The Revenue is under legal obligation to be consistent in its approach regarding taxability of any item. It cannot be purely on the whims and fancies of the Assessing Officer.: ITAT Delhi

ITAT Delhi in the case of Gopal Das Estates & Housing Pvt. Ltd. Vs DCIT was concerned with the taxation of the rental income and various other issues involved thereto. Assessing Officer sought an analytical detail of expenses incurred for earning the income from house property out of the total expenses during the year by the company. In response, the assessee submitted that no direct or separate expenditure relatable to the income under the head ‘Income from house property’ was incurred. It was also submitted that no similar disallowance had been made from the year of the establishment of the company in FY 1995-96 to the AY 2010-11. It is further submitted that no similar disallowance has ever been made in any assessments after AY 2010-11.

In appeal before the first appellate authorities, CIT(Appeals) has decided this issue following the decision of the Tribunal at Bombay in the case of Damos Trading Co. Pvt. Ltd. in ITA. No. 1684/Mum/2010. It observed that there is no requirement in law for segment-wise segregation of business expenses source-wise. It relied on the principle in law as decided by the Apex Court in CIT Vs. Chugandas & Co. (1965) 55 ITR 17 (SC) that even if a property is let out in business by an entity, the income from the property will have to be computed in terms of the principles applicable to the computation of income from house property under Chapter IV-C of the Act.

ITAT Delhi observed as under:

We have heard the rival contentions and perused the material available on record and gone through the orders of the authorities below. We do not see any infirmity into the order of Ld. CIT(A) as the Revenue itself has not made any disallowance in other years. Moreover, no reason is assigned for not following Rule of Consistency. The Revenue is under legal obligation to be consistent in its approach regarding taxability of any item. It cannot be purely on the whims and fancies of the Assessing Officer.

 With above observation, the assessee’s appeal

The complete copy of the order is as under:

 

ITAT DELHI

Gopal Das Estates & Housing Pvt. Ltd.

Vs.

DCIT

[ITA Nos. 2576/Del/2015]

These appeals filed by the assessee and the Revenue are pertaining to the Assessment Years 2011-12 and 2012-13 against the orders of the Ld.CIT(A)-4 dated 25.03.2015 and 02.02.2017 respectively. Since the similar grounds have been raised, all appeals of the assessee and the Revenue were taken up for hearing together and are being decided by way of this consolidated order for the sake of brevity.

 ITA No.2576/Del/2015 [Assessment Year : 2011-12]

2. First we take up the assessee’s appeal in ITA No. 2576/Del/2015 pertaining to Assessment Year 2011-12. The assessee has raised following grounds of appeal:

1. “That on the facts & in the Circumstances of the case & in Law CIT (A) has erred in upholding the A.L.V of 10th floor of property Gopal Das Bhawan, 28 Barakhamba Road, New Delhi, at Rs. 1,64,53,100/- as determined by Assessing Offices U/s 23 of Income Tax Act, on the basis of provisional Rateable value fixed by NDMC, as against the actual Rent of Rs 88,92,600/- received by the appellant from tenant M/S ING Vysya Life Insurance Company Pvt. Ltd. in terms of Lease Agreement dt.31.08.2004 Which was always accepted in the past as the A.L.V of the Space.

2. That on the facts & in the Circumstances of the case & in law CIT(A) has erred in not dealing with Ground of Appeal No. 9 of the Appeal before him which reads as under:-

” Whether on the facts and circumstances of the case and in law, the learned assessing authority had made an over pitched assessment disregarding all the cases quoted before him in defiance of the ratio of Hon’ble Supreme Court’s decision in the case of Union of India vs. Kamalakshmi finance Co. Ltd. SLP No. 7717 of 1990 dated 24/09/1991 and committing a judicial impropriety in terms of the ratio of the said decision, a copy which was filed in the proceedings before him. “

