The ACIT, C.C.-1(3),, Ahmedabad v. Royale Manor Hotels & Industries Ltd.,, Ahmedabad

ITA 1959/AHD/2007 | 2003-2004
Pronouncement Date: 13-04-2010 | Result: Dismissed

Appeal Details

RSA Number 195920514 RSA 2007
Assessee PAN AABCR5304G
Bench Ahmedabad
Appeal Number ITA 1959/AHD/2007
Duration Of Justice 2 year(s) 11 month(s) 4 day(s)
Appellant The ACIT, C.C.-1(3),, Ahmedabad
Respondent Royale Manor Hotels & Industries Ltd.,, Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 13-04-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted D
Tribunal Order Date 13-04-2010
Date Of Final Hearing 08-04-2010
Next Hearing Date 08-04-2010
Assessment Year 2003-2004
Appeal Filed On 09-05-2007
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH AHMEDABAD (BEFORE S/SHRI G. D. AGARWAL VP AND BHAVNESH SAINI JM) ITA NO.1959/AHD/2007 A. Y.: 2003-04 THE A. C. I. T. CENT. CIRCLE-1(3) ROOM NO. 304 3 RD FLOOR AAYAKAR BHAVAN ASHRAM ROAD AHMEDABAD VS ROYALE MANOR HOTELS & INDUSTRIES LTD. INTERNATIONAL AIRPORT AIRPORT ROAD AHMEDABAD PA NO. AABCR 5304 G (APPELLANT) (RESPONDENT) DEPARTMENT BY SHRI C. K. MISHRA DR ASSESSEE BY SHRI S. N. SOPARKAR AR O R D E R PER BHAVNESH SAINI: THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LEARNED CIT(A)-III AHMEDA BAD DATED 7 TH FEBRUARY 2007 FOR ASSESSMENT YEAR 2003-04 ON THE FOLLOWING GROUNDS: 1. THAT THE CIT(A) HAS ERRED IN LAW AND ON FACTS I N DELETING THE ADDITION OF RS.29 33 000/- BEING INTEREST PAYAB LE TO TFCI MADE U/S. 43B WITHOUT CONSIDERING CLAUSE (IV) OF RESTRUCTURING AGREEMENT IN ENTIRETY WHEREIN IT IS C LEARLY WRITTEN THAT THE INTEREST PAYABLE IS CONVERTED INTO TERM LOAN @ 2.5% 2. THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETIN G THE ADDITION OF RS.29 35 712/- OUT OF RS.29 82 984/- MA DE ON ACCOUNT OF EXCESS DEPRECIATION CLAIMED ON ELECTR ICAL INSTILLATION WITHOUT CONSIDERING THE FACT THAT ASSE SSEE DID NOT FURNISH ANY PROOF REGARDING BIFURCATION OF ELECTRICAL INSTILLATION BLOCKED INTO PLANT AND MACH INERY AND ELECTRICAL INSTALLATION. 2. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BOT H THE PARTIES PERUSED THE FINDINGS OF THE AUTHORITIES BELOW AND C ONSIDERED THE MATERIAL AVAILABLE ON RECORD. ITA NO.1959/AHD/2007 ROYALE MANOR HOTELS & INDUSTRIES LTD. 2 3. THE ASSESSEE IN APPEAL BEFORE THE LEARNED CIT(A) CONTESTED THE DISALLOWANCE OF RS.5 21 12 315/-U/S 43B OF THE IT A CT AND IT ALTERNATIVELY SOUGHT FOR DIRECTION TO ALLOW RS.24.1 4 LACS AS INTEREST PAID U/S 43B OF THE IT ACT. ON OTHER GROUND THE DISALLO WANCE OF DEPRECIATION OF RS.29 82 984/- ON ELECTRICAL INSTALLATIONS BY RE STRUCTURING THE CLAIM RATE ON DEPRECIATION WAS CHALLENGED. 4. ON GROUND NO.1 OF THE APPEAL THE AO NOTED THAT A TERM LOAN WAS OBTAINED FROM IDBI AND TFCI FOR STARTING THE PROJEC T. THE INTEREST ON TERM LOAN WAS HOWEVER NOT PAID AND THE ASSESSEE HAD SOUGHT AND OBTAINED REVISION OF THE TERMS AND CONDITIONS OF TH IS LOANS. ACCORDINGLY AFTER RESTRUCTURING OF THE LOANS THE ACCRUED INTER EST WAS CONVERTED INTO LOANS PAYABLE IN 10 QUARTERLY INSTALLMENTS. THE AO HOWEVER DISALLOWED THE INTEREST OF RS.5 21 13 315/- PERTAINING TO BOTH THE