ITO, New Delhi V. Yogindra Knitting Mills, New Delhi

ITA 4290/DEL/2010

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 0215 (ITAT-DELHI)
• Duration Of Justice: 5 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-03-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: I
• Next Hearing Date: 07-03-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 17-09-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: LOKENDRAJIT PAONAM
• Assessee Lawyers: BANITA DEVI NAROEM
• Keywords: Capital receipt

Judgement Text

ITA NO. 4290/DEL/2010 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH I NEW DELHI BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER I.T.A. NO. 4290/DEL/2010 A.Y. : 2007-08 INCOME TAX OFFICER, WARD 33(4), ROOM NO. 206-B, C.R. BLDG., I.P. ESTATE, NEW DELHI 110 002 VS. M/S YOGINDRA KNITTING MILLS, D-158, NEW RAJINDER NAGAR, NEW DELHI (PAN/GIR NO. : AAAFY0254A) (APPELLANT ) (APPELLANT ) (APPELLANT ) (APPELLANT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) ASSEESSEE BY : MS. BANITA DEVI NAROEM, SR. D.R. DEPARTMENT BY : SH. LOKENDRAJIT PAONAM, ADV. ORDER ORDER ORDER ORDER PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) DATED 30.6.2 010 PERTAINING TO ASSESSMENT YEAR 2007-08. 2. THE ISSUE RAISED IS THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. COMMISSIONER OF INCOME TAX (APPEAL S) HAS ERRED IN DELETING THE ADDITION (MADE OF DAMAGES FOR WRONGFUL DETENTION OF PROPERTY RECEIVED BY THE ASSESSEE FROM ITS ERSTWHILE TENANT, WHICH WAS AS PER THE DECREE PASSED BY DELHI HIGH COURT UPON A COMPROMISE HAVING BEEN ARRIVED AT BETWEEN THE TWO PARTIES, CON FIRMED BY THE TENANT TO THE ASSESSING OFFICER THAT THE SAID AMOU NT WAS PAID AS SETTLEMENT OF RENT); DECIDING THE CASE ON THE BASIS OF A COPY OF THE JOINT APPLICATION BY THE ASSESSEE AND THE TENANT WIT HOUT MENTIONING THE DATE OF THIS JOINT APPLICATION, WHICH WAS PRESU MABLY CONSIDERED BY ITA NO. 4290/DEL/2010 2 THE HIGH COURT WHILE PASSING THE DECREE; WHICH WAS SUBMITTED BEFORE LD. COMMISSIONER OF INCOME TAX (APPEALS). IT HAS FUR THER BEEN URGED THAT THERE IS VIOLATION OF RULE 46A. 3. IN THIS CASE ASSESSEE IS ENGAGED IN THE BUSINE SS OF TRADING READY MADE GARMENTS AND SHARES. ASSESSEE ALSO DERI VES INCOME FROM BUSINESS, RENT FROM LET OUT PROPERTY DIVIDEND AND BANK INTEREST. ASSESSING OFFICER OBSERVED THAT AS PER AIR INFORMAT ION, ASSESSEE HAD RECEIVED RENT OF ` 17,35,485/- ON 31.5.2006 FROM M/S HINDALCO INDUSTRIES LTD. ASSESSEE REPLIED THAT THE SAID AMOU NT RECEIVED FROM M/S HINDALCO INDUSTRIES WAS ON ACCOUNT OF DAMAGES CA USED BY THEM TO THE PROPERTY OF THE ASSESSEE AND SUCH RECEIPT BEING IN THE NATURE OF COMPENSATION AND REIMBURSEMENT OF EXPENSES. THE CONFI RMATION FROM M/S HINDALCO WAS ALSO REQUISITIONED BY THE ASSESSING