3. The facts giving rise to the present appeal are that the assessee Company filed its return of income declaring total income at Rs. 6,60,76,260/- on 30.09.2011. The case of the assessee was selected for scrutiny and the assessment u/s 143(3) of the Income Tax Act, 1961 (“the Act”) was framed vide order dated 31.03.2014. The Assessing Officer while framing the assessment observed that during the year under consideration, the assessee company had been engaged in Real Estate business deriving rental income from property/ies. He recorded that on perusal of the details furnished by the assessee, the assessee had offered income with respect to certain units of Dr. Gopal Das Bhawan and did not offer income for certain Units stating that they were vacant and other were kept for self use. It was further observed that as regard Archna Complex, the assessee offered the income for entire premises, but qua AVG Bhawan, the assessee did not offer any income claimed it, to be vacated. Therefore, the Assessing Officer called upon the assessee as to why higher value of the rent should not be treated as deemed income under the head “Income from house property” with respect to the property which was actually let out, vacant and/or kept for self uses. In response to the query of the Assessing Officer, the assessee duly filed its reply making averments in support of its claim. However, the reply of the assessee was not accepted by the A.O and he made addition of Rs. 4,93,74,921/- as deemed rental “income under the head income from house property.” Further, the Assessing Officer disallowed the expenses amounting to Rs.1,28,15,025/- which were relatable to income under the income from house property and claimed under the head “profits and gains of the business or profession”. In addition to the aforesaid, the Assessing Officer further made disallowance qua the compensation paid for office space in Gopal Das Bhawan of Rs. 37,98,932/-; bank guarantee commission paid to the bank of Rs. 5,06,577/-; disallowance of expenses by invoking section 14A of the Act read with Rule 8D of the Income Tax Rules, 1962 of Rs. 24,67,387/-; additions on account of cessation/remission of liability of Rs.77,24,546/-; difference in income as per Form No. 26AS and profit and loss account of Rs. 1,35,37,730/- and advances received of Rs. 59,87,33,920/- in respect of Ardee City Project Phase-1. Hence, the Assessing Officer computed income of the assessee company at Rs. 75,50,35,298/- against the income declared in the return income at Rs.6,60,76,260/-.

4. Aggrieved against this, the assessee preferred appeal before the Ld.CIT(A) who partly allowed appeal of the assessee. Thereby, the Ld.CIT(A) deleted the addition made in respect of the advances received of Rs. 59,87,33,920/- and found no merit in the addition made by the A.O by disregarding the account of the assessee company and more particularly without rejecting the books of accounts u/s 145(3) of the Act. He further deleted the addition of Rs. 1,28,15,025/- related to the disallowance of the expenses related to house property, however, claimed under the head “profit and gains of the business of the assessee”. The additions made on account of disallowance of compensation, disallowance of bank guarantee commission were also deleted. Further, the Ld.CIT(A) deleted the disallowance made u/s 14A of the Act and addition of Rs. 77,24,546/-made by the Assessing Officer on account of cessation/remission of liability. However, the Ld.CIT(A) in respect of the deemed income from the letting of the properties directed the Assessing Officer to take the rateable value of the property as per the New Delhi Municipal Council (“NDMC”) valuation for one month and then compute the ALV while multiplying it with the number of months which the property was actually let out during the year. It was directed that the ALV in respect of the such property shall thereafter, be computed as per Clause (a) or clause (b) of Section 23 of the Act, whichever was higher. Hence, the Ld.CIT(A) partly allowed the appeal of the assessee.

5. Aggrieved against this, both the assessee and the Revenue are in appeal before this Tribunal.

6. Ground No.1 of assessee’s appeal is against the confirming of addition of Rs.76,51,600/- in respect of rent qua the 10th Floor of Gopal Das Bhawan.

7. Ld. Counsel for the assessee reiterated the submission as made before Ld.CIT(A). He contended that NDMC had provisionally fixed the rateable value which was higher than the actual rent received by the assessee. It was due to the reason that the NDMC had assumed that the space was occupied for all 12 months of the year whereas in the case of the assessee, the space was partly let out during the year. He further contended that against this action of NDMC, a representation had been made for review which was under consideration. It was contended that subsequently, in the Financial Year 2011-12 relevant to Assessment Year 2012-13, the NDMC revised the rateable value of the 2nd floor and in this regard, the assessee’s contention was accepted. It was contended that the method adopted by NDMC did not reflect the rental value. He submitted therefore, the impugned addition deserves to be deleted.

8. On the contrary, Ld. Sr. DR opposed these submissions and supported the orders of the authorities below. He contended that the decision of Ld.CIT(A) is in accordance with law. The assessee has not pointed out any infirmity into the order of Ld.CIT(A).

9. We have heard the rival contentions and perused the material available on record and gone through the orders of the authorities below. We find that Ld.CIT(A) has decided the issue by observing as under:-

13.8. “On careful consideration of the above facts, in my view the provision of section 23, clause (a) and clause (b) when read together, clearly provide for taking as the annual lettable value, higher of the two figures, namely the actual rent received by the assessee and the value at which the property may be reasonably expected to let out. The Ld. A.O. has relied upon the valuation made by the NDMC, which was found to be higher than the actual rent received by the Appellant. On the other hand, the appellant pleads that it had long term agreement with the tenants, who are not related to it in any manner, and therefore, the actual rent received by the appellant alone may assessed as ‘income from house property’ in respect of such let out property. Since the valuation by NDMC is for levy of property tax and not for determining the value at which the property the property may let-out. In my view, the provisions of section 23 are deeming in nature and even though the appellant may be justified to plead that the tenant was not related and the actual rent was received on the basis of written agreements, the provisions of section 23 will apply and therefore, if the annual let-table value as per clause (a) is higher than that as per clause (b), the value as per clause (a) is to be taken. Though the valuation by NDMC is for levy of property tax, however, such value is an approximate proxy for ascertaining annual lettable value. However, it is also evident that in making assessment in respect of rateable value of the said properties, the NDMC has computed the rateable value by taking the rent of full period of 12 months, whereas the property was not actually let-out thought the year. In view of this, the Ld. AO is directed to take the rateable value of the property as per NDMC Valuation for one month and then compute the ALV by multiplying it with the number of months for which the property was actually let out during the year. The ALV in respect of such property shall thereafter, be computed as per clause (a) or clause (b), whichever is higher. In view of the above, the appellant gets part-relief on this ground of appeal.”

