Sunair Hotels Ltd., New Delhi v. ACIT, New Delhi

ITA 2729/DEL/2010 | 2007-2008
Pronouncement Date: 20-08-2010 | Result: Allowed

Appeal Details

RSA Number 272920114 RSA 2010
Assessee PAN AAACS1463L
Bench Delhi
Appeal Number ITA 2729/DEL/2010
Duration Of Justice 2 month(s) 16 day(s)
Appellant Sunair Hotels Ltd., New Delhi
Respondent ACIT, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 20-08-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted G
Tribunal Order Date 20-08-2010
Assessment Year 2007-2008
Appeal Filed On 04-06-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : G NEW DELHI BEFORE SHRI C.L. SETHI JUDICIAL MEMBER AND SHRI B.C. MEENA ACCOUNTANT MEMBER ITA NO.2729/DEL/2010 (ASSESSMENT YEAR : 2007-08) M/S. SUNAIR HOTELS LIMITED VS. ADDL.CIT RANGE 9 A 7 IST FLOOR GEETANJALI ENCLAVE NEW DELHI. NEW DELHI 110 017. (PAN : AAACS1463L) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI VINOD BINDAL & MS. SWEETY KOTH ARI CAS REVENUE BY : SHRI GAJANAND MEENA CIT DR O R D E R PER B.C. MEENA ACCOUNTANT MEMBER : THIS APPEAL FILED BY THE ASSESSEE ARISES OUT OF THE ORDER OF THE CIT (APPEALS)-XII NEW DELHI DATED 4.3.2010 FOR THE ASS ESSMENT YEAR 2007-08. THE GROUNDS OF APPEAL TAKEN BY THE ASSESSEE READ AS UNDER : 1. THE LD. CIT(A) ERRED IN LAW AND ON FACTS IN DIS ALLOWING 30% DEDUCTION FOR REPAIRS U/S 24 AMOUNTING TO RS.79 63 877/- ON RENTAL INCOME RECEIVED BY THE APPELLANT BY HOLDI NG THAT THE RELEVANT INCOME WAS SERVICE CHARGES AND NOT RENT SI NCE THERE WAS A SEPARATE SERVICE AGREEMENT BETWEEN THE APPELL ANT AND THE TENANT WHILE IGNORING THE LAWFUL EXPLANATION OF TH E APPELLANT THAT THE IMPUGNED SERVICE AGREEMENT WAS A PART OF T HE RENT AGREEMENT ONLY. THUS THE LAWFUL DEDUCTION CLAIMED BY THE APPELLANT SHOULD BE ALLOWED BY FOLLOWING THE APPELL ATE ORDER FOR THE PRECEDING ASSESSMENT YEARS BY THE HON'BLE ITAT. 2. THE LD. CIT(A) ERRED IN LAW AND ON FACTS IN CONS IDERING RS.2 65 46 255/- AS 'INCOME FROM OTHER SOURCES' INS TEAD OF ITA NO.2729/DEL/2010 2 'RENTAL INCOME' WHILE IGNORING THE LAWFUL EXPLANAT ION OF THE APPELLANT THAT THE IMPUGNED SERVICE AGREEMENT WAS A PART OF THE RENT AGREEMENT ONLY. THUS THE LAWFUL DEDUCTION CLA IMED BY THE APPELLANT SHOULD BE ALLOWED BY FOLLOWING THE APPELL ATE ORDER FOR THE PRECEDING ASSESSMENT YEARS BY THE HON'BLE ITAT. 3. THE LD. CIT(A) ERRED IN LAW AND ON FACTS IN DISA LLOWING LITIGATION FEES OF RS.20 67 650/- BY STATING THAT T HE SAME WAS NOT INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS WHILE IGNORING THE FACTS AND LAWFUL EXPLANATION OF THE APPELLANT THAT THE SAID LITIGATION EXPENSES WERE INCURRED FOR DEFENDING CASES FILED AGAINST THE APPELLANT COMPANY CHALLENGI NG ITS OPERATIONS AND THUS INTERFERING IN THE FUNCTIONIN G OF ITS BUSINESS. THUS THE LITIGATION EXPENSES WERE INCURR ED WHOLLY AND EXCLUSIVELY FOR THE BUSINESS PURPOSE OF THE APP ELLANT COMPANY AND SHOULD BE ALLOWED FULLY. 