Income Tax Appellate Tribunal - Kolkata
Sushil Kumar And Co. vs Joint Commissioner Of Income-Tax on 14 August, 2003
Equivalent citations: [2004]88ITD35(CAL)
ORDER
1. This Special Bench was constituted under Section 255(3) on the recommendation of the Division Bench of the Tribunal for considering the issue as to whether the amount received by the assessee in terms of the consent decree passed by the Small Causes Court is mesne profit and whether it is taxable as a capital receipt or revenue receipt. We have heard the parties and perused the record including the order of the "E" Bench of the Tribunal in assessee's own case in I.T.A. Nos. 2690/C/97, 2953/C/94, 1413/C/97, 709-1 l/C/99, 1108/C/99 for assessment years 1990-91 to 1995-96 and 1997-98.
2. The relevant facts briefly stated are that the appellant is a partnership firm. The appellant owned certain shares of Shree Nirmal Commercial Ltd. By virtue of its shareholdings, it had acquired the occupancy rights in respect of 21st Floor of 'Nirmal Building' at Mumbai along with car parking space No. 32 in the basement of the building. The appellant had entered into a Leave & Licence agreement in respect of the said premises on 1-9-1989 with M/s. Imkemex India Ltd. a company registered under the Indian Companies Act, 1956 (hereinafter referred to as 'the licensee'). Under the said agreement, the licensee agreed to make interest-free deposit of Rs. 24,00,000 within seven days from the date of the agreement. It was also agreed that the licensee would pay to the assessee during the months of September, October and November, 1989 the amount on account of use of the space for the above premises @ Rs. 41,500 per month and from 1st December, 1989 till 30th November, 1990 @ Rs. 90,000 per month and, thereafter, i.e., from 1st December, 1990 till 30th November, 1994 @ Rs. 1,10,000 per month. It was also agreed under the said agreement that if the licensee complied with all the terms and conditions mentioned in the said Leave and Licence agreement dated 1st September, 1989 and regularly pays the monthly compensation and other dues as referred therein, the licensee if so desires, may renew the agreement with the assessee for a further period of five years commencing from 1st December, 1994 and ending on 30th November, 1999 upon the same terms and conditions save and except that the licensee would pay compensation for the next five years @ Rs. 1,20,000 per month and difference in the municipal taxes as applicable on 1st January, 1994 and as applicable on 1st November, 1989.
3. The licensee paid a sum of Rs. 1,20,000 only to the appellant within 7 days of the agreement dated 1st September, 1989 as against agreed sum of Rs. 24,00,000. Thus, there was a breach of the agreement. The assessee filed a suit in the Court of Small Causes at Mumbai being Suit No. 208/251 of 1989. However, before the Court could proceed in the matter, the appellants and the licensee agreed to obtain a consent decree. Accordingly, a prayer was made to the Small Causes Court at Mumbai on 25th October, 1989 for issue of consent decree on the terms as agreed upon between the parties.
4. On the very next day, i.e., 26th October, 1989, the Court of Small Causes at Mumbai issued a consent decree on the terms agreed upon between the parties. As per the consent terms, the tenants had to vacate the suit premises by 30-11-1989 and a sum of Rs. 1,25,700 was to be paid by way of mesne profits from 1-9-1989 till 30-11-1989. The agreed terms also provided for continued occupation of the leased premises on payment of further deposit of Rs. 22,80,000 by 1-11-1989, payment of mesne profit of Rs. 1,25,700 calculated @ Rs. 41,900 from 1-9-1989 till 30-11-1989 and further stipulated monthly payments without any default. It was further provided that in the event of default, the lessees would vacate the premises on receipt of the registered notice from the Advocate of the appellants subject to refund of Rs. 24 lakhs deposits by the assessee to the licensees/lessees. The lessees did not vacate the premises. Instead, they exercised the option of paying a further deposit of Rs. 22,80,000 and other payments referred to in the consent terms as a result of which they continued to be in possession of the property. The monthly payments were paid by the lessees as per the stipulations in the agreed terms. For assessment years 1990-91 to 1995-96. The Tribunal in I.T.A. Nos. 2690/C/ 97, 2953/C/94, 1413/C/97, 709/C/99, 710/C/99 & 711/C/99 vide order dated 28-3-2000 held that the amounts received by the assessee were in the nature of mesne profits and are neither taxable as revenue receipt nor as capital gains. The Bench relied upon the decision of the Hon'ble Calcutta High Court in the case of CIT v. Smt. Lila Ghosh [l 994] 205 ITR 9 and expressed the view that the judgment of the Supreme Court in the case of P. Mariappa Gotmder v. CIT [1998] 232 ITR 2 was distinguishable on facts.
