M/s. Oriental Hotels Ltd., CHENNAI v. ACIT, CHENNAI

ITA 2314/CHNY/2007 | 2003-2004
Pronouncement Date: 21-01-2011 | Result: Partly Allowed

Appeal Details

RSA Number 231421714 RSA 2007
Assessee PAN AAACO0728N
Bench Chennai
Appeal Number ITA 2314/CHNY/2007
Duration Of Justice 3 year(s) 2 month(s) 20 day(s)
Appellant M/s. Oriental Hotels Ltd., CHENNAI
Respondent ACIT, CHENNAI
Appeal Type Income Tax Appeal
Pronouncement Date 21-01-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted B
Tribunal Order Date 21-01-2011
Date Of Final Hearing 17-01-2011
Next Hearing Date 17-01-2011
Assessment Year 2003-2004
Appeal Filed On 01-11-2007
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL BENCH B CHENNAI BEFORE SHRI ABRAHAM P. GEORGE ACCOUNTANT MEMBER AN D SHRI GEORGE MATHAN JUDICIAL MEMBER .. I.T.A. NO. 2314/MDS/2007 ASSESSMENT YEAR :2003-04 M/S. ORIENTAL HOTELS LTD. PARAMOUNT PLAZA 47 MAHATMA GANDHI ROAD NUNGAMBAKKAM CHENNAI-600 034. V. THE ASSISTANT COMMISSIONER OF INCOME-TAX COMPANY CIRCLE-V(1) CHENNAI. (PAN:AAACO 0728N) A N D I.T.A.NO. 1974/MDS/2008 ASSESSMENT YEAR : 2004-05 THE DEPUTY COMMISSIONER V. M/S. ORIENTAL HOTEL LTD. OF INCOME-TAX NUNGAMBAKKAM COMPANY CIRCLE-V(1) CHENNAI. CHENNAI-600 034 . (APPELLANTS) (RESPONDENTS) ASSESSEE BY : SHRI R. VIJAYARAGHAVAN DEPARTMENT BY : SHRI P.B. SEKARAN O R D E R PER GEORGE MATHAN JUDICIAL MEMBER : ITA 2314/MDS/2007 IS AN APPEAL FILED BY THE ASSESS EE AGAINST THE ORDER OF THE LEARNED CIT(APPEALS)-V CHENNAI IN APPEAL NO. 8 9/2006-07 DATED 31-7-2007 FOR THE ASSESSMENT YEAR 2003-04 AND ITA NO. 1974/MD S/2008 IS AN APPEAL FILED I.T.A. NOS. 1974/MDS/2008& 2314/MDS/07 2 BY THE REVENUE AGAINST THE ORDER OF THE LEARNED CIT (APPEALS)-V CHENNAI IN APPEAL NO.658/06-07 DATED 22-2-2008 FOR THE ASSESSM ENT YEAR 2004-05. AS BOTH THE APPEALS RELATE TO THE SAME ASSESSEE AND HA VE IDENTICAL ISSUES THE SAME ARE DISPOSED OF BY THIS COMMON ORDER. 2. SHRI P.B. SEKARAN CIT-DR REPRESENTED ON BEHALF OF THE REVENUE AND SHRI R. VIJAYARAGHAVAN ADVOCATE REPRESENTED ON BEHALF O F THE ASSESSEE. 3. I.T.A.NO. 1974/MDS/2008: IN THIS APPEAL THE REVENUE HAS RAISED THE FOLLOWING GROUNDS : 1. THE ORDER OF THE LEARNED CIT(A) IS CONTRARY TO LAW AND FACTS OF THE CASE. 2.1. THE LEARNED CIT(A) ERRED IN DIRECTING THE ASS ESSING OFFICER TO MODIFY THE COMPUTATION OF DEDUCTION U/S 80HHD BY EXCLUDING THE GUARANTEE COMMISSION AND OPERATING RE CEIPTS FROM THE QUANTUM OF TOTAL TURNOVER (IT OUGHT TO BE TOTAL RECEIPTS OF THE BUSINESS) IN THE PRESCRIBED FORMULA. 2.2. HAVING REGARD TO THE FINDING GIVEN BY THE ASS ESSING OFFICER THAT THE GUARANTEE COMMISSION WAS FOR GUARA NTEE EXTENDED TO M/S. TAJ MALDIVES PVT. LTD. IN RESPECT OF BANK LOAN AND THE OPERATING RECEIPTS WAS FOR TECHNICAL AND MA NAGEMENT SERVICES FOR OPERATION OF HOTELS THE LEARNED CIT(A ) OUGHT TO HAVE SEEN THAT THE RECEIPTS ON THE IMPUGNED TWO ITE MS ARE NOTHING BUT RECEIPTS OF THE HOTEL BUSINESS OF THE A SSESSEE. 2.3. THE LEARNED CIT(A) FAILED TO APPRECIATE THAT THE DENOMINATOR IN THE PRESCRIBED FORMULA FOR COMPUTATI ON OF DEDUCTION U/S. 80HHD BEING CLASSIFIED AS TOTAL REC EIPTS OF THE I.T.A. NOS. 1974/MDS/2008& 2314/MDS/07 3 BUSINESS CARRIED ON BY THE ASSESSEE THE IMPUGNED TWO ITEMS OF RECEIPT ARE TO BE INCLUDED IN THE DENOMINATOR IN THE PRESCRIBED FORMULA. 2.4. THE LEARNED CIT(A) OUGHT TO HAVE SEEN THAT TH E DECISIONS RENDERED IN THE CONTEXT OF SEC. 80HHC WILL NOT BE A PPLICABLE TO SEC. 80HHD SINCE BOTH THE SECTIONS ARE NOT PARI MATERIA TO EACH OTHER OWING TO THE FACT THAT THE LEGISLATURE HAS USED THE WORDS TOTAL RECEIPTS OF THE BUSINESS IN SEC. 80HH D(3) TO CATEGORISE THE DENOMINATOR PART OF THE FORMULA UNLI KE THE TERM TOTAL TURNOVER OF BUSINESS USED IN SEC. 80HHC(3). 3.1. THE LEARNED CIT(A) ERRED IN DIRECTING THE ASS ESSING OFFICER TO GRANT DEPRECIATION AT THE RATE OF 25% ON THE ELECTRICAL FITTINGS WHICH FORM AN INTEGRAL PART OF THE PLANT A ND MACHINERY. 