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TMI Blog2017 (12) TMI 639X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of M/s Hemkund Chemicals Pvt. Ltd. It was claimed that the impugned issue is covered by the decision of the Tribunal in the case of Narang Overseas Pvt. Ltd. vs ACIT (111 ITD 1)(Mum. Trib.)(SB)(pages 23-53 of the paper book); ITA No.4623/Mum/2005, order dated 20/02/2008 and another decision of the Mumbai Bench of the Tribunal in the case of M/s Goodwill Theaters Pvt. Ltd. (ITA No.8185/Mum/2011) dated 09/06/2013, which was affirmed by Hon'ble jurisdictional High Court in ITA No.2356 of 2013, order dated 06/06/2016. This assertion of the Ld. counsel for the assessee was not controverted by the Ld. DR. 3.1. We have considered the rival submissions and perused the material available on record. The facts, in brief, are that for Assessment Year 2007-08, the assessee declared total income of Rs. 1,75,879/- on 27/03/2008, showing income from house property out of other units apart from L/40. The rental income of Rs. 78,33,360/- in respect of unit L/40 in the possession of M/s Hemkund was considered as compensation and claimed exempt. This income was received by the assessee, consequent to order passed by Addl. Rent Control Tribunal, New Delhi. The said premises was in possession o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecision of the Madras High Court regarding the nature of receipt remained unaffected by the judgment of the apex Court. Accordingly, the contention of Revenue that the issue regarding the nature of mesne profits is covered by the decision of the Supreme Court cannot be accepted. (Paras 16 & 23) The only issue which arises from the appeal of the assessee and requires adjudication is whether the mesne profits received by the assessee is revenue receipt or capital receipt inasmuch as the finding of the CIT(A) that amount of Rs. 34,57,01,137 received by the assessee amounts to mesne profits has not been challenged by the Department either by filing cross-appeals or cross-objection. However, in the course of hearing, the Departmental Representative invoked the provisions of r. 27 of ITAT Rules, 1963 and contended that the aforesaid amount cannot be treated as mesne profits since such receipts originate from the agreement between assessee and NIHPL. Counsel for the assessee has not objected to the right of Revenue for invoking r. 27 of ITAT Rules, 1963. (Para 32) There is no dispute to the proposition that consideration received under the leave and license agreement amounts to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ory definition, it is not necessary to look into any other definition. The above definition clearly takes within its scope any receipt against wrongful possession of property. In the present case, the amount received under the decree of the Court is related to the wrongful or unlawful possession of the property by NIHPL from 1st April, 1992 till handing over the property to the assessee. Therefore, the same has to be treated as mesne profits.-Anant Chunilal Kate vs. ITO (2004) 187 CTR (Bom) 93 : (2004) 267 ITR 482 (Bom) and Kumar Sudhenden Naran Deb vs. Mrs. Renuka Biswas (1992) 1 SCC 206 followed. (Paras 35 to 37) There is cleavage of opinion between High Courts. The Madras High Court has held that mesne profit is recompense for deprivation of income which the owner would have enjoyed but for the interference of the persons in wrongful possession of the property. Consequently, the same is revenue receipt chargeable to tax. On the other hand the High Courts of Andhra Pradesh, Calcutta, Kerala and Patna have held that mesne profit is in the nature of damages for deprivation for use and occupation of the property and therefore capital receipt not chargeable to tax. There is no j ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its income from house property by not offering true and correct rental income from all tenants in its return of income for Assessment Year 2003-04, identical assertions were made for remaining assessment years, by submitting that the ld. First Appellate Authority wrongly deleted the addition of Rs. 3,67,96,393/- (Assessment Year 2004-05), Rs. 3,95,69,419/- (Assessment Year 2005-06) and Rs. 4,26,06,757/- (Assessment Year 2006-07). 2. Since identical grounds are raised in all the appeals, these can be disposed off by a common and consolidated order for the sake of brevity. The fact, in brief, are that the assessee is owner of shops in Cannaught Place, New Delhi and declared Rs. 33,19,541/- as rental income from the shops, whereas the ld. Assessing Officer calculated the income at Rs. 31,56,251/-. The assessee claimed it a typographical error/calculation mistake. However, the matter travelled to the Hon'ble High Court, wherein, the rent was determined at the rate of Rs. 1,42,200/- per month, payable by bank of Punjab. However, the assessee claimed Rs. 7,331/- per month, as rent received. The Assessing Officer calculated the deemed rental income from these properties and thus the ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for M/s. Bank of Punjab or the assessee's 39 other tenants as erroneously assumed by the Assessing Officer. The Special Bench of the ITAT in the case of Narang Overseas(P)Ltd. v. ACIT 111 ITD 1, held that the amount was received against wrongful possession of the property and therefore the mesne profit received by the assessee under the consent