B. R. ASSOCIATES VS COMMISSIONER OF INCOM ETAX, 2000 PTD-ANDHRA-PRADESH-HIGH-COURT-INDIA 2489 (1998)

Income-tax---

----Capital or revenue receipt---Salami received in lieu of rent---Tribunal finding that assessee collecting lesser rents from tenants though rents at that point of time in neighbouring areas more---Salami or Pagadi was received only as advance---Is a revenue receipt.

For the assessment year 1968-69, the Income-tax Officer found that. the assessee had received a sum of Rs.8,500 from D and Rs.9,000 from A as Salami in instalments. However, the partners of .firm D denied payment of Salami or Pagadi to the assessee. The Income-tax Officer treated the income as income from other sources and assessed the same to tax. In so far as the Salami received from A was concerned, the assessee admitted having received the amount of Rs.9,000 during the assessment year in question as Salami from them. The assessee, however, contended that the said Salami should be assessed as a capital receipt and not as a revenue receipt. The assessee further contended that the Salami was actually received in lieu of rent. However, the Income-tax Officer held that the Salami amounts were received from A 'at the time of building construction, that the persons from whom the monies were received were, accommodated in the building as tenants and they were paying lesser rents, that the Pagadi had to be regarded as advance payment and hence the same was assessable as income. The Tribunal upheld the order of the Income-tax Officer, on reference:

Held, that the assessee was collecting lesser rents from the tenants though the rents at that point of time from the neighbouring areas were more and that the Salami or Pagadi amount received by the assessee from A was only as advance and had to be assessed as a revenue receipt.

Member for the Board of Agricultural Income-tax v. Sindhurani Chaudhurani (1957) 32 ITR 169 (SC); Durga Das Khanna v. CIT-(1969) 72 ITR 796 (SC) and Maharaja Chintamani Saran Nath Sah Deo v. CIT (1971) 82 ITR 464 (SC) distinguished.

C. V. Rajeev Reddy for the Assessee.

S. R. Ashok for the Commissioner.

JUDGMENT

DR. MOTILAL -B. NAIK, J. ---At the instance of the assessee, the Income-tax Appellate Tribunal stated the case and referred the following question of law for the opinion of this Court:

"Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was justified in law in holding that the salami amounts of Rs.9,000 received from Apsara Footwear and Rs.8,500 received from D. S. Reddy Cloth Stores by the assessee revenue receipts assessable to tax in the hands of the assessee for the assessment year 1968-69?"

The assessee is an unregistered firm. The assessment initially was completed on November 1, 1971'. On appeal before the Assistant Commissioner of Income-tax (Appeals), the Assistant Commissioner of Income-tax (Appeals) directed the Income-tax Officer to redo the assessment after going into all the facts regarding assessment of salami after giving the assessee an opportunity to produce the necessary evidence in support of payment of salami. While redoing the assessment as per the direction of the Assistant Commissioner of Income-tax (Appeals); the Income-tax Officer found that the assessee received Rs.8,500 from D. S. Reddy Cloth Stores and Rs.9,000 from Apsara Footwear as salami in instalments. During the course of reassessment, on behalf of D. S. Reddy Cloth Stores, the partners of the said firm and others were examined and cross-examined. However, the said D. S. Reddy and other partners of D. S. Reddy Cloth Stores denied payment of salami or Pagadi to the assessee. The Income-tax Officer treated this income as from other sources and assessed the same to tax.

In so far as the salami received from Apsara Footwear concerned, it was admitted by the assessee having received an amount of Rs.9,000 during the assessment year as salami from Apsara Footwear. The assessee, however, contended that the said salami should be considered as capital receipt and cannot be assessed as a revenue receipt. It was further contended that the salami was actually received in lieu of rent. However, the Income-tax Officer held that from the facts of the case it was clear that the salami amounts were received from Apsara Footwear at the time of building construction, the persons from whom these moneys were received were accommodated in the building as tenants and they were paying lesser rents. The pagadi, therefore, according to the Income-tax Officer should be regarded advance payment and hence it was held as taxable income. He, therefore, added another sum of Rs.9,000 received from Apsara Footwear and taxed the said income.

