2001 (4) TMI 185 - AT - Income Tax

Summary

Issues involved:
1. Disallowance of deduction claimed by the assessee on account of damages payable to Land and Development Office (L&DO).
2. Disallowance of legal charges in the assessment year 1985-86.
3. Disallowance of depreciation on car and legal expenses in other years.

Issue 1: Disallowance of deduction claimed by the assessee on account of damages payable to Land and Development Office (L&DO):
The case involved the disallowance of a deduction claimed by the assessee for damages payable to L&DO due to unauthorized construction and misuse of premises. The CIT(A) denied the deduction, stating that the liability for payment of damages was yet to be ascertained finally. The assessee argued that the liability was in the nature of ground rent and should be allowed as a deduction under section 24(1)(v) of the Act. The Delhi High Court's decision in a similar case supported the deduction of such payments as ground rent. The Tribunal held that the amount demanded by L&DO was in the nature of ground rent and was an allowable deduction under section 24(1)(v) of the Act, even if the payment had not been made. The Tribunal also referred to the provisions of section 43B of the Act and concluded that no disallowance could be made under this section for the damages demanded by L&DO.

Issue 2: Disallowance of legal charges in the assessment year 1985-86:
The issue of disallowance of legal charges in the assessment year 1985-86 was raised by the assessee but was not pressed during the hearing. As a result, this issue was dismissed.

Issue 3: Disallowance of depreciation on car and legal expenses in other years:
In other years, the issues related to the disallowance of depreciation on a car and legal expenses. However, these issues were not pressed during the hearing, leading to the dismissal of the grounds related to these issues.

In conclusion, the Tribunal partly allowed all six appeals, directing the AO to allow the deduction of the amount payable to L&DO for misuse of premises under section 24(1)(v) of the Act. The issues regarding legal charges, depreciation on car, and legal expenses were dismissed as they were not pressed during the hearing.