Case Law Details
It has been contended by the ld. counsel of the assessee that the Ld. Commissioner of Income Tax (Appeals) has erred in treating Rs. 35,49,091/- as revenue receipt being the amount received from the flat owners and / or tenants for replacement of capital assets and shown as sinking fund in accounts which was considered and treated as capital receipt by the assessee since its inception and the same was duly accepted by the Assessing Officer in the earlier assessments.
Ld. counsel of the assessee further contended that as per contract with the owners/ tenants of ‘Narain Manzil’ assessee is responsible for replacement for regular maintenance of the building besides the replacement of the equipment, plant and machinery and accessories and for structural repairs of building. Due to natural wear and tear over a period of time, equipment, machinery and plant having limited life, the assets installed at building require not only regular repairs but also major repairs and in certain cases replacements also. The replacement of assets require large outlays of funds the owners / tenants are not willing to bear the large cost at one go. Thus as per contract the assessee is collecting Rs.2 per sq.ft. payment from the owners for replacement of assets beside Rs. 14 per sq. ft. area charged to the owners of flats in respect of regular maintenance. The amount recovered for replacement of assets is kept as sinking fund and cost of replacement of assets is being utilized out of this fund. In our considered opinion, the system being followed by the assessee is cogent one. Rs. 2/- sq.ft. being collected by the assessee is put in a sinking fund utilized for replacement of assets. This system is being followed since a large number of years. Revenue has accepted it in those years. There is no change in facts or law during the current assessment year. There is no doubt that the responsibility is of the assessee to replace the capital asset. But for that a mechanism is in operation, whereby Rs. 2/- is being collected and held in a sinking fund. Capital repairs and replacements are to be met out of this fund. In the agreement it is specifically mentioned that Rs. 2/- is being collected for the sinking fund in this regard. It is settled law that revenue cannot inter into the shoes of a businessman and decide how he should conduct the business. We have found no infirmity in the accounting and conduct of the assessee, which will warrant an inference that Rs. 2/- being collected for the sinking fund for replacement of asset is a revenue receipt.
INCOME TAX APPELLATE TRIBUNAL, DELHI
I.T.A. No. 1063/Del/2011 – A.Y.: 2007-08
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