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ACIT, CIRCLE-12(1), New Delhi Vs. M/S HL MALHOTRA & CO. PVT. LTD. 506, DAKHA HOUSE, PUSA LANE, 18/17, WEA KAROL BAGH, NEW DELHI
January, 27th 2015
                                             ITA NOS.3875 & 3884/Del/2011 &
                                                 ITA NOS. 756 & 983/DEL/2012

                IN THE INCOME TAX APPELLATE TRIBUNAL
                    DELHI BENCH "C", NEW DELHI
         BEFORE SHRI S.V. MEHROTRA, ACCOUNTANT MEMBER
                                AND
                  SHRI H.S. SIDHU, JUDICIAL MEMBER
                        I.T.A.No.3875/DEL/2011
                              A.Y. : 2005-06
ACIT,                              VS.           M/S HL MALHOTRA &
CIRCLE-12(1),                                    CO. PVT. LTD.
New Delhi                                        506, DAKHA HOUSE,
                                                 PUSA LANE, 18/17,
                                                 WEA KAROL BAGH,
                                                 NEW DELHI
                                                 (PAN: AAACH0936J)
(APPELLANT)                                      (RESPONDENT)
                     I.T.A. NO. 3884/Del/2011
                            A.Y. : 2005-06
M/S HL MALHOTRA &               VS.           ACIT,
CO. PVT. LTD.                                 CIRCLE-12(1),
506, DAKHA HOUSE,                             New Delhi
PUSA    LANE, 18/17,
WEA    KAROL  BAGH,
NEW DELHI
(PAN: AAACH0936J)
(APPELLANT)                                   (RESPONDENT)
                       I.T.A.No.756/DEL/2012
                            A.Y. : 2008-09
M/S HL MALHOTRA &                VS.          ACIT,
CO. PVT. LTD.                                 CIRCLE-12(1),
506, DAKHA HOUSE,                             New Delhi
PUSA    LANE, 18/17,
WEA    KAROL  BAGH,
NEW DELHI
(PAN: AAACH0936J)
(APPELLANT)                                   (RESPONDENT)
                      I.T.A. NO. 983/Del/2012
                            A.Y. : 2008-09
ACIT,                           VS.           M/S HL MALHOTRA &
CIRCLE-12(1),                                 CO. PVT. LTD.
New Delhi                                     506, DAKHA HOUSE,
                                              PUSA LANE, 18/17,
                                              WEA KAROL BAGH,
                                              NEW DELHI
                                              (PAN: AAACH0936J)

(APPELLANT)                                      (RESPONDENT)

                                 1
                                                           ITA NOS.3875 & 3884/Del/2011 &
                                                               ITA NOS. 756 & 983/DEL/2012




         Department by                       :   Sh. Robin Rawal, Sr. DR
          Assessee by                        :   Sh. Rohit Jain, CA &
                                                 Sh. Rohit Garg, CA


                                     Date of Hearing : 19-1-2015

                                     Date of Order :      23-1-2015
                                     ORDER
PER BENCH



      These are the Cross Appeals filed by the Revenue as well as
Assessee emanate out of respective Orders passed by the Ld. CIT(A)-X,
New   Delhi        pertaining   to   assessment        years   2005-06     &   2008-09
respectively.

2.    The grounds raised in the Revenue's Appeal No. 3875/Del/2011 (AY.
2005-06) reads as under:-

              "1.     On the facts and circumstances of the case in law, the
                      Ld. CIT(A) has erred in giving relief of Rs. 18,35,634/-
                      out of total disallowance of Rs. 27,04,339/- made by the
                      AO on account of expenses and depreciation.

              2.      On the facts and circumstances of the case, the Ld.
                      CIT(A) was not right in taking cognizance of the facts
                      which were not available to the AO during the course of
                      assessment      proceedings       and    it   was    during    the
                      appellate proceedings only that assessee has been
                      found to have resumed business.




                                             2
                                                           ITA NOS.3875 & 3884/Del/2011 &
                                                               ITA NOS. 756 & 983/DEL/2012

           3.      The appellant craves leave, to add, alter or amend any
                   ground of appeal raised above at the time of the
                   hearing."




3.   The grounds raised in the Assessés Appeal No. 3884/Del/2011 (A.Y.
2005-06) read as under:-

           "1.     That the Commissioner of Income Tax (Appeals) erred
                   on facts and in law in confirming the action of the
                   assessing     officer       in   assessing   service    charges     of
                   Rs.19,610 and interest income of Rs.1,52,970 under the
                   head 'Income from other sources' instead of 'Profits and
                   Gains from Business and Profession', as declared by the
                   appellant.

