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TMI Blog1996 (9) TMI 170X X X X Extracts X X X X X X X X Extracts X X X X ..... en submission to explain the return. It was stated that the assessee-company gave away its plant and machinery on lease to Amrit Paper Mills (P.) Ltd. for ten years on a rent of Rs. 10,000 per month from 12-1-1971. It was also noted that the lessee started neglecting payment of rent on certain grounds. A case was instituted being Title Suit No. 423 of 1973 before the Court of Subordinate Judge at Howrah, praying for temporary injunction which was allowed as prayed by the lessee who was allowed to stay till the questions formulated for reference to arbitration were determined. It was also noted that there was no order for payment of arrear or current rent to the lessor. Thereafter, the assessee-company filed a civil revision application (CR No. 3520 of 1974) before the Hon'ble High Court praying, inter alia, for rent, which was yet to be decided. Accordingly, the assessee's representative submitted before the ITO that in view of decisions of several Courts, the lease income had not accrued and the assessee had not shown the income and, therefore, the question of inclusion of rental income did not arise. According to the assessee, the lease rent income would be determined only as and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... posit to the Court of Subordinate Judge every month monthly rent in terms of the agreement subject to the results of the proceedings under section 20. The Commissioner (Appeals) has also noted that the Court has clearly observed that the amount deposited would remain in the Court and neither of the party would be entitled to withdraw the amount except with the order of the Court and until disposal of the proceedings under section 20. The Commissioner (Appeals), therefore, concluded that from the above judgment, the claim of the assessee that it was neither receiving any money nor the money was not accruing to the assessee in respect of the lease rent, was correct. The Commissioner (Appeals), therefore, agreed with his predecessor that the position of the lessor and the lessee was extremely fluid and that the receipt of the lease rent is dependent on the finding of the Court. He, therefore, directed the ITO to consider the issue regarding the taxability of the lease rent after the decision of the Court is finally known. Hence, these appeals by the revenue under consideration. 6. It is submitted by the learned departmental representative that the Commissioner (Appeals) erred in com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... smuch as it was not taken up before the higher authorities by the department and, therefore, the ITO while passing the assessment order in question, failed to take into consideration the order of the Commissioner (Appeals) passed earlier. It is clarified further that the lessee company denied to pay the lease rent to the assessee and in fact, the said lessee filed counter-claims against specific non-performance of the certain terms of the agreement. It is also submitted that the matter is pending before arbitration and that according to the direction given in the judgment, the amount could not be withdrawn. It is pointed out that according to the lessee, the counter-claims against the assessee will be about Rs. 38 lakhs. The assessee's learned counsel, therefore, submits that the question of taxability or otherwise could be considered after the passing of a decree. In this connection, reference is made to the decision as in Addl. CIT v. Ganesh Das [1981] 129 ITR 467 (All.), Salig Ram Kanhaya Lal v. CIT [1982] 133 ITR 915 (Punj. Har.) and Chooharmal Wadhuram v. CIT [1968] 69 ITR 88 (Guj.). In the circumstances, it is urged that the lease rent for the years under consideration has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has become fluid and the verdict of the Hon'ble High Court is being awaited. It is submitted, therefore, that on these premises, the order of the Commissioner (Appeals) who followed the order of the predecessor Commissioner (Appeals) for the earlier year, was quite proper and reasonable and the same requires to be sustained. 10. We have gone through the orders of the authorities below along with other papers placed before us for consideration. As indicated earlier, in the assessment order the method of accounting followed by the assessee was shown as on mercantile basis. The lease agreement also stipulated the payment of lease rent by the 10th of every month by which the rent was due. In other words, the assessee as a lessor has a legal right which is enforceable or recognisable which, in fact, in the present case is an ascertainable claim which can be enforced according to law. Of course, enforceability by legal process is subject to certain qualifications, particularly in the present case, the lessee made counter-claims against the assessee on the strength of the contentions that there were breaches of the terms of the contract for which the lessee had to make payments on acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would not also detract from or efface the accrual of the income, although non-receipt may in appropriate cases be a valid ground for claiming deduction. On the facts of the present case before us, as indicated earlier, the monthly lease rent became payable for every month as per the terms of the lease deed. The lease rent has thus accrued to the assessee. In our opinion, the conclusion of the Commissioner (Appeals) that the receivability of the lease rent is dependent upon the finding of the Court, is not correct, in view of the ratio in the case of Morvi Industries Ltd. Of course, in the present case, there is postponement of receipt of the lease rent by the assessee. But as held in the above cited case, postponement of payment would not affect the accrual of income. In this view of the matter, following the ratio in the case of Morvi Industries Ltd., we are of the opinion that the order of the Commissioner (Appeals) on this point common to all these years cannot be supported. But we have also to keep in mind all the contentions made before us that the lessee has lodged a counter-claim that it had incurred expenditure on behalf of the assessee as a lessor, in respect of certain i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers for inclusion of such amount of rent after 31-3-1988, as according to the learned departmental representative, the litigation which is pending may take more time to be finally decided by the Court. In our opinion, this apprehension is legitimate, as the revenue will be put to loss, if fresh assessment as directed by the Commissioner (Appeals) has to be kept pending and which may not be able to be disposed of by 31-3-1988. In this connection we may refer to the decision of the Hon'ble Supreme Court in the case of ITO v. M.K. Muhammed Kunhi [1969] 71 ITR 815. At this juncture it is necessary also to refer to a decision of the Hon'ble Andhra Pradesh High Court in the case of ITO v. Khalid Mehdi Khan (Minor) [1977] 110 ITR 79, in which amongst other things, the provisions of section 153(2A) and section 244 of the Act were dealt with and considered. At page 83 (middle portion), it was observed that it is obvious that the provisions contained in sub-section (2A) shall have to be an additional factor which the Tribunal has to take into consideration while passing an order of stay or other interlocutory order pending the appeal before it. It was also observed in that decision that it i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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