M/s. KUONI TRAVELS (I) LTD., MUMBAI v. ADDL. CIT Rg. - 3(2), MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES F MUMBAI BEFORE SHRI R V EASWAR PRESIDENT AND SHRI P M JAGTAP ACCOUNTANT MEMBER I T A NO: 5562/MUM/2005 (ASSESSMENT YEAR: 2001-02) ASSISTANT COMMISSIONER OF INCOME TAX APPELLANT CIRCLE 3(2) MUMBAI VS KUONI TRAVEL (INDIA) PRIVATE LIMITED MUMBAI RESP ONDENT (PAN: AAACS0170L) I T A NO: 5400/MUM/2005 (ASSESSMENT YEAR: 2001-02) KUONI TRAVELS (INDIA) PRIVATE LIMITED MUMBAI APP ELLANT VS ASSISTANT COMMISSIONER OF INCOME TAX RESPONDENT CIRCLE 3(2) MUMBAI ASSESSEE BY: SHRI K SHIVARAM & SHRI PARAS SAVLA REVENUE BY: SHRI SATBIR SINGH O R D E R R V EASWAR PRESIDENT: THESE ARE CROSS APPEALS RELATING TO THE ASSESSMENT YEAR 2001-02. THE ASSESSEE IS A DOMESTIC COMPANY ENGAGE D IN THE BUSINESS AS TRAVEL AGENTS AND TOUR OPERATORS. THE APPEALS ARISE OUT OF THE ASSESSMENT ORDER PASSED UNDER SECTION 14 3(3)(II) OF THE INCOME TAX ACT 1961 ON 30.03.2004. 2. WE FIRST TAKE UP THE APPEAL OF THE DEPARTMENT IN ITA NO: 5562/MUM/2005. THE FIRST GROUND RELATES TO THE ALL OWANCE OF ITA NO: 5562/MUM/2005 ITA NO: 5400/MUM/2005 2 ` 82 17 495/- BEING PAYMENT MADE AS VRS COMPENSATION. THE BRIEF FACTS IN THIS REGARD ARE THAT DURING THE RELE VANT PREVIOUS YEAR WHICH IS THE YEAR ENDED 31.03.2001 THE ASSESSEE TO OK OVER THE BUSINESS OF SITA WORLD TRAVEL (INDIA) LIMITED AS A GOING CONCERN. THE SAID SITA WORLD TRAVEL (INDIA) LIMITED WAS ALSO RUNNING A CARGO DIVISION. THE ASSESSEE PAID ` 82 17 495/- AS COMPENSATION TO THE STAFF OF THE CARGO DIVISION ON ACCOUNT OF ITS CLOSU RE AND DEBITED THE SAME TO THE PROFIT AND LOSS ACCOUNT. THE ASSESSING OFFICER TOOK THE VIEW THAT THE PAYMENT CANNOT BE ALLOWED AS A DE DUCTION SINCE IT PERTAINED TO THE BUSINESS OF AMALGAMATING COMPANY NAMELY SITA WORLD TRAVEL (INDIA) LIMITED. THE ASSESSEE SUBMITT ED THAT THE CARGO DIVISION WAS COMPLETELY CLOSED DURING THE REL EVANT ACCOUNTING YEAR ON ACCOUNT OF LOSSES AND THAT THE CLOSURE TOOK PLACE AFTER THE AMALGAMATION WHICH TOOK EFFECT FROM 01.04.2000 AS PER THE ORDERS OF THE HONBLE HIGH COURT IN THE COMPANY APPLICATIO N. IT WAS ALSO SUBMITTED THAT THE CARGO DIVISION WAS CLOSED BY THE ASSESSEE ON ACCOUNT OF LOSSES SUFFERED AND BECAUSE IT WAS FOUND COMMERCIALLY UNVIABLE TO CONTINUE THE SAME. IT WAS POINTED OUT THAT THE PAYMENT OF COMPENSATION TO THE STAFF OF THE SAID DIVISION W AS IN COMPLIANCE WITH SECTION 25FFF OF THE INDUSTRIAL DISPUTES ACT UNDER WHICH THE EMPLOYEES WERE ENTITLED TO THREE MONTHS AVERAGE PAY IF THE UNDERTAKING IS CLOSED ON ACCOUNT OF CIRCUMSTANCES B EYOND THE CONTROL OF THE EMPLOYER. THE ASSESSING OFFICER HO WEVER WAS NOT SATISFIED WITH THE REASONS GIVEN BY THE ASSESSEE. HE PROBED THE MATTER FURTHER BY ISSUING A QUESTIONNAIRE IN WHICH HE MENTIONED THAT THE CARGO ACTIVITIES WERE CLOSED PRIOR TO THE MERGE R OF SITA WORLD ITA NO: 5562/MUM/2005 ITA NO: 5400/MUM/2005 3 TRAVEL (INDIA) LIMITED WITH THE ASSESSEE AND THERE FORE THE COMPENSATION PAID TO THE STAFF CANNOT BE CONSIDERED AS EXPENDITURE INCURRED IN THE COURSE OF CARRYING ON OF THE ASSESS EES BUSINESS. THE ASSESSEE POINTED OUT THAT THE MANAGEMENT OF SIT A WORLD TRAVEL (INDIA) LIMITED WAS TAKEN OVER BY IT ON 24.0 3.2000 AND THE BOARD OF DIRECTORS WAS CHANGED WITH EFFECT FROM THA T DATE THAT SITA WORLD TRAVEL (INDIA) LIMITED AMALGAMATED WITH THE A SSESSEE COMPANY WITH EFFECT FROM 01.04.2000 THAT THE COURT ORDER WAS RECEIVED IN THE MONTH OF NOVEMBER 2000 AND ACCORDIN GLY THE ASSESSEE WAS OBLIGED TO PAY THE COMPENSATION. THE ASSESSING OFFICER AFTER CONSIDERING THIS REPLY FROM THE ASSES SEE REITERATED HIS VIEW THAT THE CARGO DIVISION OF SITA WORLD TRAVEL ( INDIA) LIMITED WAS CLOSED PRIOR TO THE DATE OF APPROVAL FOR AMALGAMATI ON GIVEN BY THE HONBLE HIGH COURT AND THAT THE EXPENSES INCURRED I N RESPECT OF A DIVISION THAT HAS BEEN CLOSED DOWN BY THE EARLIER E NTITY ARE NOT ALLOWABLE AS BUSINESS EXPENSES OF THE NEW ENTITY. HE ALSO FOUND THAT THE ASSESSEE HAS PAID MORE THAN WHAT THE EMPLO YEES OF THE CARGO DIVISION WERE ELIGIBLE TO RECEIVE UNDER THE P ROVISIONS OF THE INDUSTRIAL DISPUTES ACT. HE ACCORDINGLY DISALLOWED THE PAYMENT OF VRS COMPENSATION AMOUNTING TO ` 82 17 495/-. 