TaxTMI 
TaxTMI 
2025 (3) TMI 2225
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....enancy rights allegedly being capital in nature. 1.2 Ld. CIT(A) further erred in holding that the said expenditure could not be treated as business expenditure and thereby disallowing the same u/s. 37(1) of the Act. 1.3 Ld. CIT(A) failed to appreciate and ought to have considered, inter-alia, that: a. business of letting out of property on rent is one of the main objects as stipulated in Memorandum of Association of the Appellant; b. income arising from business of letting out of property has been always offered and assessed to tax under the 'Profits and Gains from Business or Profession'; c. compensation paid for surrender of tenancy rights was laid out of commercial expediency and wholly & exclusively for the business purpose. 1.4 The Appellant prays that, for the above and other reasons, the disallowance of expenditure incurred by way of compensation paid for surrender of tenancy rights be deleted and the same be allowed u/s. 37 of the Act. WITHOUT PREJUDICE TO GROUND NO. 1 ABOVE, GROUND NO. 2: ALLOWANCE OF DEPRECIATION ON COMPENSATION PAID FOR SURRENDER OF TENANCY RIGHTS AMOUNTING TO RS. 2,50,000/-:....
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....the AO be directed to delete/ appropriately reduce the interest u/s. 234B and 234D of the Act. GROUND NO. 8: RECOVERY OF INTEREST U/S. 244A OF THE ACT AMOUNTING TO RS. 2,57,321/-: 8.1 On the facts and in the circumstances of the case and in law, the Id. AO in recovery of interest u/s. 244A amounting to Rs. 2,57,321/- granted earlier. 8.2 The Appellant prays that the AO be directed to delete/ appropriately reduce the recovery of interest u/s. 244A of the Act." 3. Brief facts of the case are that the assessee had filed the original return declaring income of Rs. 84,26,810/- on 28.09.2015 for AY 2015-16. Subsequently, a revised return was filed at the same income claiming TDS deduction of Rs. 29,57,965/-. The return was revised once again on 31.01.2017 by filing a return declaring nil income. The case was selected for scrutiny and assessment was finalized at an income of Rs. 99,11,810/- vide order dated 21.12.2017 after making an addition on account of disallowance of Rs. 1 cr. claimed as a revenue expenditure on account of payment for surrender of tenancy rights. 4. Aggrieved with the order of Ld. AO, the assessee preferred an appeal before Ld. CIT(A)....
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....9;ble Apex Court in the case of Goetze (India) Ltd. (supra) wherein it was held as under: 2. The question raised in this appeal relates to whether the appellant-assessee could make a claim for deduction other than by filing a revised return, The assessment year in question was 1995-96. The return was filed on 30-11-1995 by the appellant for the assessment year in question. On 12-1-1998, the appellant sought to claim a deduction by way of a letter before the Assessing Officer. The deduction was disallowed by the Assessing Officer on the ground that there was no provision under the Income-tax Act to make amendment in the return of income by modifying an application at the assessment stage without revising the return. 3. This appellant's appeal before the Commissioner of Income-tax (Appeals) was allowed. However, the order of the further appeal of the Department before the Income-tax Appellate Tribunal was allowed. The appellant has approached this Court and has submitted that the Tribunal was wrong in upholding the Assessing Officer's order. He has relied upon the decision of this Court in National Thermal Power Co. Ltd. v. CIT[1998] 229 ITR 383, to contend ....
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....pra) and held that: "22. It was then submitted by Mr. Gupta that the Supreme Court had taken a different view in Goetze (India) Ltd (supra). We are unable to agree. The decision was rendered by a Bench of two learned Judges and expressly refers to the judgment of the Bench of three learned Judges in National Thermal Power Comp. Ltd. (supra). The question before the Court was whether the appellant-assessee could make a claim for deduction, other than by filing a revised return. After the return was filed, the appellant sought to claim a deduction by way of a letter before the Assessing Officer. The claim, therefore, wax not before the appellate authorities. The deduction was disallowed by the Assessing Officer on the ground that there was no provision under the Act to make an amendment in the return of income by modifying an application at the assessment stage without revising the return. The Commissioner of Income-tax (Appeals) allowed the assessee's appeal. The Tribunal, however, allowed the department's appeal. In the Supreme Court, the assessee relied upon the judgment in National Thermal Power Co. Ltd. (supra) contending that it was open to the assessee to rais....
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....nclosed as Annexure-4 at page no. 21 to 23], where the Hon'ble Gujarat High Court has held that: "6. Regarding a claim contrary to the disclosures in the return, the Tribunal relied on the decision of the Supreme Court in the case of National Thermal Power Co. Ltd. (supra) to observe that the purpose of assessment is to tax real income. This court taking note of the decisions of the Supreme Court in the case of Goetze (India) Ltd. v. CIT [2006] 284 ITR 323/157 Taxman 1 and National Thermal Power Co. Ltd. (supra) in the case of Mitesh Impex (supra) had observed as under (page 103 of 367 ITR): "It thus becomes clear that the decision of the Supreme Court in the case of Goetze (India) Ltd. v. CIT (supra) is confined to the powers of the Assessing Officer and accepting a claim without revised return. This is what the Supreme Court observed in the said judgment while distinguishing the judgment in the case of National Thermal Power Co. Ltd. v. CIT (supra) and that is how various High Courts have viewed the dictum of the decision in the case of Goetze (India) Ltd. v. CIT (supra). When it comes to the power of the Appellate Commissioner or the Tribunal, the courts ha....
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....for the surrender of tenancy rights which is claimed beyond the audited accounts and not routed through the Profit and Loss account could not be treated as a business expenditure. He, therefore, argued that the decision of the Ld. CIT(A) deserves to be upheld. 6.4 We have heard the rival submissions and perused the material placed before us. We notice that the issue stands covered in favour of the assessee by the order of the co-ordinate bench in the assessee's own case for AY 2016-17. The relevant portion of the order is as under: "35. After hearing both the parties and on perusal of the material placed on record, it is seen that assessee has paid compensation of Rs. 1,18,66,667/- to the existing tenants for surrendering the tenancy rights. The assessee had filed a suit against these tenants to restrain them from creating any third party rights and the tenant had approached the assessee for settlement and based on this consent terms assessee had to pay the compensation to other tenants. We find that this issue is covered by the decision of Hon'ble Calcutta High Court in the case of Shyam Burlap Co. Ltd. v. CIT (supra) wherein it was held that rental income earned b....
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....ng out properties and as 85 per cent of the income of assessee was by way of deriving rent and lease rentals, income from rent constituted the business income of the appellant Since compensation was paid by the appellant, the landlord of the premises, to obtain possession from the lessee/tenant so as to earn a higher rental income, it had arisen out of business necessity and commercial expediency. Since there was no question of acquiring a property it cannot be said that the payment made was for having a benefit of enduring nature. Rather the compensation was paid to the existing tenants to have their portions vacated to have new tenants with higher rent and thus to have a higher rental income which was a business activity permitted by the Memorandum. [Para 14] 36. Similar view has been reiterated by the Hon'ble Kerala High Court as relied upon by the Id. Counsel. Since, no contrary judgment has been brought on record before us therefore, respectfully following two decisions of Calcutta High Court in the case of CIT v. Auto Distributor Ltd.; Shyam Burlap Co. Ltd. v. CIT and Hon'ble Kerala High Court judgment, we allow this issue in favour of the assessee and held t....