5. In assessment years 1996-97 and 1997-98, the assessee received a sum of Rs. 14,40,000 per annum from the lessee/licensee in consideration of occupation of the building and claimed the said amount as not liable to tax on the ground that it was in the nature of mesne profit. The Assessing Officer held that the amount received by the assessee is nothing but licence fee mutually agreed upon between the parties and not a mesne profit. The Assessing Officer relied upon the decision of the Madras High Court in the case of CIT v. P. Mariappa Gounder [1984] 147 ITR 676 and has pointed out that the said decision of the Madras High Court has been affirmed by the Supreme Court in P. Mariappa Gounder's case (supra). The Assessing Officer has further pointed out that no mesne profit accrued to the assessee after the date of the order of the Small Causes Court at Mumbai dated 26-10-1989 and that the amount received from the licensee by the assessee represents the licence fee and, accordingly, is liable to tax. The CIT(A) has upheld the view of the Assessing Officer vide separate orders both dated 27-10-2000 for assessment years 1996-97 and 1997-98 respectively. The CIT(A) has referred to Section 2(12) of C.P.C. and order XX, Rule 12 of C.P.C. and pointed out that the Court has no jurisdiction to award mesne profit beyond the period of three years and, therefore, by no stretch of imagination, the amount received by the assessee beyond the period of three years after passing the decree by the Small Causes Court could be treated as mesne profit.
6. During the course of hearing of these appeals, the Ld. A.R. of the assessee in his submissions vehemently argued that the sum received by the assessee from the licensee under the consent decree passed by the Small Causes Court on 26th October, 1989 is mesne profit and non-taxable. In support of his submission the Ld. A.R. of the assessee referred to the decision of the jurisdictional High Court in the case of Smt. Lila Ghosh (supra). He further submitted that the case of the Madras High Court viz., P. Mariappa Gounder (supra) is not applicable to the case of the assessee as in that case the issue whether mesne profit was taxable or non-taxable was not subject-matter of dispute as the assessee had himself offered the mesne profit for taxation. The Ld. AR submitted that the decision of the Supreme Court at P. Mariappa Gounder's case (supra) is on the appeal filed against the decision of the Madras High Court and that the only issue raised, was as to the year of assessability and not as to whether the amounts received as mesne profit were taxable at all. Such issue not having been raised or decided, the aforementioned decision of the Supreme Court was inapplicable, it was contended. The learned counsel for the assessee further contended that the "E" Bench of the Kolkata Tribunal in the assessee's own case for assessment years 1990-91 to 1995-96 vide order dated 28-3-2000 (supra) held the similar amounts received to be in the nature of mesne profit and not taxable either as revenue receipt or capital gains. It was further contended that when a Bench of the Tribunal has considered an issue, it is not open to the another. Bench of the Tribunal to take a different view on the same issue. It was, accordingly, contended that the view expressed by the Tribunal in the assessee's own case for earlier years may be followed.