3.2. THE LEARNED CIT(A) FAILED TO APPRECIATE THAT ELECTRICAL FITTINGS IS SPECIFICALLY MENTIONED ALONGWITH FURNIT URE AND FITTINGS IN S.NO.II OF THE DEPRECIATION TABLE WHICH IS ELIG IBLE FOR DEPRECIATION AT 15% AND HENCE HAVING REGARD TO THE LEGAL PRINCIPLE GENERALIA SPECIALIBUS NON DEROGANT TH E LEARNED CIT(A) OUGHT TO HAVE UPHELD THE ACTION OF THE ASSES SING OFFICER. 4.1. THE LEARNED CIT(A) ERRED IN HOLDING THAT PROJ ECT EXPENSES IN RESPECT OF PROJECT AT COIMBATORE WOULD BE AN ALLOWABLE BUSINESS EXPENDITURE. 4.2. THE LEARNED CIT(A) FAILED TO APPRECIATE THAT THE ASSESSEE ITSELF VIDE ITS LETTER DATED 9.8.2006 ADDRESSED TO THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS HAD INDICATED THAT THE PROJECT AT COIMBATORE DID NOT FR UCTIFY AND THE EXPENSES IN RELATION THERETO WERE DEBITED TO P & L ACCOUNT. I.T.A. NOS. 1974/MDS/2008& 2314/MDS/07 4 4.3. IN THE LIGHT OF THE FACTS OF THE CASE HAVING REGARD TO THE DECISION OF THE HON'BLE MADRAS HIGH COURT IN THE CA SE OF E.I.D. PARRY (I) LTD. V. CIT (257 ITR 253) AND THE DECISIO N OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF TRIVENI ENGI NEERING WORKS LTD. V. CIT (232 ITR 639) THE LEARNED CIT(A) OUGHT TO HAVE UPHELD THE ACTION OF THE ASSESSING OFFICER. 4. IN REGARD TO GROUNDS NO. 2.1 TO 2.4 IT WAS SUBMI TTED BY THE LEARNED DR THAT THE ASSESSEE IS IN THE BUSINESS OF OPERATING H OTELS. IT WAS THE SUBMISSION THAT WHEN COMPUTING THE DEDUCTION U/S. 80HHD OF THE INCOME TAX ACT 1961 THE ASSESSING OFFICER HAD INCLUDED THE GUARANTEE CO MMISSION RECEIVED BY THE ASSESSEE AS ALSO THE OPERATING RECEIPTS IN THE TOTA L TURNOVER. IT WAS THE SUBMISSION THAT THE GUARANTEE COMMISSION WAS ON ACC OUNT OF THE COMMISSION RECEIVED BY THE ASSESSEE FOR THE GUARANTEE GIVEN BY THE ASSESSEE TO M/S. TAJ MALDIVES PVT. LTD. AND THE OPERATING FEE WAS THE RE CEIPTS RECEIVED BY THE ASSESSEE FOR THE TECHNICAL AND MANAGEMENT SERVICES RENDERED BY THE ASSESSEE IN REGARD TO THE OPERATION OF THE HOTEL OWNED BY M/S. TAJ MALDIVES PVT. LTD. IT WAS THE SUBMISSION THAT M/S. TAJ MALDIVES PVT. LTD WHIC H INCLUDED PERMISSION TO USE THE TAJ BRAND NAME DEPUTING TRAINED EMPLOYEES A SSISTING IN POLICY MAKING BUDGETARY CONTROL AND INSTITUTION OF CONTROL AND MO NITORING MECHANISMS. IT WAS THE SUBMISSION THAT THE GUARANTEE COMMISSION AND TH E OPERATING FEES RECEIVED BY THE ASSESSEE WERE BUSINESS RECEIPTS AND CONSEQUE NTLY THE SAME WERE LIABLE TO I.T.A. NOS. 1974/MDS/2008& 2314/MDS/07 5 BE INCLUDED IN THE TOTAL RECEIPTS OF THE BUSINESS. IT WAS THE SUBMISSION THAT AS PER THE PROVISIONS OF SECTION 80HHD(3) WHAT IS PROV IDED IS THE TOTAL RECEIPTS OF THE BUSINESS CARRIED ON BY THE ASSESSEE AND AS THE GUARANTEE COMMISSION AND THE OPERATING FEE RECEIVED BY THE ASSESSEE WERE IN THE NATURE OF RECEIPTS OF THE BUSINESS AND WAS EARNED IN THE COURSE OF THE BUSINE SS OF THE ASSESSEE THE SAME WERE LIABLE TO BE TREATED AS PART OF THE TURNO VER. IT WAS THE SUBMISSION THAT THE LEARNED CIT(A) ERRED IN HOLDING THAT THE S AME WAS EXCLUDABLE IN VIEW OF THE DECISION OF THE HON'BLE SUPREME COURT IN THE CA SE OF CIT V. K. RAVINDRANATHAN NAIR REPORTED IN 295 ITR 228. IT WA S THE SUBMISSION THAT THE LEARNED CIT(A) HAS MISINTERPRETED THE DECISION OF T HE HON'BLE SUPREME COURT IN THE CASE OF K.RAVINDRANATHAN NAIR TO SAY THAT THE R ECEIPTS ENTITLED FOR THE INCENTIVE DEDUCTIONS MUST HAVE A CLOSE AND IMMEDIAT E NEXUS TO THE ACTIVITY ELIGIBLE FOR DEDUCTION. IT WAS THE SUBMISSION THAT THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF K. RAVINDRANATHAN NAIR DID NOT HOLD THAT SUCH RECEIPTS WAS EXCLUDABLE FROM THE TOTAL TURNOVER. I T WAS THE SUBMISSION THAT AS PER THE SAID SUPREME COURT DECISION FOR THE PURPOSE OF WORKING OUT THE FORMULA AND IN ORDER TO AVOID DISTORTION IN ARRIVING AT THE EXPORT PROFITS CLAUSE (BAA) STOOD INSERTED TO SAY THAT ALTHOUGH INCENTIVE PROFITS AND INDEPENDENT INCOMES CONSTITUTED PART OF THE GROSS TOTAL INCOME THEY HA D TO BE EXCLUDED FROM GROSS TOTAL INCOME BECAUSE SUCH RECEIPTS HAD NO NEXUS WIT H THE EXPORT TURNOVER. IT WAS THE SUBMISSION THAT FOR THE PURPOSE OF SECTION 80HHD(3) THE WORDINGS WERE I.T.A. NOS. 1974/MDS/2008& 2314/MDS/07 6 BEAR TO THE TOTAL RECEIPTS OF THE BUSINESS CARRIED ON THE ASSESSEE AND NOT THE TOTAL TURNOVER. IT WAS THE SUBMISSION THAT THE OR DER OF THE LEARNED CIT(A) WAS LIABLE TO BE REVERSED. 