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TMI Blog2019 (12) TMI 213X X X X Extracts X X X X X X X X Extracts X X X X ..... opolitan Regional Development Authority in respect of leasehold land - Capital or Revenue nature - Held that:- Matter restored before the AO for deciding the issue in the light of decision of Hon ble Gujarat High Court in the case of Sun Pharmaceuticals India Ltd [ 2009 (3) TMI 587 - GUJARAT HIGH COURT ] Disallowance of lease premium being included in the maintenance expenses - Held that:- Since the issue of disallowance of lease amortization premium of 1,29,52,157/- has been restored back to the file of ld AO supra, we deem it fit and appropriate, in the interest of justice and fairplay, to restore this issue also to the file of ld AO for denovo adjudication in accordance with law. Treatment of maintenance charges recovered together with rental income - Held that:- As all these issues are interlinked with each other, we deem it fit and appropriate, in the interest of justice and fairplay, to restore this issue also to the file of ld AO for denovo adjudication in accordance with law. Rate of depreciation on computer software. - Held that:- Earlier, tribunal by placing reliance on the Special Bench decision in the case of Amway India Enterprises vs DCIT [ 2008 (2) TMI 454 - ITAT DEL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax free bonds of ₹ 9,32,86,760/- and dividend income of ₹ 18,09,99,321/- as exempt u/s 10 of the Act in the return of income. We find that the assessee made suo moto disallowance of expenses u/s 14A of the Act computed at 0.1% of exempted income as expenditure attributable to earning of tax free income. The ld AO adopted the computation mechanism provided in Rule 8D(2) of the Rules and made the following disallowance :- Under Rule 8D(2)(i) consisting of amount disallowed by Assessee in the return of income 2,74,286 Under Rule 8D(2)(iii) 2,65,23,192 Total Disallowance 2,67,97,478 2.2. We find that the ld CITA reduced the quantum of disallowance u/s 14A of the Act by directing the ld AO to consider the average value of investments by applying a particular formula and directed to apply 0.5% of such investments and work out the disallowance. 2.3. We find that the year under consideration is Asst Year 2007-08, for which year, the computation mechanism provided in Rule 8D(2) of the Rules cannot be made applicable as it was introduced only with effect from 24.3.2008 relevant to Asst Year 2008-09 and was held to be prospective in operation by the decision of Hon'ble Jur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per the Registration Act it was compulsory to do so. There was no change in the ownership of the land and the lease rent payable was very nominal. Keeping in view all these facts, it was held by the Tribunal that the benefit accrued to the assessee was only in the nature of an advantage for carrying on the business by paying nominal rent of the land and by obtaining the land on lease, the capital structure of the assessee did not undergo any change. Keeping in view all these findings of fact recorded by the Tribunal, which were not specifically disputed by the Revenue, the Hon'ble Gujarat High Court did not find any infirmity in the order of the Tribunal deleting the disallowance made on account of lease rent paid by the assessee to GIC treating the same as Revenue expenditure. In our opinion, before the ratio of the decision of Hon'ble Gujarat High Court in the case of Sun Pharmaceuticals Ind. Ltd. (supra) is applied in the present case, the relevant facts are required to be verified, we therefore restore this issue to the file of the A.O. for deciding the same afresh in the light of the decision of Hon'ble Gujarat High Court in the case of Sun Pharmaceuticals Ind. Ltd. (supra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d reliance on certain decisions in support of its facts of the case. However, the contentions of the assessee were not appreciated by the lower authorities. 4.2. We have heard the rival submissions and perused the materials available on record. We find that the assessee had incurred maintenance charges of ₹ 2,05,42,418/- and had recovered maintenance charges to the tune of ₹ 1,68,61,573/- and the net maintenance charges of ₹ 36,80,845/- has been disallowed by the assessee under the head income from business in the computation of income. The maintenance charges expenditure was incurred in relation to providing the facilities and other services to the licensees from whom the maintenance charges were recovered. We find that the assessee had tried to give a different treatment for rental income, which is offered under the head income from house property and for maintenance charges recovered, which is offered under the head income from business. It would be pertinent to look into the details of maintenance expenses on let out property together with the treatment given by the assessee with regard to the same and details of maintenance