4. THE LD. CIT(A) ERRED IN LAW AND ON FACTS IN NOT DISPOSING OF THE GROUND OF APPEAL REGARDING ADDITIO N TO INCOME OF THE SUM OF RS.1 24 06 266/- TOWARDS DEPRECIATION ON THE BASIS OF FINDING GIVEN IN THE BLOCK ASSESSMENT ORDE R WHICH HAS ALREADY BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY T HE CIT(A) IN THE PRECEDING ASSESSMENT YEARS AS WELL AS SO CONFIR MED BY THE HON'BLE ITAT; AND ALSO WITHOUT CONSIDERING THE LAWF UL EXPLANATION OF THE APPELLANT JUSTIFYING THE SAID CL AIM OF DEPRECIATION. THUS THE ADDITION SO MADE SHOULD BE DELETED. 5. THE APPELLANT CRAVES THE LEAVE TO ADD SUBSTITUT E MODIFY DELETE OR AMEND ALL OR ANY GROUND OF APPEAL EITHER BEFORE OR AT THE TIME OF HEARING. 6. THE APPELLANT CRAVES THE LEAVE TO ADD SUBSTITUT E MODIFY DELETE OR AMEND ALL OR ANY GROUND OF APPEAL EITHER BEFORE OR AT THE TIME OF HEARING. 2. AFTER HEARING THE PARTIES WE FIND THAT GROUND N OS.1 TO 4 ARE COVERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE BY T HE EARLIER DECISION OF THE TRIBUNAL IN ITA NOS.3737 TO 3739/DEL/2006 FOR ASSES SMENT YEARS 2001-02 TO 2003-04 VIDE ORDER DATED 27.6.2008. THIS ORDER IS LATER ON FOLLOWED BY THE ITA NO.2729/DEL/2010 3 TRIBUNAL IN FAVOUR OF THE ASSESSEE IN THE APPEALS F OR ASSESSMENT YEARS 2004- 05 AND 2005-06 COPIES OF THE ORDERS ARE PLACED BEF ORE US. 3. GROUND NO.1 RELATED TO DEDUCTION U/S 24 OF THE I NCOME-TAX ACT AND GROUND NO.2 RELATED TO ASSESSING THE RENTAL INCOME UNDER HEAD INCOME FROM OTHER SOURCES ARE COVERED BY THE OBSERVATIONS MADE VIDE PARAS 11 TO 13 OF THE ORDER OF THE TRIBUNAL REFERRED TO SUPRA AS UN DER : 11. THE ASSESSEE IMPUGNED ABOVE DISALLOWANCE IN AP PEAL AND DREW LD. CIT (A)S ATTENTION TO TWO AGREEMENTS DATE D 29.10.97 WITH MITSUI & CO. LTD. FOR LETTING OUT ITS COMMERCI AL CENTER TO THAT CONCERN. ONE AGREEMENT WAS FOR RENT AND THE O THER WAS FOR SERVICES CLAIMED TO HAVE BEEN ENTERED AT THE INSIST ENCE OF THE TENANT. THE ASSESSEE ALSO PLACED ON RECORD SUBSEQU ENT CHANGES IN THE AGREEMENT BETWEEN THE TENANT AND THE ASSESSE E. IT WAS CONTENDED THAT THE APPELLANT NEVER PROVIDED ANY SER VICES TO THE TENANT NOR CLAIMED ANY DEDUCTION OF ANY EXPENSES FO R SUCH SERVICES. WHAT WAS RECEIVED FROM THE TENANT UNDER T HE TWO AGREEMENTS WAS RENT FOR LETTING OUT OF THE PREMISES . EVEN THE TENANT HAS DEDUCTED TAX AT SOURCE FROM THE ENTIRE A MOUNT TREATING IT AS RENT AND NOT AS SERVICES