9911796707
TMI Blog2019 (7) TMI 122X X X X Extracts X X X X X X X X Extracts X X X X ..... st of construction plus land cost plus infra cost is to be allowed on proportionate basis - HELD THAT:- Even after 01.04.2002 in the return of income, the assessee had not claimed any such land cost or constructed cost, since it had offered the lease premia in the form of rent in its hands from year to year. It was only after the order passed under section 263 of the Act, lease premia in totality was assessed in the hands of assessee in the year in which the assessee had entered into agreement of lease. The corresponding fall out to which is that the concept of matching principle has to be applied and where the assessee had entered into agreement to lease, then the cost of said assets needs to be allowed as deduction in its hands. Taxability of lease premium after spread over the period of 99 years - The question which arose was the assessability of lease premium in the hands of assessee i.e. whether it could be spread over the period of 99 years or the same has to be assessed in the hands of assessee in the year in which it enters into lease agreement. The assessee has clearly mentioned that the allotment of land was made by respective State Governments for development of area and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alternate issue of allowing deduction of cost / depreciation by following matching principle of accounting. In such circumstances, we find no merit in the pleadings of learned Authorized Representative for the assessee in applying dictate of Hon ble High Court of Madhya Pradesh. Accordingly, this plea is dismissed. The grounds of appeal on merits are thus, allowed in favour of assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... velopment of the constructed premises incurred during earlier period/years. 9. Without prejudice to ground no.5 and 6,The learned CIT(A) has erred in conforming the decision of AO in disallowing the depreciation on leased assets amounting ₹ 8,11,41,046/- as an application of income. He ought to have appreciated that depreciation on leased assets is allowable considering the CBDT circular no.2 of 2001 dated 9-2-2001. 10. The appellant craves leave to add, alter, clarify, explain, modify, delete any of the grounds of appeal, and to seek any just and fair relief. 4. The assessee has also raised additional grounds of appeal which read as under:- 11. The opening WDV of various assets as on 1/4/2002 (including the INFRASTRUCTURE assets created by the appellant) ought to be considered for the purpose of depreciation u/s 32 of the ITA, 1961. 12. Alternatively and without prejudice to the Ground No.7, 9 & 11, the income from development activities arising from lease premium and transfer premium, ought to be worked out after reducing all related corresponding proportionate costs (including INFRASTRUCTURE costs) incurred prior to 1/4/2002. 5. The additional grounds of ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the course of assessment proceedings for assessment year 2008-09 it was noted that profit on sale of plots was recognized on notional 10% on the amount realized from the lease of plots of land. Similarly, profits on sale of plots for assessment year 2003-04 were recognized on similar lines i.e. @ 10% of amount realized during the year. The Assessing Officer also noted that assessee was charging transfer premium when the lease was assigned by lessee to another party, but only a part of transfer premium was treated as income for that year. The income of ₹ 22,01,555/- at 1/78th part of total receipts were recognized as transfer premium in the year under appeal. The Assessing Officer found that the assessee was entering into 99 years lease with buyers in respect of buildings and plots of land. At the time of entering into lease agreement, huge amount was taken as one time premium and only notional amount of ₹ 1 per year was shown as payable for the balance 99 years. The assessee was treating the said amount of one time premium received as being spread over 99 years and only 1/99th of premium was treated as income during the year. In assessment year 2008-09, the Assessin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssing Officer noted that total interest accrued to ₹ 14.06 crores on term deposits held with the banks appearing under the head 'Investment' in the Balance Sheet. Further, rent accrued was declared at ₹ 1,23,87,565/- which was the lease premium recognized on constructed properties. The Assessing Officer further noted that income from development activities was ₹ 2.26 crores. However, the income was not fully offered and since the assessee had not offered the profit recognized on sale of plots of ₹ 1.42 crores, income recognized on transfer premium of ₹ 22 lakhs (approx.) and lease premium on constructed properties of ₹ 1.23 crores, the assessee was asked to explain the nature of said entries. After considering reply of assessee and tax audit report and the order passed in assessment year 2008-09, the