KOLKATA PORT TRUST ,KOLKATA vs. ACIT, CIRCLE - 35, KOLKATA , KOLKATA

2 & CO 23/Kol/2019, ITA No.367/Kol/2018, ITA Nos. 368&369/Kol/2018 & ITA No. 452/Kol/2018 & CO 60/Kol/2018 Kolkata Port Trust., Assessment Year: 2012-13 & 2014-15 ORDER Per Shri A.T.Varkey, JM: All these captioned appeals and Cross Objections preferred by the assessee and the appeals of the revenue are against the separate orders of Ld. CIT(A)-10, Kolkata dated 28.12.2017 for AYs 2012-13 to 2014-15. Since all these appeals and Cross Objections have been heard together, we dispose of the same by this consolidated order for the sake of convenience.

3. Briefly stated facts as noted by the AO are that during the course of assessment proceedings the AO found from individual transaction statement that the assessee had received a sum of Rs.3,50,67,785/- as interest on Income Tax Refund of Rs.36,73,76,770/- during the relevant year. But the assessee had not disclosed the same in its return of income. Therefore, he added back Rs.3,50,67,785/- to the total income of assessee and penalty proceedings u/s. 271(1)(c) of the Act was initiated for filing inaccurate particulars of income. Accordingly, notice u/s. 274 r.w.s. 271(1)(c) of the Act was issued on 29.12.2016 and served upon the assessee. In response to this notice, the Ld. AR filed its submission before the AO which was reproduced by the AO in the penalty order dated 20.06.2017 at page 2 and thereafter, according to the AO the assessee’s reply was not acceptable and imposed penalty of Rs.1,17,26,930/- u/s. 271(1)(c) of the Act for furnishing inaccurate particulars of income which has resulted into the omission of interest income on Income Tax refund as part of the taxable income. Aggrieved, assessee preferred an appeal before the Ld. CIT(A), who cancelled the penalty imposed by the AO u/s. 271(1)(c) of the Act by holding that the assessee’s omission to offer interest income on Income Tax refund of Rs.3,50,67,785/- was an inadvertent and bona fide error and no contumacious conduct has been established by the AO. Thus, according to Ld. CIT(A), the assessee cannot be held guilty of concealment of income warranting levy of penalty. Aggrieved, revenue is in appeal before us.

3 & CO 23/Kol/2019, ITA No.367/Kol/2018, ITA Nos. 368&369/Kol/2018 & ITA No. 452/Kol/2018 & CO 60/Kol/2018 Kolkata Port Trust., Assessment Year: 2012-13 & 2014-15 4. We have heard rival submissions and gone through the facts and circumstances of the case. We note that the Ld. CIT(A) has deleted the penalty taking note that due to inadvertent and bona fide error the assessee has not shown the income and this omission on the part of assessee was not due to contumacious conduct of the assessee, therefore, penalty need not be levied upon the assessee. Be that as it may, we are not going to get into the merit of the impugned order of Ld. CIT(A). However, we confirm the action of the Ld. CIT(A) on a different reason, “i.e. invalid notice of penalty.” At the outset, we note that the show cause notices issued u/s 274 of the Act r.w.s. 271 of the Act dated 29.12.2016 issued by the AO before imposing penalty does not contain the specific charge against the assessee namely as to whether the assessee was being proceeded against for “having concealed particulars of income” or “having furnished inaccurate particulars of income”. A copy of the show cause notice u/s 274 of the Act dated 29.12.2016 was filed before us and perusal of the same reveals that AO has not struck out the irrelevant portion in the show cause notice and, therefore, the show cause notice does not specify the charge against the assessee as to whether the charge is for “concealment of particulars of income” or “furnishing of inaccurate particulars of income”. The same is reproduced for the purpose of ready reference:

Whereas in the course of proceedings before me for the assessment year 2014- 15 it appears to me that you have concealed the particulars or furnished inaccurate particulars of such income.

5. We note similar issue came up before the Hon’ble High Court and Apex court and we refer to the decision of the Hon’ble Karnataka High Court in the case of CIT vs. SSA’s Emerald Meadows in of 2015 dated 23.11.2015 wherein the Hon’ble Karnataka High Court following its own decision in the case of CIT vs Manjunatha Cotton and Ginning factory (2013) 359 ITR 565 took a view that imposing of penalty u/s 271(1)(c) of the Act is bad in law and invalid for the reason that the show cause notice u/s 274 of the Act does not specify the charge against the assessee as to whether it is for concealment of particulars of income or furnishing of inaccurate particulars of income. We also note that as against the decision of the Hon’ble Karnataka High Court the revenue preferred an appeal in SLP in CC No.11485 of 2016 and the Hon’ble Supreme Court by its order dated 05.08.2016 dismissed the SLP preferred by the 4 & CO 23/Kol/2019, ITA No.367/Kol/2018, ITA Nos. 368&369/Kol/2018 & ITA No. 452/Kol/2018 & CO 60/Kol/2018 Kolkata Port Trust., Assessment Year: 2012-13 & 2014-15 department. We also note that the decision of the Hon’ble Bombay High Court in the case of CIT vs Shri Samson Perinchery in ITA No.1154 of 2014 dated 05.01.2017 wherein the Hon’ble Bombay High Court following the decision of the Hon’ble Karnataka High Court in the case of CIT vs Manjunatha Cotton and Ginning factory (supra) came to the conclusion that imposition of penalty on defective show cause notice without specifying the charge against the assessee cannot be sustained. Our attention was also drawn to the decision of ITAT in the case of Suvaprasanna Bhattacharya vs ACIT in ITA No.1303/Kol/2010 dated 06.11.2015 wherein identical proposition has been followed by the Tribunal.

