M/S KAMDHENU ENTERPRISES, Jaipur V. DCIT, Jaipur

ITA 1425/JPR/2010

• Counselvise Citation: 142523114 RSA 2010
• Duration Of Justice: 10 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 16-12-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ROSHANTA MEENA
• Assessee Lawyers: G G MUNDRA
• Keywords: Charitable institution; Diversion of income; TDS

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH A JAIPUR (BEFORE SHRI R.K.GUPTA AND SHRI N.L.KALRA) ITA NO. 1425/ JP/2010 ASSESSMENT YEAR 2006-07 PAN: AAHFK 4851 G M/S. KAMDHENU ENTERPRISES VS THE DCIT LAL KATRA, HALDIYON KA RASTA CIRCLE- 2 JOHRI BAZAR, JAIPUR JAIPUR (APPELLANT ) (RESPONDENT) ASSESSEE BY: SHRI G.G. MUNDRA DEPARTMENT BY : MISS. ROSHANTA MEENA DATE OF HEARING: 28-09-2011 DATE OF PRONOUNCEMENT: 31-10-2011 ORDER PER N.L. KALRA, AM:- THE ASSESSEE HAS FILED AN APPEAL AGAINST THE ORDE R OF THE LD. CIT(A)-I, JAIPUR DATED 01-11-2010 FOR THE ASSESSMENT YEAR 2 006-07 WHEREIN THE ASSESSEE IS AGGRIEVED THAT THE LD CIT(A) HAS ERRED IN CONFIR MING THE ADDITION OF RENTAL INCOME OF RS. 14,83,140/- TO THE INCOME OF THE ASS ESSEE FIRM WHICH WAS NEITHER RECEIVED NOR WAS RECEIVABLE BY THE ASSESSEE.. 2.1 THE AO NOTICED THAT THE ASSESSEE HAS SHOWN RENT AL INCOME RECEIVED FROM M/S. INFRASTRUCTURE LEASING & FINANCIAL SERVICES LT D., NEW DELHI. 5204 SQ. FT. 2 SUPER BUILT UP AREA WAS LEASED @ 4,94,380/- PER MON TH. THE LEASE COMMENCED W.E.F. 01-06-2005. THE RENT WAS PAYABLE W.E.F. 01- 06-05 OR THE DATE OF OCCUPANCY OF OFFICE SPACE WHICHEVER IS EARLIER. THE AO THEREFORE, OBSERVED THAT LEASE MONEY RECEIPTS SHOULD BE OF RS. 49,43,800/- W HILE THE ASSESSEE HAS SHOWN THE RECEIPT OF RS. 34,60,660/-. THE AO THEREFORE, R EQUIRED THE ASSESSEE TO EXPLAIN AS TO WHY THE RENTAL INCOME HAS BEEN UNDER-STATED T O THE EXTENT OF RS. 14,83,140/- . IN RESPONSE TO THE SHOW CAUSE NOTICE, THE ASSESSE E FILED THE WRITTEN SUBMISSIONS AND THESE HAVE BEEN REPRODUCED BY THE AO IN HIS ORD ER WHICH ARE AS UNDER:- FROM THE COPY OF THE LEASE AGREEMENT AND LETTER DA TED 05/07/2005 OF THE PREVIOUS OWNER/ BUILDER OF THE OFFICE SPACE UND ER CONSIDERATION THE FOLLOWING FACTS ARE APPARENT/ VERIFIABLE. THAT THE SAID OFFICE SPACE WAS LEASED OUT BY M/S AN AND SPINNING & WEAVING MILLS PVT. LTD. ( THE THEN LANDLORD) TO M/S INFRASTRUCTURE LEASING AND FINANCIAL SERVICES LTD (THE TENANT). AS PER TERMS