Assessing Officer noted that assessee had failed to credit sum of ₹ 18.98 crores being plot premium funds (net credit), ₹ 1.08 crores of properties premium funds (net credit) and ₹ 1.12 crores of development charges (net credit). The Assessing Officer observed that method of accounting adopted by assessee resulted in substantially d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r however, observed that even as per AS-19, this would be financial lease and not operating lease. Hence, the claim of depreciation by assessee was found to be not in order by the Assessing Officer. It was further held that depreciation could be claimed by lessee but not the assessee. It was further held that there was no basis for spreading the premium received at the time of agreement, to 99 years on a straight line basis. The Assessing Officer observed that where the assessee was not required to provide any services to the lessee over the period of 99 years, even where the assessee may be generally engaged in development of land area falling in its jurisdiction, but the lease contract did not have even a single clause requiring the lessor i.e. assessee to provide any services to the lessee. Thus, even from the 'matching principle', there was no expenditure to be incurred contractually over the 99 years lease period and therefore, premium received in the first year was income in that year and AS-9 was inapplicable to plots and lands especially where the assessee had accounted only for part of receipt as income in the current year. The Assessing Officer held that where lease was f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was 106% and was above 100% for assessment year 2004-05, the Assessing Officer held that working of percentage of application of funds worked out by assessee was an incorrect method of accounting. 12. The next aspect which was taken up by the Assessing Officer was submission of assessee that it had been granted registration under section 12A of the Act and income would need to be computed in accordance with sections 11 to 13 of the Act. The assessee also submitted that it had filed an appeal before the Tribunal against order passed under section 263 of the Act. The Assessing Officer vide para 15.2 at page 28 notes that income of assessee became taxable after deletion of section 10(20A) of the Act w.e.f. 01.04.2003. Subsequently, the assessee applied for registration under section 12A of the Act for the first time on 28.11.2006 and this application was rejected by Commissioner vide order dated 30.05.2007. Subsequently, the assessee filed an appeal before the Tribunal, which decided the issue in favour of assessee vide its order dated 29.04.2009. The registration was accordingly, granted by order of Commissioner of Income-tax-V, Pune, dated 29.09.2009 w.e.f. 30.11.2006. The assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenditure considered as capital expenditure would not be allowed and taxable income was determined at ₹ 21.89 crores and the assessment was made under the head 'business income'. 14. The CIT(A) notes that the assessee had furnished return of income in response to notice under section 148 of the Act at nil claiming exemption under section 11 of the Act. However, the order under section 143(3) r.w.s. 148 of the Act was passed assessing income at ₹ 7,42,84,300/-. The assessee filed an appeal against the said order of assessment and the CIT(A) allowed the issue of depreciation partially. Both the Department and assessee filed appeal to the Tribunal. Before the decision of Tribunal, Commissioner issued notice under section 263 of the Act on 28.01.2011 and passed the order on 07.03.2011. The Tribunal set aside the issue of depreciation in respect of Revenue's appeal and directed adjudication considering registration under section 12A of the Act was available. The CIT(A) thus, notes that entire gamut of assessment had been changed; hence the plea of assessee that assessment should be completed de-novo. This order of Tribunal was passed on 30.12.2011. The CIT(A) also notes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 12A of the Act. The assessee thus, explained its modalities of developing township and various expenditure incurred i.e. first allotment of land / tenements to various parties. It was then explained that the assessee carried out infra related expenses which included making roads, gardens, water tanks, streets, plantation, etc. These infra facilities were used by public, for which assessee was not charging any fees / toll charges. However, these infra expenses had to be considered for computing income in the hands of assessee. Another point which was raised by assessee was that the assessee created budget of expenses in ensuing year and the same were approved by the State Government i.e. application of funds was under the control of Government authorities. Another point which was raised was that the assessee was required to refund premium of land allotment if any customer wishes to surrender the allotted plot, which