           2.      That the Commissioner of Income Tax (Appeals) erred
                   on facts and in law in confirming the disallowance of the
                   following expenditure holding the same to be personal
                   expenditure of the directors of the appellant:

                   1. Electricity & water expenses -            Rs.1 ,46,739; and

                   2. Watch & ward expenses                     Rs.1,08,000

           2.1 That the Commissioner of Income Tax (Appeals) erred on
           facts   and   in     law in     not appreciating         that    the   above
           expenditure were incurred in respect of the registered 'office
           of the appellant.

           2.2 That the Commissioner of Income' Tax (Appeals) further
           failed to appreciate that these cannot be disallowance of any
           expenditure in case of a corporate assessee on account of
           personal expenses.

           3.      That the Commissioner of Income Tax (Appeals) erred
           on facts and in law in confirming the disallowance of the

                                           3
                                                  ITA NOS.3875 & 3884/Del/2011 &
                                                      ITA NOS. 756 & 983/DEL/2012

           travelling expenditure to the extent of Rs.3,96,735 holding the
           same to be personal expenditure of the directors of the
           appellant.

           3.1 That the Commissioner of Income Tax (Appeals) erred on
           facts and in law in alleging that the appellant failed to produce
           any details justifying the above travelling expenditure.

           3.2 That the Commissioner of Income Tax (Appeals) further
           failed to appreciate that these cannot be disallowance of any
           expenditure in case of a corporate assessee on account of
           personal expenses.

           4.    That the Commissioner of Income Tax (Appeals) erred
           on facts and in law in making ad-hoc disallowance of 50% out
           of the total director's remuneration of Rs 4,80,000 on the
           ground that part of such remuneration pertains to earning of
           rental income.

                 The appellant craves leave to add, alter, amend or vary
           from the above grounds of appeal before or at the time of
           hearing."




4.   The grounds raised in the Asessee's Appeal No. 756/Del/2012 (A.Y.
2008-09) read as under:-

           1.    That the Commissioner of Income Tax (Appeals) erred
           on facts and in law in confirming the action of the assessing
           officer in assessing service charges of Rs 4,06,675 and
           interest income of Rs.1,67,584 under the head 'Income from
           'Other sources' instead of 'profits and Gains from Business and
           Profession', as declared by the appellant.

           2.    That the Commissioner of Income Tax (Appeals) erred
           on facts and in law in       confirming the disallowance of the
           following expenditure holding the same to be personal
           expenditure of the directors of the appellant:

                                    4
                                       ITA NOS.3875 & 3884/Del/2011 &
                                           ITA NOS. 756 & 983/DEL/2012

i)      Electricity and water charges : Rs.1,85,113; and

ii)     Watch and ward expenses :      RS. 1,47,420

2.1 That the Commissioner of Income Tax (Appeals) erred on
facts   and   in    law in   not appreciating   that    the   above
expenditure were incurred in respect of the registered office
of the appellant.

2.2 That the Commissioner of Income Tax (Appeals) further
failed to appreciate that these cannot be disallowance of any
expenditure in case of a corporate assessee on account of
personal expenses.

3.      That the Commissioner of Income Tax (Appeals) erred
on facts and in law in confirming the disallowance of the
travelling expenditure to the extent of Rs.4,48,227 holding the
same to be personal expenditure of the directors of the
appellant.

3.1 That the Commissioner of Income Tax (Appeals) erred on
facts and in law in alleging that the appellant failed to produce
any details justifying the above travelling expenditure.

3.2 That the Commissioner of Income Tax (Appeals) further
failed to appreciate that these cannot be disallowance of any
expenditure in case of a corporate assessee on account of
personal expenses.

4.      That the Commissioner of Income Tax (Appeals) erred
on facts and in law in making ad-hoc disallowance of 50% out
of the total director's remuneration of Rs4,80,000 on the
ground that part of such remuneration pertains to earning of
rental income.

The appellant craves leave to add, alter, amend or vary from
the above grounds of appeal before or at the time of hearing.

                             5
                                                    ITA NOS.3875 & 3884/Del/2011 &
                                                        ITA NOS. 756 & 983/DEL/2012

5.    The grounds raised in the Revenue's Appeal No. 983/Del/2012 (A.Y.
2008-09) read as under:-

            1.    Whether    Ld.   CIT(A)   was    correct      on   facts    and
                  circumstances of the case and in law in giving relief to
                  the assessee of Rs. 21,97,811/- against the disallowance
                  of Rs. 32,18,941/- made by the AO on account of
                  expenses debited to profit and loss account.

            2.    The appellant craves leave, to add, alter or amend any
                  ground of appeal raised above at the time of hearing."

