M/s Elel Hotel & Investment Ltd.,, New Delhi v. ACIT, New Delhi

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : B NEW DELHI BEFORE SHRI G.E. VEERABHDRAPPA VICE PRESIDENT AN D SHRI RAJPAL YADAV JUDICIAL MEMEBR I.T.A NOS. 4513 4514/DEL/09 ASSTT. YEARS 2003-04 2004-05 M/S. ELEL HOTELS & INVESTMENTS LTD. 9 TH FLOOR HOTEL SEA ROCK BAND STAND BANDRA (W) MUMBAI VS. DY. CIT CENTRAL CIRCLE-13 NEW DELHI. (APPELLANT) (RESPONDENT) ITA NOS. 4244 4245 4430 4431/DEL/09 ASSTT. YEARS 2001-02 2002-03 2003-04 2004-05 ASSTT. CIT CENTRAL CIRCLE-13 VS. M/S. ELEL HOTEL S & INVESTMENTS LTD. CENTRAL CIRCLE-13 NEW DELHI. 2/40 JANPATH NEW DELHI. (APPELLANT) (RESPONDENT) CO NOS. 21 22/DEL/2010 ASSTT. YEARS 2001-02 2002-03 M/S. ELEL HOTELS & INVESTMENTS LTD. VS. ACIT 2/40 JANPATH NEW DELHI. CENT. CIRCLE 13 ROOM NO. 332 ARA CENTRE JHANDEWALAN EXTN. NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI AJAY WADHWA CA RESPONDENT BY: SHRI STEPHEN GEORGE CIT DR ORDER PER RAJPAL YADAV JM: ITA NOS.4513 4514 4244 4245 4430 /DEL/09 ASSTT. YEARS 2003- 04 2004-05 2001-02 2002-03 2003-04 C O NOS. 21 22/DEL/10 ASSTT. YEARS 2001-02 2002-03 2 IN THIS BUNCH OF EIGHT APPEALS COMMON ISSUES ARE INVOLVED WE HEARD THEM TOGETHER AND DEEM IT APPROPRIATE TO DISP OSE OFF THEM BY THIS COMMON ORDER. FOR THE FACILITY OF REFERENCE OF CERT AIN DETAILS I.E. ITA NO. ASSTT. YEAR NAME OF THE APPELLANT DATE OF LD. CIT (A)S ORDER AND DATE OF AOS ORDER IN MORE CONVENIENT AND SCIENTIFIC WAY W E DEEM IT APPROPRIATE TO NOTE THEM IN THE FOLLOWING TABULAR F ORM :- S.NO. ITA NO. APPELLANT ASSTT. YEAR DATE OF CITS ORDER DATE OF AOS ORDER 1. 4244/DEL/09 DEPARTMENT 2001-02 31.8.09 31.12.08 ORDER UNDER SECTION 143(3) R W S 153A 2. 4245/DEL/09 -DO- 2002-03 8.9.09 -DO- 3. 4430/DEL/09 -DO- 2003-04 14.9.2009 -DO- 4. 4431/DEL/09 -DO- 2004-05 -DO- -DO- 5. CO 21/DEL/10 IN ITA 4244/DEL/09 ASSESSEE 2001-02 31.8.2009 -DO- 6. CO 22/DEL/10 IN ITA NO. 4245/DEL/09 -DO- 2002-03 8.9.09 -DO- 7. 4513/DEL/09 -DO- 2003-04 14.9.2009 31.12. 08 143(3) 153A 8. 4514/DEL/09 -DO- 2003-04 -DO- - DO- ITA NOS.4513 4514 4244 4245 4430 /DEL/09 ASSTT. YEARS 2003- 04 2004-05 2001-02 2002-03 2003-04 C O NOS. 21 22/DEL/10 ASSTT. YEARS 2001-02 2002-03 3 2. THE FIRST COMMON GRIEVANCE RAISED BY THE REVENUE IN ASSTT. YEAR 2001-02 AND 2002-03 RELATES TO DELETION OF DISALLO WANCE OF DEPRECIATION ON THE LEASED ASSET AMOUNTING TO RS. 666488/- AND R S. 579590/- RESPECTIVELY. THESE GROUNDS OF APPEAL ARE ALSO INTE RCONNECTED WITH THE SOLITARY GRIEVANCE OF ASSESSEE RAISED IN ITS APPEAL FOR ASSTT. YEAR 2003- 04 AND 2004-05 WHEREIN THE LD. CIT(A) HAS UPHELD TH E DISALLOWANCE OF DEPRECIATION AMOUNTING TO RS. 506309/- AND RS. 4439 12/- IN ASSTT. YEAR 2003-04 AND 2004-05 RESPECTIVELY. WE TAKE ALL THESE GROUNDS OF APPEAL TOGETHER. THE FACTS ON ALL VITAL POINTS ARE COMMON IN ALL THE FOUR ASSTT. YEARS. FOR THE FACILITY OF REFERENCE WE ARE TAKING UP THE FACTS MAINLY FROM ASSTT. YEAR 2001-02. THE BRIEF FACTS ARE THAT ASSES SEE COMPANY HAD FILED ITS RETURN OF INCOME ON 30 TH OCTOBER 2001 U/S 139 (1) OF THE INCOME TAX ACT DECLARING A LOSS OF RS. 1081630/-. IT HAD CLA IMED A DEDUCTION OF RS. 666488/- ON ACCOUNT OF DEPRECIATION U/S 32 OF THE I NCOME TAX ACT. THE AO HAS COMPLETED THE ASSTT. ORDER U/S 143(3) OF THE ACT ON 31 ST MARCH 2004 DETERMINING THE LOSS AT RS. 405046/-. IN THIS ASSTT. ORDER AO HAS REDUCED THE LOSS CLAIMED BY THE ASSESSEE ON THE GRO UND THAT HE HAS BROUGHT TO TAX A SUM OF RS. 681084/- REPRESENTING A LLEGED LICENSE FEES RECEIVABLE FROM ITC LTD. UNDER THE HOTEL OPERATOR A GREEMENT. IT EMERGES OUT FROM THE RECORD THAT ASSESSEE IS THE OW NER OF HOTEL KNOWN ITA NOS.4513 4514 4244 4245 4430 /DEL/09 ASSTT. YEARS 2003- 04 2004-05 2001-02 2002-03 2003-04 C O NOS. 21 22/DEL/10 ASSTT. YEARS 2001-02 2002-03 4 AS HOTEL SEA ROCK AT BAND STAND BJ ROAD BANDRA MUMBAI. THIS HOTEL WAS BEING OPERATED BY ITC LTD. UNDER HOTEL OP ERATOR AGREEMENT EFFECTIVE FROM 1 ST JULY 1986 FOR A PERIOD OF 25 YEARS AND RENEWABLE AT THE OPTION OF ITC FOR FURTHER PERIOD OF 25 YEARS. T HE ASSESSEE IN TERMS OF THE SAID AGREEMENT WAS ENTITLED TO 23% OF THE GROSS REVENUE OF THE HOTEL. IT WAS ALSO PROVIDED IN THE AGREEMENT THAT A LL EMPLOYEES INCLUDING MANAGERIAL STAFF WOULD