However, the matter was again carried before the Assistant Commissioner of Income-tax (Appeals) and then finally landed before the Income-tax Appellate Tribunal. It was argued before the Tribunal as well as before the Appellate Authority that the income received from Apsara Footwear, though pagadi, cannot be treated as revenue receipt but that has to be treated as only capital receipt. This contention of the assessee was rejected by the departmental appellant authority as well as the Tribunal holding that in the facts and circumstances these receipts are advances and they are to be treated as revenue receipts. The assessee made an effort before the Tribunal requiring it to state the case and refer the question of. law as formulated by it, as indicated above, to this Court for opinion and thus the matter has been referred to this Court for the opinion of this Court.

We have heard Sri Rajeev Reddy, learned counsel appearing on behalf of the assessee, elaborately on the question whether the salami received by the assessee from Apsara Footwear is a revenue receipt or capital receipt. In support of his contention, Mr. Rajeev Reddy has taken, us to the decisions-reported in Maharaja Chintamani Saran Nath Sah Deo v. CIT (1971) 82 ITR 464 (SC); Member for the Board of Agricultural Income-tax v. Sindhurani Chaudhurani (1957) 32 ITR 169 (SC) and Durga Das Khanna v. CIT (1969) 72 ITR 792 (SC), and contended that the salami receipt can never be treated as revenue receipt but only to be treated as capital receipt. On the contrary, learned standing counsel appearing on behalf of the Revenue stated that in the facts and circumstances of the case, the Assessing Authority as well as the lower appellate authority have found that the pagadi or salami received by the assessee is in the nature of advance and, therefore, it has rightly been treated as revenue receipt and added in the taxable income.

In the wake of the above submission, we have given our anxious consideration in the light of the three decision referred to by learned counsel appearing on behalf of the assessee. Regarding the principal laid down by the apex Court in the three decisions there cannot be any dispute but what we found is that the facts of those three cases are totally different from the set of circumstances of which emanates from the facts of this case. In this case the finding of the two forums, i.e., Assessing Authority as well as the lower appellate authority, is that the assessee was collecting lesser rents from the tenants though the rents at that point of time from the neighbouring areas were higher. The finding further goes to show that the amount so collected was in the nature of, advance and, therefore, the Assessing Authority as well as the lower appellate authority found that the salami amount received by the assessee from Apsara Footwear is only an advance and has to be treated as revenue receipt. As indicated above, on a careful consideration, we have no doubt in our mind to reach such conclusion and hold that the amount received by the assessee from Apsara Footwear in the nature of salami or pagadi is only an advance and has to be treated as revenue receipt and cannot be treated as capital receipt.

Though learned counsel for the assessee contended that in the absence of any evidence the Department cannot assume and presume that the pagadi or salami received by the assessee is a revenue receipt. We are afraid we cannot accede to this submission. As seen from the orders passed by the Assessing Authority as well as the lower Appellate Commissioner, the assessee was given sufficient time to produce evidence and further on behalf of D. S. Reddy Cloth Stores three witness have been examined. On the basis of the material placed by the assessee, both on behalf of Apsara Footwear as well as D. S. Reddy Cloth Stores, the Assessing Authority as well as the lower appellate authority have reached the conclusion that the pagadi or salami received from Apsara Footwear is a revenue receipt and not a capital receipt. This finding of facts, in our view, is based on substantial material placed before the authorities, and therefore, we are unable to appreciate the submission made on behalf of the assessee that there was no material before the Revenue to reach such a conclusion.

We, therefore, hold that the view taken by the Assessing Authority as well as the lower appellate authority and the Tribunal is just and proper in the facts and circumstances of the case.

We answer the reference accordingly in favour of the Revenue and against the assessee. No costs.

M.B.A./4139/FC???????????????????????????????????????????????????????????????????????????????? Reference answered.