3. ON APPEAL THE CIT(A) NOTED THAT AS PER THE ORDE R OF THE HONBLE HIGH COURT THE APPOINTED DATE OF AMALGAMATI ON WAS 01.04.2000 AND THAT ON AND FROM THAT DATE ALL THE A SSETS AND LIABILITIES OF SITA WORLD TRAVEL (INDIA) LIMITED BE CAME THE ASSETS AND LIABILITIES OF THE ASSESSEE. HE FURTHER HELD THAT IT WAS ONLY THE CARGO DIVISION OF THE AMALGAMATING COMPANY THAT WAS CLOSE D AND NOT THE ITA NO: 5562/MUM/2005 ITA NO: 5400/MUM/2005 4 ENTIRE BUSINESS. HE AGREED THAT RETRENCHMENT COMPE NSATION PAID TO EMPLOYEES ON THE CLOSURE OF THE BUSINESS IS NOT DEDUCTIBLE BUT HELD THAT ON THE FACTS OF THE PRESENT CASE IT IS NO T A CASE OF CLOSURE OF THE BUSINESS AND CONSEQUENTIAL RETRENCHMENT BUT IT IS A CASE OF CLOSURE OF A DIVISION OF THE BUSINESS RESULTING IN PAYMENT OF COMPENSATION PACKAGE TO THE STAFF HITHERTO EMPLOYED IN THAT DIVISION. HE FURTHER FOUND THAT THE CARGO DIVISION HAD TO BE CLOSED DOWN AS IT WAS A LOSS MAKING PROPOSITION AND IT DID NOT RESULT IN ANY ENDURING BENEFIT TO THE ASSESSEE. HE THEREFORE HEL D THAT THE PAYMENT WAS ALLOWABLE UNDER SECTION 37(1) OF THE AC T. AS REGARDS THE QUANTUM OF THE EXPENSES HE OBSERVED THAT THE L IMIT PRESCRIBED BY THE INDUSTRIAL DISPUTES ACT IS ONLY THE MINIMUM AND AN ASSESSEE WAS FREE TO PAY MORE THAN THE MINIMUM. HE ACCORDIN GLY DIRECTED THE ASSESSING OFFICER TO ALLOW THE PAYMENT AS A DED UCTION. 4. THE REVENUE IS IN APPEAL TO CONTEND THAT THERE W AS NO INFORMATION AS TO THE DATE OF THE PAYMENT AND THER EFORE THIS ASPECT NEEDS VERIFICATION. ON THE OTHER HAND THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE AMOUNT WAS ACTUALLY PAI D DURING THE RELEVANT PREVIOUS YEAR AND AFTER THE JUDGMENT OF TH E SUPREME COURT IN THE CASE OF K RAVINDRANATHAN NAIR VS. CIT (2001) 247 ITR 178 (SC) SUCH PAYMENTS CANNOT BE DISALLOWED IF ACTUALL Y PAID. OUR ATTENTION WAS DRAWN TO PAGES 1 TO 10 OF THE PAPER B OOK WHICH CONTAINED THE DETAILS RELATING TO THE PAYMENT OF CO MPENSATION. ATTENTION WAS ALSO DRAWN TO PAGES 208 TO 253 OF THE PAPER BOOK WHICH ARE COPIES OF THE DOCUMENTS PLACED BEFORE THE CIT(A). IT WAS ITA NO: 5562/MUM/2005 ITA NO: 5400/MUM/2005 5 SUBMITTED ON THE BASIS OF THESE DOCUMENTS THAT THE CIT(A) HAS TAKEN THE CORRECT DECISION. 5. WE HAVE CAREFULLY CONSIDERED THE FACTS AND THE R IVAL CONTENTIONS. IN ITS LETTER DATED NIL WRITTEN TO TH E ASSESSING OFFICER (PAGES 1 AND 2 OF THE PAPER BOOK) THE ASSESSEE HAS CATEGORIZED THE PAYMENT AS RETRENCHMENT COMPENSATION PAID TO TH E EMPLOYEES OF THE CARGO DIVISION LOCATED AT DELHI SRINAGAR AN D KOLKATA TOWARDS FULL AND FINAL SETTLEMENT. THE ASSESSEE HAS ALSO S TATED THAT THE PAYMENT WAS NOT MADE ON ACCOUNT OF VOLUNTARY RETIRE MENT OF EMPLOYEES BUT WAS MADE ON RETRENCHMENT ON ACCOUNT OF CLOSURE OF THE CARGO DIVISION. IN SUPPORT OF THIS PLEA THE AS SESSEE HAD CITED THE JUDGMENT OF THE SUPREME COURT IN THE CASE OF K RAVINDRANATHAN NAIR VS. CIT (SUPRA) AS ALSO ANOTHE R JUDGMENT OF THE MADRAS HIGH COURT IN CIT VS. NAZEENA TRADERS (P RIVATE) LIMITED (1987) 165 ITR 405 (MAD). IT THUS APPEARS THAT THE ASSESSEE HAS MADE THE CLAIM ON THE FOOTING THAT IT IS A CASE OF RETRENCHMENT COMPENSATION. A SUBSEQUENT MEMORANDUM OF SETTLEMENT IS PLACED AT PAGE 5 OF THE PAPER BOOK. THIS IS DATED 19.10.2000 AND HAS BEEN ENTERED INTO BETWEEN THE EM PLOYEE AND SITA WORLD TRAVEL (INDIA) LIMITED. ACCORDING TO TH IS MEMORANDUM SITA WORLD TRAVEL (INDIA) LIMITED HAS EFFECTED CLOS URE OF THE CARGO DIVISION WITH EFFECT FROM 20.10.2000 ON PAYMENT OF NOTICE PAY AND COMPENSATION AS PER SECTION 25FFF OF THE INDUSTRIAL DISPUTES ACT. THE MEMORANDUM FURTHER RECORDS THAT THE EMPLOYEE HA S OFFERED TO RESIGN FROM THE SERVICES AND REQUESTED THE COMPANY TO CONSIDER SOME ADDITIONAL COMPENSATION IN VIEW OF HIS VOLUNTA RILY LEAVING THE ITA NO: 5562/MUM/2005 ITA NO: 5400/MUM/2005 6 SERVICES OF THE COMPANY. ACCORDINGLY A SUM OF ` 1 00 000/- WAS PAID TO THE EMPLOYEE THOUGH THIS WAS MORE THAN THE PAYMENT CONTEMPLATED BY SECTION 25FFF OF THE INDUSTRIAL DIS PUTES ACT. THE CARGO BUSINESS OF SITA WORLD TRAVEL (INDIA) LIMITED BECAME PART OF THE ASSESSEES BUSINESS WITH EFFECT FROM 01.04.2000 WHICH IS THE DATE OF AMALGAMATION AS PER THE HIGH COURTS ORDER AND WHATEVER PAYMENT