charges recovered , which are as u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly the amortised portion of ₹ 1,29,52,157/-. Since the issue of disallowance of lease amortization premium of ₹ 1,29,52,157/- has been restored back to the file of ld AO supra, we deem it fit and appropriate, in the interest of justice and fairplay, to restore this issue also to the file of ld AO for denovo adjudication in accordance with law. Needless to mention that the assessee be given a reasonable opportunity of being heard. We find that the ld AR had vehemently argued before us that the ld AO had made disallowance twice. All these arguments could be advanced by the assessee before the ld AO in the set aside proceedings. The assessee is also at liberty to adduce fresh evidences, if any, in support of its various contentions. Accordingly, the Ground No. 3 raised by the assessee is allowed for statistical purposes. 5. The Ground Nos. 4(a) to 4 (d) are with regard to the treatment of maintenance charges recovered together with rental income and consequentially taxing the same under the head income from house property. 5.1. We have heard the rival submissions. We find that the ld AR had vehemently argued before us regarding the treatment of this issue in various asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owed. 7. The Ground No. 6 raised by the assessee is with regard to the disallowance of claim of deduction u/s 28 / 37(1) of the Act in the sum of ₹ 58,23,274/- towards amounts written off as irrecoverable as trading / business loss. 7.1. The brief facts of this issue are that the ld AO observed that during the year, the assessee had written off bad debts of ₹ 72,26,009/- in its books, the details of which were furnished. From the said details, the ld AO observed that the said sum admittedly included the following two sums :- a) Deposit paid to Municipal Corporation of Greater Bombay - 4,07,920/- b) Deposit paid to Goodhope Advisory Services Pvt ltd for a flat at Kolkata - 54,15,354/- ----------------- 58,23,274/- ----------------- The ld AO observed that these two items were never considered as income in terms of section 36(2) of the Act. He noted that ₹ 4,07,920/- was paid as 'Debris removal deposit and security deposit towards permission for provision of temporary monsoon protection shed at the premises' and ₹ 54,15,354/- was towards 'deposit for premises written off'. The assessee was asked to clarify as to how the write off of the aforesaid two ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the refundable security deposit of the assessee. Further, GASPL was in the practice of adjusting the gross rent payable (inclusive of TDS) by the assessee against the security deposit However, the assessee company had deducted TDS of ₹ 4,14,943/- from such rent payable to the said party, which it has paid to the central Government and had issued them the TDS certificate. Accordingly, the assesses has debited a sum of ₹ 414943/- towards such excess rent wrongly adjusted by the .said party against Security Deposit, Thereafter, the board of directors of the assesses company at its 80th meeting held on 28.04.2006 approved to surrender the said premises belonging to the above party and further decided to recover ₹ 84,45,054/- as full and final settlement, (copy of the board's resolution and approval note is enclosed at Annexure4(c)). Thus, the balance amount of ₹ 50,00,785/- (1,34,45,839 - 84,45,054) and ₹ 4,14,943/- (TDS deducted wrongly adjusted by the party) has been written off in the books of accounts of the assessee. It is submitted that ₹ 54,15,728/- represents amount irrecoverable from the party which has been incurred in the course ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee-company is a non-resident company. It is engaged in the business of manufacture of accounting and computing machines which are sold or given on hire and of giving services in respect of the same. The assessment year involved is 1965-66. The assessee-company entered into an agreement with one Mr. Sunder Waney, the landlord of the premises, on March 2, 1969 (1960). The landlord undertook to construct a factory together with a garage and a two-room flat on the plot of land situated at Kurla and to grant a lease of the said premises to the assessee-company for a period of ten years renewable for a further period of five years at the option of the assessee-company for the compensation fixed in the agreement. Three more agreements were entered into by the assessee-company with the said landlord in this connection from time to time. In order to facilitate speedy construction, the assessee-company, by one of these agreements, advanced a total sum of ₹ 99,888 to the landlord till 1963. As the landlord became insolvent, the entire amount of ₹ 1,08,088 inclusive of interest and the principal amount advanced was written off by the assessee-company. 