TMI Blog2013 (11) TMI 1317X X X X Extracts X X X X X X X X Extracts X X X X ..... DELHI High Court] - Compensation received by the assessee on acquisition of agricultural land was exempt - It is only the enhanced compensation received this year against the acquisition of same land - Its nature cannot be different than the original compensation received by the assessee – Exemption allowed on the enhanced compensation on land – Decided against the Revenue. Recovery of Bad-Debts to be taxable u/s 41(1) of the Income Tax Act - Maintenance charges paid by the assessee on behalf of RPG Home Finance Pvt.Ltd. were debited to the account of RPG Home Finance Pvt.Ltd. in the earlier year. Since they defaulted in making the payment of even the purchase price of the property, the amount debited as maintenance charges to them was treated as bad debt in the year under consideration - Subsequently, a compromise took place and RPG Home Finance Pvt.Ltd. not only made the payment of outstanding purchase consideration but also of the outstanding maintenance charges – Held that:- Maintenance charges have been offered as income in AY 2005-06. Thus, at one hand, when the assessee has claimed the maintenance charges as bad debt, the same is disallowed and when it is recovered, it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld be liable to tax under the income from house property . Before parting, we would also like to deal with the alternate submission by the counsel of the assessee Mr. Pradeep Dinodia that in case this is taxed as income from other sources , then deduction of depreciation and annual repairs would still have to be allowed to the assessee. This would, in fact, make the whole exercise of revenue to change the head of income as purely academic as there would be very marginal difference between the allowance of depreciation and repairs and a notional allowance of 20% in the year under revenue. We agree with the assessee s counsel that there is no gain to the revenue in any case by shifting the head of income from one to the other. 24.4 Further, the A.O. in prior years has himself taxed the rental income of DLF Centre as income from house property and no changes in the facts and circumstances of the case are discernible in the year under review. 24.5 Having considered all the facts and circumstances of the case, the orders of the A.O. as well as the CIT(Appeals) and the arguments both of the learned CIT DR and the AR of the assessee, we are of the considered opinion that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sition of the land in question and even till the date of the award, the assessee had made no attempt to transfer or alter the character of the agricultural land and, hence, the assessee had not taken steps to develop the land in question in its normal line of business with a view to parcel it out into plots for sites to be utilised for housing and commercial buildings. In other words, the agricultural land purchased originally by the assessee for urbanization or conversion into building plots remained agricultural land till the acquisition and payment of compensation. Hence, the first question was answered in the negative, i.e., the profits were not business profits. The same is the position in the case of the present assessment year. Further, the Hon ble ITAT in ITA No.679 for A.Y. 2002-03 vide its order dated 23.02.2009 has also decided the issue in favour of the appellant by holding that the taxability of enhanced compensation received on acquisition of land is covered by the various decisions of the Hon'ble Delhi High Court in assessee s own case for earlier years (some of which are reported at 141 ITR 806, 158 ITR 352, 161 ITR 709, 217 ITR 333) wherein it was held that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see is engaged in the business of real estates for the last many years. The business model of the assessee has been discussed by the AO at page 2 of his order. A firm namely DLF Real Estate Developers, which was subsequently merged with the assessee, sold a property consisting of floor space measuring about 35866 sq. ft. to M/s RPG Home Finance Pvt.Ltd. in November 1995 for an agreed price of Rs.9.14 crores and as per other terms and conditions, as per copy of agreement enclosed at pages 17 to 43 of the Paper Book. The said buyer paid part of the amount and defaulted on certain other conditions including the payment; and therefore the sale of the property went into litigation and was neither completed nor possession handed over to the buyer. Since, on account of non compliance on the payment terms and other conditions, the sale of property went into dispute, the buyer i.e. RPG Home Finance Pvt.Ltd., stopped making further payments in respect of the property towards its purchase price etc. As per terms of sale after the property is constructed and sold, it requires regular maintenance and the buyer of the property are charged maintenance charges a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PB page 165. During the course of assessment proceedings as well as appellate proceedings, all these facts were explained to the AO/CIT(A). With regard to the fact that amount has subsequently been recovered by the assessee and accounted for as its income in assessment year 2005-06, the CIT(A) called for a remand report of the A.O. The intention of the CIT(A) to call for such remand report, as were indicated during the course of appellate hearing, was to understand that if the amount written off in the current year has actually be recovered in assessment year 2005- 06 and has been offered for taxation, then possible he should take a view of allowing this amount as a business loss in the current year. However, the AO in the original assessment order as well as in his remand report and also the CIT(A) has examined the allowability of this amount written off purely from a point of view of section 36(1)(vii) of the Income-tax Act. It has repeatedly been stated in the assessment order/remand report or in the CIT(A) order that the conditions pertaining to writing off of bad debts are not satisfied; therefore, the amount is not allowable. The AO in the remand r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessing Officer, which has been confirmed by the CIT(A) may kindly be set aside and relief may be allowed to the assessee. 12. Learned DR, on the other hand, stated that the deduction claimed by the assessee as a bad debt cannot be allowed and the fact that it was recovered subsequently also shows that it has not become bad. He also submitted that the deduction for expenditure of maintenance charges can also not be allowed because it was not pertaining to this year. He, therefore, submitted that the order of learned CIT(A) should be sustained and ground No.1 of the assessee s appeal should be rejected. 13. We have heard the arguments of both the sides and perused the material placed before us. In our opinion, this matter needs reexamination at the end of the Assessing Officer. It was stated by the learned counsel that the maintenance charges paid by the assessee on behalf of RPG Home Finance Pvt.Ltd. were debited to the account of RPG Home Finance Pvt.Ltd. in the earlier year. Since they defaulted in making the payment of even the purchase price of the property, the amount debited as maintenance charges to them was treated as bad debt in the year under consideration. However, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dered the assessment order and the submission made by the ld.AR. As per the assessment order, the appellant company had shown an amount of Rs.8,38,271/- as written off in respect of expenses incurred on proposed hotel at Qutub Enclave. During the assessment proceedings, the appellant explained that the expenses had been incurred on account of marketing survey, professional fee and other expenses. The project could not ultimately materialize and the project was abandoned. The expenditure written off was claimed as allowable expense u/s 36(1)(vii) of the Act. The AO however held that venturing into a new business as an expenditure on account of investment was part of capital lay out for the new business as the expense has been incurred on preparing project report of the new venture of the assessee company, it is a capital loss and not a loss incidental to the business and the AO did not allow the expense while computing the total income of the assessee. The appellant company vide its letter dated 31.10.2006 has submitted that the expense of Rs.8,38,271/- was incurred by DLF Infrastructure Ltd. in earlier years when the said project was assigned to them. As per debit note dated 12.12. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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