FRESCA FINE DINING P. LTD ( NOW MERGED WITH ONESTAR MERCANTILE CO. P. LTD), MUMBAI v. ITO 5(1)(4), MUMBAI

ITA 3253/MUM/2010 | 2006-2007
Pronouncement Date: 29-03-2011 | Result: Allowed

Appeal Details

RSA Number 325319914 RSA 2010
Bench Mumbai
Appeal Number ITA 3253/MUM/2010
Duration Of Justice 11 month(s) 3 day(s)
Appellant FRESCA FINE DINING P. LTD ( NOW MERGED WITH ONESTAR MERCANTILE CO. P. LTD), MUMBAI
Respondent ITO 5(1)(4), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 29-03-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted F
Tribunal Order Date 29-03-2011
Assessment Year 2006-2007
Appeal Filed On 26-04-2010
Judgment Text
I.T.A NO.3253/ MUM/2010 FRESCA FINE DINING PVT.LTD 1 IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH MUMBAI. BEFORE SHRI N.V.VASUDEVAN JUDICIAL MEMBER AND SHRI PRAMOD KUMAR ACCOUNTANT MEMBER I.T.A NO.3253/ MUM/2010 ASSESSMENT YEAR: 2006-07 FRESCA FINE DINING PVT.LTD. .. APPELLANT (NOW MERGED WITH ONESTAR MERCANTILE CO.P.LTD) PENINSULA SPENTA 2 ND FLOOR MATHURADA MILL COMPOUND SENAPATI BAPAT MARG LOWER PAREL MUMBAI-13. PA NO.AAACF 3506 D VS INCOME TAX OFFICER 5(1)(4) . RESPONDEN T MUMBAI. APPEARANCES: M.D.INAMDAR FOR THE APPELLANT ASHIMA GUPTA FOR THE RESPONDENT O R D E R PER PRAMOD KUMAR: 1. BY WAY OF THIS APPEAL THE ASSESSEE HAS CALLED INTO QUESTION CORRECTNESS OF CIT(A)S ORDER DATED 22 ND FEBRUARY 2010 IN THE MATTER OF ASSESSMENT UNDER SECTION 143(3) OF THE INCOME TAX ACT 1961 FOR THE ASSESS MENT YEAR 2006-07. 2. THE SHORT GRIEVANCE RAISED IN THIS APPEAL IS WHE THER OR NOT THE CIT (A) WAS JUSTIFIED IN UPHOLDING THE ACTION OF THE AO IN REJE CTING THE APPELLANTS CLAIM FOR DEPRECIATION OF `.17 16 606 ON ASSETS PURCHASED DUR ING THE ASSESSMENT YEAR 2001- 02 ON THE ALLEGED GROUND THAT THE TRANSFER OF THE A SSETS WAS NON-GENUINE. I.T.A NO.3253/ MUM/2010 FRESCA FINE DINING PVT.LTD 2 3. BRIEFLY STATED THE MATERIAL FACTS ARE LIKE THIS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTIC ED THAT THE ASSESSEE HAS CLAIMED DEPRECIATION ON THE FIXED ASSETS AT `.17 16 606. T HE AO ALSO NOTICED THAT THE ASSETS WERE CLAIMED TO HAVE BEEN PURCHASED FROM PIRAMAL H OLDING LTD DURING THE FINANCIAL YEAR RELEVANT TO A.Y. 2001-02. IT WAS ALSO NOTED TH AT IN EARLIER YEARS I.E. A.Y. 2001-02 ONWARDS THE DEPRECIATION CLAIMED ON THESE ASSETS H AVE BEEN DISALLOWED ON THE GROUND THAT THE TRANSFER OF ASSETS IN THE HANDS OF THE ASSESSEE COMPANY WAS NOT VALID. IT WAS ALSO NOTED BY THE AO THAT THE ISSUE OF ALLOWANCE OF DEPRECIATION IS COVERED AGAINST THE ASSESSEE BY THE DECISION OF THE CIT (A) FOR THE ASSESSMENT YEARS 2001-02 TO A.Y. 2005-06. IT WAS