10. We find that contention of the assessee was that the issue related to rateable value adopted by NDMC was under consideration for review before the Competent Authority at NDMC. This aspect is not addressed by Ld. CIT(A) therefore, we modify the order of Ld.CIT(A) and direct the Assessing Officer to consider the decision of NDMC in respect of the rateable value revised in the subsequent year and adopt the same for this year as well. This ground of assessee’s appeal is allowed in terms stated herein above.

11. Ground No.2 of assessee’s appeal is against not having decided Ground No.9 by Ld.CIT(A) which was raised before him.

12. Ld. Sr. DR opposed these submissions and supported the order of Ld.CIT(A).

13. We have heard the rival contentions and perused the material available on record and gone through the orders of the authorities below. We find that Ground No.9 was raised by the assessee before Ld.CIT(A) that reads as under:-

9. “Whether on the facts and circumstances of the case and in law, the learned assessing authority had made an over pitched assessment disregarding all the cases quoted before him in defiance of the ratio of Hon’ble Supreme Court’s decision in the case of Union of India vs Kamalakshmi Finance Co.Ltd. SLP No.7717 of 1990 dated 24.09.1991 and committing a judicial impropriety in terms of the ratio of the said decision, a copy which was filed in the proceedings before him?”

14. We find merit into the contention of the Ld. Counsel for the assessee that Ground No.9 was not decided by Ld.CIT(A). We therefore, restore this Ground to Ld.CIT(A) and direct him to decide on merit. This ground of assessee’s appeal is allowed for statistical purposes only.

15. In the result, the appeal of the assessee is partly allowed for statistical purposes.

ITA No.3899/Del/2015 [Assessment Year : 2011-12] 

16. Now, we take up the Revenue’s appeal in ITA No. 3899/Del/2015 pertaining to Assessment Year 2011-12. The Revenue has raised following grounds of appeal:-

1. “Whether on the facts and circumstances of the case & in law, the ld. CIT(A) erred in deleting the disallowance of Rs.1,28,15,025/- made on a/c of expenses not allowable under the head “Income form House Property”.

2. Whether on the facts and circumstances of the case & in law, the ld. CIT(A) erred in deleting the disallowance of Rs.37,98,932/-made on account of compensation paid to allotters.

3. Whether on the facts and circumstances of the case & in law, the ld. CIT(A) erred in deleting the disallowance of Rs.5,06,577/-made on a/c of bank guarantee Commission paid to Bank.

4. Whether on the facts and circumstances of the case & in law, the ld. CIT(A) erred in deleting the disallowance of Rs.24,67,387/ – made u/ s 14A r.w.r. 8D.

5. Whether on the facts and circumstances of the case & in law, the ld. CIT(A) erred in deleting the addition of Rs. 77,24,546/-made u/s 41(1) on a/c of cessation of liability.

6. Whether on the facts and circumstances of the case & in law, the ld. CIT(A) erred in deleting the addition of Rs.1,35,37,730/ – made on account of receipt shown in 26AS but not shown in the profit and loss A/c

. 7. The appellant craves leave, to add, alter or amend any ground of appeal raised above at the time of the hearing.”

17. Ground No.1 in Revenue’s appeal is against the deleting the disallowance of Rs.1,28,15,025/- made on account of expenses not allowable under the head “Income from House property”.

18. Ld. Counsel for the assessee reiterated the submissions as made in the written synopsis. The submissions of the assessee are reproduced as under:-

 Ground No.1 – Expenses incurred for earning rental income. 

“In the Departmental appeal with reference to expenses incurred for earning rental income. The discussion on this point is contained on page 7 of the assessment order. The Assessing Officer sought an analytical detail of expenses incurred for earning the income from house property out of the total expenses during the year by the company. The assessee submitted that no direct or separate expenditure relatable to the income under the head ‘Income from house property’ was incurred. The Assessing Officer, however, averred that after availing statutory deduction u/s 2(24)(a) of the Act the stance of the assessee for rebate u/s 24(a) was not tenable and that pro rata allocation out of total expenses in the ratio of rental income to total income was required to be made and added to the assessed income. So he did. In appeal the Ld. ClT(Appeals) dis-agreed with the view of the Assessing Officer and in terms of the observations contained in page 52 of his order granted relief.

