IN INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C : NEW DELHI) BEFORE SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER and SHRI K. NARASIMHA CHARY, JUDICIAL MEMBER ITA No.4249/Del./2016 Assessment Year : 2012-13 Dy. Commissioner of Income-tax, vs. M/s. Godavari Shilpkala Hospitality Circle 10 (1), New Delhi. Pvt. Ltd., Room No.314, Claridges Hotel, Aurangzeb Road, Plot No.12, New Delhi 110 011. (PAN : AADCG0213B) (APPELLANT) (RESPONDENT) Appellant by : Shri Amit Katoch, Senior DR Respondent by: Shri Ajay Wadhwa, Advocate Date of Hearing : 13.08.2019 Date of Order : 28.08.2019 ORDER PER K. NARASIMHA CHARY, JM : Aggrieved by order dated 18.05.2016 in Appeal No.282/15- 16/CIT(A)-4 passed by learned Commissioner of Income-tax (Appeals)-4, New Delhi {for short ld.CIT(A) } for Assessment Year 2012-13, Revenue filed this appeal on following grounds :- 1. Whether on facts and circumstances of case, Ld. CIT(A) is justified in not upholding disallowance of Rs.2,68,36,592/- under section 14A of Income Tax, 1961 (the Act) without considering legislative intend of introducing section 14A by Finance Act 2001 as clarified by CBDT Circular No.5/2014 dated 10.02.2014. 2. Whether on facts and on circumstances of case and in law, Ld. CIT(A) is justified in not upholding disallowance of Rs.2,68,36,592/- under section 14A of Act without consider 2 ITA No.4249/Del./2016 legal principles that allowability of expenditure under Act is not conditional upon earning of income as upheld by Hon'ble Supreme Court in case of CIT Vs. Rajendra Prasad Moody [1978] 115 ITR 519. 3. Whether on facts and circumstances of case and law, Ld. CIT(A) is justified in deleting addition of Rs.66,75,874/- by ignoring provisions of section 37(1) of I.T. Act, 1961. 4. Whether on facts and circumstances of case and in law, Ld. CIT(A) is justified in deleting addition of Rs.66,75,874/-, whereas auditor has also been certified lease rent expenditure as capital expenditure. 2. Insofar as grounds no.1 & 2 are concerned, all through proceedings, contention of assessee is that assessee did not earn any exempt income during impugned assessment year. It was so pleaded before Ld. AO and also before ld. CIT (A). Ld. AO had taken view that investment guidelines provided by ultimate holding company of assessee are for investment of temporary surplus funds and it requires meeting of certain expenditure and, therefore, non-earning of any dividend income is of any consequence. 3. Ld. CIT (A) however while following decision of Hon ble jurisdictional High Court in case of Cheminvest Ltd. vs. CIT 378 ITR 33 (Delhi) held that section 14A will not apply if no exempt income is received or receivable during relevant previous year. 4. It is not explained before us as to how decision of Hon ble jurisdictional High Court in case of Cheminvest Ltd. (supra) is not applicable to facts of case. Since Ld. CIT (A) followed binding principle of Hon ble jurisdictional High Court which is later in point of time to decision of ld. AO, we are of considered opinion that course 3 ITA No.4249/Del./2016 adopted by Ld. CIT (A) cannot be found fault with. We, therefore, uphold finding of Ld. CIT (A) on aspect of non-application of section 14A in cases where there was no exempt income during relevant previous year. 5. Now, coming to ground no.3, it relates to disallowance of Rs.66,75,874/- on account of lease rent paid. Ld. AO disallowed same relying on observations of tax audit report wherein auditors have stated that lease rent has been capitalized in books of account during relevant previous year and assessee had claimed expenses as revenue in computation of income while filing return. 6. It is admitted fact that during relevant previous year, assessee was running business of catering service and mandap keeping services. Such fact is verified by first appellate authority from audited balance sheet wherein revenue from operations was shown as Rs.2,03,08,588/-. assessee expanded business by opening hotel in Bharatpur in respect of which it entered into lease rent with H.H. Maharaj Vishvendra Singh at Bharatpur. TDS under section 194-I of Income-tax Act, 1961 ( Act ) was deducted on lease rent paid. 7. On set of facts, ld. CIT (A) found that opening hotel is merely extension of business of assessee as is evident from common management and affairs of existing business as well as new project at Bharatpur. utilization of common pool of funds was also found by ld. CIT (A). In these circumstances, Ld. CIT (A) while applying decision of Hon ble Apex Court in Taparia Tools Ltd. vs. JCIT (2015) 372 ITR 605 held that expense which is revenue in nature can be claimed as deduction 4 ITA No.4249/Del./2016 u/s 37(1) of Act regardless of treatment given by assessee in their books of account. Since expenses were met in respect of existing business which was expended by way of taking lease of premises from Maharaj Vishvendra Singh at Bharatpur, Ld. CIT (A) found that they are revenue in nature and following decisions reported in CIT vs. SRF Ltd. (2015) 372 ITR 425; CIT vs. Modi Industries (1993) 200 ITR 341 (Delhi); CIT vs. Relaxo Footwears Ltd. (2007) 293 ITR 231 (Delhi); Jay Engineering Works Ltd. vs. CIT (2007) 212 CTR 562 (Delhi); and CIT vs. Gaja Advisors (P.) Ltd. (2014) 367 ITR 726 (Delhi), ld. CIT (A) held that since facts are covered by these judgments, assessee is entitled to relief and accordingly granted relief to assessee. It is not explained before us as to any discrepancy in facts found by ld. CIT (A) and since expenses are incurred while conducting business though it was expended further by way of lease at Bharatpur, they are revenue in nature and assessee is entitled to claim deduction u/s 37 (1) of Act. On this score also, we find reasoning given by ld. CIT (A) is impeccable and there is no reason to interfere with impugned order. 8. In result, appeal filed by Revenue is therefore dismissed. Order pronounced in open court on this 28th day of August, 2019. Sd/- sd/- (PRASHANT MAHARISHI) (K. NARASIMHA CHARY) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated 28th day of August, 2019 TS 5 ITA No.4249/Del./2016 Copy forwarded to: 1.Appellant 2.Respondent 3.CIT 4.CIT(A)-40, New Delhi. 5.CIT(ITAT), New Delhi. AR, ITAT NEW DELHI. Dy. Commissioner of Income-tax, Circle 10(1), New Delhi v. Godavari Shilpkala Hospitality Pvt. Ltd