A ND CONDITIONS FEBRUARY THE SAID AGREEMENT INCLUDING THE TERMS AS PER PARA NO. (1)(B) AND (C) THE RENT WAS RECEIVABLE BY THE THEN LANDLORD I.E. M/S ANAND SPIN NING & WEAVING MILLS PVT. LTD. THE SAID LAND LORD AS PER TERMS AND CONDITIONS NO. 1 (A) OF THE SAID LEASE AGREEMENT RECEIVED THE RENT FOR THE MONTH OF JUNE, 2005 TO AUGUST, 2005 AMOUNTING TO RS. 14,83,140/- FROM THE TENANT IN THE MONTH OF JUNE, 2005. ON 5 TH DAY OF JULY, 2005 M/S ANAND SPINNING & WEAVING MIL LS PVT. LTD. (THEN LAND LORD) WROTE A LETTER TO THE TENANT M/S IL & FC LTD. INFORMING THE FACTS THAT THE TENANCY RIGHTS GIVEN TO THE SAID TEN ANT HAVE BEEN ASSIGNED/ ATTORNED TO M/S KAMDHENU ENTERPRISES I. E. THE ASSE SSEE FIRM WITH A DIRECTION THAT HEREINAFTER THE RENT IS PAYABLE TO THE SAID NE W LANDLORD VIDE PARA (4) OF THE SAID LETTER. A COPY OF THE SAID LETTER HAS ALREADY BEEN FILED. THUS THE RENT FOR 3 THREE MONTHS (JUNE TO AUGUST) RECEIVED ALREADY BY M /S ANAND SPINNING & WEAVING MILLS PVT. LTD. BELONG TO THE SAID CONCERN AND RENT RECEIVABLE AFTER THAT PERIOD IS THE INCOME OF THE ASSESSEE FIRM. TO CONFIRM THE FACTS MENTIONED IN PARA (I) AND (II) ABOVE THE EX-LANDLORD I.E. M/S ANAND SPINNING & WEAVING MILLS PVT. LTD. A LETTER TO THE ASSESSEE FIRM CONFIRMING THE FACTS THAT THE RENTAL INCOME FOR THE SAID PERIOD 01/06/2005 TO 31/08/2005 BELONGS TO HER. A COPY OF THE AID LETTER IS ENCLOSED. FURTHER THE SAID CONCERN M/S ANAND SPINNING & WEAVING MILLS PVT. LTD . IS AN EXISTING INCOME TAX ASSESSEE AND DECLARED THE RENTAL INCOME RS.14,8 3,140/- FOR THE PERIOD 01/06/2005 TO 31/03/2008 IN ITS RETURN OF INCOME FO R THE A.Y. 2006-07. A COPY OF I.T. RETURN AND COPY OF BANK STATEMENT FOR VERIF ICATION OF THE SUBMISSIONS MADE HEREINABOVE ARE ENCLOSED. IN VIEW OF THE ABOVE SUBMISSION, FACTS AND CIRCUMST ANCES DULY SUPPORTED BY DOCUMENTARY EVIDENCES THAT THE RENT FO R THE PERIOD 1 ST JUNE, 2005 TO 31/08/2005 WAS RECEIVED BY THE EX-LANDLORD AND R ROM 1 ST DAY OF SEPT. 2005 ONWARDS BY THE ASSESSEE FIRM. THUS THE RENTAL INCOM E DECLARED BY THE ASSESSEE FIRM IN HER INCOME-TAX RETURN FOR THE ASSESSMENT YE AR UNDER CONSIDERATION IS CORRECT. IN THIS CONNECTION THE ASSESSEE FIRM ALSO SUBMITS THAT AS PER PROVISIONS OF I.T. ACT, 1961 THE INCOME FROM HOUSE PROPERTY IS THE RENT RECEIVED OR RECEIVABLE. IN THIS CASE THE RENT RECEIVED BY THE A SSESSEE FIRM IS DULY DECLARED