WHICH SITA WORLD TRAVEL (INDIA) LIMITED HAD TO MAKE BECAME LIABLE TO BE PAID BY THE ASSESSEE. THERE DO ES NOT APPEAR TO BE ANY DOUBT ABOUT THE FACT THAT THE PAYMENT WAS MADE BY THE ASSESSEE IN THE RELEVANT PREVIOUS YEAR. THEREFORE WE ARE UNABLE TO ACCEPT THE PLEA OF THE LEARNED DEPARTMENTAL REPR ESENTATIVE THAT THE DATE OF PAYMENT REMAINS TO BE VERIFIED. THE OB JECTION OF THE ASSESSING OFFICER APPEARS TO BE ONLY THAT THE CARGO DIVISION DID NOT BELONG TO THE ASSESSEE. HOWEVER BY VIRTUE OF THE ORDER OF THE HIGH COURT THE SAID DIVISION BECAME PART OF THE ASSESSEE S BUSINESS. THE OTHER OBJECTION OF THE ASSESSING OFFICER IS THA T THE EXPENSES WERE INCURRED NOT IN CONNECTION WITH THE CARRYING O N OF THE ASSESSEES BUSINESS BUT FOR CLOSURE OF THE BUSINESS . THIS OBJECTION IS ALSO NOT ACCEPTABLE BECAUSE THE DECISION TO CLOS E THE CARGO DIVISION HAD ALREADY BEEN TAKEN BY SITA WORLD TRAVE L (INDIA) LIMITED AND THE LIABILITY TO PAY OFF THE STAFF OF THE SAID DIVISION BECAME THE LIABILITY OF THE ASSESSEE BY VIRTUE OF THE AMALGAMA TION ORDER WHICH LIABILITY WAS DISCHARGED BY THE ASSESSEE BY ACTUAL PAYMENT. IT CANNOT THEREFORE BE SAID THAT THE PAYMENT WAS NOT M ADE IN THE COURSE OF THE CARRYING ON OF THE BUSINESS OF THE AS SESSEE. IN THIS ITA NO: 5562/MUM/2005 ITA NO: 5400/MUM/2005 7 VIEW OF THE MATTER WE DO NOT FIND ANY INFIRMITY IN THE DECISION OF THE CIT(A). WE UPHOLD THE SAME AND DISMISS THE GROUND. 6. THE SECOND GROUND RELATES TO THE DEDUCTION ALLOW ABLE UNDER SECTION 80HHD OF THE ACT AMOUNTING TO ` 12 61 21 998/-. THE BRIEF FACTS IN THIS CONNECTION MAY BE NOTED. THE ASSESSE E WAS REQUESTED TO JUSTIFY THE DEDUCTION BY FURNISHING TH E RELEVANT DETAILS. THE ASSESSEE SUBMITTED THAT IT COMPLIED WITH ALL TH E CONDITIONS OF SECTION 80HHD INASMUCH AS IT WAS AN INDIAN COMPANY AND WAS ALSO ENGAGED IN THE BUSINESS OF TRAVEL AGENT. IT W AS EXPLAINED THAT THE TRAVEL AGENT IS A PERSON WHO ARRANGES THE TRAVE L FOR ANOTHER PERSON AS A BUSINESS AND LOOKS AFTER ALL THE PRELIM INARIES REQUIRED FOR THE TRAVEL SUCH AS OBTAINING PASSPORTS VISA A IR / RAIL RESERVATION AND SOMETIMES EVEN THE BOARDING AND LODGING FACILIT IES. IT WAS POINTED OUT THAT THOUGH EXPLANATION (A) BELOW SECTI ON 80HHD DEFINES A TRAVEL AGENT AS A PERSON WHO HOLDS A VA LID LICENCE GRANTED BY THE RESERVE BANK OF INDIA UNDER SECTION 32 OF THE FOREIGN EXCHANGE REGULATION ACT 1973 THAT SECTION OF FERA UNDER WHICH THE LICENCE WAS GRANTED WAS DELETED FRO M 08.01.1993. IT WAS POINTED OUT THAT THE ASSESSEE COMPANY IS A T OUR OPERATOR APPROVED BY THE DIRECTORATE GENERAL OF TOURISM GOV ERNMENT OF INDIA. IT WAS POINTED OUT THAT THE ASSESSEE HAS RE CEIVED FOREIGN EXCHANGE IN RELATION TO THE SERVICES PROVIDED TO FO REIGN TOURISTS AND HAS ALSO FURNISHED THE CHARTERED ACCOUNTANTS REPOR T IN THE PRESCRIBED FORM ALONG WITH THE RETURN OF INCOME AND THUS ALL STATUTORY CONDITIONS WERE FULFILLED. IT WAS ACCORD INGLY PLEADED THAT THE ASSESSEE IS ELIGIBLE FOR THE DEDUCTION. ITA NO: 5562/MUM/2005 ITA NO: 5400/MUM/2005 8 7. THE ASSESSING OFFICER DID NOT ACCEPT THE ASSESSE ES SUBMISSIONS. HE REFERRED TO SUB-SECTION (1) OF SEC TION 80HHD READ WITH EXPLANATION (A) BELOW THE SECTION AND POINTED OUT THAT THE ASSESSEE WAS REQUIRED TO OBTAIN A VALID LICENCE FRO M RESERVE BANK OF INDIA TO CARRY ON THE BUSINESS OF ORGANIZING TOU RS AND TRAVELS. HE AGREED THAT SECTION 32 OF THE FERA ACT 1973 WAS D ELETED FROM 08.01.1993 BUT OBSERVED THAT THERE IS NO CORRESPOND ING AMENDMENT IN THE INCOME TAX ACT OR IN THE RESERVE B ANK OF INDIA ACT. ACCORDING TO HIM THE ASSESSEE HAD TO SATISFY TWO CONDITIONS NAMELY (A) THAT THERE SHOULD BE AN APPROVAL FROM R ESERVE BANK OF INDIA UNDER FERA AND (B) THERE SHOULD BE APPROVAL F ROM THE DIRECTOR GENERAL OF TOURISM GOVERNMENT OF INDIA. 8. FACED WITH THIS SITUATION THE ASSESSEE WITHOUT PREJUDICE TO ITS MAIN CONTENTION FILED TWO CERTIFICATES ISSUED BY THE TOURISM MINISTRY. THE FIRST CERTIFICATE WAS DATED 04.02.19 99. IT WAS ISSUED IN THE NAME OF SITA WORLD TRAVEL (INDIA) LIMITED. THE ASSESSING OFFICER THEREFORE HELD THAT IT IS OF NO ASSISTANCE TO THE ASSESSEE SINCE THE SAID COMPANY CEASED TO EXIST AFTER BEING AMALGAMATED WITH THE ASSESSEE COMPANY. THE SECOND CERTIFICATE WAS DATED 30.10.2002. THIS WAS FOUND TO BE EFFECTIVE ONLY FR OM 28.10.2002 WHICH IS BEYOND THE RELEVANT PREVIOUS YEAR. THUS T HESE TWO CERTIFICATES ISSUED BY THE TOURISM MINISTRY WERE AL SO FOUND TO BE OF NO ASSISTANCE TO THE ASSESSEE. 