clauses were missing in private enterprises. The assessee stressed that it was entering into lease agreements with various parties for allotment of lands and constructed units, where the period of lease was 99 years but it receives premium at the time of allotmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... next plea raised by assessee was that claim of depreciation on leased building. It was stressed that where the lease period was 99 years and the same was operating lease, then the lessee was required to vacate building / premises and handover the properties back to the assessee at the end of lease period. Since the income from use of property was being offered to tax, then related depreciation on the same ought to be considered before working out taxable income of assessee for the respective years. In this regard, assessee placed reliance on the ratio laid down in CIT Vs. Institute of Banking Personnel Selection reported in 264 ITR 110 (Bom) and DIT Vs. Framjee Cawasjee Institute reported in 109 CTR 463 (Bom). The next plea was against benefit of accumulation through Form No.10. The said claim was not made during the course of assessment proceedings but before the appellate proceedings and the CIT(A) was asked to allow the same. The assessee then, pointed out that for assessment years 2005-06 and 2008-09, the Assessing Officer had rejected accumulation claim made through Form No.10 on the ground of defect therein. It was stressed before the CIT(A) that since there was huge confusio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Reference was made to CBDT circular No.273, dated 06.02.1980, which specifically allows the Assessing Officer and CIT(A) to accept belated submission of Form No.10 and allow the condonation of delay. Coming to last issue of depreciation on leased assets, this plea of assessee was also not accepted. The next plea of assessee which was raised was the aspect of WDV for the purpose of working out eligible depreciation. The Assessing Officer had re-worked the WDV of assets by considering explanation 4 to section 32 of the Act, wherein depreciation was to be compulsorily allowed for working out business income. It was pleaded that since upto assessment year 2002-03, income of assessee was exempt, there was no occasion to visit section 32 of the Act. Further, reference was made to definition of WDV under section 43(6) of the Act, which state that WDV should be based on depreciation actually allowed. To the definition, Explanation 6 was added by the Finance Act, 2008 with retrospective effect from 01.04.2003 i.e. effective from assessment year 2003-04 onwards. By this Explanation, it was clarified that when the assessee was not required to compute income under the Income-tax Act and was th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m of accounting. Referring to the order of Assessing Officer, the assessee points out that it talks of the claim of assessee that corresponding cost be allowed. The Assessing Officer treated the assessee's lease as financial lease and did not allow depreciation on assets and / or corresponding costs. The learned Authorized Representative for the assessee stressed that in case lease premium is treated as income of assessee on accrual basis, then land cost needs to be allowed and also cost of construction on infrastructure is to be allowed along with depreciation on leasehold premises and also depreciation on infra cost. It was fairly pointed out that expenditure on infra cost for the respective years was allowed by the Assessing Officer. However, the Assessing Officer denied depreciation on the ground that it was finance lease. 19. The Assessing Officer has denied application of income as incurred in earlier years and the case of Assessing Officer was that at best the assessee can be allowed depreciation on them as assessee had already booked expenses in its Income and Expenditure Account. The learned Authorized Representative for the assessee thereafter, took us through written s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the decision of Hon'ble Apex Court in CIT Vs. Rajasthan & Gujarati Charitable Foundation Poona (2018) 89 taxmann.com 127 (SC). Again reference was made to order of CIT(A) at page 31 i.e. contention 5, where it was held that the assessee was claiming reduced depreciation at higher rates and the Assessing Officer on the other hand, was of the view that depreciation was to be thrust upon at the income tax rates and reworked WDV as per Income Tax Act. It was stressed by learned Authorized Representative for the assessee that working of Assessing Officer was wrong. Under section 43(6), Explanation 6 of the Act, he stated that (a) there was no reliance in clause (c) which was not applicable and total amount of depreciation already claimed and allowed. However, the Finance Act, 2008 amended with retrospective effect from 01.04.2003. He then referred to decision of the Hon'ble Bombay High Court in CIT Vs. Institute of Banking Personnel Selection (supra), wherein it was held that it was not under section 32 of the Act under which thrust was to claim depreciation as per the principle. The learned Authorized Representative for the assessee here stressed that where the assessee was not claim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly provided that delivery of possession is to be returned to assessee after expiration of lease. He drew our attention to clause (Q) and (R), where the assessee had given leasehold rights, then the assets would return back to the assessee on expiry of lease. 