BE IN THE PAYROLL OF THE ASS ESSEE SALARIES TO BE PAID BY ITC FOR AND ON BEHALF OF ASSESSEE. THE ITC WAS REQUIRED TO PAY AND DISCHARGE ALL OPERATING EXPENSES FEES AND TAXES IN RESPECT OF THE HOTEL. ACCORDING TO THE ASSESSEE THE AGREEMENT DID NOT CREATE ANY TENANCY IN FAVOUR OF THE ITC AS SPECIFICALLY PROVI DED IN THE AGREEMENT AT ARTICLE NO. VIII. IN 1993 THE HOTEL WAS SEVERELY DA MAGED IN A BOMB BLAST DURING THE RIOTS IN MUMBAI. PURSUANT TO THE DAMAGE SUBSTANTIAL NUMBER OF ROOMS OF THE HOTEL BECOME NON FUNCTIONAL REQUIRI NG EXTENSIVE REPAIR AND RENOVATION. THE DISPUTE AROSE BETWEEN THE ASSE SSEE AND ITC WITH RESPECT TO THE RESPONSIBILITY TO REPAIR AND RESTORE THE DAMAGED PORTION AND OTHER CONSEQUENTIAL ISSUES. BOTH THE PARTIES WE RE WENT INTO LITIGATION AND ULTIMATELY THE DISPUTE WAS SETTLED AFTER 12 YEA RS THROUGH THE ARBITRATION. THE SOLE ARBITRATOR JUSTICE SHRI H SUR ESH HAS SOLVED THE DISPUTE MAINLY IN THE FOLLOWING TERMS:- ITA NOS.4513 4514 4244 4245 4430 /DEL/09 ASSTT. YEARS 2003- 04 2004-05 2001-02 2002-03 2003-04 C O NOS. 21 22/DEL/10 ASSTT. YEARS 2001-02 2002-03 5 (A) AGREEMENT FOR SETTLEMENT OF DISPUTE DATED 11 TH MAY 2005 (B) CONSENT TERMS DATED 11 TH MAY 2005 (C) CONSENT AWARD OF THE ARBITRATOR DATED 24 TH MAY 2005. THE BROAD TERMS FOR THE SETTLEMENT OF ALL DISPUTES AND DIFFERENCE WERE :- (I) ITC LTD. WOULD HAND OVER VACANT AND PEACEFUL PO SSESSION OF HOTEL PROPERTY (II) ALL LIABILITIES RELATING TO THE WORKERS WOULD BE BORNE BY THE APPELLANT. (III) APPELLANT WOULD MAKE PAYMENT OF AN AGGREGATE SUM OF RS. 42.10 CRORES TO ITC LTD. WHICH WAS ACCOUNTED FOR IN THE BOOKS OF ACCOUNT AS UNDER :- (A) RE-PAYMENT OF SECURITY DEPOSIT TO ITC LTD. R S. 7.75 CR. (B) COST OF STORE ACQUIRED FROM ITC LTD. RS .0.64 CR. (C) REIMBURSEMENT TOWARDS TRANSFER OF RS.3 .84 CR. VARIOUS ACCOUNTS (D) TOWARDS TERMINATION OF OPERATOR AGREEMENT AND ASSESSEE OBTAINING RIGHTS TO OPERATE THE HOTEL RS. 30.86 CR. RS. 43.10 CR. (IV) APPELLANT WOULD NOT BE ENTITLED FOR ANY AMOUNT S RELATING TO LICENSE FEE FOR ANY YEAR TILL THE DATE OF SETTLEMENT. 3. ACCORDING TO THE ARBITRATORS AWARD ASSESSEE WAS NOT TO RECEIVE LICENSE FEE IN ASSTT. YEAR 2001-02 AND 2002-03.. T HE AO HAS MADE ADDITION ON ACCOUNT OF ACCRUAL OF LICENSE FEE WHICH WAS RECEIVABLE BY THE ASSESSEE. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A) AGAINST THE ORIGINAL ASSTT. ORDER PASSED U/S 143 (3). ITS APPEAL WAS ALSO DISMISSED AND IN ORDER TO AVOID LITIGATION WITH THE DEPARTMENT IT DID NOT CARRY THE DISPUTE FURTHER. ITA NOS.4513 4514 4244 4245 4430 /DEL/09 ASSTT. YEARS 2003- 04 2004-05 2001-02 2002-03 2003-04 C O NOS. 21 22/DEL/10 ASSTT. YEARS 2001-02 2002-03 6 4. SINCE THE LICENSE FEE RECEIVABLE BY THE ASSESSEE WAS ASSESSED AS A BUSINESS INCOME THE AO GRANTED THE DEPRECIATION T O THE ASSESSEE IN THE ORIGINAL ASSESSMENT MADE U/S 143(3). 5. A SEARCH U/S 132 OF THE ACT WAS CONDUCTED IN THE GROUP CASES OF SHRI SURESH NANDA ON 28 TH FEBRUARY 2007 WHICH COVERED THE PREMISES OF THE ASSESSEE COMPANY ALSO. THE AO PROCEEDED TO F RAME THE ASSESSMENT U/S 153A AND ULTIMATELY PASSED THE ASSTT . U/S 153A READ WITH SECTION 143(3). IN THESE ASTT. ORDERS AO HAS D ISALLOWED THE DEPRECIATION TO THE ASSESSEE IN ALL THE FOUR ASSTT. YEARS. 6. ON APPEAL LD. CIT(A) TOOK INTO CONSIDERATION THE PAST HISTORY AND OBSERVED THAT LICENSE FEE RECEIVABLE FROM ITC LTD. WAS ASSESSED BY THE AO IN THE ORIGINAL ASSTT. ORDER UNDER THE HEAD BUS INESS. NO DOCUMENT WAS FOUND DURING THE COURSE OF SEARCH. THE AO WAS U NABLE TO BRING ANY NEW MATERIAL FACT ON THE RECORD WHICH CAN AUTHORIZE HIM TO TAKE A DEPARTURE FROM THE STAND TAKEN BY HIM IN THE ORIGIN AL ASSTT. ORDER. LD. CIT (A) HAS DELETED THE DISALLOWANCE OF DEPRECIATIO N IN ASSTT. YEAR 2001- 02 AND 2002-03. ITA NOS.4513 4514 4244 4245 4430 /DEL/09 ASSTT. YEARS 2003- 04 2004-05 2001-02 2002-03 2003-04 C O NOS. 21 22/DEL/10 ASSTT. YEARS 2001-02 2002-03 7 7. IN ASSTT. YEAR 2003-04 AND 2004-05 LD. CIT (A) W AS OF THE OPINION THAT SINCE IN VIEW OF ARBITRATION AWARD NO LICENSE FEE WAS TO BE RECEIVED BY THE ASSESSEE THEREFORE THERE IS NO BUSINESS INCO ME AND AS SUCH ASSESSEE IS NOT ENTITLED FOR THE DEPRECIATION. HE D ISALLOWED THE CLAIM OF DEPRECIATION IN ASSTT. YEAR 2003-04 AND 2004-05. 