RAJASTHAN RAJYA SAHKARI KRAYA VIKRAYA SANGH LTD.,JAIPUR vs. ASSISTANT COMMISSIONER OF INCOME TAX, JAIPUR

आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR Jh fot; iky jko] U;kf;d lnL; ,oa Jh foØe flag ;kno] ys[kk lnL; ds le{k BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM vk;dj vihy la-@ITA No. 251/JP/2018 fu/kZkj.k o"kZ@Assessment Year : 2013-14 cuke Rajasthan Rajya Sahkari Kraya The ACIT, Vs. Vikraya Sangh Ltd., Circle-6, 4, Bhawani Singh Road, Jaipur. Jaipur. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AAAAR 0279 B vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Shri V.K. Jain (C.A.) jktLo dh vksj ls@ Revenue by : Shri Ajay Malik (Addl. CIT) lquokbZ dh rkjh[k@ Date of Hearing : 16/05/2018 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 22/05/2018 vkns'k@ ORDER

PER: VIJAY PAL RAO, J.M. This appeal by the assessee is directed against the order dated 28.12.2017 of ld. CIT(A), Jaipur for the assessment year 2013-14. The assessee has raised the following ground under as under:- “1. That the Learned CIT(Appeals) erred in confirming addition of Rs. 1,00,00,000/- on account of disallowance of contribution of Rs. 1 Crore towards Rajasthan Bhawan, Mumbai. The same is allowable expenditure and addition of Rs. 1,00,00,000/- deserves to be deleted.”

ITA No. 251/JP/2018 Rajasthan Rajya Sahkari Kraya Vikraya Sangh Ltd. ACIT

sum of Rs. 1 crore to Rajasthan Bhawan Mumbai at Mumbai and the

same was debited to the P & L account. The AO was of the view that

the said amount of Rs. 1 crore being contribution of the Rajasthan

Bhawan Mumbai is not covered u/s 37(1) of the Act and accordingly,

proposed to disallowance the said amount. The assessee submitted that

the contribution was made towards the construction of Rajasthan

Bhawan, Mumbai against which the employees of the assessee will be

entitled to stay in the premises at nominal and concessional charges.

Therefore, the assessee claimed that though the ownership of the asset

does not vest with the assessee however, the asset created by the

contribution would result in business advantage of the assessee as the

employees of the assessee would be permitted to use the premises at

concessional and nominal charges. The AO did not accept this

contention of the assessee and disallowed the said claim of Rs. 1 crore.

On appeal, the ld. CIT(A) confirmed the disallowance made by the AO

as to claim of the assessee. Hence, the assessee has filed the present

appeal.

ITA No. 251/JP/2018 Rajasthan Rajya Sahkari Kraya Vikraya Sangh Ltd. ACIT

the relevant material on record. The ld. DR has strongly relied upon by

the order of Assessing officer and submitted that the contribution made

by the assessee does not fall under the provisions of Section 37(1) of

the Act and further, it is on capital account. The ld. DR has further

contended that the asset being the Rajasthan Bhawan, Mumbai does

not belong to the assessee and the ownership is not vested with the

assessee therefore, any expenditure towards construction of such asset

cannot be allowed as business expenditure.

this issue has been considered and decided by this Tribunal in various

cases including in the case of Rajasthan Renewal Energy as well as M/s

Rajasthan State Industrial Development & Investment Corp. Ltd. vs.

DCIT in ITA No. 311/JP/2014, 420/JP/2014, 323/JP/2016, Co. No.

07/JP2016, ITA No. 313/JP/2014, 421/JP/2014, 93/JP/2015,

207/JP/2015, 94/JP/2015, 208/JP2015 vide order dated 23.02.2018. He

has further submitted that as per the order dated 24.10.2017 the

Government of Rajasthan has allowed the assessee a rebate of 50% for

stay in the Rajasthan Bhawan Mumbai at Mumbai. He has filed a copy

of the said order dated 24.10.2017.

ITA No. 251/JP/2018 Rajasthan Rajya Sahkari Kraya Vikraya Sangh Ltd. ACIT

material on record. At the outset we note of the Coordinate Benches of

this Tribunal in case of M/s Rajasthan State Industrial Development &

Investment Corp. Ltd. vs. DCIT (supra) has considered and decided an

identical issue in para 36 as under:-

“36. We have considered the rival submissions as well as relevant material on record. At the outset we note that this Tribunal in assessee’s own case for the assessment year 2003-04 while considering an issue of the expenditure incurred towards the contribution made to the construction of guest house in Delhi vide order dated 21.08.2007 in ITA No. 324/JP2006 has held in para 12 as under:- “12. Considering the above submissions, we are of the view that undisputedly assessee was not the owner of the four rooms in the guest house of the State Government at Chanakyapuri in New Delhi and the assessee was only entitled to use those four rooms allotted to it for staying of its officials visiting Delhi. Assessee has no right to sell, alter or amend those allotted room. The guest house was undisputed neither purchased nor constructed by the assessee. The maintenance of these rooms were also in the hands of the State Government who has been charging the same on annual basis from the assessee. Thus in a sense only the facilities to use those allotted four rooms to the assessee were purchased on a lump-sum payment. It is an established position of law that in a case of ownership against immovable property, the unconditional interest in absolute term with freedom to sell, alienate ect. is transferred by the seller to the purchaser, which is admittedly not the case over here. Under these circumstances we are of the view that the Ld. CIT(A) has rightly come to the conclusion that no capital assets have been created to the