23. The learned Departmental Representative for the Revenue on the other hand, pointed out that premium received by assessee is to be taxed in the year of receipt. With regard to cost of land, it was stressed by her that till 2002, there was exemption under section 10(20A) of the Act and where the assessee was following cash method, expenses on cost of land and cost of construction were taken care of in earlier years and cannot be again deducted, even though surplus was not offered to tax. She stressed that where the expenses were already incurred and claimed, then they were deemed to be allowed. It was further pointed out that where the assessee was also benefitting and getting cost of land as deduction as application of income and was further claiming depreciation on such assets, then claim of depreciation on such assets would amount to double deduction. It was further pointed out that reliance on Calcutta Co. Ltd. Vs. CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d units; cost of open land as on 01.04.2002 and infra cost as on 01.04.2002. The assessee in this regard furnished written submissions, copy of which was handed over to the learned Departmental Representative for the Revenue, who sought time to go through the same. The assessee also furnished certain details with regard to working of land area, which was possessed by assessee and part of which was developed and the assessee then gave some working of land cost both for the sale of land and portion of land utilized for construction. He also then took us through working of constructed premises cost which needs to be apportioned year-wise in order to work out the income in the hands of assessee. In addition, the learned Authorized Representative for the assessee pointed out that the issue of assessability of lease premium in the hands of assessee now stands covered by decision of the Hon'ble High Court of Madhya Pradesh in M.P. Audyogik Kendra Vikas Nigam (Indore) Ltd. Vs. ACIT reported in 98 taxmann.com 191 (MP), wherein it has been held that for accounting purpose, 1/99th lease premium is to be taken as revenue in the hands of assessee. In this regard it was pointed out that the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Referring to decision of Hon'ble High Court, it was pointed out that benefit of accumulation needs to be allowed and because of insertion of Explanation 6 to section 43(6) of the Act, where any of the person comes from the exempt era i.e. income being taxable w.e.f assessment year 2003-04, then on this the CIT(A) has already allowed the relief vide para 17 in assessment year 2003-04. Referring to order of the Hon'ble High Court of Madhya Pradesh in M.P. Audyogik Kendra Vikas Nigam (Indore) Ltd. Vs. ACIT (supra), wherein in the case of said case it was arm of Government, where the income was taxable then the same has to be taxed over period of 99 years. The learned Authorized Representative for the assessee pointed out that obligation on the lessor that if any person surrenders lease after period of 5 years, then 93/99 years premium had to be returned; this was contractual liability of assessee. However, the Tribunal in such circumstances had held that accounting is to be done of the whole receipt on the date of entering into agreement, ignoring the submissions of assessee on surrender of lease after lock in period of 5 years. 26. The learned Departmental Representative for the R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was trust and the provisions of section 11 of the Act are to be applied for computing its income, then surplus as declared in form No.10 should not be treated as its income and in case the surplus is determined at a higher figure than the one declared by assessee, then the assessee should be given an opportunity to file revised form No.10 in this regard. The connected issue raised by assessee is depreciation on assets, cost of which has been allowed as application of income in the hands of assessee. The case of Revenue on the other hand, is that revenue though is taxable in the hands of assessee but the cost of construction and all other costs including infra cost was incurred during earlier period and the same should not be allowed as deduction in current year. Similarly, in respect of depreciation on assets and its WDV, the issues were raised by Department against claim of assessee. This is without prejudice to the plea of assessee before the authorities below and even before us that the income which needs to be assessed in the