the assessee had reduced from pre- operative expenses. The Assessing officer treated the same as "income from other source". The CIT (A) allowed the claim of the assessee which order is upheld by the Ti-ibunal. lt has come on i: record that the assessee company *ur,,.nnaged in renovation of Hotel KanishRa acquired from the ITDC: During this period, the ! assessee had imported raw material under EPGCG licenses having : reduced rate of import duty, for renovaiion of Hotel. Since the : aforesaid material was imported under EPGCG licenses with reduced rate of import duty, the assessee was re(luired to furnish the banl< t, guarantee. The bank guarantee was furnished. lt was under these' circumstances, the money was to be kept in FDR with the banl<. In view of this, We are of the opiniori that the ITAT rightly held : that the earning of the said interest on these FDRs was inextricably linked with the setting up of the business and would be treated as a part of the pre-operative expenses. ,. -{ 2011:DHC:14688-DB

ln these circumstances, expenses incurred by the constructi on. Exemption Application +tTA 84L/201.1 the expenses were assessee to reduce allowed subject to just exception. stands disposed of. pre operative the cost of We thus do not find any merit in a this appeal and is accordingly dismissecl. iry of the issues raised in +CM AFFL. L234.O/2013. in ITA 839/2O3J '. Exemption allowed subject to just e>tception. Application stands disposed of. ' +ITA E39/20fl.n All the four issues raised in this appl,=al are identical as raised in appeal pertaining to the assessing year 2004-05 (lTA B3B/2011). This appeal is also dismissed. +CM APP[-. T23431203.n. in lT'A 84L l?O'n"L a ( It ; Apart from the two issues which a,re covered by the orders passed 'in ITA 837/2OLI on 14th JulV, ,ZOff and in the afore mentioned appeals, the additional issue raised in tlris appeal pertains to the expenditure incurred on landscaping. The assessee had debited a sum of T33,20,4I71- on this account and had claimed the depreciation thereon. The question was as to whether this 2011:DHC:14688-DB

i expenditure can be treated as part of building and can be , capitalized for the purpose of depreciatiQn. The answer given by f' the ITAT is in affirmative with the followin$ discussion:- "We have carefully considered the rival contentions and gone through the record including the discussion in the impugned order. The term 'building' has not been defined in the Act. The mature of the as;ses has to be ascertained and we have to understand tlre meaning of the term 'building' depending upolr the context to which a reference has been made. Here the assessee is in a Hotel business. His building is not merely a structr:re of four walls nut includes all such things as are necessary to give the building a better look and is a matter of attraction for the customers to use it. Having regard to the assessee's nature of business it cannot be said the landscaping done by the assessee cannot be considereil as a building. After all the assessee has given a better lool< to this building by pi'ovision of :this landscaping which has become an integral part of the building to be used as a Flotel. In order to acquire a Star category, all these artistic lool<s are very much necessary. The i)ommissioner, in our view, has correctly appliedtihe principal laid down by the jurisdictional High ilourt in the case of CIT Vs. Delhi Airport Service 255 ITR 90 and also the decision of the Supreme Court in CIT Vs. Gwalior Rayon Silk Mfg. Co. Ltd. 196 ITR 149 and the decision of the wt-adras Higll Court I CIT Vs. Solution Petro Chemicals Industries Corporation Ltd. 233 ITR 391 to give an extend and more meaningful definition of the terrn 'building'. We agree his view and decline to interfere on this aspect of the matter. Moreover it must be appreciated tlre revenue has accepted the order of the CIT (A) for the assessment yea r 2006-07 and it has only challenged thbt issues in the assessment year 2007-08 whicl'r is second year which is the year of consequence of the decision in the first year which remains unchallenged, lrr other words, the department having accepted *a 2011:DHC:14688-DB

?' i d t) i the finding of 'tne CIT (A) foi the assessment year 2006-07, cannot questionl the same while giving effects to that in the assessment year 20O7-OB. Even on this ground we decline to interfere with the order of the CIT (Appeals) for the assessment year 2007-08 ion the disputed matter." As noted by the ITAT, the CIT (A) hatl accepted the plea of tlre assessee in respect of the assessment year 2006-07 as well and allowed the depreciation by inclusion of, the aforesaid sum in the cost of building. The Revenue had not .iirtt"nged this issue irr the I t. said assessment year. Once the amount is spent and allowed to be , cost of building depreciation allowed in the year 2006-01, there is no redson to disallow the depreciation in tire subsequent year. ; We find no merit in this appeal which is accordingly ' dismissed. CM AFFL. 3.2344/2O1.L in ITA 84L/201;& ;, Exemption allowed subject to just e4ception. Application stands disposed of. rrA 84r./20i1" : One additional issue which is raised in this appeal by the ' assessee relating to assessment year i 2007-08 relates to the ;r , addition made by the Assessing Officer involcing the provisions of Section 41 (1) read with Section 28 of tire lncome-Ta>< Act. The Assessing Officer had noticed that certain,'creditors who lrad to talce i the money from the assessee had not nlade their claims for more ; t ,. 'i ; ;1. 2011:DHC:14688-DB

I {/ a-r9 i i than three years and those accounts haVe become non-operative. On this basis, h'e concluded that the liabitity had ceased to exist : and, therefore, it was a gairr to the assessee and made aclditions on l, this ground. The Tribunal has deleted the lrddition talcing note of the factthat merely because three years have passed the liability is not seized to exist, moreso, when the assessee was still showing that liability in its books of accounts. ; We.do not find any infirmity in the order of the Tribunal. This appeal is also dismissed. . l'Vi'w7lir'-' tl \.,t)._. I AlK. Sflt<R[, J. i, . -/-2 ' 6^--.:e{^.1. , M"[-.MEfflT'l\, J. July L5,2OI"L skb I A/k-/ Zr/cl fu l'aty'z>n "- ffia t'ale 2011:DHC:14688-DB

#23 Spl.DB %27.04.2012 Present: None for the Parties + ITA No.840/2011 * This matter is listed on the basis of note put up by the office. Vide order dated 15th July, 2011, batch of income tax appeals rverc decided, which includes ITA g41/2011. However, Registry has pointed out that actual number of the said- ITA is 84012011. We thus clari$r that the order dated 15tr' July, z[lf'lffble K in ITA g40l10l1 instead of ITA 84112011. Necessary oorrections bJmade in this I behalf. t.4 nd" Ie\ ,I \J ACTINKffi JUSTICE APRIL 27 ,2OT2 pk z ff.t/rhr'1ra,r f- 2011:DHC:14688-DB