CHARGES U/S 194(C). THE LD. CIT(A) AFTER CONSIDERING FACTS AND CIRCUMSTANCES O F THE CASE TREATED THE ENTIRE AMOUNT AS RENT AND HELD THAT THE ASSESSEE WAS ENTITLED TO FULL DEDUCTION TOWARDS REPAIRS U/S 24 O F THE LT. ACT. THE ID. CIT(A) OBSERVED AS UNDER:- 'I HAVE CONSIDERED THE FACTS AND CIRCUMSTANCES THE REASONING OF THE AO AND THE SUBMISSIONS OF THE ASSE SSEE. AFTER CONSIDERING THE SAME 1 AM OF THE OPINION THAT THOUGH TWO AGREEMENTS HAD BEEN MADE FOR SUBLICENSE FEE I.E' RENT AND SERVICE CHARGES SEPARATELY YET THE F ACT REMAINS THAT NO SERVICES OF ANY KIND WERE PROVIDED BY THE APPELLANT TO MITSUI CO. TO COMPOUND THE ISSUE THE AO HAS ALSO FAILED TO BRING ON RECORD THE FACT WHE THER ANY EXPENSES IN RESPECT OF THE SERVICES ALLEGEDLY PROVIDED TO MITSUI & CO. WERE CLAIMED BY THE APPEL LANT. IN VIEW OF THE ABOVE I AM OF THE OPINION THAT NO S ERVICES WERE ACTUALLY PROVIDED BY THE APPELLANT AND FACTU ALLY THE SO-CALLED SERVICE CHARGES WERE NOTHING BUT RENT RECEIVED BY IT. FURTHER IT IS SETTLED LAW THAT FO RM AND ITA NO.2729/DEL/2010 4 SUBSTANCE OF THE TRANSACTION AND NOT THE NOMENCLA TURE ASSIGNED TO IT DETERMINE THE NATURE OF THE INCOME. ACCORDINGLY THE APPELLANT IS ELIGIBLE TO CLAIM STA NDARD DEDUCTION U/S 24 OF THE ACT FROM THE SAME AND THE DISALLOWANCE OF RS.54 39 600/- SO MADE IS DELETED.' SIMILAR ORDERS WERE PASSED IN SUBSEQUENT TWO YEARS. 12. THE REVENUE BEING AGGRIEVED HAS BROUGHT THE ISS UE IN APPEAL BEFORE THE APPELLATE TRIBUNAL. 13. WE HAVE HEARD BOTH THE PARTIES. DURING THE COU RSE OF ASSESSMENT PROCEEDINGS IT WAS NOT DISPUTED THAT TH E ASSESSEE DID NOT RENDER ANY SERVICE NOR ANY EXPENDITURE TOWA RDS ANY SERVICES HAS BEEN CLAIMED IN THE ACCOUNT. THE ENTIR E AMOUNT RECEIVED FROM THE TENANT HAS BEEN SHOWN TOWARDS REN T. THERE IS NO DISPUTE ABOUT THE RECEIPT. IN THESE CIRCUMSTANCE S AS THE ENTIRE RECEIPT HAS BEEN TREATED AS RENT ASSESSABLE UNDER THE 'HOUSE PROPERTY INCOME' THE STATUTORY DEDUCTION TO WARDS REPAIRS AT 25% OF THE GROSS AMOUNT WAS REQUIRED TO BE ALLOWED. THEREFORE ON FACTS AND CIRCUMSTANCES OF THE CASE WE SEE NO ERROR IN THE APPROACH OF THE LD. CIT(A). 4. RESPECTFULLY FOLLOWING THE DECISION OF ITAT WE ALLOW GROUND NOS.1 & 2 OF ASSESSEES APPEAL. 5. GROUND NO.3 RELATED TO LITIGATION FEES IS COVERE D BY THE DECISION OF THE TRIBUNAL REFERRED TO SUPRA VIDE PARAS 15 TO 17 AS UNDER :- 15. THE ASSESSEE CHALLENGED ABOVE DISALLOWANCE IN APPEAL AND FURNISHED DETAIL OF TOTAL SUM OF RS.31 53 844 I NCURRED TOWARDS LEGAL AND PROFESSIONAL EXPENSES IN THE PERI OD RELATING TO A Y 2001-02. SIMILAR DETAILS HAVE BEEN FILED BEFORE US. WITH REGARD TO DETAILS IT WAS POINTED OUT THAT