TaxTMI 
TaxTMI 
2020 (7) TMI 622
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....ase and license basis. Whereas, the assessee has received leave and license fee of only Rs. 9 lakh. He noticed that on the basis of similar facts in assessment year 2012-13, the Assessing Officer had estimated the interest on interest free security deposit @ 10% and added back to the income of the assessee under the head income from other source. Therefore, following the assessment order passed in assessment year 2012-13, the Assessing Officer estimated the interest on interest free security deposit @ 10% and made an addition of Rs. 27,48,594. The assessee contested the aforesaid addition by filing appeal before the first appellate authority. 4. After considering the submissions of the assessee in the context of facts and material on record, learned Commissioner (Appeals) found that while deciding dispute relating to similar addition made in assessee's own case in assessment year 2012-13, the Tribunal, though, has agreed with the Assessing Officer that notional interest on security deposit has to be treated as income of the assessee, however, the quantum of such interest was reduced from 10% to 9% by the Tribunal. Following the aforesaid decision of the Tribunal, learned Commiss....
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....ilasha, August Kranit Marg, Mumbai400036, hereinafter called "the Licensor: [which expression shall unless it be repugnant to the context or meaning thereof be deemed and include heirs, executors, administrators and assignees] of the ONE PART: And ASIT C. MEHTA INVESTMENT INTERMEDIATES LIMITED, a company incorporated with limited liabilities under the Indian Companies Act, 1956 and having its Registered Office at Nucleus House, 5th Floor, Saki Vihar Road, Andheri (E), Mumbai 400072, "ACMIIL" hereinafter called "the Licensee" [which expression shall unless it be repugnant to the context or meaning thereof to mean and include its assignees of the OTHER PART Whereas 1. The licensor is a tenant of G.R. Podar Foundation having office at Podar Chambers, S.A. Brelvi Road, Mumbai 400001 hereinafter called the foundation. 2. The foundation owns a building known as Podar Chambers situation at S.A. Brelvi Road, Mumbai 400001. 3. The Licensor as such tenant is entitled to use and occupy an office unit admeasuring approx. 850 sq. ft. along with lift of 100 sq. ft. bearing office No. 67A on the third floor of the said building [hereafter refe....
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....rs and replacement of furniture and fixtures, fees for overdue stay etc. 7. It is agreed that the fees shall be paid by the Licensee to the Licensor during the each month." 7.1 The first statute which is relevant for a leave and licence is the Indian Easement Act, 1882. Section 52 of the said Act defines a 'licence' as a right granted by one person to another to do something in or upon the grantor's immoveable property, which act would, in the absence of such a right, be unlawful. It further states that a licence must not amount to an easement or an interest in the property. Thus, a licence is only permission or a right to do something upon an immoveable property. It is solely a personal right or privilege granted to the licensee by the licensor. A licence does not confer any interest in the immoveable property. It is for this reason that a licensee cannot maintain an action for possession of the property in his own name. Thus the crux of a licence is that it is always a right or a permission and never transfers ownership of the property. Under the leave and license agreement, the legal ownership and the possession of the property remains with th....
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....ceived or receivable is in excess of the sum, the amount so received or receivable. According to section 23(1)(b) where the property is actually let out, the actual amount of rent received or receivable shall form part of the income from house property. Ordinarily, the notional interest that may accrue on security deposit would not form part of income from house property. However, where payment of the security deposit is to circumvent real rent, the same shall fall within its ambit as income from house property. Interest on the security amount of Rs. 35,00,000 will be treated as income of the assessee. Thus, in the facts, as noticed above, it is considered appropriate to hold that interest @ 9% per annum on the security amount of Rs. 35,00,000 would be just to meet the ends of justice and the same will be treated as taxable income of the assessee under the head 'Income from house property' relating to the land and building. (Paras 17 & 19) Their Lordships concluded that where the security deposit is to circumvent real rent, the same shall fall within its ambit as income from house property; in the facts and circumstances, interest @ 9% per annum on security deposit of Rs. ....
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.... whole, the transaction adopted by the assessee in the instant case was a device to reduce the tax burden. This is the germ of the "pre-ordained series of transactions". The two issues i.e. 'Leave and License Fee' and 'Security Deposit' in the instant appeal are interconnected and part of the same transaction. To persuade the Tribunal to adopt, in relation to closely integrated situation, a step by step, dissecting approach, would be a denial rather than an affirmation of the true judicial process. 7.6 We find from the list of Directors of Asit C. Mehta Investment Intermediates Ltd, given to us by the Ld. counsel in response to a query by us, that the assessee (Licensor) is the Managing Director in Asit C. Mehta Investment Intermediates Ltd (Licensee). The receipt of Rs. 2,75,00,000/- by the assessee as interest-free security deposit from the licensee-company in which she herself is the Managing Director cannot be ignored while computing the annual letting value. 7.7 Respectfully following the aforesaid judgment rendered by their Lordships of the Hon'ble Punjab and Haryana High Court narrated at para 7.2 hereinbefore, we are of the considered view that th....
