TMI Blog2008 (8) TMI 605X X X X Extracts X X X X X X X X Extracts X X X X ..... 2001-02 and 2002-03 are again directed against the orders of the CIT (Appeals)-III, Trivandrum, dated 30-10-2004, 16-12-2004 and 27-2-2006, respectively. The major issues raised by the assessee are common, which are related to the taxability of arrear rent, if not, taxability of mesne profit, deductions in respect of depreciation and business expenses, granting of credit for the tax deducted at source, etc. There are minor issues for individual assessment years. As the major issues are common in all these appeals, all these appeals are clubbed together for joint hearing and analogous disposal through this common order. 3. First we will take up the appeal of the assessee for the assessment year 1985-86, in ITA No. 22/Coch./2003. 4. The first ground raised by the assessee in this appeal is that the CIT (Appeals) has erred in confirming the order of the Assessing Officer that arrear rent of Rs. 9,31,164 received from Central Bureau of Investigation (CBI) on 24-6-1993 by virtue of Calcutta High Court Arbitration Award in favour of the assessee is taxable as income from house property, under section 23 of the Income-tax Act, 1961. It is also the case of the assessee that withou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h effect from assess-ment year 2001-02 and the impugned assessment year being 1985-86, section 25B is not applicable. When section 25B is not applicable to the case of the assessee, the issue is covered by the judgment of the Calcutta High Court in the case of Hope (India) Ltd. v. CIT [1999] 238 ITR 740 wherein the Court has held that income from house property cannot be computed on the basis of enhanced rent which the tenants agreed to pay after the close of the previous year. He has also relied on the judgment of the same High Court in the case of Hamilton Co. (P.) Ltd. v. CIT [1992] 194 ITR 391 (Cal.) wherein the Court has held that arrears of rent of earlier previous years received in the relevant previous year could not be brought to tax in the year of receipt, as such rent does not shed its character of income from house property and for that reason such receipts cannot be taxed either under the residuary head "Other Sources". The learned C.A. has submitted that this issue of taxability of arrear rent prior to the assessment year 2001-02 has further been deliberated upon by different Benches of Income-tax Appellate Tribunal and unanimously held that arrears of rent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Income-tax Act is inclusive and not exhaustive and receipt not falling within the ambit of any specific clause, may yet be income and accordingly the arrear rent if not brought to tax as income from house property has to be brought to tax under the head "Income from Other sources". 11. Shri G. Vijayan Nair, ld. D.R. further explained the special facts of the present case placed before us. He explained that in the cases considered by the Hon ble Calcutta High Court in the case of Hope (India) Ltd. ( supra ) and Hamilton Co. (P.) Ltd. s case ( supra ), the issue was the rent receivable as per the agreements entered into by the assessees and tenants. The arrear rent has been paid in those cases on the basis of the agreements itself. But in the present case, there was no such agreement on the matter of arrear rent/enhancement of rent whereby the matter was dragged to Arbitration proceedings. The amounts of arrear rent received by the assessee was not the out come of any agreement entered into between the assessee and the CBI but the amounts were paid by the CBI on the basis of the Arbitration Award and due process of law. Therefore, this factual feature of the case is ent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing before 1-4-2001 has already been settled by the judicial pronouncements of Calcutta High Court, as stated above. The Legislature has consciously taken note of this inherent inability, has inserted a new section 25B through the Finance Act, 2000 to be effective from 1-4-2001, applicable to the assessment year 2001-02 onwards. Section 25B is altogether changing the position declared by the Courts before 1-4-2001. The position upto1-4-2001 has been well settled. Such being the case, it is not possible in law to hold that section 25B is clarificatory in nature and retrospective in operation. We hold that it has only prospective operation. 13. Regarding the basic question whether rent arrears brought to tax or not prior to 1-4-2001, as already stated, is settled by the judgment of the Calcutta High Court, it does not call for any further elucidation. 14. The argument of the ld. D.R. that the facts of the present case are different, arrear rent has been paid on the basis of an Arbitration Award, any how does not change the character of the issue. Arbitration is one of the lawful methods available to settle the dispute. Parties can go before the Civil Court or Rent Court. Part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the CIT (Appeals) has erred in not allowing the claim of the assessee for business expenses by way of deduction in computing the taxable income for the impugned assessment year. The fourth issue is that the CIT (Appeals) has erred in bringing to tax the arrear rent of Rs. 51,28,323. The last and fifth issue is that the CIT (Appeals) has erred in upholding the disallowance of the claim of the assessee towards municipal taxes paid. 20. We considered the grounds in detail. We have already adjudicated the issue regarding the taxability of arrear rent in paras 4 to 14 above while disposing of the appeal filed by the assessee for the assessment year 1985-86. Following the said order, we hold that the assessing authority is not justified in taxing the arrear rent received by the assessee for the assessment year 1996-97. Accordingly, the amount of arrear rent included in the computation of taxable income is deleted. This ground is allowed and the issue is decided in favour of the assessee. 