TaxTMI 
TaxTMI 
2015 (7) TMI 875
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....d. DAL submitted an offer of paying Rs. 28,11,000 per annum as licence fee to the NDMC. However, no agreement as such was executed at that stage. A suit was filed by DAL against NDMC for specific performance with an alternative prayer for damages. The suit ended in a compromise and this led to an agreement dated 11th March 1981 being executed between DAL and NDMC. The key features of this agreement were as under: (i) The land was to be given to DAL on licence basis for a period of 99 years on payment of licence fee of Rs. 1,45,00,000 pa. (ii) DAL would form a public limited company within a period of twelve months and the licence of the land was to be transferred to the said company. (iii) The building would be constructed on the land by DAL. Nevertheless, the land and the building were to vest in the NDMC. DAL would have the right to raise loans on the security of the structures/buildings/ fixtures and fittings etc. from any Indian or foreign licensed bank or from any financial corporation including ICICI and IDBI. (iv) The plans for the hotel building together with drawings had to be approved in advance from NDMC and the Director General of Tourism, Government of Indi....
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....er responsible to answer that the sub- licensees shall not get any right over and above the rights and privileges of the licensees." 3. Pursuant to the above agreement, Bharat Hotels Ltd. ("BHL") came to be incorporated. On 18th June 1981 an agreement was entered into between BHL and DAL which anticipated the transfer of the licence in respect of the land from DAL to BHL. The obligations of DAL as incorporated in the agreement dated 11th March 1981 were set out as obligations of BHL in the agreement dated 18th June 1981. Clause 4 of this agreement permitted BHL to allow use of the shopping complex by way of a licence to one or more persons or their nominees with information to DAL. It was, inter alia, provided in Clause 4(a) that BHL would accept "interest-free-deposit from the user at an agreed rate per sq. ft. of the area to be licensed to any party". The deposit would vary from party to party and from time to time. Of the deposit, the DAL was permitted to retain 25% on the agreed terms and conditions and the balance 75% was to be retained by BHL. DAL was bound to repay the deposit. It was further provided that BHL would be bound to repay the deposit of any licensee as and whe....
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....the tripartite agreement. Relevant to the present appeals it should be noted that Clause 27 prohibits the sub-licensees from assigning their interest in the space allotted in any way without obtaining previous written consent of BHL. Clause 1 states that deposit "free of interest" shall remain with BHL "during the subsistence of this agreement". The licence fee is to be calculated at a rate per sq. ft. of the licence area. Under Clause 7(f), it is stated that the sub-licensee shall deposit a sum equal to three months charges calculated at the said rate and that the said security "shall be free of interest". Clause 30 states that after adjustment of the outstanding dues, the deposit, free of interest shall be repaid to the sub-licensee on termination or determination of either BHL"s licence under the original licence deed dated 22nd April 1982 or upon termination or determination of the sub-licence in terms of the agreement. Clause 31 clarifies that the allotted space remains under the overall control and supervision of Assessee. Clause 32 gives the Assessee right of entry to any of the allotted spaces without notice for any inspection. Clause 34clarifies that the sub-licensees do n....
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....8-89. As regards the instalments received under the new licence agreements during and after AY 1989-90 the AO would have to decide on their taxability. The AO's order was not clear on this aspect and the matter required to be remanded. (v) As regards the issue of interest on deferred licence fee, the order of the CIT (A) remanding it to the AO was modified by directing the AO to decide the issue in accordance with law as and when the claim was made by the Assessee. (vi) The decision of the CIT (A) directing the AO to allow the arrears of licence fees on actual payment basis was upheld. (vii) The direction of the CIT (A) to the AO to allow depreciation on the increase in liability on account of exchange rate fluctuation on notional basis was also upheld. 11. In the present appeals by the Revenue, by the order dated 27th November 2000, the Court framed the following questions of law: (i) Whether the assessee is entitled to depreciation in respect of the hotel building, under Section 32 of the Act? (ii) Whether the assessee is entitled to depreciation in respect of WTT and WTC under Section 32 of the Act? (iii) Whether the ITAT was justified in holding that as....
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.... the depreciation was to replace the value of an asset to the extent it is depreciated during the period of accounting relevant to the AYs in question and such valuation as to that extent will be diminished by the corresponding allowance of depreciation. He referred to the decision of the Supreme Court in P.K. Badiani v. CIT (1976)105 ITR 642 (SC). He also referred to the later decision in Mysore Minerals Ltd. v. CIT (1999) 106 Taxman 166, where it was held that the word "owned" in Section 32(1) is provided with reference to the control exercised over the property by the person claiming relaxation. It is submitted that since the Assessee has made the investment in the capital assets and is still utilizing it, the Assessee would be entitled to claim the said depreciation in respect of the hotel building, the WTT and the WTC from the respective periods when they were begun to be utilised. With reference to various clauses of the Agreements in question Mr. Vohra contended that the Assessee had complete control over the buildings and was also given right to sub-licence them. Alternatively it was submitted that explanation (1) to Section 32 had been inserted in the Act with effect from ....
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....nowledges that depreciation would be claimed by assessee who carries on business "in a building not owned by him but in respect of which the assessee holds a lease or other right of occupancy and any capital expenditure is incurred by the assessee for the purposes of the business or profession on the construction of any structure or doing of any work or in relation to....... the building." In such event, Section 32 (1) would apply "as if the said structure or work is a building owned by the assessee. 18. In any event even for the period earlier than 1st April 1988, in view of the decision in Supreme Court in Commissioner of Income Tax v. Podar Cement Private Limited (1997) 226 ITR 625 and Mysore Minerals v CIT (supra) the legal position is no longer res integra. In Podar Cement Private Limited the Supreme Court was called upon to consider whether the income derived by the assessee on the flat or the building were income from other sources and not income from the house property. The Court in that context considered the words "owner" and accepted that this would include "that person who can exercise the rights of the owner, and not on behalf of the owner but in his own right." In ....
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....est free refundable deposits from the allottees of the spaces. The sub-licence agreements which have been referred to earlier made this position explicit. For the AY 1987-88, the AO treated the deposits as trading receipts and this view was confirmed upto the ITAT. This was the view taken for AY 1988-89 as well. 21. Before the ITAT for the AYs in question, the Revenue tried to project an argument that since by an amendment to Explanation 1 to Section 2 (47) (v), with effect from 1st April 1988 "transfer" in relation to an "immovable property" was assigned the same meaning as in Clause (d) of Section 269 UA of the Act, the consideration in a transaction which resulted in the transferee acquiring the right of enjoyment of the immovable property would have to be treated as a capital receipt. The ITAT found that the AO had not examined if the amount received by the Assessee in the concerned AY pertained to a sub-licence agreement executed prior to the AY in question. If it did then it was not taxable in view of the earlier decision of the ITAT. However, if it related to an agreement executed in the year under consideration, then the AO had to decide the issue of taxability in light ....