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2016 (6) TMI 246 - ITAT CHENNAI

2016 (6) TMI 246 - ITAT CHENNAI - [2016] 48 ITR (Trib) 186 - Revision u/s 263 - treatment to sinking fund from the parties as capital or revenue receipt - Held that:- As in the assessment order there was no discussion whatsoever by the Assessing Officer on the issue relating to sinking fund. There is no application of mind or any enquiry by the Assessing Officer on this issue. Being so, in our opinion, the assumption of jurisdiction under section 263 of the Act is justified.

Regardin .....

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essee from the buyer. This does not a part of the sale consideration received by the assessee so as to be treated as capital receipt and to grant deduction under section 80-IA of the Act.

Thus the transaction is in the nature of charging fees from owners for providing various types of services in the form of maintenance of various routine services and maintenance of the building, consequently, all within the ambit of trading activities, nothing to do with the consideration received by .....

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countant Member) And Duvvuru RL Reddy (Judicial Member) For the Petitioner : R. Vijayaraghavan For the Respondent : Pathlavath Peerya ORDER Chandra Poojari (Accountant Member) 1. These two appeals filed by the assessee are directed against the different order of the learned Commissioner of Income-tax-3, Chennai, dated February 24, 2015, and February 25, 2015, pertaining to the assessment years 2010-11 and 2011- 12, respectively. 2. The common ground in these two appeals is with regard to invokin .....

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ncome-tax invoked the provisions of section 263 of the Act so as to give direction to the Assessing Officer to consider this receipt as revenue receipt and re-frame the assessment. Against this the assessee is in appeal before us. 3. Before us, the learned authorised representative submitted that sinking fund is collected at 1.5 per cent. of the sale value from the owner occupants to whom assessee sold space in earlier years for meeting the expenditure on common facilities used by the co-owners. .....

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e learned authorised representative emphasised that appropriation towards sinking fund is in the nature of collecting funds from the co-owners to meet the future liability and, hence, it cannot be treated as income of the assessee. Further, the learned authorised representative submitted that interest on sinking fund of ₹ 10,62,076 and ₹ 18,67,921 has already been offered to tax in the return of income and, hence, the section 263 order has to be set aside. The learned authorised repr .....

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und from the parties and treated as capital receipt. According to the Commissioner of Income-tax, the receipt from sinking fund from the parties is a revenue receipt in view of the judgment of the Bombay High Court in the case of M. Visvesvaraya, Industrial Research and Development Centre v. CIT [2012] 26 taxmann.com 200 (Bom) wherein held that : "(a) The mere use of the term 'sinking fund' and the manner in which the assessee treats the same in its accounts is not decisive of the m .....

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n respect of the plant and machinery and the equipment in respect of the said facilities originally installed as well as any replacement in respect thereof. (d) The fact that depreciation has been claimed by the assessee in respect of the plant and machinery and other equipment required for extending the facilities indicates that the sinking fund was utilised for acquiring and maintaining the same for the benefit of the assessee. (e) The income was, therefore, used by the assessee and for the as .....

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her hand the learned authorised representative relied in the case of Alpha Services v. Deputy CIT (ITA No. 1063/Del/2011) wherein held that fund collected by the assessee from the flat owners and/or tenants for replacement of capital assets and capital repair which was considered and treated as capital receipt in the accounts by the assessee since its inception, and the same was also accepted by the Department in earlier years, cannot be treated as capital receipt when there is no change in fact .....

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y the Assessing Officer on this issue. Being so, in our opinion, the assumption of jurisdiction under section 263 of the Act is justified. Regarding the pleas of the assessee is that the sinking fund is a part of sale consideration of the property, in our opinion, this plea of the assessee is having no merit since it is an admitted fact the office space sold during the year was not actually owned by the assessee. The transaction has actually taken place between M/s. SCM Microsystems (India) P. L .....

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