9. THE ASSESSEE THEN FILED A CERTIFICATE ISSUED BY THE INTERNATIONAL AIR TRANSPORT ASSOCIATION (IATA). AS THIS CERTIFICATE ONLY MENTIONED THAT THE ASSESSEE HAS MET WITH THE P ROVISIONAL ITA NO: 5562/MUM/2005 ITA NO: 5400/MUM/2005 9 STANDARDS LAID DOWN BY IATA AND SINCE IATA WAS NOT A GOVERNMENT AGENCY AND HAS NOT APPROVED THE ASSESSEE AS A TOUR OPERATOR THIS CERTIFICATE WAS ALSO HELD NOT TO BE OF ANY USE TO THE ASSESSEE. 10. FOR THE ABOVE REASONS THE ASSESSING OFFICER DIS ALLOWED THE CLAIM FOR DEDUCTION UNDER SECTION 80HHD OF THE ACT. 11. ON APPEAL THE CIT(A) HELD THAT SINCE THE ASSES SEE IS A RECOGNIZED TOUR OPERATOR / TRAVEL AGENT AND IS RECO GNIZED BY THE GOVERNMENT OF INDIA DEPARTMENT OF TOURISM AND CULT URE IT WAS ENTITLED TO THE DEDUCTION UNDER SECTION 80HHD OF TH E ACT. HE THEREFORE DIRECTED THE ASSESSING OFFICER TO VERIFY THE ASSESSEES CLAIM AND SUBMIT A REMAND REPORT. IN THE REMAND RE PORT THE ASSESSING OFFICER SUBMITTED THAT SITA WORLD TRAVEL (INDIA) LIMITED HAD AMALGAMATED WITH THE ASSESSEE COMPANY ON THE OR DERS OF THE HIGH COURT WITH EFFECT FROM 01.04.2000. HE ALSO RE PORTED THAT THE ASSESSEE HAS TO BE TREATED AS THE SUCCESSOR IN BUSI NESS TO SITA WORLD TRAVEL (INDIA) LIMITED WITH EFFECT FROM THE S AID DATE AS PER THE DECISION OF THE SUPREME COURT IN THE CASE OF MARSHA LL SONS COMPANY (INDIA) LIMITED VS. ITO (1997) 223 ITR 809 (SC). HE THUS REQUESTED THE CIT(A) TO DECIDE THE ADMISSIBILITY OF THE DEDUCTION ON MERITS. 12. ON THE BASIS OF THE REMAND REPORT IN WHICH THE JUDGMENT OF THE SUPREME COURT IN THE CASE OF MARSHALL SONS COMP ANY (INDIA) LIMITED (SUPRA) WAS RELIED UPON THE CIT(A) HELD TH AT THE AMALGAMATION WAS EFFECTIVE FROM 01.04.2000 AND ALL THE INCOME AND EXPENSES OF THE TRANSFEREE COMPANY FROM THE SAI D DATE ARE ITA NO: 5562/MUM/2005 ITA NO: 5400/MUM/2005 10 ASSESSABLE / ALLOWABLE IN THE HANDS OF THE ASSESSEE COMPANY. IN THIS VIEW OF THE MATTER HE UPHELD THE ASSESSEES CL AIM. 13. THE REVENUE IS IN APPEAL QUESTIONING THE DECISI ON OF THE CIT(A) ON THE SAME GROUNDS WHICH WERE TAKEN BY THE ASSESSING OFFICER WHILE DENYING THE ASSESSEES CLAIM. ON THE OTHER HAND THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE IS A DULY APPROVED TOUR OPERATOR AND ALL THE CONDITIONS PRESCRIBED BY THE SECTION WERE ALSO SATISFIED AND THEREFORE THE CIT (A) WAS RIGHT IN HIS DECISION. HE ALSO PLACED RELIANCE ON THE REMAN D REPORT SUBMITTED BY THE ASSESSING OFFICER. OUR ATTENTION WAS DRAWN TO PAGES 36 AND 37 OF THE PAPER BOOK WHICH ARE COPIES OF THE CERTIFICATES ISSUED BY THE DEPARTMENT OF TOURISM M INISTRY OF TOURISM AND CULTURE GOVERNMENT OF INDIA RECOGNIZI NG SITA WORLD TRAVEL (INDIA) LIMITED AS A TOUR OPERATOR FOR THE P ERIOD UP TO 20.02.2002 AND RECOGNIZING THE ASSESSEE AS AN APPRO VED TOUR OPERATOR FROM 28.10.2002 TO 27.10.2005. ATTENTION WAS ALSO DRAWN TO CLAUSE 3.1(C) OF THE SCHEME OF AMALGAMATION APPR OVED BY THE HIGH COURT IN WHICH IT WAS STIPULATED THAT ALL THE ASSETS AND LIABILITIES OF SITA WORLD TRAVEL (INDIA) LIMITED WO ULD BECOME ASSETS AND LIABILITIES OF THE ASSESSEE COMPANY. HE SUBMIT TED THAT SECTION 80HHD APPLIES NOT ONLY TO A TRAVEL AGENT BUT ALSO T O A PERSON CARRYING ON BUSINESS AS A TOUR OPERATOR AND SINCE T HE ASSESSEE IS AN APPROVED TOUR OPERATOR THE DEDUCTION WAS RIGHTL Y ALLOWED BY THE CIT(A). 