AND NO OTHER RENT IS RECEIVABLE. IT IS, THEREFORE, REQUESTED THAT THE RENTAL INCOME DUE/ RECEIVED BY THE ASSESSEE FIRM IS CORRECTLY DEC LARE IN ITS RETURN OF INCOME AND DESERVES TO BE ACCEPTED AS SUCH. IT IS, THEREFO RE, REQUESTED THAT THE PROPOSED ADDITION OF RS. 14,83,140/- ON ACCOUNT OF RENT FOR THREE MONTHS FROM JUNE, 2005 IS WRONG AND UNWARRANTED. 2.2 THE AO REFERRED TO THE PROVISIONS OF SECTION 22 OF THE ACT. AS PER SECTION 22 OF THE ACT, THE INCOME FROM HOUSE PROPERTY IS TO BE TAXED IN THE HANDS OF THE OWNER OF THE PROPERTY. THE RENT FROM JUNE, 2005 TO AUG. 2005 IS TAXABLE IN THE 4 HANDS OF THE ASSESSEE. IN RESPECT OF SUBMISSIONS OF THE ASSESSEE, M/S. ANAND SPINNING & WEAVING MILLS (P) LTD. HAS SHOWED RENTAL INCOME IN THE RETURN OF INCOME, THE AO OBSERVED THAT THE INCOME IS TO BE TA XED AND ASSESSED IN THE CORRECT HANDS. THE AO FURTHER NOTICED THAT THE ASSE SSEE HAS SHOWN A SUM OF RS. 14,83,140/- AS RECEIVABLE FROM M/S. ANAND SPINNING & WEAVING MILLS (P) LTD. THE AO ASSUMED THAT THE ENTRIES IN THE BALANCE SHEE T IS IN RESPECT OF THREE MONTHS OF THE RENT TAKEN ON ACCOUNT OF M/S. ANAND SPINNING & WEAVING MILLS (P) LTD. THE AO ACCORDINGLY DETERMINED THE GROSS RE NT OF RS. 49,43,800/-. THE INCOME WAS ASSESSED AT RS. 34,60,140/- AS AGAINST R ETURN OF INCOME OF RS. 24,22,460/-. 2.3 BEFORE US, THE LD.AR HAS MADE THE FOLLOWING SUB MISSIONS:- IN THIS CONNECTION ASSESSEE SUBMITS THAT THE FIRM H AD NO POSSESSION ON PROPERTY PRIOR TO LETTER DATED 05-07- 05 ASSIGNING THE TENANCY OF PROPERTY IN ITS FAVOUR. THE OLD OWNER HAVING POSSES SION ON PROPERTY LET OUT THE SAME IN ITS OWN NAME BY EXECUTING LEASE DEED IN OWN NAME AND ASSIGNED THE TENANCY RIGHTS AT A LATER STAGE VIDE LETTER DATED 0 5-07-05 BY WHICH DATE THE RENT FOR THE MONTH OF 1-6-05 TO 31-8-05 BECAME DUE ON 9- 6-05 AND HE ACTUALLY RECEIVED THE RENT FOR SAID PERIOD TREATING THE SAME AS ITS INCOME AND INFORMED TO ASSESSEE FIRM THAT IT WAS ITS INCOME AND DECLARED THE SAME AS ITS INCOME IN ITS INCOME TAX RETURN. IT IS THE POSSESSION OF PROPERTY WHICH IS IMPORTANT AND NOT THE MERE RIGHT TO RECEIVE OWNERSHIP IN PAPERS THROU GH AGREEMENT TO SALE. THE RENT FOR 1-6-05 TO 31-8-05 HAVING RECEIVED BY EX-OW NER AND POSSESSION HOLDER AND, THEREFORE ASSESSEE FIRM HAD NEITHER RECEIVED N OR IT COULD BE RECEIVABLE TO THE FIRM AND, THEREFORE THE SAME CANNOT BE TREATED AS