7. On the other hand, the Ld. Departmental Representative sought to support of the orders of the Revenue authorities. It was submitted that the order passed by the Tribunal dated 28-3-2000 in assessee's own case (supra) is not an order in accordance with law. It was further submitted that the larger Bench of the Tribunal having been constituted, it was the duty of the Bench to consider the issue referred to it in accordance with law. The Ld. Departmental Representative placed reliance on the decision of the Supreme Court in the case of Distributors (Baroda) (P.) Ltd. v. Union of India [1985] 155 ITR 120' in support of his submissions. It was pointed out that the decision of the Division Bench of the Tribunal for assessment years 1990-91 to 1995-96 is not in accordance with law as the amount received by the assessee from the licensee pursuant to the consent decree passed by the Small Causes Court on 26-10-1989 is not a mesne profit, but compensation received for use and enjoyment of the property. The Ld. Departmental Representative pointed out that the assessee had entered into an agreement with the licensee for the use of its premises from 1-9-1989. As per the agreement, a sum of Rs. 24 lakhs was to be paid as a deposit within seven days of the execution of the agreement. There is nothing on record to suggest that the assessee had issued any notice to the licensee or attempted to persuade the licensee for complying with the terms of the agreement. The assessee had immediately filed a suit without termination of the agreement. The date of filing of the suit has not been indicated. On 25-10-1989, the parties agreed to certain terms and conditions and requested the Small Causes Court to issue a consent decree. On the very next day, i.e., 26-10-1989 the consent decree was passed. The Ld. Departmental Representative submitted that the terms and conditions of the consent decree mutually agreed upon between the parties are more or less similar as stipulated in the agreement dated 1 -9-1989 and the Court has simply granted the request of the parties and issued a consent decree. It was further contended that the amount received by the assessee under the consent decree does not fall within the definition of mesne profit. Our attention was invited to Section 2(12) of CPC which defines mesne profit to be a profit which a person in wrongful possession of that property actually received or the profits which might, with ordinary diligence, have received therefrom. It was submitted that in the instant case the amount was actually received by the owner of the premises, i.e., the appellants, which is being taxed by the department and not the amount received by the licensee on account of any wrongful possession. Had the licensee by wrongful possession earned profit or the profits which might have with ordinary diligence been received by the licensee, the amount could be termed as mesne profit with in the definition of Section 2(12) of C.P.C. The Ld. Departmental Representative further submitted that if at all the licensee was in wrongful possession of the property on account of breach of agreement dated 1-9-1989, it could be only up to 26-10-1989, i.e., the date on which the Small Causes Court accepted the consent terms of the parties. It was further contended that there was no wrongful possession of the property after the passing of the consent decree by the Small Causes Court. The licensee continued the occupation of the premises from 26-10-1989 onwards on the terms and conditions settled by the parties themselves. Since the period for which the assessee has received monthly compensation as per mutual terms and conditions settled by the parties is beyond the period of wrongful possession, it cannot be said that the amount received' by the assessee was for wrongful possession of the premises. It was, accordingly, submitted that the amount received by the assessee does not fall within the definition of 'mesne profit' as defined under Section 2(12) of C.P.C. and that the amount received is in the nature of income liable to tax as revenue receipt.