IN THIS BACKDROP THE ASSESSING OFFICER DISALLOWED THE CLAIM OF DEPRECIATION. AGGRIEVED THE ASSESSE E IS IN APPEAL BEFORE THE CIT (A) BUT WITHOUT ANY SUCCESS. BEING AGGRIEVED THE ASSE SSEE IS IN FURTHER APPEAL BEFORE US. 4. HAVING HEARD THE RIVAL CONTENTIONS AND HAVING PE RUSED THE MATERIAL ON RECORD WE FIND THE ISSUE IS COVERED IN FAVOUR OF T HE ASSESSEE BY THE DECISION DATED 11 TH MARCH 2011 OF A CO-ORDINATE BENCH OF THIS TRIBUNA L IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEARS 2001-02 TO 2005-06 COPY OF WH ICH IS PLACED ON RECORD BEFORE US WHERE IN IT WAS INTER ALIA HELD AS FOLLOWS: WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND ALSO P ERUSED THE RELEVANT MATERIAL ON RECORD. IT IS OBSERVED THAT THE PREMISES WAS TAK EN BY THE ASSESSEE ON RENT IN THE MONTH OF JUNE 1999 FOR RUNNING ITS RESTAURANT BUSIN ESS AND BY AN AGREEMENT DATED 16.09.1999 OTHER ASSETS REQUIRED FOR THE SAID BUSI NESS WERE TAKEN ON LEASE BY THE ASSESSEE FROM ITS GROUP CONCERN M/S. PIRAMAL HOLDIN GS LTD. FOR A PERIOD OF FIVE YEARS. SUBSEQUENTLY AN AGREEMENT FOR CONDUCTING TH E RESTAURANT BUSINESS WAS ENTERED INTO BY THE ASSESSEE ON 24.06.2000 WITH M/S . OVERSEAS CHINESE CUISINE (I) PVT. LTD. AND THEREAFTER ON 31.03.2001 THE ASSETS EARLIER TAKEN ON LEASE FROM PIRAMAL HOLDINGS LD. WERE PURCHASED BY THE ASSESSEE FOR A CONSIDERATION OF RS. 3.66 CRORES. SINCE THE SAID ASSETS EARLIER TAKEN ON LEA SE AND THEREAFTER PURCHASED ON 31.3.2001 WERE USED FOR ITS BUSINESS FOR RUNNING TH E RESTAURANT DEPRECIATION THEREON WAS CLAIMED BY THE ASSESSEE FOR THE YEAR UN DER CONSIDERATION. THE CLAIM OF THE ASSESSEE FOR THE SAID DEPRECIATION HOWEVER WA S DISALLOWED BY THE ASSESSING OFFICER AS WELL AS BY THE LEARNED CIT(A) MAINLY FOR TWO REASONS. FIRSTLY THEY WERE OF THE OPINION THAT THE LEASE AGREEMENT UNDER WHICH TH E SAID ASSETS WERE ACQUIRED BY I.T.A NO.3253/ MUM/2010 FRESCA FINE DINING PVT.LTD 3 THE ASSESSEE COMPANY BEING IN SUBSISTENCE ON 31.3. 2001 THE ASSESSEE COULD NOT VALIDLY PURCHASE THE SAME ON THAT DATE. IT WAS HE LD BY THEM IN THIS CONTEST THAT LEASE RENT HAVING BEEN PAID BY THE ASSESSEE UPTO 3 1.3.2001 THE ASSETS COULD HAVE BEEN PURCHASED BY IT ONLY ON 01.04.2001. SECONDLY THE COST OF ACQUISITION CLAIMED BY THE ASSESSEE AT RS.3.66 CRORES WAS ALSO NOT ACCE PTED BY THEM MAINLY ON THE GROUND THAT THE VALUE OF THE SAID ASSETS AS INDICAT ED BY THE ASSESSEE IN THE CONDUCTING AGREEMENT ENTERED INTO WITH M/S. OVERSEA S CHINESE CUISINE (I) PVT. LTD. WAS ONLY RS.1.76 CRORES. IT WAS ALLEGED THAT THE AS SESSEE THUS HAD INFLATED THE COST OF ACQUISITION OF THE SAID ASSETS TO CLAIM HIGHER DEPR ECIATION