INCOME OF ASSESSEE FIRM FROM HOUSE PROPERTY. IN ACCORDANCE WITH SECTION 23 OF I. T. ACT, 1961 ALV OF 5 HOUSE PROPERTY WHERE THE SAME IS LET SHALL BE DEEME D TO BE ACTUAL RENT RECEIVED OR RECEIVABLE BY THE OWNER. IN VIEW OF THESE CLEAR FACTS AND POSITION OF LAW THE A.O. IS WRONG IN MAKING ADDITION OF RS. 14,83,140/- IN THE RENTAL INCOME FROM HOUSE PROPERTY OF THE ASSESSEE FIRM AND SUBJECTING THE SAME TO TAX. THE LD. CIT (A) IS ALSO WRONG AND HAS ERRED IN LAW IN CONFIRMIN G THE SAID ACTION OF A.O. GIVING FOLLOWING FINDING: THE INCOME FROM HOUSE PROPERTY IS TO BE TAXED IN THE HANDS OF ACTUAL OWNER OF THE PROPERTY. ALL THE RIGHTS OF THE PROPERTY WERE ASSIGNED TO THE ASSESSEE VIDE LEASE D EED DATED 9.6.2005 WITH IMMEDIATE EFFECT. THIS MEANS THAT RIG HT TO RECEIVE WAS THAT OF AN ASSESSEE AND NOT THAT OF M/S ANAND S PINNING & WEAVING MILLS PVT. LTD. NEW DELHI. IN THE BALANCE S HEET AS ON 31.3.2006 OF THE APPELLANT M/S ANAND SPINNING & WEA VING MILLS PVT. LTD. NEW DELHI WERE SHOWN AS DEBTOR FOR RS. 14 83140/. THIS MAY BE 3 MONTHS RENT RECEIVED IN ADVANCE OR SECURIT Y DEPOSIT EQUIVALENT TO 3 MONTHS RENT. IN BOTH THE SITUATION, IT WAS THE INCOME OF APPELLANT. BY NOT SHOWING THIS INCOME IN ITS HANDS THE APPELLANT HAS DISCLOSED RETURNED INCOME LESS BY RS. 1483140/. THE AO HAS, THEREFORE, RIGHTLY ADDED THIS INCOME OF RS. 1483140/ . IT IS SUBMITTED THAT ABOVE FINDINGS OF LD. CIT (A) IS INCORRECT IN LAW. IT IS CORRECT THAT INCOME FROM HO USE PROPERTY IS TO BE TAXED IN THE HANDS OF ACTUAL OWNER BUT AS PER SECTI ON 23 THE RENT RECEIVED OR RECEIVABLE COULD ONLY BE TAXED IN THE HANDS OF O WNER. IT IS EVIDENT FROM FACTS AND DOCUMENTS ON RECORD THAT ASSESSEE FIRM NE ITHER RECEIVED RENT FOR THE PERIOD 1-0605 TO 31-08-05 NOR IT WAS RECEIVABLE BY IT. THE TENANCY OF PROPERTY VIDE LEASE DEED DATED 9-06-05 WAS ASSIGNED IN FAVOUR OF ASSESSEE FIRM VIDE LETTER DATED 05-07-05 BY WHICH TIME ERSTW HILE OWNER ALREADY RECOVERED RENT FOR SAID PERIOD ON 09-06-05 AND WHIL E ASSIGNING TENANCY HE CLEARLY STIPULATED THAT RENT ALREADY RECOVERED B Y IT WILL BELONG TO IT AS IS CLEAR FROM ITS LETTER AND NO RIGHT TO RECEIVE RENT FOR SAID PERIOD REMAINED WITH ASSESSEE FIRM. IN THE BALANCE SHEET OF ASSESSE E FIRM AS ON 31-3-06 (P.B. PAGE 56) THE ANAND SPINNING WEAVING MILLS LTD . WAS SHOWN DEBTOR 6 FOR RS. 14,83,140/ WHICH WAS FOR SECURITY DEPOSIT OF