6. Ld. DR vehemently opposed the order of Ld. CIT(A) and has cited various case laws. We note that all the case laws cited before us by the Ld. DR has been dealt with elaborately by the Coordinate Bench of this Tribunal in the case of Jeetmal Choraria Vs. ACIT, for AY 2010-11 dated 01.12.2017, wherein the Tribunal has noted as under:

“7. The learned DR submitted that the Hon’ble Calcutta High Court in the case of Dr.Syamal Baran Mondal Vs. CIT (2011) 244 CTR 631 (Cal) has taken a view that Sec.271 does not mandate that the recording of satisfaction about concealment of income must be in specific terms and words and that satisfaction of AO must reflect from the order either with expressed words recorded by the AO or by his overt act and action. In our view this decision is on the question of recording satisfaction and not in the context of specific charge in the mandatory show cause notice u/s.274 of the Act. Therefore reference to this decision, in our view is not of any help to the plea of the Revenue before us.

9. In the case of CIT Vs. Kaushalya (supra), the Hon’ble Bombay High Court held that section 274 or any other provision in the Act or the Rules, does not either mandate the giving of notice or its issuance in a particular form. Penalty proceedings are quasi- criminal in nature. Section 274 contains the principle of natural justice of the assessee being heard before levying penalty. Rules of natural justice cannot be imprisoned in any straight-jacket formula. For sustaining a complaint of failure of the Principles of natural 5 & CO 23/Kol/2019, ITA No.367/Kol/2018, ITA Nos. 368&369/Kol/2018 & ITA No. 452/Kol/2018 & CO 60/Kol/2018 Kolkata Port Trust., Assessment Year: 2012-13 & 2014-15 justice on the ground of absence of opportunity, it has to be established that prejudice is caused to the concerned person by the procedure followed. The issuance of notice is an administrative device for informing the assessee about the proposal to levy penalty in order to enable him to explain as to why it should not be done. Mere mistake in the language used or mere non-striking of the inaccurate portion cannot by itself invalidate the notice. The ITAT Mumbai Bench in the case of Dhanraj Mills Pvt.Ltd. (supra) followed the decision rendered by the Jurisdictional Hon’ble Bombay High court in the case of Kaushalya (supra) and chose not to follow decision of Hon’ble Karnataka High Court in the case of Manjunatha Cotton & Ginning Factory (supra). Reliance was also placed by the ITAT Mumbai in this decision on the decision of Hon’ble Patna High court in the case of CIT v. Mithila Motor's (P.) Ltd. [1984] 149 ITR 751 (Patna) wherein it was held that under section 274 of the Income-tax Act, 1961, all that is required is that the assessee should be given an opportunity to show cause. No statutory notice has been prescribed in this behalf. Hence, it is sufficient if the assessee was aware of the charges he had to meet and was given an opportunity of being heard. A mistake in the notice would not invalidate penalty proceedings.