8. LD. COUNSEL FOR THE ASSESSEE WHILE IMPUGNING THE ORDER OF LD. CIT(A) IN ASSTT. YEAR 2003-04 AND 2004-05 IN THE A PPEALS OF ASSESSEE CONTENDED THAT HOTEL BUSINESS WAS NEVER DISCONTINUE D. EARLIER IT WAS BEING CARRIED OUT UNDER THE HOTEL OPERATION AGREEME NT. ITC USED TO OPERATE THE HOTEL DURING THE DISPUTED PERIOD ALSO EFFECTIVELY ITC HAS OPERATED THE HOTEL TILL MAY 2005. THEREAFTER THE B USINESS CONTINUED BY MEANS OF OPERATOR / MANAGEMENT AGREEMENT WITH CLAR IDGES HOTEL PVT. LTD.. DURING THE ASSTT. YEAR 2007-08 ASSESSEE MANAG ED AND OPERATED THE HOTEL ITSELF. ON THE STRENGTH OF HONBLE DELHI HIGH COURTS DECISION IN THE CASE OF CAPITAL BUS SERVICE PVT. LTD. VS. CIT R EPORTED 123 ITR 404 (DELHI). HE CONTENDED THAT ALLOWANCE FOR NORMAL DEP RECATION DOES NOT DEPEND ON THE ACTUAL WORKING OF MACHINERY. IT IS SE EN IF THE MACHINERY IN QUESTION IS EMPLOYED BY THE ASSESSEE FOR THE PURPOS E OF THE BUSINESS AND FOR NO OTHER BUSINESS. IF IT IS KEPT BY HIM RE ADY FOR ACTUAL USE ITA NOS.4513 4514 4244 4245 4430 /DEL/09 ASSTT. YEARS 2003- 04 2004-05 2001-02 2002-03 2003-04 C O NOS. 21 22/DEL/10 ASSTT. YEARS 2001-02 2002-03 8 DEPRECIATION WOULD BE ALLOWED. SIMILARLY HE RELIED UPON THE FOLLOWING DECISIONS :- 1 MULTICAN BUILDERS LTD. V. CIT (2005) 270 ITR 142 (CAL) 2 CIT VS. SOUTHERN PETROCHEMICAL INDUSTRIES (P) LTD . (2008) 301 ITR 255 (MAD) 3 CIT VS. ESPN SOFTWARE INDIA (P) LTD. (2008) 301 I TR 368 (DEL) 4 CIT VS. HUGHES ESCORTS COMMUNICATIONS LTD. (2009) 311 ITR 253 (DEL) 5 CIT V. INDIA TEA AND TIMBER TRADING CO. (1996) 22 1 ITR 857 (GAU) 6 CIT V. VINDHYACHAL DISTILLERIES PVT. LTD. (2005) 272 ITR 583 (MP) 9. ON THE OTHER HAND LD. DR RELIED UPON THE ORDER O F LD. CIT(A). IN ASSTT. YEAR 2003-04 AND 2004-05 WHEREAS WITH REGARD TO 2001-02 HE RELIED UPON THE ORDER OF AO . 10. WE HAVE DULY CONSIDERED THE RIVAL CONTENTION AN D GONE THROUGH THE RECORD CAREFULLY. IN ORDER TO AVAIL DEPRECIATIO N U/S 32 OF THE INCOME TAX ACT AN ASSESSEE IS REQUIRED TO PROVE THE OWNERS HIP OF THE ASSET AND ITS USER FOR THE PURPOSE OF BUSINESS OR PROFESSION. AS FAR AS OWNERSHIP OF ASSET IS CONCERNED THE AO HAS NOT DISPUTED. THE ONL Y AREA OF DIFFERENCE BETWEEN THE ASSESSEE AND THE AO IS THAT IN ASSTT. Y EAR 2003-04 AND 2004-05 THERE IS NO BUSINESS RECEIPT HENCE ASSESSEE IS NOT ENTITLED TO THE DEPRECIATION. THE LD. REVENUE AUTHORITIES HAVE CONSIDERED ACCRUAL ITA NOS.4513 4514 4244 4245 4430 /DEL/09 ASSTT. YEARS 2003- 04 2004-05 2001-02 2002-03 2003-04 C O NOS. 21 22/DEL/10 ASSTT. YEARS 2001-02 2002-03 9 OF BUSINESS RECEIPT OR GENERATION OF INCOME AS SINE QUA NON FOR AN ASSESSEE TO PROVE THE ACTUAL USER OF THE ASSET. INT ERPRETATION OF EXPRESSION USED EMPLOYED IN SECTION 32 HAD COME U P ON A NUMBER OF OCCASIONS BEFORE THE HONBLE SUPREME COURT HONBLE HIGH COURT AND THE TRIBUNAL. RECENTLY THE HONBLE PRESI-DENT OF TH E TRIBUNAL WHILE SITTING AS A 3RD MEMBER IN THE CASE OF SANGHVI MOVERS (P.) LTD. V. DY. CIT [2008] 110 ITD 1 (PUNE) HAS MADE A LUCID ENUNCIATION OF LAW ON THIS POINT. WE CANNOT DO BETTER THAN TO EXTRACT SOME OF THE FINDINGS RECORDED IN PARA 15 OF HIS ORDER WHICH READS AS UNDER :- 15. I HAVE GIVEN CAREFUL THOUGHT TO THE RIVAL SUBM ISSIONS OF THE PARTIES. THERE IS NO DISPUTE FIRST CONDITION FOR GE TTING DEPRECIATION I.E. OWNERSHIP OF THE ASSET HAS BEEN FULLY ESTABLISHED I N THIS CASE. THE CONTROVERSY RELATES TO THE SECOND CONDITION I.E. THE USER OF THE ASSET FOR PURPOSES OF BUSINESS. FACTS LEADING TO THE CONT ROVERSY HAVE ALREADY BEEN NOTED ABOVE. I WOULD LIKE NOW TO REFER TO THE RELEVANT DECISIONS ON CONTROVERSY. 15.1 IN MACHINERY MFRS. CORPN. LTD. V. CIT [1957] 31 ITR 203 (BOM.) THE BOMBAY HIGH COURT HAS OBSERVED THAT THE EXPRESS ION USED IS SECTION 10(2)( VI ) OF THE INDIAN INCOME-TAX ACT 1922 CORRESPONDING TO SECTION 32 OF THE ACT HAS TO BE GIVEN A WIDER MEAN ING. THE EXPRESSION INCLUDES PASSIVE AS WELL AS ACTIVE USER. IT HAS BEEN JUDICIALLY HELD IN A NUMBER OF CASES THAT DEPRECIAT ION MIGHT BE ALLOWED IN CERTAIN CASES EVEN THOUGH THE MACHINERY WAS NOT IN USE OR WAS KEPT IDLE. THE WORDS USED FOR THE PURPOSES OF BUSINESS ARE CAPABLE OF LARGER AND NARROWER INTERPRETATION. IF THE EXPRESSION USED IS CONSTRUED STRICTLY IT CA N BE TAKEN AS CONNOTING OR