REVENUE'S & ASSESSEE'S APPEALS              (ITA   NOS.      3875/DEL/2011       &
3884/DEL/2011) (A.Y. 2005-06)

6.    Assesse    filed its Return of income declaring a total income of
Rs.3,44,492/- on 27.10.2005 and was processed u/s 143(1) of the I.T. Act
on 11.03.2006. The case of the assessee was selected for scrutiny and
notice u/s 143(2) of the I.T. Act was issued to assessee on 30.10.2006. In
response to the same the Authorised Representative of the assessee
appeared before the AO and filed necessary details/ documents. The
assessee is engaged in the business of Travel related activities for the last
more than 23 years. During the year under consideration the assessee
company has not carried out any business activities. The company has
shown income from house property as Ieave and license fees of
Rs.41,11,890/- and income from other sources as interest income of
Rs.1,52,970/- and service charges of Rs.19,610/-. Against this income, the
assessee company has claimed expenses of Rs.27,04,339/- and 30%
statutory deduction against house property of Rs.12,33,567/-. The AO
asked to furnish justification regarding allowability of business expenses
and depreciations as no business activities appear to have conducted
during the year and immediate preceding year. The assessee company
filed details in respect of house property including leave & lease
agreement but could not offer any justification for claiming of expenses
against no business income. The AO asked the assessee to furnish the


                                      6
                                                     ITA NOS.3875 & 3884/Del/2011 &
                                                         ITA NOS. 756 & 983/DEL/2012

explanation for not submitting any justification for claim of huge expenses
against no business income and show cause as to why the entire
expenses including depreciation of RS.27.04 lacs should not be disallowed
as company has not carried out any' business activities not only during
year but since 1999-2000. The assessee vide letter dated 14.12.2007
submitted that "the assessee company has been carrying on the business
of travel related activities for the last more than 23 years and during the
previous year relevant to the assessment year 2005-06 has continued the
same business activities. In the past the assessee company have been
General Selling Agent for Japan Airlines and Alitalia and had been having
branch offices in Punjab, Haryana, Bengal and many other states and
cities. Further, after termination of contracts by Japan Airlines and Alitalia
the branch offices were closed. The main income of the assessee
company consists of leave and license fee, service charges and interest.
Assessee further submitted that for the purpose of carrying on the
business the assessee company has incurred expenses on salaries, rent of
office, electricity, printing and stationery, audit fee. telephone, filing fee of
registrar of companies, watch and ward, depreciation etc. The assessee
has filed the profit and loss accounts contains the detail of the said
expenses. Assessee further submitted before the AO that in the past the
said expenses have been allowed by the AO by completing the
assessment under section 143(3) of the I.T. Act.

6.1   The AO considered the contention of the assessee considered and
found in accurate as assessee company not only not carrying out its
business activities since past 7-8 years but also not carried out any
business activities in future 2-3 years. Therefore, the assessee company is
entitled only for the expenses incurred u/s 57 of the Act against income
from other sources earned u/s 56 and 30% deduction under sub-section
(a) of section 24 of the I.T. Act is allowable against income from house
property. The assessee has claimed business expenses as well as 30%
deduction u/s 24 against house property of Rs.41,11,890/- and against
income from other sources of RS.1,72,580/- deliberately with special


                                       7
                                                   ITA NOS.3875 & 3884/Del/2011 &
                                                       ITA NOS. 756 & 983/DEL/2012

motive to reduce its income from house property and income from other
sources just to defraud revenue, even though no business activities in any
manner were carried out.

6.2   AO has also held that the assessee company has not any intention
to regularize its business activities in the near future, as per the details/
documents filed by the assessee company.           Keeping in view of the
aforesaid discussion, the AO was of the view that the entire expenses
and depreciation of Rs. 27,04,339/- claimed by the assessee company as
business   expenses    are   disallowed   and   therefore,    completed       the
assessment u/s. 143(3) of the I.T. Act vide his order dated 24.12.2007.

7.    Aggrieved with the assessment order dated 24.12.2007, assessee
filed an appeal before the Ld. First Appellate Authority who vide impugned
order dated 31.5.2011 partly allowed the appeal filed by the assessee and
restricted the disallowance of Rs. 8,68,705/- by allowing the relief of Rs.
18,35,634/- out of the total disallowance made by the AO amounting to
Rs. 27,04,339/- on account of expenses and depreciation.

8. Revenue has filed the Appeal against the relief given by the Ld. First
Appellate Authority amounting to Rs. 18,35,634/- and the assessee has filed
the Cross Appeal against the disallowance of expenditure amounting to
Rs.8,68,705/-mentioned in the impugned order and as per prayer made.