10. In the case of Earthmoving Equipment Service Corporation (supra), the ITAT Mumbai did not follow the decision rendered in the case of Manjunatha Cotton & Ginning Factory (supra) for the reason that penalty in that case was deleted for so many reasons and not solely on the basis of defect in show cause notice u/s.274 of the Act. This is not factually correct. One of the parties before the group of Assessees before the Karnataka High Court in the case of Manjunatha Cotton & Ginning (supra) was an Assessee by name M/s.Veerabhadrappa Sangappa & Co., in ITA NO.5020 OF 2009 which was an appeal by the revenue. The Tribunal held that on perusal of the notice issued under Section 271(1)(c) of the Act, it is clear that it is a standard proforma used by the Assessing Authority. Before issuing the notice the inappropriate words and paragraphs were neither struck off nor deleted. The Assessing Authority was not sure as to whether she had proceeded on the basis that the assessee had either concealed its income or has furnished inaccurate details. The notice is not in compliance with the requirement of the particular section and therefore it is a vague notice, which is attributable to a patent non application of mind on the part of the Assessing authority. Further, it held that the Assessing Officer had made additions under Section 69 of the Act being undisclosed investment. In the appeal, the said finding was set-aside. But addition was sustained on a new ground, that is under valuation of closing stock. Since the Assessing Authority had initiated penalty proceedings based on the additions made under Section 69 of the Act, which was struck down by the Appellate Authority, the initiated penal proceedings, no longer exists. If the Appellate Authority had initiated penal proceedings on the basis of the addition sustained under a new ground it has a legal sanctum. This was not so in this case and therefore, on both the grounds the impugned order passed by the Appellate Authority as well as the Assessing Authority was set-aside by its order dated 9th April, 2009. Aggrieved by the said order, the revenue filed appeal before High Court. The Hon’ble High Court framed the following question of law in the said appeal viz., 1. Whether the notice issued under Section 271(1)(c) in the printed form without specifically mentioning whether the proceedings are initiated on the ground of concealment of income or on account of furnishing of inaccurate particulars is valid and legal? 2. Whether the proceedings initiated by the Assessing Authority was legal and valid? The Hon’ble Karnataka High Court held in the negative and against the revenue on both the questions. Therefore the 6 & CO 23/Kol/2019, ITA No.367/Kol/2018, ITA Nos. 368&369/Kol/2018 & ITA No. 452/Kol/2018 & CO 60/Kol/2018 Kolkata Port Trust., Assessment Year: 2012-13 & 2014-15 decision rendered by the ITAT Mumbai in the case of Earthmoving Equipment Service Corporation (supra) is of no assistance to the plea of the revenue before us.

11. In the case of M/S.Maharaj Garage & Co. Vs. CIT dated 22.8.2017 referred to in the written note given by the learned DR, which is an unreported decision and a copy of the same was not furnished, the same proposition as was laid down by the Hon’ble Bombay High Court in the case of Smt.Kaushalya (supra) appears to have been reiterated, as is evident from the extracts furnished in the written note furnished by the learned DR before us.

7 & CO 23/Kol/2019, ITA No.367/Kol/2018, ITA Nos. 368&369/Kol/2018 & ITA No. 452/Kol/2018 & CO 60/Kol/2018 Kolkata Port Trust., Assessment Year: 2012-13 & 2014-15 cause notice u/s 274 of the Act does not strike out the inappropriate words. In these circumstances, we are of the view that imposition of penalty cannot be sustained. The plea of the ld. Counsel for the assessee which is based on the decisions referred to in the earlier part of this order has to be accepted. We therefore hold that imposition of penalty in the present case cannot be sustained and the same is directed to be cancelled.”

8. The Cross Objection preferred by the assessee is in support of the order of Ld. CIT(A). Since we uphold the action of the Ld. CIT(A), the cross objection filed by the assessee is dismissed being infructuous.

9. Now, we are coming to ITA No. 452/Kol/2018. The only ground raised by the revenue is against the action of the Ld. CIT(A) in deleting the sum of Rs.1.75 cr. representing unclaimed credit balances.

10. Brief facts of the case as noted by the AO are that in the books of account of the assessee he found that the assessee had an outstanding liability to the tune of Rs.1.75 cr. for the year 1983-84 under the head ‘prior period income’. Therefore, the assessee was asked to explain the details regarding the same for which the assessee submitted that on 28.02.2014 an amount of Rs.1.75 cr. was adjustment of excess provision of outstanding liabilities prior to AY 2002-03 . According to AO, the assessee’s explanation was not acceptable and since the liability is not relevant to the assessment year under consideration (AY 2014-15) he disallowed the same and was added back to the total income of the assessee. Aggrieved, the assessee preferred an appeal before the Ld. CIT(A), who was pleased to delete the same. Aggrieved, the revenue is in appeal before us.

11. Assailing the decision of the Ld. CIT(A), the Ld. CIT, DR contended that the entries made by the assessee clearly reflect that the sum of Rs.1.75 cr. is the unclaimed credit balances (for the AY 1983-84) which were time barred in this year i.e. AY 2014- 15 and so the assessee for this assessment year has reversed this amount by writing back in the P&L Account and, therefore, the AO has rightly added back the said amount as 8 & CO 23/Kol/2019, ITA No.367/Kol/2018, ITA Nos. 368&369/Kol/2018 & ITA No. 452/Kol/2018 & CO 60/Kol/2018 Kolkata Port Trust., Assessment Year: 2012-13 & 2014-15 income of the assessee during the relevant assessment year as decided by the Hon’ble Supreme Court in the case of CIT Vs. TVS Iyengar & Sons (1996) 88 taxman 429 (SC). Therefore, according to Ld. CIT, DR the Ld. CIT(A) erred in allowing the relief to the assessee, so he wanted us to reverse the decision of the Ld. CIT(A) and uphold the decision of the AO.

