9911796707
TMI Blog2020 (12) TMI 520X X X X Extracts X X X X X X X X Extracts X X X X ..... nal (in short 'the Tribunal') in ITA No. 2244, 2245 & 5126 to 5141/del/2014 for assessment year 1992-93 to 2010-11. The learned DR also could not controvert this fact but relied on the order of the lower authorities. 3. We have heard rival submission of the parties on the issue in dispute and perused the relevant material on record. In the instant case the assessee was engaged in the business of manufacturing and sale of "Katha" and "Cutch". The assessee has taken factory on lease from "Mehta Charitable Prajnalaya Trust" (in short 'MCPT'). This trust was also engaged in same business, however, surrendered its certain business rights in favour of the assessee. Payment for surrender of such business rights was not paid separately by the assessee and it was paid in the form of enhanced lease rentals per month. The assessee treated entire lease rental per month as revenue expenditure whereas the Revenue treated part of the enhanced lease rental as capital expenditure. In earlier years, this dispute went before the Hon'ble Delhi High Court. The Hon'ble court laid down test for treating part of the enhanced lease rental as revenue expenditure and balanced part for treating capital expen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 1996-97 81,00,000 26,99,251 12,00,000 24,01,332 13,82,514 18,33,619 70,24,262 10,75,756 1997-98 81,00,000 26,99,251 12,00,000 27,65,445 13,82,514 20,07,813 74,72,509 6,22,491 1998-99 81,00,000 26,99,251 12,00,000 30,09,644 13,82,514 21,98,555 79,67,450 1,32,550 1999-00 94,50,000 26,99,251 12,00,000 34,07,305 13,82,514 24,07,418 85,13,974 9,36,026 2000-01 99,22,500 26,99,251 12,00,000 37,82,108 13,82,514 26,36,123 91,17,482 8,05,018 2001-02 1,04,18,628 26,99,251 12,00,000 41,98,140 13,82,514 28,86,554 97,83,945 6,34,683 2002-03 1,09,39,560 26,99,251 12,00,000 46,59,936 13,82,514 31,60,777 1,05,19,964 4,19,506 2003-04 1,14,86,544 26,99,251 12,00,000 51,72,529 13,82,514 34,61,051 1,13,32,831 1,53,713 2004-05 1,14,86,544 26,99,251 12,00,000 57,41,507 13,82,514 37,89,851 1,22,30,609 (7,44,065) 2005-06 1,14,86,544 26,99,251 12,00,000 63,73,072 13,82,514 41,49,887 1,32,22,210 (17,35,666) 2006-07 1,14,86,544 26,99,251 12,00,000 70,74,110 13,82,514 45,44,126 1,43,17,487 (28,30,943) 2007-08 1,14,86,544 26,99,251 12,00,000 78,52,263 13,82,514 49,75,818 1,55,27,332 (40,40,788) 2008-09 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 276 2003-04 1,02,06,544 57,99.501 8,78,062 9,21,676 35,99,239 66,87,305 2004-05 1,02,86,544 17,99,501 9,81,965 9,21,676 37,03,142 65,83,402 2005-06 1,02,86,544 17,99,501 10,91,064 9,21,676 38,12,241 64,74,303 2006-07 1,02,86,544 17,99,501 12,05,617 9.21,676 39,26,794 63,59,750 2007-08 1,02,85,544 17.99.501 13,25,898 9.21,676 40,47,075 62,39,469 2008-09 1,02.86.544 17.99,501 14,52,193 9,21,676 41,73,370 61,13,174 2009-10 1,02,86,544 17,99,501 15,84,802 9,21.676 43,05,979 59,80,565 2010-11 1,02,86,544 17,99,501 17,24,042 9,21,676 44,45,219 58,41,325 2011-12 1,02,86,544 17,99.501 18,70,244 9,21,676 45,91,421 56,95,123 2012-13 1,02,86,544 17,99,501 20,23,756 9,21,676 47,44,933 55,41,611 3.2 We find that for the relevant assessment year 2012-13 the assessee has computed negative figure of Rs. 1,22,77,352/- towards capital expenditure whereas the Assessing Officer has worked out amount of Rs. 55,41,611/- towards capital expenditure. In the year under consideration, the Ld. CIT(A) has followed finding of his predecessor for assessment year 2011-12. In assessment year 2011-12 the authorities have followed their fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per year. 15. Before us, the learned counsel submitted that the normal appreciation in rent in the case of commercial property is more than 10%, whereas the learned DR submitted that assessee could not produce any evidence from any competent local authority which can supply input, and therefore, such an escalation of 10% or 11% is not supported by any proper evidences. 16. From the judgment of the Hon'ble High Court, it is seen that the Hon'ble High Court held that the portion attributable to normal appreciation in line the lease rental prevailing in the market should be allowed for which the assessee has claimed should be 10% to 11% of the lease rent charged on last year as a escalation and Assessing Officer has restricted to 5%. Since, it is lease of a commercial property; therefore, the annual escalation would normally be more than the residential property. The assessee has given a comparison of property taken on lease with HPMC to show that comparatively assessee is paying more HPMC, and therefore, keeping in that benchmark the escalation of 10% to 11% is reasonable. Though, both the parties have been unable to give annual rate prevailing in the market, however, on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out. The basis given by the Assessing Officer that 12% on interest on investment should be given into account. If one goes by SBI Prime Lending Rate right from the Assessment Years 1992-93 to 2010-11, it is seen that it ranges between 10.25 to 17%. The average of which worked out to more than 15%, because up till Assessment Year 1998-99 the PLR rate was more than 13% and after 2006-07 also it is ranging between 12 to 14%. Thus, 12% rate as taken by the Assessing Officer seems to be on a very lower side even though this could not be proper base. Since substantial investment was done by the Trust in various years, therefore, looking to quantum of investment made and escalation over the period of time the rate of 18% claimed by the assessee seems to be quite reasonable and accordingly, we direct the Assessing Officer to take rent attributable to improvement and modernization of plant and machinery, building, etc during the Assessment Years 1989-90 to 1995-96 @18%. 21. Another very important submission made by Mr. K. Sampath before was that the capital expenditure attributable to 'noncompete fee' or amount received for not carrying out any activity in relation to business or profes ..... X X X X Extracts X X X X X X X X Extracts X X X X
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