1988 (5) TMI 62 - AT - Income Tax

Summary

Issues Involved:
1. Nature of Consent Fee and Leave & Licence Extra Levy
2. Inclusion of Advertisement Income and Related Expenses
3. Charging of Interest under Sections 215 and 217 of the IT Act
4. Nature of Compensation Received for Covenanting Not to Exploit Space

Issue-wise Detailed Analysis:

1. Nature of Consent Fee and Leave & Licence Extra Levy:

The primary issue revolves around whether the consent fee and leave & licence extra levy received by the assessee, a co-operative housing society, are capital receipts or revenue receipts. The assessee contended that these amounts are capital in nature, arguing that they represent 'salami' and are not definite sources of income. The ITO, however, held that these amounts are revenue receipts, includible in the total income of the assessee-society. The AAC disagreed with the ITO, stating that these receipts are capital in nature due to their non-recurring nature and their role in covering potential risks and administrative expenses. The Tribunal, after considering the rival submissions, concluded that these amounts are revenue receipts. The Tribunal reasoned that the consent fee and leave & licence extra levy are not 'salami' since they are not lump sum payments for granting lease or interest in property but are recurring payments linked to specific transactions (transfer of flats or granting leave & licence). The Tribunal relied on the Special Bench decision in Jai Hind Co-op. Hsg. Society Ltd., which held that such receipts are revenue in nature due to their regularity and definite source.

2. Inclusion of Advertisement Income and Related Expenses:

The assessee received gross income from advertisements through hoardings placed in its compound and claimed related expenses. The ITO restricted the allowable expenses to 10% of the gross receipts, a decision upheld by the AAC. The Tribunal agreed with the authorities below, noting that the hoarding did not require elaborate maintenance and that the claimed expenses (including a portion of the accountant's and peon's salaries) were not exclusively incurred for the hoarding. Therefore, the restriction to 10% of the gross receipts was deemed fair and reasonable.

3. Charging of Interest under Sections 215 and 217 of the IT Act:

For the assessment years 1976-77, 1977-78, and 1979-80, the assessee objected to the charging of interest under Section 217, and for the assessment year 1978-79, under Section 215. However, no specific arguments or facts were presented before the Tribunal to support these objections. Consequently, the Tribunal rejected these grounds due to the lack of substantiation.

4. Nature of Compensation Received for Covenanting Not to Exploit Space:

In the assessment year 1978-79, the assessee claimed that a sum of Rs. 8,000 received as compensation for covenanting not to exploit a certain space was capital in nature. This contention was not pressed before the AAC, and no arguments were advanced before the Tribunal. The Tribunal held that the compensation received was includible in the net income, justifying the ITO's inclusion of this amount.

Conclusion:

The Tribunal allowed the Department's appeals, holding that the consent fee and leave & licence extra levy are revenue receipts. It also upheld the ITO's restriction of advertisement-related expenses and rejected the assessee's objections regarding the charging of interest and the nature of compensation received. Consequently, the cross objections filed by the assessee were dismissed.