hands of assessee is 1/99th of lease premium and not the whole lease premium. In this regard, the learned Authorized Representative for the assessee has r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ued liability, then the estimated expenditure was an accrued liability, which according to mercantile system of accounting was debited to books of account against the receipts which represent sale proceeds of said land and same is to be allowed as deduction while computing income under section 28(1) of the Act. The Hon'ble Apex Court observed that The appellant here is being assessed in respect of the profits and gains of its business and the profits and gains of the business cannot be determined unless and until the expenses or the obligations which have been incurred are set off against the receipts. The expression "profits and gains" has to be understood in its commercial sense and there can be no computation of such profits and gains until the expenditure which is necessary for the purpose of earning the receipts is deducted therefrom-whether the expenditure is actually incurred or the liability in respect thereof has accrued even though it may have to be discharged at some future date. 32. We may also refer to the ratio laid down by the Hon'ble Bombay High Court in the case of an assessee, which was local authority and was entitled to exemption under section 10(20A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... installments received on sale of various houses and plots under Hire Purchase Agreement should be included as revenue and at the same time to allow corresponding expenditure which had been expended by assessee in cash. The relevance of word 'cash' is that the assessee had adopted cash system of accounting but it was following project completion method and hence, income was determined under the project completion. The Tribunal held that assessee could not follow two different systems of accounting under the same head and upheld the order of Assessing Officer in including all the installments received from the allottees of houses and plots in the income of assessee. In contra, the claim of assessee was that if such installments were included, then the corresponding expenditure which has been incurred should also be allowed on matching principle. For applying matching principle, reliance was placed on the decision in Calcutta Co. Ltd. Vs. CIT (supra) and it was held that for determining true profits, cost incurred by assessee towards construction of houses and plots, which has been accumulated in the books was also to be recognized. The Tribunal further held that in case where cash s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 11.07.2008 and in response to notice under section 148 of the Act on 28.03.2008 declaring nil income claiming exemption under section 11 of the Act. The assessment in the case was completed under section 143(3) r.w.s. 148 of the Act assessing income at ₹ 7.42 crores. The Revenue authorities rejected the rent model of offering revenue adopted by assessee; instead, the entire lease premium were taxed in the year of registration of lease deed and the said method was applied as appropriate method for computing taxable income in the hands of assessee. The plea of assessee before the authorities below was that in case the model of taxing entire lease premium is adopted, then the concept of matching principle should be applied as a corollary. The related cost i.e. land cost, constructed area cost, infra cost and depreciation on infra cost should be allowed to assessee. The said issues were raised before the Assessing Officer and CIT(A) in the respective years but the same were not accepted in toto. The assessee filed an appeal against order of assessment. The CIT(A) allowed the issue of depreciation partially. Both the assessee and Revenue filed an appeal before the Tribunal. Befo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plots of lands were carved out and sold to individual lessees; on other portion of land, the assessee had constructed tenements which were again leased to various lessees. The concept of matching principle requires that when the revenue is assessed in the hands of assessee, then corresponding expenditure needs to be appropriated and allowed as deduction, as what is to be taxed in the hands of assessee is 'income' and not the 'total revenue' earned by it. Applying the propositions laid down as referred in the paras hereinabove, we find merit in the plea of assessee in application of matching principle of claim of expenditure on account of various items. 