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2016 (8) TMI 98 - CALCUTTA HIGH COURT

2016 (8) TMI 98 - CALCUTTA HIGH COURT - [2016] 386 ITR 218 - Addition being the difference between the annual lease rent receivable and received - assessee paid the full amount of lease rent of ₹ 1,18,42,200/- and the three companies, the lessor, the assessee and the sub-lessee were sister concerns - Held that:- There is no denial of the fact that the bona fide of the transaction was never in dispute. There is evidence to show that the assessee resolved to remit the sum of ₹ 1.5 cror .....

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Appears For the Respondent : Mr. S. Bhowmick, Adv. Appears ORDER The Court : The subject matter of challenge in the appeal is a judgment and order dated June 26, 2007, passed by the learned Income Tax Appellate Tribunal, E Bench, Kolkata, in ITA No.762/Kol/2007, pertaining to the assessment year 2002-03, by which an appeal preferred by the assessee was allowed. The aggrieved revenue has come up in appeal which was admitted on March 17, 2008 and the following substantial question of law was form .....

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ows. The assessee is a lessee in respect of the sugar factory at an annual rental of ₹ 1,18,42,200/-. The lessor of the assessee is Shruti Ltd. The assessee, on its part, has let out the factory to M/s. Eastern Sugar and Industries Ltd. at a rental of ₹ 2.25 crores. During the relevant previous year, consequent to the breakdown of the boiler, necessitating extensive repairs and renovations, the assessee agreed to reduce the rental from ₹ 225 lakhs to ₹ 75 lakhs, which is .....

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assessee has failed to justify reason for allowing reduction of lease rent to the lessee-company which belongs to the same group of companies. The lease rent has, therefore, accrued in the hands of the assesseecompany amounting to ₹ 2,25,00,000/- which was receivable as per agreement and ₹ 1,50,00,000/- is added to the total income of the assessee-company being accrued lease rent for the relevant previous year. The CIT(A) agreed with the views of the Assessing Officer and added as f .....

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hat although there was an agreement in existence during the material time because of the changed position due to inability to pay a sum of ₹ 1.5 crore and having agreed upon to pay ₹ 75 lakhs by the lessee company, the Board of Directors, through resolution, altered the conditions stipulated in the agreement in the financial interest of the company as has been brought on record by the Ld. Counsel on behalf of the appellant company. To this factual aspect, there is no denial or rebutt .....

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Mr. Agarwal, learned Advocate appearing for the revenue-appellant, submitted that the head lessor, the assessee and the sub-lessee are all sister concerns. He submitted that if due to breakdown of the boiler, it was necessary on the part of the assessee to reduce the rental payable by the sub-lessee, the assessee, in that case, would have approached the head lessor for proportionate reduction of the rent payable to the former by the assessee. The fact that the assessee did not do any such thing, .....

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erein the following view was taken: Where a trader transfers his goods to another trader at a price less than the market price, and the transaction is a bona fide one, the taxing authority cannot take into account the market price of those goods, ignoring the real price fetched, to ascetain the profit from the transaction. Mr. Bhowmik submitted that even assuming that the assessee has allowed a reduction of rent, the revenue is not entitled to make an addition which the assessee could have earne .....

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