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2016 Supreme(Mad) 3488
IN THE HIGH COURT OF MADRAS
S. Manikumar and D. Krishnakumar, JJ.
The Commissioner of Income Tax, Chennai - Appellant
Versus
M/s. Tamil Nadu Tourism Development Corporation Ltd. - Respondent
T.C.A. Nos. 321 and 322 of 2016
Decided On : 19-07-2016
For the Appellant : Mr. M. Swaminathan.
For the Respondent: Mr. M. Vijayaraghavan.
Headnote:Income Tax Act, 1961 Section 37(1) Maintenance charges - Tribunal held the expenditure to be revenue expenditure as the source of income for meeting expenditure came by collecting fee from tourist and not from capital assets of assessee. Appeal dismissed
Income Tax Act, 1961 Section 37(1) Sanction for development - Receipt of grant is to be treated capital as it has been converted into equity capital. Funds is not utilised and is required to be surrendered to central government.
S. Manikumar, J.
Tax Case Appeals have been filed against the common orders, made in I.T.A. Nos. 550 & 551/Mds/2010 and Cross-Appeals.
2. Facts leading to the appeals are that the assessee, M/s. Tamil Nadu Tourism Development Corporation Ltd., filed returns for the assessment year 2005-06 on 31.10.2005 and a revised return on 06.06.2006, admitting the total income of Rs.2,12,97,601/-. For the assessment year 2006-07, the assessee filed returns on 27.11.2006, admitting the total income of Rs.2,05,70,640/-. Returns were processed under Section 143(1), selected for scrutiny and notice under Section 143(2) was issued.
3. After enquiry, assessment was completed and vide order, dated 05.12.2012, the following additions were made to the income of the assessee for the assessment year 2005-06:
| 30% deduction claimed for franchise income as discussed above | 50,88,343/- |
| Interest on Government Loan as discussed above | 17,55,632/- |
| Thiruvalluvar statue expenses as discussed above | 45,34,350/- |
| Prior period expenses as discussed above | 8,20,616/- |
| Government grants as discussed above | 5,42,20,000/- |
Similar order was passed for the assessment year 2006-07 and the assessing officer has made the following additions:
| 30% deduction claimed from income from lease/franchise of hotels | 41,47,414/- |
| Thiruvalluvar statue expenses as discussed above | 45,34,350/- |
| Loss on sale of assets | 3,14,286/- |
| Depreciation on coaches | 7,45,813/- |
| Grants from Government | 1,88,97,000/- |
4. Being aggrieved by the same, Tamil Nadu Tourism Development Corporation has filed two appeals in I.T.A. Nos. 436/07-08 and 246/08-09 respectively. I.T.A. No. 436/07-08 was partly allowed and I.T.A. No. 246/08-09 was allowed, on all the grounds raised in the appeal.
5. Aggrieved by the order of C.I.T. Appeal No. 436/07-08 dated 19.01.2010 for the assessment year 2005-2006 and C.I.T.(Appeal) No. 246/08-09 dated 20.01.2010, for the assessment year 2006-2007, the Commissioner of Income Tax, Chennai filed ITA Nos. 550 and 551/2010 respectively. Cross Objection Nos. 29 and 30/Mds/2010 have been filed by the assessee.
6. As the issues involved in all the appeals were same, but for the difference in the assessment years, the Income Tax Appellate Tribunal, by common order dated 12.08.2013 in I.T.A. Nos. 550 and 551/Mds/2010 filed by the Commissioner of Income Tax, Chennai and Cross Objection Nos. 29 and 30/Mds/2010, dismissed the appeals filed by the Revenue. Cross objections filed by the assessee were also dismissed.
7. Aggrieved by the order in I.T.A. No. 550/Mds/2010 for the Assessment year 2005-2006, Tax Case (Appeal) No. 321/2016 has been filed on the following substantial questions of law.
1. Whether in the facts and circumstances of the case, the Tribunal was right in holding that the expenses incurred by the assessee in maintaining the Thiruvalluvar statue is revenue in nature on the ground that the statue did not belong to the assessee?
2. Has not the Tribunal erred in overlooking the fact that the expenses incurred for providing protective coating to the statue with poly silicon has extended the 'life' of the statue and therefore the expenses resulting in an advantage of enduring benefit ought to have been classified as capital expenditure?
3. Whether in the facts and circumstances of the case, the Tribunal was right in holding that the receipt of grants by the assess from the Central Government capital in nature?
4. Has not the Tribunal erred in overlooking the fact that the grants received by the assessee was for improving existing facilities and therefore the proposed expenditure for which money was received was only revenue in nature?
5. Whether the Tribunal is right in ignoring the fact that the money received by the assessee for meeting revenue expenditure has not been utilised by the assessee and therefore th
