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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 ..... ugned orders both dated 01/01/2013 of the First Appellate Authority, Mumbai. 2. During hearing, the Ld. counsel for the assessee, Shri Salil Kapoor along with Girish S. Pikale and Ms. Saumya Singh, did not press ground no. 1 to 1.3 of the ground raised. The Ld. DR Shri V. Justin, had no objection to the prayer of the assessee, therefore, grounds no.1 to 1.3 are dismissed as not pressed. 3. The only ground agitated by the Ld. counsel for the assessee, is with respect to confirmation of the amount of Rs. 78,33,360/- (Assessment Year 2007-08) and ₹ 49,86,226/- (Assessment Year 2008-09) received in respect of Unit L/40 in possession 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rseas Pvt. Ltd., 111 ITD 1 (Mum.)(SB) for ready reference:- The Supreme Court in the case of P Mariappa Gounder was only concerned with one issue relating to the year of taxability of mesne profit, i.e., whether it was taxable in asst. yr. 1963-64 or asst. yr. 1964-65. The issue whether mesne profit constituted revenue receipt or capital receipt was not before the Court as is apparent from the question posed by the Court for adjudication, the contentions raised by the respective parties as well as the operational part of the judgment. It cannot be said that the apex Court gave any decision regarding the nature of the receipt by way of mesne profit. The decision 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 amo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mesne profit and the mere fact that a particular amount was claimed by the assessee as mesne profit in the suit filed before the Court and the fact that the same has been accepted by the defendant would not make the compensation as mesne profit, is also not sustainable. Consent decree has the same binding force as any other decree. The mesne profits have been defined in s. 2(12) of the CPC, 1908 as those profits which the person in wrongful possession of such property actually received or might with ordinary diligence have received therefrom, together with interest on such profits, but shall not include profits due to improvements made by the person in wrongful possession. In view of this statutory 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) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s also noted that the Mumbai Bench of the tribunal, the case of the assessee for AYs 2004-05 and 2006-07 (ITA No.6701/Mum/2011) and ITA No.1190 to 1192/Mum/2013, order dated 04/03/2015 held as under. This bunch of four appeals is by the Revenue challenging the respective impugned orders dated 08/07/2011(Assessment Year 2003-04) and 19/11/2012(Assessment Years 2004-05 to 2006-07) of the ld. First Appellate Authority, Mumbai, on the ground in deleting the addition of ₹ 3,00,31,873/- being rental income from the property. The crux of argument advanced by Shri Vijay Kumar Bora, ld. DR, is that the ld. Commissioner of Income tax (Appeals) while granting the relief did not appreciate the facts, as the assessee suppressed 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 ₹ 3,67,96,393/- (Assessment Year 2004-05), ₹ 3,95,69,419/- (Assessment Year 2005-06) and ₹ 4,26,06,757/- (Assessment Year 2006-07). 2. Since i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Appellant by 19000% i.e. from ₹ 23,769/- per month to ₹ 50,72,233/- per month, i.e. (Rs.6,08,66, 796/ - p.a.). The rest of the building (other than premises on 1st Floor occupied by Bank of Punjab) is occupied by statutory tenants and they were paying statutory rent for the last 25 years. It is also noted that the Assessing Officer unjustifiably enhanced the rental income of the assessee without any documentary evidence/presumptive basis as the presumptive rent was never received/receivable by the assessee. There is uncontroverted finding in the impugned order that the Additional Rent Control Tribunal directed Punjab National Bank to deposit the amount of ₹ 1,42,000/- (as mesne profit/occupation charges/damages) in the Court and not Hon ble Delhi High Court, which bank of Punjab was paying to M/s. Hemkunt Chemicals vide its order dated 05/07/2003. The Hon ble Delhi Court in its Order dated 29/07/2003 did not mention any amount, or fix/determine any enhanced rent 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, he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the assessment order in increasing the rents of all the Appellant's remaining 39 protected tenants (being ₹ 23,769/- per Month paid to the Appellant by its lawful/ protected tenants) by 19000% i.e. to ₹ 50, 72,233/ - Per Month because these lawful tenants are , protected tenants who enjoy protection under the Delhi Rent Control Act,1958. Sec 6A of the Delhi Rent Act 1958 has restricted the power of land lords (i.e. the appellant herein) to increase rents beyond 10% and that too only after every 3 years. 