It is submitted that no similar disallowance had been made from the year of the establishment of the company in FY 1995-96 to the AY 2010-11. It is further submitted that no similar disallowance has ever been made in any assessments after AY 2010-11. The Ld. CIT(Appeals) has correctly decided this issue following the decision of the Tribunal at Bombay in the case of Damos Trading Co. Pvt. Ltd. in ITA. No. 1684/Mum/2010. It needs to be emphasized that there is no requirement in law for segment-wise segregation of business expenses source-wise. It is also a principle in law as postulated in by the Apex Court in CIT Vs. Chugandas & Co. (1965) 55 ITR 17 (SC) that even if a property is let out in business by an entity, the income from the property will have to be computed in terms of the principles applicable to the computation of income from house property Under Chapter IV-C of the Act. Being so the objection raised by the Assessing Officer that the deduction as claimed u/s 24(a) would be a duplication of the expenses is erroneous and unsustainable in law. It is only for this reason that in every year since FY 1995-96 to the last assessment u/s 143(3) for AY 2014-15 no such disallowance was ever made. The disallowance as made by the Assessing Officer is on a misconception of facts and law and being so merits to be annulled.”

19. Ld.Sr.DR supported the assessment order and submitted that Ld.CIT(A) was not justified in deleting the disallowance. However, he conceded the fact that no such disallowance was made in any other Assessment Year. However, he contended that every Assessment Year is an independent year.

20. We have heard the rival contentions and perused the material available on record and gone through the orders of the authorities below. We do not see any infirmity into the order of Ld.CIT(A) as the Revenue itself has not made any disallowance in other years. Moreover, no reason is assigned for not following Rule of Consistency. The Revenue is under legal obligation to be consistent in its approach regarding taxability of any item. It cannot be purely on the whims and fancies of the Assessing Officer. The Ground No.1 of Revenue’s appeal is dismissed.

21. Ground No.2 of Revenue’s appeal is against the deletion of disallowance of Rs.37,98,932/- made on account of compensation paid to allottees.

22. At the outset, Ld. Counsel for the assessee submitted that similar disallowance was made in assessee’s own case pertaining to earlier years and the matter was taken upto the stage of Hon’ble Jurisdictional High Court who decided the issue in favour of the assessee. He placed reliance on the decision of Hon’ble High Court of Delhi in assessee’s own case reported at [2019] 103 taxmann.com334 (Delhi).

23. On the contrary, Ld. Sr. DR supported the assessment order and submitted that Ld.CIT(A) was not justified in deleting the addition. However, he could not controvert the submissions of the assessee that this issue is covered in favour of the assessee by the judgement of Hon’ble High Court of Delhi in the case of the assessee, pertaining to earlier Assessment Year.

24. We have heard the rival contentions and perused the material available on record and gone through the orders of the authorities below. We find that the similar issue was decided by the Hon’ble High Court of Delhi in assessee’s own case in ITA Nos. 210 of 2003, 609, 611, 772, 1134 of 2005 & Oths. vide judgement dated 03.2019. Hon’ble High Court has held as under:-

31. “In CIT v. Nainital Bank Ltd. [1966] 62 ITR 638 (ill the Assessee bank had settled the claims of those who had pledged their jewellery with the Bank which was stolen by dacoits. The question was whether such payments could be allowed as business expenditure under Section 10(2)(xv) of the Indian Income Tax Act, 1922? It was acknowledged that:

 “In choosing to compensate its constituents for the loss of their jewellery and maintain its business connections and goodwill, the bank laid out expenditure for the purpose of its business.”

32. It was further explained that:

“The sole question is whether the bank in incurring the expenditure acted in the interest of and for the purpose of its business. The bank is carrying on banking business and advances loans on the security of jewellery. The credit of a banking business is very sensitive: it largely thrives upon the confidence which its constituents have in its management. To maintain that confidence the management has often to make concessions and thereby to preserve the goodwill of the business and its relations with the clientele. The bank could have, if so advised, taken its stand strictly on its legal obligations, and could have recovered the amounts due by the constituents at the same time denying liability to make any compensation for the loss of jewellery pledged with it. But such a stand might very well have ruined its business, especially in the rural areas in which it operated. The bank had evidently two courses open: to enforce its rights strictly according to law, and thereby to lose the goodwill it had built up among the constituents, or to compensate the constituents for loss of their jewellery, and maintain its business connections and goodwill. In choosing the second alternative, in our judgment, the bank laid out expenditure for the purpose of its business. Paying to the constituents the price of the jewellery stolen in a robbery or a burglary was therefore expenditure for the purpose of the business. There can be no doubt that the expenditure was wholly and exclusively in the interest of the business. The expenditure was laid out for no other purpose.”