THREE MONTHS RENT RECOVERED BY IT AND WHICH WAS AGREED BY IT TO RETUR N TO ASSESSEE FIRM AND WAS NOT TOWARDS RENT FOR THE PERIOD 1-6-05 TO 31-08 05 WHICH FACT IS VERY MUCH EVIDENT FROM BALANCE SHEET ITSELF. THE AMOUNT OF SECURITY DEPOSIT CANNOT IN LAW BE ASSESSED AS RENT RECEIVED OR RECE IVABLE. THE LD. CIT (A) IS THUS WRONG ON FACTS AND HAS ERRED IN LAW IN GIVING A FINDING THAT THIS MAY BE 3 MONTHS RENT RECEIVED IN ADVANCE OR S ECURITY DEPOSIT EQUIVALENT TO 3 MONTHS RENT. IN BOTH THE SITUATION, IT WAS INCOME OF APPELLANT. IN VIEW OF ABOVE FACTS OF THE CASE AND SUBMISSIONS MADE THE ASSESSING OF RS. 14,83,140/ AS INCOME FROM HOUSE P ROPERTY IN THE HANDS OF APPELLANT IS WRONG AND BAD IN LAW WHICH DESERVES TO BE DELETED. 2.4 ON THE OTHER HAND, THE LD DR RELIED UPON THE OR DERS OF THE AUTHORITIES BELOW. 2.5 WE HAVE HEARD BOTH THE PARTIES. SHRI PUSHPENDER KUMAR SURANA, SHRI GOPAL DAS AND SMT. UMA KHANDELWAL ENTERED INTO AGRE EMENT OF SALE WITH M/S. ANAND SPINNING & WEAVING MILLS (P) LTD. ON 10 TH JUNE, 2003. AS PER SALE AGREEMENT, THREE PERSONS PURCHASED 5204. 26 SQ. FT. SUPER BUILT AREA ON THE UPPER GROUND FLOOR ALONGWITH PARKING RIGHTS FOR TWO CARS ON THE LOWER GROUND FLOOR. THE COMMERCIAL FLATS ADMEASURING 5292.26 SQ. FT. STOOD MORTGAGED BY THE SELLER TO THE VIJAY BANK. THE FLAT WAS GIVEN ON RENT TO M/S. ERIC ON COMMUNICATION LTD. THE SELLER WAS ENTITLED TO RECEIVE THE RENT TILL 31 ST DEC. 2003 IN CASE THE TENANT DOES 7 NOT VACATE THE FLAT BY 31 ST DEC. 2003, THE PURCHASERS WERE ENTITLED TO RECEIVE THE RENT W.E.F. 01-01-2004 ONWARDS. THE DEED OF THE PA RTNERSHIP WAS EXECUTED AMONG SHRI PUSHPENDRA KUMAR SURANA, SHRI GOPAL DAS AND SMT. UMA KHANDELWAL AND THIS PARTNERSHIP DEED IS DATED 24-06 -2005. AS PER CLAUSE 3 OF THE PARTNERSHIP DEED, ALL THE THREE PARTNERS CONTRIBUTE D THEIR RESPECTIVE CAPITALS BEING OFFICE FLAT MEANT FOR COMMERCIAL USE JOINTLY OWNED BY THEM WHICH IS MEASURING TO 5204.26 SQ. FT. SUPER BUILT AREA. THE CAPITAL AC COUNT OF THREE PARTIES WERE CREDITED BY A SUM OF RS. 1,01,25,000/- EACH IN THE NAME OF IST AND SECOND PART I.E. SHRI PUSHPENDRA KUMAR SURANA AND SHRI GOPAL DA S AND RS. 67.50 LACS IN THE NAME OF SMT. UMA KHANDELWAL, PART THREE. AS PER CLA USE 2 OF THE DEED, IT IS MENTIONED THAT BUSINESS OF THE PARTNERSHIP SHALL BE THAT TO BUILD, CONSTRUCT, OWN TO TAKE LEASE AND GIVE ON LEASE OFFICES, FLATS, MU LTIPLEX CINEMA(S) / THEATERS ETC. AND TO RUN AND MANAGE OTHER INCIDENTAL AND ALLIED A CTIVITIES. HOWEVER, IN THE YEAR UNDER REFERENCE, THE ASSESSEE FIRM HAS SHOWN THE RE NTAL INCOME. THE PARTNERSHIP FIRM IS CONSTITUTED TO DO THE BUSINESS AND TO EARN APPROPRIATE PROFITS AND LOSS OF THE BUSINESS. 