8. In regard to the terms of 'mesne profit' used in the consent decree, the Ld. Departmental Representative contended that it is settled law that the interest of third party cannot be adversely affected by the terms and conditions mutually agreed by the parties themselves. The interest of the department cannot be adversely affected merely by the use of term 'mesne profit' in the consent terms for which a decree was issued and the department is justified to consider the actual nature of the receipt and determine its taxability according to law. In support of the proposition that the agreement between the parties does not adversely affect the third party, the Ld. Departmental Representative relied upon the decision of the jurisdictional High Court in the case of CGT v. Smt. Aloka Lata Sett [1991] 190 ITR 556 (Cal.). In the light of the aforementioned decision of the jurisdictionar High Court, the Ld. Departmental Representative vehemently argued that the term used by the appellants with the licensee is not determinative of the nature of the receipt as the department was not a party to the suit. The interest of the department cannot be adversely affected merely because the parties chose to use the words 'mesne profit' in the consent decree obtained from the Small Causes Court. It was further contended that if one goes by the substance of the consent terms on which a decree was obtained by the parties, the amount received by the assessee is nothing but compensation for use of property in the form of rent. Referring to the decision of the jurisdictional High Court in the case of Smt. Lila Ghosh (supra), it was contended that the said decision is distinguishable on facts. It was pointed out that in that case a sum of Rs. 2 lakhs received by the assessee was a mesne profit for deprivation of the possession of the property and the amount was paid by the Government on acquisition of the land and, therefore, the receipt was a capital receipt. The Ld. Departmental Representative further pointed out that in the said case their Lordships held that the mesne profit was capital gain but the same was not liable to tax as there was no cost of acquisition (capital gains not being workable). It was further submitted that the Hon'ble High Court had nowhere stated that the amount received as mesne profit was not liable to tax at all under any circumstance. Referring to the decision of the Apex Court in the case of P. Mariappa Gounder (supra), the Ld. Departmental Representative pointed out that in the said case the subject-matter of dispute was the assessment of mesne profit and on appeal the matter was decided by the Hon'ble Supreme Court specifically regarding the year of assessability. Even if the decision of the Supreme Court in regard to assessment of mesne profits is considered to be only an obiter dicta, the same is binding on any lower court or Tribunal. In support of this submission, the Ld. Departmental Representative relied upon the following authorities:
(i) L.B. Kharawala v. ITO [1984] 147 ITR 67 (Guj.)
(ii) CIT v. Andhra Pradesh Riding Club [1987] 168 ITR 393 (AP)
(iii) CIT v. Smt. Asrafi Devi Rajgharia [1983] 142 ITR 380 (Cal.) and
(iv) Mahendralal Choudhari v. CIT [1949] 17 ITR 454 (Nag.) It was accordingly pleaded that the issue may be decided in favour of the Revenue.
9. In counter reply, the learned counsel for the assessee submitted that the Small Causes Court had used the term 'mesne profit' while passing the consent decree and as such it is not open to the department to question the wisdom of the Small Causes Court in awarding the mesne profit till 1999. It was submitted that the. Assessing Officer is not competent to ignore the term of 'mesne profit' used in the decree issued by the Small Causes Court. It was further contended that the decision of the jurisdictional High Court in the case of Smt. Lila Ghosh (supra) is an authority for the proposition that the mesne profit is not taxable receipt. It was pleaded that the issue may accordingly be decided in favour of the assessee.
10. We have given our thoughtful consideration to the rival contentions and the material on record proceed to consider the issue involved herein. Sum and substance of the dispute involved in this appeal is relating to the taxability of Rs. 14,40,000 for each year received by the assessee from M/s. Imkemex India Ltd. for the use of the 21st floor of Nirmal Building at Mumbai along with car parking space. The issue involved has three facets:-
(i) Whether the amount of Rs. 14,40,000 each received for assessment years 1996-97 and 1997-98 falls within the ambit of mesne profits.
(ii) If the amount is mesne profits, whether the same is revenue receipt or capital receipt.
(iii) Whether the amount is taxable either as revenue receipt or capital receipt.
11. It may be stated even at the cost of repetition that M/s. Imkemex India Ltd. has taken over the possession of the property on 1-9-1989 for the purpose of carrying out the painting and other minor repairs and after three months the leave and licence agreement was to commence subject to payment of security deposit amount of Rs. 24 lakhs. However, only a sum of Rs. 1,20,000 was paid within the stipulated period of one week and the balance of Rs. 22,80,000 remained unpaid. Thus there was a breach of the agreement.