2.2. Section 105 and 107 of the transfer of Transfer of Property Act does not confer any right on any Civil Court to fix the rent of any premises, which is a matter between the Lessor and the Lessee subject to provisions of the Rent Act. The Appellant is expressly barred from receiving any consideration for creation of a sub-tenant or the tenants as per see 16(4) of the Delhi Rent Act. Similar issue with identical facts in assessee's own case was decided by the ld. Commissioner 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is received. Section 258 of the Act makes a special provision for arrears of rent received, and states that where an assessee has received an amount by way of arrears of rent from such property, which is not charged to tax in any previous year, the amount so received shall be deemed to be chargeable under the head 'income from house property' as income of the previous year in which it is received, whether the assessee continues to remain the owner of such property in the previous year in which arrears are received or not. (deduction of 30% would also be allowable against such receipt). In the present case since the appellant has not received any amount either by way of unrealized rent or by way of arrears in AY 2003-04, which is evident from the court orders (the amount is stated to have been received after directions of the Court dated 2910712007) and amounts were released to the appellant from 2810712006. In point of fact even the order of Court directing deposit of monthly amount of ₹ 1,42,0001 - is dated 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the order of the Supreme Court vide SLP 19635 of 2002 in which the court directed the Bank to hand over the possession to the assessee company by 30/06/2003 due to which the Bank gave possession to the assessee company of Novelty Chambers on 30/09/2003. Hence a suit was filed by the assessee company for mesne profit for the aforesaid period. The Small Causes Court at Mumbai passed an order dated 28/03/2007 whose copy was received by the assessee company on 13th June 2007 for the T.E. and R. Suit No.59/81 of 2000 of Miscellaneous Notice Number 275 of 2002 filed by the assessee company wherein the Mesne Profit was fixed at ₹ 8,33,474/- per month for the period between 1/06/2000 to 30/09/2003 plus interest thereon. The period was decided on the basis of the fact that the tenancy of Central Bank of India was terminated on 1/06/2000 and it vacated the premises a give peaceful possession to the assessee company on 30/09/2003. The total compensation was thus fixed at ₹ 3,33,38,960/- plus interest thereon at the rate of 6%. Thereafter, Central Bank 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 Numbe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ture and not chargeable to tax. Against the finding of the learned CIT(A), the department is in appeal here before the Tribunal 5. Learned DR placed reliance on the order of AO. Part of the order of the AO was read also. On the other hand, learned counsel of the assessee placed strong reliance on the order of learned CIT(A). The findings of the learned CIT(A) have been recorded in para 1.3 at pages 17 18 of his order, are as under :- I have considered the facts. It is seen that the AO has relied in the case of P. Mariappa Gounder 147 ITD 676 (Mad) which has been affirmed by the Supreme Court in 232 ITR 2 (SC) wherein the issue was the year of taxability of the msene profit. Wherein as per the order of Supreme Court, the trial Court has determine the amount of mesne portit payable to the appellant and the trial court has determined the liability and passed an order on December 22, 1962. Therefore, it was held that the amount was ascertained on 22.12.1962. Hence, it was liable to be charge on the basis of mercantile system of accounting in the AY. 1963-64. It is further seen that the Appellant has contested that the issue whether the mesne profit was capital or reven ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earned CIT(A) is in consonance with the order of the Special Bench, which has been confirmed by the Hon'ble ITA No.8185/2011 Bombay High Court. Accordingly, we confirm the order of the learned CIT(A) on the issue involved. 