33. Applying the law explained by the Supreme Court in the above decisions to the case in hand, the plausible conclusion is that the compensation paid by the Assessee to the allottees of the commercial spaces for the surrender of their rights therein cannot be said to be disallowable on the ground of such payment having been made for ‘extraneous considerations.’

34. In Kanga and Palkhivala’s Commentary on the Income Tax Law Volume 1, the distinction between the expressions “for the purpose of earning profits’ and ‘for purpose of the business’ was brought out as under:

“II. Wholly and Exclusively for the Purposes of the Business.

 (a)  Purpose of Business- Before the corresponding section in the 1922 Act was amended in 1939, allowance was given in respect of any non-capital expenditure ‘incurred solely for the purpose of earning such profits or gains.’ Under the present law, the expenditure should be laid out ‘wholly and exclusively for the purposes of the business.’ The two expressions are not synonymous; the latter is wider than the former, Expenditure may be for the purpose of the business although it may not be incurred for the purpose of earning the profits of the business. This is established by the decision of the Supreme Court in Meenakshi Mills Ltd. v. CIT 63 ITR 207. The expression “for the purposes of business” is wider than the expression “for the purpose of earning income.” The former would include within its scope expenditure incurred on grounds of commercial expediency.”

35. In the present case, the Assessee has a plausible explanation for making such payment of compensation to protect its ‘business interests.’ While it is true that there was no ‘contractual obligation ‘ to make the payment, it is plain that the Assessee was also looking to build its own reputation in the real estate market.

36. Further the mere fact that the recipients treated the said payment as ‘capital gains’ in their hands in their returns would not be relevant in deciding the issue whether the payment by the Assessee should be treated as ‘business expenditure.’ As explained by the Madras High Court in CIT v. Sarada Binding Works (lm] 102 ITR 187, it is the point of view of the payer which is relevant.

37. The decision in err v. Mangal Tirth Estates Ltd. [2008] 303 ITR 366/171 Taxman 435 (Mad) was a case where the Assessee therein had also followed the CCM. It was engaged in the business of construction and sale of a multi-storeyed office cum shopping complex. The Assessee had under the development agreement agreed to provide air conditioning to the shops and to also allot car park space. The Assessee claimed deduction on advertisement, sales promotion, legal charges and claimed losses in its return. The AO rejected the claim on the ground that only a portion of the expenditure related to the space already constructed could be allowed. It was held that since the Assessee had maintained the system of accounts on mercantile basis by adopting CCM, the revenue expenditure “normally, must be allowed in its entirety in the year in which it was incurred. The Assessee was held entitled to deduction of the entire legal and advertisement expenses in the year in which it was incurred.” On a similar analogy, in the present case, the payment of compensation is to be allowed in full in the year of payment of such compensation.

38. The result of the above discussion is that the Court holds that the payment made by the Assessee to the allottees of the flats for their surrendering the rights therein should be allowed as business expenditure of the Assessee.

39. This Court accordingly answers the question of law framed in ITA 210 of 2003 the affirmative i.e. in favour of the Assessee and against the Revenue by holding that the conclusion recorded by the ITAT that the compensation of Rs.l1838705 was paid by the Assessee for ‘extraneous consideration’ is perverse and contrary to the record.

40. ITA 210 of 2003 filed by the Assessee is accordingly allowed. Accordingly, the appeals of the Revenue vis-a-vis the said issue would fail. However, the Court proposes to pass separate orders in each of the appeals.”

25. Respectfully, following the above binding precedent, we do not see any infirmity into the order of Ld. CIT(A), the same is hereby affirmed. Thus, Ground No.2 raised by the Revenue is dismissed.

26. Ground No.3 raised by the Revenue is against the deleting the disallowance of Rs.5,06,577/- made on account of bank guarantee commission paid to Bank.

27. Ld. Counsel for the assessee submitted that this issue is covered in favour of the assessee by the judgement of Hon’ble High Court of Delhi vide judgment dated 20.03.2019 in assessee’s own case reported at [2019] 103 taxmann.com334 (Delhi).