12. The assessee filed a suit in the Small Causes Court being Suit No. 208/ 251 of 1989. Despite requisition by the Assessing Officer as well as by us, the assessee failed to file copy of the suit. The date of filing of the suit has also not been indicated. The filing of the suit not being in dispute and the default having occurred on 8-9-1989 and the compromise terms having been filed in the Small Causes Court on 25-10-1989, it is presumed that the suit must have been filed in between 8-9-1989 and 25-10-1989. Copy of the consent terms filed by the appellants and M/s. Imkemex India Ltd. in the Court of Small Causes at Mumbai is on record. It will be useful to reproduce the consent terms filed by the parties in the Court for the sake of ready reference:-
Consent Terms
1. The defendants hereby admit and concede that they had remained in arrears of compensation and had defaulted in paying the balance deposit amount of Rs. 22,80,000, as stated in the Plaint and that the licence granted to them has been duly revoked.
2. In view of the above, on admission, a decree against the defendants to vacate the suit premises by 30th November, 1989. It is further agreed between the parties hereto that if the defendants pay to the plaintiffs a sum of Rs. 22,80,000 by way of deposit by 1-11-1989 and also pay to the plaintiffs Rs. 1,25,700 as and by way of mesne profits, from 1st September, 1989 till 30th November, 1989 at Rs. 41,900 per month by 10-11-1989 and further pay to the plaintiffs as and by way of mesne profits a sum of Rs. 1,10,000 per month regularly in advance by 10th of the month for which the same is payable, commencing from 1st day of December, 1989 up to 30th November 1990, with any three defaults and further pay a sum of Rs. 1,20,000 per month plus Municipal taxes as applicable on 1-11-1994 minus the Municipal taxes as applicable on 1-11-1989 on intimation in respect thereof with xerox copies of the relevant Municipal lax bills for the purposes of ascertaining the increase being sent by plaintiffs to defendants by Registered A.D. post at Bombay, in advance by the 10th of the month for which the said mesne profits and Municipal taxes are payable commencing from 1st December, 1994 up to 30th November, 1999 with any three defaults, the execution of the decree be stayed till 30-11-1999.
3. In the event of default in payment of the balance deposit amount of Rs. 22,80,000 by 1-11-1989 and/or in the event of default of payment of Rs. 1,25,700 by 10-11-1989 and/or in the event of any three defaults in payment of the mesne profits payable from 10-12-1989 onwards as stated hereinabove in Clause (2) by due dates. Warrant of Possession to issue against the defendants immediately after the expiry of 15th day from the date of the receipt by the defendants of a notice through the plaintiff's Advocate by Registered Post A.D. addressed to the defendants at their Bombay Office, to execute the decree and to refund to the defendants the deposit of Rs. 24 lakhs, provided always that the plaintiffs undertake to this Hon'ble Court that they shall refund the defendants the amount of deposit of Rs. 24 lakhs in full simultaneously at the time of receiving vacant possession of the said premises in execution of Warrant of Possession after adjusting therefrom any arrears of mesne profits and other dues as provided herein.
4. It is agreed and declared by both the parties herein that the agreement dated 1st September, 1989 stands terminated and that the defendants are not and will hereafter continue to be in occupation and user of the suit premises entirely on the basis of these consent terms and not under the said agreement dated 1st September, 1989. It is however further agreed and declared by the parties hereto that the liabilities and undertakings of the defendants and plaintiffs as contained in Clauses 4, 6, 7, 8, 9, 10, 13, 15 and 16 of the agreement dated 1st September, 1989 shall continue to apply to the plaintiffs and defendants during the period of these terms.
5. No order as to costs.
6. Refund of 2/3rd costs to the plaintiffs.
Dated this 25th day of October, 1989.