3. The assessee claimed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... advanced to the landlord in pursuance of the agreement before the execution of the lease deed would make any difference. In our opinion, it will not. It is not disputed that the assessee required factory premises for its business and that it did not get a ready factory for that purpose. It took a business decision to enter into agreements with the landlord who owned the land which did not have the factory shed and other structures required by the assessee. The landlord expressed difficulty in constructing the factory building and other structures. The assessee, in pursuance of other agreements entered into, advanced moneys which were in the beginning to be adjusted against the future rents, but subsequently were agreed to be refunded to the assessee on a fixed date. It is true that if the landlord had failed to construct the factory building and other structures as agreed to, the agreements would have fallen through and there was no penalty clause as such. However, one cannot get away from the fact that all this was done by the assessee with a view to acquire the factory premises on lease. The mere fact that the factory would be ready in a year or so would not make any difference. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mumbai- Trib) dated 30.1.2019 wherein the undersigned was the Author. The relevant operative portion of the said order is as under:- "52. We have heard the rival submissions. It is not in dispute before us that the said rental deposit / lease deposit was paid by the assessee for taking the premises on lease for the purpose of business of the assessee. The payment of said lease deposit was to the tune of ₹ 41.65 lakhs by the assessee to the concerned landlord. It is not in dispute that the assessee had vacated the said leased premises in a peaceful manner. The ld. DRP had taken note of various email correspondences and various actions taken by the assessee for recovering the rental deposit from the landlord after vacating the said leased premises. We find that the assessee had categorically stated that the said leased deposits were indeed written off in the books for the financial year 2009-2010 relevant to the assessment year 2010-2011. This fact remained uncontroverted by the Revenue before us. Hence, we hold that when the lease deposit was paid for the purpose of business, and when the said lease deposit become irrecoverable, despite having efforts from the side of the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e wherein this tribunal had placed reliance on the orders passed for the Asst Years 1997-98 , 2001-02 and 2003-04 in assessee's own case on the impugned issue. Hence we do not find any infirmity in the order of the ld CITA in this regard. Accordingly, the grounds raised by the revenue are dismissed. 11. In the result, the appeal of the revenue in ITA No. 1751/Mum/2011 for Asst Year 2007-08 is dismissed. ITA No. 1739/Mum/2013 - Asst Year 2008-09 - Assessee Appeal 12. Both the parties fairly agreed before us that the Ground Nos. 2(a) to 2(d) raised by the assessee for this asst year is similar to the Ground Nos. 2(a) to 2(d) raised by the assessee for the Asst Year 2007-08 and hence the decision rendered thereon would apply with equal force for Asst Year 2008-09 also except with variance in figures. Accordingly, the Ground Nos. 2(a) to 2(d) raised by the assessee are allowed for statistical purposes. 13. Both the parties fairly agreed before us that the Ground Nos. 3(a) to 3(e) raised by the assessee for this asst year is similar to the Ground Nos. 4(a) to 4(d) raised by the assessee for the Asst Year 2007-08 and hence the decision rendered thereon would apply with equal force fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f returned income. It is well settled that there is no estoppel against the statute. Since the grievance of the assessee had not been adjudicated by the lower authorities by proper findings on facts and figures in the manner known to law, we deem it fit and appropriate, in the interest of justice and fairplay, to restore this issue to the file of ld AO for denovo adjudication in accordance with law. Needless to mention that the assessee be given a reasonable opportunity of being heard. We find that the ld AR had made several arguments with regard to the impugned issue but we refrain to give any opinion on such arguments and all arguments made by the ld AR are left open to be stated before the ld AO afresh. The assessee is also at liberty to adduce fresh evidences, if any, in support of its various contentions. Accordingly, the Ground Nos. 1(a) to 1(c) raised by the assessee are allowed for statistical purposes. 15. In the result, the appeal of the assessee in ITA No. 1739/Mum/2013 for Asst Year 2008-09 is allowed for statistical purposes. ITA No. 1738/Mum/2013 - Asst Year 2009-10 - Assessee Appeal 16. Both the parties fairly agreed before us that the Ground Nos. 2(a) to 2(d) ra ..... X X X X Extracts X X X X X X X X Extracts X X X X
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