- (1.) The appeal is directed against a judgment and order dated 12th September, 2008 passed by the learned Income Tax Appellate Tribunal "A" Bench, Kolkata in ITA No. 1083/Kol/2007, ITA No.1062/Kol/2007 and CO No.38/kol/2007 all pertaining to the assessment year 2003 -04.
(2.) ITA No.1083 was an appeal preferred by the assessee whereas ITA No.1062 was an appeal preferred by the revenue and CO No.38 was a cross objection preferred by the assessee apropos the appeal preferred by the revenue. The learned Tribunal allowed the appeal of the revenue and dismissed the cross objection filed by the assessee. The appeal preferred by the assessee was partly allowed. The assessee has come up in appeal. The following questions were formulated on 1st July, 2010 when the appeal was admitted by this Court: - "(a) Whether on a true and proper interpretation of sub -section (4) of section 80HHD of the Income Tax Act, 1961, the Tribunal was justified in law in upholding the addition of Rs.44,68,966/ - and its purported findings in that behalf are arbitrary, unreasonable and perverse (b) Whether the Tribunal was justified in law in upholding the addition of notional interest of Rs.40,89,045/ - made by the Assessing Officer in respect of the appellant's balances with its subsidiaries and in proceeding on the assumption that the Assessing Officer had disallowed the said amount out of interest expenditure and its purported findings in that behalf are arbitrary, unreasonable and perverse (c) Whether the Tribunal was justified in law in holding that the rental income received from Spice Cell Ltd. was assessable as business income and not under the head 'house property' and in not following its orders for the assessment years 2001 -02 and 2002 -03 -
(3.) The learned Tribunal upheld the addition of a sum of Rs.44,68,966/ - for the following reasons. "We have carefully considered the issue. It is seen from the details given at pages 36,37 of the Paper Book that the foreign exchange reserve was utilized by the assessee during financial year 1993 -94 to 2002 -03 for addition to plant and machinery, electric installations, kitchen facilities and computers. It has also been admitted by the assessee that during the financial year 2003 -04 tourism has suffered and foreign visitors were not coming to India due to spread of terrorism and overall economic situation of the country. It has also been admitted that the assessee had suffered loss due to lack of business opportunity resulting in less tourists traffic in Eastern India which affected the hotel occupancy ratio and the overall performance of the hotel. It is also very clear from the minutes of the meeting of the Board of Directors of the Hospitality Resorts Ltd. held on 28 -03 -2003 that the assessee had subscribed for Rs.9.5 crore equity shares for Hospitality Resorts Ltd. allotted @ Rs.1 per share at a premium of Rs.1 each. It is very clear from the page one of the aforestated minutes of he meeting of Hospitality Resorts Ltd. that the funds were required by it for further diversification and expansion of the existing business as also for meeting the debt/obligation and strengthening the working capital of the company. Thus, it is very clear that not only the additions to the fixed assets were of routine nature and could not be said to be for expansion of existing facilities to foreign tourists but the investment in equity shares of Hospitality Resorts Ltd. was also not wholly or exclusively for the expansion of business. We, therefore, see no reason to interfere with the decision of the lower authorities. The grounds no.1 and 2 of the appeal of the assessee are rejected." ;