28. On the contrary, Ld.Sr.DR supported the assessment order.

29. We have heard the rival contentions and perused the material available on record and gone through the orders of the authorities below. We find that this issue is also decided in favour of the assessee by the Hon’ble High Court of Delhi in assessee’s own case wherein Hon’ble High Court of Delhi has held as under:-

70. “The Assessee’s case appears to be supported by the decisions in SA Builders v. CIT [2007] 288 ITR 1/158 Taxman 74 (SC) which has been followed in Hero Cycles v. CIT [2015] 63 taxrnann.com308/(2016) 236 Taxman 447/379 ITR 347 (SC). The ratio of the decision of the Bombay High Court in CIT v. Lokhandwala Constructions Industries Ltd. [2003] 260 ITR 579/131 Taxman 810 (Bom) was rightly relied upon by the ITAT to allow the plea of the Assessee and treat the said interest payments as revenue expenditure. As explained in CIT v. Bombay Samacltar Ltd. [1969] 74 ITR 723 (Bom) and this Court in Regal Theatre v. CIT [1997] 225 ITR 205/(1998] 100 Taxman 116 (Delhi) and CIT v. Gautam Motors [2011] 334 ITR 326/[2010] 194 Taxman 21 (Delhi) merely because the Assessee was a cash rich company, the payment of interest cannot be disallowed as business expenditure.

71. Further as rightly pointed out, AS 2 would apply in terms of which, with the Assessee following the CCM, the expenditure incurred subsequent to the completion of the project cannot be attributed to work and had to be allowed only as revenue expenditure. Consequently, the question is answered in the affirmative in favour of the Assessee and against the Revenue.”

30. In the light of the binding precedent, we do not see any infirmity into the order of Ld.CIT(A), the same is hereby affirmed. This Ground of Revenue’s appeal is thus, dismissed. 31. Ground No.4 raised by the Revenue is against the deleting of addition 24,67,387/- made by the Assessing Officer by invoking the provision of section 14A of the Act r.w. Rule 8D of the Income Tax Rules, 1962 (“the Rules”).

32. Ld. Sr. DR vehemently argued that Ld.CIT(A) was not justified in deleting the addition.

33. On the contrary, Ld. Counsel for the assessee reiterated the submissions as made in the written synopsis. The submissions of the assessee are reproduced as under:-

Ground No.4 – Disallowance u/s 14A of the Act.

“This concerns a disallowance u/s 14A of the Act. The disallowance is in a sum of Rs.24,67,387/-. The case of the assessee that it had neither divided income nor had it incurred any expenditure relatable to the exempt income was rejected by the Assessing Officer. Assessee also pointed out that it had not incurred even any interest in acquiring the investment during the year. The Assessing Officer, however, after misreading Circular 5 dated 11.02.2014 caused the disallowance. The issue was taken up before the CIT (Appeals) who vide his order in para 17 on internal page 56 of the order, noticing that the assessee had not received any dividend income, vacated the addition. The CIT (Appeals) particularly noted that there was no earning reported by way of dividend income.

By now it is well established by a series of decisions of various High Courts that Section 14A can be invoked only if there is some exempt income. In the absence of any exempt income Section 14A has no play. The decisions are in:

• CIT vs. Lakhani Marketing Incl. (2014) 272 CTR 265 (P&H) 

• ClT vs. Winsome Textile Industries Ltd. (2009) 319 ITR 204 (P&H) 

• CIT vs. Holcim India Pvt. Ltd. (2014) 272 ITR 282 (Del)

• JCIT Vs. Holland Equipment Co. (2005) 3 SOT 810 (Mum);

• CIT Vs. Hero Cycles Ltd. (2010) 323 ITR 518 (P&H);

• CIT Vs. Metalman Auto P. Ltd. (2011) 336 ITR 434 (P&H); 

• Godrej & Boyce Mfg. Co. Ltd. vs. DCIT (2010) 328 lTR 81 (Bom); 

• CIT vs. Walfort Share & Stock Brokers (P) Ltd. (2010) 326 ITR 1 (SC); 

• CIT vs. Delite Enterprises P. Ltd. ITA No. 110 of 2009 (Mum)

• CIT vs. Shivam Motors P. Ltd. (2015) 230 Taxman 63 (All) 

In the circumstances the view taken by the learned ClT (Appeals) is unexceptional and beyond reproach and merits to be confirmed.”

34. We have heard the rival contentions and perused the material available on record and gone through the orders of the authorities below. We find that Ld.CIT(A) gave a finding on fact that the assessee had not earned any exempt income. Therefore, in the light of the judgement of Hon’ble High Court of Delhi in the case of CIT vs Holcim India Pvt.Ltd. [2014] 272 ITR 282 (Del.), we hereby dismiss the ground raised by the Revenue. Thus, Ground No.4 raised by the Revenue is dismissed.

35. Ground No.5 of Revenue’s appeal is against the deleting the addition of Rs.77,24,546/- made u/s 41(1) on account of cessation of liability.

36. Ld. Sr. DR supported the assessment order and submitted that Ld.CIT(A) was not justified in deleting the addition made by the Assessing Officer. He submitted that the assessee failed to provide confirmation from the third party to the fact that liability have not seized to exist.