5. IN REPLY THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED THAT THIS ISSUE HAD COME UP FOR CONSIDERATION FOR THE ASSESSMENT YE AR 2001-02 AND THE TRIBUNAL IN ITS ORDER IN ITA NO. 980/MDS/2006 DATED 9-4-2009 HAD RESTORED THE ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR RE-ADJUDICATI ON. HE VEHEMENTLY SUPPORTED THE ORDER OF THE LEARNED CIT(A). 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. A PER USAL OF THE PROVISIONS OF SECTION 80HHD(3) CLEARLY SHOWS THAT THE SAID PROVIS ION IS THE COMPUTATION PROVISION FOR THE DEDUCTION U/S. 80HHD. THE SAID S UB-SECTION PROVIDES FOR THE FORMULA FOR THE COMPUTATION OF THE DEDUCTION. AS P ER THE SAID FORMULA THE PROFITS DERIVED FROM THE SERVICES PROVIDED TO THE F OREIGN TOURISTS IS THE AMOUNT WHICH BEARS TO THE PROFITS OF THE BUSINESS AS COMPU TED UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION THE SAME PROPO RTION AS THE RECEIPTS SPECIFIED IN SUB-SECTION (2) BEING THE RECEIPTS WHI CH ARE BROUGHT INTO INDIA BY THE ASSESSEE IN REGARD TO THE SERVICES PROVIDED TO THE FOREIGN TOURISTS AS REDUCED BY THE PAYMENTS REFERRED TO UNDER SUB-SECTION (2A) THE RESULTANT OF WHICH BEAR TO THE TOTAL RECEIPTS OF THE BUSINESS CARRIED ON BY THE ASSESSEE. THUS THE PROPORTION IS MADE ON THE BASIS OF THE TOTAL RECEIP TS OF THE BUSINESS CARRIED ON BY THE ASSESSEE. A PERUSAL OF THE PROVISIONS OF SECTI ON 80HHC(3) SHOWS THAT THE I.T.A. NOS. 1974/MDS/2008& 2314/MDS/07 7 WORDS USED THEREIN AS BEARS TO THE TOTAL TURNOVER OF THE BUSINESS CARRIED ON BY THE ASSESSEE. THE HON'BLE SUPREME COURT IN THE CA SE OF K. RAVINDRANATHAN NAIR HAS INTERPRETED THE TERM BEARS TO THE TOTAL TURNOV ER OF THE BUSINESS CARRIED ON BY THE ASSESSEE TO SAY THAT ONLY SUCH RECEIPTS WHI CH HAD NO NEXUS WITH THE EXPORT TURNOVER WERE TO BE EXCLUDED. APPLYING THE SAME PRINCIPLES IT IS NOTICED THAT THE GUARANTEE COMMISSION RECEIVED BY THE ASSES SEE AND THE OPERATING RECEIPTS RECEIVED BY THE ASSESSEE ARE CONNECTED TO THE BUSINESS OF THE ASSESSEE ON WHICH THE ASSESSEE IS CLAIMING THE DEDUCTION U/S . 80HHD OF THE ACT. AS THE SAID RECEIPTS ARE IN RELATION TO THE BUSINESS CARRI ED ON BY THE ASSESSEE THE RECEIPTS FROM WHICH THE ASSESSEE IS CLAIMING THE DE DUCTION 80HHD THE SAID TWO RECEIPTS ARE LIABLE TO BE INCLUDED IN THE TOTAL REC EIPTS RECEIVED BY THE ASSESSEE. IN THE CIRCUMSTANCES THE FINDING OF THE LEARNED CI T(A) STANDS REVERSED AND THE GROUNDS 2.1 TO 2.4 OF THE REVENUES APPEAL STAND AL LOWED. 7. IN REGARD TO GROUNDS 3.1 AND 3.2 IT WAS SUBMITTE D BY THE LEARNED DR THAT THE ISSUE WAS AGAINST THE ACTION OF THE LEARNED CIT (A) IN DIRECTING THE ASSESSING OFFICER TO GRANT DEPRECIATION @ 25% ON THE ELECTRIC AL FITTINGS WHICH FORM AN INTEGRAL PART OF THE PLANT AND MACHINERY. IT WAS T HE SUBMISSION THAT THE DETAILS OF THE SAME WERE NOT AVAILABLE AND CONSEQUENTLY THE SAME WAS LIABLE TO BE RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR R E-ADJUDICATION AFTER VERIFYING AS TO WHETHER THE ELECTRICAL FITTINGS WERE STAND ALONE FITTINGS OR THEY FORM PART OF I.T.A. NOS. 1974/MDS/2008& 2314/MDS/07 8 THE INTEGRAL PART OF THE PLANT AND MACHINERY. HE V EHEMENTLY SUPPORTED THE ORDER OF THE ASSESSING OFFICER. 8. IN REPLY THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED THAT THE ELECTRICAL FITTINGS ON WHICH DEPRECIATION HAD BEEN CLAIMED AT 25% AND ALLOWED BY THE LEARNED CIT(A) WERE IN THE NATURE OF WIRES AND OTHER FITTINGS WHICH FORM AN INTEGRAL PART OF THE PLANT AND MACHINERY. HE VEHEM ENTLY SUPPORTED THE ORDER OF THE LEARNED CIT(A). 