REQUIRING THE ACTIVE REQUIREMENT OR AC TUAL WORKING OF THE MACHINERY PLANT OR BUILDING IN THE BUSINESS. ON TH E OTHER HAND A WIDER MEANING WILL INCLUDE NOT ONLY CASES WHERE MAC HINERY AND PLANT ETC. ARE ACTIVELY EMPLOYED BUT ALSO CASE WHERE THE RE IS WHAT MAY BE ITA NOS.4513 4514 4244 4245 4430 /DEL/09 ASSTT. YEARS 2003- 04 2004-05 2001-02 2002-03 2003-04 C O NOS. 21 22/DEL/10 ASSTT. YEARS 2001-02 2002-03 10 DESCRIBED AS PASSIVE USER OF THE SAME IN THE BUSINE SS AND THE SAME CAN BE SAID TO BE IN USE WHEN IT IS KEPT READY FOR USE. 15.2 IN THE CASE OF WHITTLE ANDERSON LTD. ( SUPRA ) THEIR LORDSHIPS OF THE BOMBAY HIGH COURT WERE CONCERNED WITH THE QUEST ION WHETHER GINNING MACHINES REMAINING IDLE UNDER POOLING AGREE MENT COULD BE SAID TO BE USED SO AS TO BE ENTITLED TO THE DEPRECI ATION. THEIR LORDSHIPS MADE THE FOLLOWING RELEVANT OBSERVATIONS : NOW THE EXPRESSION USE OR USED HAS SEVERAL TIMES RECEIVED INTERPRETATION AT THE HANDS NOT ONLY OF THIS COURT AND OF THE OTHER HIGH COURTS BUT BY THE SUPREME COURT ITSELF. SO FAR AS T HIS COURT IS CONCERNED IN CIT V. VISHWANATH BHASKAR SATHE [1937] 5 ITR 21 (BOM.) IN A CASE WHICH WAS VERY SIMILAR TO THE PRE SENT CASE THIS COURT WITH REFERENCE TO THE PROVISIONS OF SECTION 10(2)( VI ) OF THE INDIAN INCOME-TAX ACT SAID THAT THE WORD USED IN THAT SECTION SHOULD BE UNDERSTOOD IN A WIDE SENSE SO AS TO EMBRACE PASS IVE AS WELL AS ACTIVE USER. THEY POINTED OUT THAT WHEN MACHINERY I S KEPT READY FOR USE AT ANY MOMENT IN A PARTICULAR FACTORY UNDER AN EXPRESS AGREEMENT FROM WHICH TAXABLE PROFITS ARE EARNED TH E MACHINERY CAN BE SAID TO BE USED FOR THE PURPOSE OF THE BUSINESS WHICH EARNED THE PROFITS ALTHOUGH IT WAS NOT ACTUALLY WORKED AND T HE DEPRECIATION ALLOWANCE GRANTED BY SECTION 10(2)( VI ) COULD BE GIVEN IN RESPECT OF SUCH MACHINERY. NO DOUBT THAT WAS SAID IN CONNECTI ON WITH CLAUSE ( VI ) OF SECTION 10(2) BUT THE SUPREME COURT HAS POINT ED OUT THAT ALL THESE CLAUSES ARE IN PARI MATERIA AND THE EXPRESSION USED IN EITHER OF THEM WOULD APPLY TO THE OTHER : SEE THE LIQUIDATORS OF PURSA LTD. V. CIT [1954] 25 ITR 265 ; [1954] SCR 767 (SC). IN VISHWANATH BHASKAR SATHES CASE THE FACTS WERE SIMILAR TO THE PRESENT CASE. THE ASSESSEE OWNED A GINNING FACTORY AND WAS A MEMBER OF A POOL WITH THE OWNERS OF OTHER GINNING F ACTORIES. DURING THE ASSESSMENT YEAR IN QUESTION IN THAT CASE THE AS SESSEES FACTORY HAD NOT BEEN ACTUALLY EMPLOYED IN THE WORK OF GINNI NG IN ACCORDANCE WITH THE POOLING AGREEMENT THOUGH HE HAD RECEIVED A SHARE OF THE PROFITS. THAT WAS BECAUSE THE ASSESSEE WAS UNDER TH E AGREEMENT BOUND AT HIS OWN EXPENSE TO KEEP THE GINS AND OTHER WORKING PLANT AND MACHINERY IN GOOD REPAIR AND CONDITION AND WORK ING ORDER EVEN WHEN HIS FACTORY WAS NOT WORKING SO THAT IT MAY BE READY FOR ACTUAL USE AT ANY MOMENT. IT WAS HELD THAT UNDER THESE CI RCUMSTANCES THE ASSESSEE WAS ENTITLED TO THE ALLOWANCE UNDER SECTIO N 10(2)( VI ). ITA NOS.4513 4514 4244 4245 4430 /DEL/09 ASSTT. YEARS 2003- 04 2004-05 2001-02 2002-03 2003-04 C O NOS. 21 22/DEL/10 ASSTT. YEARS 2001-02 2002-03 11 THEIR LORDSHIPS FURTHER MADE REFERENCE TO DECISION OF SUPREME COURT AS UNDER : IN LIQUIDATORS OF PURSA LTD. [1954] 2 ITR 265; [1954] SCR 767 (SC) REFERRING TO THIS EXPRESSION IN SECTION 10(2)( VI ) USED FOR THE PURPOSE OF BUSINESS THE SUPREME COURT RULED THAT IT MEANT USED FOR THE PURPOSE OF ENABLING THE OWNER TO CARRY ON THE BUSIN ESS AND EARN PROFITS IN THE BUSINESS. IN THE PENULTIMATE PARA THEIR LORDSHIPS HELD AS UN DER : THE AGREEMENT CLEARLY PROVIDED THAT ALTHOUGH TWO OUT OF THE FOUR PRESSES WHICH WERE DIRECTLY IN THE POOLING ARRANGEM ENT WERE TO REMAIN IDLE WHILE THE TWO PRESSES WORKED IT IS CLE AR THAT THE OWNERS OF THOSE PRESSES WHICH WERE IDLE HAD TO KEEP THEM R EADY FOR USE AT ANY TIME AND THE CONTINGENCY FOR THEIR USE COULD AL SO UPON THE TERMS OF THE AGREEMENT ARISE AT ANY TIME AND HAVING REGA RD TO THE DEFINITION OF THE WORD USED AS INDICATED IN THE AUTHORITIES TO WHICH WE HAVE REFERRED IT IS CLEAR THAT EVEN THESE PRESSES WHICH REMAINED UNDER FORCED IDLENESS WERE IN USE DURING THE ENTIRE PERIO D OF THE YEAR. 15.3 IN THE CASE OF DILIP SINGH SARDARSINGH BAGGA ( SUPRA ) THE BOMBAY HIGH COURT ON THE QUESTION OF ALLOWING DEPRE