12. Per contra, the Ld. AR submitted that the assessee was a local authority and its income was not taxable u/s. 10 of the Act and since the assessee was not taxable in the FY 1983-84 and the liability was originally booked in its books by debiting the P&L Account and crediting the outstanding liabilities; and according to him, no tax deduction or benefit was obtained in FY 1983-84 under the Income Tax Act when the provision was originally made in FY 1983-84. Therefore, according to him, the reversal of the same in the relevant AY 2014-15 is not taxable even under any section/provision particularly not u/s. 41(1) of the Act and, therefore, according to the Ld. AR, in view of the fact that Rs.1.75 cr. was credited to the P&L Account represents the reversal of a liability credited in the books during the period when the assessee was not a taxable entity and, therefore, the Ld. CIT(A) has rightly deleted the addition of Rs.1.75 cr. and, therefore, he does not want us to interfere in the order of the Ld. CIT(A).

13. We have heard rival submissions and gone through the facts and circumstances of the case. We note that the assessee in question is a Port Trust engaged in providing port services since the year 1870 and is under the direct control and supervision of the Union Government and is a creature of the Port Trust Act. It is undisputed that the income of the Port Trust was earlier exempted being a local authority u/s. 10 of the Act. Due to the subsequent amendment by the Finance Act, 2003 the income of the assessee Trust became taxable. It is noted that the assessee in the relevant assessment year i.e. AY 2014-15 has written back outstanding liabilities of Rs.1.75 cr. pertaining to AY 1983-84. Before the Ld. CIT(A) it was contended by the assessee that since the income derived by the Port Trust was not taxable in the year 1983-84, no deduction for liabilities was allowed in that year. In order to support this fact the assessee produced the relevant general voucher before the Ld. CIT(A) (voucher no. MAJV/2013/0119 dated 28.02.2014). After considering the same, the Ld. CIT(A) held as under:

9 & CO 23/Kol/2019, ITA No.367/Kol/2018, ITA Nos. 368&369/Kol/2018 & ITA No. 452/Kol/2018 & CO 60/Kol/2018 Kolkata Port Trust., Assessment Year: 2012-13 & 2014-15 “.... On giving due consideration to the facts of the case and averments of the Ld. ARs of the appellant, I am in complete agreement with the contention put forth by the appellant in this regard. The credit of Rs.1,75,00,000/- to the P&L Account represents the reversal of a liability created in the books during the period when the assessee was not a taxable entity and therefore when the liability was never allowed as deduction in the year in which it was debited/created; then reversal of the same in the relevant year cannot be brought to tax. For the reasons set out in the foregoing therefore, the addition of Rs.1,75,00,000/- made by the Ld. AO is hereby deleted. Ground no. 2 is therefore allowed.”

14. We note that the Ld. CIT(A) taking note that the liability was pertaining to AY 1983-84 when the assessee/entity’s income was not taxable and the liability of Rs.1.75 cr. pertained to AY 1983-84 which was never allowed as deduction in the year in which it was debited/created so, the reversal of the same in the relevant assessment year cannot be brought to tax, which action of the Ld. CIT(A) cannot be found fault with. The judgments cited by the Ld. CIT, DR is distinguishable on the facts of this case and, therefore, we do not find any infirmity in the order of the Ld. CIT(A) and so, we confirm the same and dismiss the appeal of the revenue.

15. The Cross Objection preferred by the assessee is in support of the order of Ld. CIT(A). Since we uphold the action of the Ld. CIT(A), the cross objection filed by the assessee is dismissed being infructuous.

16. Now, we are coming to to 369/Kol/2018. Since the grounds of appeal of the assessee are the same for AYs 2012-13 to 2014-15 except variance in figures the appeal for AY 2012-13 is taken as a lead case and the result will be followed in the case of AYs. 2013-14 and 2014-15. The first ground of appeal of the assessee is against the action of the Ld. CIT(A) in disallowing the contribution made by the assessee to Kolkata Port Trust officer’s Club.

17. Brief facts of the case as noted by the AO are that it was seen from schedule-16 of the P&L Account that expenses to the tune of Rs.19,42,034/- has been debited as donation to Kolkata Port Trust Officers’ Association. According to AO, these expenses were not relatable to the business activity of the assessee Trust, so was disallowed and added back to the total income of the assessee. Aggrieved, the assessee preferred an appeal before the Ld. CIT(A), who was pleased to give partial relief to the assessee to the tune of Rs.2,23,078/- in place of Rs.19,42,034/- addition made by the AO. Still not 10 & CO 23/Kol/2019, ITA No.367/Kol/2018, ITA Nos. 368&369/Kol/2018 & ITA No. 452/Kol/2018 & CO 60/Kol/2018 Kolkata Port Trust., Assessment Year: 2012-13 & 2014-15 satisfied with the partial relief granted by the Ld. CIT(A), the assessee is before us challenging the action of the Ld. CIT(A) in confirming Rs.17,18,956/-.

