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Income Tax Appellate Tribunal, ‘ C’ BENCH : CHENNAI
Before: SHRI GEORGE MATHAN & SHRI S.JAYARAMAN
आदेश / O R D E R
PER GEORGE MATHAN, JUDICIAL MEMBER
This is an appeal filed by the assessee against the order of the Commissioner of Income-tax (Appeals)-9, Chennai in appeal No.03/CIT(A)-9/2007-08 dated 27.02.2017 for the assessment year 2005-06.
In this appeal, the assessee has raised the following grounds:-
“1.1 The CIT (A) erred in confirming the action of the AO in treating the maintenance charges as property income as against income from other sources.
1.2 The CIT (A) erred in not following the orders of the Hon’ble Tribunal for the earlier years.
2. The CIT (A), having held that maintenance charges is income from other sources, erred in not allowing depreciation claimed in respect of firefighting and lift equipments.
3.1 The CIT (A) erred in confirming the disallowance of miscellaneous expenses of Rs.3.15 Crores paid to M/s. Aban Hotels and Resorts Pvt. Ltd.
3.2 The CIT (A) omitted to see that this is purely a business expenditure rightly allowable as revenue expenditure.
3.3 The CIT (A) erred in merely following the case laws relied on by the Assessing Officer which is not applicable to the facts of the present case.
4.1 The CIT (A) erred in sending the issue relating to the additions to the property income to the file of the Assessing Officer.
4.2 The CIT (A) ought to have deleted the entire addition to the property income as it is untenable.”
Mr.G.Baskar represented on behalf of the Assessee, and 3.
Mr.R.Clement Ramesh Kumar represented on behalf of the Revenue.
It was submitted by ld.A.R that Ground Nos.1.1 & 1.2 was against the action of the Ld.CIT(A) in upholding the action of the ld. Assessing Officer in treating the maintenance charges as property income assessable under the head “income from house property”.
4.1 It was fairly agreed by both the parties that this issue was squarely covered by the decision of Co-ordinate Bench of this Tribunal in assessee's own case in ITA No.503/Mds./2001 & 588/Mds./2003 dated 31.10.2006 for assessment years 1990-91 & 1999-2000 wherein it has been held in para Nos.80 & 81 as follows:-
“80. The next ground is that the C1T(Appeals) erred in confirming the disallowance of salary paid to staff at Rs.18,28,252. The learned Counsel for the Assessee submitted that the Assessee received rental income on house property and also collected amenity charges. The amenity charges cannot be assessed under the head ‘income from house property’ and the same has to be assessed under the head ‘Income from other sources’. The Assessee claimed the expenses Incurred for earning amenity charges. The Assessing Officer treated the entire income under single head i.e. ‘income from house property’ and restricted the expenses as per. sec.24 of the Act. He submitted that the income has to be assessed under two heads as above and admissible deduction has to be given. He relied On the judgment of the Hon’ble Jurisdictional High Court in the case of Tarapore & Co. v. CIT reported In 259 1TR 389 and In the case of Attukal Shopping Complex P. Ltd. v. CIT (259 JTR 567)(Ker.) and the Asessee’s own reported in 227 1TR 325 (Mad) and submitted that the Department has accepted this method of treatment of income for the Asst. Year 2002-03 and 2003-04. The learned Departmental Representative relied on the order of the CIT(Appeals).
After hearing both the parties, we set aside this issue to the rile of the Assessing Officer to re-do the assessment on this issue following the ratio laid down by the Hon’ble Jurisdictional High Court in the Assessee’s own case in T.C No.940 of 1985 (reported in 227 ITR 325) wherein the High Court has answered the question regarding assessment of amenities collected as Income from other sources. It is needless to mention that while re-doing the assessment as directed above, the Assessee will become entitled for deduction as mentioned in sec.57 of the Act. This ground is allowed for statistical purpose.”
We have considered the rival submissions. As it is noticed that the issue of maintenance charges, also claimed as amenity charges have been restored to the file of ld. Assessing Officer for re-adjudication in respect of earlier assessment years on identical findings as has been extracted above, the issue raised in this appeal is restored to the file of ld. Assessing Officer for re-adjudication after granting of opportunity of being heard. Consequently, Ground Nos.1.1 & 1.2 of assessee’s appeal is allowed for statistical purposes.