CIATION AND AFTER RELEVANT PROVISIONS OF THE MOTOR VEHICLES ACT OBSE RVED AS UNDER : IN VIEW OF THE FOREGOING DISCUSSION WE ARE OF THE CLEAR OPINION THAT THE ASSESSEE WHO HAD PURCHASED THE MOTOR VEHICLE F OR VALUABLE CONSIDERATION AND USED THE SAME FOR HIS BUSINESS C ANNOT BE DENIED THE BENEFIT OF DEPRECIATION ON THE GROUND THAT THE TRANSFER WAS NOT RECORDED UNDER THE MOTOR VEHICLES ACT OR THAT THE V EHICLES STOOD IN THE NAME OF THE VENDOR IN THE RECORDS OF THE AUTHOR ITIES UNDER THE MOTOR VEHICLES ACT. 15.4 IN THE CASE OF CIT V. SALKIA TRANSPORT ASSOCIATES [1983] 143 ITR 39 (CAL.) FIVE BUSES OWNED BY THE ASSESSEE WERE NOT R EGISTERED UNDER THE MOTOR VEHICLES ACT. THEIR LORDSHIPS NOTED RELEVANT PROVISIONS OF THE MOTOR VEHICLES ACT AND ON THE QUE STION WHETHER THE ASSESSEE WAS ENTITLED TO DEPRECIATION UNDER THE ABO VE CIRCUMSTANCES OBSERVED AS UNDER : THAT THE ASSESSEE HAS PURCHASED FIVE NEW BUSES IS NOT DISPUTED. THE ONLY ARGUMENT IS THAT THE VEHICLES WERE NOT REG ISTERED IN THE NAME OF THE ASSESSEE UNDER THE MOTOR VEHICLES ACT. BUT THAT IS ONE OF THE FACTORS THAT HAS TO BE TAKEN INTO CONSIDERAT ION FOR DECIDING THE ITA NOS.4513 4514 4244 4245 4430 /DEL/09 ASSTT. YEARS 2003- 04 2004-05 2001-02 2002-03 2003-04 C O NOS. 21 22/DEL/10 ASSTT. YEARS 2001-02 2002-03 12 QUESTIONS OF OWNERSHIP OF THE BUSES. IT CANNOT BE S AID AS A MATTER OF LAW THAT UNLESS THE BUSES ARE REGISTERED IN THE NAM E OF THE ASSESSEE THE ASSESSEE CANNOT BE REGARDED AS THE OWNER OF THE BUSES. ON THE CONTRARY THE ESSENTIAL PRE-REQUISITE FOR REGISTRAT ION UNDER SECTION 22(1) OF THE MOTOR VEHICLES ACT IS OWNERSHIP OF THE MOTOR VEHICLE. UNLESS A PERSON IS THE OWNER OF A MOTOR VEHICLE HE IS NOT ENTITLED TO GET IT REGISTERED IN HIS NAME UNDER SECTION 22(1) O F THE MOTOR VEHICLE ACT. THE TRIBUNAL IN THIS CASE HAS COME TO THE CONC LUSION ON A REVIEW OF THE FACTS AND ALSO OF THE AGREEMENT THAT THE ASS ESSEE WAS THE OWNER OF THE FIVE NEW BUSES AND AS SUCH WAS ENTITLE D TO CLAIM DEPRECIATION ALLOWANCE ON THESE BUSES. THE TRIBUNAL HAS NOT COMMITTED ANY ERROR OF LAW IN COMING TO THIS CONCLU SION. THE REQUIREMENT OF SECTION 32 OF THE INCOME-TAX ACT IS THAT THE VEHICLES MUST BE OWNED BY THE ASSESSEE. THIS SECTION DOES NOT REQUIRE THAT THE ASSESSEE MUST BE A REGISTERED OWNER OF THE VEHI CLES IN ORDER TO CLAIM DEPRECIATION ALLOWANCE IN RESPECT OF THEM. WE ARE OF THE VIEW THAT IN THE FACTS OF THIS CASE THE NEW BUSES WERE OWNED BY THE ASSESSEE WITHIN THE MEANING OF SECTION 32 OF THE IN COME-TAX ACT AND THE ASSESSEE WAS ENTITLED TO CLAIM DEPRECIATION ALL OWANCE ON THESE VEHICLES. 15.5 IN THE CASE OF ANIL BULK CARRIERS (P.) LTD. V. CIT [2005] 276 ITR 625 (ALL.) TRUCKS PURCHASED BY THE ASSESSEE FOR OIL T RANSPORT BUSINESS WERE REGISTERED WITH TRANSPORT AUTHORITY ONLY ON 1- 4-1997. THESE TRUCKS WERE ALSO FINED FOR THEIR USER FOR THE YEAR ENDING 31-3-1997. ON THE QUESTION WHETHER ASSESSEE WAS ENTITLED TO DEPRE CIATION IN THE ASSESSMENT YEAR 1997-98 ON ABOVE TRUCKS THEIR LORD SHIPS AFTER CONSIDERING ALL RELEVANT DECISIONS OBSERVED AS UND ER : THE TRIBUNAL WAS OBSESSED WITH A VIEW THAT SINCE T HE REGISTRATION OF THE VEHICLE BY THE REGISTERING OFFICER UNDER THE MO TOR VEHICLE ACT 1988 WAS GRANTED ON 1-4-1997 THE VEHICLE COULD NOT BE PLIED ON 31- 3-1997. THE TRIBUNAL APPROACHED THE SAID PROBLEM WI TH WRONG ANGLE. FOR THE INCOME-TAX PURPOSES THE TRIBUNAL WAS REQUIR ED TO EXAMINE AS TO WHETHER THE ASSETS (OIL TANKERS) WERE USED DURIN G THE PREVIOUS ASSESSMENT YEAR OR NOT. THE USER OF OIL TANKERS EVE N PRIOR TO OBTAINING REGISTRATION FROM THE REGISTERING-AUTHORI TY OR WITHOUT PAYMENT OF ROAD TAX ETC. MAY BE VIOLATIVE OF THE PROVISIONS OF THE MOTOR VEHICLE ACT 1988. BUT NONETHELESS IF THE VEH ICLE WAS PLIED EVEN WITHOUT OBTAINING REGISTRATION OR PAYMENT OF R OAD TAX ETC. IT ITA NOS.4513 4514 4244 4245 4430 /DEL/09 ASSTT. YEARS 2003- 04 2004-05 2001-02 2002-03 2003-04 C O NOS. 21 22/DEL/10 ASSTT. YEARS 2001-02 2002-03 13 CANNOT BE SAID AS A MATTER OF FACT THAT THE VEHIC LE HAS NOT BEEN USED. THE ATTENTION OF THE TRIBUNAL WAS NOT DRAWN T OWARDS RULE 47 OF THE MOTOR VEHICLES RULES WHICH GIVES SEVEN DAYS TIM E TO APPLY FOR REGISTRATION OF THE VEHICLE WITH THE REGISTERING AU THORITY UNDER THE