decree awarded by the Apex Court at the rate of Rs. 10 lakhs was on account of damages for deprivation of use and occupation for the property and, therefore, the sum so received was capital in nature and not chargeable to tax was not considered by the Assessing Officer in proper prospective and he deliberately chose to ignore that the assessee's 39 protected tenants were not a party to the proceeding between the assessee and Bank of Punjab/Hem Kunt Chemicals at any stage, thus, the orders therein had no, and could not have any application upon them. The annual value to be assessed in the hands of the landlord/owner is a statutory rent amount only and not the enhanced amount received by the tenant from the sub-tenants/ occupant. The Assessing Officer had committed an error in considering the amount of money deposited, in court, by Ban ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er of Income tax (Appeals) for A. Y. 2003-04, wherein, CIT(A) vide order No.CIT(A)-23/ITO-12(1 )(4)/IT-448/201 0-11 dated 08/07/2011 held as under: "The Assessing Officer has computed income from house property in respect of all the tenanted premises, including L- 40, 1st Floor premises in respect of which there was a dispute before the Tribunal! Court, and in respect of which the appellant has been allowed to withdraw moneys deposited under Court order. The Assessing Officer on the basis of the amount determined by the High Court in respect of L-40 which was in dispute, has treated the same as rental for the balance properties as receivable and the difference amount (i. e., difference between rental income as per High Court order and as declared by the appellant) has been brought to tax. For the properties other than L-40, deemed value of rental of Rs. 34,61 ,623 per month has been taken. With regard to L-40 on similar basis (after allowing for cost inflation @ 20%), amount of Rs. 1, 13,600/- per month has been taken as the deemed rental value. It is found, firstly that the order of Delhi High Court was only specific to L-40 premises, which were let out to Hemkunt Chemicals fur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2910712003, which is after the end of the previous year relevant to AY 7003-04. Thus in view of the provisions of sections 25AA and 258, the income (receipt) is to be taxed in the year of receipt and cannot be subjected to tax in AY 2003-04. The rental income for AY 2003-04 would be restricted to the standard rent determined under the Rent Control Act. The addition made by the Assessing Officer is thus deleted." 2.3. Before us, no contrary decision was brought on record by either side reversing the aforesaid order, thus, on the Rule of consistency also the assessee is having a good case, thus, the stand of the CIT(A) deserves to be upheld. The Assessment Year 2003-04 is the lead year, wherein, we have upheld the stand of the ld. Commissioner of Income tax (Appeals), whereas, the remaining Assessment Years, on identical fact, the ground raised by the Revenue is that the case of Assessment Year 2003-04 is pending before the Tribunal. However, we have upheld the order of the ld. Commissioner of Income tax (Appeals) for Assessment Year 2003-04, therefore, the identical issue for the later assessment years is automatically disposed of in favour of the assessee." 3.5. During hearing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k of India filed an Application to the Small Causes Court against the T.E. and R Suit No.59/81 of 2000 of Miscellaneous Notice Number 275 of 2002 vide its appeal number 1744 of 2007 for staying execution and operation of the order dated 28/03/2007 which was disposed by directing the appellant to pay Rs. 1,47,28,280/-. Moreover, ITA No.8185/2011 Central Bank of India have also preferred an appeal against the said determination of mesne profit which has been admitted and is pending. Thus, in the mean time during AY 08-09, Central Bank of India paid Rs. 1,47,18,280/- to the assessee company which the assessee company has directly taken to the capital reserve without crediting the profit and loss account holding it to be a capitol receipt exempt from Income-tax. The appeal of the Central Bank of India vide its appeal number 1744 of 2007 is still pending for adjudication. 4. Assessee preferred appeal before the CIT(A). Detailed written submissions were filed before him. It was submitted that mesne profit received for unauthorized occupation of the premises is a capital receipt not chargeable to tax in the light of the decision of Special Bench of the Tribunal in the case of Narang Ov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is further seen that the Appellant has contested that the issue whether the mesne profit was capital or revenue was not the question agitated in the case of P. Mariappa Gounder. The AR relied in the case of Narang Overseas P.Ltd. 111 ITD 1 Mum, (SB) wherein the Hon'ble 5 Member Special Bench has considered the decision in the case of P. Mariappa Gounder (supra) and observed that the above decision was only concern with one issue relating to year of applicability of mesne profit i.e. whether it was taxable in the AY. 63-64 or A.Y. 64-65. The issue ITA No.8185/2011 whether mesne profit constitute revenue receipt or capital receipt was not before the Supreme Court as was apparent from the question posed before it for adjudication. After considering these facts, the Hon'ble Special Bench has held that