Commissioner Of Income-Tax vs Hindustan Times Ltd.
1987 Latest Caselaw 114 Del

JUDGMENT

Ranganathan, J.

1. These six applications under section 256(2) of the Income-tax Act, 1961, by the Commissioner of Income-tax against the same assessed (M/s. Hindustan Times Ltd.) can be disposed of by a common order since they involve some common questions. The applications relate to the assessment years 1973-74, 1974-75, 1977-78, 1978-79, 1979-80 and 1980-81 respectively.

2. One common question the reference of which is sought in all the applications is whether the assessed is entitled to depreciation in respect of a sum of Rs. 36,96,516 which it claimed as part of the actual cost of a construction put up by it for business purposes. This question arises briefly in the following circumstances :

The assessed purchased an existing residential building bearing No. 18-20 at Kasturba Gandhi Marg, New Delhi, in the year 1961. Since the assessed wanted to use the building for commercial purposes, it paid certain additional charges to the Development Officer of the Government of India and also an extra ground rent in respect of the land. This was in 1962. Later, the assessed demolished the original construction and put up a multi-storeyed structure thereon. But the floor area of the multi-storeyed structure was several times the original area of 51,198 square feet. The assessed applied to the Land and Development Officer for permission to put up this building. This permission was also granted on the assessed's paying a sum of Rs. 36,96,516 as additional premium or commercialisation charges. The assessed claimed that this sum of Rs. 36,96,516 which it had to incur for putting up a building for its offices on the said plot of land forms part of the actual cost of the building and that it was entitled to claim depreciation in respect thereof. This claim of the assessed has been accepted by the Income-tax Appellate Tribunal for the assessment years in question and the Commissioner seeks a reference to this court on the question as to whether the capitalisation of the above expenditure and allowance of depreciation thereon is justified.

3. Counsel for the Revenue contended that the charges in question have been levied by the Union Government in respect of the land which had been leased out to the original lessee from whom the assessed purchased the property and that as per the letters written by the Government of India, it is clear that the additional premium was on account of additional levy on the cost of land of the existing plot "for incentive and remunerative use". He contended, therefore, that the payment related to the land and not to the building which belonged to the assessed and which was a commercial asset. He contended that since the question involved an interpretation of the lease agreement as well as the permission granted by the Government of India for its commercialisation, a question of law was involved and should be directed to be referred to this court.

4. We have heard the counsel at some length but we are of opinion that the conclusion of the Tribunal is patently correct. As the Tribunal has pointed out, the Union of India was the Lesser of the land which had initially been leased out for residential purposes, and when the assessed wanted to convert the use from residential to commercial purposes, it had to pay a premium or commercialisation charges. Commercial use of the land had already been permitted in 1962 and in question of commercialisation for the second time did not arise. The charges, therefore, had been paid by the assessed in order to obtain the permission of the Lesser of the land to put up a multi-storeyed building in place of the original small structure which was there on the land. It is true that, so far as the Union of India is concerned, it was only the Lesser of the land and that any payment or charges it demanded from the assessed was only in its capacity as the Lesser, but so far as the assessed is concerned, we are concerned with the direct object and purpose with which the expenditure in question had been laid out by the assessed. The Tribunal is clearly correct in coming to the conclusion that the sum of Rs. 36,96,516 has been laid out by the assessed in order to acquire permission for constructing an additional space of 3,45,144 square feet for office purposes. In fact this is also made clear by the letter from the Government of India to which counsel for the Department made a reference. In our opinion, therefore, the question raised by the Revenue requires no interpretation of any document which is ambiguous. The payment has clearly been made only to enable the assessed to put up the construction of the business asset and it follows that the payment made by the assessed has to form part of the cost incurred by the assessed in putting up that building. In our view, the conclusion of the Tribunal is patently the only one which can be arrived at in the circumstances and no question of law is involved. We therefore, do not see any justification for calling upon the Tribunal to refer this question for our decision on this aspect.

5. In ITC No. 72 of 1986, this is the only question of which reference is sought. ITC No. 72 of 1986 is, therefore, dismissed.

6. In ITC No. 73 of 1986, the Commissioner seeks reference of another question relating to the deduction of a sum of Rs. 4,12,068. The point involved in this question is already covered by a decision of this court in Addl. CIT v. Rattan Chand Kapoor [1984] 149 ITR 1. There is, therefore, no need to call for a reference so far as this assessment year is concerned. ITC No. 73 of 1986, therefore, stands dismissed.

7. In ITC No. 84 of 1986, three questions have been raised. So far as the first question is concerned, this court has already answered the question against the Department in respect of the assessment year 1978-79 in circumstances almost similar to ITC No. 192 of 1986. Though the assessed claimed the amount as a bad debt, the Tribunal has allowed it as a loss incidental to business. This again is only question of fact and the conclusion of the Tribunal based on facts does not give rise a any question of law.

8. The second question is obviously a question of fact. The conclusion of The Tribunal that the expenses in question were in the nature of repairs and therefore deductible is only based on an appreciation of the facts and does not give rise to a question of law.

9. The third question relates to the commercialisation charges which we have already dealt with. In the circumstances, no reference justified in ITC No. 84 of 1986 and it is hereby dismissed.

10. ITC No. 191 of 1986 raises two questions one of which related to the commercialisation charges which has already been dealt with. So far as the other question is concerned, Counsel for the Revenue states that this question has already been referred by the Tribunal and that the application under section 256(2) of the Act in respect of this proceeds on a misapprehension. In the result, ITC No. 191 of 1986 fails and is dismised.

11. The position in ITC Nos. 193 and 194 of 1986 is also similar and these are also dismissed. This disposes of all the applications. We make no order as to costs.