MOTOR VEHICLES ACT. THE FINDING RECORDED BY THE TRI BUNAL THAT THE OIL TANKERS WERE NOT USED ON THE LAST DATE OF THE P REVIOUS YEAR IS NOT BASED ON LEGAL EVIDENCE AND HAS GIVEN RISE TO A SU BSTANTIAL QUESTION OF LAW INVOLVED IN THE APPEAL AND THEREFORE IT IS NOT CORRECT TO SAY THAT THE APPEAL IS CONCLUDED BY FINDING OF FACT AND IS NOT MAINTAINABLE. IN VIEW OF ABOVE EXPOSITION OF LAW THE CASE IN HAND IS TO BE EXAMINED. THE TWO OIL TANKERS ALONG WITH MOUNTED BODIES WERE PURCHASED FOR THE BUSINESS BY THE ASSESSEE WHO IS A TRANSPORTER D URING THE ACCOUNTING YEAR. IT IS NOT THE CASE OF THE DEPARTME NT THAT THESE OIL TANKERS WERE NOT NECESSARY FOR THE BUSINESS PURPOSE S OF THE ASSESSEE-APPELLANT. THESE OIL TANKERS WERE ACTUALLY PLIED ON THE ROAD ON THE LAST DATE OF THE ACCOUNTING YEAR WERE CHALLA NGED AND ALSO FINED BY THE CMM KANPUR. THEREFORE THE OIL TANKER S WERE ACTUALLY PUT TO USE IN THE RELEVANT ACCOUNTING YEAR BY THE A SSESSEE FOR ITS BUSINESS PURPOSES. ALTERNATIVELY THE ASSESSEE WAS E NTITLED FOR DEPRECIATION ON THESE TWO OIL TANKERS AS THEY WERE PURCHASED DURING THE RELEVANT ACCOUNTING YEAR FOR BUSINESS PURPOSES AND WERE READY TO USE ROAD TAX WAS DEPOSITED AND THE OIL TANKERS WER E GOT REGISTERED WITH THE REGISTERING AUTHORITY ON THE LAST DATE OF THE ACCOUNTING YEAR. FAILURE OF THE ASSESSEE TO PRODUCE THE HIRE CONTRAC T WITH THE PARTIES IS IN RESPECT OF THE TWO OIL TANKERS IS OF LITTLE SIGN IFICANCE IN VIEW OF EXPOSITION OF LAW THAT THE WORD USED UNDER SECTIO N 32 OF THE ACT HAS TO BE GIVEN WIDER MEANING AND IT WILL INCLUDE ASSET S READY FOR USE. 15.6 THE PUNJAB AND HARYANA HIGH COURT IN CIT V. PEPSU ROAD TRANSPORT CORPN. [2002] 253 ITR 303 HAS HELD THAT THE ASSESSEE WHO WAS THE TRANSPORTER HAD TO KEEP SPARE ENGINES IN TH E STORE WAS ENTITLED TO DEPRECIATION ON THE SPARE ENGINES IN TH E STORE AS THE ENGINES WERE MEANT TO BE USED IN THE CASE OF NEED. THERE IS A NORMAL DEPRECIATION OF VALUE EVEN WHEN MACHINES OR EQUIPMENT IS MERELY KEPT IN THE STORE. LOOKING TO THE NATURE OF BUSINESS OF THAT ASSESSEE WHO WAS A TRANSPORTER IT WAS HELD THAT KE EPING SPARE ENGINES IN STORE TO MEET EMERGENT SITUATIONS WAS T HE REQUIREMENT OF BUSINESS. ITA NOS.4513 4514 4244 4245 4430 /DEL/09 ASSTT. YEARS 2003- 04 2004-05 2001-02 2002-03 2003-04 C O NOS. 21 22/DEL/10 ASSTT. YEARS 2001-02 2002-03 14 15.7 IN THE CASE OF MYSORE MINERALS LTD. V. CIT [1999] 239 ITR 775 (SC) THEIR LORDSHIPS OF SUPREME COURT IN RESPECT O F CLAIM OF DEPRECIATION MADE THE FOLLOWING OBSERVATIONS : SECTION 32 OF THE INCOME-TAX ACT 1961 CONFERS A BENEFIT ON THE ASSESSEE. THE PROVISION SHOULD BE SO INTERPRETED AN D THE WORDS USED THEREIN SHOULD BE ASSIGNED SUCH MEANING AS WOULD EN ABLE THE ASSESSEE TO SECURE THE BENEFIT INTENDED TO BE GIVEN BY THE LEGISLATURE TO THE ASSESSEE. IT IS ALSO WELL SETTLE D THAT WHERE THERE ARE TWO POSSIBLE INTERPRETATIONS OF TAXING PROVISION T HE ONE WHICH IS FAVOURABLE TO THE ASSESSEE SHOULD BE PREFERRED. GENERALLY SPEAKING DEPRECIATION IS ALLOWANCE FOR TH E DIMINUTION IN THE VALUE DUE TO WEAR AND TEAR OF A CAPITAL ASSET EMPLO YED BY AN ASSESSEE IN HIS BUSINESS. BLACKS LAW DICTIONARY (F IFTH EDITION) DEFINED DEPRECIATION TO MEAN INTER ALIA : A FALL IN VALUE; REDUCTION OF WORTH. THE DETERIORA TION OR THE LOSS OR LESSENING IN VALUE ARISING FROM AGE USE AND IMPR OVEMENTS DUE TO BETTER METHODS. A DECLINE IN VALUE OF PROPERTY CAUS ED BY WEAR OR OBSOLESCENCE AND IS USUALLY MEASURED BY A SET FORMU LA WHICH REFLECTS THESE ELEMENTS OVER A GIVEN PERIOD OF USE FUL LIFE OF PROPERTY ... CONSISTENT GRADUAL PROCESS OF ESTIMATING AND A LLOCATING COST OF CAPITAL INVESTMENTS OVER ESTIMATED USEFUL LIFE OF A SSET IN ORDER TO MATCH COST AGAINST EARNINGS. AN OVERALL VIEW OF THE ABOVE SAID AUTHORITIES SHOWS THAT THE VERY CONCEPT OF DEPRECIATION SUGGESTS THAT THE TAX BENEF IT ON ACCOUNT OF DEPRECIATION LEGITIMATELY BELONGS TO ONE WHO HAS INVESTED IN THE CAPITAL ASSET IS UTILIZING THE CAPITAL ASSET AND THEREBY LOSING GRAD UALLY INVESTMENT CAUSED BY WEAR AND TEAR AND WOULD NEED TO REPLACE THE SAME BY HAVING LOST ITS VALUE FULLY OVER A PERIOD OF TIME. IT IS EVIDENT FROM ABOVE NOTED DECISIONS THAT DEPRE CIATION IS AN ALLOWANCE FOR DIMINUTION IN VALUE DUE TO WEAR AND T EAR OF A CAPITAL ASSET AND THAT CLAIM ON ACCOUNT OF DEPRECIATION LEG ITIMATELY BELONGS TO ONE WHO HAS INVESTED IN THE CAPITAL ASSET. 