9911796707
TMI Blog1988 (1) TMI 77X X X X Extracts X X X X X X X X Extracts X X X X ..... a joint stock company in the name of M/s Champa Properties (P) Ltd., the assessee before us. Smt. Champabati held 90 per cent shares of the company and the other co-owners held the balance 10 per cent. The company was incorporated on 20th Sept., 1968. Before the assessee-company was formed, Smt. Champabati by three separate registered deeds of conveyance dt. 6th May, 1966 leased each floor of the building for a term of 20 years w.e.f. 1st Aug., 1966 to three separate partnership firms, viz., Benarsilal Company, Gobind Prasad Company and Krishna Kumar Company, on a monthly lease-rent of Rs. 100 exclusive of both owner and occupiers' share of the municipal rates and taxes payable on the said property. In the lease deeds so executed it w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l have no effect and shall be deemed to have been cancelled." It was expressly agreed upon vide paragraph 9 of each of the aforesaid agreements that "the Lessor shall be liable to pay the said sum of Rs. 3,000 (Rupees Three Thousand) per month to the lessee only as and when the same is received from the incoming tenant and shall not in any manner be deemed to be the personal liability of the Lessor." The assessee company thereafter on and from 1st Aug., 1971 tenanted the entire property (all the three floors of the building) and the appurtenant land to the Government of India, Department of Rehabilitation, Branch Secretariat at Calcutta on monthly basis for a period of one year but renewable for a further period not exceeding 5 years @ Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : "That, on the facts and in the circumstances of the case, the learned CIT(A), erred in deleting the addition of Rs. 72,000 being the amount claimed to have been paid to the 3 (three) lessees although those payments constituted application of income by the assessee-company." 5. The departmental representative stated that in the asst. yr. 1981-82. the CIT(A) did not give any proper reasons in deleting the addition of Rs. 72,000 made in each of the two assessment years under appeal as the only ground given was that the ITO never expressed any doubts in respect of the lease agreements entered originally in 1966 fixing the lease rent of Rs. 1000 per month for each floor for a period of 20 years and also further according to the CIT(A) no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Calcutta High Court decision in the case of (A. Gasper vs. CIT (1979) 12 CTR (Cal) 149 : (1979) 119 ITR, 581 (Cal). In reply, the assessee's learned counsel placed reliance on the agreement dt. 15th June, 1971 which made it clear that the lessees did not surrender their right, title and interest as granted to them by the lessor in the original agreement dt. 6th May 1966 as modified by deed dt. 16th Sept, 1966. He took us through various clauses of the agreement and particularly brought to our notice the following recital made in page 2 viz. that without prejudice to the right, title and interest of the Lessee in the said demised floor under the said lease, the Lessee would concur in the grant of and allow the Le3ssor to let out the entiret ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Lessor to the Lessee. According to the assessee's learned counsel, the amount paid by the assessee to the lessees on the basis of the agreement dt 15th June, 1971 did not form part of the assessee's income at all as the assessee collected the amount payable to the lessees under the agreement as trustees on behalf of the lessees and, therefore, there was a diversion of income before the same reached the assessee. It was pointed out that after the expiry of the lease period the assessee entered into a fresh lease agreement dt. 31st July 1986 with the very same three partner ship firms for a further period of 20 years commencing from 1st Aug., 1986 on monthly rent of Rs. 1375 for each of the three floors as against Rs. 1000 originally fixed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. The first is a case in which the income never reaches the assessee who even if he were to collect it, does so, not as part of his income but for and on behalf of the person to whom it is payable." In the instant case the lease rent payable as per original agreement dt. the May 1966 as modified by deed dt. 16th S ..... X X X X Extracts X X X X X X X X Extracts X X X X
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