CRP (India) P Ltd, Chennai V. ACIT, Corporate Circle -1(2), Chennai

ITA 97/CHNY/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 4767 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 7 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-08-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2014-2015
• Appeal Filed On: 08-01-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: S SRIDHAR

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI . . . , ! ' , $ '% BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ./ ITA NO.97/CHNY/2018 ( )( / ASSESSMENT YEAR : 2014-15 M/S CRP (INDIA) PVT. LTD., PLOT NO.79, SIDCO INDUSTRIAL ESTATE, THIRUMUDIVAKKAM, CHENNAI - 600 044. PAN : AAACC 1347 F V. THE ASSISTANT COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 1(2), CHENNAI. (+,/ APPELLANT) (-.+,/ RESPONDENT) +, / 0 / APPELLANT BY : SHRI S. SRIDHAR, ADVOCATE -.+, / 0 / RESPONDENT BY : SHRI AR.V. SREENIVASAN, JCIT 1 / 2$ / DATE OF HEARING : 30.07.2019 34) / 2$ / DATE OF PRONOUNCEMENT : 08.08.2019 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER : THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) -1, CHENNA I, DATED 31.10.2017 AND PERTAINS TO ASSESSMENT YEAR 2014-15. 2. SHRI S. SRIDHAR, THE LD.COUNSEL FOR THE ASSESSEE , SUBMITTED THAT THE ASSESSEE LET OUT A VACANT INDUSTRIAL SHED TO ITS SUBSIDIARY 2 I.T.A. NO.97/CHNY/18 COMPANY FOR A RENT OF 1.20 CRORES. THE RENTAL INCOME WAS NOT OFFERED TO TAX. ACCORDING TO THE LD. COUNSEL, THE ASSESSEE EXPLAINED BEFORE THE ASSESSING OFFICER THAT THE PRE MISES LET OUT TO THE SUBSIDIARY COMPANY / JOINT VENTURE COMPANY AND THE SAID COMPANY WAS INCURRING A PERSISTENT LOSS. THEREFORE , ACCORDING TO THE LD. COUNSEL, THE RENT COULD NOT BE RECOVERED. SINCE THE ASSESSEE COULD NOT RECOVER THE RENT FROM THE SUBSID IARY COMPANY, IT WAS DECIDED TO WAIVE THE RENT BY A RESOLUTION DATED 01.04.2013. ACCORDING TO THE LD. COUNSEL, EVEN THE RENT RELATAB LE TO EARLIER PERIOD WAS TRANSFERRED TO SHARE CAPITAL ACCOUNT SO THAT THE RENT PAYABLE BY THE SUBSIDIARY COMPANY MAY BE TREATED AS CAPITAL CONTRIBUTION BY THE ASSESSEE TO THE JOINT VENTURE C OMPANY. THE LD.COUNSEL FURTHER CLARIFIED THAT NO EXPENDITURE WA S CLAIMED FOR REPAIRS AND MAINTENANCE. THEREFORE, ACCORDING TO T HE LD. COUNSEL, THE ASSESSMENT OF 1.20 CRORES IS NOT JUSTIFIED. 3. WE HEARD SHRI AR.V. SREENIVASAN, THE LD. DEPARTM ENTAL REPRESENTATIVE ALSO. ADMITTEDLY, A FACTORY PREMISE S WAS LET OUT TO THE SUBSIDIARY COMPANY / JOINT VENTURE COMPANY. IT IS NOT IN DISPUTE THAT THE SUBSIDIARY COMPANY / JOINT VENTURE COMPANY WAS PERSISTENTLY INCURRING LOSSES. THEREFORE, THE ASSE SSEE COULD NOT 3 I.T.A. NO.97/CHNY/18 RECOVER THE RENT OF 1.20 CRORES FROM THE SAID COMPANY. IT IS SEEN FROM THE ASSESSMENT ORDER THAT THE ASSESSEE HAS TO PAY SERVICE TAX ON THE SAID RENT TO THE GOVERNMENT. THE EARLIER PE RIOD RENT WAS TRANSFERRED TO THE CAPITAL ACCOUNT AND IT WAS TREAT ED AS CAPITAL CONTRIBUTION BY THE ASSESSEE. THE QUESTION ARISES F OR CONSIDERATION IS WHEN THE TENANT COULD NOT PAY THE RENT OR THE AS SESSEE BEING A LANDLORD COULD NOT RECOVER THE AMOUNT, CAN WAIVE TH E RENT PAYABLE BY THE TENANT? AND WHETHER SUCH RENT IS ASSESSABLE IN THE HANDS OF THE ASSESSEE OR NOT? THIS TRIBUNAL IS OF THE CONSI DERED OPINION THAT WHEN THE ASSESSEE LET OUT THE PROPERTY FOR PAYMENT OF RENT, MERELY BECAUSE THE TENANT IN THIS CASE HAPPENED TO BE SUBS IDIARY COMPANY / JOINT VENTURE COMPANY INCURRING PERSISTENT LOSS A ND THE RENT WAS WAIVED, CANNOT BE A REASON NOT TO TAX THE AMOUNT DU E FROM TENANT. IN OTHER WORDS, THE RENT PAYABLE BY THE TENANT BY W AIVER WOULD AMOUNT TO APPLICATION OF INCOME AND IT CANNOT BE CO NSTRUED AS OVERRIDING TITLE. IT WAS PASSED ON TO THE TENANT. ON ACCRUAL BASIS, THE RENTAL INCOME WAS ACCRUED TO THE ASSESSEE. IT IS UPTO THE ASSESSEE EITHER TO TREAT AS CAPITAL CONTRIBUTION OR OTHERWISE. HOWEVER, THE ASSESSEE IS LIABLE TO PAY INCOME-TAX O N SUCH RECEIPT / ACCRUALS. THEREFORE, THIS TRIBUNAL DO NOT FIND ANY REASON TO INTERFERE 4 I.T.A. NO.97/CHNY/18 WITH THE ORDER OF THE LOWER AUTHORITY AND ACCORDING LY THE SAME IS CONFIRMED. 4. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE COURT ON 8 TH AUGUST, 2019 AT CHENNAI. SD/- SD/- ( ! ' ) ( . . . ) (INTURI RAMA RAO) (N.R.S. GANESAN) $ / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 6 /DATED, THE 8 TH AUGUST, 2019. KRI. / -278 98)2 /COPY TO: 1. +, /APPELLANT 2. -.+, /RESPONDENT 3. 1 :2 () /CIT(A)-1, CHENNAI 4. PRINCIPAL CIT, CHENNAI-1, CHENNAI 5. 8; -2 /DR 6. <( = /GF.