TaxTMI 
TaxTMI 
TaxTMI 
2011 (10) TMI 749
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.... the CIT(A) which is under challenge amounts to ₹ 2,87,54,025/-. 4. It was a common stand of the parties before the Bench that facts and circumstances as well as arguments on either side would be identical for both the years on the first issue. 5. The relevant facts as are appearing in the Assessment Order for the year 2006-07 are that the assessee declared a total income of ₹ 59,71,00,000/- odd vide its return dated 27.11.2006. Subsequently, it was revised on 29.02.2009 declaring a total income of ₹ 58,76,00,000/- odd. The Assessing Officer (A.O.) on a perusal of the computation of income filed by the assessee observed that the assessee had declared ₹ 6,95,75,017/- on account of income from house property. On going through the computation of income on record, the said house property, it was observed that the assessee has taken only 75% of actual rent received as gross annual value of the let out portion of the house property. In regard to this, it had given the following note :- "The aforesaid amount of rent is exclusive of 25% of the Gross Rent received from the tenants since 25% of the Gross Rent is diverted by overriding title to L&DO in terms of Cla....
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....d to have been settled by Indian City Property vs. CIT, 55 ITR 262 (Cal), CIT vs. H.G. Gupta & Sons, 149 ITR 253 (Delhi). Accordingly the assessee's income from house property was computed as under: Actual rent received ₹ 15,47,14,350/- Less: Municipal Tax ₹ 1,66,42,881/- Net Annual Value ₹ 13,80,71,469/- Less: Standard Deduction u/s 24(a) ₹ 4,14,21,440/- Income from House Property ₹ 9,66,50,028/- 5.4. Similarly in 2007-08 A.Y. the assessee was required to address an identical issue in regard to expenses of ₹ 3,87,54,025/- as having been paid to L&DO. The action of the assessee in taking only 75% of the actual rent received from the let out property was questioned wherein identical note in regard to the same as in the earlier years had been given by the assessee in its computation. The assessee therein in the said year filed detailed written submissions vide letter dated 03.11.2009 which is found reproduced at page nos.2 to 4 of the Assessment Order. A perusal of the same shows that it was contended that the assessee had taken on lease from the Government of India the land situated at Tolstoy Marg, New Delhi vide lease deed dated 5t....
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....nts :- i) Radha Soami Satsang vs. CIT, 193 ITR 321 (SC) ii) CIT vs. ARJ Security Printers, 264 ITR 276 (Del) iii) CIT vs. Harig Crankshafts Ltd., 173 Taxman 152 (Del) 5.7. Not convinced by the explanation offered in the years under consideration the A.O. was of the view that although it is not denied that there is an agreement between the STC and L&DO, however, the payment of 25% of the rent received by the L&DO cannot be allowed, as according to him the annual value of the house property is to be determined in terms of section 23 and 24 of the Act which does not provide for such a deduction, as such, the deduction claimed was not allowed. 6. Aggrieved by this, the assessee went in appeal before the CIT(A). 6.1. Before the CIT(A), detailed written submissions were filed which are identical to what was filed before the A.O. in 2007-08 A.Y. The reliance placed in the assessment order on Indian City Property vs. CIT, 55 ITR 262 was stated to be misplaced. It was contended that the facts are entirely different in as much as India City Property was stated to be a case of claim of pro-rata deduction of managing agency commission against income from property which is not the case ....
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....gross rental receipts should be taken as annual value for computing the income from house property. 11. The main contention of the AR is that, as per the agreement 25% of the rent belonged to the Land and Development Officer, New Delhi and it does not have control over the same and the income is diverted at source. The AR relied on the following case laws : 1. J.B. Patel & Co. V. Dy. CIT (118 ITD 556) 2. CIT v. H.G. Gupta & Sons, 149 ITR 253 3. CIT v. Surat Jilla Kamdar Sahakari Sangh Ltd, 201 ITR 157 4. CIT v. Champa Properties (P) Limited reported in 212 ITR 303 5. Indian City Property v. CIT reported in 55 ITR 262 6. Radha Soami Satsang v. CIT, 193 ITR 321 (SC) 7. CIT vs. ARJ Security Printers, 264 ITR 276 (Del) 8. CIT v. Harig Crankshafts Ltd, 173 Taxman 152 (Del) 12. As per the agreement, the assessee had paid 25% of the rent to the L&DO which is not disputed by the Assessing Officer. It is a clear case of diversion of income at source. It cannot be considered as application of income. The assessee has rightly taken the net amount received as ALV. In view of the above fats and circumstances, the action of the Assessing Officer is not in accordance with l....
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....eference was made to the chart addressing the position accepted the very same position. The position has been accepted all along in 2001-2002 A.Y. the said order was subjected to reopening and examining the assessment order u/s 147/143(3) the payment of 25% from the gross rentals received was allowed to be made to the L&DO the claims and deduction of the said amount was allowed. Similarly in 2002-03 A.Y. and in 2003-04 to 2005-06 A.Ys consistently in the case of the assessee the Assessments Orders have been passed under section 143(1) and these payments have consistently been allowed to the assessee and only for the first time in 2006-07 & 2007-08 A.Ys. the payments have been disallowed. It was contended that no new fact has emerged. There is no change in the position of law. Merely at his own whims, to reinterpret the agreement which has all along been accepted by the Department over the years i.e. from 1971 onwards the AO has chosen to disturb the accepted position. It was agitated that the Department should not be allowed to upset the settled position which is contrary to the principles laid down by the Apex Court in the case of Radha Soami Satsang vs. CIT, 193 ITR 321 (SC). Hea....