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. A PER USAL OF THE ORDER OF THE ASSESSING OFFICER AS ALSO THAT OF THE LEARNED CIT(A ) CLEARLY SHOWS THAT THE NATURE OF THE ELECTRICAL FITTINGS HAVE NOT BEEN LOOKED INT O BY EITHER OF THE AUTHORITIES BELOW. IF THE ELECTRICAL FITTINGS ARE STAND ALONE ITEMS THEN OBVIOUSLY DEPRECIATION ON THE SAME IS TO BE GRANTED AT 15%. HOWEVER IF T HEY FORM INTEGRAL PART OF THE PLANT AND MACHINERY THEN DEPRECIATION WOULD BE AT 25%. AS THE DETAILS OF THE SAME ARE NOT AVAILABLE BEFORE US WE ARE OF THE VIE W THAT THIS ISSUE REQUIRES TO BE RESTORED TO THE FILE OF THE ASSESSING OFFICER FO R RE-ADJUDICATION AFTER VERIFYING THE CORRECT FACTS AND WE DO SO. IN THE CIRCUMSTANC ES GROUNDS 3.1 & 3.2 OF THE REVENUES APPEAL STAND PARTLY ALLOWED FOR STATISTIC AL PURPOSES. 10. IN REGARD TO GROUND NO.4.1 4.2 & 4.3 IT WAS SU BMITTED BY THE LEARNED DR THAT THE ASSESSEE HAD INCURRED A PROJECT DEVELOPMEN T EXPENDITURE AT COIMBATORE. IT WAS THE SUBMISSION THAT THE ASSESSE E HAD SUBSEQUENTLY ABANDONED THE PROJECT. IT WAS THE SUBMISSION THAT THE EXPENDITURE WAS IN THE I.T.A. NOS. 1974/MDS/2008& 2314/MDS/07 9 NATURE OF ARCHITECT FEE AND SOIL TESTING CHARGES IN REGARD TO A PROJECT WHICH THE ASSESSEE HAD PROPOSED TO START AT COIMBATORE. IT W AS THE SUBMISSION THAT THE PROJECT HAD TO BE SCRAPPED AS THE TITLE TO THE LAND ON WHICH THE PROJECT WAS TO BE STARTED WAS HELD TO BE DEFECTIVE DUE TO A SUPREME C OURT ORDER WHEREIN IT HAD BEEN HELD THAT THE SELLER HAD NO TITLE TO THE PROPE RTY. IT WAS THE SUBMISSION THAT AS THE ASSESSEE HAD ABANDONED THE PROJECT THE CLAIM OF REVENUE EXPENDITURE WAS NOT ALLOWED BY THE ASSESSING OFFICER AND BY REL YING UPON THE DECISION OF THE HON'BLE MADRAS HIGH COURT IN THE CASE OF CIT V. SOF T BEVERAGES (P) LTD. REPORTED IN 245 ITR 194 AS ALSO THE DECISION OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF GUJARAT MINERAL DEVELOPMENT CORPORATION REPORTED IN 143 ITR 822 TREATED THE LOSS AS CAPITAL IN NATURE. IT WAS THE SUBMISSION T HAT THE LEARNED CIT(A) HAD BY RELYING UPON THE DECISION OF THE HON'BLE MADRAS HIG H COURT IN THE CASE OF SESHASAYEE PAPER AND BOARDS REPORTED IN 243 ITR 421 AS ALSO THE DECISION OF THE HON'BLE RAJASTHAN HIGH COURT IN THE CASE OF CIT V. ANJANI KUMAR COMPNAY LIMITED REPORTED IN 259 ITR 114 DIRECTED THE ASSESS ING OFFICER TO ALLOW THE LOSS AS A REVENUE EXPENDITURE. IT WAS THE SUBMISSION TH AT THE EXPENDITURE INCURRED BY THE ASSESSEE WAS CAPITAL IN NATURE INSOFAR AS IT WAS TOWARDS THE SOIL TESTING AND ARCHITECT FEE FOR THE PUTTING UP OF A BUILDING AND CONSEQUENTLY SAME WAS LIABLE TO BE HELD AS A CAPITAL EXPENDITURE AND THE LOSS THEREON AS A CAPITAL LOSS. THE LEARNED DR FURTHER RELIED UPON THE DECISION OF THE HON'BLE MADRAS HIGH COURT IN THE CASE OF E.I.D. PARRY (INDIA) LTD. V. CI T REPORTED IN 257 ITR 253. I.T.A. NOS. 1974/MDS/2008& 2314/MDS/07 10 11. IN REPLY THE LEARNED AUTHORISED REPRESENTATIVE VEHEMENTLY SUPPORTED THE ORDER OF THE LEARNED CIT(A). IT WAS THE SUBMISSION THAT THE EXPENDITURE INCURRED BY THE ASSESSEE WAS ON ACCOUNT OF AN EXISTING BUSIN ESS AND NOT OF A NEW BUSINESS. 12. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. A PE RUSAL OF THE DECISION OF THE HON'BLE MADRAS HIGH COURT IN THE CASE OF E.I.D. PARRY (INDIA) LTD. REFERRED TO SUPRA CLEARLY SHOWS THAT IN THE SAID CASE THE ASSE SSEE WANTED TO SET UP A NEW PROJECT FOR THE MANUFACTURE OF METHANOL AT ENNORE. THE ASSESSEE HAD INCURRED VARIOUS EXPENDITURES AND THE PROJECT WAS SUBSEQUENT LY ABANDONED. THE HON'BLE MADRAS HIGH COURT HELD THAT IT WAS CLEAR FROM THE A SSESSEES OWN CASE THAT THE EXPENDITURE WAS INCURRED FOR THE PURPOSE OF SETTING UP OF A NEW PROJECT AND THE SUBSEQUENT ABANDONMENT OF THAT PROJECT DID NOT ON T HAT SCORE CONVERT WHAT WAS AN EXPENDITURE IN THE NATURE OF CAPITAL EXPENDITURE INTO A REVENUE EXPENDITURE. APPLYING THE SAID PRINCIPLES TO THE CASE OF THE ASS ESSEE HEREIN IT IS NOTICED THAT THE EXPENDITURE INCURRED BY THE ASSESSEE WAS IN REL ATION TO A NEW PROJECT AT COIMBATORE. TRUE THE ASSESSEE IS IN THE BUSINESS OF RUNNING HOTEL BUSINESS. THE PROJECT AT COIMBATORE IS NOT AN EXPANSION OR AN EXTENSION OF THE HOTEL BUSINESS OF THE ASSESSEE. EACH HOTEL PUT UP BY THE ASSESSEE IS A DIFFERENT PROJECT INSOFAR AS SOME LICENCES ARE REQUIRED AND S EPARATE SANCTIONS HAVE TO BE TAKEN. THE PERMISSIONS AND