13. A decree passed by the Small Causes Court at Mumbai on 26-10-1989 is also on record and the same is reproduced hereunder for the sake of convenience and ready reference:-
Decree : The plaintiffs abovenamed have filed this suit against the defendants and praying as follows:
(a) that the Defendants be decreed and ordered to quit and vacate the office premises on the 21st floor of Nirmal Building, C-Wing as well as the open car parking space No. 32 in the basement of the said Nirmal Building situated at Nariman Point, Bombay-400021;
(b) that the Defendants be decreed and ordered to pay to the plaintiffs mesne profits from the date of the filing of the suit till the said office premises are vacated by the Defendants at such rate as this Hon'ble Court may deem fit and proper;
(c) that the Defendants be restrained by a permanent injunction and order of this Hon'ble Court from carrying out in the said premises any alterations, additions, constructions, demolitions or other changes whatsoever and/or from dealing with transferring induction any other person or persons or firm into the said premises and from allowing any one else to use and occupy the same on any terms whatsoever:
(d) for interim and ad interim injunction and order in terms of prayer (c) above;
(e) for costs of the suit; and
(f) for such further and other reliefs as to this Hon'ble Court may deem fit and proper This suit coming on this 26th day of October, 1989 for hearing and final disposal before Ld. Judge Shri P.V. Ghodkhande presiding in Court Room No. 8 in presence of Shri H.H. Lashkari, Advocate for the Plaintiff and S.P. Sabnis, Advocate for the Defendant.
Order: It is ordered that decree in terms of consent terms vide Ex-A, copy attached herewith.
Two-third court fee return to the plaintiffs. No order as to cost.
14. Certain facts coming out from the consent terms and the decree passed, which are of vital importance, may be highlighted hereunder:-
(a) That the assessee had filed a suit for eviction against M/s. Imkemex India Ltd. for breach of the agreement. The appellants had also prayed for grant of mesne profit from the date of filing of the suit till the said office premises is vacated by the defendants. The appellants had also prayed for granting of interim injunction against any alterations, additions, construction, demolition etc. in respect of the suit premises.
(b) That in the consent terms para-2, it was agreed that M/s. Imkemex India Ltd. had defaulted in paying the balance deposit amount of Rs. 22,80,000 as a result of which a decree against the defendants to vacate the suit premises by 30-11-1989 was to be granted. The operative portion of the order issued by the Small Causes Court reads as under:-
It is ordered that decree in terms of consent terms vide Ex-A, copy attached herewith Two third court fee return to the plaintiffs. No order as to cost.
Thus, by virtue of the decree passed by the Small Causes Court, the entire consent terms have been given effect to. A perusal of the consent terms reveals that there is an admission of default in payment of balance deposit amount of Rs. 22,80,000 by M/s. Imkemex India Ltd. In para-2 of the consent terms it is provided. "In view of the above, on admission, a decree against the Defendants to vacate the suit premises by 30th November, 1989." It is evident from the consent terms read with the Court order that there are two aspects of the consent terms. One is that the suit premises is decreed to be vacated by 30-11-1989 and that the agreement executed on 1 -9-1989 stood terminated. Another aspect of the consent terms is that the parties mutually agreed that if the sum of Rs. 22,80,000 is paid by M/s. Imkemex India Ltd. by 1-11 -1989 and a sum of Rs. 1,25,700 at the rate of Rs. 41,900 per month for three months is paid by 10-11-1989 and further a sum of Rs. 1,10,000 per month is regularly paid in advance by 10th of each month for which the same is payable commencing from 1-12-1989 up to 30-11 -1994 and further a sum of Rs. 1,20,000 per month up to 30-11-1999 is paid, the licensee was not required, till 30-11-1989 to vacate the premises. The licensee/lessee were allowed to occupy the premises from 1 -12-1989 on the terms and conditions of the consent terms/decree. Para-10 of the consent terms may be reproduced hereunder even at the cost of repetition:-
4. It is agreed and declared by both the parties herein that the agreement dated 1st September, 1989 stands terminated and that the defendants are not and will hereafter continue to be in occupation and user of the suit premises entirely on the basis of these consent terms and not under the said agreement dated 1st September, 1989. It is however further agreed and declared by the parties hereto that the liabilities and undertakings of the defendants and plaintiffs as contained in Clauses 4, 6, 7, 8, 9, 10, 13, 15 and 16 of the agreement dated 1st September, 1989 shall continue to apply to the plaintiffs and defendants during the period of these terms.
