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2017 (4) TMI 766 - ITAT DELHI

2017 (4) TMI 766 - ITAT DELHI - TMI - Mesne profits - Lease in favour of NTPC Ltd expired. However. NTPC Ltd. did not vacate the premises. - The suit for eviction was decreed. Mesne profits @Rs.40/- per sq. ft. with 24% interest was awarded by the Trial Court. - Held that:- The case is squarely covered by the decision of Special Bench in the case of Narang overseas Pvt. Ltd. (2008 (2) TMI 817 - ITAT MUMBAI) and therefore the mesne profit are not taxable as revenue receipt but has to be treated a .....

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New Delhi vide order dated 16.9.2016 for the A.Y. 2012-13. The assessee has raised the following grounds of appeal:- 1. That on the facts and circumstances of the case and in law, the Commissioner of Income-tax (Appeals)-21, New Delhi [briefly "the CIT(A)"] has erred in upholding the assessment of income at ₹ 14,03,626/- as against declared income of ₹ 3,28,260/-. The Appellant denies his liability to be assessed at the total income of ₹ 14,03,626/-. 2. That on the f .....

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e ground either at or before the hearing of the appeal. 2. The ld. counsel for the assessee did not press ground no. 1 being general in nature and therefore the same is dismissed. The ground no. 2 and 3 on one issue whether mesne profit are taxable as revenue receipt or capital receipts. The Assessing Officer taxed the said mesne profits as revenue profits, which was confirmed by the ld. CIT (A). 3. The ld. counsel for the assessee submitted note written submissions where the relevant dates of t .....

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premises. 16.8.1995 I Suit for eviction was filed by the Appellant. NTPC Ltd vacated the property only on 6.4.1998. 30.4.1998 The suit for eviction was decreed. Mesne profits @Rs.40/- per sq. ft. with 24% interest for the period 10.8.1995 to 6.4.1998 was awarded by the Trial Court. 05.11.2005 On appeal by the NTPC Ltd, the Appellate Court reduced the mesne profits from j ₹ 40/'- per sq. ft. to ₹ 10/- per sq. ft. 23.3.2011 On appeal by the Appellant to the Delhi High Court, the Ho .....

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, reliance was placed on Narang Overseas (P) Ltd. v. AC1T (2008) 111 ITD 1 (Mum-Special Bench). The Special Bench taking into consideration C1T v. P. Mariappa Gounder (1984) 147 ITR 676 (MadLand P. Mariappa Gounder v. C1T (1998) 232 1TR 2 (SC) has made following observations at page 20: "In view of the these judgments, it cannot he said that in the ease of P. Mariappa Gounder (supra), the Hon'ble Supreme Court adjudicated the issue regarding the nature and character of the mesne profits .....

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geable to tax. Accordingly, the contention of Revenue that the issue regarding the nature of mesne profits is covered by the aforesaid decision of the Hon the Supreme Court cannot be accepted dispute that there is a cleavage of opinion expressed by the High Courts on this issue". Discussing all the case laws, including that of P. Mariappa Gounder. the Special Bench held in paragraph 49 (page 45) that: A "In the present case, after the termination of lease. NIHPL was occupying and using .....

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axability of interest from the date of termination of lease. It was observed in paragraph 55 that: "The above discussion clearly reveals that if the interest is paid for deprivation of use of money fallen due to them it is revenue receipt chargeable to lax. On the other hand, if the interest is paid on account of the injury to the capital i.e.. deprivation of use and occupation of the property then it is capital receipt not chargeable to lax. In the present case, it has already been held by .....

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he lease was terminated and mesne profits was on account of damages for deprivation of use and occupation, as in the case of Narang Overseas (P) Ltd (Supra), the Assessing Officer has assessed the mesne profits to tax. Out of ₹ 10,75.365/-, the amount of ₹ 6,93,087/- was charged to tax u/s 25B of the Act, holding that the same w;as in addition to the rent and balance of ₹ 3,82.278/- w as taxed as income from other sources. Appellate proceedings The CIT(A) upheld the assessment .....

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Bench, it would be unfair of the Revenue to pick and choose assessee where it would follow the decision of Special Bench in Narang Overseas P. Ltd. (supra) III. The question whether mesne profits is a capital revenue receipt has not been considered Narang Overseas (P) Ltd (supra) by Hon ble Delhi High Court either in Pal Properties (1) (P) Ltd. v. CIT f2002] 254 ITR 687 or in CIT v. Uberoi Sons (Machines) Ltd. (2012) 211 Taxman 123. In Pal Properties (supra) the questions before the Hon'ble .....

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nt years 1990-91 and 1991-92 as relatable thereto?" In Uberoi Sons (Machines) Ltd. (supra), tenant continued to occupy the premises and mesne profits towards arrears of rent for the assessment years 1992-93 to 1998-99 was sought to be taxed by reopening the assessments. The questions before the Hon'ble Court were: "(i) Whether the ITAT was, in the facts and circumstances of the case, correct in law in quashing the re-assessment order passed by the Assessing Officer under Section 14 .....

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ineers Syndicate (2015) 371 ITR 439 (T&A.P.) 4. The ld. counsel for the assessee further submitted that note of Pal Properties is was relied upon the ld. DR how the same is not applicable in the present case which is reproduced herein below:- Questions considered in Pal Properties (I) (P) Ltd. v. CIT [2002] 254 ITR 687 were as under: "1. Whether the Tribunal i vas right in law in holding that damages or any part thereof for illegal occupation of the premises accrued to the appellant tho .....

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n for three months i.e. April to June, 1989. Assessee s stand that tenancy was valid till June, 1989, hence, no rent has accrued for the later period. The Assessing Officer made addition on account of rent for the period of 9 months i.e. July, 1989 to March, 1990 for the reason that the assessee was entitled to receive rent, inasmuch as. it had filed a suit for possession and recovery of rent and compensation at the market value. For assessment year 1991-92, similar addition on account of rent w .....

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mesne profit connote two different meanings. Taking into consideration the facts of the case, the High Court at page 693 and 694 observed that: "In the instant case, the claim of the appellant against his erstwhile tenant is pending. The Us between the parties being pending adjudication, the fate thereof is unknown. In a given case, having regard to the delay in disposal of the matter, the parties may arrive at a settlement in terms whereof the landlord may give up his right of mesne profit .....

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