9.    At the time of hearing Sh. Robin Rawal, Ld. Sr. DR appeared for the
Revenue and stated that the assessee company has not carried out its
business activities since past 7-8 years but also not carried out any
business activities in future 2-3 years. He further submitted that the
assessee company is entitled only for the expenses incurred u/s 57 of the
Act against income from other sources earned u/s 56 and 30% deduction
under sub-section (a) of section 24 of the I.T. Act is allowable against
income from house property. He stated that the assessee has claimed
business expenses as well as 30% deduction u/s 24 against house
property of Rs.41,11,890/- and against income from other sources of
Rs.1,72,580/- deliberately with special motive to reduce its income from

                                      8
                                                 ITA NOS.3875 & 3884/Del/2011 &
                                                     ITA NOS. 756 & 983/DEL/2012

house property and income from other sources in spite of the fact that no
business   activity in any manner were carried out by the assessee.
Finally, he argued that Ld. CIT(A) has wrongly restricted the disallowance
of expenditure of Rs. 8,68,705/- on account of electricity, water expenses
and watch and ward expenses and Director's remuneration which is
contrary to the law and facts of the case. He requested that the AO has
passed the assessment order as per law and the Ld. CIT(A)'s order is
contrary to the law and the same may be cancelled.

10.   Shri Rohit Jain and Shri Rohit Garg, Chartered Accountants appeared
for the assessee and argued that the AO has wrongly observed that
assessee was not carrying out the business activities during the year
under consideration and has wrongly assessed the services charges and
interest income as income from other sources. In fact the assessee has
booked the commission charges on booking of air-tickets which was the
principal business of the assessee and the service charges received by the
assessee are part and parcel of the assessee's business activities and his
business income. As regards to the interest income he stated that the
same represent bank interest of available business funds of the assessee
and was also in the nature of business income which has been accepted
by the Department in the earlier assessment years. He also draw our
attention toward the impugned order at Page 4-5 to support his
contention. He further submitted that the principle of Rule of Consistency
must be followed by the Tax Authorities, in view of the various decisions
of the Hon'ble Apex Court; Hon'ble High Courts and the Tribunal.             In
support of his contention he filed the copies of the case laws in the shape
of Paper Book pages 1-69.       He also draw our attention toward the
relevant paragraphs of the decisions rendered by the Hon'ble Supreme
Court of India as well as Hon'ble High Courts.     He requested that the
Revenue Authority has wrongly disallowed the expenses claimed by the
assessee   merely on the ground that      the assessee's business has not
functional for the   past 7-8 years   and for the 2-3   subsequent years.
Whereas infact these expenses are very much necessary for maintaining


                                      9
                                                         ITA NOS.3875 & 3884/Del/2011 &
                                                             ITA NOS. 756 & 983/DEL/2012

the assessee's office, retaining the staff and other related expenditure to
keep the assessee company alive. Therefore, the impugned order passed
by the Ld. CIT(A) may be cancelled and the Appeal filed by the assessee
may be allowed.

11.   We have heard both the parties and perused the relevant records,
especially the order passed by the Revenue Authroity alongwith the case
laws cited by the Ld. Counsel of the assessee as well as other
documentary evidence filed by the assessee's counsel in the shape of
paper book. We are of the considered view that the assessee has claimed
the expenses of RS. 27,04,339/- for which the details of the same are as
under:-

          To Salaries                          642,432.00
          To Rent                               50,388.00
          To Electricity AND Water             146,740.00
          To Office Maintenance                 44,420.00
          To Printing Stationery                 6,224.00
          To Postage, Telegrams AND Couriers     3,380.00
          To Repairs and Maintenance           113,247.00
          To Telephone AND Trunk Calls         124,403.00
          To Travelling AND Conveyance         449,418.00
          To Car Maintenance                   198,855.00
          To Bank Charges AND Commission         5,606.00
          To Insurance                          11,849.00
          To Staff Welfare                      16,202.00
          To Staff Medical                      16,531.00
          To Staff Uniform                       4,275.00
          To SubScriptions                      21,770.00
          To News Papers AND Trade Journals      2,799.00
          To Filing Fee                          2,454.00
          To Bonus                               9,000.00
          To Auditors Remunerations             19,980.00
          To Legal AND Professional Fees        22,500.00
          To Documentation                       3,497.00
          To Watch AND Wards                   108,000.00
          To Directors' Remunerations          480,000.00
          To Meeting AND Conference              4,459.00
          To Loss on Sale of Assets              3,979.00
          To Diwali Expenses                     11,501.00.
          To Depreciation                      180,430.00

11.1 The AO has disallowed the entire expenses and depreciation total
amounting Rs. 27,04,339/- by holding that the assessee company
has not only carrying out its business activities past 7-8 years but also


