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TMI Blog1992 (9) TMI 114X X X X Extracts X X X X X X X X Extracts X X X X ..... income from sub-letting of leasehold properties should have been taxed under the head 'business' and not under the head 'other sources'. Accordingly, this ground is rejected as not pressed. 5. In ground No. 2 the appellant contends that it is entitled to allowance of depreciation in respect of building and expenditure on property at Dilarjung Road, Calcutta. The assessee had claimed a sum of Rs. 1114 as depreciation on building at No. 6, Dilarjung Road, Calcutta but this was disallowed by the Assistant Commissioner on the ground that the assessee was only a tenant and not an owner of the property in question. The C.I.T. (Appeals) agreed with the I.T.O. and upheld the disallowance. 6. Before me Shri K.V. Singh, the learned Counsel for the assessee, relied on Explanation 1 to section 32(1)(ii) of the Act and submitted that in the light of this provision of law the assessee is entitled to the depreciation allowance in respect of the building. He pointed out with reference to Schedule B of the 52nd Annual Report and Accounts for the year ended 30th June, 1987 that the assessee had claimed total depreciation of Rs. 4,448 in respect of the building (Union), that the Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 4 the appellant objects to the addition of Rs. 14,526 as its income in the year under appeal. This amount represented unclaimed security deposits due to the assessee's tenants which it had written back in its books of account. The assessee claimed that this amount represented capital receipt and that further the assessee's liability continued to subsist to repay the security deposit whenever claimed by the tenants as it was only a unilateral entry passed by the assessee in its books of account. The departmental authorities disagreed with this submission of the assessee and held that taxability of this amount could not be escaped by merely describing it as a capital receipt and by the fact that the said amount still would be refundable by the assessee to the tenants. The departmental authorities pointed out that the tenants to whom these amounts were refundable had left the premises long ago and their whereabouts were not known. They, therefore, concluded that this amount was chargeable to tax and that as it was not relatable to any of the sources such as salary, business, it was chargeable to tax under the head 'other sources'. This was upheld by the C.I.T. (Appeals). 11. Bef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,115.00 (5) Ramdeo Satya Narayan Rs. 405.00 (6) Vishwa Karma Construction Co. P. Ltd. Rs. 1,920.00 ------------------------ Rs. 14,526.13 ------------------------ 14. There is no dispute that these persons were formerly the tenants of the assessee and that these amounts were also received by the assessee as security deposits at the time of commencement of the tenancy. There is also no dispute that these tenants had vacated the premises long back, that they have also not claimed this amount from the assessee over a long period of years and that the appellant now does not know their whereabouts. It is in the above context that the appellant has written back these amounts by debiting the accounts of these parties and crediting its Profit & Loss Account. There can hardly be any dispute that these entries passed by the assessee are purely unilateral entries and are not based on any agreement between the assessee and the six parties referred to above. It cannot also be disputed that these amounts were not received by the assessee in the year of account in order to hold that these amounts were received as income by the assessee during the previous year under appeal. Further, the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,56,529 which was sought to be included in the total income of the assessee under section 41(1) of the Income-tax Act, 1961 in that case. Their Lordships held that section 41(1) of the Act treated as income what had earlier been allowed as a deduction and that it creates a liability to tax only in those cases where an allowance had been actually granted. Though this is a case under section 41(1) of the Act, still the principles of this decision of the Calcutta High Court are equally applicable to the facts of the present case. Admittedly, the security deposits which are refundable by the assessee were not allowed to the assessee in any of the earlier years. Therefore, the question of bringing to charge this amount under section 41(1) does not arise as rightly held by the Assessing Officer. At the same time, the nature of this receipt as a capital receipt does not get altered or affected by the mere unilateral entry passed by the assessee in its books of accounts so as to convert it into a revenue receipt and income of the assessee in the year under appeal. 16. The decision of the Delhi Bench 'E' of the Appellate Tribunal in the case of Omega Bright Steel (P.) Ltd. at pages 417 & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sources'. 18. This was affirmed by the C.I.T. (Appeals) who agreed with the I.T.O. 19. Shri K.V. Singh, the learned Counsel for the appellant, placed before me copies of the two lease deeds dated 6-8-86 executed by the assessee-company in favour of Goutam Engineers Ltd. and submitted that these two lease deeds were for a period of 99 years commencing from 1st August, 1986, that the first lease deed was for the lease of open land measuring 7 Cottahs 4 Chittaks and 20 sq. ft. while the other lease deed was for the lease of a pucca godown measuring 5,230 sq. ft. He pointed out that Rs. 25,000 was reserved as the premium or salami in each of these lease deeds in consideration of which the assessee-company leased out these two properties to the lessee for a period of 99 years. He further pointed out that the monthly rent agreed to be paid under each of these two lease deeds was Rs. 500 payable on the 7th day of the succeeding month. Shri Singh submitted that as per the terms of this lease deed the assessee had received a sum of Rs. 50,000 by two cheques as salami on 6-8-86 from the lessee Goutam Engineers Ltd. and that this amount was credited to the General Reserve as could be seen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... capital nature, the same has been directly credited to General Reserve. " 22. The lessee Goutam Engineers Ltd. had capitalised these payments made to the assessee as could be seen from pages 24 & 31 of the assessee's compilation. At page 24 the following narration is found :--- " Details of Leasehold land as on 31-12-86 - Schedule 'C' 6-8-86 --- Paid by cheque No. 016976 & 016977 both dated 6-8-86 for Rs. 25,000 each to M/s. Atlas & Union Jute Press Co. Ltd. being salami for lease out the land and open space at 1A, K.P. Sinha Street, Cossipore 50,000.00 Registration charges incurred 10,837.00 ---------------- Total Rs. 60,837.00 ---------------- At page 31 which is Schedule 'C' containing the particulars of the fixed assets, the sum of Rs. 60,837 is shown under the head 'Leasehold Land & building'. 23. I have perused copies of the two registered lease deeds dated 6-8-86 at pages 8 to 23 of the assessee's paper book. The first lease deed is for the lease of the vacant land measuring 7 Cottahs 4 Chittaks and 20 sq. ft. while the other lease deed is for the lease of a pucca godown covering an area of 5,230 sq. ft. Both the lease deeds are for a period of 99 years comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontrary, the payment of the premium was the consideration for granting the lease of the vacant land and the godown to the assessee. This was the consideration for bringing about the relationship of landlord and tenant or lessor and lessee, between the assessee-company and Gautam Engineers Ltd. There is no dispute that these two are public limited companies and that they have no connection with each other. There is no material or circumstance which would show that these premium amounts were refundable or were liable to adjustment against any future payment of rent by the lessee. On the contrary, on the expiry of the lease period the lessee was bound to give vacant and peaceful possession of the demised premises to the lessor together with all additions and alterations made thereon. In my view, the two premium amounts received by the assessee do not have any of the characteristics of revenue receipt as contended for the Revenue. 27. In the case of Durga Das Khanna, the Supreme Court held that prima facie premium or salami is not income and that it is for the income-tax authorities to show that facts existed which would make it a revenue payment. This decision followed the principle ..... X X X X Extracts X X X X X X X X Extracts X X X X
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