2.6 THERE WAS A LEASE AGREEMENT BETWEEN M/S. ANAND SPINNING & WEAVING MILLS (P) LTD. AND M/S. INFRASTRUCTURE LEASING & FI NANCIAL SERVICES LTD. AND THE AGREEMENT IS DATED 9-06-2005. AS PER AGREEMENT, M/ S. INFRASTRUCTURE LEASING & FINANCIAL SERVICES LTD. WAS TO PAY RENT OF RS. 4,9 4,380/- PER MONTH. AS PER LEASE 8 RENT AGREEMENT, THE RENT WAS PAYABLE IN ADVANCE ON QUARTERLY BASIS ON OR BEFORE THE IST DAY OF JUNE, IST SEPT, IST DEC. AND IST JAN OF EACH YEAR DURING THE CURRENCY OF THIS AGREEMENT. THE RENT OF FIRST QUARTER IS BEI NG PAID AT THE TIME OF SIGNING OF LEASE AGREEMENT. M/S. ANAND SPINNING & WEAVING MILL S (P) LTD. VIDE LETTER DATED 05-07-2005 M/S. INFRASTRUCTURE LEASING & FIN ANCIAL SERVICES LTD. INFORMED THAT IT HAS SOLD, TRANSFERRED AND ASSIGNED ALL THE RIGHTS, TITLE AND INTEREST IN THE SAID PREMISES IN FAVOUR OF M/S. KAMDHENU ENT ERPRISES. IN TERMS OF CLAUSE 4 (F) OF THE SAID LEASE DEED, M/S. ANAND SPINNING & W EAVING MILLS (P) LTD. ATTORNED / ASSIGNED TENANCY IN FAVOUR OF THE SAID P URCHASER M/S. KAMDHENU ENTERPRISES. THE TENANT WAS INFORMED THAT IT WILL B E LIABLE TO PAY THE RENT, AND OTHER CHARGES TO THE SAID PURCHASER AS ITS NEW LAND LORD AND THE SAID PURCHASER SHALL BE ENTITLED TO RECEIVE THE SAME FROM YOU DURI NG YOUR TENANCY OF THE SAID PREMISES. IN THE LETTER DATED 5-7-05, M/S. ANAND SP INNING & WEAVING MILLS (P) LTD. HAS STATED AS UNDER:- (I) PLEASE ALSO BE INFORMED AND NOTE THAT WE HAVE A SSIGNED ALL OUR RIGHTS, TITLE AND INTEREST UNDER THE LEASE DEED DAT ED 09-06-2005 IN RESPECT OF THE SAID PREMISES WITH IMMEDIATE EFFECT. 2.7 PAGE 14 OF THE PAPER BOOK CONTAINS COPY OF THE POSSESSION LETTER. AS PER THIS LETTER, SHRI P.K. BINDAL, MANAGING DIRECTOR OF M/S. ANAND SPINNING & WEAVING MILLS (P) LTD. DELIVERED THE SYMBOLIC POSSE SSION OF COMMERCIAL OFFICE 9 FLAT MEASURING 5204.26 SQ.FT SUPER AREA ALONGWITH P ARKING RIGHTS FOR TWO CARS TO SHRI PUSHPENDRA KUMAR SURANA, SHRI GOPAL DAS AND SM T. UMA KHANDELWAL. THE POSSESSION LETTER IS DATED 10-06-2003 AND THE POSSE SSION HAS BEEN TAKEN BY SHRI BIMAL CHAND, POWER OF ATTORNEY HOLDER OF SHRI PUSHP ENDRA KUMAR SURANA AND SHRI GIOPAL DAS FOR HIMSELF AS WELL AS POWER OF ATT ORNEY HOLDER SMT. UMA KHANDELWAL. 