SANCTION FOR THE PROJEC T AT COIMBATORE ARE NOT AN EXTENSION OF THE PERMISSION OR THE LICENCE AVAILABL E TO THE ASSESSEE IN REGARD TO I.T.A. NOS. 1974/MDS/2008& 2314/MDS/07 11 ITS BUSINESS OF RUNNING OF HOTELS. AS IT IS THE PR OJECT AT COIMBATORE WHICH IS A SEPARATE PROJECT AS SUCH WHICH HAS BEEN ABANDONED AND THE EXPENDITURE INCURRED BY THE ASSESSEE ON SUCH PROJECT BEING THE SOIL TESTING FEE AND ARCHITECTS FEE WHICH ARE OBVIOUSLY FOR THE PURPOSE OF PUTTING UP A BUILDING OR A HOTEL WHICH ITSELF IS A CAPITAL ASSET THE EXPENDITURE INCURRED IS IN THE CAPITAL FIELD AND THE LOSS ON THE ABANDONMENT ALSO FALLS IN THE CAPITAL FIELD. IN THE CIRCUMSTANCES GROUNDS 4.1 4.2 AND 4.3 OF THE REVENUES APPEAL STAND ALLO WED AND THE ORDER OF THE LEARNED CIT(A) IS REVERSED ON THIS ISSUE AND THAT O F THE ASSESSING OFFICER RESTORED. 13. IN THE CIRCUMSTANCES THE APPEAL OF THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 14. ITA NO. 2314/MDS/2007: IN REGARD TO THE ASSESSEES APPEAL IN REGARD TO GROUNDS 2 AND 3 IT WAS SUBMITTED BY THE L EARNED AUTHORISED REPRESENTATIVE THAT THE GROUNDS WERE AGAINST THE AC TION OF THE LEARNED CIT(A) IN CONFIRMING THE DISALLOWANCE OF THE ASSESSEES CLAIM OF DEDUCTION U/S. 35D. IT WAS FAIRLY AGREED BY BOTH THE SIDES THAT THE ISSUE WAS HELD AGAINST THE ASSESSEE IN THE ASSESSEES OWN CASE IN ITA NOS. 89 90 AND 1 341/MDS/2003 DATED 30-06- 2005 WHEREIN IN PARA 33 OF THE SAID ORDER THE CO-OR DINATE BENCH OF THIS TRIBUNAL HAS HELD AS FOLLOWS : 33. WE HAVE HEARD THE RIVAL SUBMISSIONS ON THIS IS SUE. IT TRANSPIRES FROM THE RECORDS THAT THE ASSESSEE IS IN THE I.T.A. NOS. 1974/MDS/2008& 2314/MDS/07 12 BUSINESS OF HOTEL. AS PER THE CONTENTION OF THE DE PARTMENT HOTEL IS NOT AN INDUSTRIAL UNDERTAKING. THE ASSESS EES PLEA IS THAT THE CIT(APPEALS) HAS ALLOWED THE EXPENDITURE O N SHARES IN ONE YEAR UNDER SEC. 35D OF THE ACT AND THE SAME SHOULD BE SUBSEQUENTLY ALLOWED IN ALL THE YEARS. WE HAVE GON E THROUGH THE DECISION OF THE HON'BLE KERALA HIGH COURT IN HO TEL & ALLIED TRADES P. LTD. (SUPRA) WHICH WAS SUBSEQUENTLY AFFIR MED BY THE HON'BLE APEX COURT IN 245 ITR 538 WHEREIN IT HAS HE LD THAT HOTEL IS NOT AN INDUSTRIAL UNDERTAKING. ACCORDINGL Y . THE ISSUE IS AS TO WHETHER PRELIMINARY EXPENSES INCURRED FOR RAISING FUNDS THROUGH PUBLIC ISSUE SHOULD BE ALLOWED UNDER SEC. 35D OF THE ACT OR NOT. THE DEDUCTION UNDER SEC. 35D OF THE ACT IS ALLOWED ONLY IF THE EXPENDITURE IS IN CONNEC TION WITH EXPANSION OF INDUSTRIAL UNDERTAKING OR SETTING UP O F A NEW INDUSTRIAL UNDERTAKING. THE ACTIVITY OF HOTEL BUSI NESS DOES NOT INVOLVE AN ACTIVITY OF SETTING UP OF AN INDUSTRY AN D EMPLOYMENT OF LABOUR WHICH IS A CONDITION PRECEDENT FOR AN ACTIVITY TO BE CALLED INDUSTRIAL ACTIVITY. WE FIND THAT THIS ISSUE IS COVERED BY THE DECISION OF THE HON'BLE SUPREME C OURT REPORTED IN 245 ITR 538. RESPECTFULLY FOLLOWING TH E SAID DECISION WE DECIDE THIS ISSUE AGAINST THE ASSESSEE AND IN FAVOUR OF THE REVENUE. IN THE CIRCUMSTANCES AS IT IS NOTICED THAT THE ISSU E IS IDENTICAL AND AS NO NEW FACTS HAVE BEEN PLACED BEFORE US RESPECTFULLY FOLL OWING THE DECISION OF THE CO- I.T.A. NOS. 1974/MDS/2008& 2314/MDS/07 13 ORDINATE BENCH OF THIS TRIBUNAL GROUNDS NO.2 AND 3 OF THE ASSESSEES APPEAL STAND DISMISSED. 15. IN REGARD TO GROUNDS 4 TO 7 OF THE ASSESSEES A PPEAL IT WAS SUBMITTED BY THE LEARNED AUTHORISED REPRESENTATIVE THAT THE ISSU E WAS AGAINST THE ACTION OF THE LEARNED CIT(A) IN HOLDING THAT THE INTEREST INCOME IS TO BE EXCLUDED WITHOUT APPRECIATING THAT THE ENTIRE INTEREST INCOME AROSE ON ACCOUNT OF THE BUSINESS TRANSACTION AND HENCE CONSTITUTED BUSINESS INCOME. IT WAS FAIRLY AGREED BY BOTH THE SIDES THAT THE ISSUE WAS SQUARELY COVERED AGAIN ST THE ASSESSEE IN PARA 12.4 OF THE DECISION OF THE CO-ORDINATE BENCH OF THIS TR IBUNAL IN THE ASSESSEES OWN CASE IN ITA NO. 252/MDS/99 DATED 30-06-2005 WHEREIN IT HAS BEEN HELD AS FOLLOWS: 12.4. THIS INTEREST INCOME FROM LENDING TO THE SU BSIDIARY COMPANIES IS NOT DERIVED FROM THE BUSINESS AS HELD BY THE APEX COURT IN PANDIAN