IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCHES : D : NEW DELHI
BEFORE SHRI R.S. SYAL, AM AND SHRI A.T. VARKEY, JM
Assessment Year : 2008-09
ACIT, Vs. Kalinga International,
Circle 33(1), 5/1, West Patel Nagar,
New Delhi. New Delhi.
PAN : AAAFK1235H
Assessee By : None
Department By : Dr. B.R.R. Kumar, Sr. DR
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
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
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
view taken by the ld. CIT(A) on this issue. This ground is not
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
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
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.
[A.T. VARKEY] [R.S. SYAL]
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated, 08th September, 2014.
Copy forwarded to:
4. CIT (A)
5. DR, ITAT
AR, ITAT, NEW DELHI.