Tribunal rules deposit for rent adjustment not additional property price. Rs. 28,00,000 addition removed.

The Tribunal determined that the amount of Rs. 30,12,520 received by the assessee was a deposit intended for adjusting yearly rent, not an additional price for the property. It was held that the amount did not constitute a revenue receipt but a deposit to be offset against rent. The Tribunal also ruled that the addition of Rs. 28,00,000 to the assessee's income by the Income-tax Officer was unjustified, as the amount was deemed a deposit for rent adjustment, not an extra property price. Consequently, the appeal was allowed, and the Rs. 28,00,000 addition was removed.

---

---

Issues Involved:
1. Determination of the nature of the amount Rs. 30,12,520 received by the assessee.
2. Whether Rs. 30,12,520 should be considered as additional price for the property or as a deposit.
3. Whether the amount Rs. 30,12,520 represents revenue receipt or capital receipt.
4. Validity of the addition of Rs. 28,00,000 to the returned income by the Income-tax Officer.

Issue-wise Detailed Analysis:

1. Determination of the nature of the amount Rs. 30,12,520 received by the assessee
The primary issue was to ascertain the nature of Rs. 30,12,520 received by the assessee from Canara Bank. The Income-tax Officer and the Commissioner of Income-tax (Appeals) considered this amount as an additional price for the property. However, the Tribunal examined the documents and concluded that the amount was a deposit meant for adjustment against yearly rent. The Tribunal noted that the relevant document described the amount as a deposit to be adjusted by yearly rent, and the yearly rent of Rs. 30,740 for 98 years amounted to Rs. 30,12,520. This indicated that the amount was not a price received for any property but a deposit primarily meant for adjustment of yearly rent.

2. Whether Rs. 30,12,520 should be considered as additional price for the property or as a deposit
The Tribunal emphasized that the deed of conveyance mentioned the sale of the building for Rs. 12,16,000 and not the land. The land was not sold but sublet, and the amount of Rs. 30,12,520 was treated as an advance rent deposit. The Tribunal observed that the subsequent conduct of the parties, including the treatment of the amount in the books of Canara Bank and the assessee, supported the view that the amount was a deposit. Canara Bank had shown Rs. 30,12,520 as "sundry asset/sundry debtor's A/c" and adjusted the yearly rent against this amount.

3. Whether the amount Rs. 30,12,520 represents revenue receipt or capital receipt
The Tribunal held that the amount of Rs. 30,12,520 could not be treated as a revenue receipt because it did not represent the price or consideration for the sale of stock-in-trade. The demised land was not sold but sublet, and the amount received was an advance to be adjusted in yearly rent. The Tribunal noted that if the sub-lease came to an end, there was an obligation to return the amount, indicating that it was a deposit and not an outright payment for the transfer of ownership of any property.

4. Validity of the addition of Rs. 28,00,000 to the returned income by the Income-tax Officer
The Tribunal found that the addition of Rs. 28,00,000 by the Income-tax Officer was not justified. The Tribunal noted that the Income-tax Officer had added Rs. 28,00,000 on the basis that it represented additional cost received by the assessee in the garb of interest-free advance. However, the Tribunal concluded that the amount was a deposit to be adjusted against yearly rent and not an additional price for the property. The Tribunal also noted that the Commissioner of Income-tax (Appeals) had confirmed the addition without enhancement, considering Rs. 30,12,520 as additional price received.

Conclusion
The Tribunal allowed the appeal, holding that the amount of Rs. 30,12,520 was a deposit meant for adjustment against yearly rent and not an additional price for the property. The addition of Rs. 28,00,000 to the returned income was deleted. The Tribunal emphasized that the substance of the transaction, as reflected in the documents and subsequent conduct of the parties, indicated that the amount was a deposit and not a revenue receipt.

---