THE DASADA TALUKA CO.OP. PURCHASE & SALES UNION LIMITED,,SURENDRANAGAR vs. THE INCOME TAX OFFICER, WARD-1., SURENDRANAGAR

The solitary issue in the ground of appeal of the assessee is confirming the disallowance of rental expenses of Rs. 13,11,244/-.

The fact in brief is that assessee has filed return of income on 13th October, 2010 declaring income of Rs. 2,26,690/-. The case was subject to scrutiny assessment and notice u/s. 143(2) of the Act was issued on 1st Sep, 2011. The assessee was an organization/person engaged in the business of trading of seeds, fertilizer and running petrol pump. During the course assessment on verification of the Profit and Loss A/c, the Assessing Officer noticed that assessee has claimed rent expenses of Rs. 13,11,244/- under the head of petrol pump income which includes lease rent of earlier years i.e. April, 2003, Feb, 2008 and delayed interest. On query, the assessee explained that they have taken Government land on lease and there was dispute for extension of lease of the land. The assessee further submitted that issue of extension of lease period had been settled during the year under consideration as per the order of the Distt. Collector Surendranagar, therefore, the claim of expenses were admissible during the year. The Assessing Officer has not accepted the submission of the assessee stating that assessee has maintained books of account on mercantile system, therefore, a sum of Rs. 13,11,244/- being delayed rent and interest on earlier years were not allowable as business expenditure and same was added to the total income of the assessee.

Assessee has filed appeal before the ld. CIT(A). The ld. CIT(A) has dismissed the appeal of the assessee holding that assessee has not claimed rental expenses, only claimed interest component.

During the course of appellate proceedings before us, the ld. counsel contended that assessee was given on lease the Government land for 30 years, after expiry of lease period there was a dispute relating to further extension of lease period which was only settled during the year under consideration relevant to the assessment year. The ld. counsel has placed the copies of orders of the collector dated 8- 9-2009 and other relevant documents in the paper book. The assessee society was required to pay rent of Rs. 9,64,150/- and delayed interest of Rs. 3,47,094/- totaling to Rs. 13,11,244/- which was paid on 29th August, 2009 in the financial year relevant to the year under consideration. Thereafter, the collector district Surendernagar passed an order on 8th Sep, 2009 renewing the lease of the petrol pump for further period of 15 years. The ld. counsel has also placed reliance on the decision of Saurastra Cement and Chemical (213 ITR 523) (Guj). On the other hand, the ld. Departmental Representative has supported the order of lower authorities.

Heard both the sides and perused the material on record. The assessee is a co-operative society and engaged in the business of running public pump and trading in fertilizer, seeds and cloth. During Page No 4 The Dasada Taluka Co-op. Purchase & Sales Union Ltd. the course of assessment proceedings, the Assessing Officer had disallowed expenses of Rs. 13,11,244/- on the ground that expenses relating to earlier year were not admissible. After perusal of the material on record, it is observed that the Assessing Officer has not considered the material fact of the case that assessee has obtained government land on lease and the issue of renewal of lease was under dispute and the same was determined only by the Distt. Collector, Surendrangar on 8.9.2009 in the financial year relevant to the assessment year under consideration. The assessee society was required to pay rent of Rs. 9,64,150/- and delayed interest of Rs. 3,47,094/- totaling to Rs. 13,11,244/- which was paid by the assessee on 29th August, 2009. On the basis of this payment the district collector, Surendranagar has passed an order on 8th Sep, 2008 renewing the lease of the petrol pump land for further period of 15 years. The ld. CIT(A) has incorrectly stated in his finding that assessee has only claimed the interest component and not claimed the rental expenses of earlier year, after perusal of the material on record, we find that amount of Rs. 13,11,244/- is comprised of lease rent of Rs. 9,64,150/- and interest amount of Rs. 3,47,094/- pertaining to lease rent and interest for the period 2003 to 2008. On perusal of material on record, it is categorically demonstrated that impugned expenses were crystallized during the year under consideration. There is no doubt about the genuineness of the expenditure. Having considered the material on record, we do not find any justification for the disallowance of the Page No 5 The Dasada Taluka Co-op. Purchase & Sales Union Ltd. claim of the assessee without considering the relevant material fact that the impugned liability was crystallized during the year under consideration. Therefore, we allow the claim of the assessee. Accordingly, the appeal of the assessee is allowed.

In the result, the appeal of the assessee is allowed.