Decided on October 04,2007



- (1.) In this reference under Section 256 (1) of the Income Tax Act, 1961 ('the Act'), relevant to the Assessment Year 1981-82 the following question has been referred for our opinion: ?Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal ('Tribunal') is justified in holding that the liability to pay interest was contractual liability and that the said liability having been questioned by the Assessee and the matter being subjudice the contractual liability had not accrued and arisen during the previous year under consideration and therefore, the disallowance of Rs.79,220/- was rightly made by the Income Tax Officer??
(2.) The Assessee was allotted a plot of land by the Delhi Development Authority ('DDA') for the construction of a cinema building. As required by the terms of the lease entered into between the Assessee and the DDA, the Assessee completed the construction in August, 1970. On 5th September, 1970 the DDA issued an occupancy certificate to the Assessee. The Assessee raised some disputes with regard to the payment of ground rent contending that drainage, sewerage and water supply facilities had not been provided by the DDA. It was also contended by the Assessee that the land in question had been encroached upon. The dispute with regard to the payment of ground rent appears to have continued for a while. The Assessee then filed a Civil Writ Petition No. 1041 of 1976 (M/s. Jasjeet Films Private Limited v. Delhi Development Authority and Ors.) in this Court in which it was prayed that a mandamus be issued to the DDA to develop the area and for a writ to quash the demand for ground rent. The writ petition was disposed of by this Court on 21st September, 1979 on the ground that the Assessee was trying to enforce a contractual obligation and therefore, the writ petition was not the appropriate remedy.
(3.) The Assessee then filed a suit in this Court on 3rd October, 1979 along with an application for injunction under Order 39 Rules 1 and 2 of the Code of Civil Procedure ('CPC'). In this suit, the Assessee prayed for a declaration to the effect that the DDA is bound in law to develop the cinema surroundings and site as assured at the time of the acceptance of the tender of the Assessee and for a further declaration that the Assessee is not liable to pay any ground rent or interest till the assured developments have been fully carried out. On 9th September, 1980 the Assessee received a letter from the DDA. Since the language used in the said letter has come in for some discussion, we propose to quote the full text of the said letter which reads as under: ?From B.S. Sehgal, Dy. Director (OSB) To M/s. Jasjeet Films (Pvt.) Ltd. Moti Cinema Compound, Chandni Chowk, Delhi. Sub: Regarding payment of ground rent in respect of Milan Cinema plot at Karampura Shopping Centre. Dear Sirs, The payment of ground rent in respect of your above noted cinema plot for the period from 1.7.80 to 30.8.81, amounting to Rs.2,01,600/- (Rupees two lakh one thousand and six hundred only) has become due. It is also to inform you that an amount of Rs.1,87,134.70 pa (Rupees one lakh sixty seven thousand one hundred thirty four and paisa seventy only) is also payable by you on account of interest charges for belated payments of ground rent. You are, therefore, requested to please make payment of the total dues stated above which comes to Rs.3,68,734.70 (Rupees three lakh sixty eight thousand seven hundred thirty four and paise seventy only). The above amount may please be remitted in favour of the Delhi Development Authority through a bank draft within 15 days, positively failing which further necessary action will be taken, by this office. Yours faithfully, sd/- (B.S. Sehgal) Dy. Director (OSB)?;

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