ALL THE EXPENDITURE CLAIMED RELATED TO PROCEEDINGS BEFORE THE HON'BLE D ELHI HIGH COURT AND BEFORE THE ARBITRATOR APPOINTED BY HIGH C OURT TO RESOLVE THE DISPUTE ARISING OUT OF AGREEMENT BETWEE N THE PARTIES. THE LD. CIT(A) HAS NOTED THE DETAIL OF LITIGATION A ND OF CLAIM MADE BY THE APPELLANT COMPANY AGAINST THE OPPOSITE PARTY. THE APPELLANT FURTHER CONTENDED THAT ASSERTION OF AO TH AT DISALLOWED ITA NO.2729/DEL/2010 5 AMOUNT RELATED TO PROFESSIONAL FEES FOR DEFENDING C RIMINAL CASES WAS TOTALLY INCORRECT. IN FACT NO CRIMINAL CASE HA S BEEN FILED AGAINST THE ASSESSEE BY V.L.S. FINANCE LTD. THE ASS ESSEE FURTHER RELIED UPON CASE LAW ALLOWING LITIGATION EXPENSES U /S 37(1) OF THE I.T. ACT INCURRED TO DEFEND ITS BUSINESS OR ACT IONS ARISING OUT OF BUSINESS. IT WAS EXPLAINED THAT ENTIRE LITIGATIO N RELATED TO ACTIONS WHICH AROSE DURING THE COURSE OF BUSINESS A ND IT WAS STATED THAT LITIGATION EXPENSES WERE NORMAL EXPENSE S WHICH ARE INCURRED BY A BUSINESSMAN WHOLLY AND EXCLUSIVELY FO R PURPOSES OF BUSINESS. 16. THE LD. CIT(A) ALLOWED THE CLAIM WITH THE FOLL OWING OBSERVATIONS : ' I HAVE CONSIDERED THE FACTS AND CIRCUMSTANCES OF THE CASE THE REASONING OF THE AO AND ALSO THE SUBMISSIONS OF THE ASSESSEE. AFTER CONSIDERING THE SAME I SEE NO MERIT IN THE CONTENTION OF THE AO THAT THE IMPUGNED LITIGATION EXPENSES DID NOT RELATE WHOLLY AND EXCLUSIVELY TO THE BUSINESS OF THE APPELLANT COMPAN Y BUT PERTAINED TO SOME PERSONAL DISPUTE OF THE PROMOTERS OF THE APPELLANT COMPANY. MERELY BECAUSE THE NAMES OF THE PROMOTERS WEE ALSO INCLUDED AS CLAIMANTS IN THE CLA IM FILED BEFORE THE ARBITRATOR APPOINTED BY THE DELHI HIGH COURT DOES NOT SUFFICE TO WARRANT ANY INFERENCE TH AT THE EXPENDITURE IS ATTRIBUTABLE TO THE PROMOTERS IN THE IR INDIVIDUAL CAPACITY. IT IS ABUNDANTLY CLEAR FROM TH E TEXT OF THE CLAIM FILED BY THE APPELLANT THAT ALL CLAIMS PE RTAINED TO THE LOSSES AND ADDITIONAL EXPENSES INCURRED BY T HE APPELLANT COMPANY DUE TO DELAYS IN ARRANGING OR NON - ARRANGEMENT OF FINANCE BY VLS FINANCE LTD. THUS IN NO MANNER THERE WAS A QUESTION OF PERSONAL DISPUTE RAI SED IN THE SAID ARBITRATION PROCEEDINGS. MOREOVER ALL THE SE CLAIMS WERE DEFINITELY RELATED TO THE HOTEL BUSINES S OF THE APPELLANT COMPANY FOR WHICH IT INCURRED LITIGATION EXPENSES. FURTHER KEEPING IN VIEW THE RATIOS GIVEN IN THE JUDGMENTS CITED BY THE APPELLANT I AM INCLINED TO AGREE WITH THE APPELLANT AND I DELETE THE ADDITION OF RS.12 89 000/- SO MADE AS THE EXPENDITURE IN MY OPINION HAS BEEN INCURRED WHOLLY AND EXCLUSIVELY D URING ITA NO.2729/DEL/2010 6 THE COURSE OF BUSINESS CARRIED OUT BY THE ASSESSEE COMPANY. SIMILAR ORDERS HAVE BEEN PASSED IN TWO SUBSEQUENT A SSESSMENT YEARS. 