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ACIT, Circle 33(1), New Delhi. Vs. Kalinga International, 5/1, West Patel Nagar, New Delhi.
September, 09th 2014
           IN THE INCOME TAX APPELLATE TRIBUNAL
                DELHI BENCHES : D : NEW DELHI

      BEFORE SHRI R.S. SYAL, AM AND SHRI A.T. VARKEY, JM

                       ITA No.4500/Del/2012
                     Assessment Year : 2008-09


ACIT,                              Vs.   Kalinga International,
Circle 33(1),                            5/1, West Patel Nagar,
New Delhi.                               New Delhi.

                                         PAN : AAAFK1235H

     (Appellant)                            (Respondent)


              Assessee By      :    None
              Department By    :    Dr. B.R.R. Kumar, Sr. DR


                                   ORDER

PER R.S. SYAL, AM:

       This appeal by the Revenue is directed against the order

passed by the ld. CIT (A) on 07.05.2012 in relation to the

assessment year 2008-09.


2.     Revised grounds have been filed by the Revenue.            First

revised ground is as under:-


        "The ld. CIT(A) has erred in deleting the addition of
        Rs.1,88,061/- on account of disallowance made on
                                                       ITA No.4500/Del/2012


      insurance, depreciation, interest on finance and
      restricting addition @ 10% on disallowance made on
      car expenses to Rs.34,944/- by following ITAT's order
      for AY 2000-01 and citing that there was no such
      addition made in subsequent year 2009-10, despite the
      fact that the ITAT order for AY 2000-01 is too far from
      the AY 2008-09 is question and cannot bind the
      Revenue."







3.   Briefly stated, the facts of the case are that the AO

disallowed certain expenses.        The   ld. CIT(A)     deleted the

disallowance by relying on the order passed by the Tribunal in

assessee's own case for AY 2000-01.


4.   We have heard the ld. DR and perused the relevant material

on record. There is no appearance from the side of the assessee

despite notice.   As such, we are proceeding to dispose of this

appeal ex parte qua the assessee. In so far as the deletion of the

addition is concerned, it is observed that the ld. CIT(A) deleted

such addition by relying on the Tribunal order passed in

assessee's own case for AY 2000-01. The ld. DR could not bring

on record any material to indicate that there was any fallacy in

such order or in the subsequent years such order has not been

followed. Respectfully following the precedent, we approve the


                                2
                                                     ITA No.4500/Del/2012


view taken by the ld. CIT(A) on this issue.     This ground is not

allowed.


5.   The second ground is against the deletion of addition of `

15,56,334/- made by the AO on account of interest @ 12% on `

1.29 crore. The facts of this ground are that the assessee gave

interest free loans and advances amounting to ` 1.29 crore to the

related parties.   The AO observed that the assessee had also

taken interest bearing loans. He, therefore, disallowed interest @

12% on such interest free loans and advances to the related

parties and others. This resulted into an addition of ` 15,56,334/-.

The ld. CIT(A) deleted the addition.


6.   After considering the submissions advanced on behalf of the

Revenue, we find from the impugned order that interest free

loans were given to the persons whose properties were used by

the assessee for showrooms and godowns, on which no rent was

paid. It can be seen from the impugned order that the AO himself,

while passing order u/s 143(3) for the AY 2009-10, accepted the

assessee's submissions on this score and did not make any such

addition. When interest free loans were given to the parties from







                                 3
                                                      ITA No.4500/Del/2012


whom the assessee had taken premises for its business purpose

without paying any rent, the notional interest on such loans can

be considered as quid pro quo of rent. Since the AO has himself

accepted the assessee's case, in his order for AY 2009-10, we

hold that no interference can be made in the impugned order on

this issue. This ground is not allowed.


7.   The last effective ground is against the deletion of addition

of ` 6,13,200/- made on account of conversion expenses. The AO

noticed from the Profit & Loss Account that a sum of ` 6,13,200/-

paid as conversion charges was claimed as deduction.             In his

opinion, this was a capital expenditure and, hence, could not be

allowed. The ld. CIT(A) deleted this addition after noticing that the

property in respect of which the assessee paid conversion

charges to MCD, was belonging to Smt. Sarla, and the same was

used by the assessee for his business purpose.


8.   In view of the fact that the assessee was to use this property

of some third person for business purpose and the same was not

possible unless it was so converted, the conversion charges in

such circumstances could not have been considered as a capital


                                  4
                                                           ITA No.4500/Del/2012


expenditure. The case is not even hit by Expl. 1 to sec. 32(1)

inasmuch as payment of such conversion charges cannot be

considered as any capital expenditure `on the construction of any

structure or doing of any work in or in relation to, and by way of

renovation or extension of, or improvement to, the building'. We,

therefore, hold that such a payment cannot be considered as

capital expenditure. The impugned order on this score is upheld.


9.        In the result, the appeal is dismissed.


10. The order pronounced in the open court on 08.09.2014.

               Sd/-                                        Sd/-

       [A.T. VARKEY]                                    [R.S. SYAL]
     JUDICIAL MEMBER                                ACCOUNTANT MEMBER


Dated, 08th September, 2014.

dk

Copy forwarded to:

     1.   Appellant
     2.   Respondent
     3.   CIT
     4.   CIT (A)
     5.   DR, ITAT

                                                     AR, ITAT, NEW DELHI.


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