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Income Tax Appellate Tribunal, DELHI BENCH: ‘B’ NEW DELHI
Before: SHRI B. R. R. KUMAR & SH. YOGESH KUMAR US
This appeal is filed by the Revenue against the order dated 29.01.2019 of the Ld. Commissioner of Income Tax (Appeals)–9, New Delhi, [hereinafter referred to CIT (Appeals)] under Section 143(3) of the Income Tax Act, 1961 (the Act) for Assessment Year 2015-16.
The Revenue has raised the following ground of appeal:-
“1. That on the facts and in the circumstances of the case the Ld. CIT (Appeals) erred in disallowing compensation paid to M/s. SSPL amounting to Rs.1,26,00,000/-. “
The Ld.CIT(A) while allowing the appeal held as under:-
“5.1 I have considered the facts of the ground and contention of the AR of the appellant. The appellant has explained that SSPL was the owner of the hotel property which was being managed by the appellant, and the appellant had been a tenant there since 1951 at an annual rent of Rs. 100,000/- only. Over a period of time the relations with landlord deteriorated as the rent remained same and market rent had increased many folds since the hotel has a very prime location.
SSPL the landlord had filed about seventeen cases in various courts of Delhi to get the assessee company vacated.
In 1999 however, the Appellant company and the landlord, in order to buy peace entered into a working arrangement whereby SSPL will withdraw all the cases in various courts and re assessee company will pay compensation for continuing to operate from premises. As per new agreement, the appellant was required to pay, in addition to the rent of Rs. 1,00,000/-p.a. ar. amount equivalent to 5% of the gross operating profit of the Ambassador Hotel, subject to minimum guarantee which is much more than the minimum guarantee, e.g. the minimum guarantee in the year under assessment was 1.26 crores and the 5% of gross profit was only Rs. 57.50 Lacs. The AO held that the compensation paid to SSPL was a case of application of income, being an arrangement of sharing of profit by two contracting parties. An addition of Rs. 1,26,00,000/- was made by relying on the judgment of the Apex Court in the case of Sital Das Tirath Das 33 ITR 367 wherein the Court held that an application of income by the assessee is not deductible for tax purposes.
In this respect, the appellant has argued that the minimum guaranteed amount has been paid by the appellant from 1999 onwards and has been allowed in the assessment of all these years. The case cited by the AO of Sital Das Tirath Das was a case of maintenance money paid by a husband to wife and his children.
The appellant is a company which has paid compensation to the owner of the hotel property, in which business of the appellant is being run and there is no similarly to the facts of the case.
In the factual matrix of the case, It is also noted for the submission that Ld. CIT(A)-13, New Delhi has adjudicated this issue in AY2013-14 in favored of the appellant. Copy of this is placed on record. I am inclined to agree with the appellant that payment of compensation to the landlord as per the terms of a registered agreement being honoured by both parties since 15 years, is a revenue expenditure. The appellant succeeds this ground of appeal.”
Brief facts of the case are that, during the year the assessee was engaged in the business of operating a hotel in the name of Ambassador Hotel situated at Sujan Singh Park, New Delhi. Return of income was electronically filed on 30/09/2015. After that the assessee has filed revised return declaring income of Rs. 6,03,62,899/- on 02/12/2015. The return was revised to claim the MAT credit of Rs. 22,72,283/- is Schedule MATC-Computation of Tax Credit u/s 115JAA since the credit carried forward was omitted to be mentioned in the original return. The case was selected for scrutiny and notice u/s 143(2) was issued on 28/09/2016 and duly served upon the assessee. After the change of incumbent, statutory notices were again issued and served upon the assessee.
Details called for have been filed and the case was discussed. In response to notice u/s 143(2), the authorized representative appeared on behalf of the assessee company and attended the assessment proceedings from time to time and filed submissions and necessary details and discussed the case.
The assessment order came to be passed on 28/11/2017 by assessing the income of the assessee at Rs. 8,22,09,576/- as against the returned income of Rs.6,03,62,899/-. Aggrieved by the same, the assessee has preferred an appeal before CIT(A), the Ld. CIT(A) has allowed the appeal filed by the assessee on 29/01/2019.
Aggrieved by the order dated 29/01/2019 passed by CIT(A), the Revenue Department is in appeal before the Tribunal on the grounds mentioned above.
We have heard the parties, perused the material on record and gave our thoughtful consideration.
The Ld. DR submitted that the Ld. CIT(A) has committed grave error in deleting the addition, further justified and relied on the order of the Ld. A.O.
Per contra, the Ld. Counsels for the assessee submitted that, the assessee had entered into an agreement in the year 1996 with the owners of the property and pursuant to which assessee has been paying the enhanced rent, the enhanced rent paid in the earlier assessment years, no disallowance of rent has been made by the Revenue. When disallowance has been made for the AY 2013-14 by the A.O which has been deleted by the CIT(A). The issue travelled up to the Tribunal by way of Appeal filed by the Revenue in for Assessment Year 2013-14, wherein the Co-ordinate Bench of the Tribunal has dismissed the appeal filed by the Revenue by deciding the issue in favour of the assessee.
We have heard the parties, verified the material on record. On giving our thoughtful consideration, we find force with the contentions of the Ld. Counsel for the assessee. The similar issue has been considered and decided in assessee’s own case for the AY 2013-14 in vide order dated 28/07/2021 wherein the Co-ordinate Bench of this Tribunal held as follows:-
“9. We have heard the rival submissions and perused the materials available on record. The issue in the present ground is with respect to allowability of enhanced compensation. AO had disallowed the expenses but CIT(A) has held that AO was not justified in disallowing the expenses. It is an undisputed fact that the assessee had entered into an agreement in 1996 with the owners of the property and pursuant to which the assessee has been paying the enhanced rent. Before us, Learned AR has pointed out that though the clause of the agreement speaks about the payment of rent in proportion of the gross profit but the said clause has not been triggered by the parties. The aforesaid contention of the Learned AR has not been controverted by Revenue. We further find that assessee has paid enhanced rent pursuant to the agreement entered into in 1996, but in any of the earlier years in the assessments that have been framed, no disallowance of rent has been made by Revenue. We agree with the contention of Learned DR that the principle of res judicata is not applicable to income tax proceedings and each assessment year is an independent but at the same time the Hon’ble Supreme court in the case of Radhasoami Satsang vs
CIT (1992) 193 ITR 321 (SC) has held that even though principles of res judicata do not apply to income tax proceedings, but where a fundamental aspect permeating through different assessment years has been found as the fact one way or the other and the parties have allowed the position to be sustained by not challenging the order, then it would not be appropriate to allow the position to be changed in the subsequent year. We further find that based on 7 the view of disallowance of enhanced rent paid in the year under consideration, no reassessment proceedings for earlier years has been initiated by the Revenue. Considering the totality of the aforesaid facts and relying on the aforesaid decision rendered in the case of Radhasoami Satsang (supra), we find no reason to interfere with the order of CIT(A). Thus the ground of Revenue is dismissed.”
By respectfully following the above order, we find no reason to interfere of with the order of the CIT(A), consequently we dismiss the grounds of appeal of the Revenue.
In the result, the appeal filed by the Revenue is dismissed.
Order pronounced in the open court on : 08 /07/2022.