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TMI Blog2011 (10) TMI 749X X X X Extracts X X X X X X X X Extracts X X X X ..... under challenge amounts to ₹ 2,87,54,025/-. 4. It was a common stand of the parties before the Bench that facts and circumstances as well as arguments on either side would be identical for both the years on the first issue. 5. The relevant facts as are appearing in the Assessment Order for the year 2006-07 are that the assessee declared a total income of ₹ 59,71,00,000/- odd vide its return dated 27.11.2006. Subsequently, it was revised on 29.02.2009 declaring a total income of ₹ 58,76,00,000/- odd. The Assessing Officer (A.O.) on a perusal of the computation of income filed by the assessee observed that the assessee had declared ₹ 6,95,75,017/- on account of income from house property. On going through the computation of income on record, the said house property, it was observed that the assessee has taken only 75% of actual rent received as gross annual value of the let out portion of the house property. In regard to this, it had given the following note :- The aforesaid amount of rent is exclusive of 25% of the Gross Rent received from the tenants since 25% of the Gross Rent is diverted by overriding title to L DO in terms of Clause XIV-A of ter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been settled by Indian City Property vs. CIT, 55 ITR 262 (Cal), CIT vs. H.G. Gupta Sons, 149 ITR 253 (Delhi). Accordingly the assessee s income from house property was computed as under: Actual rent received ₹ 15,47,14,350/- Less: Municipal Tax ₹ 1,66,42,881/- Net Annual Value ₹ 13,80,71,469/- Less: Standard Deduction u/s 24(a) ₹ 4,14,21,440/- Income from House Property ₹ 9,66,50,028/- 5.4. Similarly in 2007-08 A.Y. the assessee was required to address an identical issue in regard to expenses of ₹ 3,87,54,025/- as having been paid to L DO. The action of the assessee in taking only 75% of the actual rent received from the let out property was questioned wherein identical note in regard to the same as in the earlier years had been given by the assessee in its computation. The assessee therein in the said year filed detailed written submissions vide letter dated 03.11.2009 which is found reproduced at page nos.2 to 4 of the Assessment Order. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ars. It was urged that unless some new fact is brought on record the past accepted practice cannot be deviated from. For the said proposition, reliance was placed upon the following judg3ements :- i) Radha Soami Satsang vs. CIT, 193 ITR 321 (SC) ii) CIT vs. ARJ Security Printers, 264 ITR 276 (Del) iii) CIT vs. Harig Crankshafts Ltd., 173 Taxman 152 (Del) 5.7. Not convinced by the explanation offered in the years under consideration the A.O. was of the view that although it is not denied that there is an agreement between the STC and L DO, however, the payment of 25% of the rent received by the L DO cannot be allowed, as according to him the annual value of the house property is to be determined in terms of section 23 and 24 of the Act which does not provide for such a deduction, as such, the deduction claimed was not allowed. 6. Aggrieved by this, the assessee went in appeal before the CIT(A). 6.1. Before the CIT(A), detailed written submissions were filed which are identical to what was filed before the A.O. in 2007-08 A.Y. The reliance placed in the assessment order on Indian City Property vs. CIT, 55 ITR 262 was stated to be misplaced. It was contended that the fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which worked out to ₹ 15,47,14,350/- (116035763 x 100/75). According to the AO gross rent received from others at Delhi is to be taken as ALV. The rents received at Mumbai Kakinada are returned at 100%. Hence the Assessing Officer was wrong in increasing the said receipts by another 25% for ALV purpose as he has done in respect of the rental receipts at Delhi. 10. The AO concluded that gross rental receipts should be taken as annual value for computing the income from house property. 11. The main contention of the AR is that, as per the agreement 25% of the rent belonged to the Land and Development Officer, New Delhi and it does not have control over the same and the income is diverted at source. The AR relied on the following case laws : 1. J.B. Patel Co. V. Dy. CIT (118 ITD 556) 2. CIT v. H.G. Gupta Sons, 149 ITR 253 3. CIT v. Surat Jilla Kamdar Sahakari Sangh Ltd, 201 ITR 157 4. CIT v. Champa Properties (P) Limited reported in 212 ITR 303 5. Indian City Property v. CIT reported in 55 ITR 262 6. Radha Soami Satsang v. CIT, 193 ITR 321 (SC) 7. CIT vs. ARJ Security Printers, 264 ITR 276 (Del) 8. CIT v. Harig Crankshafts Ltd, 173 Ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was placed upon : CIT vs. Sitaldas Tirathdas, 41 ITR 367 (S.C.); CIT vs. Sunil J. Kinariwala, 259 ITR 10 (S.C.); Ashok Soi vs CIT, 273 ITR 165 (Delhi) (Wherein 74 ITD 235 (M) affirmed; Savitri And Co. vs ITO, 246 ITR 520 (Bom.) 10. The ld. Authorised Representative (A.R.) heavily relied upon the impugned order and contended that the consistent stand of the assessee has been accepted by the department over the years. Reference was made to the chart addressing the position accepted the very same position. The position has been accepted all along in 2001-2002 A.Y. the said order was subjected to reopening and examining the assessment order u/s 147/143(3) the payment of 25% from the gross rentals received was allowed to be made to the L DO the claims and deduction of the said amount was allowed. Similarly in 2002-03 A.Y. and in 2003-04 to 2005-06 A.Ys consistently in the case of the assessee the Assessments Orders have been passed under section 143(1) and these payments have consistently been allowed to the assessee and only for the first time in 2006-07 2007-08 A.Ys. the payments have been disallowed. It was contended that no new fact has emerged. There is no change in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... areful perusal of the facts and circumstances and the position of law, we are of the view that on the issue the grounds raised by the Department in both the years deserve to be rejected. In order to come to the said conclusion we set out our reasons in the subsequent paragraphs. 