11 & CO 23/Kol/2019, ITA No.367/Kol/2018, ITA Nos. 368&369/Kol/2018 & ITA No. 452/Kol/2018 & CO 60/Kol/2018 Kolkata Port Trust., Assessment Year: 2012-13 & 2014-15 511/Kol/2010 and ITA No. 2105/Kol/2010 dated 03.02.2017 in similar issue Tribunal has held as under:

“3.3. We have heard the rival submissions. We find that the issue under dispute is covered by the earlier order of this tribunal in assessee’s own case as stated supra wherein it was held as below:- “15. At the time of hearing before us, the Ld. Counsel for the assessee submitted that the issue is covered in favour of the assessee by the decision of the Hon’ble Bombay High Court in the case of CIT vs Bharat Petroleum CorporationLtd 252 ITR 43 (Bom) wherein it has been held that 40A(9) of the Act is not applicable in case the assessee has reimbursed expenses to the club formed for the benefit of the employees. He also placed reliance on the decision of this Tribunal in the case of DCIT vs Chloride Industries Ltd reported in 76 ITD 1 (Kol).

of the assessee is, therefore , allowed..”

19. We note that the assessee Port Trust has been contributing every year for more than four decades annual contribution to this Officers club for the welfare of the employees and this annual contribution has been consistently allowed by the AO in earlier assessment years after scrutiny u/s. 143(3) of the Act. Therefore, based on the principles of consistency since the facts permeating in the earlier years are the same, and there is no change in the facts and law the disallowance was not warranted and,

12 & CO 23/Kol/2019, ITA No.367/Kol/2018, ITA Nos. 368&369/Kol/2018 & ITA No. 452/Kol/2018 & CO 60/Kol/2018 Kolkata Port Trust., Assessment Year: 2012-13 & 2014-15 therefore, relying on the decision of CIT Vs. Radhasoami Satsang (1993) 201 ITR 493 as well as the case law referred to above, we are inclined to allow the ground of appeal raised by the assessee for all the three assessment years i.e. AYs. 2012-13 to 2014-15.

21. Coming to the unrealised portion of Rs.101.84 cr. the AO has noted that he asked the assessee to explain about the taxation impact regarding compensation billing of Rs.176.92 cr. as appearing from the Note 14 Notes of Account of the assessee and they were also asked to explain why the service tax amounting to Rs.9.04 cr. for land compensation bill for KDS should not be disallowed u/s. 43B of the Act. It was replied by the assessee that it had large areas of land which has been given out on rent and when there is a breach of agreement like unauthorised construction, unauthorised occupation etc. the eviction notices are issued under the Public Premises Act and thereafter the dispute is referred to the Estate Officer appointed under the Public Premises Act (hereinafter referred to as the “PP Act”) and the compensation billings are issued instead of rent billing. According to the assessee, since litigation is going on in respect of assessee’s land, the occupants had been given eviction notice, so the issue being subjudice and, therefore, the amount /compensation bill is disputed and can be settled only after the Estate Officer or High court/Supreme Court puts its final seal of approval on it. So according to the assessee, since there is total uncertainty in realisation of the compensation bills, the assessee following accounting standard 9 issued by the Institute of Chartered Accountants takes into consideration only that part of the compensation bills which are actually realised as income. According to Ld. AR, when there is total

13 & CO 23/Kol/2019, ITA No.367/Kol/2018, ITA Nos. 368&369/Kol/2018 & ITA No. 452/Kol/2018 & CO 60/Kol/2018 Kolkata Port Trust., Assessment Year: 2012-13 & 2014-15 uncertainty regarding realisation of the compensation bill raised by the assessee because eviction notices have been issued to the parties they do not accept the amount raised in the compensation bills and only after the court order for payment the parties accepted the bills and, therefore, according to assessee, no income can accrue or arise to it until it acquires a right to receive it. It was explained before the AO that an amount can accrue or arise to the assessee only when the assessee acquires a legal right to recover that amount and thus, it was submitted that this amount cannot be taxed. However, the AO did not accept the same and according to AO, assessee had the right of recovery rental income from the land which it has given on rent irrespective of the fact whether the land is evicted by the tenant or not. According to AO, the compensation billing is the term adopted by the assessee for its own advantage of keeping records regarding some disputed tenants. The AO concluded as under:

Under this backdrop, it is evident that after the issue of eviction notice, the assessee credits the compensation account instead of rent account. These rental bills raised has compensation as already accrued as the tenant is in the occupation and physical possession of the said land. Even if the eviction notice is not accepted by the Dispute Resolution Authority viz. Estate Officer etc., the rent for the period remain due and the rent has to be paid by the occupant. On the other hand, if the tenant is evicted, he is liable to pay the rent for the period for which the land was under his control. As such, in either case the rent has accrued and is certain to be received. There remains no rooms of doubt or uncertainty about the receive of the income. In consequences it being a accrued rent taxable in the year in which it has accrued. Note No. 14 to the Notes of Accounts clarified that compensation billing of Rs.176,92,12,615/- (excluding Service Tax and Education Cess) was made during the year. Actual amount realized for the year 2011-12 was Rs.75,08,09,517/- has been recognized as revenue.