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....cuted on 05.12.1975. The undisputed fact on record with which we are concerned with is that Clause XIV-A mandates that in the eventuality a portion of the leased property is let out by the assessee prior permission of the lessor is to be obtained and thereafter from the rent received 25% therefrom must be handed over to the government. For ready reference we reproduce the specific clause. "Clause XIV-A : The intended lessee shall not sub-let or give on rent any part of the said land or building constructed on the desired piece of land without prior permission of the lesser. In case of such permission the STC will pay to the Government 25% of the rent fetched in respect of such accommodation as is hired out by the Corporation to organizations other than that of the STC and its subsidiaries including Central Cottage Industries Emporium." It is a matter of record that the said lease agreement has been interpreted consistently over the years by the department has allowed the assessee to reduce 25% from the gross rental receipt and taking the 75% of the rental receipts for consideration of the provisions of the Act. Before us this fact has been specifically emphasized. Specific refe....
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.... the obligation income is diverted before it reaches the assessee, it is deductible; but where the income is required to be applied to discharge an obligation after such income reaches the assessee, the same consequence, in law, does not follow. It is the first kind of payment which can truly be excused and not the second. The second payment is merely an obligation to pay another a portion of one's own income, which has been received and is since applied." 11.3. The said judgement has also been relied upon by the Ld. A.R. 11.4. On a careful consideration of the same, we find that no help can be derived there from by the argument from the principle laid out therein as this was a case where the wife and children of the assessee, who continued to be members of his family, received a portion of the assessee's income after he had received it as his own. Their Lordships held that it was a case of application of a portion of the income to discharge an obligation and not one in which by an overriding charge the assessee became only a collector of another's income. 11.5. Similarly in CIT vs. Sunil J. Kinariwala, 259 ITR 10 (SC) which has also been relied upon by the ld.D.R. It is seen t....
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.... response it was explained that the partnership deed had been amended by virtue of which the income accruing or arising from the property leased to NABARD was not to belong to the firm but it was to directly belong to the partners in the profit- sharing ratio and appropriate books of accounts of the partners and the books of accounts of the assessee firm in regard thereto have been passed. As such, it was contended that the asset was transferred by book entries to the debit of the capital account of the partners. The lease deed with NABARD it was stated could not be changed in favour of the partners as NABARD did not agree to such a change. On account of these facts that since the lease deed entered into by the partnership firm with NABAD did not recognize partners as lessors, it was held that the Assessing Officer was right as there was no diversion of income received from NABARD as there was no overriding title. The facts in the present case are distinguishable. 11.9. Reliance has also been placed upon by the department on the case of Ashok Soi vs. DCIT, 74 ITD 235 (Del). A perusal of the said order which was upheld by the Jurisdictional High Court in the case of Ashok Soi vs CI....
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....co-owners. The record shows that the assessee had got his name substituted as owner in the property in the records of the NDMC and house tax was also paid by him. The rental income was shown by the co-owners in their individual return and PAN etc. stood filed. Considering these facts, the co-ordinate Bench came to the conclusion that in view of the fact that terms of the will are unambiguous in regard to the distribution of the rental income and the genuineness of the will was not doubted. In terms of the said will the rental income had been shared. The mentioning in the preamble of the lease deed the name of the assessee in the interest of executing a proper agreement did not create such a position that the co-owners were disentitled to the receipt of the rental. In these circumstances, the co-ordinate Bench held that the income is diverted before it reached the assessee as had been contemplated by the Apex Court in the case of CIT vs. Sitaldas Tirathdas, 41 ITR 361 (SC). The said order further supports the finding. 12. Accordingly, for the reasons given herein above, the sole ground of the Department in ITA No.822/Del/2010 and ground no.1 in ITA No.3747/Del/2010 is rejected. 13....
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....g the fact that no borrowed funds were used; ignoring the fact that investments stood made in the earlier year; and that sufficient evidence was available to prove that there was no direct expenditure. In the years under consideration there was interest expenditure of ₹ 51,34,13,932/- and interest income of ₹ 118,73,56,698/-. As such no net interest expenses stood charged to the Profit & Loss account. The disallowance made as such was held to be uncalled for. Reliance was also placed upon the judgment of the Punjab & Haryana High Court in the case of CIT vs. Hero Cycle, 189 Taxman 50 (P&H) and CIT vs. Winsome Textile Industries Ltd., 319 ITR 204 (P&H). The CIT(A) further took note of the fact that the assessee had offered on its own a disallowance of ₹ 37,000/- towards indirect expenditure. Accordingly considering the above reasons, the CIT(A), deleted the addition made by way of disallowance. 16. Aggrieved by this the Revenue is in appeal before the Tribunal. 17. Ld. Departmental Representative submitted that the issue may be restored to the file of the A.O. since the order of Special Bench in the case of Daga Capital is no longer good law in view of the judgem....