2013 (10) TMI 1075 - AT - Income Tax

Addition of unrealized rent under the head Income from House property Held that - Section 25AA states that where the assessee cannot realize rent from a property let to a tenant and subsequently the assessee has realized any amount in respect of such rent, the amount so realized shall be deemed to be income chargeable under the head Income from house property and accordingly charged to income-tax as the income of that previous year in which such rent is realized whether or not the assessee is the owner of that property in that previous year - In terms of the said section the impugned amount cannot be brought to tax in the instant year Decided against the Revenue.

Summary

Issues:
1. Addition of interest provision for losses incurred by the Corporation.
2. Addition of interest provision on outstanding amount receivable from M/s Food Corporation of India.
3. Addition on account of unrealizable rent.

Issue 1: Addition of interest provision for losses incurred by the Corporation

The appeal raised concerns about the deletion of additions made for non-provision of interest on losses incurred by the Corporation. The Assessing Officer disallowed Rs. 4.61 crores and Rs. 12.13 crores of interest on outstanding amounts from the State Government and Food Corporation of India (FCI) respectively. The CIT(A) deleted the additions based on a previous Tribunal order for the 2007-08 assessment year. The Tribunal upheld the CIT(A)'s decision, emphasizing that recoveries from the State Government and FCI were trade debts, not interest-free advances. Consequently, the Tribunal decided the issue against the revenue, following the precedent set in the earlier assessment year.

Issue 2: Addition of interest provision on outstanding amount receivable from M/s Food Corporation of India

The second appeal raised similar grounds to the first, focusing on the deletion of additions for non-provision of interest on outstanding amounts from FCI. The Tribunal referred to the previous decision regarding the 2008-09 assessment year and decided the issue against the revenue, aligning with the precedent established in the earlier assessment year.

Issue 3: Addition on account of unrealizable rent

The third issue involved an addition on account of unrealizable rent. The Assessing Officer noted the non-provision of rent for a building leased to the Food & Civil Supplies Department. The CIT(A) deleted the addition based on a Tribunal order for the 2004-05 assessment year. The Tribunal analyzed the provisions of the Income Tax Act related to the taxation of annual property value and determined that the rent not received could not be taxed in the current year. Therefore, the Tribunal decided the issue against the revenue, following the precedent set in the earlier assessment year.

In conclusion, the Tribunal dismissed all appeals of the revenue, upholding the decisions of the CIT(A) based on previous Tribunal orders and interpretations of relevant provisions of the Income Tax Act.