36. First, we will refer to the claim of assessee on account of cost of land and the constructed area cost on proportionate basis. In this regard, the assessee has filed details in excel file and has claimed the cost to be worked out in step-wise manner. The assessee in the written submissions has explained the rationale of each step and the same is reproduced hereunder for ready reference: "Step-wise working - Now, in the enclosed excel file, the costs sought to be claimed are worked out in a step-wise manner. Hereinbelow, mea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /11/2018 Cost Proportionate cost has been worked out the basis of total land cost & total land area as to the proportion of area sold prior to 01/04/2002 Area Constructed premises which is leased out prior to 31/03/2002 Cost Proportionate cost has been worked out the basis of total constructed area & total construction cost as to the proportion of area sold prior to 1/04/2002 8. Area Land leased out during 01/04/2002 till 31/03/2014 is as per certificate of PCNTDA dated 27/11/2018. The year wise area leased out is also mentioned in the said certificate dated 27/11/2018 Cost Proportionate cost has been worked out the basis of total land cost & total land area as to the proportion of area sold from 1/04/2002 till 31/03/2014. The appellant is eligible to claim the said proportionate cost in a year in which area is leased out. Area Constructed Area leased out during 01/04/2002 till 31/03/2014 is as per certificate of PCNTDA dated 27/11/2018. The year wise constructed area leased out is also mentioned in the said certificate dated 27/11/2018. Cost Proportionate cost has been worked out the basis of total land cost & total land area as to the proportion of area sold ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .03.2014, which is 55.37 Hectors. Thus, the assessee is seeking appropriation of land cost over the period of years totaling ₹ 1.74 cores. The assessee has filed details of land sold yearwise after 2002 and hence, we direct the Assessing Officer to verify this stand of assessee and after checking the area leased after 01.04.2002 to 31.03.2014 (179.02 Hectors), the cost of said land at ₹ 1.75 crores needs to be appropriated year-wise and allowed as land cost against revenue booked on entering into lease deed with lessees (year-wise). 39. The second step is working of constructed premises cost. The perusal of Balance Sheet filed by assessee as on 01.04.2002 reflects the value of properties constructed at ₹ 123.99 crores. To this land, cost of 200 Hectors i.e. costing at ₹ 1.95 crores needs to be added. Thus, total cost of construction including land and cost of constructed premises works out to ₹ 125.95 crores. Out of total constructed area of 396240 sq.mtrs., the value of area which was leased out after 01.04.2002 till 31.03.2014 (as per Schedule 1 to the calculation filed) works out to 40,674 sq.mtrs. valuing ₹ 12.92 crores (approx.) The closin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to Water & drainage system - In the Balancesheet as of 31/3/2002 (i.e. opening balancesheet), cost of ₹ 372.31 lacs is shown under this head. Further, the said item appears in the grouping of fixed assets. As per facts, this INFRA cost is incurred for the overall area of activity of PCNTDA. In other words, the said cost does not relate specifically to leased out land area or leased out constructed area. Appellant has been claiming depreciation on the said cost and the I-T department has been granting the same every year. Hence, there is no dispute about depreciation of this INFRA cost item. Depreciation on INFRA costs appearing in MISC EXPENDITURE - In the opening balancesheet as of 31/3/2002, cost of ₹ 3919.00 lakhs is appearing. The said cost is accumulation of various costs relating to creation of roads, creation of parks, water tanks, bridges, etc. Now, this INFRA cost is an asset used by PCNTDA for its overall activity. Ownership of the said asset (i.e. INFRA facilities) vests with PCNTDA. In other words, ownership of such INFRA facilities does not get transferred to any users / lessees. Considering this aspect, PCNTDA is eligible to claim depreciation on cost o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eciation on such assets. 42. Before parting, we may also deal with the objections of learned Departmental Representative for the Revenue in this regard that all the costs which the assessee claims as deductible i.e. on account of land cost and constructed cost was incurred prior to 2002, hence is deemed to be allowed in the hands of assessee. It is reiterated that upto 31.03.2002, the assessee's income was exempt under section 10(20A) of the Act and the assessee had not claimed deduction on account of said land cost in its hands as it was not offering any income in its hands. Even after 01.04.2002 in the return of income, the assessee had not claimed any such land cost or constructed cost, since it had offered the lease premia in the form of rent in its hands from year to year. It was only after the order passed under section 263 of the Act, lease premia in totality was assessed in the hands of assessee in the year in which the assessee had entered into agreement of lease. The corresponding fall out to which is that the concept of matching principle has to be applied and where the assessee had entered into agreement to lease, then the cost of said assets needs to be allowed as de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt from the ratio laid down in CIT Vs. Mumbai Metropolitan Regional Iron & Steel Market Committee (supra). 