2019 (10) TMI 771 - AT - Income Tax

Nature of receipt of Damage for unauthorised occupation of property - Taxability of amount in question received form Punjab State Industrial Development Corporation PSIDC - income from house property or income from other sources - HELD THAT - Assessee had entered into the lease agreement with the PSIDC on 28.10.1993 for a period of three years upto 31.10.1996. The said lease agreement sufficiently indicates that no landlord / tenant existed between two parties after 31.10.1996. We further find from the arbitration award to this effect dated 28.04.1997 that the assessee had been awarded damages with interst than rental amount of the property in issue. This arbitration award forms part of case record in pages 17 to 25 of the paper book. All this leads to irresistible conclusion that assessee has not received any rent from this lessee / tenant but damages amounting neither assessable under the head house property income nor income from other sources going by the various case law discussed in the CIT(A) s order (supra). We reiterate that hon ble jurisdictional high court s in Smt. Lila Ghosh 1993 (1) TMI 11 - CALCUTTA HIGH COURT has already settled the law that mense profits are in the nature of damages which are not chargeable to tax being in the nature of a capital receipt. We apply the very analogy in the case of damages as well to conclude that both the lower authorities have erred in treating the assessee s damages amount as chargeable to tax. The assessee therefore succeeds in its former substantive ground.

Summary

Issues:
1. Treatment of amount received from Punjab State Industrial Development Corporation as income from house property and interest as income from other sources.

Analysis:

Issue 1: Treatment of amount received from Punjab State Industrial Development Corporation as income from house property and interest as income from other sources

The appeal was against the lower authorities' treatment of the amount received from Punjab State Industrial Development Corporation (PSIDC) as income from house property and interest as income from other sources. The appellant argued that the amount received was manse profit and should be considered a capital receipt. The Assessing Officer (AO) held that the amount was unrealized rent and should be taxed as income from house property. The appellant cited case laws to support their claim that the receipt was manse profit. The judicial member analyzed the lease agreement, arbitration award, and relevant case laws to determine whether the amount received was indeed manse profit. The tribunal concluded that the appellant did not lose control of the property, continuously received rent, and the amount received was arrear rent, taxable under the Income Tax Act. The tribunal dismissed the appeal, confirming the additions made by the AO.

Issue 2: Disallowance of TDS claim

The appellant also raised a grievance regarding the disallowance of a TDS claim. However, the appellant decided not to press this claim due to the small amount involved. Consequently, the tribunal declined to consider this substantive ground.

In summary, the tribunal partially allowed the appellant's appeal, ruling in favor of the appellant regarding the treatment of the amount received from PSIDC but declining the disallowance of the TDS claim. The judgment provided a detailed analysis of the legal aspects, including relevant case laws and provisions of the Income Tax Act, to support its decision.