TMI Blog1996 (12) TMI 106X X X X Extracts X X X X X X X X Extracts X X X X ..... e terms of lease, the assessee was liable to pay ground rent to the D.D.A. On the construction made and completed by the assessee, there was further liability to pay property tax. As per agreement with the flat owners, in thePragatiTower, the assessee is entitled to recover ground rent and property tax. For the past several years, the assessee had been recovering ground rent and property tax from the flat owners. These two receipts were neither shown nor treated as income of the assessee. However, in the period under consideration, the Assessing Officer found that assessee collected ground rent aggregating to a sum of Rs. 1,10,923. No amount was paid to the D.D.A. Likewise assessee collected Rs. 10,622 from the flat owners towards property-tax. The Assessing Officer was of the view that above receipts were of trading nature in the light of decision of Supreme Court in the cases of Chowringhee Sales Bureau P. Ltd v. CIT [1973] 87 ITR 542 and Sinclair Murray Co. P. Ltd [1974] 97 ITR 615. He asked the assessee to show cause why above receipts should not be taxed as such. 4. The assessee in its written reply contended that amounts of rent were collected under clause 6(a) of the agr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e addition on account of ground rent and property tax was accordingly justified. 6. The assessee has brought the issue in appeal before the Appellate Tribunal. 7. We have heard rival submissions of parties at great length. The learned counsel for the assessee Sh. Talwar drew our attention to agreement of assessee with the D.D.A. granting lease of plot to the assessee. He further drew our attention to agreement of assessee with flat owners under which the amounts in dispute were collected. It was claimed that amounts were held by assessee in fiduciary capacity for discharge of a specified statutory liability. It was held as an agent for passing the same to statutory bodies. The amount could not be pocketed by the assessee and, therefore, it was not a trading receipt. Shri Talwar greatly relied upon decision of ITAT, Pune Bench in the case of Sharma Associates v. Asstt. CIT [1996] 217 ITR 1 (AT). The learned representative vehemently opposed above submissions and claimed that amount in question were collected by the assessee in the course of carrying on of its business and was trading receipts. The assessee has never paid any ground rent. Both the amounts were collected to discha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in multi-storeyed building called 'PragatiTower'. These were sold to different flat owners under written contracts which clearly provided that these flat owners were to pay ground rent and property tax on proportionate basis depending upon the area sold to them. Paras 6(a) and 6(c) relating to payment of ground rent and property tax are as follows : "6(a). The ground rent is payable to D.D.A. @ 2 1/2% of premium of the plot, i.e., Rs. 55,80,000 per annum w.e.f.13th April, 1980. This will be borne by the flat owners in proportion to the area of their respective flats and the share payable by each owner will be determined by the promoters on the basis of the total saleable area in the building. 6(c). The property tax will be payable by each flat owner to the Municipal Corpn. ofDelhiw.e.f. the date on which the building becomes ready for occupation irrespective of the date of taking possession of flat. However, if assessment of property tax is not made separately for each flat and a consolidated demand is made by the Municipal Corpn. on the promoters then in that case each flat owner will pay his proportionate share to the Promoters/Corporation Body/Flat owners' Association on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r understanding that it is to be passed on to DDA and to Delhi Municipal Corpn. These are held by the assessee as an agent and in fiduciary capacity. If above position is accepted, there is no difficulty in holding that receipts so held by the assessee cannot be treated as trading receipts. This proposition is well-settled as per decision of Hon'ble Supreme Court in the cases of Sitaldas Tirathdass, Tollygunge Club Ltd and Bijli Cotton Mills (P.) Ltd. In the case of Sharma Associates, the Pune Bench of ITAT has also taken the same view. 11. In the alternative and without prejudice to the above finding, it is held that so long there is liability of the assessee to pay to the D.D.A. as also to the Delhi Municipal Corpn., the ground rent and property tax, the receipts in the hands of assessee cannot be charged to tax unless it is held that amount collected by the assessee is over and above the statutory and contractual liabilities. There is no finding recorded by the revenue authorities that assessee had no liability to pay ground rent or the property tax on the amount collected by the assessee was in excess of above liabilities. Therefore, on this account also, we hold that amounts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hus in the light of decisions noted above, it is held that amounts collected by the assessee under the two heads are not part of trading receipts. 14. For the aforesaid reasons, we hold that addition of collection on account of ground rent and property tax is unjustified. The same is directed to be deleted. 15. In the next ground of appeal, assessee has challenged assessment of rent as business income from flat No. 1309. The facts of the case are that above flat was agreed to be sold to Sh. H.S. Mangat. Shri Mangat is stated to be non-resident and was to make payment to the assessee after obtaining permission from the Reserve Bank ofIndia. It is stated that Reserve Bank ofIndiadid not allow permission to Sh. Mangat to make investment in properties. In the above circumstances, the assessee let out the flat and collected rent of Rs. 1,67,905. The above receipt was shown as income under the head 'House property'. The Assessing Officer assessed above amount as business receipt. The assessee challenged this decision in appeal but remained unsuccessful. Hence this appeal. 16. We have heard rival submissions of parties. It is not in dispute that only an agreement of sale was entered ..... X X X X Extracts X X X X X X X X Extracts X X X X
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