OFFICER. IN THE CONFIRMATION, M/S HINDALCO REPLIED THAT THE SAME WAS PAID AS SETTLEMENT OF RENT FOR SUIT NO. 812/2000. ASSES SEE SUBMITTED THAT COMPROMISE BETWEEN THE ASSESSEE AND M/S HINDALCO WAS ARRIVED TO SETTLE THEIR DISPUTES AND CLAIMS. POSSESSION WAS HA NDEDOVER TO THE ASSESSEE AND M/S HINDALCO INDUSTRIES AGREED TO PAY A SUM OF ` 17,35,485/- IN FULL AND FINAL SETTLEMENT FOR CLAIM OF DAMAGES /MESNE PROFIT. ASSESSING OFFICER WAS OF THE OPINION THAT THE AMOUNT RECEIVED BY THE ASSESSEE IS REVENUE RECEIPT AND ACCORDINGLY, HE ADDED THE SAME AS REVENUE RECEIPT. 4. UPON ASSESSEES APPEAL LD. COMMISSIONER OF INCOME TAX (APPEALS) HELD AS UNDER:- I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE. FOR THE PURPOSE OF DECIDING THIS APPEAL IT IS ESSENTIAL TO ASCERTAI N THE TRUE NATURE OF THE AMOUNT OF ` 17.35 LAKHS RECEIVED BY THE APPEL LANT FROM M/S ITA NO. 4290/DEL/2010 3 HINDALCO LTD. IN TERMS OF SETTLEMENT REACHED BEFOR E THE HONBLE DELHI COURT IN SUIT NO. 812 OF 2000. THIS SETTLEMENT WAS REACHED AFTER THE INTERIM ORDER OF THE DELHI HIGH COURT DATE D 25.7.2000 HAD DETERMINED THE TENANT TO PAY RENT OF ` 48,400/- PER MONTH, WHICH WAS PAID BY THE TENANT. THEREAFTER, VIDE TH E ORDER OF THE DELHI HIGH COURT DATED 2.6.2006, THE VACANT POSSESSI ON OF THE PROPERTY WAS DELIVERED TO THE APPELLANT, WHO WAS AL SO ASKED TO PAY AN AMOUNT OF ` 17.35 LAKHS, IN PURSUANCE OF THE AGREEMENT REACHED BETWEEN THE TWO PARTIES, TOWARDS REPAIRS OF THE DAMAGED PROPERTY. IN THIS REGARD, A COPY OF THE JO INT APPLICATION BY THE APPELLANT FIRM AND THE TENANT WAS SUBMITTED BEFORE ME, WHICH CLEARLY SHOWS THAT THE ABOVE PAYMENT WAS IN LI EU OF THE REPAIR COSTS OF THE LEASED OUT PROPERTY. IN VIEW O F THE SAME, SUCH A RECEIPT WAS CLEARLY CAPITAL IN NATURE AND CANNOT BE TERMED AS REVENUE. THE ACTION OF THE ASSESSING OFFICER TO TR EAT THE SAME AS RENT IN NATURE WAS CERTAINLY UNJUSTIFIED AS THE LD. ASSESSING OFFICER FAILED TO NOTICE THAT THE HONBLE DELHI COURT HAD ALREADY FIXED MONTHLY RENT OF ` 48,400/- VIDE THEIR INTERIM ORDER DATED 25.7.2000. FURTHER, ON PERUSAL OF THE JOINT APPLICATION BY THE TENANT AND THE APPELLANT, WHICH WAS CONSIDERED BY THE HONBLE HIGH COURT WHILE PASSING THE DECREE, IT IS EVIDENT THAT THE CLAIM FILED BY THE APPELLANT WAS IN RESPECT OF COMPEN SATION FOR THE REPAIR COSTS NEEDED FOR THE IMPUGNED PROPERTY. IN VIEW OF THE SAME, THE ADDITION MADE BY THE ASSESSING OFFICER IS BEING DELETED, BEING BASED ON INCORRECT APPRECIATION OF FACTS. IT IS IRRELEVANT WHETHER TDS WAS DEDUCTED THEREON OR NOT, AS THE SAME IS DONE BY PAYER, AS A PRECAUTION TO AVOID ANY POS SIBILITY OF ITA NO. 4290/DEL/2010 4 PENALTY ON NON-DEDUCTION OF TDS, AND CANNOT BE RELIE D UPON TO DETERMINE THE NATURE OF PAYMENT, I.E. CAPITAL OR REV ENUE. 5. AGAINST THIS