                                        10
                                                        ITA NOS.3875 & 3884/Del/2011 &
                                                            ITA NOS. 756 & 983/DEL/2012

not carried out any business activities in future 2-3 years. He further
observed that only expenses incurred u/s 57 of the Act against income
from other sources earned u/s 56 and 30% deduction under sub-section
(a) of section 24 of the I.T. Act is allowable against income from house
property. AO was of the view that assessee has claimed business
expenses as well as 30% deduction u/s 24 against house property of
Rs.41,11,890/- and against income from other sources of RS.1,72,580/-
with the   objective to reduce its income from house property and income
from other sources in spite of the fact that no business activity in any
manner were carried out by the assessee.            Assessee company has no
intention to regularize its persons activities in        future also, as per the
details and documentary evidence filed by the assessee. Ld. CIT(A) after
hearing    both the parties and            documentary evidence filed by the
assessee has allowed the following expenses. He has mentioned at Page
No. 30 of the impugned order:-

Ground     Description                 Amount               Decision in brief
No.
                                       involved(Rs.)
1          General                     -                    Does     not    require
                                                            adjudication
2          i) Interest on Bank FDR i) Rs. 117355            The view of the
                                                            assessing officer to
           ii) Interest on IT Refund   ii) Rs. 35615
                                                            treat the same as
           iii) Service charges        iii) Rs. 19610       "income from other
                                                            sources" is upheld.
3          Disallowance        of Rs. 27,04,339/-           In    view    of    the
           expenditure in the P&L                           discussion        made
           A/c                                              hereinabove out of
                                                            total expenses of Rs.
                                                            27,04,339/- debited
                                                            in   P&L     A/c,   the
                                                            following    expenses
                                                            are directed to be
                                                            disallowed.

                                                               (a)     Electricity &
                                                                       Water Expn.
                                                                       (Rs.
                                                                       1,23,970)
                                                               (b)     Watch       &
                                                                       Ward      (Rs.

                                           11
                                                  ITA NOS.3875 & 3884/Del/2011 &
                                                      ITA NOS. 756 & 983/DEL/2012

                                                               1,08,000)
                                                         (c)   Travelling
                                                               Exp.      (Rs.
                                                               2,96,735)
                                                         (d)   Directors
                                                               Remunerati
                                                               on        (Rs.
                                                               2,40,000/-)
                                                         Totaling         Rs.
                                                         8,68,705/-


11.2 After considering the aforesaid finding of the AO as well as by the
Ld. CIT(A), we are of the considered view that it is an admitted fact that
the assessee is a company and its business is travelling related activities.
During the assessment year in dispute assessee has shown its income
from house property of Rs. 41,11,89/- and income from other sources Rs.
1,52,970/- and service charges of Rs. 19,610/-. Against this income
assessee has claimed expenses of Rs. 27,40,339/- and the AO has
disallowed the total expenses on the ground that assessee company not
carry out any business since 7-8 years and but also not carried out any
business activities in future 2-3 years and only expenses incurred u/s 57
& u/s. 24 of the I.T. Act are allowable. Ld. CIT(A) treated services charges
as income from    other sources, but according to the assessee that the
assessee is entitled for all business expenses even during lull period in
the business as covered under section 30 to 37 of the I.T. Act. All
expenses are to be allowed to either keep the corporate status alive or
incurred for the purpose of business during the period of lull. Therefore,
the Ld. CIT(A) after examining all the expenses has restricted the
disallowance to the tune of Rs. 8,68,705/- and given the relief of Rs.
18,35,634/- out of the total disallowance of Rs. 27,04,339/-.        We have
considered the arguments advanced by both the         parties and the order
of the Revenue Authority alongwith the details of the expenses incurred
by the assessee as well as expense allowed by the Ld. CIT(A). As per the
details submitted by the assessee in Paper Book dated 29.10.2012 at
Page no. 77 in which the assessee has shown the details of salary of the



                                     12
                                                ITA NOS.3875 & 3884/Del/2011 &
                                                    ITA NOS. 756 & 983/DEL/2012

employees working with the assessee.      For the sake convenience the
same is reproduced as under:-

     Name                                Amount (Rs.)

1. SH. Bhupender Kumar             117000.00 Accounts Officer
2. Sh. Upendra Prasad              87000.00 Accounts Assistant

3. Sh. Subhash Chandar             75000.00 Executive
4. SH. Hakesh Sharma               73367.00 Computer Operator

5. Sh. Ravinder Singh              74800.00 Executive
6.Sh. Shiv Nandan                  50665.00 Driver

7.Krishan Dutt Shukla              49400.00 Driver

8. Sh.Ramesh Chand Jukhwal         34800.00 Peon

9. Sh. Shankar Rawat               38400.00 Chartered Accountant
10. Sh. Dhirender Panday           14000.00 Assistant

11. Ms. Pooja Gupta                4000.00 Computer operator

                        Total      642432.00






11.3 Keeping in view     of the   above details of salaries     paid to the

aforesaid employees of the assessee company, we find that Ld. CIT(A) has

allowed the entire salary expenses to the assessee in the impugned order

which is not permissible under the facts and circumstances of the present

case, because the assessee company is not carrying out its business

activities since past 7-8 years and also not carry out for subsequent 2-3

years amount to Rs. 6,42,432/- has wrongly been allowed by the Ld.