The plain and simple fact is that rent is nothing but a periodical payment paid by the tenant to the landlord for use of land. It accrues as soon as the tenant uses the land for the period. Here the period of use is the factor that determines the accrual of the same. Sine in the given case the period of accrual is during the previous year relevant to AY 2012-13 the said payment whether termed as rent or compensation is taxable in the year to which it relates. Further even after the eviction notice the right to receive compensation from the tenant for the period the land is used by the tenant does not cease.

14 & CO 23/Kol/2019, ITA No.367/Kol/2018, ITA Nos. 368&369/Kol/2018 & ITA No. 452/Kol/2018 & CO 60/Kol/2018 Kolkata Port Trust., Assessment Year: 2012-13 & 2014-15 “1. I have carefully considered .the oral and written submissions of the Ld. ARs of the appellant and perused the observations of the Ld. AO in the assessment order. I have also given my due consideration to the judicial decisions and pronouncements relied upon by the Ld. ARs in the course of hearing as well as in the written submissions. From the assessment order passed by the Ld. AO, it appeared that at the time of assessment proceedings, the appellant raised no plea at any stage that 'compensatory charges' which the appellant was charging and/or receiving from various occupiers of the property were capital receipt. In fact I find that in the appellant's books for FY 2011-12, the appellant had credited Rs.76,01,63,183/- under the head 'Compensatory Charges' and in the return of income such sum credited in the P&L A/c was offered to tax as income. However in Note No.14 of the Annual Accounts the appellant made the following disclosure of facts:

"Compensation billing for unauthorized occupation of KoPT property has been made during the year for Rs.176,92,12,615.07 (excluding service tax & education cess). In absence of any contractual agreement, considerable uncertainties are involved in actual realization of such claims. Actual amount realized for the year 2011-12 amounting to Rs.75,08,09,517.42 has been recognized as the revenue and debited to the Compensation Charges (Land & Buildings) and credited to Claim Suspense Account following the Accounting Policy followed by the Port. " 2.In the light of the aforesaid disclosure of facts the Ld. AO required theappellant to explain as to why it .had not accounted for income of 5.152,12,68,915/- [228,14,32,098- 76,01,63,183] for which demands were being raised by the appellant itself, particularly when the appellant was following mercantile system of accounting. Even .at that stage the appellant only claimed that there were breach of agreements by various occupiers/tenants for which eviction notices were issued and the disputes between the lessees/occupiers/tenants and the estate officer were referred to judicial proceedings and pending resolution of such disputes the appellant was sending compensation billing instead of rent billing. The appellant was also charging service tax which is leviable for consideration received for use of / letting our Properties in terms of the service-tax laws. Referring to Accounting Standard - 9, issued by lCAI, the appellant had claimed that in view of the uncertainty regarding realization of compensatory billings the appellant was not recognizing the revenue in form of compensation billing until actual realization of payment from the parties. The appellant therefore claimed before the Ld. AO that unreallzed compensation billing was not assessable to tax as income of the appellant since it involved huge uncertainties. The appellant claimed that no real income accrued or arose to the appellant until the appellant acquired legal right to recover the said amount. The contention raised by the appellant did not find favour with the Ld. AO and accordingly the Ld. AO assessed even the unrealized compensation billings to the extent of Rs.152,12,68,915/- on the ground that the appellant followed mercantile system of accounting and therefore the appellant was legally chargeable to tax in relation to compensation charges for which the demands were raised by the appellant.