14. WE HAVE CAREFULLY CONSIDERED THE FACTS AND THE RIVAL CONTENTIONS. IN THE CASE OF AN INDIAN COMPANY ENGA GED IN THE ITA NO: 5562/MUM/2005 ITA NO: 5400/MUM/2005 11 BUSINESS OF A TOUR OPERATOR APPROVED BY THE PRESCR IBED AUTHORITY OR CARRYING ON BUSINESS AS A TRAVEL AGENT DEDUCTION I S AVAILABLE UNDER SUB-SECTION (1) OF SECTION 80HHD IN COMPUTING THE T OTAL INCOME. THE QUESTION WHETHER THE ASSESSEE IS A TRAVEL AGENT OR NOT WITHIN THE MEANING OF EXPLANATION (A) BELOW THE SECTION NE ED NOT DETAIN US BECAUSE IF THE ASSESSEE IS A TOUR OPERATOR THAT WOULD BE SUFFICIENT COMPLIANCE FOR OBTAINING THE DEDUCTION. SUB-SECTION (1) OF SECTION 80HHD REQUIRES THAT THE ASSESSEE SHOULD BE AN APPROVED TOUR OPERATOR AND FOR THIS PURPOSE THE PRESCRIBED A UTHORITY FOR GRANTING APPROVAL UNDER RULE 18BBA(5) OF THE INCOM E TAX RULES 1962 IS THE DIRECTOR GENERAL DIRECTORATE GENERAL OF TOURISM GOVERNMENT OF INDIA. AT PAGE 36 OF THE PAPER BOOK THE ASSESSEE HAS PLACED A LETTER DATED 04.02.1999 ISSUED BY THE GOVERNMENT OF INDIA MINISTRY OF TOURISM. IT HAS BEEN SIGNED BY ONE VINOD KUMAR FOR DIRECTOR GENERAL (TOURISM). THE LETTER IS ADDR ESSED TO SITA WORLD TRAVEL (INDIA) LIMITED AND THE SUBJECT IS GR ANT OF RECOGNITION AS APPROVED TOUR OPERATOR. THE LETTER SAYS THAT C ONSEQUENT TO THE AFORESAID COMPANY CONFIRMING THE ACCEPTANCE OF THE REGULATORY TERMS AND CONDITIONS THE MINISTRY OF TOURISM HAS D ECIDED TO GRANT RECOGNITION TO THE COMPANY AS APPROVED TOUR OPERATO R WITH EFFECT FROM 21.01.1999 TO 20.02.2002. SINCE THIS LETTER H AS BEEN ISSUED BY THE PRESCRIBED AUTHORITY IT IS SUFFICIENT COMPL IANCE WITH SUB- SECTION (1) OF SECTION 80HHD AND THE ASSESSEE IS AN APPROVED TOUR OPERATOR FOR THE PURPOSE OF THE SECTION. THE APPRO VAL IS NO DOUBT IN THE NAME OF SITA WORLD TRAVEL (INDIA) LIMITED BUT A S POINTED OUT ON BEHALF OF THE ASSESSEE AS PER CLAUSE 3.1(C) OF THE SCHEME OF ITA NO: 5562/MUM/2005 ITA NO: 5400/MUM/2005 12 AMALGAMATION ALL RIGHTS PRIVILEGES POWERS AND AU THORITIES AND ALL PROPERTIES MOVABLE OR IMMOVABLE CORPOREAL OR INCO RPOREAL AND ALL LICENSES LIBERTIES PATENTS TRADEMARKS IMPORT QU OTAS ETC. HELD BY THE AMALGAMATING COMPANY I.E. SITA WORLD TRAVEL (I NDIA) LIMITED AND ALL OTHER OBLIGATIONS AND DUTIES OF THE SAID CO MPANY INCLUDING LIABILITIES FOR PAYMENT OF GRATUITY SUPERANNUATION BENEFITS PROVIDENT FUND OR COMPENSATION IN THE EVENT OF RETRENCHMENT S HALL ALL BELONG AND STAND TRANSFERRED TO THE TRANSFEREE COMPANY NA MELY ASSESSEE COMPANY PURSUANT TO SECTION 394 OF THE COMPANIES A CT 1956 AND OTHER APPLICABLE PROVISIONS OF THE ACT. THUS THE A PPROVAL GRANTED BY THE PRESCRIBED AUTHORITY TO SITA WORLD TRAVEL (I NDIA) LIMITED FOR A PERIOD OF THREE YEARS ENDING WITH 20.02.2002 SHOULD BE TREATED AS APPROVAL GRANTED TO THE ASSESSEE COMPANY WITH EFFEC T FROM 01.04.2000 BY VIRTUE OF THE SCHEME OF AMALGAMATION DULY APPROVED BY THE HIGH COURT. THEREFORE THE ASSESSEE IS ENTI TLED TO THE DEDUCTION UNDER SECTION 80HHD AS AN APPROVED TOUR O PERATOR FOR THE RELEVANT ASSESSMENT YEAR. WE ACCORDINGLY ENDOR SE THE DECISION OF THE CIT(A). 15. IN THE VIEW WE HAVE TAKEN IT IS NOT NECESSARY FOR US TO EXAMINE THE QUESTION WHETHER THE ASSESSEE IS A TRAV EL AGENT WITHIN THE MEANING OF EXPLANATION (A) TO SECTION 80HHD AND WHETHER THE DELETION OF SECTION 32 OF FERA 1973 WITH EFFECT F ROM 08.01.1993 HAS ANY IMPACT ON THE DEFINITION. THE GROUND OF TH E DEPARTMENT IS ACCORDINGLY DISMISSED. 16. THE THIRD GROUND ALSO RELATES TO THE DEDUCTION UNDER SECTION 80HHD OF THE ACT. IT IS AGAINST THE DECISION OF TH E CIT(A) HOLDING ITA NO: 5562/MUM/2005 ITA NO: 5400/MUM/2005 13 THAT THE ASSESSEE HAS UTILIZED THE TOURISM RESERVE IN CONSONANCE WITH THE CONDITIONS LAID DOWN UNDER SECTION 80HHD(4 )(B) OF THE ACT. THE DEDUCTION UNDER SECTION 80HHD IS SUBJECT TO FUL FILLMENT OF SEVERAL CONDITIONS ONE OF WHICH IS THAT AN AMOUNT NOT EXCEEDING 40% OF THE PROFITS FROM THE ELIGIBLE BUSINESS SHOUL D BE DEBITED TO THE PROFIT AND LOSS ACCOUNT OF THE PREVIOUS YEAR IN RESPECT OF WHICH THE DEDUCTION IS TO BE ALLOWED AND CREDITED TO A RE SERVE ACCOUNT TO BE UTILIZED FOR THE PURPOSES OF THE BUSINESS OF THE ASSESSEE IN THE MANNER LAID DOWN IN THE SECTION. THIS CONDITION IS PRESCRIBED BY SECTION 80HHD(1)(A)(II). THE MANNER IN WHICH THE R ESERVE IS TO BE UTILIZED IS PRESCRIBED IN SUB-SECTION (4) OF THE SE CTION. ACCORDING TO THIS SUB-SECTION THE AMOUNT CREDITED TO THE RESERV E ACCOUNT SHALL BE UTILIZED BEFORE THE EXPIRY OF A PERIOD OF FIVE Y EARS NEXT FOLLOWING THE PREVIOUS YEAR IN WHICH THE AMOUNT WAS CREDITED TO THE RESERVE ACCOUNT. CLAUSE (B) OF THE SUB-SECTION SAYS THAT P URCHASE OF NEW CARS AND NEW COACHES BY TOUR OPERATORS ALREADY APPR OVED; WILL BE CONSIDERED AS ONE OF THE PERMISSIBLE METHODS OF UTI LIZATION OF THE RESERVE. SUB-SECTION (5) PROVIDES FOR THE CONSEQUE NCES OF UTILIZATION OF THE RESERVE ACCOUNT IN A MANNER NOT PROVIDED FOR BY SUB-SECTION (4). THE CONSEQUENCE IS THAT THE AMOUN T WHICH IS UTILIZED CONTRARY TO THE METHOD PRESCRIBED BY SUB-S ECTION (4) SHALL BE DEEMED TO BE THE PROFITS OF THE ASSESSEES BUSIN ESS AND BE CHARGED TO TAX ACCORDINGLY. 