37. On the contrary, Ld. Counsel for the assessee reiterated the submissions as made before Ld.CIT(A) and also in the Synopsis filed before this Tribunal. The submissions of the assessee are reproduced as under:-

 Ground No.5 – Addition u/s 41 (1) of the Act. 

“In respect of an addition purportedly taken under the aegis of section 41(1) of the Act. The addition is in a sum of Rs.77,24,546/-. The Assessing Officer asked for the details of sundry creditors with their age and finding some of then static and constant for over three years invoked section 41(1) of the Act to cause the addition. Before the Ld. CIT(Appeals) it was submitted that act of the Assessing Officer is patently wrong for it was done half-heartedly and improperly without a specific confirmation of waiver by the creditor. The decisions of the Apex Court in ClT Vs. Sugauli Sugar Works P. Ltd. (1999) 236 ITR 518 (SC) and of the jurisdictional High Court in ClT Vs. Shri Vardhman Overseas Ltd. (2012) 343 ITR 408 were cited on this behalf. The Ld. CIT(Appeals) disagreeing with the view taken by the Assessing Officer in terms of the reasons as contained in para 18 of his order and by following the decisions of the Apex Court and the jurisdictional High Court as cited has deleted the addition. The order of the Ld. CIT(Appeals) being in conformity with law merits to be confirmed.”

38. We have heard the rival contentions and perused the material available on record and gone through the orders of the authorities below. We find that Ld. CIT(A) has decided the issue by observing as under:-

18. “Vide Ground No.6 of the appeal, the appellant had challenged the action of the A.O. of invoking the provision of sec 41(1) whereby addition in respect of existing liabilities with regards three creditors aggregating to Rs.77,24,546/- was made. In holding so the Ld. A.O. has relied primarily on the fact that the appellant could not furnish confirmation from the said creditors in respect of which the liabilities were lying static for more than three years. The appellant, on the other hand have pleaded that such liabilities continued to exist in its books and the appellant has not unilaterally written off such liabilities from its books. Further, being a listed company, such liabilities are acknowledged in favour of creditors, within the meaning of section 18 of the limitation act, 1963.

On careful consideration of the above facts, in my view, the appellant’s case is covered by the decision of Hon’ble Delhi High Court in the case of CIT Vs Shree Vardman Overseas Limited 343 ITR 408, in which following the decision of Hon’ble Supreme Court in the case for CIT Vs Sugauli Sugar Works Pvt. Ltd 236 ITR 518, the Hon’ble High Court has held that as the assessee had not unilaterally written off the accounts of sundry creditors in its books and such liabilities were shown in the balance sheet, such liabilities in respect of the creditors cannot be held to have ceased to exist nor was it remitted by the creditors. The facts of the above cases are no different from the appellant’s case and the finding of the A.O. that the facts of the case are different and distinguishable is not supported by any of the reasoned arguments. Keeping in view the above and following the aforesaid decisions, this ground is also allowed in favour of the appellant.”

39. We do not see any reason to interfere into the findings of Ld.CIT(A) as Ld.CIT(A) has rightly followed the judgement of Hon’ble High Court of Delhi in the case of CIT vs Shree Vardman Overseas Limited 343 ITR 408 (Del.). Moreover, the Assessing Officer has not brought any material to suggest that the liabilities have seized to exist. In the absence of such material, no interference is called for. Ground No.5 raised by the Revenue is thus, dismissed.

40. Ground No.6 is against the deleting the addition of Rs.1,35,37,730/- on account of difference in receipt in Form No.26AS in Profit & Loss Account.

41. Ld. Sr. DR supported the assessment order and submitted that Ld.CIT(A) was not justified in deleting the addition. He submitted that the Assessing Officer has given finding on fact in the assessment order that there was discrepancy in the Profit & Loss Account as per Form No.26AS and there was difference of Rs.1,35,37,730/-.

42. On the contrary, Ld. Counsel for the assessee reiterated the submissions as made in the written synopsis. The submissions of the assessee are reproduced as under:-

Ground No.6 – TDS adjustments. 

“This ground is in respect of the differences noticed in the TDS account as compared from Form 26AS the web portal in a sum of Rs.1,35,37.730/-. The assessee had pointed out in terms of letter dated 06.03.2014 that the differences were on account of a computer error at the Department’s end and that the credits as denoted by 26AS in excess were erroneous. A reconciliation was also provided in support of this plea. The Assessing Officer disagreed with the same. However, before the CIT (Appeals) the same reconciliation with an identical explanation was submitted. The Ld. CIT(Appeals) vide his orders contained in para 19 noticing the errors in the assessment order and after satisfying himself that there was no relationship between the assessee and the nominees for TDS credits as appearing in the Form 26AS directed relief. While doing so the Ld. CIT(Appeals) followed the orders of the jurisdictional High Court On its Own Motion Vs. Union of India & Ors. – 2013 – TIOL – 207 – HC – DEL – IT and CBDT Instruction No. 5/2013 dated 8.07.2013 and also the decision of the Bombay Tribunal in LSG India P. Ltd. granted relief. The order of the Ld. CIT (Appeals) being in accordance with law merits to be confirmed.”