6. Even from going through the documents placed before me, it appeared that the appellant had granted lease to M/s Eri-Tech Limited in 1967 for a period of 30 years and after the expiry of the initial period, the appellant had offered to grant long term lease of99 years on revised terms under which the lessee was called upon to make lumpsum upfront payment for grant of lease. I therefore find that at the relevant time when the lease period came to an end, the appellant had not required the lessee to vacate the premises but had offered to extend the lease albeit on modified terms and as such it was not a case where the appellant was willing to re-possess the property and use it for personal purposes. Since the lessee did not agree for the terms offered, the appellant instituted eviction proceedings, which were resisted by the lessee, by instituting writ petitions in Hon'ble Calcutta High Court. Ultimately the matters were referred under Public Premises Act. The lessee resisted this by filing writ petition being WP No. 645 of 2005. In the course appellate proceedings, the Id. AR of the appellant filed copy of the order dated 27.01.2016 passed in WP No. 645 of 2005 by the Calcutta High Court, in terms of which the Estate Officer was directed to proceed with eviction proceedings in accordance with law. From perusal of the said order dated. 27.01.2016, it is noted that the Writ Court had vacated all Interim orders granting stay and required the Estate Officer to complete eviction proceedings expeditiously and directed the Estate Officer to quantify the "occupation charges" payable by the petitioners i.e. the lessees for their occupation of the property from the date of possession until eviction. From the documents placed on record by the appellant,it therefore transpired that even though the writ court allowed the appellant to proceed with eviction of the lessee nowhere in the order passed by the writ court any direction was issued to the lessee. to pay "mesne profit" as claimed 17 & CO 23/Kol/2019, ITA No.367/Kol/2018, ITA Nos. 368&369/Kol/2018 & ITA No. 452/Kol/2018 & CO 60/Kol/2018 Kolkata Port Trust., Assessment Year: 2012-13 & 2014-15 by the Id. ARs of the appellant. The term "mesne profit" as defined in Section 2(12) of Civil Procedure Code has a distinct and specific meaning and it is necessary for the authority or Court to quantify such "mesne profit" having regard to the provisions of the Civil Procedure Code. Section 2(12) of the Civil Procedure Code as follows: “(12) ‘’mesne profits’ of property means those profits which the person in wrongful possession of such property actually received or might with ordinary diligence have received therefrom, together with interest on such profits, but shall not include profits due to improvements made by the person in wrongful possession. “ 7. From the foregoing definition it is evident that mesne profit cannot be equated with the rent simpllcitor but it is equal to the loss of income which the unauthorized occupier made by use of his unauthorized occupation. On perusal of the order of the High Court, it appeared that at no stage it was even the case of the appellant that for the period of alleged unauthorized occupation it should be compensated by 'mesne profit' but the plea of the appellant was for compensating the "occupation charges" for the period during which the lessee had overstayed in the premises. From the order of the High Court, it also appeared that the Court neither considered the plea for grant of 'mesne profit' nor allowed or granted to the appellant 'mesneprofit' although the assessee's plea for eviction was granted by the Court.

8. The appellant's reliance on the judgment of the jurisdictional Hon'ble Calcutta High Court in the case of CIT VsUtaGhosh(supra) is therefore not applicable because the facts are distinguishable. In the case decided by the Hon'ble Calcutta High Court, after the expiry of lease, the appellant had never extended the lease but instituted eviction proceedings in the Court. The assessee's plea for eviction was granted by various Courts upto the Hon'ble Supreme Court and the Hon'ble Supreme Court had l' also passed the order for decree. Besides, the Court had also quantified Rs.2,OO,OOOI- as "mesne profit" which upholding the order of eviction. Before the decree was executed, the Government of West Bengal acquired the premises under Land Acquisition Act and paid compensation. In addition the State Government paid Rs.2,00,000/- for the assessee to assign the decree for "mesne profit". On these facts the Court held that mesne profits received by the appellant were in the nature of damages which the appellant had suffered due to wrongful possession of the property by the tenant who continued to remain possession all through.

12. In the present case the conduct of the appellant year after year clearly shows that the appellant was having several tenants/lessees/licensees/occupiers etc. from whom it was 19 & CO 23/Kol/2019, ITA No.367/Kol/2018, ITA Nos. 368&369/Kol/2018 & ITA No. 452/Kol/2018 & CO 60/Kol/2018 Kolkata Port Trust., Assessment Year: 2012-13 & 2014-15 claiming payment of monthly basis for the use of occupation & immovable properties belonging to the appellant. Wherever the appellant was having subsisting and mutually agreed terms the monthly sum was termed as 'rent' whereas in cases where the terms were not settled, the invoices were raised under the nomenclature 'compensatory billings'. The basis character of the charges demanded however remained same i.e. the charges for occupation & use of the premises belonging to the appellant. The Id. ARs of the appellant has nowhere brought on record any material that even where the eviction proceedings were instituted, the appellant had stopped demanding the' occupation charges on monthly basis but prayed for payment of mesne profits for unauthorized occupation. Even in the lone instance for which documents were provided; it showed that the Court did not grant ' mesne profit but the lessee/occupier was directed to pay occupation charges for the period during which it was in occupation of the property after the lease expired. In absence of any order of any Court or competent authority which in any manner showed that the monthly claims made by the appellant were In nature of 'mesne profit', it is not possible to accept the submissions of the Id. ARs at its face value. For these reasons therefore I also do not deem it fit to deal with the various judgments relied upon by the Id. ARs since the appellant has been unable to prove having regard to its facts that the compensatory billings were indeed in the nature of 'mesneproflt', It was for' the appellant to bring on record some positive tangible and irrefutable evidence in support of its claim that the entire sum of Rs.228,14,32,098/- assessed in the impugned order was in fact in nature of mesne profit quantified and allowed as such by any competent Court or judicial forum. The mere fact that the appellant termed the, said sum as 'compensation' in its books by itself did not give the color of mesne profit merely because the appellant claimed the said sum to be due from unauthorized occupiers. For the reasons set out in the foregoing therefore, the appellant's claim that sum OffRs.228,14,32,098/- was capital receipt and therefore liable to be excluded from the assessed total income Is rejected. Ground Nos. 6 to 9 is therefore dismissed.”