CIT(A). After examining the same, we are of the view that under the facts

and circumstances of the case and to keep the corporate status alive,

minimum expenses on account of salary should be allowed to the



                                    13
                                                   ITA NOS.3875 & 3884/Del/2011 &
                                                       ITA NOS. 756 & 983/DEL/2012

assessee. Therefore, we allow the salary          of one Account Assistant

amounting to Rs. 87000/-;     Computer Operator Rs. 73,367/-; Driver Rs.

49,400/-; Peon Rs. 38,400/- and salary of one CA Rs. 24,000/- only and

salary for others claimed by the assessee and the other expenses are

disallowed. AO is directed to recompute the income of the assessee, as

per the directions given as aforesaid.


12.   As regards the Assessee's Cross Appeal NO. 3884/Del/2011 (A.Y.

2005-06) in which assessee has raised four grounds of appeal and

challenged the impugned order passed by the Ld. CIT(A),


12.1 As regard No. 1 raised in the assessee's appeal is concerned, we

find that the assessee has assailed the findings of the Ld. CIT(A) in holding

that services charges of Rs. 19,610/-          and interest income of Rs.

1,52,970/- both have to be assessed under the head "income from other

sources", instead of profit and gains from business and profession. As far

as the issue regarding the interest income on FDR is concerned, the same

is not mere res integra and we concur with the finding of the Ld. CIT(A)

recorded in para 4.6 of his order.        As far as the issue regarding the

taxability of service charges under the head "income from other sources"

vis-a-vis profits and gains on business or profession is concerned, we find

that the services   charges were merely received.       The same has been

received from M/s Span     Excursion Pvt. Ltd. on account of "referral" of

some passengers to other travel agents.        Ld. CIT(A) in para 4.8 of his

order has observed that the service charges had been received                 for

referring cases of its own Directors, relatives and business associates. In


                                     14
                                                      ITA NOS.3875 & 3884/Del/2011 &
                                                          ITA NOS. 756 & 983/DEL/2012

the back drop of this fact Ld. CIT(A) has rightly concluded as under vide

para no. 4.9 & 4.10 as under:-


                     4.9.    Although it was strenuously argued by the Ld.

               A.R.s that the receipts by way of service charges should be

               treated as "income from business" as against "income from

               other sources" held by the assessing officer, arguments for

               the following reasons:

               (i)           Section 2(13) of the LT. Act defines "business"- as

               under:

                        "S.2(13) - "business" includes any trade, commerce

               or manufacture or any adventure or concern in the nature

               of trade, commerce or manufacture"

                            Applying the above principles, I find that the

               receipts by way of service charges does not form a

               continuous and systematic course of activity for the

               appellant. Some stray "referrals" in the case of its own

               directors and their relatives (for example director's son Sh.

               R. Malhotra and couple of business associates) resulted in

               booking of tickets through Span Excursions Pvt Ltd. Against

               that purchase, a few thousand by way of service charges

               has been received during the year. The income, therefore,

               was more of a casual nature.




                                         15
                                   ITA NOS.3875 & 3884/Del/2011 &
                                       ITA NOS. 756 & 983/DEL/2012

(ii)     Earlier till 1993, the appellant company was

operating as a General Selling Agent (G.S.A.) for Alitalia

Airlines (Italian Airlines) and Japan Airlines (JAL). However,

after the discontinuance of the GSA business of Alitalia

Airlines (Italian

Airlines) and Japan Airlines (JAL), the appellant continued

to struggle in the same line for some time. Thereafter, it

has tied up with Infolink (P) Ltd.[now known a Spryance

(India) Pvt Ltd] for providing business support services and

had earned some service charges in earlier years.

However, the fact remains that neither in the impugned

assessment year nor in subsequent 2 assessment years

there is any regular source of income from any activity,

which can be categorized as "business" or "trade" or

"adventure in the nature of trade" within the meaning of

section 2(13) of the I. T. Act.

(iii)    The assessee's other argument that in the earlier

assessment years, such income has been disclosed under

the head "profit and gains from business and profession"

and, therefore, this accepted view of the department

should not be disturbed, has no merit because as can be

seen from the details given below, there was not enough

reason to do so in earlier years because in those years, the

appellant company was receiving income from secretarial


                       16
                                   ITA NOS.3875 & 3884/Del/2011 &
                                       ITA NOS. 756 & 983/DEL/2012

and other support services, which activity actually fell

under the head "business".