IN ORDER TO AVOID THE PAYMENT OF TAX. 9. AFTER HAVING CONSIDERED THE SUBMISSIONS MADE BY BOTH THE PARTIES BEFORE US AS WELL AS THE MATERIAL AVAILABLE ON RECORD WE AR E OF THE OPINION THAT BOTH THE REASONS GIVEN BY THE AUTHORITIES BELOW TO DISALLOW THE CLAIM OF THE ASSESSEE FOR DEPRECIATION ON FIXED ASSES ARE NOT TENABLE. AS REG ARDS THE COST OF ACQUISITION IT IS OBSERVED THAT THE CLAIM OF THE ASSESSEE OF HAVING P URCHASED THE FIXED ASSETS FROM PIRAMAL HOLDINGS LTD. AT RS. 3.66 CRORES WAS DULY SUPPORTED BY THE BILLS ISSUED BY THE SAID PARTY. THE COPIES OF THE SAID BILLS ALONG WITH ANNEXURES ARE PLACED AT PAGE NOS. 121 TO 131 OF THE ASSESSEES PAPER BOOK AND A PERUSAL OF THE SAME SHOWS THAT ALL THE MINUTE DETAILS IN RESPECT OF EACH AND EVERY ITEM OF ASSETS SOLD BY PIRAMAL HOLDINGS LTD. TO THE ASSESSEE COMPANY WERE GIVEN T HEREIN ALONG WITH THEIR RESPECTIVE WRITTEN DOWN VALUE AS ON 31.03.2001. AS REGARDS THE OBJECTION OF THE AUTHORITIES BELOW RELATING TO VARIOUS EXPENSES INCL UDED IN THE SAID VALUE IT IS OBSERVED THAT THE SAID EXPENSES HAVING BEEN APPAREN TLY INCURRED BY M/S. PIRAMAL HOLDINGS LTD. PRIOR TO THE ACQUISITION OF RESPECTI VE ASSETS WERE CAPITALIZED IN ITS BOOKS OF ACCOUNT AND THE SAME DULY INCLUDED IN THE WRITTEN DOWN VALUE OF THE SAID ASSETS IN THE BOOKS OF M/S. PIRAMAL HOLDINGS LTD. WERE INCLUDED IN THE CONSIDERATION FOR TRANSFER OF THE SAID ASSETS BY M/ S. PIRMAL HOLDINGS LTD. TO THE ASSESSEE. IN OUR OPINION THE COST OF ACQUISITION OF THE SAID ASSETS AS CLAIMED BY THE ASSESSEE THUS WAS DULY SUPPORTED AND SUBSTANTIATED BY THE RELEVANT DETAILS FURNISHED BY M/S. PIRAMAL HOLDINGS LTD. IN THE BIL LS RAISED ON THE ASSESSEE FOR SALE OF RELEVANT ASSETS. THE AUTHORITIES BELOW HOWEVER IG NORED THIS VITAL EVIDENCE AND ADOPTED THE COST OF ASSETS ACQUIRED BY THE ASSESSEE AT RS.1.76 CRORES RELYING ON THE CONDUCTING AGREEMENT ENTERED INTO BY THE ASSESSEE W ITH M/S. OVERSEAS CHINESE CUISINE (I) PVT. LTD. WHEREIN THE COST OF ASSETS P ROVIDED BY THE ASSESSEE TO M/S. OVERSEAS CHINESE CUISINE (I) PVT. LTD. WAS INDICATE D AT RS.1.76 CRORES. THIS DIFFERENCE HOWEVER WAS EXPLAINED BY THE ASSESSEE VIDE LETTER DATED 23.09.2003 FILED BEFORE THE A.O. (COPY PLACED AT PAGES 71 TO 7 3 OF THE ASSESSEES PAPER BOOK) WHEREIN IT WAS SUBMITTED BY THE ASSESSEE THAT SOME OF THE ASSETS WHICH WERE MAINLY IN THE NATURE OF IMMOVABLE ASSETS AND WHICH WERE FO RMING PART OF THE RESTAURANT VIZ. CHINA GARDEN HAD NOT BEEN SPECIFICALLY INCLUD ED IN THE CONDUCTING AGREEMENT WITH M/S. OVERSEAS CHINESE CUISINE (I) PVT. LTD. T HE DETAILS OF SUCH ASSETS ALONG WITH THE APPROXIMATE VALUE THEREOF WERE ALSO