ORDER THE REVENUE IS IN APPEAL BEFO RE US. 6. WE HAVE HEARD THE RIVAL CONTENTIONS IN LIGHT O F THE MATERIAL PRODUCED AND PRECEDENTS RELIED UPON. WE FIND THAT IT IS AN ADMITTED FACT THAT JOINT ON APPLICATION FILED BY THE PARTIES, THE HONBLE DELHI HIGH COURT HAD ORDERED THAT THE DEFENDANT SHALL PAY TO THE PLAINTIFF A SUM OF ` 17,35,485/- IN FULL AND FINAL SETTLEMENT / ADJU STMENT OF ALL THE CLAIMS OF BOTH THE PARTIES. IN THIS REGARD, WE NOT E THAT BEFORE THE VACATION OF THE PREMISES BY THE TENANT ASSESSEE HAS GOT THE PREMISES EXAMINED BY THE ARCHITECT WHICH GAVE ESTIMATE OF ` 21 03900/- WHICH WAS REQUIRED FOR THE REPAIR OF THE PREMISES. LD. COUNSEL OF THE ASSESSEE CLAIMED THAT IT IS AGAINST THIS DAMAGE CAUSE D TO THE PREMISES, ASSESSEE HAS RECEIVED A SUM OF ` 17.35 LACS AND THUS IT IS NOT REVENUE RECEIPT. ASSESSEE COUNSEL CLAIMED THAT THE SAME WAS ON ACCOUNT OF COMPENSATION / REIMBURSEMENT OF EXPENSES FO R REPAIRING THE DAMAGED PROPERTY. 7. IN THE BACKGROUND OF THE AFORESAID FACTS, WE FIN D THAT GROUND RAISED IN THE APPEAL IS MISPLACED IN AS MUCH AS THE COMPENSATION FOR WRONGFUL DETENTION OF THE PROPERTY AS CLAIMED BY TH E REVENUE. THE HONBLE DELHI HIGH COURTS ORDER MAKES IT CLEAR THA T IT WAS A FULL AND FINAL SETTLEMENT OF ALL THE CLAIMS OF BOTH THE PART IES AND THIS CLAIM WAS BASED UPON THE DAMAGES CAUSED TO THE PROPERTY FOR WH ICH ASSESSEE HAD OBTAINED ESTIMATE OF DAMAGES. 7.1 IN THIS REGARD, THE SPECIAL BENCH DECISION IN T HE CASE OF M/S NARANG OVERSEAS P. LTD. VS. ASSISTANT COMMISSIONER OF INCOME TAX [2008] 300 ITR 1 (MUMBAI) (SB) HAS HELD THE HEAD NO TES ONLY ITA NO. 4290/DEL/2010 5 CAPITAL OR REVENUE RECEIPT PROPERTY GIVEN ON LEA VE AND LICENCE TERMINATION OF AGREEMENT SUIT SUM PAID AS MESNE PROFITS UNDER ORDERS OF COURT IS ON ACCOUNT OF DAMAGES FOR DEPRE VIATION OF USE AND OCCUPATION OF PROPERTY CAPITAL RECEIPT AND NOT T AXABLE INTEREST ON SUCH MESNE PROFITS TILL DATE OF DECREE OR COURT, CAPITAL RECEIPT INTEREST FOR PERIOD THEREAFTER, REVENUE AND TAXABLE - CODE OF CIVIL PROCEDURE, 1908, S. 2(12). 7.2 WE FIND THAT THE ABOVE CASE SUPPORTS THE CASE O F THE ASSESSEE AND ASSESSEE CASE IS FURTHER FORTIFIED BY THE FACT THAT THE AMOUNT PAID WAS NOT AGAINST OCCUPATION RENT, BUT THE DAMAGE CAUS ED TO THE PREMISES. ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY OR ILLEGALITY IN THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) . ACCORDINGLY, WE UPHOLD THE SAME. 8. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 11/3/2011. SD/- SD/- [ [[ [I.P. BANSAL I.P. BANSAL I.P. BANSAL I.P. BANSAL] ]] ] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER DATE 11/3/2011 SRB COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: - -- - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT, DELHI BENCHES