[Emphasis supplied]
15. It is evident from the sequence of events in this case that by using the process of the Court, the parties have merely revived the agreement executed on 1-9-1989 with slight modifications and with an assurance that on expiry of the lease on 30-11 -1994, the appellants would not be required to file a fresh suit for eviction, if necessary. The crux of the consent terms and Court decree is that the terms and conditions of the leave and licence agreement of 1-9-1989 have been incorporated in the consent terms with slight modifications which has become the consent decree of the Court. It is also noteworthy that the Court fee paid by the appellants has been ordered to be refunded to the extent of 2/3rd because of the consent decree having been passed as against a decree passed by the Court on the basis of rival claims and evidence on record. In the light of these facts we proceed to consider as to whether the compensation paid by M/s. Imkemex India Ltd. to the appellant is mesne profit.
16. The term 'mesne profit' is not defined under the Income-tax Act, 1961. The said term is defined under Civil Procedure Code. Section 2(12) of C.P.C. as under:-
'Mesne profits' of property means those profits which the person in wrongful possession of such property actually received or might with ordinary diligence have received therefrom, together with interest on such profits but shall not include profits due to improvements made by the person, in wrongful possession.
17. The meaning of the word 'mesne' is defined in "Chambers 20th Century Dictionary" and "Merriam Webster's Collegiate Dictionary, 10th Edition" as 'intermediate' 'intervening'. The words 'mesne profit' is defined in "The Law Lexicon, 2nd Edition" at page 1225 as under:
Mesne Profits Intermediate profits. The profits or other pecuniary benefits which one who dispossesses the true owner receives between disseizin and the restoration of possession, those which are received intermediate the original entry and the restoration of the possession of the premises.
18. The Andhra Pradesh High Court in the case of Poluru Ranga Rao v. Koppolu Ramadoss AIR 1959 AP 182 at 184 has explained the mesne profits as under:
The criterion for calculation of mesne profits cannot be what the person out of possession might have got had he been on the land. Mesne Profits could only consist of what the person in wrongful possession of such property actually received or might with ordinary diligence have received therefrom.
A perusal of the above definition of mesne profits reveals that an amount awarded by the Court in respect of a wrongful possession of the property on the basis of the amount actually received by the wrongful possessor or the amount which the wrongful processor might with ordinary diligence have received therefrom in the period of wrongful possession is known as mesne profits.
In other words, the mesne profits as awarded by the Court to the plaintiff against the defendant is to compensate what the plaintiff or the appellant has lost by the reason of the wrongful alienation of the property by the other person. Moreover, the court determines the mesne profits not on the basis what the plaintiff has lost by his exclusion but what the defendant i.e., the other party has or might reasonably have made by his wrongful possession. Thus the prerequisite for qualifying any amount granted by the Court to be mesne profit is wrongful possession of property for which the compensation is awarded by the Court in accordance with provisions of Section 2(12) of the C.P.C. read with Order XX, Rule 12 of First Schedule.
19. Let us now proceed to consider as to whether the amount received by the assessee herein from the licensee under the consent decree dated 26th October, 1989 falls within the ambit of mesne profits. In this context we have to consider the material on record. The copy of the plaint which could be of some help is not on record. During the course of hearing of the appeal, the assessee's representative was asked by the Bench to furnish a copy of the plaint filed before the Court of Small Causes at Murnbai but for the reasons best known to the assessee, the copy of the plaint was not filed till date. It is also observed on perusal of the orders of the authorities below that the assessee also failed to furnish a copy of the plaint before Revenue authorities inspite of being asked repeatedly. In this regard the observation made by the CIT(A) at page 25 of the impugned order for the assessment year 1996-97 has been taken note of by us wherein it is stated that the appellant for reasons best known to them did not file copy of the plaint filed in the Court of Small Causes at Mumbai. The Assessing Officer has also observed in the assessment order that copy of the plaint was not filed by the assessee despite being repeatedly asked to do so. It is well-settled principle of law that if a party in possession of best evidence does not produce the same, adverse inference can be drawn against the person who ought to have filed it. CIT v. Smt. Krishnaveni Ammal [1986] 158 ITR 826, 829, 830 (Mad.).
