ITO Ward-18 (1), v. Yamuna Holding & Trading Co. (P) Ltd,

ITA 1182/DEL/2008 | 2002-2003
Pronouncement Date: 15-01-2010 | Result: Dismissed

Appeal Details

RSA Number 118220114 RSA 2008
Assessee PAN FYEAR2005V
Bench Delhi
Appeal Number ITA 1182/DEL/2008
Duration Of Justice 1 year(s) 9 month(s) 11 day(s)
Appellant ITO Ward-18 (1),
Respondent Yamuna Holding & Trading Co. (P) Ltd,
Appeal Type Income Tax Appeal
Pronouncement Date 15-01-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted I
Tribunal Order Date 15-01-2010
Date Of Final Hearing 10-12-2009
Next Hearing Date 10-12-2009
Assessment Year 2002-2003
Appeal Filed On 03-04-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : C NEW DELHI BEFORE SHRI G.E VEERABHADRAPPA VICE PRESIDENT AND SHRI RAJPAL YADAV JUDICIAL MEMEBR I.T.A NO. 1182/DEL/08 ASSESSMENT YEAR - 2002-03 ITO WARD 18 (1) NEW DELHI. VS. M/S. YAMUNA HOLDING & TRADING CO. (P) LTD.. 17 PARLIAMENT STREET ALLAHABAD BANK BUILDING NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY : MRS. ANUSHA KHURANA DR RESPONDENT BY : SHRI O.P. SAPRA ADVOCATE ORDER PER RAJPAL YADAV JM: REVENUE IS IN APPEAL BEFORE US AGAINST THE ORDER O F LD. CIT(A) DATED 4 TH MAY 2006 PASSED FOR ASSTT. YEAR 2003-04. THE FIRST GROU ND OF APPEAL RELATES TO DELETION OF RS. 2 04 625/- WHICH HAS BEEN ADDED BY THE AO WITH THE AID OF SECTION 41 (1) OF THE INCOME TAX ACT. ITA NO. 1182/DEL/08 & AS STT. YEAR 2002-03 2 2. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE HA S FILED ITS RETURN OF INCOME ON 29 TH OCTOBER 2002 DECLARING A LOSS OF RS. 34 830/-. ON SCRUTINY OF THE ACCOUNTS LD. AO FOUND THAT ASSESSEE HAS BEEN SHOWING EXPENSES ON GROUND RENT PAYABLE TO M/S. BST MANUFACTURING. LTD. AMOUNTING TO RS. 2 04 625/ -. ACCORDING TO HIM ASSESSEE HAS NOT PAID GROUND RENT SINCE FINANCIAL YEAR 1993- 94 UPTO 2000-01. THUS IN THE OPINION OF AO THE LIABILITY TO PAY HAS CEASED AND T HIS AMOUNT DESERVES TO BE TREATED AS INCOME OF THE ASSESSEE U/S 41(1) OF THE INCOME T AX ACT. 3. BEFORE LD. CIT(A) IT WAS CONTENDED THAT THE AMOU NT CONSIDERED BY THE AO IS THE SHARE OF GROUND LEASE RENT PAYABLE BY THE ASSES SEE COMPANY TO M/S. BST MANUFACTURING LTD. IN RESPECT OF LAND AT 17/1 FRIE NDS COLONY NEW DELHI ON WHICH THE ASSESSEE HAD BUILT A FLAT AND LEASED OUT TO M/S APOLLO TYRES LTD. THE RENTAL INCOME FROM THIS PROPERTY HAS BEEN SHOWN AND OFFERE D FOR TAX. THE ASSESSEE HAD PAID GROUND LEASE RENT OF RS. 3 34 344/- AT THE END OF YEAR 2005 VIDE TWO CHEQUES DATED 6 TH OCTOBER AND 31 ST OCTOBER 2000. IT ENCLOSED THE DETAILS OF THOSE CH EQUES. IT WAS CONTENDED THAT LIABILITY TO PAY NEVER CEASED OR STAND REMITTED RESULTING IN ANY BENEFIT ACCRUING TO THE ASSESSEE. IN SUPPORT OF ITS CONTENTION ASSESSEE HAS RELIED UPON THE DECISION OF HONBLE SUPREME COURT IN THE C ASE OF CCIT V. KESARIA TEA CO. LTD. 254 ITR 434 AND POINTED OUT THAT FOR INVOKING SECTION 41(1) CERTAIN CONDITIONS ARE REQUIRED TO BE FULFILLED. ACCORDING TO THE ASSE SSEE THOSE CONDITIONS ARE THAT (I) IN THE COURSE OF ASSESSMENT FOR AN EARLIER ALLO WANCE OR DEDUCTION HAS BEEN MADE IN RESPECT OF A TRADING