2014 (7) TMI 253 - AT - Income Tax

Outstanding sales tax liability Held that - If the amount of liability has not been not deducted in arriving at the quantum of taxable income which could be on the ground of deferral of sales-tax being considered as deemed payment, so that deduction in its respect stands claimed, the same could definitely be considered as income on cessation of liability - The onus on the assessee in-as-much as it is its claim that no deduction qua the said liability/s has in fact been claimed for the relevant year/s thus, the matter is remitted back to the AO for verification of assessee s claim by issuing definite findings of fact. Advance forfeited but outstanding in books of accounts - taxability u/s 51 Agreement to sale not materialized Held that - It could not be ascertained as to how the primary facts being undisputed and un-rebutted - the assessee s income when the relevant asset (property) continues to be owned by the assessee and, accordingly, reflected in its accounts - assessee has clarified that the asset sold by it during the FY 2006-07 was in fact its factory building at Vapi the amount has nothing to do with the sale - The amount is a capital receipt in the assessee s hands, and which character would not undergo any change due to lapse of time - it would stand to be reduced from the cost of the relevant asset (residential plot) on its sale, i.e., if and when it takes place, in terms of section 51 of the Act. Disallowance of claim of rent Held that - The assessee explaining its inability to improve matters as the recipient was not co-operating with it - No improvement in its case, besides stating that the godown had been rented at ₹ 2300/- per month w.e.f August 2006 onwards, stands made by the assessee - if the assessee could demonstrate the actual renting of the godown from Shri Lakdawalla and payment of the sum to him, i.e., as a fact, there is no particular reason for disbelieving the assessee s claim - The amount stands paid as an advance, so that it having been forfeited by the landlord, it is quite possible that he may not co-operate with the assessee - The onus to establish the basic facts afore-stated would be though on the assessee thus, the matter is remitted back to the AO for verification. Depreciation on a staff quarter Held that - There was no merit in the assessee s claim, which thus is only a bald one it could not be observed that even the name of the relevant employee or any evidence of his working for the assessee having being adduced at any stage. Notional income from house property Held that - The assessee wrongly agitates the addition on this ground at ₹ 1,68,000 - CIT(A) having allowed it specific and substantial relief in-as-much as the estimation by the AO was ad hoc, while the municipal valuation would, besides being conservative, make for an objective criterion - No improvement in its case stands made by the assessee - reference to the municipal tax bill during hearing reveals municipal tax to be unpaid not only for FY 2010-11 but also for the preceding years as well Decided partly in favour of Assessee.

Summary

Issues:
1. Sales-tax liability cessation and income recognition.
2. Treatment of forfeited advance on sale of residential plot.
3. Disallowance of rent claim for hiring a Godown.
4. Disallowance of depreciation on staff quarter.
5. Notional income from house property estimation.

Sales-tax liability cessation and income recognition:
The appeal concerned the appellant's challenge against the Commissioner of Income Tax (Appeals)'s order partially allowing the appeal related to the assessment under section 143(3) of the Income Tax Act, 1961 for the assessment year 2009-10. The primary issue was the sales-tax liability outstanding in accounts, which the appellant claimed was not payable or recoverable under the law. The appellant argued that if no deduction had been claimed or allowed for the liability in the past, it should not be considered as income. The tribunal emphasized the onus on the appellant to prove the non-deduction of the liability in previous years. The matter was remanded to the Assessing Officer for verification and a decision based on factual findings.

Treatment of forfeited advance on sale of residential plot:
The appellant had forfeited an advance received for the sale of a residential plot, which continued to be reflected in its books. The tribunal found that the amount was a capital receipt and not income, as the relevant asset was still owned by the appellant. The tribunal ruled in favor of the appellant, stating that the character of the amount would not change over time and should be reduced from the cost of the asset upon its eventual sale.

Disallowance of rent claim for hiring a Godown:
The disallowance of a rent claim for hiring a Godown was based on the lack of evidence provided by the appellant to substantiate the payment. The tribunal noted that if the appellant could demonstrate the actual renting of the Godown and payment made, there was no reason to disbelieve the claim. The matter was remanded to the Assessing Officer for further verification and a decision based on merits.

Disallowance of depreciation on staff quarter:
The claim for depreciation on a staff quarter was disallowed due to lack of substantiation by the appellant, whose business had ceased at the relevant location. The tribunal found no merit in the claim, as there was no evidence provided regarding the relevant employee or their work for the appellant. The tribunal upheld the disallowance of the claim.

Notional income from house property estimation:
The appellant contested the estimation of notional income from a residential property at Vapi, challenging the Annual Value determined by the Assessing Officer. The tribunal upheld the decision of the Commissioner of Income Tax (Appeals), noting that the municipal valuation provided an objective criterion for assessment. The tribunal found the order reasonable and consistent with the law, upholding the assessment of income from the house property.

In conclusion, the tribunal partly allowed the appellant's appeal and remanded certain issues for further verification and decision, while upholding the decisions on other issues.