FURNIS HED BY THE ASSESSEE. THE ASSESSING OFFICER AS WELL AS THE LEARNED CIT(A) DID NOT ACCEPT THIS EXPLANATION OF THE ASSESSEE ON THE GROUND THAT THE ASSESSEE FAILED TO IDENTIFY SUCH ASSETS. IN OUR OPINION HAVING REGARD TO THE NATURE OF THE SAID AS SETS SUCH AS CIVIL WORKS INTERIOR DECORATION ELECTRICAL WORK FIXTURES ETC. PROVIDE D IN THE RESTAURANT IT WAS PRACTICALLY DIFFICULT TO IDENTIFY SUCH ASSETS SEPAR ATELY AND IN ANY CASE THIS WAS NOT THE JUSTIFIABLE REASON TO REJECT THE EXPLANATION OF THE ASSESSEE ALTOGETHER AND TO ADOPT THE COST OF ACQUISITION OF ASSETS AT RS.1.76 CRORES AS INDICATED IN THE I.T.A NO.3253/ MUM/2010 FRESCA FINE DINING PVT.LTD 4 CONDUCTING AGREEMENT AS AGAINST THE COST OF RS. 3.6 6 CRORES CLAIMED BY THE ASSESSEE WHICH WAS DULY SUPPORTED BY THE BILLS RAISED BY PIR AMAL HOLDINGS LTD. GIVING ALL THE RELEVANT DETAILS OF THE ASSETS AND BASIS OF VAL UATION THEREOF. 10. AS REGARDS THE ALLEGATION OF THE REVENUE AUTHOR ITIES THAT THE ASSETS EARLIER LEASED OUT WERE TRANSFERRED BY M/S. PIRAMAL HOLDING S LTD. TO THE ASSESSEE COMPANY AS ON 31.03.2001 AT THE INFLATED PRICE IN ORDER TO CLAIM HIGHER DEPRECIATION FOR AVOIDING PAYMENT OF TAX WE FIND MERIT IN THE CONT ENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE SAME IS BASELESS KEEPING IN VIEW THE FACT THAT BOTH M/S. PIRAMAL HOLDINGS LTD. AND THE ASSESSEE COMPANY WE RE LOSS MAKING COMPANIES AND EVEN THEIR ASSESSED INCOME FOR THE YEAR UNDER CONSI DERATION WAS NEGATIVE. MOREOVER BY TRANSFER OF ITS ASSETS ON 31.03.2001 M/S. PIRAMAL HOLDINGS LTD. HAD BECOME DISENTITLED TO CLAIM ANY DEPRECIATION THEREO N WHICH IT COULD HAVE OTHERWISE CLAIMED FOR THE ENTIRE YEAR. INSTEAD THE ASSESSEE COMPANY BECAME ENTITLED TO CLAIM DEPRECIATION ON THE SAID ASSETS ONLY FOR SIX MONTHS . IN OUR OPINION IT CANNOT THEREFORE BE SAID THAT THE ASSETS WERE TRANSFERRED BY M/S. PIRAMAL HOLDINGS LTD. TO THE ASSESSEE COMPANY AS ON 31.03.2001 AT INFLATED P RICE TO CLAIM HIGHER DEPRECIATION IN ORDER TO AVOID PAYMENT OF TAX. 11. AS REGARDS THE OTHER OBJECTION OF THE REVENUE A UTHORITIES THAT IN VIEW OF THE SUBSISTENCE OF LEASE AGREEMENT AS ON 31.03.2001 THE ASSETS LEASED OUT UNDER THE SAID AGREEMENT COULD NOT BE VALIDLY TRANSFERRED BY M/S. PIRAMAL HOLDINGS LTD. TO THE ASSESSEE COMPANY IT IS OBSERVED THAT THE SAID ASSETS WERE HELD BY THE ASSESSEE ON LEASE FOR THE ENTIRE YEAR UNDER CONSIDERATION AN D ACCORDINGLY LEASE RENT FOR THE SAME WAS PAID AND CLAIMED AS EXPENDITURE. ON THE L AST DATE OF THE SAID YEASR I.E. ON 31.03.2001 THE ASSETS TAKEN EARLIER ON LEASE HOWE VER WERE PURCHASED BY THE ASSESSEE FROM M/S. PIRAMAL HOLDINGS LTD. AND AS