2016 (8) TMI 98

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....ed. The aggrieved revenue has come up in appeal which was admitted on March 17, 2008 and the following substantial question of law was formulated: Whether, on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal is correct in deleting the addition of Rs. 1.5 crores, being the difference between the annual lease rentof Rs. 2,25,00,000/- receivable and Rs. 75,00,000/- received while the assessee paid the full amount of lease rent of Rs. 1,18,42,200/- and the three companies, the lessor, the assessee and the sub-lessee were sister concerns? The facts of the case, briefly stated, are as follows. The assessee is a lessee in respect of the sugar factory at an annual rental of Rs. 1,18,42,200/-. The lessor of ....

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.... rent payable to the appellant is stipulated in the agreement. This agreement has not lapsed. Therefore, income in terms of the agreement has accrued to the assessee." In a further appeal by the assessee, the learned Tribunal deleted the addition on the basis of the following reasoning: "On a total consideration of the facts and circumstances of the case, it transpired that although there was an agreement in existence during the material time because of the changed position due to inability to pay a sum of Rs. 1.5 crore and having agreed upon to pay Rs. 75 lakhs by the lessee company, the Board of Directors, through resolution, altered the conditions stipulated in the agreement in the financial interest of the company as has bee....

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....drew our attention to a judgment of the Apex Court in the case of CIT -vs- Calcutta Discount Co. Ltd., reported in 1973 (91) ITR 8, wherein the following view was taken: "Where a trader transfers his goods to another trader at a price less than the market price, and the transaction is a bona fide one, the taxing authority cannot take into account the market price of those goods, ignoring the real price fetched, to ascetain the profit from the transaction." Mr. Bhowmik submitted that even assuming that the assessee has allowed a reduction of rent, the revenue is not entitled to make an addition which the assessee could have earned but chose not to earn by remitting the rent payable by Eastern Sugar & Industries Ltd. He submitted ....