17. THE REVENUE HAS BROUGHT THE ISSUE IN APPEAL BE FORE THE APPELLATE TRIBUNAL. THE LD. DR RELIED UPON THE ORDE R OF THE AO. THE LD. COUNSEL FOR THE ASSESSEE ON THE OTHER HAND DREW OUR ATTENTION TO THE DETAIL OF LITIGATION EXPENSES IN A LL THREE YEARS AND CONTENDED THAT ALL THE EXPENSES WERE INCURRED B Y THE COMPANY IN RESPECT OF LITIGATION CARRIED ON BY THE COMPANY AGAINST V.L.S. FINANCE LTD. IN DIFFERENT COURTS. NO EXPENSES PERTAINING TO PERSONAL LITIGATION OR OTHER LITIGATI ON OF THE DIRECTORS WERE DEBITED IN THE BOOKS OF ACCOUNT OF T HE ASSESSEE. IF DIRECTORS WERE CARRYING ANY LITIGATION IN THEIR PERSONAL CAPACITY THOSE EXPENSES WERE SEPARATELY DEBITED IN THE PERSONAL ACCOUNT OF THE PARTNERS AND NOT CLAIMED BY THE ASSE SSEE COMPANY. IN THE LIGHT OF CATEGORICAL FINDING OF LD. CIT (A) IN OUR OPINION IT WAS FOR THE REVENUE AUTHORITIES TO SHOW FROM THE DETAIL OF EXPENSES THAT EXPENSES DISALLOWED RELATED TO CRIMINAL PROCEEDINGS AGAINST DIRECTORS OR WERE OTHERWISE INA DMISSIBLE AND WERE WRONGLY CLAIMED BY THE ASSESSEE COMPANY. T HIS HAS NOT BEEN SHOWN. THEREFORE ON FACTS AND CIRCUMSTANC ES FOR THE CASE WE ARE UNABLE TO INTERFERE WITH THE FINDING O F THE LD. CIT(A) THAT NO INADMISSIBLE EXPENDITURE WAS CLAIMED BY THE APPELLANT UNDER THE HEAD 'LITIGATION EXPENSES'. ADD ITION MADE WAS RIGHTLY DELETED IN ALL THE THREE YEARS. THIS GR OUND OF APPEAL IS ALSO REJECTED. 5. RESPECTFULLY FOLLOWING THE DECISION OF ITAT CITE D SUPRA WE ALLOW THIS GROUND OF ASSESSEES APPEAL. 6. GROUND NO.4 RELATED TO DEPRECIATION IS ALSO COVE RED BY THE OBSERVATIONS MADE VIDE PARA 18 TO 22 OF THE ORDER O F THE TRIBUNAL REFERRED TO SUPRA AS UNDER : 18. THE LAST COMMON GROUND RELATES TO DISALLOWANC E OF DEPRECIATION ON 'PROTECTIVE BASIS'. THE AMOUNT FOR AY 2001-02 IS RS.3 43 06 165. THE BACKGROUND OF THIS DISALLOWA NCE IS THAT ITA NO.2729/DEL/2010 7 THE SEARCH OPERATION WAS CONDUCTED ON THE ASSESSEE COMPANY ON 21.11.00 AND THE BLOCK ASSESSMENT U/S 158BC WAS MAD E FOR THE PERIOD 1.4.90 TO 21.11.00. WHILE MAKING ABOVE ASSES SMENT THE AO TREATED CERTAIN EXPENDITURE ON CONSTRUCTION OF H OTEL AS BOGUS AND DISALLOWED THEM. THE AO HAD HELD THAT CER TAIN PARTIES FROM WHOM CAPITAL GOODS WERE CLAIMED TO HAV E BEEN PURCHASED DID NOT SUPPORT THE CLAIM OF PURCHASES. HE FURTHER RECORDED A FINDING THAT CERTAIN CONSTRUCTION WAS NO T UNDERTAKEN AS ALLEGED AND EXPENSES CLAIMED FOR SUCH CONSTRUCTI ON WERE BOGUS EXPENSES. THE DEPRECIATION CLAIMED ON SUCH CONSTRUCTION/EXPENSES WAS DISALLOWED. THIS DISALLOW ANCE MADE IN THE BLOCK ASSESSMENT U/S 158BC WAS FOLLOWED IN T HE REGULAR ASSESSMENT