CHEMICALS (SUPRA). THERE IS NO DI RECT OR MINIMUM NEXUS WITH THE ASSESSEES BUSINESS AS THE INTEREST IS EARNED FROM OTHER SOURCES. RESPECTFULLY FOLLOWING THE DECISION OF THE APEX COURT CITED SUPRA WE HOLD THAT THE INTEREST INCOME EARNE D FROM LENDING TO THE SUBSIDIARY COMPANIES OF THE ASSESSEE IS NOTHING BUT INCOME FROM OTHER SOURCES AND IT HAS NO CONNECTION WHATSOEVER W ITH THE BUSINESS INCOME. IN VIEW OF THIS WE DECIDE THIS ISSUE AGAI NST THE ASSESSEE AND IN FAVOUR OF THE REVENUE. WITH REGARD TO THE A LTERNATIVE PLEA OF THE ASSESSEE THAT THE INTEREST RECEIPTS ARE TO BE E XCLUDED THEN THE CORRESPONDING EXPENDITURE INCURRED INCLUDING ON BO RROWINGS FOR EARNING THIS INCOME SHOULD ALSO BE EXCLUDED. WE AR E OF THE VIEW I.T.A. NOS. 1974/MDS/2008& 2314/MDS/07 14 THAT IF THIS HAS ALREADY CLAIMED IN THE PROFIT AS B USINESS EXPENDITURE AND IT IS ALLOWED THEN IT SHOULD NOT BE ALLOWED FR OM INTEREST RECEIPTS IN OTHER WORDS NETTING OF INCOME CANNOT BE DONE AN D IF IT IS NOT ALLOWED THEN IT SHOULD NOT BE ALLOWED FROM INTERES T RECEIPTS. ACCORDINGLY WE SET ASIDE THE MATTER TO THE FILE OF THE ASSESSING OFFICER WHO WILL EXAMINE THE ACCOUNTS OF THE ASSESS EE AND IN TERMS OF THE ABOVE DIRECTIONS HE WILL DECIDE THIS ISSUE. IN THE CIRCUMSTANCES RESPECTFULLY FOLLOWING THE DE CISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL AND AS NO FRESH FACTS HAVE BEEN PL ACED BEFORE US THE GROUNDS 4 TO 7 OF THE ASSESSEES APPEAL STAND DISMISSED AND T HE ORDER OF THE LEARNED CIT(A) ON THIS ISSUE STANDS CONFIRMED. 16. IN REGARD TO GROUNDS 8 AND 9 IT WAS SUBMITTED B Y THE LEARNED AUTHORISED REPRESENTATIVE THAT THE ISSUE WAS AGAINST THE ACTIO N OF THE LEARNED CIT(A) IN CONFIRMING THAT THE AMOUNT RECEIVED BY THE ASSESSEE FROM M/S BRITISH AIRLINES TOWARDS SETTLEMENT OF THE BILLS OF STAY OF THEIR CR EW IS NOT TO BE INCLUDED IN THE FOREIGN EXCHANGE RECEIPTS OF THE ASSESSEE FOR THE P URPOSE OF SECTION 80HHD. IT WAS FAIRLY AGREED BY BOTH THE SIDES THAT THIS ISSUE WAS SQUARELY COVERED AGAINST THE ASSESSEE BY THE DECISION OF THE CO-ORDINATE BEN CH OF THIS TRIBUNAL IN ITA NO. 252/MDS/1999 DATED 30-06-2005 VIDE PARA 27 WHEREIN IT HAS BEEN HELD AS FOLLOWS : 27. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH T HE PARTIES ON THIS ISSUE. IT IS A FACT THAT CREWS OF VARIOUS I.T.A. NOS. 1974/MDS/2008& 2314/MDS/07 15 AIRLINES STAYED IN THE HOTELS. WE HAVE OBSERVED FR OM THE RECORDS THAT THIS CLAIM WAS NOT MADE IN ITS ORIGINA L ASSESSMENT. THE ASSESSEE HAS RAISED THIS ISSUE AT THE TIME OF RE-ASSESSMENT FOR THE FIRST TIME. MOREOVER THE ASSESSEE HAS NOT PRODUCED THE DISCLAIMER CERTIFICAT E IN ACCORDANCE WITH THE PROVISIONS OF SUB-SEC. (2A) OF SEC. 80HHD OF THE ACT AND THERE IS NO EVIDENCE TO SHOW T HAT THE CREWS OF VARIOUS FOREIGN AIRLINES ARE TOURISTS BUT THEY HAVE COME AS EMPLOYEES OF THE AIRLINES AND THIS PARTICULAR SECTION IS APPLICABLE TO THE FOREIGN TOU RISTS OR TOUR OPERATORS AND THE ASSESSEE SHALL RECEIVE FROM THESE TOURISTS THE AMOUNT IN CONVERTIBLE FOREIGN EXCHANGE OR THE ASSESSEE SHALL COMPLY THE REQUIREMENT SPECIFIED IN EXPLANATION 1 TO SEC. SUB-SEC.1 OF SEC. 80HHD OF TH E ACT. FURTHER PARA 4 OF THE BOARDS CIRCULAR NO. 731 WHI CH READS AS FOLLOWS DISENTITLES THE CLAIM OF THE ASSES SEE: THE MATTER HAS BEEN EXAMINED. THE CONDITION FOR DEDUCTION U/S 80-O IS THAT THE RECEIPT SHOULD BE IN CONVERTIBLE FOREIGN EXCHANGE. WHEN THE COMMISSION IS REMITTED ABROAD IT SHOULD BE IN A CURRENCY THAT IS REGARDED AS CONVERTIBLE FOREIGN EXCHANGE ACCORDING TO FERA. THE BOARD ARE OF THE VIEW THAT IN SUCH CASES THE RECEIPT OF BROKERAGE BY A REINSURANCE AGENT IN INDIA FROM THE GROSS PREMIA BEFORE REMITTANCE TO HIS FOREIGN PRINCIPALS WILL ALSO I.T.A. NOS. 1974/MDS/2008& 2314/MDS/07 16 BE ENTITLED TO THE DEDUCTION U/S 90-O OF THE ACT. IN VIEW OF THE ABOVE DISCUSSION THE AMOUNT RECEIVE D FROM THE BRITISH AIRLINES TOWARDS SETTLEMENT OF BIL LS OF STAY OF THEIR CREWS CANNOT BE INCLUDED IN FOREIGN EXCHANGE RECEIPTS OF THE ASSESSEE FOR THE PURPOSE O F COMPUTATION OF DEDUCTION UNDER SEC. 80HHD OF THE AC T. AS IT IS NOTICED THAT THE ISSUE IS SQUARELY COVERED AGAINST THE ASSESSEE IN THE ASSESSEES OWN CASE REFERRED TO SUPRA AND AS NO F RESH FACTS HAVE BEEN PLACED BEFORE US TO DIFFER FROM THE VIEW TAKEN BY THE CO-O RDINATE BENCH OF THIS TRIBUNAL IN THE ASSESSEES OWN CASE THE FINDING OF THE LEAR NED CIT(A) STANDS CONFIRMED AND CONSEQUENTLY GROUNDS 8 AND 9 OF THE ASSESSEES APPEAL STAND DISMISSED. 