17. IN THE BALANCE SHEET THE ASSESSEE HAD SHOWN ` 3 77 87 554/- AS AMOUNT TRANSFERRED FROM THE TOURI SM PROMOTION RESERVE TO TOURISM DEVELOPMENT UTILIZED RESERVE. THE ASSESSING ITA NO: 5562/MUM/2005 ITA NO: 5400/MUM/2005 14 OFFICER CALLED FOR THE DETAILS OF THE AMOUNT AND FR OM THE DETAILS FURNISHED BY THE ASSESSEE HE FOUND THAT IT CONSISTE D OF THREE AMOUNTS AS FOLLOWS: - (1) ` 58 35 649/- UTILIZED FOR ACQUISITION OF CARS. (2) ` 2 55 25 772/- UTILIZED FOR ACQUISITION OF CARS AND BUSES BY SITA WORLD TRAVEL (INDIA) LTD. AND TAKEN OVER BY THE ASSESSEE. (3) ` 64 26 133/- FOR WHICH NO DETAILS OF UTILIZATION WERE FURNISHED. SO FAR AS THE AMOUNT OF ` 58 35 649/- IS CONCERNED IT WAS ADMITTED BY THE ASSESSEE THAT THE CARS WERE ACQUIRED FOR THE USE OF STAFF MEMBERS / DIRECTORS / CONSULTANTS. THIS WAS NOT CO NSIDERED BY THE ASSESSING OFFICER AS UTILIZATION OF THE RESERVE FOR THE PURPOSES OF THE BUSINESS. AS REGARDS THE AMOUNT OF ` 2 55 25 772/- THE ASSESSING OFFICER AGREED THAT THE AMOUNT WAS UTILIZ ED FOR ACQUIRING LUXURY COACHES AND IN FITTING THEM WITH AMENITIES L IKE AIR- CONDITIONERS ETC. BUT HE TOOK THE VIEW THAT THE A MOUNT WAS SPENT NOT BY THE ASSESSEE BUT BY SITA WORLD TRAVEL (INDIA ) LIMITED AND THEREFORE THE ASSESSEE CANNOT CLAIM ANY BENEFIT IN RESPECT OF THE SAME. AS REGARDS THE AMOUNT OF ` 64 26 133/- IN THE ABSENCE OF ANY DETAILS THE ASSESSING OFFICER DID NOT CONSIDER IT AS LAWFUL UTILIZATION OF THE RESERVE. HE THUS ADDED BACK THE AGGREGATE AMOUNT OF ` 3 77 87 554/- TO THE INCOME OF THE ASSESSEE. 18. ON APPEAL THE CIT(A) AGREED WITH THE ASSESSEE THAT THE ENTIRE AMOUNT OF THE RESERVE WAS PROPERLY UTILIZED AS REQUIRED BY SECTION 80HHD(4) OF THE ACT AND THEREFORE THE ASS ESSEE WAS ITA NO: 5562/MUM/2005 ITA NO: 5400/MUM/2005 15 ELIGIBLE FOR THE DEDUCTION. HE WAS OF THE VIEW THA T USE OF CARS BY THE EMPLOYEES OF THE ASSESSEE CANNOT BE CONSIDERED TO BE PERSONAL USE BUT SHOULD BE CONSIDERED AS USE FOR TH E PURPOSE OF THE ASSESSEES BUSINESS SINCE THE ASSESSEE CANNOT W ORK WITHOUT ITS EMPLOYEES AND PROVISION OF CAR TO THE EMPLOYEE AMOU NTED TO UTILIZATION OF THE CARS FOR THE PURPOSE OF THE BUSI NESS. AS REGARDS THE AMOUNT OF ` 2 55 25 772/- THE CIT(A) HELD THAT THE ASSETS OF T HE AMALGAMATING COMPANY UNDER THE ORDERS OF THE HIGH COURT BECAME THE ASSETS OF THE ASSESSEE COMPANY AND THER EFORE IT AMOUNTED TO PROPER UTILIZATION OF THE RESERVE. ACC ORDINGLY THIS AMOUNT WAS ALSO ALLOWED. AS REGARDS THE AMOUNT OF ` 64 26 133/- THE NECESSARY REGISTRATION PAPERS WERE SUBMITTED BE FORE THE ASSESSING OFFICER ON REMAND PROCEEDINGS AND THEREFO RE THE CIT(A) DIRECTED THE ASSESSING OFFICER TO ALLOW THE CLAIM. IT IS ALSO TO BE NOTED THAT THE VALUE OF CARS USED BY THE ASSESSEES EMPLOYEES WAS FOUND TO BE ` 1 66 73 393/- BY THE ASSESSING OFFICER DURING THE REMAND PROCEEDINGS AND NOT ` 58 35 649/- AS CONSIDERED BY THE ASSESSING OFFICER. THUS NOT ONLY THE CLAIM OF ` 3 77 87 554/- WAS ALLOWED BY THE CIT(A) BUT SOMETHING MORE WAS ALSO A LLOWED BEING THE DIFFERENCE BETWEEN THE AMOUNT OF ` 1 66 73 393/- AND ` 58 35 649/-. 19. IT IS AGAINST THE AFORESAID DECISION OF THE CIT (A) THAT THE REVENUE HAS COME IN APPEAL BEFORE THE TRIBUNAL. WE HAVE ALREADY NOTICED THE STATUTORY PROVISIONS. SO FAR AS THE CA RS PURCHASED BY SITA WORLD TRAVEL (INDIA) LIMITED IS CONCERNED WE ARE IN AGREEMENT WITH THE VIEW TAKEN BY THE CIT(A) THAT AFTER AMALGA MATION OF THAT ITA NO: 5562/MUM/2005 ITA NO: 5400/MUM/2005 16 COMPANY WITH THE ASSESSEE COMPANY WITH EFFECT FROM 01.04.2000 IT MUST BE TAKEN AS IF THOSE CARS WERE ACQUIRED BY THE ASSESSEE COMPANY AND THEREFORE THE ASSESSEES CLAIM SHOULD B E ALLOWED. AS REGARDS THE VALUE OF CARS AMOUNTING TO ` 64 26 133/- FOR WHICH THE RELEVANT PURCHASE AND REGISTRATION DOCUMENTS WERE N OT AVAILABLE BEFORE THE ASSESSING OFFICER BUT WERE MADE AVAILABL E BY THE ASSESSEE IN THE COURSE OF REMAND PROCEEDINGS IT HA S TO