Vimal Gandhi, JM - (1.) THIS appeal by the assessee for the assessment year 1987-88 is directed against order of CIT(A) and in the first ground, assessee has challenged addition of Rs. 1,10,923 on account of ground rent and Rs. 19,662 on account of property tax collected from constituents as a trading receipt.
(2.) The facts of the case are that assessee is a builder and promoter of buildings. The assessee acquired a plot of land No. 26 at Rajendra Place, New Delhi from D.D.A. on lease through public auction held on 28-10-1977 and as per the terms mentioned in letter No. F. 23 (3)/78-IMPL dated 20-1-1978 of D.D.A. After getting the plan approved, the assessee started constructing multi-storeyed building named Pragati Tower on the plot. Subsequently and from assessment year 1978-79 onward the flats in the aforesaid building were sold to different buyers. Under the terms of lease, the assessee was liable to pay ground rent to the D.D.A. On the construction made and completed by the assessee, there was further liability to pay property tax. As per agreement with the flat owners, in the Pragati Tower, the assessee is entitled to recover ground rent and property tax. For the past several years, the assessee had been recovering ground rent and property tax from the flat owners. These two receipts were neither shown nor treated as income of the assessee. However, in the period under consideration, the Assessing Officer found that assessee collected ground rent aggregating to a sum of Rs. 1,10,923. No amount was paid to the D.D.A. Likewise assessee collected Rs. 10,622 from the flat owners towards property tax. The Assessing Officer was of the view that above receipts were of trading nature in the light of decision of Supreme Court in the cases of Chowringhee Sales Bureau P. Ltd. v. CIT [1973] 87 ITR 542 and Sinclair Murray & Co. P. Ltd. [1974] 97 ITR 615. He asked the assessee to show cause why above receipts should not be taxes as such.
(3.) THE assessee in its written reply contended that amounts of rent were collected under clause 6(a) of the agreement with flat owners and were not trading receipts as there was an overriding title with the D.D.A. It was further contended that ground rent is neither tax nor duty as it was collected by the D.D.A. for services intended to be rendered in the area. THE Assessing Officer did not find any force in the submission of the assessee. He held that it was statutory liability of the assessee which under the agreement was passed on to the flat owners. In this connection, reliance was placed to property tax paid by the assessee in earlier years and debited to the profit and loss account. THE Assessing Officer also referred to surrender of Rs. 1,50,929 made by the assessee under the Amnesty Scheme out of the amount collected from the flat owners towards property tax. THE ground rent was also held to be of similar nature. THE Assessing Officer treated these receipts as trading receipts.;