17. IN REGARD TO GROUNDS 9 AND 10 IT WAS SUBMITTED BY THE LEARNED AUTHORISED REPRESENTATIVE THAT THE ISSUE WAS SIMILAR TO THE IS SUE IN THE REVENUES APPEAL IN ITA NO. 1974/MDS/2008 AND THE ARGUMENTS IN RELATION TO THE GUARANTEE COMMISSION AND OPERATING RECEIPTS WERE IDENTICAL. IT WAS THE SUBMISSION THAT IN RELATION TO THE FOREIGN EXCHANGE FLUCTUATION AND TH E PROVISION WRITTEN BACK IT WAS SUBMITTED THAT THE ISSUE MUST BE RESTORED TO THE FI LE OF THE ASSESSING OFFICER IN LINE WITH THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2001-02 IN ITA NO. 980/MDS/2006 DATED 9-4- 2009. I.T.A. NOS. 1974/MDS/2008& 2314/MDS/07 17 18. IN REPLY THE LEARNED DR VEHEMENTLY SUPPORTED T HE ORDER OF THE LEARNED CIT(A). 19. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. IN R ELATION TO THE ISSUE OF OPERATING RECEIPTS AND GUARANTEE COMMISSION TO BE I NCLUDED IN THE TOTAL RECEIPTS OF THE BUSINESS OF THE ASSESSEE FOR THE PURPOSE OF COMPUTING THE DEDUCTION U/S. 80HHD IN THE REVENUES APPEAL IN ITA NO. 1974/MDS/2 008 SUPRA WE HAVE HELD THAT THE SAME IS LIABLE TO BE INCLUDED IN THE TOTAL RECEIPTS FROM THE BUSINESS. IN THE CIRCUMSTANCES THE FINDING OF THE LEARNED CIT(A) ON THIS ISSUE STANDS CONFIRMED. 20. IN REGARD TO THE ISSUE OF FOREIGN EXCHANGE FLUC TUATION AND PROVISION WRITTEN BACK AS IT IS NOTICED THAT THE ISSUE IS SQU ARELY COVERED BY THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE ASSES SEES OWN CASE FOR THE ASSESSMENT YEAR 2001-02 IN ITA NO. 980/MDS/2006 DAT ED 9-4-2009 THE ISSUES ARE RESTORED TO THE FILE OF THE ASSESSING OFFICER F OR RE-ADJUDICATION IN LINE WITH THE SAID DECISION. IN THE CIRCUMSTANCES GROUNDS 9 AND 10 OF THE ASSESSEES APPEAL ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. 21. IN REGARD TO GROUND NO.11 IT WAS SUBMITTED BY T HE LEARNED AUTHORISED REPRESENTATIVE THAT THE ISSUE WAS IDENTICAL TO THE ISSUE IN GROUND NOS. 3.1 AND 3.2 OF THE REVENUES APPEAL IN ITA NO. 1974/MDS/200 8 IN REGARD TO THE ISSUE OF DEPRECIATION ON THE ELECTRICAL FITTINGS. BOTH SIDE S AGREED THAT THE DECISION IN THE REVENUES APPEAL IN REGARD TO GROUNDS 3.1 AND 3.2 I N ITA NO. 1974/MDS/2008 I.T.A. NOS. 1974/MDS/2008& 2314/MDS/07 18 WOULD APPLY HERE ALSO. AS WE HAVE ALREADY RESTORED THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR VERIFYING AS TO WHETHER THE E LECTRICAL FITTINGS ARE ON STAND ALONE FITTINGS OR AN INTEGRAL PART OF THE PLANT AND MACHINERY AND TO RE-DECIDE THE ISSUE OF DEPRECIATION AFTER VERIFYING THE FACTS TH E ISSUE IN THIS GROUND IS ALSO RESTORED TO THE FILE OF THE ASSESSING OFFICER WITH IDENTICAL DIRECTIONS. 22. IN REGARD TO GROUNDS 12 TO 14 OF THE ASSESSEES APPEAL IT WAS SUBMITTED BY THE LEARNED AUTHORISED REPRESENTATIVE THAT THE I SSUES ARE AGAINST THE DISALLOWANCE OF LONG TERM CAPITAL LOSS CLAIMED BY T HE ASSESSEE ON THE SALE OF SHARES OF THE ASSESSEE ACQUIRED IN THE COURSE OF AM ALGAMATION. IT WAS SUBMITTED THAT M/S. COVELONG BEACH HOTELS INDIA LTD . (CBHIL) WAS AMALGAMATED TO THE ASSESSEE COMPANY ON THE BASIS OF THE JUDGMEN T OF THE HON'BLE MADRAS HIGH COURT DATED 20-06-2002 WITH EFFECT FROM 1.4.20 01. IT WAS THE SUBMISSION THAT CBHIL HELD 38 944 EQUITY SHARES OF THE ASSESSE E COMPANY. IT WAS THE SUBMISSION THAT AS PER THE COMPANIES ACT A COMPANY CANNOT HOLD ITS OWN SHARES. CONSEQUENTLY ON THE AMALGAMATION THESE SHA RES HELD BY CBHIL WERE SOLD BY THE ASSESSEE COMPANY THROUGH A TRUSTEE. IT WAS THE SUBMISSION THAT THE SALE OF THE SHARES RESULTED IN A LONG TERM LOSS WHI CH WAS CLAIMED BY THE ASSESSEE. IT WAS THE SUBMISSION THAT THE ASSESSIN G OFFICER HAD HELD THAT THE LONG TERM CAPITAL LOSS ON THE SALE OF THE SHARES CO ULD NOT BE GRANTED IN THE HANDS OF THE ASSESSEE AS THE ASSESSEE WAS NOT THE OWNER O F THE SHARES. IT WAS THE SUBMISSION THAT THERE CANNOT BE A SITUATION WHERE T HERE IS NO OWNER OF THE I.T.A. NOS. 1974/MDS/2008& 2314/MDS/07 19 SHARES. AS PER THE ORDER OF AMALGAMATION BY THE HO N'BLE HIGH COURT OF MADRAS THE ASSESSEE BECAME THE OWNER OF THE SHARES ON 1.4. 