LOANS BY POINTING OUT THAT SECTION 43B OF THE IT ACT HAS BEEN AMENDED BY FINANCE ACT 2006 WITH RETROSPECTIVE EFFECT FROM 01-04-1989 WHE REBY CONVERSION OF INTEREST INTO LOAN WILL NOT BE ALLOWED AS DEDUCTION AT THE TIME OF SUCH CONVERSION. THE LEARNED CIT(A) ON THE SAME ANALOGY CONFIRMED THE ADDITION BECAUSE OF THE AMENDED PROVISIONS OF SECTI ON 43B OF THE IT ACT. IT HAS BEEN ARGUED THAT ALTERNATIVELY BEFORE THE LE ARNED CIT(A) THAT THE INSTALLMENTS OF THE LOANS WOULD COMMENCE FROM 01-10 -2005. THEREFORE PAYMENT OF RS.29.33 LACS IS TOWARDS INTEREST ACCRUE D AND NOT TOWARDS PRINCIPAL AND SHOULD BE ALLOWED U/S 43B OF THE IT A CT. THE LEARNED CIT(A) CONSIDERING THE EXPLANATION OF THE ASSESSEE AND MAT ERIAL ON RECORD HELD THAT SINCE THE PAYMENT OF RS.29.33 LACS WAS MADE ON 24-06-2003 AND WAS TOWARDS INTEREST AS PER RESTRUCTURING THEREFOR E THE DEDUCTION TO THAT EXTENT IS ALLOWABLE. THE FINDINGS OF THE LEARN ED CIT(A) IN PARA 7 OF HIS ORDER IS REPRODUCED AS UNDER: 7. IN RESPECT OF THE ALTERNATE GROUND IT IS SEEN T HAT THE A. O. HAS NOTED THAT THE PAYMENT OF RS.29.33 LAKHS TO TFCI ON 24/6/2003 WAS ONE OF THE 26 INSTALLMENTS TO BE PAID . THE ITA NO.1959/AHD/2007 ROYALE MANOR HOTELS & INDUSTRIES LTD. 3 COMPONENT OF INTEREST IN THIS INSTALLMENT WAS CALCU LATED BY THE AO TO BE RS.5 18 927/- AND SO HE ALLOWED THIS PAYME NT U/S. 43B. IT IS ARGUED BY THE APPELLANT THAT THE 10 EQUA L INSTILMENTS HAVE TO BE PAID WITH EFFECT FROM 1/10/2 005 AND SO PAYMENT OF RS.29 33 000/- IS ONLY AGAINST THE IN TEREST ACCRUED AND SHOULD BE ALLOWED IN FULL AND NOT PARTI ALLY AS DONE BY THE A.O. A COPY OF THE RESTRUCTURING DONE B Y TFCI DATED 2/6/03 WAS FILED (ALSO FURNISHED TO AO IN ASS ESSMENT PROCEEDINGS) TO SHOW THAT AS PER CLAUSE (III) RS.76 3 LAKHS WAS REPAYABLE IN 26 INSTALLMENTS W. E. F. 1/10/2005 TIL L 1/1/2012 WHEREAS AS PER CLAUSE (IV) FUNDING OF INTEREST WAS REPAYABLE W. E. F. 1/4/2003 IN 10 QUARTERLY INSTALLMENT TILL JULY 2005. THIS REVISED REPAYMENT SCHEDULE WAS ALSO DETAILED A S ANNEXURE 1 OF THIS RESTRUCTURING DATED 2/6/2003. SI NCE THE PAYMENT OF RS.29.33 LAKH WAS MADE ON 24/6/2003 AND WAS TOWARDS INTEREST AS PER RESTRUCTURING THERE WAS NO OCCASION FOR THE A. O. TO APPORTION IT IN INTEREST AND PRINC IPAL. AS SUCH THE PAYMENT OF RS.29.33 LAKHS IS ALLOWABLE IN FULL U/S. 43B. THE RELATED ALTERNATE GROUND OF APPEAL IS THEREFORE ALLOWED. 5. AFTER CONSIDERING THE RIVAL SUBMISSIONS OF THE P ARTIES WE DO NOT FIND IT TO BE A FIT CASE FOR INTERFERENCE. THE ASSE SSEE SPECIFICALLY PLEADED BEFORE THE AO THAT PAYMENT OF RS.29.33 LACS WAS MAD E ON 24-6-2003. THE AO HOWEVER CALCULATED THE COMPONENT OF INTERES T AT RS.5 18 927/- AND ALLOWED PART DEDUCTION. THE LEARNED COUNSEL FOR THE ASSESSEE FILED THE RESTRUCTURING AGREEMENT AND ATTACHED APPENDIX T O SHOW THAT THE INSTALLMENTS OF THE INTEREST SHALL HAVE TO BE MADE WITH EFFECT FROM 01-10-2005. THIS FINDS SUPPORT FROM THE AGREEMENT WHEREAS AS PER CLAUSE (IV) FUNDING OF INTEREST WAS PAYABLE FROM EA RLIER DATE. THE REVISED PAYMENT SCHEDULE ANNEXED WITH ANNEXURE 1 ALSO SUPP ORT THE CASE OF THE ASSESSEE. SINCE THE PAYMENT OF RS.29.33 LACS WAS MA DE ON 24-6-2003 AND WAS TOWARDS INTEREST THERE WAS NO OCCASION FOR THE AO TO APPORTION IT AS INTEREST AND PRINCIPAL. THE LEARNED CIT(A) WA S THEREFORE JUSTIFIED IN DELETING THE ADDITION. GROUND NO.1 OF THE APPEAL OF THE REVENUE IS ACCORDINGLY DISMISSED. 