LIABILITY INCURRE D BY THE ASSESSEE. ITA NO. 1182/DEL/08 & AS STT. YEAR 2002-03 3 (II) SUBSEQUENTLY A BENEFIT IS OBTAINED IN RESPECT OF SUCH TRADING LIABILITY BY WAY OF REMISSION OR CESSATION THEREOF DURING THE YE AR IN WHICH SUCH EVENT OCCURRED. (III) IN THAT SITUATION THE VALUE OF THE BENEFIT AC CRUING TO THE ASSESSEE IS DEEMED TO BE THE PROFIT AND GAINS OF BUSINESS WHICH OTHERWISE WOULD NOT BE HID INCOME. (IV) SUCH VALUE OF THE BENEFIT IS MADE CHARGEABLE T O INCOME AS THE INCOME OF THE PREVIOUS YEAR WHERE IN SUCH BENEFIT WAS OBTAINE D. 4. LD. CIT(A) GONE THROUGH THE RECORD CAREFULLY AND HELD THAT FUNDAMENTAL REQUIREMENT FOR THE IMPOSITION OF PROVISION SECTION 412(1) IS THAT THE ASSESSEE SHOULD OBTAIN EITHER IN CASH OR IN ANY OTHER MANNER WHATSO EVER ANY AMOUNT IN RESPECT OF TRADING LIABILITY BY WAY OF REMISSION OR CESSATION THEREOF THEN ONLY THIS TRADING LIABILITY CAN BE DEEMED TO BE THE PROFIT OF THE BUSINESS. THE AO HAS NOT BROUGHT ON RECORD ANY EVIDENCE FOR FULFILLING THE CONDITIONS OF PROVI SIONS OF SECTION 41(1). IT ALSO EMERGES OUT FROM THE RECORD THAT BEFORE LD. CIT(A) IT WAS CONTENDED THAT RENTAL INCOME RECEIVED FROM M/S. APOLLO TYRES HAS BEEN ASS ESSED AS INCOME FROM HOUSE PROPERTY. 5. WITH THE ASSISTANCE OF LD. REPRESENTATIVE WE HAV E GONE THROUGH THE RECORD CAREFULLY. THE LIABILITY TO PAY GROUND LEASE RENT F OR THE LAND AT 17/1 FRIENDS COLONY NEW DELHI TO M/S. BST MANUFACTURING LTD. HAS NOT B EEN CEASED AND THE DEDUCTION OF THIS AMOUNT WAS NOT CLAIMED BY THE ASSESSEE IN EARLIER YEARS. THE ASSESSEE HAS DULY RECOGNIZED THIS LIABILITY. IT HAS DISCHARGED P ART OF IT AT THE END OF YEAR 2005. ITA NO. 1182/DEL/08 & AS STT. YEAR 2002-03 4 THEREFORE THERE IS NO QUESTION TO APPLY SECTION 41 (1) QUA THIS AMOUNT. LD. CIT(A) HAS RIGHTLY DELETED THE ADDITION. 6. IN GROUND NO. 2 REVENUE IS DISPUTING THE DELETIO N OF RS. 11 52 347/-. THE BRIEF FACTS ARE THAT ASSESSEE HAS RECEIVED A SECURITY DEP OSIT OF RS. 6 34 848/- FROM M/S. APOLLO TYRES LTD. TO WHOM FLAT BELONGING TO ASSESSE E COMPANY WAS LEASED OUT. SIMILARLY A SUM OF RS. 5 17 589/- IS PAYABLE TO REG ENT PROPERTY TOWARDS COST OF THE FLAT. THE AO TREATED BOTH THESE AMOUNT AS A TRADING LIABILITY AND CONCLUDED THAT ASSESSEE HAS NOT DISCHARGED THIS LIABILITY. THEREFO RE THESE AMOUNTS DESERVES TO BE ADDED AS INCOME OF THE ASSESSEE U/S 41(1) OF THE AC T. ON APPEAL LD. CIT(A) HELD THAT SECTION 41(1) IS NOT ATTRACTED BECAUSE NONE OF THE CONDITIONS IS APPLICABLE ON THESE AMOUNTS. SECURITY DEPOSITS RECEIVED BY ASSESS EE FROM A TENANT CANNOT BE A TRADING LIABILITY. SIMILARLY THE COST OF THE FLAT R EQUIRED TO BE PAID TO REGENT PROPERTY IS ALSO NOT A TRADING LIABILITY. 