In respect of ground No.2, it was submitted by the ld.A.R that the issue was in respect of non-allowance of depreciation claimed in respect of fire fighting and lift equipments. It was fairly agreed by both the parties that this issue was squarely covered by the decision of Co-ordinate Bench of this Tribunal in assessee's own case in 573 & 1697/Mds./1997 dated 23.02.2004 for assessment years 1991-92 & 1993-94 wherein the issue has been restored to the file of ld. Assessing Officer for re-adjudication.
We have considered the rival submissions. As it is noticed that the issue of amenity charges have been remitted back to the file of ld. Assessing Officer for re-adjudication and the said amenity charges includes the charges in respect of lift equipments and fire fighting equipments etc., we are of the view that respectfully following the decision of Co-ordinate Bench of this Tribunal in assessee's own case referred to supra, this issue is also restored to the file of ld. Assessing Officer for re-adjudication after granting of adequate opportunity of being heard and we do so. Consequently, Ground No.2 of assessee’s appeal is allowed for statistical purposes.
In respect of ground No.3, it was submitted by the ld.A.R that assessee owned 20 acres of land on Mount Road, Chennai and it entered into a joint venture agreement with M/s.Aban Hotels & Resorts (P) Ltd. As per the agreement entered into between the assessee and M/s.Aban Hotels & Resorts (P) Ltd., assessee had received `2.15 crores as an upfront fee. On account of certain breach in contract, a settlement was arrived at between the assessee and M/s.Aban Hotels & Resorts (P) Ltd., through Arbitration Tribunal, Chennai.
Consequently, `3.15 crores was paid by the assessee to M/s.Aban Hotels & Resorts (P) Ltd., towards part expenses and as part damages for non-performance of the contract in connection with the project. As the assessee had incurred `3.15 crores for the purpose of venturing into a new business activity and the same was paid during this year for breach of contract, the ld. Assessing Officer had held that the same was capital expenditure whereas assessee had claimed as revenue expenditure. It was a submission that a joint venture agreement was entered into in March, 2000 and the work in respect of MOU has also been started by M/s.Aban Hotels & Resorts (P) Ltd. It was a submission that the assessee may be entitled to claim of revenue expenditure. In reply, ld.D.R vehemently supported the orders of ld. Assessing Officer and the Ld.CIT(A).
We have considered the rival submissions. Admittedly, the MOU has been entered into by the assessee with M/s.Aban Hotels & Resorts (P) Ltd., for the establishment, ownership and operation by the parties of one or more joint venture companies. As per the MOU, assessee was holding 50% of shares in the joint venture and balance 50% was held by M/s.Aban Hotels & Resorts (P) Ltd. The Phase-I development comprises the integrated tourism related Deluxe Five Star Hotel of International standard of about 300 rooms, a Modern Shopping Mall with various facilities for Shopping, Office Space, Entertainment Outlets etc. The assessee was to provide the land on lease basis to the joint venture company for an initial period of 30 years. Thus clearly the MOU has been entered into by the assessee with M/s.Aban Hotels & Resorts (P) Ltd., is not one in respect of transfer of the land. Per se the MOU is for the purpose of creation of joint venture vehicle for the purpose of putting up constructions on leased properties. This admittedly is a new line of business of the assessee. The violation of the conditions of MOU has led to the cancellation of the same and the assessee being held responsible for repayment of part of expenditure incurred as also damages. This is nothing, but loss of capital. Thus, we are of the view that the ld. Assessing Officer was right holding that the expenditure was in fact loss of capital and not revenue expenditure. This being so, ground Nos.3.1 to 3.3 of assessee’s appeal stands dismissed.
In respect of ground Nos.4.1 & 4.2, it was submitted by the ld.A.R that he did not wish to press these grounds, consequently ground Nos.4.1 & 4.2 of assessee’s appeal stands dismissed as not pressed.
In the result, the appeal of the assessee is partly allowed for statistical purposes.
Order pronounced in the open court after conclusion of hearing on 12th June, 2018, at Chennai.