21. Another two issues raised by the assessee-company are that, the CIT (Appeals) has erroneously confirmed the disallowance of depreciation allowance and business expenses claimed by the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... computing its taxable income. Except for the fact that the CIT (Appeals) has considered the case of a subsequent assessment year compared to the earlier order of the Tribunal, absolutely there are no changes in the facts and circumstances of the case. The facts and circumstances of the case, which prevailed for the earlier assessment years 1987-88 to 1990-91 and considered by the Tribunal in its earlier order are very much existing for the impugned assessment year 1996-97 and the CIT (Appeals) has grossly erred in by-passing the order of the Tribunal on flimsy grounds. Therefore, in the facts and circumstances of the case and following our earlier order, we hold that the assessee-company is entitled for depreciation allowance and the assessee is also entitled for claiming deduction in its business expenses. These two issues are decided in favour of the assessee. 23. The next issue is the disallowance of municipal taxes paid by the assessee-company and claimed as a deduction. The case of the assessee is that the payment was made in the month of March by way of Cheque but credited in the accounts of the Municipal Authorities in the month of April after the realization of the che ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t year is that the CIT (Appeals) is not justified in holding that the Assessing Officer has erred in not applying the provisions of sections 198 and 199 of the Act and granting credit for the tax deducted at source of Rs. 27,20,256. 29. It is the case of the assessee that the deduction was made under section 194-I by the tenant on the impression that the amount was in the character of income from rent in the hands of the assessee-company, if the amount was deducted by the tenant and paid to the credit of the Central Government. Therefore, new provisions of section 199, the amount so deducted and paid must be treated as a payment of tax on behalf of the assessee from whose income the deduction was made for the assessment year for which income is assessable. 30. The assessee further contends that there is no conclusive presumption that tax is always deducted out of income; that is why the expression Tax deducted at source has been used in the Act, rather than Tax deducted from income . It is important to note that the meaning of the term "income" is not analogous to "taxable income". Similarly, section 199 uses the term "income assessable" and not "taxable income". The inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2005] 277 ITR 469 has considered similar issue. In that case the assessee had diverted its dividend income to the State Government by way of an overriding charge. No tax was deducted on the portion of the dividend income diverted to State Government, as it is not taxable. Therefore, the entire tax deducted at source pertained to the dividends payable to the assessee. The High Court held that the Tribunal was justified in allowing the credit for TDS in respect of dividend. 32. In the facts and circumstances of the case and in view of the above judicial pronouncement, we hold that the assessee must be given credit for the tax deducted at source. The Assessing Officer is directed to do so. This issue is decided in favour of the assessee. 33. The next ground is that the arrears of rent may be treated as mesne profit, which is also not exigible to tax, This ground is rejected as infructuous as the issue has already been decided in favour of the assessee. 34. The last ground raised by the assessee in this appeal is against the jurisdiction of the Commissioner to invoke section 263 to pass revision order impugned in this appeal. As the appeal has been disposed off on merits in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, these contentions are accepted and the Assessing Officer is directed to allow the benefit of depreciation allowance and business expenses to the assessee by way of deduction in computing its taxable income. 44. In the light of our order for the earlier assessment years, again the issue of arrear rent is decided in favour of the assessee and the Assessing Officer is directed to exclude the arrear rent from the computation of taxable income. 45. The third point is in respect of the disallowance of claim of municipal tax. This issue is remitted back to the Assessing Officer so that he may verify the claim of the assessee in the light of the documentary evidence that may be produced, in accordance with law. 46. The last ground is again mesne profit with reference to the arrear rent, which is also not exigible to tax, this ground is rejected as infructuous as the issue has already been decided in favour of the assessee. 47. The assessee is successful in its appeal for the assessment year 1999-2000. 48. Next we will consider the appeal for the assessment year 2000-01 in ITA No. 228/Coch./2005. 49. The first issue for the impugned assessment year is the disallow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learance of cheque was on 8-4-2002. That does not mean that the payment was made after the close of the previous year, for the purpose of Income-tax. The Supreme Court in the case of CIT v. Ogale Glass Works Ltd. [1954] 25 ITR 529 has held that when cheque is not dishonoured, but encashed, the payment relates back to the date of receipt of the cheque and in law the date of payment would be the date of delivery of the cheque. Accordingly, we direct the Assessing Officer to give deduction for the amount of Rs. 92,66,907 towards municipal tax. 62. The next ground is regarding the disallowance of carry over and brought forward unabsorbed business losses and unabsorbed depreciation. The Tribunal in assessee s own case has considered the very same issue for the assessment years 1987-88 to 1990-91 in its order dated 19-8-2004 in ITA Nos. 23 to 26/Coch./2003. There is no change in the facts and circumstances of the case. Therefore, the earlier decision is squarely applicable. Accordingly, we direct the Assessing Officer to grant the benefit of carry forward of unabsorbed depreciation and business loss. 63. The last ground is that the CIT (Appeals) has erred in remitting the mat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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