CIT vs. HOTEL EXCELSIOR LTD

J'. 2s# o/" T5.A7.2 O ln i Present: Mr. Anupam Tripathi, Sr. Sianding Counsel for the ' Revenue. +cM APPL. L2337/20L1. '1 Exemption allowed subject to just exception. Application stands disposed of. tT'A 838/201.11 : 'Four issues are raised in this appeal.i The first issue relates to the penalty/damages paid by the assessee to NDMC after acquiring the prdperty i.e. Hotel l(anishlca under the disinvestment policy of Covt. of India and claim of depre.ciation 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 250z'6 which according to the Revenue is correct rate, This issue also stands decided aqainst the Revenue by this Court in Cormmissionbr of, lncarme Tax Vs. ITA L26712010 decided on 31't August, BSES Yarnana pawer Ltd,( 2010) The third issue is in iespect of a sum of TI,22,2551- disallowed by the Assessing Officer on account of late deposit of PF and of T .. 13,5921- on account of unpaid bonus Qispllowed by the Assessing Officer under Section 438 of the Income-Jax Act (hereinal'ter would :*. 2011:DHC:14694-DB

'l' be'referred to as 'the Act'). lt is not in dispute that the aforesaid payment was made by filing the returns. In such circumstances, as decided by this Court in a number of cases, such an expenditure was allowable ""p"ndituru. The last issue concerns the interest of tl,16,2OIl- earned by i the assessee on FDR which the assessee had reduced from pre- operative expenses. The Assessing offi'cer treated the same as . "income from other source". The CIT (Ai allowecl the claim of the assessee which order is upheld by the Tribunal. lt has come on t, record that the assessee company was engaged in renovation of : Hotel Kanishka acquired from the ITDC. During this period, the assessee had imported raw material under EPGCG licenses having reduced rate of import duty, for renovAtion of Hotel. Since the aforesaid material was imported under EPGCG licenses with reduced .i' rate of import duty, the assessee was required to furnish the banl< guarantee. The bank guarantee was furni'shed. lt was under these ; circumstances, the money was to be lceptiin FDR with the banl<. tl In view of this, we are of the opiniorl 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. \, I L Li .f',' I ,tr 2011:DHC:14694-DB

Application stands disposed of. +ITA 839/2bnX Exemption allowed subject to just Application stands disposed of. ?, 'i I In these circumstances, the expenses were pre operative expenses incurred by the assessee .to reduce tlre cost of : construction. We thus do not find any merit in 'u:ny of the issues raised in this appeal and is accordingly dismissecl. +cM APPL. L234ol201,3. [n ITA 839/2Oi3. Exemption allowed subject to just e><ception. t' All the four issues raised in this appeal are identical as raised in appeal pertaining to the assessing year.2004-05 (lrA B3B lz}LL). i This appeal is also dismissed. i i ]. +CM APP!-. L2343/203._1. ;n ITA 8Ar./ZOiL exception. +tTA 84L/20LL Apart from the two issues which a,;e covered by the orders \ , passed 'in lrA B37l2orr on 14th July, 2orr and in the afore mentioned appeals, the' additional isst-re 'raised in tlris appeal pertains to the expenditure incurred on landscaping. The assessee i had debited a sum of T33,20,4L71- on this account and had claimed the depreciation thereon. The question was as to whether this 2011:DHC:14694-DB

be treated as Part building and can be { of expenditure can capitalized for the the ITAT is in affirmative with the following discussion:- purpose of depreciation. The answer given by "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 asses has to be ascertained and we have to understand the meaning of the term 'building'.depending upon the context to which a reference has been made. Here the assesseg is in a Hotel business. His building is not m6rely a stru.cture of four walls nut includes all such things as .aF€ 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 considered as a building. After all the assessee has given a better lool< to this building by provision of this landscaping which has become an integial 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 pommissioner, in our view, has correctly applied the principal laid down by the jurisdictional High Court 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 Madras'High Court I CIT Vs. Solution Petro Chemicals Indus.iries Corporation Ltd, 233 ITR 391 to g'ive an extend and more meaningful definition bt tfre terr-n 'building'. We agree his view and decline to interfere on this aspect of the matter. Moreover it must be appreciated the revenue has adcepted the order of the CIT (A) for the assessment'year 2006-07 and it has only challenged that issues in the assessment year 2007-08 which is second year which is the year of consequence of the decision in the first year which remains Lnchallenged. In other words, the department having accepted \/ t-.1 I ,\ 2011:DHC:14694-DB

J the finding of the CIT (A) ioi ttre assessment year 2006-07, cannot question' the same while giving effects to that in the assessment year 2007-08. Even on this ground we decline to interfere with the order of the tJlT (Appeals) for the assessment year 2007-08 on the disputed matter. " ' : As noted by the ITAT, the CIT (A) had accepted the plea of the assessee in respect of the assessment year 2006-01 as well and allowed the depreciation by inclusion of the aforesaid sum in the ,-.,, cost of building. The Revenue had not clrallenged this issue in the said assessment year. Once the amount is spent and allowed to tre cost of building depreciation allowed in the year 2006-07, there is f no reason to disallow the depreciation in tire subsequent year. ; We find no merit in this appgal which is accordingly ' dismissed. : CM AFFL. L23z[4/20lx in ITA 84L/2Ot l t: Exemption allowed subject to just ex;eption. -i Application stands disposed of. . . tTA E4t/20L1 ' \ O:" additional issue which is raisbd in this appeal by the '\. assessee relating to assessment year 2007-08 relates to the addition made by the Assessing Officer involcing the provisions of Section 41 (1) read with Section 28 of the lncome-Ta>< Act. The Assessing Off"icer had noticed that certain'lcreditors who had to tal<e rl the money from the assessee had not m'ade their claims for more 2011:DHC:14694-DB

/ -b than thr'ee years and those accounts have become non-operative. . On this basis, he concluded that the liability had ceased to exist ' and, therefore, it was a gain to the assessee and made additions on I this ground. The Tribunal has deleted the hddition talcing note of the I fact that merely because three years havri passed the liability is not i seized to exist, moreso, when the assessee was still showing that t liability in its books of accounts. i .a . I We do not find any infirmity.in the i,rder of the Tribunal. This appeal is also dismissed, ' Mf: AtK. SIKR[, j, tu M.t,MEHTA, J. July L5, 2O1"1 skb .I,I ti \ 2011:DHC:14694-DB