2.8 M/S. ANAND SPINNING & WEAVING MILLS (P) LTD. AF TER RELINQUISHING ITS RIGHT TO RECEIVE RENT WAS NEITHER A DEJURE OWNER NOR DEFE CTO OWNER. THIS COMPANY RETAINED THE RENT FOR THREE MONTHS ON THE BASIS OF MUTUAL UNDERSTANDING BETWEEN THAT COMPANY AND THE ASSESSEE. THUS THERE WAS ONLY A CONTRACTUAL OBLIGATION. THE OBLIGATION IS SELF IMPOSED OR GRATUITOUS. THE HON'B LE APEX COURT IN THE CASE OF MOTI LAL CHHADAMI LAL JAIN VS. CIT , 190 ITR HAS HE LD AS UNDER:- WHERE THE OBLIGATION FLOWS OUT OF AN ANTECEDENT A ND INDEPENDENT TITLE IN THE FORMER (SUCH AS, FOR EXAMP LE, THE RIGHTS OF DEPENDANTS TO MAINTENANCE OR OF COPARCENERS ON PAR TITION, OR RIGHTS UNDER A STATUTORY PROVISION OR AN OBLIGATION IMPOS ED BY A THIRD PARTY AND THE LIKE), IT EFFECTIVELY SLICES AWAY A PART OF THE CORPUS OF THE RIGHT OF THE LATTER TO RECEIVE THE ENTIRE INCO ME AND SO IT WOULD BE A CASE OF DIVERSION. ON THE OTHER HAND, WHERE THE OBLIGATION IS SELF- IMPOSED OR GRATUITOUS (AS HERE), IT IS ONLY A CASE OF AN APPLICATION OF INCOME.' 10 2.9 THE HON'BLE APEX COURT IN THE CASE OF CIT VS. THAKUR DAS BHARGAVA, 40 ITR 301 HAD AN OCCASION TO CONSIDER A CASE WHERE TH E ADVOCATE RECEIVING PROFESSIONAL FEE IN CRIMINAL CASE EXPRESSED AN UND ERSTANDING TO SETTLE THE AMOUNT OF FEE UPON CHARITABLE TRUST THEN HON'BLE APEX COUR T HELD THAT THE AMOUNT OF FEE IS CHARGEABLE TO TAX IN THE HANDS OF THE ASSESSEE. IT WAS ASSESSEE'S OWN VOLUNTARY DESIRE THAT HE WOULD CREATE A TRUST OUT OF FEE PAID TO HIM. SUCH VOLUNTARY DESIRE ON THE PART OF THE ASSESSEE DID NOT GIVE RISE TO A NY LEGAL ENFORCEABLE OBLIGATION. AT THE MOST IN THE INSTANT CASE, THE PAYMENT RETAIN ED BY M/S. ANAND SPINNING & WEAVING MILLS (P) LTD. SHOULD REPRESENT THE AMOUNT AS PART OF THE COST OF THE PROPERTY BUT TO THAT EXTENT THE ASSESSEE GOT REDUCT ION IN THE COST OF THE ASSET. 2.10 THUS THE RIGHT OF RECEIVING THE RENT BY M/S. A NAND SPINNING & WEAVING MILLS (P) LTD. STOOD EXTINGUISHED AND THE ASSESSEE GOT A RIGHT TO RECEIVE RENT. THE ASSESSEE FILED A LETTER ADDRESSED TO M/S. ANAND SPI NNING & WEAVING MILLS (P) LTD. ALONGWITH THIS LETTER, THE COPY OF INCOME-TAX RETURN AND COPY OF TDS CERTIFICATES WERE ALSO ENCLOSED. IT MEANS THAT THIS