15.8 REFERENCE TO SECTION 32(1) AS EXISTING IN ALL MATER IAL TIME REVEALS THAT BUILDING MACHINERY AND OTHER ASSETS MENTIONED IN SUB-SECTION (1) WHEN OWNED BY THE ASSESSEE AND USED FOR PURPOS ES OF THE ITA NOS.4513 4514 4244 4245 4430 /DEL/09 ASSTT. YEARS 2003- 04 2004-05 2001-02 2002-03 2003-04 C O NOS. 21 22/DEL/10 ASSTT. YEARS 2001-02 2002-03 15 BUSINESS OR PROFESSION ARE ENTITLED TO DEPRECIATIO N. IT HAS BEEN NOTED THAT SECTION 32 CONFERS THE BENEFIT ON THE ASSESSEE AND IT IS REQUIRED TO BE CONSTRUED LIBERALLY AND IN A MANNER WHICH IS FAVOURABLE TO THE ASSESSEE. I FIND FORCE IN ASSESSEES SUBMISSION THA T DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF DINESHKUMAR GULABCHAND AGRAWAL ( SUPRA ) HAS TO BE READ IN THE LIGHT OF OTHER DECISIONS OF BOMBAY HIGH COURT AND OF THE SUPREME COURT AND WHEN SO READ IT DOES NOT LAY ANY DIFFERENT LAW. EXPRESSION USED I S TO BE CONSTRUED IN THE CONTEXT OF FACTS AND CIRCUMSTANCES OF THE CASE AND WOULD INCLUDE NOT ONLY ACTIVE USE OF ASSET BUT ALSO PASSIVE USE O F ASSET FOR PURPOSES OF BUSINESS. THIS IS WHAT HAS BEEN CONSIST ENTLY HELD BY THE SUPREME COURT AND THE BOMBAY HIGH COURT IN THE DECI SIONS CITED SUPRA. PERMANENT REGISTRATION UNDER THE MOTOR VEHIC LES ACT IS NOT SINE QUA NON FOR CLAIM OF DEPRECIATION. TEMPORARY REGISTRATION F OR A LIMITED PERIOD PENDING PERMANENT REGISTRATION IS GO OD ENOUGH TO CLAIM DEPRECIATION ON ASSET OWNED BY THE ASSESSEE AND USE D IN BUSINESS AS NOTED IN THE DECISIONS OF DIFFERENT HIGH COURTS. NO DECISION TAKING A CONTRARY VIEW WAS CITED BEFORE ME. HIRING OF ASSE T IS ONE WAY OF ESTABLISHING USER OF THE ASSET IN BUSINESS. BUT US ER OR USED CAN BE PROVED INDEPENDENT OF HIRING AGREEMENT. THROUGH OTH ER EVIDENCE ASSESSEE CAN PROVE THAT ASSETS WERE USED FOR THE PU RPOSES OF BUSINESS OR PROFESSION. THE EXPRESSION PURPOSES OF BUSINESS ITSELF IS VERY WIDE EXPRESSION AND IT IS NOT NECESSARY THAT R ECEIPT OF INCOME MUST BE SHOWN TO BE ENTITLED TO CLAIM DEPRECIATION. [EMPHASIS SUPPLIED] 11. IN THE LIGHT OF ABOVE PROPOSITION IF WE EXAMINE THE FACTS OF THE PRESENT CASE THEN IT WOULD REVEAL THAT BUSINESS ASS ETS OWNED BY THE ASSESSEE IN THE SHAPE OF HOTEL WAS USED FOR THE HO TEL BUSINESS. IT IS A DIFFERENT MATTER THAT IN THESE ACCOUNTING YEARS ON ACCOUNT OF CERTAIN DISPUTES WITH ITC LIMITED ASSESSEE HAS NOT RECEIVED LICENSE FEES. BUT ITA NOS.4513 4514 4244 4245 4430 /DEL/09 ASSTT. YEARS 2003- 04 2004-05 2001-02 2002-03 2003-04 C O NOS. 21 22/DEL/10 ASSTT. YEARS 2001-02 2002-03 16 NON RECEIPT OF LICENSE FEE WOULD NOT BE A FACTOR TH AT BUSINESS ASSETS WERE NOT USED FOR THE PURPOSE OF THE BUSINESS. THER E IS ONE MORE ANGEL IN THE CONTROVERSY. THE PARTIES UNDER THE AGREEMENT TO OPERATE THE HOTEL I.E. THE ASSESSEE AS WELL AS ITC WERE LITIGATING AF TER THE BOMB BLAST ON SO MANY ISSUES. IN THE ARBITRATION ULTIMATELY IT IS THE ASSESSEE WHO HAS TO PAY A SUM OF RS. 43.10 CRORE IN TOTAL TO THE ITC . KEEPING IN VIEW THIS PAYMENT REQUIRED TO BE MADE BY THE ASSESSEE THE ARB ITRATOR MIGHT HAVE CONSIDERED THE FACTOR OF NON PAYMENT OF LICENSE FEE TO THE ASSESSEE. IN OTHER WORDS AT THE MOST PASSIVE USER CANNOT BE DISB ELIEVED. THEREFORE THE CLAIM OF DEPRECIATION CANNOT BE DENIED TO THE A SSESSEE MERELY ON THE GROUND THAT LICENSE FEE WAS NOT RECEIVED BY THE ASSESSEE. EARNING OF INCOME ACTUALLY IN A YEAR IS ONE OF THE CORROBORATI VE FACTOR TO DEMONSTRATE THE USER OF ASSETS ONLY. IT IS NOT THE SOLE CRITERIA FOR GRANT OF DEPRECIATION. IN VIEW OF THE ABOVE DISCUSSION WE AL LOW THE GROUND OF APPEAL RAISED BY THE ASSESSEE IN ASSTT. YEAR 2003-0 4 AND 2004-05 AND REJECT THE GROUND OF APPEAL RAISED BY THE REVENUE I N ASSTT. YEAR 2001-02 AND 2002-03. ITA NOS.4513 4514 4244 4245 4430 /DEL/09 ASSTT. YEARS 2003- 04 2004-05 2001-02 2002-03 2003-04 C O NOS. 21 22/DEL/10 ASSTT. YEARS 2001-02 2002-03 17 12. IN ASSTT. YEAR 2003-04 AND 2004-05 THE COMMON G ROUND OF APPEAL RAISED BY THE REVENUE IS THAT LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 32 21 213/- AND RS. 3413764/- RESPE CTIVELY. 