BE VERIFIED WHETHER THESE CARS WERE USED FOR THE ASSESSEES BUS INESS WHICH IS THAT OF A TOUR OPERATOR. IF THEY HAD BEEN ACQUIRED ONLY FOR THE USE OF THE EMPLOYEES / OFFICERS OF THE ASSESSEE COMPANY I T CANNOT BE CONSIDERED AS USED FOR THE BUSINESS OF THE ASSESSEE . THE OBJECT OF THE SECTION IS TO PROMOTE THE BUSINESS OF TOUR OPER ATOR AND OBVIOUSLY THE REQUIREMENT IS THAT THE ASSESSEE SHOU LD HAVE PURCHASED CARS / COACHES ETC. WHICH CAN BE USED DIR ECTLY IN THE BUSINESS OF OPERATING TOURS BY TAKING TOURISTS IN S UCH VEHICLES. THERE IS NO DOUBT A BENEFIT TO THE ASSESSEES BUSIN ESS BY PROVIDING VEHICLES FOR THE STAFF BUT IN OUR OPINION WHAT SUB- SECTION (4)(B) OF SECTION 80HHD REQUIRES IS THAT THE PURCHASE OF NEW CARS AND NEW COACHES SHOULD BE FOR THE PURPOSE OF OPERATING THE TOURS. THIS ASPECT NEEDS VERIFICATION SO FAR AS THE AMOUNT OF ` 64 26 133/- IS CONCERNED. THE ASSESSING OFFICER IS DIRECTED TO CA RRY OUT THE NECESSARY VERIFICATION IN RESPECT OF THIS AMOUNT. HOWEVER SO FAR AS THE AMOUNT OF ` 1 66 73 393/- IS CONCERNED THE ASSESSEE ITSELF HAD ADMITTED BEFORE THE ASSESSING OFFICER THAT THE CARS ACQUIRED WERE FOR THE USE OF STAFF MEMBERS / DIRECTORS / CONSULTA NTS. THE ADMISSION IS REFERRED TO AT PAGE 18 OF THE ASSESSME NT ORDER. WE ITA NO: 5562/MUM/2005 ITA NO: 5400/MUM/2005 17 HAVE ALREADY SEEN THAT THIS DOES NOT MEET THE REQUI REMENTS OF SUB- SECTION (4) OF SECTION 80HHD. ACCORDINGLY THE CIT( A) WAS WRONG IN DIRECTING THE ASSESSING OFFICER TO ALLOW DEDUCTION EVEN IN RESPECT OF ` 1 66 73 393/- REPRESENTING THE VALUE OF CARS ACQUIR ED FOR USE OF THE ASSESSEES STAFF / DIRECTORS / CONSULTANTS. WE HOL D ACCORDINGLY AND ALLOW THE GROUND IN PART. 20. GROUND NO.4 IS DIRECTED AGAINST THE DECISION OF THE CIT(A) ALLOWING DEDUCTION OF THE ARCHITECT FEES OF ` 7 38 643/- AND EXPENDITURE OF ` 45 04 115/- BEING RENOVATION OF THE PREMISES AS REVENUE EXPENDITURE. A PERUSAL OF THE ASSESSMENT O RDER SHOWS THAT THE ARCHITECT FEES WERE PAID TO MR ABHAY KULKA RNI IN CONNECTION WITH THE REPAIRS OF PREMISES IN MAKER E ACQUIRED DURING THE RELEVANT PREVIOUS YEAR. THE ASSESSEE EXPLAINED THA T THE PREMISES WERE USED AS THE OFFICE OF THE COMPANY AND CAPITAL EXPENDITURE WAS SEPARATELY DEBITED CAPITALIZED TO THE BUILDING ACCO UNT AND ONLY THE REPAIR EXPENSES AND ARCHITECT EXPENSES WHICH WERE C ONSIDERED TO BE REVENUE IN NATURE WERE CLAIMED UNDER SECTION 30 OF THE ACT. THE ASSESSING OFFICER DID NOT ACCEPT THE ASSESSEE CLAIM WHICH WAS HOWEVER ACCEPTED BY THE CIT(A). IN OUR OPINION TH E ARCHITECT FEES BY ITSELF DOES NOT BRING INTO EXISTENCE ANY CAPITAL ASSET AND SHOULD BE CONSIDERED AS REVENUE IN NATURE. FURTHER THE AS SESSEE ITSELF HAS SEGREGATED THE CAPITAL EXPENDITURE AND CAPITALI ZED THE SAME. IN OUR OPINION THE CIT(A) WAS RIGHT IN HOLDING THA T THE ARCHITECT FEE WAS ALLOWABLE AS REVENUE EXPENDITURE. 21. AS REGARDS RENOVATION EXPENSES PAID TO M/S HEMA NT JOSHI & ASSOCIATES THEY WERE PAID FOR RENOVATION OF ALL TH E MUMBAI ITA NO: 5562/MUM/2005 ITA NO: 5400/MUM/2005 18 PROPERTIES OF THE ASSESSEE. THE ASSESSING OFFICER TOOK THE ENTIRE EXPENDITURE AS CAPITAL IN NATURE. THE CIT(A) HAS H OWEVER HELD THAT THE EXPENSES DID NOT BRING INTO EXISTENCE ANY ASSET OF ENDURING NATURE. HE HAS FURTHER HELD THAT THE PROPERTIES IN QUESTION WERE RENTED PROPERTIES AND NOT OWNED BY THE ASSESSEE. T HIS FINDING IS NOT CONTROVERTED. WE ACCORDINGLY CONFIRM THE DECIS ION OF THE CIT(A) ON THIS POINT ALSO. THE GROUND IS THUS DISMISSED. 22. GROUND NO.5 IS THAT THE CIT(A) ERRED IN HOLDING THAT THE EXPENDITURE OF ` 24 00 022/- INCURRED FOR SOFTWARE MAINTENANCE IS REVENUE EXPENDITURE. ACCORDING TO THE ASSESSING OF FICER (PARAGRAPH 11) THE ASSESSEE DEVELOPED THE SOFTWARE WHEREAS ACCORDING TO THE CIT(A) THE EXPENDITURE WAS WITH R EFERENCE TO MAINTENANCE OF HARDWARE AND SOFTWARE. FROM PAGE 39 2 OF THE PAPER BOOK WHICH IS THE BILL SUBMITTED BY MICROLAN D IT IS SEEN THAT THE PAYMENT WAS FOR INTEGRATED SERVICE MANAGEMENT. EVEN ASSUMING THAT SOME SOFTWARE WAS DEVELOPED BY MICROL AND CONSIDERING THE FAST CHANGING BUSINESS EXIGENCIES A ND RAPID STRIDES MADE IN THE SOFTWARE INDUSTRY IT IS QUITE POSSIBLE THAT THE SOFTWARE DEVELOPMENT BY THE ASSESSEE MIGHT BECOME OBSOLETE W ITHIN A SHORT SPAN OF TIME. THERE IS THEREFORE NO POSSIBILITY OF THE ASSESSEE GETTING ANY ENDURING BENEFIT. WE THEREFORE CONFIRM THE DECISION OF THE CIT(A) AND DISMISS THE GROUND. 