mesne profit received from the depreviation of use of occupation of property would be capital receipt not chargeable to tax. This decision of Special Bench is also taken before the jurisdictional High Court. However, the appeal against this decision was dismissed vide order dated 25.6.2009 in ITA No. 1797 of 2008 by the Hon'ble Bombay High Court. In the light of these fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition by observing that since this receipt is not revenue in nature as the same is capital in nature, not chargeable to tax. Though the learned CIT(A) has deleted the addition, however, while deleting the addition, learned CIT(A) has observed that since the mesne profit is reflected in the profit and loss account, hence, it is rightly taxable for computing book profit, hence, on principle, the findings of the AO were upheld. However, since the mesne profit is held to be capital in nature, hence, not chargeable to tax, then it ITA No.8185/2011 becomes consequential in nature. Therefore, the income computed under Section 115JB was also deleted by the learned CIT(A). 10. Learned DR placed reliance on the order of AO. On the other hand, learned counsel of the assessee stated that the findings of the learned CIT(A) recorded in para 5.1 are partly incorrect. It was stated that it is incorrect to note at the end of the learned CIT(A) that since the mesne profit is reflected in profit and loss account, hence, it is rightly taxable for computing books profit. In this respect, it was submitted by the learned AR that mesne profit was not reflected in the profit and loss account and this fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts and in the circumstance of the case and in law, the Tribunal was correct in holding that mesne profits are capital receipts in the hands of the assessee and not revenue receipts chargeable to tax? (b) Whether on the facts and in the circumstance of the case and in law, the Tribunal was correct in holding that mesne profits, cannot be part of book profit u/s. 15JB, as it was held as capital assets ?". 3. The impugned order of the Tribunal has held that the mesne profits received by the Respondent-Assessee for the unauthorized occupation of its premises from Central Bank of India is a receipt of capital nature and thus not taxable. To reach the above conclusion, the impugned order placed reliance upon the decision of Special Bench of the Tribunal in Narang Overseas Pvt. Ltd., v/so ACIT 100 ITD (Mum)S.B. The issue before the Special Bench in Narang Overseas Pvt. Ltd. (supra) was whether the mesne profits received by an assessee is revenue or capital in nature. The Special Bench, in its order placed reliance upon the definition of mesne profits in Section 2(12) of the Code of Civil Procedure, 1908 which reads as under:- "Mesne profits/of property means those 'profits ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In matters of tax, justice requires that there must be certainty of law which presupposes equal application of law. Thus) where the issue in controversy stands settled by the decisions of this court or the Tribunal in any other case and the Revenue has accepted that decision then in that event, the Revenue ought not to agitate the issue further unless there is some cogent justification such as change in law or some later decision of an higher forum, etc., then in such cases appropriately the appeal memo itself must specify the reasons for preferring an appeal failing which at least before admission the officer concerned should file an affidavit pointing out the reasons for filing the appeal. It is only when the court is satisfied with the reasons given, that the merits of the issue need be examined of purposes for admission (please see I.T.A. No.37 of 2013 CIT v. Proctor and Gamble Home Products Ltd., dated January 19,2015 [2015J 377 ITR 66 (Bom); I.TA. No.269 of 2013 CIT v. SBI dated February 4, 2015 [2015]375 ITR 20(Bom); I.TA. No. 330 of 2013 DIT v. Citibank N. A. dated March 11, 2015 - [2015] 377 ITR 69 (Bom).) Filing of appeal under Section 260A of the Act is serious is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... NO.1791 of 2008 for nonremoval of office objections on 25th June, 2009, no steps have been taken by the Revenue to have the appeal restored, is evidence enough of the Revenue having accepted the decision of the Special Bench of the Tribunal in Narang Overseas Pvt. Ltd., (supra). Thus, the question as framed in the present facts does not give rise to any substantial question of law. 12 Accordingly, Appeal is dismissed. No order as to costs.' 4. In The aforesaid order, the Hon'ble jurisdictional High Court duly considered the decision of the Special Bench of the Tribunal in the case of Narang Overseas Pvt. Ltd., DIT(IT) vs Credit Agricole Indosuez 102 ITR 377(Bom.) and held that since the decision of the Special Bench of the Tribunal in the case of Narang Overseas Pvt. Ltd. is not challenged by the Revenue, therefore, it is not acceptable to not to follow the decision of the Special Bench. Thus, respectfully following the decision of the Hon'ble High Courts and the ratio laid down in the cases decided by the Tribunal, wherein, it was held that mense profit is not revenue receipt but capital in nature. Identical ratio was laid down in the case of Narang Overseas and M/s Goo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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