7. Ground No.3 is against holding that the mesne profits though forming part of book profits under Section 115JB were deductible being capital receipts, in spite of the clear provisions of the Explanation to Section 115JB which do not permit such a deduction. 8. The noted that the assessee has treated the income of ₹ 1,47,18,280/- as capital receipt which was taken directly to the capital reserve account without crediting the profit and loss account. The AO held that since this receipt has been treated as revenue receipt and in view of the provision of Section 115JB, needs to be added back to the book profit as the same has been carried to reserves other than a reserve specified under Section 33AC of the Act. Accordingly, the same was brought to tax while computing the income under Section 115JB of the Act. 9. Learned CIT(A) deleted the addition by observing that since this receipt is not revenue in nature as the same is capital in nat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he AO under Section 115JB. Accordingly, in this regard, the order of the learned CIT(A) is confirmed. 12. In the result, appeal of the department is dismissed. In the aforesaid order, the Tribunal has duly considered the decision from Hon'ble Madras High Court in the case of CIT vs P. Mariappa Gounder (147 ITR 676) (Mad.), the Special Bench decision in the case of Narang Overseas Pvt. Ltd. (supra), CIT vs M/s Annamma Alexander, 191 ITR 551 (Kerala), the decisions relied upon by Ld. DR and thereafter the appeal of the Revenue was dismissed. It is noted that this decision of the Tribunal was affirmed by Hon'ble jurisdictional High Court vide order dated 06/06/2016 (Income Tax Appeal No.2356 of 2013). The relevant portion (pages 10-14 of the paper book) is reproduced hereunder:- This Appeal under Section 260-A of the Income Tax Act, 1961 (the Act), challenges the order dated 19th June, 2013 passed by the Income Tax Appellate Tribunal (the Tribunal)for the Assessment Year 2008-09. 2 The Revenue urges the following questions of law for our consideration: ( a) Whether on the facts and in the circumstance of the case and in law, the Tribunal was co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the face of the order of the Special Bench of the Tribunal in Narang Overseas Pvt. Ltd., (supra) which appears to be undisturbed. 5. Today, when the Appeal was called out, Mr. Chhotaray, learned Counsel appearing for the Revetlue on instruction states that till date no proceedings had been filed in this Court, seeking to restore its appeal in the case of Narang Overeas Pvt. Ltd., (supra) dismissed on 25th June, 2009. However, he further states that the Revenue is still in the process of ascertaing the reason for non-removal of office objections in Income Tax Appeal (L) No: 1791 of 2008 in Narang Overseas Pvt. Ltd., (supra), leading to dismissal on 25th June, 2009. 6. In spite of our order dated 14rh January, 2016, the Revenue has not taken any steps to put on affidavit the reasons why it seeks to press this appeal. This is particularly so in the face of having accepted the order of the Special Bench of the Tribunal in Narang Overseas Pvt. Ltd., (supra). 7. We had in Director of Income Tax (International Taxation) v/s Credit Agricole Indosuez ITR 102 -377- observed as under:- ( v) :- .. In matters of tax, justice requires that there must be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso, the amounts are' received by the Respondent-Assessee from a person in wrongful possession of its property i.e. after the relationship of landlord and tenant has come to an end, Once the Special Bench order of the Tribunal in Narang Overseas Pvt. Ltd. (supra) has taken a view on the character of mesne profits, then unless the Revenue challenges the order of the Special Bench of the Tribunal it would be unfair of the Revenue to pick and choose assessees where it would follow the decision of the Special Bench of the Tribunal in Narang Overseas Pvt. Ltd., (supra) The least that is expected of the State which prides itself on Rule of Law is that it twould equally apply the law to all assessees's. 11 We make it clear that we have not examined the merits of the question raised for our consideration. We are not entertaining the present appeal on the limited ground that the Revenue must adopt an uniform stand in respect of all assessees. This is more so as the issue of law is settled by the decision of the Special Bench of the Tribunal in Narang Overseas Pvt. Ltd., (supra), The fact that even after the dismissal of its Appeal (L) NO.1791 of 2008 for nonremoval of of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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