THOUGH MADE ON A PROTECTIVE BASIS. THE DISALLOWANCE OF DEPRECIATION IS ENTIRELY BASED ON W HAT WAS HELD BY THE AO IN THE BLOCK ASSESSMENT U/S 158BC OF THE LT. ACT. 19. THE ASSESSEE IMPUGNED ABOVE DISALLOWANCE IN AP PEAL BEFORE THE CIT(A) AND EXPLAINED THAT DISALLOWANCE I N BLOCK ASSESSMENT WAS BASED ON CERTAIN EVIDENCE AND STATEM ENTS COLLECTED AT THE BACK OF THE ASSESSEE WITHOUT AFFOR DING OPPORTUNITY TO THE ASSESSEE TO EXPLAIN THEM. THE AP PELLATE AUTHORITY IN THE IMPUGNED ORDER FOUND THAT IN EARLI ER PROCEEDINGS U/S L58BC CIT (A) HAD REMANDED THE ISS UE OF BOGUS EXPENSES TO THE AO TO ALLOW OPPORTUNITY TO TH E ASSESSEE TO CROSS-EXAMINE THE CONCERNED PARTIES. AFTER CONSI DERING THE REPORT OF THE AO THE LD. CIT(A) VIDE ORDER DATED 1 5.4.04 IN BLOCK ASSESSMENT IN APPEAL NO. 223/2002-03 HAD DELE TED THE ENTIRE ADDITION. IT WAS ALSO EXPLAINED IN THESE PRO CEEDINGS THAT VALUATION OF CONSTRUCTION OF HOTEL WAS GOT DONE BY TFCI AND EXPENDITURE SHOWN ON CONSTRUCTION WAS FULLY SUPPORT ED BY THE REPORT OF ABOVE LEADING FINANCIAL INSTITUTION. THE ASSESSEE ALSO RELIED UPON GOVERNMENT APPROVED VALUER'S REPORT. TH E DETAIL OF EXPENSES INCURRED ON CONSTRUCTION OF HOTEL WERE AGA IN SUBMITTED WITH LD. CIT(A). THE LD. CIT(A) IN THE IM PUGNED ORDER FOR AY 2001-02 DELETED THE ADDITION WITH THE FOLLOWING OBSERVATIONS:- '9. I HAVE CONSIDERED THE FACTS AND CIRCUMSTANCES OF THE CASE THE SUBMISSIONS OF THE ASSESSEE AND THE REASONING OF THE AD FOR DISALLOWING THE CLAIM OF TH E ASSESSEE. AFTER CONSIDERATION OF THE SAME 1 FIND T HAT MY ITA NO.2729/DEL/2010 8 PREDECESSOR CIT(A)-I NEW DELHI HAS ALREADY GIVEN A FINDING IN THE APPELLATE ORDER PERTAINING TO THE BL OCK ASSESSMENT PERIOD OF THIS ASSESSEE THAT THERE WAS N O JUSTIFICATION FOR THE AO TO DISALLOW DEPRECIATION T HERE. IN VIEW OF THE ABOVE IT IS MY CONSIDERED OPINION THA T NO SUCH DISALLOWANCE OF THE CLAIM OF DEPRECIATION CAN BE MADE IN THE REGULAR ASSESSMENT ALBEIT ON PROTECTIV E BASIS WITHOUT ANY LEGAL AND INDEPENDENT REASONING AS TO WHY THIS CLAIM OF THE ASSESSEE IS TO BE DISALLOWED. IN VIEW OF THE TOTALITY 'OF THE FACTS AND CIRCUMSTANCE S OF THE CASE AS THERE IS NOTHING ON RECORD TO LEGALLY JUST IFY THE DISALLOWANCE OF THE CLAIM I AM LEFT WITH NO ALTERN ATIVE BUT TO AGREE WITH THE CLAIM OF THE ASSESSEE FOR ALL OWING DEPRECIATION IN REGULAR ASSESSMENT. THE AO IS ACCORDINGLY DIRECTED TO ALLOW CLAIM OF DEPRECIATION AMOUNTING TO RS.16 04 19 433/- AS CLAIMED BY THE ASSESSEE. 20. SIMILAR ADDITION MADE IN THE OTHER TWO ASSTT. YEARS IS ALSO DELETED IN THE APPELLATE PROCEEDINGS. 