ITA No. 251/JP/2018 Rajasthan Rajya Sahkari Kraya Vikraya Sangh Ltd. ACIT

assessee but only a privilege or a reservation of four rooms were made on permanent basis to the assessee. Therefore, the provisions og guest house at Delhi was in the normal course of business and expenditure incidental to it is of revenue nature. The ld. CIT(A) has rightly observed further that the AO has not appreciated the facts properly that total expenditure of Rs. 40,00,000/- was deferred in five equal instalments and only Rs. 8,00,000/- was debited in A.Y. 2003-04. Thus, the entire addition of Rs. 40,00,000/- need to be deleted and the claim of depreciation allowed by the AO at Rs. 2,00,000/- is also to be added back in the computation of income as per the first appellate order. We concur with the view of Ld. CIT(A) which also finds support from the decisions of Hon’ble Delhi High Court in jthe case of NESET Holdings (P) Ltd. v/s CIT(supra) wherein one time payment was allowed as revenue expenditure where such payment is meant for reducing the overall revenue expenditure of the assessee. The guest house in the present case was required only for running the business and working of the assessee for better inter-action with the Government of India and various financial organizations. The first appellate order being comprehensive and reasons one, we are not inclined to interfere therewith. The same is upheld. The ground No. 2 is thus rejected.” We further note that as per letter dated 24.10.2017 the Government of Rajasthan has allowed the assessee a rebate of 75% of tariff of the room for staying of the employees/officers of the assessee. The Coordinate Bench of this Tribunal in case of Rajasthan Renewal Energy Corporation Ltd. vs. DCIT vide order dated 18.08.2017 in ITA No. 159& 202/JP/2015 and others while considering an identical issue has held in para 55 as under:- “55. We have heard the rival contentions and pursued the material available on record. It is not disputed that the contribution towards construction of Rajasthan Bhawan has been made as directed and authorized by the State Government, being 5

ITA No. 251/JP/2018 Rajasthan Rajya Sahkari Kraya Vikraya Sangh Ltd. ACIT

the owner and shareholder of the assessee company. The question is therefore not about the authorization before incurrence of the said expenditure. The question is whether the said expenditure has been incurred by the assessee company for the purposes of its business or not. The onus is on the assessee company to establish the said fact. The ld AR has submitted that the assessee company has written to the Government of Rajasthan to provide accommodation facilities in the Rajasthan Bhawan to its officers on their visit to Mumbai, however, there is nothing on record to support the said contention. We are accordingly setting aside the matter to the file of the AO to examine the said contention and the examine the matter a fresh. In the result, the ground of the assessee is allowed for statistical purposes.”

Thus, the Tribunal by considering the accommodation facility in the guest house as relevant factor set aside the issue to the record of the AO to examine the accommodation facility available to the assessee in Rajsthan Bhawan at Mumbai. 36. Since this letter dated 24.10.2017 was not available before the Coordinate Bench in case of Rajasthan Renewal Energy Corporation Ltd. (Supra) therefore, the AO was asked to examine the fact. However, in view of the said letter dated 24.10.2017 it is clear that the assessee got the rebate of 75% as well as the right to use the accommodation by its officers/employees visiting at Mumbai. Accordingly, in view of the earlier decision of this Tribunal in assessee’s own case as well as in view of the fact that the assessee has received the benefit in the shape of accommodation against the said expenditure for construction of Rajasthan house we hold that the claim of the assessee is an allowable expenditure u/s 37(1) of the Act.”

ITA No. 251/JP/2018 Rajasthan Rajya Sahkari Kraya Vikraya Sangh Ltd. ACIT Thus, in view of the decision of this Tribunal on the same issue, we do not find any error or illegality in the order of the ld. CIT(A) qua this issue. In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 22/05/2018 Sd/- Sd/- ¼fot; iky jko½ ¼foØe flag ;kno½ (Vikram Singh Yadav) (Vijay Pal Rao) ys[kk lnL;@Accountant Member U;kf;d lnL;@Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 22/05/2018. *Santosh. आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. vihykFkhZ@The Appellant- Rajasthan Rajya Sahkari Kraya Vikraya Sangh Ltd., Jaipur 2. izR;FkhZ@ The Respondent- ACIT, Circle-6, Jaipur. 3. vk;dj vk;qDr@ CIT 4. vk;dj vk;qDr@ CIT(A) 5. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत. 6. xkMZ QkbZy@ Guard File {ITA No. 251/JP/2018} vkns'kkuqlkj@ By order,

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