6. ON GROUND NO.2 OF THE APPEAL THE AO NOTED THAT DEPRECIATION ON ELECTRICAL INSTALLATIONS HAD BEEN CLAIMED @ 25% WHE REAS ALLOWABLE RATE OF ITA NO.1959/AHD/2007 ROYALE MANOR HOTELS & INDUSTRIES LTD. 4 DEPRECIATION ON ELECTRICAL INSTALLATIONS IN THE ASS ESSMENT YEAR UNDER CONSIDERATION WAS ONLY 15%. EXCESS DEPRECIATION WAS ACCORDINGLY DISALLOWED. IT WAS CLAIMED BEFORE THE LEARNED CIT(A ) THAT THE ASSESSEE WAS ENGAGED IN HOTEL BUSINESS THEREFORE ELECTRIC INSTALLATIONS THEREIN CONSTITUTED PLANT AND MACHINERY ON WHICH DEPRECIATI ON AS CLAIMED WAS ALLOWABLE. THE ASSESSEE RELIED UPON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS TAJ MAHAL HOTEL 82 ITR 44 (SC) BHARAT RADIATOR 239 ITR 608 AND THE DECISION OF THE HONBL E MADRAS HIGH COURT IN THE CASE OF GEETA HOTELS (P) LTD. VS CIT 254 ITR 649 (MAD.). THE ASSESSEE ALSO RELIED UPON THE ORDER OF ITAT AHMEDAB AD BENCH IN THE CASE OF SISTER CONCERN MARWAR HOTELS LTD. IN ITA NO .881/AHD/2006 DATED 20-10-2006 IN WHICH BY FOLLOWING THE ABOVE DECISION S THE CLAIM OF THE ASSESSEE WAS ALLOWED. THE LEARNED CIT(A) CONSIDERIN G THE ABOVE ALLOWED THE APPEAL OF THE ASSESSEE. HIS FINDING IN PARA 10 OF HIS ORDER ARE REPRODUCED AS UNDER: 10. THE CONDITIONS AND DECISION CITED ABOVE WERE PERUSED AND CONSIDERED WITH REFERENCE TO THE FACTS AND CIRC UMSTANCES OF THE APPELLANT. IT IS SEEN THAT THE RATIO OF THE DECISION OF THE SUPREME COURT IN CASE OF TAJ MAHAL HOTELS AND IN TH E CASE OF GEETA HOTELS PVT. LTD. IS APPLICABLE AND ACCEPTABLE . IT IS SEEN THAT THE APPELLANT HAD SUBMITTED A REVISED CHART DU RING ASSESSMENT PROCEEDINGS VIDE LETTER DTD. 8/3/06 CONT AINING THE BREAK UP OF THE W. D. V. OF THE BLOCK OF PLANT AND MACHINERY AND ELECTRICAL FITTINGS INCLUDED IN IT. I T IS SEEN THAT THE DISALLOWANCE REQUIRES TO BE RESTRICTED TO THE B LOCK OF ELECTRICAL FITTINGS OF RS.4 72 724/- AS GIVEN IN T HIS REVISED CHART AND THEREFORE THE DISALLOWANCE IS RESTRICTED TO RS.47 272/- AND THE BALANCE OF DISALLOWANCE OF RS.29 35 712/- IS THEREFORE DELETED. THE GROUND OF APPEAL IS ALLOWED ACCORDINGLY. 7. ON CONSIDERATION OF THE RIVAL SUBMISSIONS WE DO NOT FIND IT TO BE A FIT CASE FOR INTERFERENCE. THE TRIBUNAL IN THE CASE OF MARWAR HOTELS LTD. (SUPRA) CONSIDERING THE ABOVE DECISIONS OF THE HON BLE SUPREME COURT AND THE HONBLE MADRAS HIGH COURT (SUPRA) HELD THAT ELECTRICAL FITTINGS ITA NO.1959/AHD/2007 ROYALE MANOR HOTELS & INDUSTRIES LTD. 5 ARE PLANT. THE ISSUE IS THEREFORE COVERED IN FAVO UR OF THE ASSESSEE BY ABOVE ORDER. THIS GROUND OF THE DEPARTMENTAL APPEAL IS ACCORDINGLY DISMISSED. 8. AS A RESULT THE DEPARTMENTAL APPEAL IS DISMISSE D. ORDER PRONOUNCED ON 13-04-2010 SD/- SD/- (G. D. AGARWAL) VICE PRESIDENT (BHAVNESH SAINI) JUDICIAL MEMBER DATE : 13- 04-2010 LAKSHMIKANT/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR ITAT AHMEDABAD 6. GUARD FILE BY ORDER D Y. REGISTRAR ITAT AHMEDABAD