21. THE REVENUE IS AGGRIEVED AND HAS BROUGHT THE I SSUE IN APPEAL BEFORE THE APPELLATE TRIBUNAL. DURING THE CO URSE OF HEARING A COPY OF ORDER OF ITAT 'D' BENCH NEW DEL HI IN ITA NO. 248/D/04 AND 398/D/04 IN THE CASE OF DCIT CC-1 1 VS SUNAIR HOTELS LTD. (ASSESSEE COMPANY) DATED26.10.0 7 WAS FILED BEFORE US. THE ORDER WAS PASSED IN THE APPEAL FILED BY THE REVENUE IN THE BLOCK ASSESSMENT. THE TRIBUNAL CONSI DERED THE QUESTION WHETHER ANY DISALLOWANCE BY TREATING EXPEN DITURE ON CONSTRUCTION AS BOGUS WAS JUSTIFIED. THE TRIBUNAL N OTED THAT CERTAIN MATERIAL COLLECTED BY THE A.O. WAS NOT PUT TO THE ASSESSEE BY THE AO. SUBSEQUENTLY ON DIRECTION OF T HE APPELLATE AUTHORITY THE MATTER WAS RE-EXAMINED. THE ASSESSEE HAD FURTHER PRODUCED MATERIAL TO SHOW THAT COST OF CONSTRUCTION DECLARED WAS LOWER THAN SIMILAR COST SHOWN BY OTHER HOTELS. THE TRIBUNAL ALSO NOTED THAT COST OF CONSTRUCTION IN TH E BOOKS WAS SUPPORTED BY VALUATION CARRIED BY DVO. THE TRIBUNAL ACCORDINGLY SAW NO JUSTIFICATION FOR UPHOLDING ANY DISALLOWANCE OR ADDITION ON ACCOUNT OF BOGUS EXPENSES ON CONSTRU CTION. THE ORDER OF THE LD. CIT(A) ON THE ISSUE WAS UPHELD BY THE TRIBUNAL. ITA NO.2729/DEL/2010 9 22. IN THE LIGHT OF ABOVE ORDER OF THE TRIBUNAL W E SEE NO JUSTIFICATION IN SUSTAINING ANY DISALLOWANCE OF DEP RECIATION. AS NOTED EARLIER THE IMPUGNED DISALLOWANCE AS 'PROTEC TIVE' IS MADE SOLELY BASED ON SIMILAR DISALLOWANCE AND ADDIT ION MADE IN THE BLOCK ASSESSMENT YEAR. NO NEW OR FRESH MATER IAL WAS PLACED ON RECORD TO JUSTIFY ADDITION/DISALLOWANCE O F DEPRECIATION IN THE THREE YEARS UNDER APPEAL. THE D ISALLOWANCE IN BLOCK ASSESSMENT YEAR WAS DELETED BY LD. CIT(A) FOR THE REASONS ALREADY DISCUSSED ABOVE. THE SAID ORDER HAS BEEN CONFIRMED BY IT AT AND DISALLOWANCE OF DEPRECIATION OR OF EXPENSES CLAIMED TO BE INCURRED ON CONSTRUCTION HAS NOT BEEN SUSTAINED. THE ASSESSEE HAS PLACED ALL THE RELEVANT MATERIAL ON RECORD TO JUSTIFY COST OF CONSTRUCTION. IN THE ABOV E CIRCUMSTANCES WE UPHOLD THE ORDER OF THE CIT(A) DE LETING THE DISALLOWANCE ON DEPRECIATION IN ALL THE YEARS BEFOR E US. 7. RESPECTFULLY FOLLOWING THE DECISION RENDERED IN THE APPEALS FOR THE EARLIER YEARS REFERRED TO SUPRA THE FACTS AND CIR CUMSTANCES BEING SIMILAR TO THIS CASE WE ALLOW THE GROUND NO.4 RAISED IN THIS APPEAL. 8. GROUND NOS.5 & 6 ARE GENERAL IN NATURE AND DO NO T REQUIRE ANY ADJUDICATION. 9. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN OPEN COURT ON THE 20 TH DAY OF AUGUST 2010. SD/- SD/- (C.L. SETHI) (B.C. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : THE 20 TH DAY OF AUGUST 2010/TS COPY FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. CIT 4. CIT(A)-XII NEW DELHI. 5. DR ITAT. ASSTT.REGISTRAR ITAT NEW DELHI.