whether it could be spread over the period of 99 years or the same has to be assessed in the hands of assessee in the year in which it enters into lease agreement – Being the revenue in nature, entire amount is taxable in the instant AY itself.

Assessment of trust – assessability of lease premium in the hands of assessee – application of matching principle – Capital gains – transfer of asset – entire lease rent for 99 years has been brought to tax in the year of receipt, then cost of construction plus land cost plus infra cost is to be allowed on proportionate basis – HELD THAT:- Even after 01.04.2002 in the return of income, the assessee had not claimed any such land cost or constructed cost, since it had offered the lease premia in the form of rent in its hands from year to year. It was only after the order passed under section 263 of the Act, lease premia in totality was assessed in the hands of assessee in the year in which the assessee had entered into agreement of lease. The corresponding fall out to which is that the concept of matching principle has to be applied and where the assessee had entered into agreement to lease, then the cost of said assets needs to be allowed as deduction in its hands.

Taxability of lease premium after spread over the period of 99 years – The question which arose was the assessability of lease premium in the hands of assessee i.e. whether it could be spread over the period of 99 years or the same has to be assessed in the hands of assessee in the year in which it enters into lease agreement. The assessee has clearly mentioned that the allotment of land was made by respective State Governments for development of area and has also pointed out that as in the case before the Hon’ble High Court, there was no renewal clause after 99 years in the agreement. Further, in case any lessee surrenders the lease after initial period of 5 years, then 93/99 years premium had to be returned.

Such a liability was contractual liability of assessee. In the facts before the M.P. AUDYOGIK KENDRA VIKAS NIGAM (INDORE) LTD., SPECIAL ECONOMIC ZONE VERSUS ASSTT. COMMISSIONER OF INCOME TAX 3 (I) , INDORE) [2018 (10) TMI 62 – MADHYA PRADESH HIGH COURT] it was noted that land was transferred through the Government of Madhya Pradesh and apart from there, assessee was also authorized to purchase / acquire land of its own. The assessee was undoubtedly, managing and leasing the said land as an independent owner of land, the sums equated as land premium was used for incurring expenditure to develop the land and maintaining industrial infrastructure.

Hon’ble High Court held that there was no denial that the transaction had to be taxed under the Income-tax Act, unless the same is exempted by a particular provision of the Act. The assessee was offering 1/99 of land premium (out of total land premium received by it during the year) as taxable. The assessee claimed that lease premium was not its income before the Hon’ble High Court, so it was decided that the said land premium was the income of assessee to be taxed under the Income-tax Act. Vide para 31 it was held that from the perusal of clauses of memorandum, it was revealed that the assessee was in the business of leasing out of land and getting rental income as well as premium, therefore, the land premium is nothing but a revenue receipt in the form of advance rent, which has loosely been named as land premium.

The assessee itself had offered 1/99th portion of such land premium as revenue receipt to be taxed in the year under consideration, which goes to prove that the nature of receipt is revenue.

The issue thus, has been decided on the basis of income offered by assessee i.e. @ 1/99 of lease premium as advance rent and the appeal has been dismissed.

Tribunal has decided the issue of recognition of revenue receipts while deciding appeal against order passed by Commissioner u/s 263 which is for the instant assessment year itself. The issue of assessability of lease premium has been decided against the assessee. We have in the paras hereinabove decided the alternate issue of allowing deduction of cost / depreciation by following matching principle of accounting. In such circumstances, we find no merit in the pleadings of learned Authorized Representative for the assessee in applying dictate of Hon’ble High Court of Madhya Pradesh. Accordingly, this plea is dismissed. The grounds of appeal on merits are thus, allowed in favour of assessee.

PIMPRI CHINCHWAD NEW TOWN DEVELOPMENT AUTHORITY VERSUS THE ASST. COMMISSIONER OF INCOME TAX, RANGE – 10, PUNE AND VICE-VERSA

ITA Nos.929 to 932/PUN/2014, CO Nos.78 & 79/PUN/2014 And ITA Nos.944 And 945/PUN/2014