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....wed. 10. We have considered rival submissions and perused the material on record. As it appears, though, similar disallowance was made by the Assessing Officer in assessment year 2012-13, which was confirmed by learned Commissioner (Appeals), however, the assessee did not contest such disallowance before the Tribunal. Even otherwise also, the assessee had not established on record that the interest expenditure of Rs. 1,93,400, is directly incurred for earning interest income. That being the case, we uphold the disallowance made by the Assessing Officer and confirmed by learned Commissioner (Appeals). This ground is also dismissed. 11. In ground no.6, the assessee has raised the issue of violation of rules of natural justice and in ground no.7, it has been urged that learned Commissioner (Appeals) has passed the order on conjuncture and surmises. 12. At the outset, we must observe that no submissions in respect of these grounds have been made by the assessee. Even otherwise also, on a perusal of the order passed by learned Commissioner (Appeals), we find that the assessee has been afforded reasonable opportunity of being heard in course of the appeal proceedings. Therefo....
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....Appellate Tribunal) Rules,1963, ordinarily the appeal order has to be pronounced before expiry of ninety (90) days from the date of conclusion of hearing of appeal. However, on 24.03.2020 a nationwide lockdown was enforced by the Government of India in view of COVID-19 pandemic. Due to the unprecedented situation arising out of such lockdown all activities ceased and no normal official work could be done. For this reason only the appeal order could not be pronounced within the period of 90 days. Being faced with a similar situation the Tribunal in case of DCIT V/s JSW Limited, ITA Nos.6264 & 6103/Mum/2018, dated 14th May 2020, after interpreting rule 34(5) of the Income Tax (Appellate Tribunal) Rules, 1963 as well as various decisions of the Hon'ble Supreme Court as well as the Hon'ble Jurisdictional High Court held that keeping in view the extraordinary situation prevailing due to the pandemic, the lockdown period has to be excluded for the purpose time limit fixed for pronouncement of order as per rule 34(5). The relevant observation of the Bench in this regard is reproduced hereunder for better clarity:- "7. However, before we part with the matter, we must deal with one....
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....ax Act are directed to decide matters heard by them within a period of three months from the date case is closed for judgment". In the ruled so framed, as a result of these directions, the expression "ordinarily" has been inserted in the requirement to pronounce the order within a period of 90 days. The question then arises whether the passing of this order, beyond ninety days, was necessitated by any "extraordinary" circumstances. 9. Let us in this light revert to the prevailing situation in the country. On 24th March, 2020, Hon'ble Prime Minister of India took the bold step of imposing a nationwide lockdown, for 21 days, to prevent the spread of Covid 19 epidemic, and this lockdown was extended from time to time. As a matter of fact, even before this formal nationwide lockdown, the functioning of the Income Tax Appellate Tribunal at Mumbai was severely restricted on account of lockdown by the Maharashtra Government, and on account of strict enforcement of health advisories with a view of checking spread of Covid 19. The epidemic situation in Mumbai being grave, there was not much of a relaxation in subsequent lockdowns also. In any case, there was unprecedented disruptio....
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.... by excluding at least the period during which the lockdown was in force. We must factor ground realities in mind while interpreting the time limit for the pronouncement of the order. Law is not brooding omnipotence in the sky. It is a pragmatic tool of the social order. The tenets of law being enacted on the basis of pragmatism, and that is how the law is required to interpreted. The interpretation so assigned by us is not only in consonance with the letter and spirit of rule 34(5) but is also a pragmatic approach at a time when a disaster, notified under the Disaster Management Act 2005, is causing unprecedented disruption in the functioning of our justice delivery system. Undoubtedly, in the case of Otters Club Vs DIT [(2017) 392 ITR 244 (Bom)], Hon'ble Bombay High Court did not approve an order being passed by the Tribunal beyond a period of 90 days, but then in the present situation Hon'ble Bombay High Court itself has, vide judgment dated 15th April 2020, held that directed "while calculating the time for disposal of matters made timebound by this Court, the period for which the order dated 26th March 2020 continues to operate shall be added and time shall stand exte....