2001. IT WAS ONLY ON ACCOUNT OF THE PROVISIONS OF THE COMPANIES ACT THE ASSESSEE COULD NOT HOLD THE SHARES AND THE SAME HAD TO BE SOLD. IT WAS THE SUB MISSION THAT THE ASSESSEE BY AMALGAMATION HAD BECOME THE OWNER OF THE SHARES W.E .F. 1.4.2001 AND THE LOSS ON THE SALE OF THE SAME WAS LIABLE TO BE HELD AS TH E LONG TERM CAPITAL LOSS IN THE HANDS OF THE ASSESSEE. 23. IN REPLY THE LEARNED DR SUBMITTED THAT THE LON G TERM CAPITAL LOSS COULD NOT BE ALLOWED IN THE HANDS OF THE ASSESSEE AS THE ASSESSEE ITSELF COULD NOT HOLD ITS OWN SHARES. 24. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. A PE RUSAL OF THE SCHEME OF AMALGAMATION CLEARLY SHOWS THAT IN THE SCHEME OF AM ALGAMATION IT HAS BEEN HELD THAT THE SHARES IN THE ASSESSEE COMPANY HELD B Y CBHIL WERE TO BE SOLD THROUGH A TRUSTEE AS THE ASSESSEE COULD NOT HOLD TH E SHARES. THIS SCHEME OF AMALGAMATION HAS BEEN APPROVED BY THE HON'BLE HIGH COURT. BY THE AMALGAMATION THE ASSESSEE COMPANY HAS TAKEN OVER AL L THE ASSETS AND LIABILITIES OF CBHIL AS ON 1.4.2001 AND THE SHARES HELD BY CBHI L IN THE ASSESSEE COMPANY ARE PART OF THE ASSETS WHICH HAVE BEEN AMALGAMATED. IF IT IS HELD THAT THE CAPITAL LOSS ON THE SALE OF THE SAME CANNOT BE ALLO WED IN THE HANDS OF THE ASSESSEE COMPANY THEN OBVIOUSLY THERE WOULD BE A V IOLATION OF THE SCHEME OF AMALGAMATION INSOFAR AS THE ASSETS HAVE NOT BEEN TA KEN OVER IN FULL. EVEN I.T.A. NOS. 1974/MDS/2008& 2314/MDS/07 20 OTHERWISE IF THIS CAPITAL LOSS IS NOT ALLOWABLE IN THE HANDS OF THE ASSESSEE THE ROUTING OF THE SALE PROCEEDS THROUGH THE PROFIT & L OSS ACCOUNT OF THE ASSESSEE WOULD ALSO HAVE TO BE REVERSED. THIS IS NOT PERMIS SIBLE. IN ANY CASE THE SCHEME OF AMALGAMATION HAVING BEEN APPROVED BY THE HON'BLE HIGH COURT OF MADRAS AND AS PER THE SCHEME OF THE AMALGAMATION TH E ASSESSEE HAVING COME INTO POSSESSION OF ALL THE ASSETS AND LIABILITIES O F CBHIL W.E.F. 1.4.2001 AND THE SHARES BEING PART OF THE ASSETS AND LIABILITIES WHI CH HAVE BEEN TAKEN OVER BY THE ASSESSEE THROUGH THE SCHEME OF AMALGAMATION OBVIOU SLY THE SALE OF THE SAME WOULD HAVE TO BE HELD TO BE THE INCOME IN THE HANDS OF THE ASSESSEE. IN THE RESULT THE LOSS AROSE ON THE SALE OF THE SAME WOUL D ALSO BE A CAPITAL LOSS IN THE HANDS OF THE ASSESSEE. IN THE CIRCUMSTANCES THE A PPEAL OF THE ASSESSEE IN REGARD TO GROUNDS 12 TO 14 STANDS ALLOWED. 25. IN REGARD TO GROUND NO.15 OF THE ASSESSEES APP EAL IT WAS SUBMITTED BY THE LEARNED AUTHORISED REPRESENTATIVE THAT THE ISSU E WAS AGAINST THE LEVY OF INTEREST U/S. 234D OF THE ACT. HE RELIED UPON THE DECISION OF THE DELHI HIGH COURT IN THE CASE OF CIT V. JACABS CIVIL INCORPORAT ED REPORTED IN 235 CTR 123 (DEL). IT WAS SUBMITTED THAT THE PROVISIONS OF SEC . 234D HAD BEEN INTRODUCED ONLY W.E.F. 1-6-2003 AND CONSEQUENTLY NO INTEREST U NDER SECTION 234D COULD BE LEVIED ON THE ASSESSEE. 26. IN REPLY THE LEARNED DR VEHEMENTLY SUPPORTED T HE ORDER OF THE ASSESSING OFFICER AND THE LEARNED CIT(A). I.T.A. NOS. 1974/MDS/2008& 2314/MDS/07 21 27. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. AS I T IS NOTICED THAT THE ISSUE IS SQUARELY COVERED BY THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF JACABS CIVIL INCORPORATED REFERRED TO SUPRA RESPE CTFULLY FOLLOWING THE DECISION OF THE HON'BLES DELHI HIGH COURT THE LEVY OF INTEREST U/S. 234D STANDS CANCELLED. 28. IN THE RESULT THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED FOR STATISTICAL PURPOSES. 29. THE ORDER WAS PRONOUNCED IN THE COURT ON 21/01/ 2011. SD/- SD/- (ABRAHAM P. GEORGE) (GEORGE MATHAN) ACCOUNTANT MEMBER JUDICIAL MEMBER CHENNAI DATED THE 21 ST JANUARY 2011. H. COPY TO: ASSESSEE/AO/CIT (A)/CIT/D.R./GUARD FILE