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TMI Blog2016 (8) TMI 771X X X X Extracts X X X X X X X X Extracts X X X X ..... e claim of the assessee was in respect of amount paid towards purchase of land and not towards lease-rent. Before us, ld.AR has not placed any material on record to controvert the findings of ld.CIT(A). Further, the expenses have not been incurred during the year but were incurred in past. In view of the aforesaid facts, we see no reason to interfere with the order of ld.CIT(A) and thus this ground of Assessee is dismissed Accrual of income - Non-consideration of the shortfall in the minimum quantity amount as income of the assessee - Held that:- It is a fact that assessee is following mercantile system of accounting, but income can be said to accrue only when it becomes due and must be accompanied by corresponding liability of the other party to pay the amount and only then it can be said that for the purpose of income-tax that the income has accrued to the assessee and for this proposition, we rely on the decision of Hon’ble Apex Court in the case of CIT vs. Excel Industries Ltd. reported in (2013 (10) TMI 324 - SUPREME COURT ). Before us, Revenue has not placed any material on record to demonstrate that against the amount which is due is Assessee’s hand there is a correspondi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenses relating to Right to use of land and plantation and horticultural expenses. 3.1. During the course of assessment proceedings and on perusing the details furnished by the assessee, AO noticed that assessee has claimed expenditure for right of use of land of ₹ 1,74,032/- and ₹ 17,33,458/- towards plantation and horticultural expenses. AO also noted that the aforesaid expenses were treated by assessee in its books of accounts as deferred Revenue expenses. Assessee was therefore asked to show-cause as to why the expenses not be added to the total income to which assessee inter-alia submitted that it did not have any ownership right over the land and the amount paid was right to use and the rights expired at the end of predefined period. With respect to horticultural and plantation expenses, it was submitted that the expenses were incurred on account of beautification of site and as per pollution policy of the Government. The submission of the assessee was not found acceptable to the AO as he was of the view that the payment for right to use of land was providing enduring benefit and the expenses towards plantation and horticultural expenses were in the nature ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uring the year but since the amount has been amortized, the expenditure is allowable. Further, ld.AR also could not controvert the findings of AO and ld.CIT(A). In view of the aforesaid facts, we see no reason to interfere with the order of ld.CIT(A) and thus this ground of Assessee is dismissed. 6. Second ground is with respect to disallowance of amortization of lease charges. 6.1.AO noticed that assessee has claimed amortization of lease-hold land expenses of ₹ 21,42,722/-, on the land which was taken on lease for 99 years and the total amount capitalized to the value of land on account of purchase cost, land development charges and other expenses, was to the extent of ₹ 21,21,29,444/-. The assessee was asked to show-cause as to why the expenditure not be treated as capital expenditure to which assessee inter-alia submitted that since the assessee had acquired the land for a period of 99 years and as it does not have ownership right of the land and after the completion of lease period it has to vacate the land and therefore the payment in respect of lease-hold expense was treated as advance payment of rent and therefore should be allowed as revenue expenditure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase agreement, which might in any manner indicate that the amount of premium paid for acquiring leasehold rights for a period of 99 years represented payment of advance rent. On other hand, documents amply and clearly demonstrated that such payment was towards purchase price for acquiring aforesaid leasehold rights for a period of 99 years. The token rent for land was separately payable by the lessee to the lessor in accordance with agreement executed with GIDC and the payment in question therefore, clearly represented cost of capital asset viz. long term lease acquired by the assessee, which could not be allowed as revenue expenditure. The decision relied upon by the appellant in the case of Sun Pharmaceutical Ltd. is on different facts, where the question before the Hon'ble High Court was regarding allowance of lease rent paid. In appellant's case, the claim is in respect of amount paid towards purchase of land and not towards lease rent. This decision is therefore, not applicable. Following the above mentioned decisions in the cases of Mukund Ltd./United Phosphorus Ltd., disallowance of ₹ 21,42,722/- is upheld. 6.1. Aggrieved by the order of ld.CIT(A), assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in the present ground being identical to that of ground No.2 raised in assessee s appeal for AY 2002-03(supra), We therefore for the reasons while deciding ground No.2 of assessee s appeal for AY 2002-03(supra) hereinabove and for similar reasons, dismiss this present ground of assessee s appeal. 11. Ground No.2 is with respect to addition of ₹ 41,31,47,609/-. 11.1. During the course of assessment proceedings, AO noticed that assessee has not recognized ₹ 46,31,47,609/- income in respect of charges for shortfall in quantities for non-usage by the promoters under the take or pay agreement . The assessee was therefore asked to show ITA cause as to why the amount not be considered as income to which assessee inter-alia submitted that assessee had entered into agreement with other PSUs wherein those PSUs had agreed to discharge and evacuate minimum actual aggregate quantities of its products through the facilities of the assessee and if those PSUs failed to discharge and evacuate the material to the extent stated in the agreement, then it was required to make payment towards the shortfall of the quantities discharged. It was submitted that the PSUs had objected ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not accrue to the assessee and though the assessee was following mercantile system of accounting, the amount could not be considered as its income. He further submitted that though the assessee had accounted for income for AY 2002-03, but the same could not be realized by the assessee and therefore in subsequent year, i.e. AY 2006-07 the amount was claimed as bad debts. He submitted that the assessee being Public Sector Undertaking and in view of the huge carried forward losses no benefit would have been received by the assessee by not accounting for the income. He further submitted that unless the right to receive is established, the amount cannot be considered as income. Ld.CIT-DR, on the other hand, supported the orders of the AO and ld.CIT(A). 13. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. The issue in the present case is about non-consideration of the shortfall in the minimum quantity amount as income of the assessee. It is assessee s submission that the amount was disputed by the PSUs and the agreement was also cancelled in the subsequent years and therefore the income did not accrue ..... X X X X Extracts X X X X X X X X Extracts X X X X
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