A.Y.             Amount in (Rs.)

2001-02          3,60,000

2002-03          3,60,000

2003-04          6,30,000

2004-05          5,40,000

(iv)      Further the "principle of consistency" would not

apply in a case where there is a material change in the

factual position. This has been so held in a 3-Member

judgment of the same Apex Court reported in BSNL vs.

Union of India 282 ITR 273 (SC) wherein the Lordships have

held as under:

"The decision cited above uniformly held that res judicata

does not apply in matters pertaining to tax for different

assessment years because course of action for each

assessment year is different & distinct (para 20). The

courts will generally adopt an earlier pronouncement of the

law or a conclusion of fact unless there is a new ground

urged or a material change in factual position. "

(v)       In this 3-Member judgement, the Supreme Court

has impliedly over-ruled the earlier decision of the 2,-

                       17
                                   ITA NOS.3875 & 3884/Del/2011 &
                                       ITA NOS. 756 & 983/DEL/2012

Member Judge Bench of the Supreme Court in the case of

Radhasoami Satsangl vs. CIT 193 ITR 321(SC), wherein it

had been held that "principle of consistency" must be

followed by tax authorities. But even in Radhasoami

Satsang case, the Hon'ble Supreme Court had categorically

mentioned that its findings would not be cited as a

precedent in any other case. The relevant portion of the

said judgement is reproduced hereunder:

"Counsel for the Revenue had told us that the facts of this

case being very special, nothing should be said in a

manner which would have general application. We are

inclined to accept this submission and would like to state in

clear terms that the decision is confined to the facts of the

case and may not be treated as an authority on aspects

which   have   been    decided   for   general     application"

(emphasis mine)

(vi)    The appellant has also submitted that beginning

with F. Y. 2007-08 relevant to AY. 2008-09, the assessee

has again started rendering some outsourcing services to

I.P. Engine Management (I) Pvt Ltd. However, the fact

remains that during the impugned assessment year and its

subsequent 2 assessment years i.e. 2005-06 and 2006-07,

there has been no income under the head "business".

Under the Income Tax Act, each assessment, being


                      18
                                   ITA NOS.3875 & 3884/Del/2011 &
                                       ITA NOS. 756 & 983/DEL/2012

separate, principle of "res judicata" will not strictly apply,

more so when the facts are different. This is a settled

position of law on which there could be no difference of

opinion. The Hon'ble Delhi High Court in CIT v. M. Chawla

(1989) 177 ITR 299 (Del), has held that each assessment is

separate and independent. In another recent decision, the

Hon'ble Delhi Tribunal in a case reported in K.K. Khullar vs.

DCIT 304 ITR (AT) 295 (Del) has held the same view in the

following words:

"Coming to the issue of consistency of assessments, it may

be mentioned that the Hon'ble Supreme Court itself

mentioned in Radhasoami Satsang vs. CIT 193 ITR 321

(SC) that their findings should not be followed in every

case. We may add that if a manifestly wrong decision is

taken by the AO in one year or in a number of years, it will

not bind the AO in the assessment of a subsequent year

because there cannot be any estoppel against the law"

4.10. Hence, the assessee's contention to treat "service

charges" as "income from business" cannot be accepted.

Accordingly, as in the case of interest on FDs as well as

interest on income tax refund, the service charges of Rs.

19,610/- is also to be treated as income from other

sources. Accordingly, Ground No.2 stands dismissed."




                      19
                                                  ITA NOS.3875 & 3884/Del/2011 &
                                                      ITA NOS. 756 & 983/DEL/2012

12.2 Keeping in view of the facts noted by the Ld. CIT(A) we are in

agreement with his findings that there was no business income earned

during the year and the amounts received in the form of credit notes were

primarily casual in nature.    Thus, they were rightly assessed under the

head "income from other sources".


12.3 As regards the disallowances assailed by the Assessee vide Ground

Nos. 2 to 4, we are of the view that Ld. CIT(A) has   rightly disallowed the

expenditure on account of electricity and water charges, watch and ward

charges, traveling expenses and Director's remuneration, we uphold the

same. Accordingly, the ground nos. 2 to 4 are dismissed.


13.   In the result, the appeal filed by the Revenue stands partly allowed

and appeal filed by the assessee stands dismissed.


ASSESSEE'S & REVENUE'S           APPEALS   (ITA   NOS.     756/DEL/2012        &
983/DEL/2012) (A.Y. 2008-09)

14.   We have gone through the facts of the cross appeals and we are of

the view that the facts of the present appeals are identical to the facts of

the Appeal    No. 3576 & 3884/Del/2011 (A.Y. 2005-06) as aforesaid.