43. We have heard the rival contentions and perused the material available on record and gone through the orders of the authorities below. We find that Ld.CIT(A) has given finding on fact by observing as under:-

19.2. “On careful consideration of the above facts, in my view, income cannot be assessed only on the basis of one source of information, i.e., 26AS statement. The A.O, being a quasi judicial authority, is required to ascertain all relevant facts in order to arrive at a quasi-judicial decision. It is evident that the main reason for the difference between 26AS statement and the income disclosed in P&L Account is on account of the credit shown in TDS statement filed by one M/s Reliance Hyper Realty Limited, which is not even a tenant in any of the properties of the appellant. On perusal of the rent agreement of the appellant with other 2 parties, it is seen that the appellant has offered to tax, rental income as per agreement, for a period of 12 months falling in the current year, however, these parties have shown in their respective TDS Statements, payment for 13 months as rent. Under the circumstances, the A.O. could have made direct enquiries with the tenant or with the TDS Authorities and could have examined the bank statement and the Lease agreement with the tenant and also the extent of income offered by the appellant in respect of same tenants in subsequent assessment years before arriving at the decision. The Ld A.O. has evidently not made such efforts. Keeping in view the above in terms of the decision of Hon’ble Delhi High Court in the case of Court On Own motion Vs Union (supra), the appellant cannot be asked the suffer on account of the errors committed by third party in filing the TDS statement. The Ld A.O. is therefore, directed to carry out enquiry from M/s Sahara and M/s EPCS to verify the actual amount of rental income for the twelve months falling in the period 01.04.2010 till 31.03.2011 and determine income of the appellant accordingly. With regard, one M/s Reliance Hyper Realty Ltd., since that party is not even a tenant, the mistake carried out by it in showing appellant as payee of rental income, cannot be the basis for making addition in the hands of appellant. Accordingly, the appellant gets relief on this ground.”

44. The Revenue has not rebutted the above well-reasoned finding of Ld.CIT(A) by placing any contrary material on records. Therefore, we do not see any ground to disturb the finding of Ld.CIT(A), the same is hereby affirmed. Thus, Ground No.6 raised by the Revenue is dismissed.

45. Ground No.7 raised by the Revenue is general in nature, needs no separate adjudication.

46. In the result, the appeal of the Revenue in ITA No.3899/Del/2015 is dismissed.

47. Now, we take up the assessee’s appeal in ITA No.2523/Del/2017 pertaining to Assessment Year 2012-13. The assessee has raised following grounds of appeal:

1. “That on the facts & in the Circumstances of the case & in Law CIT (A) has erred in upholding the A.L.V of 10th floor Gopal Das Bhawan, 28 Barakhamba Road, New Delhi, at Rs. 1,12,87,400/- ignoring all our submissions & legal citations against the actual rent of Rs 88,92,600/- received by the appellant from tenant M/S ING Vysya Life Insurance Company Pvt. Ltd. in terms of registered Lease Agreement dt. 31.08.2004 and accepted in the past as the A.L.V of the Space.”

48. The ground is identical to the Ground No.1 in ITA 2576/Del/2015 pertaining to Assessment Year 2011-12. The Ld. Representatives of the parties have adopted the same arguments as were in ITA No.2576/Del/2015 [Assessment Year 2011-12].

49. We have decided this issue in para 10 of this order by holding as under:-

10. “We find that contention of the assessee was that the issue related to rateable value adopted by NDMC was under consideration for review before the Competent Authority at NDMC. This aspect is not addressed by Ld. CIT(A) therefore, we modify the order of Ld.CIT(A) and direct the Assessing Officer to consider the decision of NDMC in respect of the rateable value revised in the subsequent year and adopt the same for this year as well. This ground of assessee’s appeal is allowed in terms stated herein above.”

50. We, therefore taking the consistent view, allow the ground raised by the assessee in this appeal. Therefore, our finding on the identical ground raised in ITA No.2576/Del/2015 shall apply mutatis mutandi on the ground raised in ITA No.2523/Del/2017 pertaining to Assessment Year 2012-13.

51. In the result, the appeal of the assessee is partly allowed for statistical purposes.

52. In the final result, both appeals of the assessee in ITA Nos. 2576/Del/2015 [Assessment Year 2011-12] and 2523/Del/2017 [Assessment Year 2012-13] are partly allowed for statistical purposes and the appeal of the Revenue in ITA No.3899/Del/2015 [Assessment Year 2011-12] is dismissed.

Order pronounced in the open Court on 04th February, 2022.