Tribunal rules on rental income accrual for tax, rejects space rent addition

The Tribunal upheld the decisions in favor of the assessee, ruling that rental income should be accounted for and offered for tax on an accrual basis following the mercantile system of accounting. Additionally, the Tribunal found that the addition of space rent income was not sustainable due to unresolved disputes, emphasizing that income cannot be taxed when there is a dispute preventing its accrual. The Tribunal based its decision on the consistency of previous rulings by the Coordinate Bench and dismissed the Revenue's appeals accordingly.

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Issues:
1. Whether rental income should be accounted for in the books and offered to tax on an accrual basis.
2. Whether the addition of space rent income is sustainable when disputed by Government Departments.
3. Whether the findings of the Coordinate Bench in previous years should be followed in the current appeals.

Detailed Analysis:
1. The appeals (ITA. No. 1692/Del./2018 and ITA. No. 1693/Del./2018) involved a common grievance by the Revenue against the Orders of the Ld. CIT(A)-40 for the A.Ys. 2013-2014 and 2014-2015. The issue was whether the assessee, following the mercantile system of accounting, should have accounted for rental income in the books and offered it for tax on an accrual basis. The Tribunal noted that similar issues had been decided in favor of the assessee in previous years by the Coordinate Bench. The Counsel for the assessee argued that the Tribunal had ruled in favor of the assessee in A.Ys. 2009-2010, 2010-2011, and 2011-2012 on the same matter.

2. Regarding the addition of space rent income, the Tribunal referred to the decision of the Coordinate Bench in AYs 2009-10, 2010-11, and 2011-12. In those cases, the ld. CIT(A) had deleted the addition based on the dispute raised by Government Departments regarding ownership of the land and rent. The Tribunal upheld the decision of the ld. CIT(A) stating that since the dispute remained unresolved, the addition was not sustainable. The Tribunal emphasized that when income has not accrued due to a dispute, no rent should be considered taxable, even if there is a notional income entry in the books. The absence of resolution in the dispute was crucial for determining the taxability of the income.

3. The Tribunal, after considering the Orders of the authorities below and the previous decisions of the Coordinate Bench, decided to follow the findings of the Coordinate Bench. The Tribunal dismissed both appeals of the Revenue, stating that they were respectfully following the decisions of the Coordinate Bench in similar matters from previous years. Consequently, the appeals of the Revenue were dismissed based on the precedents set by the Coordinate Bench in earlier cases.

In conclusion, the Tribunal upheld the decisions in favor of the assessee based on the principles of the mercantile system of accounting, the unresolved dispute regarding space rent income, and the consistency in following the findings of the Coordinate Bench from previous years.

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