7. WITH THE ASSISTANCE OF LD. REPRESENTATIVE WE HAV E GONE THROUGH RECORD CAREFULLY AND WE DO NOT FIND ANY MERIT IN THIS GROU ND OF APPEAL BECAUSE ASSESSEE HAS NOT CLAIMED DEDUCTION OF BOTH THESE AMOUNTS IN THE PAST. THE SUM OF RS. 6 34 848/- WAS RECEIVED AS A SECURITY DEPOSIT FROM THE TENANT WE FAIL TO UNDERSTAND HOW SECTION 41 (1) WILL BE APPLICABLE TO THIS AMOUN T. AS FAR AS THE AMOUNT PAYABLE TO REGENT PROPERTY IS CONCERNED THAT CONCERN HAS ISSUE D A DEBIT NOTE TO THE ASSESSEE. ACCORDING TO THE ASSESSEE THIS HAS NEVER BEEN ALLOW ED AS A DEDUCTION IN COMPUTING THE INCOME OF THE ASSESSEE. THEREFORE IT CANNOT BE CONSIDERED U/S 41(1). LD. FIRST APPELLATE AUTHORITY HAS EXAMINED THE DETAILS IN THI S REGARD AND DELETED THE ADDITION. ITA NO. 1182/DEL/08 & AS STT. YEAR 2002-03 5 TAKING INTO CONSIDERATION THE ORDER OF LD. CIT(A) W E DO NOT FIND ANY ERROR IN IT ON THIS ISSUE. 8. GROUND NO.3 :- IN GROUND NO. 3 REVENUE IS DISPUT ING THE DELETION OF RS. 47 LACS WHICH HAS BEEN ADDED BY THE AO WITH THE HELP O F SECTION 41(1) OF THE INCOME TAX ACT. THE BRIEF FACTS OF THE CASE ARE THAT ASSES SEE COMPANY TOOK OVER THE LIABILITIES OF ACE CREDIT PVT. LTD. BY PASSING GENE RAL ENTRY AS ON 31 ST MARCH 1998. M/S.ACE CREDIT PVT. LTD. HAS TAKEN A SUM OF RS. 44 LACS FROM M/S. DATA MANAGEMENT SERVICES AND RS. 3 LACS FROM M/S. STANLEY ENTERPRIS ES. ACCORDING TO THE AO THE SUNDRY CREDITORS WERE APPEARING IN THE ACCOUNT OF A SSESSEE AS ON 31 ST MARCH 2000 AND 31 ST MARCH 2001. THE AO CONSIDERED THAT LIABILITY TO P AY THESE AMOUNTS HAS CEASED AND THEREFORE IT IS INCOME OF THE ASSESSEE. IT WAS POINTED OUT BEFORE THE LD. CIT (A) THAT THE LIABILITY RELATING TO THESE CONCER NS IS CAPITAL IN NATURE AND NOT BEING LIABILITY EVER ALLOWED TO THE ASSESSEE AS A TRADING LIABILITY. LD. CIT(A) AFTER TAKING INTO CONSIDERATION THE RETURNS OF THE ASSESSEE IN EARLIE R YEARS IN THE LIGHT OF THE HONBLE SUPREME COURTS JUDGMENT IN THE CASE OF CCIT VS.KES ARIA TEA CO. LTD. (SUPRA) DELETED THE ADDITION. LD. CIT (A) HAS HELD THAT TH ESE WERE NOT THE TRADING LIABILITY AND THERE IS NO EVIDENCE THAT THESE LIABILITIES HAVE BE EN CEASED IN THESE ASSTT. YEARS. 9. ON DUE CONSIDERATION ON THE ORDER OF LD. CIT(A) WE DO NOT FIND ANY ERROR IN IT. THE AO WITHOUT ANALYZING THE TRUE IMPORT OF CONDITI ONS ENUMERATED IN SECTION 41(1) OF THE INCOME TAX ACT HAS MADE THE ADDITIONS. LD. C IT(A) HAS RIGHTLY DELETED THE SAME. IT IS NOT ESTABLISHED ON THE RECORD HOW THESE AMOUNTS WERE TRADING LIABILITY AND HOW THE LIABILITY HAS BEEN CEASED. ITA NO. 1182/DEL/08 & AS STT. YEAR 2002-03 6 10. IN THE NEXT GROUND OF APPEAL THE GRIEVANCE OF R EVENUE IS LD. CIT(A) HAS ENTERTAINED ADDITIONAL EVIDENCE IN VIOLATION OF RUL E 46(A) OF THE INCOME TAX RULES. WITH THE ASSISTANCE OF LD. REPRESENTATIVE WE HAVE G ONE THROUGH THE RECORD THERE IS NO VIOLATION OF RULE 46A. LD. CIT(A) HAS GRANTED SU FFICIENT OPPORTUNITY TO THE AO ON WHATEVER MATERIAL FILED BY THE ASSESSEE DURING THE APPELLATE PROCEEDING HE HAS CALLED FOR THE REMAND REPORT AND REPRODUCED THE REM AND REPORT ON PAGE 11 AND 12. TAKING INTO CONSIDERATION THIS FINDING OF LD. CIT( A) IN PARAGRAPH 4 WE DO NOT FIND ANY VIOLATION TO THE RULE 46A. THEREFORE THIS GROUND OF APPEAL IS ALSO REJECTED. 11. IN THE RESULT APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON 15.1.2010. [ G.E VEERABHADRAPPA ] [RAJPAL YADAV] VICE PRESIDENT JUDICIAL MEMBER VEENA DATED: COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR ITAT TRUE COPY BY ORDER DEPUTY REGISTRAR ITAT