20 & CO 23/Kol/2019, ITA No.367/Kol/2018, ITA Nos. 368&369/Kol/2018 & ITA No. 452/Kol/2018 & CO 60/Kol/2018 Kolkata Port Trust., Assessment Year: 2012-13 & 2014-15 due to various reasons, inter-alia after the extinguishment of the agreement or non- extension of the tenancy/lease etc for un-authorised occupation, the Estate Officer having exercised his powers under the Public Premises Act for eviction of the parties who are in unauthorised occupation of the properties of the assessee and who has the power to award damages as per Rule 8 of the Public Premises (Eviction of Unauthorised Occupants) Rules 1971 (hereinafter referred to as the ‘PP Rules, 1971’) and who can deal with all public premises including award and damages for unauthorised use and occupation thereof by any person after the expiry of the tenancy or lease agreement etc. It is noted that section 7 of the PP Act, 1971 gives power to the Estate Officer to issue order requiring payment of arrear rent and sub-section (2) of sec. 7 of the P P Act, 1971 provides that in respect of unauthorised occupation of any public premises, the Estate Officer may by order assess the damages on account of unauthorised use and occupation of such premises. So, since the matter pertains to the properties which are awaiting the orders of Estate Officer and thereafter the Lis may pend before the various judicial forums, the arrears of rent/damages/compensation has not yet finalised/crystalised in respect of the unrealised portion of the compensation of Rs.101 cr. (approx.). It is a settled that in the absence of transfer of capital asset, and when it has to be ascertained as to whether the receipt is on account of loss of income or on account of source of income, it is trite law that any receipt in the nature of compensation, cost, damages etc. by whatever names called towards loss of income is a revenue receipt. However, any receipt to compensate for the loss of source of income is a capital receipt as has been held by the Hon’ble Supreme Court in Oberoi Hotels Pvt. Ltd. Vs. Cit (1991) 236 ITR 903 (SC). It is also well settled that the word ‘income’ has to be understood in the generic sense. If a receipt bears the trait of income as per the plain and natural meaning the same will still be included within the scope of section 2(24) of the Act even after there is no specific mention of such item in the definition clause. It is more aptly demonstrated from the scheme of the Act itself by which the receipt by way of rent from property, although not included in sub-section 24 of the Act is income as specifically included in Chapter IVC of the Act. Since sub-section 24 of section (2) defines income in all inclusive manner and not exhaustively, according to this provision income includes ‘profits and gains’........ Thus, this definition includes various items as mentioned in 21 & CO 23/Kol/2019, ITA No.367/Kol/2018, ITA Nos. 368&369/Kol/2018 & ITA No. 452/Kol/2018 & CO 60/Kol/2018 Kolkata Port Trust., Assessment Year: 2012-13 & 2014-15 clause (i) to (xiv). If any other item of receipt is or contains the element of income in common parlance that will be included within the scope of definition of income under the provision notwithstanding the fact that there is no specific inclusion of such item in the definition. (CIT Vs. G. R. Karthikeyan (1993) 201 ITR 866). Therefore, since the receipt of the portion of the compensation of Rs. 101 cr. in question is from the properties of the assessee held unauthorised by various parties, the receipt received by the assessee whether it is called compensation, damages etc. which is towards the loss of income is a revenue receipt and cannot be termed as a capital receipt since there is no loss of source of income. Therefore, this argument of the Ld. AR of the assessee is bereft of any merit and, therefore not accepted. Then coming to the taxability in respect of the unrealised portion of compensation, we are of the opinion that the quantum of amount towards loss of income respect of the property of the assessee has not been finalised since it is lis-pendence. Therefore, the amount in question has not reached finality and, therefore, not crystallised in the year under consideration, so when it gets crystallised/finalised, then it will be treated as a revenue receipt and taxed in accordance to law. Coming to this conclusion, we also apply the real income theory which is propounded in CIT Vs. M/s. Shoorji Vallabhdas & Co. (1962) 46 ITR 144 and Godhra Electricity Co. Ltd. Vs. CIT (1997) 225 ITR 746 and since no real income has arisen for the assessee in the year under consideration in respect of the sum of Rs.101 cr. (unrealised portion of the compensation) this amount need not be taxed in this assessment year, and we order accordingly. For this, we also rely on the decision of the Hon’ble Bombay High Court in the case of DSL Enterprises (P) Ltd. Vs. Mrs. N.C. Chandratre, Income-tax Officer (2013) 216 taxman 173 (Bom).

Order is pronounced in the open court on 21st February, 2020.