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2020 (11) TMI 145 - DELHI HIGH COURTRental income or otherwise - Taxing mesne profit and interest on mesne profit received at the discretion/ directions of Hon’ble Civil Court - unauthorized occupation of immovable property by Indian Overseas Bank, under Section 23(1) - Revenue OR capital receipt - HELD THAT:- Mesne profits, and interest on mesne profits, received by the appellant in pursuance of the court decree, in the facts of the present case, constitute revenue receipt. The tenant, namely, Indian Overseas Bank, did not surrender the tenancy premises despite termination of the tenancy. It is not the Indian Overseas Bank, which received any consideration for surrender of its tenancy. On the contrary, Indian Overseas Bank suffered a decree for its continued use and occupation of the premises of the appellant/assessee, even after the termination of the contractual tenancy. The Indian Overseas Bank was saddled with mesne profits and interest thereon under the courts decree. The income was generated in the hands of the landlord/assessee, and not in the hands of the tenant/ Indian Overseas Bank. The capital asset of the appellant i.e. the property in question was earning revenue for the appellant by way of rent till so long as the lease subsisted. After the termination of the lease, the erstwhile tenant continued to occupy the premises unauthorisedly. It is in lieu of the rent which the appellant would have otherwise derived from the tenant, that the mesne profits and interest thereon have been awarded. So far as the capital asset of the assesse is concerned, the same has remained intact. It is not the appellants case that there was any damage to the property/ capital asset inasmuch, as, the building structure was damaged by the bank, and that damages have been awarded by the Court on account of such physical damage. Even the title of the appellant in respect of the capital asset remained intact. Had it been a case where the capital asset would have been subjected to physical damage, or of diminution of the title to the capital asset, and damages would have been awarded under the head, there would have been merit in the appellant’s claim that damages received for harm and injury to the capital asset, or on account of its diminution, would be a capital receipt. We hold that the ITAT was right in holding that mesne profits and interest on mesne profits received under the direction of the Civil Court for unauthorised occupation of the immovable property of the assessee by Indian Overseas Bank – the erstwhile tenant of the appellant, was liable to tax under Section 23(1) of the Act, since mesne profits, and interest on mesne profits, in the facts of the present case constitute revenue receipt. - Decided in favour of revenue.
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