1992 (9) TMI 114 - AT - Income Tax

Summary

Issues Involved:
1. Taxability of income from sub-letting of leasehold properties.
2. Entitlement to allowance of depreciation on building and expenditure on property.
3. Disallowance of interest payable under section 220(2) of the Income-tax Act.
4. Taxability of unclaimed security deposits written back in books of account.
5. Taxability of premium or salami received for leasing out property.

Issue-wise Detailed Analysis:

1. Taxability of income from sub-letting of leasehold properties:
The appellant did not press the ground that income from sub-letting should be taxed under the head 'business' instead of 'other sources'. Consequently, this ground was rejected as not pressed.

2. Entitlement to allowance of depreciation on building and expenditure on property:
The appellant claimed depreciation of Rs. 1,114 on the building at No. 6, Dilarjung Road, Calcutta, which was disallowed by the Assistant Commissioner on the ground that the appellant was only a tenant and not the owner of the property. The C.I.T. (Appeals) upheld this disallowance. However, the appellant's counsel argued that under Explanation 1 to section 32(1)(ii) of the Act, the appellant is entitled to depreciation. The tribunal held that the appellant is entitled to the depreciation allowance of Rs. 1,914 under the said provision.

3. Disallowance of interest payable under section 220(2) of the Income-tax Act:
The appellant adjusted interest payable under section 220(2) amounting to Rs. 8,870 against interest received on delayed refunds under section 244(1A). The departmental authorities disallowed this adjustment. The tribunal confirmed the disallowance, stating that there is no provision in the Income-tax Act that permits such an adjustment.

4. Taxability of unclaimed security deposits written back in books of account:
The appellant wrote back unclaimed security deposits amounting to Rs. 14,526, claiming it as a capital receipt. The departmental authorities taxed this amount under the head 'other sources', arguing that the liability to repay the security deposits had ceased. The tribunal, however, held that these amounts were originally received as security deposits and their nature as capital receipts did not change due to unilateral entries in the books of account. The tribunal deleted the addition of Rs. 14,526, relying on the principles laid down in CIT v. Sugauli Sugar Works P. Ltd. and ITO v. Omega Bright Steel (P.) Ltd.

5. Taxability of premium or salami received for leasing out property:
The appellant received Rs. 50,000 as premium or salami for leasing out property and claimed it as a capital receipt. The I.T.O. and C.I.T. (Appeals) treated it as a revenue receipt, arguing that the premium was in consideration of lowering the rent. The tribunal, however, found that the premium was a non-recurring payment for granting a long-term lease and did not have the characteristics of a revenue receipt. The tribunal deleted the addition of Rs. 50,000, following the decisions in Durga Das Khanna v. CIT and CIT v. Purnendu Mullick.

Conclusion:
The appeal was partly allowed, with the tribunal granting relief on the issues of depreciation, unclaimed security deposits, and premium or salami, while upholding the disallowance of interest payable under section 220(2).