TECHSTAR INFOTECH (I) P.LTD,MUMBAI vs. ITO 10(3)(3), MUMBAI

We have considered the rival submission of the landed representative of the parties and have gone through the orders of authorities below. We have also deliberated on various case laws relied by lower authorities. The facts of the case that the tenant/ licensee despite efflux of lease period are occupying the tenanted portion are not in dispute. The tenant is remitting the user charges by way of ECS. The assessee has claimed that the payment made through ECS is not on account of contractual payment of rent and nothing but part of mesne profit. The assessee had treated the said amount as part payment of deposits of mesne profit. The parties have locked their horn on the taxability of receipt, whether it should be taxed as revenue receipt chargeable to tax or it should be treated as mesne profit being capital receipt and not chargeable to tax. The learned AR of the assessee had strongly relied upon the decision of Special Bench in Narang Overseas Private Ltd (supra) wherein the Special Bench of Mumbai Tribunal held that when the assessee was deprived of the use and occupation of the property and therefore, the mesne profit received by the assessee under the consent decree awarded by the Apex Court at the rate of Rs. 10 lakhs p.m. was on account of damages for deprivation of use and occupation of the profits and therefore, the sum so received was capital in nature not chargeable to tax. In the present case the assessee has filed already obtained a judgement and decree of vacant and peaceful possession of tenanted premises vides order dated 29 th July 2016 passed by learned Judge of Small Cause Court Bombay. While passing the judgement in degree the learned Judge of Small Cause Court Bombay directed the assessee to initiate separate proceeding under Order 20 Rule 12 of CPC for inquiry for recovery of mesne profit. The said proceeding for determination of quantum of mesne profit under Order 20 Rule 12 of CPC initiated by assessee is still pending. The main thrust of submission of learned AR of the assessee was that the issue of taxability or otherwise of mesne profit does not arise during the year under consideration and all the submission of made only to the demonstrate the facts that the amount received during the year is to be adjusted against mesne profit which might be awarded by learned Small Cause Court in a separate proceedings. Therefore, considering the submission of learned AR of the assessee that the decision of learned Small Cause Court on the quantum of mesne profit is awaited, this ground of appeal is restored back to the file of assessing officer to decide the issue afresh after taking in to consideration of decision of Small Cause Court. The assessing officer is directed to consider the decision of Special Bench of in Narang Overseas Private Ltd (supra) and pass the order in accordance with law. Needless to record that assessing officer shall grant fair and proper opportunity before passing order on the issue. In the result the grounds of the appeal raised by the assessee is allowed for statistical purpose.