11.1. Copy of the lease deed entered into by the assessee has been placed at page nos. 32 to 49 of the Paper Book which shows that the lease agreement was executed on 05.12.1975. The undisputed fact on record with which we are concerned with is that Clause XIV-A mandates that in the eventuality a portion of the leased property is let out by the assessee prior permission of the lessor is to be obtained and thereafter from the rent received 25% therefrom must be handed over to the government. For ready reference we reproduce the specific clause. Clause XIV-A : The intended lessee shall not sub-let or give on rent any part of the said land or building constructed on the desired piece of land without prior permission of the lesser. In case of such permission the STC will pay to the Government 25% of the rent fetched in respect of such accommodation as is hired out by the Corporation to organizations othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an overriding charge, is whether the amount sought to be deducted, in truth, never reached the assessee as his income. Obligations, no doubt, there are in every case, but it is the nature of the obligation which is the decisive fact. There is a difference between an amount which a person is obliged to apply out of his income and an amount which by the nature of the obligation cannot be said to be a part of the income of the assessee. Where by the obligation income is diverted before it reaches the assessee, it is deductible; but where the income is required to be applied to discharge an obligation after such income reaches the assessee, the same consequence, in law, does not follow. It is the first kind of payment which can truly be excused and not the second. The second payment is merely an obligation to pay another a portion of one s own income, which has been received and is since applied. 11.3. The said judgement has also been relied upon by the Ld. A.R. 11.4. On a careful consideration of the same, we find that no help can be derived there from by the argument from the principle laid out therein as this was a case where the wife and children of the assessee, who cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 11.8. Reliance has also been placed upon Savitri and Co. vs. ITO, 246 ITR 520 (Bombay) by the Ld. Authorised Representative. A perusal of the facts taken into consideration by their lordships shows that the assessee firm consisting of five partners purchased certain premises and the partnership firm gave the said premises on lease to NABARD. However after a few years, since no rental income was shown by the assessee firm the AO enquired about it and in response it was explained that the partnership deed had been amended by virtue of which the income accruing or arising from the property leased to NABARD was not to belong to the firm but it was to directly belong to the partners in the profit- sharing ratio and appropriate books of accounts of the partners and the books of accounts of the assessee firm in regard thereto have been passed. As such, it was contended that the asset was transferred by book entries to the debit of the capital account of the partners. The lease deed with NABARD it was stated could not be changed in favour of the partners as NABARD did not agree to such a change. On account of these facts that since the lease deed entered into by the partnership firm w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... D.R. We would further refer to the order of the Co-ordinate Bench in the case of Pradip Krishen vs. ITO in order dated 13.03.2009 in ITA No.3760/Del/2007 which has also specifically been relied upon by the ld.A.R. A perusal of the said order shows that by virtue of a will a specific property devolved upon the assessee along with two coowners. The will mandated that in the eventuality the property is rented the rental receipts would be divided equally amongst the co-owners. The record shows that the assessee had got his name substituted as owner in the property in the records of the NDMC and house tax was also paid by him. The rental income was shown by the co-owners in their individual return and PAN etc. stood filed. Considering these facts, the co-ordinate Bench came to the conclusion that in view of the fact that terms of the will are unambiguous in regard to the distribution of the rental income and the genuineness of the will was not doubted. In terms of the said will the rental income had been shared. The mentioning in the preamble of the lease deed the name of the assessee in the interest of executing a proper agreement did not create such a position that the co-owners were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich are found reproduced in paragraph no. 13.2 of the impugned order. In paragraph no.13.3 CIT(A) sets out the details of the investment which had yielded the dividends. Considering the facts taken into consideration wherein the A.O. had not controverted the facts and merely applied Daga Capitals the CIT(A) allowed the claim of the assessee. The arguments considered are set out in para 13.5 to 13.9, namely that the A.O. has made the disallowance relying upon the case law ignoring the fact that no borrowed funds were used; ignoring the fact that investments stood made in the earlier year; and that sufficient evidence was available to prove that there was no direct expenditure. In the years under consideration there was interest expenditure of ₹ 51,34,13,932/- and interest income of ₹ 118,73,56,698/-. As such no net interest expenses stood charged to the Profit Loss account. The disallowance made as such was held to be uncalled for. Reliance was also placed upon the judgment of the Punjab Haryana High Court in the case of CIT vs. Hero Cycle, 189 Taxman 50 (P H) and CIT vs. Winsome Textile Industries Ltd., 319 ITR 204 (P H). The CIT(A) further took note of the fact th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x was payable, the issue was not applicable. However, in 2004-05 and 2005-06 identical disallowance have been made by the A.O. and whereas the CIT(A) had allowed the relief in both the years. In 2004-05 A.Y. no appeal had been filed on this issue by the Department and in 200506 the Departmental appeal stood dismissed for lack of COD approval. In 2006-07, the claim was not disputed by the A.O. hence stands allowed under section 143(3) of the Act. 19. We have heard the rival submissions and perused the material available on record. It is seen that on facts, namely, that the assessee had adequate resources for making investment and the fact that investment which have yielded dividend were made in the earlier years namely April 1997, and the total investment on 01.04.2006 and 31.03.2007 was ₹ 9072.17 crores. In these facts which stand uncontroverted on record the request of the Ld. D.R. to restore the issue to the file of the A.O. cannot be acceded to. The A.O. can be directed to find a reasonable estimate to calculate the probable expenditure incurred where the facts show that some expenses may have been incurred but whereas the facts of the assessee eminently demonstrate tha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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