Commissioner of Income Tax vs C. Baljee and Sons

P.C. Balakrishna Menon, C.J.—The Income Tax Appellate Tribunal, Chandigarh Bench, has referred the following questions of law for the opinion of this court:

"Whether, on the facts and in the circumstances of the case, the Appellate Tribunal erred in upholding the order of the Appellate Assistant Commissioner deleting additions of Rs. 55,288 in each of the four assessment years, namely, 1971-72 to 1974-75, on the ground that the provisions made by the assessee on the basis of the rent damage bills issued by the Assistant Estate Manager, Shimla, under the authority of the Director of Estates, New Delhi, were valid and legal demands and allowable deductions in the relevant years in computing the taxable income of the assessee ?"

Assessment year 1973-74 :

"Whether, on the facts and in the circumstances of the case, the Appellate Tribunal rightly rejected the following ground of appeal taken by the Revenue :

''The Appellate Assistant Commissioner has further erred in directing the Income Tax Officer to delete the interest charged under sections 139, 215 and 217(IA) as no appeal lies to him against charging of interest under these sections ?''"

During the relevant assessment years covered by the orders of the Appellate Tribunal, the assessee had incurred a liability for payment of Rs. 1,05,100 each year by way of damages for use and occupation of the premises where he was carrying on the business of running the Grand Hotel. The Income Tax Officer had allowed rent only at the rate of Rs. 49,812 and added a sum of Rs. 55,288 in the total income of the assessee for each of these years. It is clear from the facts stated by the Tribunal in its order that the rent of Rs. 49,812 related to a prior period when the lease in favour of the assessee subsisted. The Estate Officer of the Government of India had determined damages for use and occupation of the premises by the assessee at Rs. 1,05,100 per year. This amount clearly falls u/s 37(1) of the Income Tax Act and is a permissible deduction. Since the whole amount of Rs. 1,05,100 is a permissible deduction, no question of interest under Sections 139, 215 or 217(A-1) arises in this case. We, therefore, answer the first question in the negative and the second question in the affirmative, both the questions in favour of the assessee and against the Revenue.

A copy of this order under the signature of the Registrar and seal of the court will be forwarded to the concerned authority.