Delhi High Court

Assistant Commissioner Of Income ... vs Sitaram Arvind Kumar on 4 November, 1999

Equivalent citations: (2000) 67 TTJ Del 447

ORDER

Krishan Swarup, A.M.

In this appeal against the order of the Commissioner (Appeals)-IX, New Delhi, dated 1-10-1990, for the assessment year 1987-88, the solitary ground taken by the department reads as, under :

"On the facts and in the circumstances of the case the Commissioner (Appeals) was not justified in the absence of copies of agreements in treating the licence-fee paid to M/S Nirmal Towers as revenue expenditure because such a payment gives the licensee a right to use the space for a period of five years thus giving him all enduring benefit."

2. The assessee had obtained right of occupancy in the building belonging to Shri Nirmal Commercial Ltd., described as Nirmal Flat at Bombay, by acquiring 270 equity shares in that company and also making an irrevocable deposit. As per the agreement, the assessee was required to pay 'licence fee' to Shree Nirmal Commercial Ltd. for the purpose of meeting the expenses towards maintenance of the building and for other overheads. During the year under consideration an amount of Rs. 52,126 was paid by the assessee. In turn the assessee had sublet the accommodation to 3 parties from whom he had. during the year under consideration, received an amount of Rs. 84,634. The assessee was required by the assessing officer to file certain details, including copies of agreement with the tenants and justification for payment of Rs. 52,126 to Shree Nirmal Commercial Ltd. According to the assessing officer, the required details were not furnished. He was of the opinion that the assessee was the virtual owner of the flat called Nirmal Flat and it was not possible to verify whether the tenants had undertaken to bear the cost of repairs or not. He further observed that in the absence of copy of agreement between the assessee and M/s Nirmal Commercial Ltd. it was not possible to find out whether the payment by the assessee was for allotment of flat or any other purpose. Finally the assessing officer held that the income from Nirmal Flat was assessable under the head "income from house property" and that the outgoing of Rs. 52,126 was a capital expenditure. Assessment was made accordingly.

2.1. In appeal the learned Commissioner (Appeals) held that lease money received by the assessee was liable to be assessed under the head "Other sources" and that the payment made by him to M/s Nirmal Commercial Ltd. was on revenue account. It would be relevant to refer to the following observations of the learned Commissioner (Appeals) on the second aspect

"As per agreement the appellant has to make the payment of Rs. 4,140 as a licence-fee to M/s Nirmal Towers. The payment of the licence-fee for the first five years and can be reviewed after the expiry of five years. Without the payment of the licence fee, the appellant is not entitled to the space allotted to him. The assessing officer is of the opinion that the payment of licence-fee is of capital nature. After going through the agreement, the licence-fee is to be paid on monthly basis for right to use the space for a period of five years which can be further extended. The licensee has a right to sublet the licensed space subject to various conditions laid down in the agreement. Payment of monthly licence fee entitles the appellant to use the licensed space and, therefore, the payment in anyway is of revenue in nature. The expenditure cannot be treated as a capital expenditure but are of revenue in nature and are essential to earn the income Therefore, I am of the opinion that the payment of monthly licence-fee could be deducted from the income. Since there is a difference between the figure mentioned in the deed and the claim made by the appellant, the assessing officer can verify the exact amount of licence-fee paid and allow same as deduction."

3. The department is aggrieved by the finding of the learned Commissioner (Appeals) that the licence-fee paid to M/s Nirmal Tower was a revenue expenditure.

4. The submission of the learned departmental Representative was that the copies of agreements required by the assessing officer were not placed by the assessee on record and it was, therefore, not possible to verify assessee's version. His other contention was that the shareholding being the basis for allotment of space and a benefit of enduring nature being available, to assessee, the expenditure could riot be said to be of revenue nature.

5. The submission of the learned counsel for the assessee was that full facts were explained to the assessing officer vide letter, dated 20th Jan., 1990, copy placed in the paper-book as annexure-IV. It was also submitted that copies of various agreements available with the assessee were placed on record and it was clearly pointed out to the assessing officer that since the assessee was not the owner of the flat the question of his entering into any lease deed for giving a sublease or tenancy did not arise. It was further submitted that the nature of payment made by the assessee to M/s Nirmal Commercial Ltd. was explained in detail as per para 5 of the aforesaid letter. The learned counsel for the assessee stressed that the same position was continuing right from the year 1968 and deduction for licence-fee paid to M/s Nirmal Commercial Ltd. was all along being allowed. In this connection he referred to the assessment order for the preceding assessment year 1986-87, copy placed on record, in which deduction for licence-fee of Rs. 52,206 was allowed after discussion of the matter. The learned counsel contended that no show cause notice for deviating from the past practice was given to the assessee. He strongly relied on the order of the learned Commissioner (Appeals).

6. We have carefully considered the facts and circumstances of the case, the material to which our attention was invited and the rival submissions, The finding of the learned Commissioner (Appeals) that the income was assessable under the head 'Other sources' has not been challenged by the department. The learned departmental Representative has not been able to point out as to which of the agreements were not made available by the assessee. The department has also riot been able to point out as to how the license-fees paid by the assessee as per the bills received from M/s Nirmal Towers provided any enduring benefit to the assessee so as to be considered to be an expenditure of capital nature. Above all, the deduction for the same expenditure has been allowed in past. It may be true that the doctrine of res judicata or the rule of estoppel is not applicable to income-tax proceedings, yet the rule of consistency does apply to such proceedings. On the facts and in the circumstances of the case we do not find any infirmity in the order of the learned Commissioner (Appeals) and hence we affirm it.

7. In the result, the appeal is dismissed.