A RESULT OF THE SAID TRANSACTION INVOLVING PURCHASE OF ASSETS BY THE ASSESSEE COMPAN Y AND SALE THEREOF BY M/S. PIRAMAL HOLDINGS LTD. THE LEASE AGREEMENT STOOD T ERMINATED ON 31.3.2001 ITSELF. IN OUR OPINION IT CANNOT THEREFORE BE SAID THAT TH E SAID LEASE AGREEMENT WAS IN SUBSISTENCE AT THE TIME OF PURCHASE OF ASSETS BY TH E ASSESSEE AND THAT THE TRANSACTION INVOLVING SUCH PURCHASE WAS NOT VALID. THE MOMENT M/S. PIRAMAL HOLDNGS LTD. AGREED TO SELL THE ASSETS AND THE ASS ESSEE COMPANY AGREED TO PURCHASE THE SAME ON 31.03.2001 IT AUTOMATICALLY FOLLOWED THAT BOTH THE SIDES AGREED TO TERMINATE THE LEASE AGREEMENT SINCE WITHOUT SUCH TE RMINATION THE PURCHASE OF ASSETS BY THE ASSESSEE COMPANY AND SALE THEREOF BY M/S. PIRAMAL HOLDINGS LTD. WAS NOT POSSIBLE. WE THEREFORE DO NOT FIND ANY MERIT IN THE STAND TAKEN BY THE REVENUE AUTHORITIES ON THIS ISSUE THAT THE LEASE AGREEMENT WAS IN SUBSISTENCE AS ON 31.03.2001 AND THE ASSESSEE THEREFORE COULD PURCH ASE THE ASSETS FROM M/S. PIRAMAL HOLDINGS LTD. VALIDLY ON 1.4.2001 OR THEREAFTER. IN OUR OPINION THERE WAS A VALID TRANSFER OF ASSETS BY PIRMAL HOLDINGS LTD. TO THE ASSESSEE COMPANY AS ON 31.3.2001 AND SINCE THE ASSESSEE HAD BECOME THE OWNER OF THE SAID ASSETS ON THAT DAY AND THE SAME WERE USED FOR ITS BUSINESS OF RUNNING THE REST AURANT IT WAS ENTITLED FOR DEPRECIATION AS CLAIMED. IN THAT VIEW OF THE MATTER WE REVERSE THE IMPUGNED ORDER OF THE LEARNED CIT(A) ON THIS ISSUE AND DIRECT THE AO TO ALLOW THE CLAIM OF THE ASSESSEE FOR DEPRECIATION ON FIXED ASSETS PURCHASED FROM M/S. PIRAMAL HOLDINGS LTD. GROUND NOS.1 & 2 OF THE ASSESSEES APPEAL FOR THE A SSESSMENT YEAR 2001-02 ARE ACCORDINGLY ALLOWED. I.T.A NO.3253/ MUM/2010 FRESCA FINE DINING PVT.LTD 5 5. WE FIND THERE IS NO CHANGE IN FACTS IN THE YEA R UNDER CONSIDERATION. THE AUTHORITIES BELOW HAVE ONLY FOLLOWED THE DECISION F OR THE ASSESSMENT YEARS 2001-02 TO 2005-06 IN DISALLOWING THE DEPRECIATION WHICH H AS SINCE BEEN REVERSED BY A CO- ORDINATE BENCH VIDE ORDER DATED 11 TH MARCH 20011 (SUPRA). IN VIEW OF THIS RESPECTFULLY FOLLOWING THE DECISION OF CO-ORDINATE BENCH (SUPRA) IN ASSESSEES OWN CASE WE DIRECT THE AO TO ALLOW THE DEPRECIATION CL AIMED BY THE ASSESSEE. 6. IN THE RESULT APPEAL IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 29 TH MARCH 2011 SD/- (N.V.VASUDEVAN) JUDICIAL MEMBER SD/- (PRAMOD KUMAR) (ACCOUNTANT MEMBER) MUMBAI DATED 29 TH MARCH 2011 PARIDA COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS) 9 MUMBAI 4. COMMISSIONER OF INCOME TAX 5 MUMBAI 5. DEPARTMENTAL REPRESENTATIVE BENCH F MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR ITAT MUMBAI