Case Law Details

Case Name : M/s Aerens Motels & Resorts Vs. Dy. Commissioner of Income Tax (ITAT Delhi)
Appeal Number : ITA No. 1914/Del/2007
Date of Judgement/Order : 29/02/2012
Related Assessment Year : 2002- 03
Courts : All ITAT (5321) ITAT Delhi (1212)

Aerens Motels & Resorts Vs. DCIT (ITAT Delhi)

There is no dispute to the fact that the expenditure on horticulture and other heads was incurred for the purpose of business. The assessee has also furnished necessary details pertaining to such expenses incurred. Similar expenses were also allowed by the department in the last year. The Assessing Officer had disallowed the entire expenditure on horticulture and out of other heads, i.e. business promotion, consumable stores, miscellaneous expenses and repairs & maintenance only on the ground that the expenditure incurred in the year under consideration are on the higher side.

Considering the facts of the case, the dis allowance of entire expenditure under the head horticulture expenses and substantial dis allowance out of business promotion expenses, consumable stores, miscellaneous expenses, repairs and maintenance cannot be sustained. These expenditure are necessary for running of the hotel/resort being run by the assessee. At the same time, the assessee has not furnished satisfactory explanation for substantial increase in the expenditure under these heads and has also not produced complete bills and vouchers supporting these expenditure. Considering the totality of the facts and arguments of both the sides, in our opinion, it would meet the ends of justice if the dis allowance is partly sustained.

INCOME TAX APPELLATE TRIBUNAL, DELHI

ITA No. 1914/Del/2007 –  Assessment Year: 2002- 03

M/s Aerens Motels & Resorts

Vs.

Dy. Commissioner of Income Tax

ORDER

PER G.D.AGRAWAL,VP:

This appeal by the assessee is directed against the order of learned CIT(A) dated 1st February, 2007 for the assessment year 2002- 03.

2. Ground Nos. 1 & 2 raised by the assessee read as under:-

“1. That the ld.CIT(Appeal) has erred in confirming the addition of Rs. 9,91,384 incurred by the appellant towards horticulture expenses.

2. That the ld.CIT(Appeal) has erred in confirming the dis allowances of the following expenses –

(a) Business promotion Rs. 3,00,000

(b) Consumable stores Rs. 3,00,000

(c) Miscellaneous expenses Rs. 1,00,000

(d) Repairs and maintenance Rs. 1,00,000

—————–

Rs. 8,00,000

—————–“

3. Ground Nos. 3 to 7 raised by the assessee are only the arguments in support of ground Nos.1 & 2.

4. The facts of the case are that the assessee company is engaged in establishing, developing and running hotels, holidays and health resorts. During the year under consideration, it had incurred expenditure on account of horticulture to the tune of Rs. 9,91,384/-. The Assessing Officer disallowed the entire expenditure claimed in this head and also disallowed the entire expenses incurred on account of business promotion, consumable stores, miscellaneous expenses and repairs & maintenance on the ground that in the last year, the expenditure incurred was on a lower side.

5. The learned CIT(A) sustained the 100% dis allowance out of horticulture expenses and substantial disallowance out of other expenses which is as high as almost 50% to 75% of the expenditure incurred. Aggrieved by the same, the assessee is in appeal before us.

6. The learned counsel for the assessee submitted that the main activity undertaken by the assessee company is establishing, developing and running hotels and resorts. For this purpose, the assessee company has to incur expenditure on beautification of the resort and maintaining lawns. It has to maintain greenery in and around the hotels and resorts. Due to increase in competition in this line of business, maintaining lawns and greenery is very necessary and it is for this reason that the assessee has to incur more expenses on horticulture than the last year. The same is also necessary for sustaining business growth. Therefore, the expenditure of this nature is a necessary business expenditure and the entire dis allowance out of such expenses should be deleted. He also submitted that similar expenses incurred by the assessee were always allowed by the Assessing Officer in the last year. In respect of other expenses incurred by the assessee company, he submitted that the Assessing Officer disallowed the same on the ground that similar expenses incurred in the last year were on a lower side. He stated that all the expenditure was incurred for running and maintenance of hotel/resort. Without the expenses on consumable stores, miscellaneous expenses, repair expenses, resort cannot be run. He, therefore, submitted that the dis allowance sustained by CIT(A) may be deleted.

7. The learned DR, on the other hand, contended that proper bills, vouchers etc. were not produced by the assessee in support of the said claim of expenses. The expenditure incurred on horticulture and other heads was much higher than the last year for which no satisfactory explanation had been offered by the assessee and, therefore, the dis allowance made may be sustained.

8. We have heard the contentions of both the sides and have perused the relevant material on record. There is no dispute to the fact that the expenditure on horticulture and other heads was incurred for the purpose of business. The assessee has also furnished necessary details pertaining to such expenses incurred. Similar expenses were also allowed by the department in the last year. The Assessing Officer had disallowed the entire expenditure on horticulture and out of other heads, i.e. business promotion, consumable stores, miscellaneous expenses and repairs & maintenance only on the ground that the expenditure incurred in the year under consideration are on the higher side. Considering the facts of the case, the dis allowance of entire expenditure under the head horticulture expenses and substantial dis allowance out of business promotion expenses, consumable stores, miscellaneous expenses, repairs and maintenance cannot be sustained. These expenditure are necessary for running of the hotel/resort being run by the assessee. At the same time, the assessee has not furnished satisfactory explanation for substantial increase in the expenditure under these heads and has also not produced complete bills and vouchers supporting these expenditure. Considering the totality of the facts and arguments of both the sides, in our opinion, it would meet the ends of justice if the dis allowance is partly sustained. Accordingly, we sustain the dis allowance as under:-

(i) On account of horticulture: Rs. 5,00,000/-

(ii) On account of business promotion: Rs. 1,50,000/-

(iii) On account of consumable stores: Rs. 1,50,000/-

(iv) On account of miscellaneous expenses: Rs. 50,000/-

(v) On account of repairs and maintenance: Rs. 50,000/-

9. In the result, the appeal of the assessee is partly allowed.

Decision pronounced in the open Court on 29th February, 2012.

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