13. THESE ADDITIONS HAVE BEEN MADE BY THE AO ON THE BASIS OF LICENSE FEES RECEIVABLE BY THE ASSESSEE FROM THE IT C. LD. CIT(A) HAS DELETED THE ADDITION ON THE GROUND THAT ARBITRATOR HAS GIVEN HIS AWARD WHILE SETTLING THE DISPUTE BETWEEN THE ASSESSEE AND ITC ON 24 TH MAY 2005. ACCORDING TO THIS AWARD ASSESSEE WAS NOT TO R ECEIVE ANY LICENSE FEE FROM THE ITC. THUS NO AMOUNT WAS DUE TO THE ASS ESSEE. LD. COUNSEL FOR THE ASSESSEE POINTED OUT THAT IN ASSTT. YEAR 19 97-98 A SIMILAR ADDITION WAS MADE WHICH HAS BEEN DELETED BY THE TRIBUNAL IN ITA NO. 3806/MUMBAI/2001. HE PLACED ON RECORD THE COPY OF T HE TRIBUNALS ORDER. ON THE OTHER HAND LD. DR RELIED UPON THE ORD ER OF AO. 14. WE HAVE DULY CONSIDERED THE RIVAL CONTENTION AN D GONE THROUGH THE RECORD CAREFULLY. IN ASSTT. YEARS 1995-96 AND 1 997-98 TRIBUNAL HAS HELD THAT IN VIEW OF THE ARBITRATIONS AWARD NO AMO UNT WAS DUE TO THE ASSESSEE FROM THE ITC ON ACCOUNT OF LICENSE FEE AND THEREFORE NO ITA NOS.4513 4514 4244 4245 4430 /DEL/09 ASSTT. YEARS 2003- 04 2004-05 2001-02 2002-03 2003-04 C O NOS. 21 22/DEL/10 ASSTT. YEARS 2001-02 2002-03 18 ADDITION CAN BE MADE ON ACCOUNT OF LICENSE FEE RECE IVABLE. THE FINDING OF THE TRIBUNAL RECORDED IN PARA 9 READ AS UNDER :- 9. FROM THE ABOVE FACTS IT IS CLEAR THAT THE ASSE SEES RIGHT TO RECEIVE LICENSE FEE FROM M/S. ITC LTD. IN TERMS OF THE AGRE EMENT WHICH WAS IN DISPUTE WAS ULTIMATELY SETTLED. THE AGREEMENT WHIC H GAVE RISE TO SUCH RIGHT WAS ITSELF A SUBJECT MATER OF DISPUTE DUE TO UNFORESEEN CIRCUMSTANCES THAT HAS OCCURRED IN THIS CASE I.E. S ERIAL BOMB BLASTS. THE ITC LTD. HAS NOT PAID THE ASSESSEE SUCH LICENSE FEE S AND HAS BEEN DISPUTING THE PAYMENT OF THE SAME . IN THESE CIRCUM STANCES WE ARE OF THE CONSIDERED OPINION THAT NO INCOME ACCRUED TO TH E ASSESSEE IN THE FORM OF LICENSE FEE FOR THESE IMPUGNED ASSESSMENT Y EARS. THUS WE ALLOW THE GROUNDS OF APPEAL OF THE ASSESSEE FOR BOT H THE ASSESSMENT YEARS ON THIS ISSUE AND DELETE THE ADDITION OF LICE NSE FEE IN QUESTION. 15. THE ASSESSEE WAS TO RECEIVE LICENSE FEE IN VIEW OF HOTEL OPERATOR AGREEMENT EFFECTIVE FROM 1 ST JULY 1986 ON ACCOUNT OF BOMB BLAST IN THE HOTEL A DISPUTE AROSE BETWEEN THE PARTIES AND THIS RIGHT TO RECEIVE LICENSE FEE WAS DISPUTED. THE DISPUTE BETWEEN THE P ARTIES WAS SETTLED BY AN ARBITRATION AWARD WHICH HELD THAT THE ASSESSE E IS NOT ENTITLED TO RECEIVE LICENSE FEE. TAKING INTO CONSIDERATION THE SETTLEMENT OF DISPUTE BY WAY OF ARBITRATION AWARD AND FINDING OF THE LD. CIT(A) COUPLED WITH THE ORDER OF THE ITAT IN 1997-98 WE DO NOT FIND AN Y MERIT IN THESE GROUNDS OF APPEAL. THEY ARE REJECTED. ITA NOS.4513 4514 4244 4245 4430 /DEL/09 ASSTT. YEARS 2003- 04 2004-05 2001-02 2002-03 2003-04 C O NOS. 21 22/DEL/10 ASSTT. YEARS 2001-02 2002-03 19 16. THE GROUNDS RAISED BY THE ASSESSEE IN THE CROSS OBJECTION FILED IN ASSTT. YEARS 2001-02 AND 2002-03 ARE COMMON WITH TH E ADDITIONAL GROUND OF APPEAL RAISED IN ASSTT. YEARS 2003-04 AND 2004-05. IN ALL THESE GROUNDS OF APPEAL ASSESSEE HAS PLEADED THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE LD. AO WAS NOT JUSTIFIED IN ISSUING NOTICES U/S 153A AS NO ASSESSMENT OR REASSESSMENT WAS PENDING A S ON THE DATE OF INITIATION OF SEARCH WHICH COULD HAVE BEEN ABETTED IN TERMS OF SECOND PROVISO TO SECTION 153A (1) OF THE INCOME TAX ACT. THUS REVENUE AUTHORITIES HAD NO RIGHT IN LAW TO REVIEW / RE CONS IDER THE ISSUE OF CLAIM OF DEPRECIATION OF ASSETS LEASED TO THE ITC WHEN N O MATERIAL IN RESPECT OF THESE ISSUES WAS FOUND DURING THE COURSE OF SEAR CH. THE ASSESSEE IN OTHER WORDS HAS CHALLENGED THE VALIDITY OF ASSTT. F RAMED U/S 153A. HOWEVER LD. COUNSEL FOR THE ASSESSEE DID NOT PRESS THESE GROUNDS OF APPEAL AT THE TIME OF HEARING. HENCE THEY ARE REJEC TED. IN THE RESULT APPEALS OF THE REVENUE ARE DISMISSED. CROSS OBJECTI ONS OF THE ASSESSEE ITA NOS.4513 4514 4244 4245 4430 /DEL/09 ASSTT. YEARS 2003- 04 2004-05 2001-02 2002-03 2003-04 C O NOS. 21 22/DEL/10 ASSTT. YEARS 2001-02 2002-03 20 ARE DISMISSED. TWO APPEALS OF THE ASSESSEE IN ASSTT . YEAR 2003-04 AND 2004-05 ARE PARTLY ALLOWED. 17. ORDER PRONOUNCED IN THE OPEN COURT ON 16.4.201 0. [G.E. VEERABHDRAPPA] [RAJPAL YADAV] VICE PRESIDENT JUDICIAL MEMBER VEENA DATED COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR ITAT TRUE COPY BY ORDER DEPUTY REGISTRAR ITAT