Therefore, need not to repeat here for the sake of brevity.


15.   We have heard both the parties on the issues in dispute               and

perused the relevant records available with us especially the Paper Books

filed by the assessee's counsel alongwith the case laws filed in the shape

of the paper book.   We are of the view that      the issue in    the present

appeals are identical to the issue involved in the     cross appeal for the

Asstt. year 2005-06 as aforesaid. Since we have discussed the facts and


                                     20
                                                 ITA NOS.3875 & 3884/Del/2011 &
                                                     ITA NOS. 756 & 983/DEL/2012

circumstances of the case, detailed arguments of both the parties in the

Revenue's Appeal for asstt. year 2005-06, which are applicable in the

present cross appeals also.


16.   In the present cross appeals the AO has made almost the identical

disallowance on a different ground by     holding that the assessee can

claim expenses to the extent of business receipts only. In our considered

view the finding of the AO is not as per law and the facts of the

assessment year in dispute.   As stated by the Ld. Counsel of the assessee

that assessee has written      to the AO vide letter dated 16.12.2010

regarding the balance and profit and loss account for the succeeding

years ending 31.3.2009 and 31.3.2010 showing the business activities of

the assessee. In spite of these facts the AO has made the disallowance as

per the assessment year 2005-06 which is contrary to the facts of the

present case. He also stated that these facts have also brought to the

notice of the Ld. CIT(A) by filing the written submissions dated 1.11.2011,

but the same    has also not been appreciated by the Ld. CITA().            He

requested that the assessee is entitled for the expenses under section 30

to 37, even during the lull period. But in the present case the assessee

has run its business as pointed out to the revenue authority as stated

above.   He requested that the issue involved in the present asstt. year

required re-examination at the level of the AO and he requested that the

issue in dispute may be set aside to the AO to allow the admissible

expenses under section 30 to 37 of the Act.




                                    21
                                                  ITA NOS.3875 & 3884/Del/2011 &
                                                      ITA NOS. 756 & 983/DEL/2012

16.1 Ld. DR has not raised any objection to the request of the assessee's

counsel.


17.   We have heard both the parties and perused the relevant records

available with us, we are of the considered view that no doubt the issue in

dispute in the present cross appeals      are identical, but in the present

appeal, with regard to ground no. 1, we find that Ld. CIT(A) has followed

the findings of asstt. year 2005-06 and thus      assailed that the service

income is to be income under the head "income from other sources". In

this regard, we find that in the year under consideration the business has

revived and therefore, the matter needs to be considered afresh by the

AO in order to find out the source from which the service income has been

earned. Accordingly, Ground NO. 1 is set aside to the file of the AO to

consider the same afresh.


17.1 We also find that assessee has started its business activities for

which the assessee is entitled for deduction of expenses u/s. 30 to 37 of

the I.T. Act. As requested by the Ld. Counsel of assessee as aforesaid and

non-opposition of the same by the Ld. DR, we are of the view that the AO

has wrongly held that the assessee can claim expenses to the extent of

business receipts only.     Whereas the assessee is entitled to claim

expenses covered under section 37 of the I.T. Act, therefore, direction is

issue to the AO to reexamine the expenses and allow the same in view of

the provisions of   section 37 of the I.T. Act.    In the result,    both the

appeals are allowed for statistical purposes.




                                     22
                                                 ITA NOS.3875 & 3884/Del/2011 &
                                                     ITA NOS. 756 & 983/DEL/2012

18.   In the result, the   Revenue's Appeal No. 3875/Del/2011 (A.Y. 2005-

06)   is   partly allowed and Assessee's Appeal No. 3884/Del/2011 (A.Y.

2005-06 is dismissed and Assessee's another Appeal No. 756/Del/2012

(A.Y. 2008-09) and Revenue's Appeal No. 983/Del/2012 (A.Y. 2008) are

allowed for statistical purpose.


      Order pronounced in the Open Court     23-1-2015.


      Sd/-                                                   Sd/-


[S.V. MEHROTRA]                                      [H.S. SIDHU]
ACCOUNTANT MEMBER                                JUDICIAL MEMBER

Date 23/1/2015

"SRBHATNAGAR"


Copy forwarded to: -
1.    Appellant -
2.    Respondent -
3.    CIT
4.    CIT (A)
5.    DR, ITAT


                               TRUE COPY

                                                     By Order,




                                                       Assistant Registrar,
                                                       ITAT, Delhi Benches




                                     23
     ITA NOS.3875 & 3884/Del/2011 &
         ITA NOS. 756 & 983/DEL/2012




24

 
 
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