2018 (3) TMI 223 - HC - Income Tax

Amortization advance rent against the cost of land - Revenue v/s capital - Held that - The decision is squarely covered against the assessee in the case of Gas Authority of India Limited vs. Joint Commissioner of Income Tax, 2012 (11) TMI 325 - DELHI HIGH COURT as held barring the right to alienate or outright sale of the property in unqualified manner, all rights of enjoyment in respect of leased properties are with the assessee. Furthermore, even though the stipulation in the deed one of which (dated 25.07.1995 with MHIDC) was produced during the hearing by the assessee, clause 3(m) enjoins the lessee not to transfer either directly or indirectly, sell or encumber the lease benefits to any other party, the same stipulation enables transfer with previous consent in writing of the Chief Executive Officer . - Decided against assessee. Expenses claimed on completed projects - Held that - In the assessee s case for another assessment year (Commissioner of Income Tax vs. M/s Ansal Properties and Industries Ltd 2012 (10) TMI 181 - DELHI HIGH COURT held that the circumstances of this case showed that the (Appeal) s Commissioner reasoning were sound and convincing and that in the absence of any specific deviation from the accounting methods and practices by the assessee, the conclusion arrived at by the AO was not warranted. - Decided against revenue. Unaccounted refundable security deposit and unaccounted refundable maintenance security deposit receivable by the assessee - Held that - During the proceedings the assessee had relied on additional evidence. The ITAT directed the deletion of the sums brought to tax on these heads. The record reveals that the said amounts were in fact verified by the AO subsequently. The AO had verified that the amounts were to be allowed as the assessee was merely a facilitator on behalf of the flat owners

Summary

Issues:
1. Amortized advance rent for wind power project
2. Deletion of expenses incurred on completed projects
3. Unaccounted refundable security deposit
4. Unaccounted refundable maintenance security deposit

Analysis:

Issue 1: Amortized advance rent for wind power project
The first issue pertains to the claim of ?2,46,411/- as amortized advance rent against the cost of land for the assessee's wind power project in Gujarat. The Revenue argued that this long-term lease would provide enduring benefits to the assessee. However, the Court noted that a similar case involving Gas Authority of India Limited had ruled against the assessee. Therefore, the claim was not upheld based on precedent.

Issue 2: Deletion of expenses incurred on completed projects
The second issue involves the deletion of ?1,89,02,581/- in expenses claimed by the assessee for completed projects, which the Assessing Officer had brought to tax. The Court referred to a previous ruling in the case of Commissioner of Income Tax vs. M/s Ansal Properties and Industries Ltd, where it was held that once a project is completed and accounted for, subsequent entries would constitute contingent liabilities. The Tribunal, relying on various judgments, including that of the Supreme Court, concluded that the AO's reasoning was not justified. The Court also cited its own decision in a similar case, ruling in favor of the assessee and against the Revenue.

Issue 3 & 4: Unaccounted refundable security deposit and maintenance deposit
The third and fourth issues are interconnected and concern unaccounted refundable security deposit and maintenance security deposit receivable by the assessee. The ITAT directed the deletion of these sums brought to tax, as additional evidence provided by the assessee verified that the amounts were to be allowed, considering the assessee's role as a facilitator on behalf of flat owners. The AO subsequently verified these amounts, leading to the dismissal of the appeals as no substantial question of law was found to arise.

In conclusion, the judgment addressed various issues related to expenses, deposits, and claims made by the assessee, with the Court ruling in favor of the assessee based on legal precedents and evidence presented during the proceedings.