IS NOT A CONTEMPORARY LETTER WHICH HAS BEEN RECEIVED BY THE ASSESSEE SUBSEQUENTL Y. M/S. ANAND SPINNING & WEAVING MILLS (P) LTD. VIDE LETTER DATED 7-7-05 TO THE TENANT ADMITTED THAT ALL THE RIGHTS OF RECEIVING RENT HAVE BEEN ASSIGNED TO THE ASSESSEE. IN THE LETTER ONLY CERTAIN ENCLOSURES WERE ALSO ATTACHED . IT IS MENTI ONED THAT BOTH THE PARTIES I.E. ASSESSEE AND M/S. ANAND SPINNING & WEAVING MILLS (P ) LTD. AGREED THAT RENT 11 FROM 10-06-05 TO 31-08-05 WILL BE RECEIVABLE BY M/S . ANAND SPINNING & WEAVING MILLS (P) LTD. AS PER MUTUAL UNDERSTANDING. HENCE, THIS IS NOT A CASE OF DIVERSION OF INCOME BY OVERRIDING TITLE BUT IT IS A N APPLICATION OF INCOME. THE ASSESSEE GOT THE RIGHT TO RECEIVE THE RENT BUT DUE TO MUTUAL UNDERSTANDING THE RIGHT WAS RELINQUISHED AFTER IT ACCRUED.. THE ASSESSEE IS ENTITLED TO BE TAXED FOR THE RENTAL INCOME FROM 01-06-05. THE HON'BLE APEX COURT IN THE CASE OF ITO VS. CH. ATCHAIAH 218 ITR 239 HAS HELD THAT THE PERSON L AWFULLY LIABLE TO BE TAXED CAN CLAIM NO IMMUNITY BECAUSE THE AO HAS TAXED THE SAID IN THE HANDS OF ANOTHER PERSON CONTRARY TO LAW. MERELY BECAUSE A WRONG PERS ON IS TAXED WITH RESPECT TO A PARTICULAR INCOME, THE AO IS NOT PRECLUDED FROM TAX ING THE RIGHT PERSON WITH RESPECT TO THAT INCOME. WHEN A PERSON IS TAXED WRON GFULLY, HE IS NO DOUBT BE ENTITLED TO BE RELIEVED OF IT IN ACCORDANCE WITH LA W BUT THAT IS A DIFFERENT MATTER ALTOGHETHER. THE RETURN OF INCOME OF M/S. ANAND SP INNING & WEAVING MILLS (P) LTD. IS LOSS. HENCE, IT IS NOT A CASE WHERE ISSUE I S TAX NEUTRAL. WE THEREFORE, FEEL THAT THE LD. CIT(A) WAS JUSTIFIED IN UPHOLDING THE ACTION OF THE AO . 2.11 RULE 4 OF THE INCOME TAX RULES PROVIDES FOR AL LOWING DEDUCTION IN RESPECT OF UNREALIZED RENT. THE REQUIREMENTS OF RULE 4 ARE NOT SATISFIED AND THEREFORE, THE RENT HAS NOT BEEN RECEIVED BY THE ASSESSEE CANNOT B E ALLOWED AS A DEDUCTION UNDER RULE 4 OF THE INCOME TAX RULES 12 3. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DIS MISSED THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 31-10 -2011. SD/- SD/- (R.K. GUPTA) (N.L. KALRA) JUDICIAL MEMBER ACCOUNTANT MEMBER JAIPUR DATED; 31 /10/2011 *MISHRA COPY FORWARDED TO :- 1. M/S. KAMDHENU ENTERPRISES, JAIPUR 2. THE DCIT, CIRCLE- 2, JAIPUR 3. THE LD. CIT BY ORDER 4. THE LD. CIT(A) 5. THE LD.DR 6. THE GUARD FILE (ITA NO.1425/JP /10) A.R, ITAT, JAIPUR 13