DCIT CIR 3(3), MUMBAI vs. TULIP HOTELS P.LTD, MUMBAI

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ITA 7540/MUM/2013Status: DisposedITAT Mumbai24 June 2016AY 2010-114 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal upheld the CIT(A)'s order, finding no reason to interfere. For the interest cost, it followed previous ITAT decisions in favour of the assessee. For the Section 40(a)(ia) issue, it agreed with the CIT(A)'s direction to the AO to verify TDS payment and allow the deduction if correct.

What were the facts?

The Revenue appealed against the CIT(A)'s deletion of an addition of Rs. 2,82,01,220/- as interest cost and the setting aside of disallowance of Rs. 2,69,22,835/- under Section 40(a)(ia). The CIT(A) had relied on previous ITAT decisions for similar issues.

What were the issues?

Whether interest paid to Cox & Kings Ltd. was a disallowable non-business expenditure and whether a deduction under Section 40(a)(ia) for TDS paid in the current year on an amount previously disallowed was permissible.

Which sections of the Income-tax Act were involved?

Section 40(a)(ia)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI “E” BENCH, MUMBAI

Before: SHRI SHAILENDRA KUMAR YADAV, JUDICIAL & SHRI RAJESH KUMAR.

Hearing: 16.06.2016Pronounced: 24.06.2016

अपीलाथ� क� ओर से /By Appellant : Shri Vinod Kumar, D.R. ��यथ� क� ओर से/By Respondent : Shri Vijay Mehta, A.R. सुनवाई क� तार�ख/Date of Hearing : 16.06.2016 घोषणा क� तार�ख/Date of Pronouncement : 24.06.2016 ORDER PER SHAILENDRA KUMAR YADAV, J.M: This appeal has been filed by Revenue against the order of Commissioner of Income-Tax (Appeals)-7, Mumbai, dated 08.10.2013 for A.Y. 2010-11 on following grounds:

A.Y. 2010-11 [DCIT vs. M/s. Tulip Hotels Pvt. Ltd.] Page 2

“1. Whether on the facts and circumstances of the case and in law, the CIT(A) was justified in deleting the addition made of Rs.2,82,01,220/- on account of expenditure as interest cost to M/s. Cox & King Ltd. without appreciating the fact that the same was disallowed as non business expenditure by considering the facts as per the provisions of the Act.

2. Whether on the facts and circumstances of the case and in law, the CIT(A) was justified in setting aside the issue of disallowance of claim of deduction of Rs.2,69,22,835/- u/s.40(a)(ia) for verification by the AO without appreciating the fact that the same was disallowed as non business expenditure as per the provision of the Act.”

2.

First issue is with regards to payment of interest to M/s. Cox & Kings Ltd. In the account, assessee has claimed an expenditure of Rs.2,82,01,220/- on account of interst cost to M/s. Cox & Kings Ltd. Similar issue arose in A.Y. 2004-05 to A.Y. 2009-10. In view of above, Assessing Officer treated the claim of expenditure of Rs.2,82,01,220/- as not a business expenditure and hence, same was disallowed.

3.

In appeal, CIT(A) observed that ITAT ‘E’ Bench, Mumbai in case of assessee for A.Y. 2004-05 and 2005-06 in & 6491/Mum/2008 has decided the issue in favour of assessee. Nothing contrary was brought to our knowledge on behalf of Revenue. Facts being similar, so following same reasoning, we are not inclined to interfere with the order of CIT(A) who has granted relief by following ITAT decision. Same is upheld. A.Y. 2010-11 [DCIT vs. M/s. Tulip Hotels Pvt. Ltd.] Page 3

4.

Next issue is with regard to deduction u/s.40(a)(ia) of the Act. In computation of income, assessee claimed deduction of Rs.2,69,22,835/- being the amount disallowed u/s.40(a)(ia) of the Act in A.Y. 2006-07 in respect of payment made to M/s. Cox & Kings India Pvt. Ltd. The said claim was made in current year as assessee has deducted TDS this year on the aforesaid amount. Assessing Officer found that in A.Y. 2006-07 the claim on the above amount was rejected on the ground that the same is not for business purposes. Since, expenditure is not allowable as business expenditure in that year, deduction claimed by assessee in the year under consideration u/s.40(a)(ia) of the Act on payment of TDS was also not allowable and therefore, same was disallowed.

4.1 In appeal, CIT(A) observed that assessee claimed deduction of Rs.2,69,22,835/- being the amount disallowed u/s.40(a)(ia) of the Act in A.Y. 2006-07 in respect of payment made to M/s. Cox & Kings Ltd. As stated above, said claim was made in F.Y. 2009-10 relevant to A.Y. 2010-11 as assessee has deducted TDS in the current year on the aforesaid amount. In A.Y. 2006-07, assessee had made suo moto disallowance of the above sum u/s.40(a)(ia) of the Act. As per the provisions of Section 40(a)(ia) of the Act, if any expenditure has been disallowed in any earlier year on account of non-deduction of tax at source, the same would be allowed as deduction in the year in which tax is deducted and paid by the assessee. A.Y. 2010-11 [DCIT vs. M/s. Tulip Hotels Pvt. Ltd.] Page 4 4.2 In this background, Assessing Officer was rightly directed to verify the challans evidencing payment of TDS and if it was found correct then he was directed to allow the said claim of Rs.2,69,22,835/- under the provisions of Section 40(a)(ia) of the Act. This reasoned factual and legal finding of CIT(A) needs no interference from our side. We uphold the same.

5.

In the result, the appeal of Revenue is dismissed.

Pronounced in the open Court on this the 24th day of June, 2016.

Sd/- Sd/- (RAJESH KUMAR) (SHAILENDRA KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai: Dated 24/06/2016 True Copy S.K.SINHA आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. राज�व / Revenue 2. आवेदक / Assessee 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त- अपील / CIT (A) 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, मुंबई / DR, ITAT, Mumbai 6. गाड� फाइल / Guard file. By order/आदेश से,

उप/सहायक पंजीकार, आयकर अपील�य अ�धकरण, मुंबई ।

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