45. The issue raised in cross objections / appeals filed by Revenue is against allowance of depreciation on brought forward block of assets of assessee trust. The Assessing Officer had re-worked the WDV of assets by allowing depreciation for one year. However, in view of Explanation 6 to section 43(6) of the Act, we find no merit in the issue raised by Revenue in this regard. We have already held in the paras hereinabove that the assessee is entitled to claim depreciation on the assets on WDV starting from 01.04.2002 and cost of assets is to be adopted, since the assessee in earlier years was not filing any return of income in 10(20A) era of exemption. 46. The second linked issue is whether depreciation is to be allowed on the assets value, which has been allowed as application of income in the hands of assessee and the objection of Revenue is that allowing depreciation on such assets would result in double relief. 47. We find that this issue stands squarely covered by the ratio laid down by Hon'ble Supreme Court in CIT Vs Rajasthan & Gujarati Charitable Foundation P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appearing liability side are in the nature of Capital Receipt. 51. The Hon'ble High Court has decided the issue in favour of assessee holding that land premium is nothing but revenue receipt in the form of advance rent and there was no reason why the advance rent received should be taxed accordingly. 52. The learned Authorized Representative for the assessee further stated that in the facts of said case also, the assessee had offered 1/99th portion of such land premium as revenue receipt to be taxed in the year under consideration and the Hon'ble High Court has held that where the leasing of plot was for 99 years and there was no provision and condition in the agreement to suggest, the modality of transfer and renewal after 99 years, then there was no reason why the advance rent should be taxed accordingly. The learned Authorized Representative for the assessee stressed that it was the obligation of assessee that in case any lessee surrenders the lease after 5 years, then 93/99 years premium had to be returned and such a liability was contractual liability. He further pointed out that the Tribunal while deciding the issue has no doubt decided the same against assessee but sinc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... period of 5 years, then 93/99 years premium had to be returned. Such a liability was contractual liability of assessee. In the facts before the Hon'ble High Court of Madhya Pradesh, it was noted that land was transferred through the Government of Madhya Pradesh and apart from there, assessee was also authorized to purchase / acquire land of its own. The assessee was undoubtedly, managing and leasing the said land as an independent owner of land, the sums equated as land premium was used for incurring expenditure to develop the land and maintaining industrial infrastructure. The Hon'ble High Court held that there was no denial that the transaction had to be taxed under the Income-tax Act, unless the same is exempted by a particular provision of the Act. The assessee was offering 1/99 of land premium (out of total land premium received by it during the year) as taxable. The assessee claimed that lease premium was not its income before the Hon'ble High Court, so it was decided that the said land premium was the income of assessee to be taxed under the Income-tax Act. Vide para 31 it was held that from the perusal of clauses of memorandum, it was revealed that the assessee was in the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee has transferred the same on long term lease and earned rental income as well as the advance rent in the form of land premium. The issue has been dealt with by all the authorities considering all the aspects of the case and recording their finding. (highlight provided by us) 57. The issue thus, has been decided on the basis of income offered by assessee i.e. @ 1/99 of lease premium as advance rent and the appeal has been dismissed. 58. However, in the facts of present case, we find that Tribunal has decided the issue of recognition of revenue receipts while deciding appeal against order passed by Commissioner under section 263 of the Act, which is for the instant assessment year itself. The issue of assessability of lease premium has been decided against the assessee. We have in the paras hereinabove decided the alternate issue of allowing deduction of cost / depreciation by following matching principle of accounting. In such circumstances, we find no merit in the pleadings of learned Authorized Representative for the assessee in applying dictate of Hon'ble High Court of Madhya Pradesh. Accordingly, this plea is dismissed. The grounds of appeal on merits are thus, allowe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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