23. GROUND NO.6 IS DIRECTED AGAINST THE DECISION OF THE CIT(A) DELETING THE DISALLOWANCE OF ` 50 000/- UNDER SECTION 14A OF THE ACT. AFTER CONSIDERING THE RIVAL CONTENTIONS WE F IND THAT THERE IS MERIT IN THE REASONING OF THE ASSESSING OFFICER (PA RAGRAPH 7 OF THE ITA NO: 5562/MUM/2005 ITA NO: 5400/MUM/2005 19 ASSESSMENT ORDER). HE HAS DISALLOWED THE AMOUNT FO R EXPENSES SUCH AS COLLECTION EXPENSES MAINTENANCE OF INVESTM ENT RECORDS DEMAT EXPENSES FOLLOW UP EXPENSES BROKERAGE STAM P DUTY ETC. IN OUR OPINION THE DISALLOWANCE WAS PROPERLY MADE. WE RESTORE THE SAME AND ALLOW THE GROUND. 24. GROUND NO.7 AND 8 ARE GENERAL AND REQUIRE NO DE CISION. 25. IN THE RESULT THE APPEAL OF THE DEPARTMENT IS PARTLY ALLOWED. 26. IN THE ASSESSEES APPEAL IN ITA NO: 5400/MUM/20 05 THERE ARE ONLY TWO GROUNDS. THEY ARE AS UNDER: - 1. THE LD. CIT(A) ERRED IN LAW AND FACTS IN CONSIDERING THE INTEREST INCOME AS NON- BUSINESS INCOME FOR THE PURPOSE OF COMPUTING THE DEDUCTION U/S 80HHD. HE OUGHT TO HAVE CONSIDERED THE INCOME AS PART OF THE BUSINESS PROFIT AS THIS INCOME IS OPERATIONAL INCOME INEXTRICABLY CONNECTED WITH THE BUSINESS OF THE APPELLANT. 2. (I) THE LD. AO ERRED IN LAW AND FACTS IN DISALLOWING ` 9 81 094/- BEING ADVANCE GIVEN AGAINST DEVELOPMENT SOFTWARE EXPENSES WRITTEN OFF ON THE GROUND THAT IT IS CAPITAL EXPENDITURE. THE REASONS GIVEN BY HIM ARE WRONG AND AGAINST THE PROVISIONS OF LAW. THE ADVANCE GIVEN AGAINST SOFTWARE PROJECT ABANDONED AND HENCE ALLOWABLE AS BUSINESS LOSS U/S 37(I) OF THE ACT. (II) WITHOUT PREJUDICE TO ABOVE THE LD. AO SHOULD HAVE ALLOWED DEPRECIATION ON THE SAID AMOUNT WHEN IT IS HELD AS CAPITAL EXPENDITURE. 27. SO FAR AS THE FIRST GROUND IS CONCERNED THE SA ME IS COVERED BY THE ORDER OF THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR THE ITA NO: 5562/MUM/2005 ITA NO: 5400/MUM/2005 20 ASSESSMENT YEAR 2000-01 IN ITA NO: 6944/MUM/2004. IN THE SAID ORDER DATED 08.10.2010 IN PARAGRAPH 8 THE TRIBUNA L HAS HELD THAT SOME OF THE ASPECTS HAVE NOT BEEN EXAMINED AT ALL I NCLUDING THE NATURE OF INTEREST INCOME AND ITS CONNECTION IF AN Y WITH THE BUSINESS THE NATURE OF MISCELLANEOUS INCOME ETC. THE TRIBUNAL HAS ACCORDINGLY RESTORED THE MATTER TO THE ASSESSIN G OFFICER FOR FRESH ADJUDICATION IN THE LIGHT OF THE JUDGMENTS OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. ASIAN STAR CO. LTD. (2010) 326 ITR 56 (BOM) AND CIT VS. SHAH ORIGINALS (2010) 327 ITR 19 (BOM). SINCE THE FACTS ARE THE SAME FOR THE YEAR UNDER APPEAL RESPECTFULLY FOLLOWING THE AFORESAID ORDER OF THE TRIBUNAL WE RESTORE THE ISSUE TO THE ASSESSING OFFICER FOR FRES H ADJUDICATION WITH THE SAME DIRECTIONS AS WERE GIVEN BY THE TRIBUNAL I N THE CITED ORDER. 28. SO FAR AS GROUND NO.2 IS CONCERNED THE SAME IS ALSO COVERED IN THE ASSESSEES OWN CASE FOR THE ASSESSME NT YEAR 2000- 01 VIDE ORDER DATED 18.08.2009. IN PARAGRAPH 3 OF THIS ORDER THE TRIBUNAL HAS RESTORED THE MATTER TO THE ASSESSING O FFICER TO DECIDE THE ALLOWABILITY OF THE CLAIM OF THE ASSESSEE IN AC CORDANCE WITH THE ORDER OF THE SPECIAL BENCH IN THE CASE OF AMWAY IN DIA ENTERPRISES VS. DCIT (2008) 301 ITR (AT) 1 (DEL) (SB). SINCE T HE FACTS ARE THE SAME FOR THE YEAR UNDER APPEAL RESPECTFULLY FOLLOW ING THE SAID ORDER WE RESTORE THE MATTER TO THE ASSESSING OFFIC ER WITH THE SAME DIRECTIONS. 29. THE ASSESSEES APPEAL IS THUS ALLOWED BUT FOR S TATISTICAL PURPOSES. ITA NO: 5562/MUM/2005 ITA NO: 5400/MUM/2005 21 30. TO SUM UP THE APPEAL OF THE DEPARTMENT IS PART LY ALLOWED AND THE ASSESSEES APPEAL IS ALLOWED FOR STATISTICA L PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD FEBRUARY 2011. SD/- SD/- (P M JAGTAP) (R V EASWAR) ACCOUNTANT MEMBER PRESIDENT MUMBAI DATED 23 RD FEBRUARY 2011 SALDANHA COPY TO: 1. KUONI TRAVEL (INDIA) PRIVATE LIMITED KUONI HOUSE 3 RD FLOOR N F ROAD BEHIND TAJ MAHAL HOTEL COLABA MUMBAI 400 005 2. ACIT CIRCLE 3(2) MUMBAI 3. CIT-3 MUMBAI 4. CIT(A)-III MUMBAI 5. DR F BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR ITAT MUMBAI