20. Be that as it may, we are inclined to agree with the Ld. D.R. that the mesne profit is awarded by the Court for wrongful possession of a property which the wrongful possessor has actually received or might with ordinary diligence have received. The rationale for awarding mesne profit by court, in our view, is that the trespasser or the person in wrongful possession not only denies the true owner of rightful possession of the property but also prevents the true owner from enjoying the income therefrom. Therefore, the mesne profit is decreed to recognize the facts that the true owner is entitled to the income from the property and the person in wrongful possession is to compensate the true owner by paying either actual income from the property or a reasonable estimate of that income. Let us first consider as to whether M/s. Imkemex India Ltd. was in wrongful possession of the property. The licensor handed over the possession of the property on the terms and conditions of the agreement executed on 1-9-1989. It was specifically provided in the agreement that up to 30-11-1989 M/s. Imkemex India Ltd. would carry out painting and small repairs in the premises and the actual lease would commence w.e.f. 1-11-1989 only. This fact is indicated in the order of the CIT(A) with reference to the terms of the agreement. The suit was filed by the assessee sometime in Sept./Oct., 1989. The filing of the suit and grant of decree by Court of Small Causes is before the actual commencement of the lease, i.e., before 1-11-1989. There was a breach in the terms and conditions of the agreement insofar as M/s. Imkemex India Ltd. had failed to pay a sum of Rs. 22,80,000 out of Rs. 24,00,000 within a week of the execution of the agreement. Thus the appellant had the right to terminate the lease on account of breach of terms of the contract. There does not appear to be any condition in the leave and license agreement providing for automatic termination of the lease on breach of condition. Assuming that there was a condition in the agreement for automatic termination of the agreement on breach of any condition, the licenspe/lessee can at best be said to be in the wrongful possession of the property after the termination of the agreement. There is no evidence on record for the appellant having issued any notice to the licensee/lessee for termination of the agreement or for complying with the specific condition in the agreement of making a deposit of Rs. 24,00,000. For the lack of information or evidence on record, one cannot ascertain the exact date of termination of the agreement. Even date of filing of the suit is not on record. In these circumstances we have to presume the wrongful possession of the property started somewhere from the date of institution of the suit sometime between (8-9-1989 to 25-10-1989) to the date of actual possession or restoration of lawful possession i.e., 26th October, 1989. At this stage, it would be relevant to refer to Order XX, Rule-12 of the First Schedule of the Code of Civil Procedure which reads as under:-
R. 12. Decree for possession and mesne profits.-(1) Where a suit is for the recovery of possession of immovable property and for rent or mesne profits, the Court may pass a decree-
(a) for the possession of the property;
(b) for the rents which have accrued on the property during the period prior to the institution of the suit or directing an inquiry as to such rent;
(ba) for the mesne profits or directing an inquiry as to such mesne profits.
(c) directing an inquiry as to rent or mesne profits from the institution of the suit until-
(i) the delivery of possession to the decree-holder, [B]
(ii) the relinquishment of possession by the judgment-debtor with notice to the decree-holder through the Court, or
(iii) the expiration of three years from the date of the decree [B] whichever event first occurs. [B] (2) Where an inquiry is directed under Clause (b) or Clause (c), a final decree in respect of the rent or mesne profits shall be passed in accordance with the result of such inquiry, [AP, KNT, K.M.].
Order XX, Rule 12A relates to a decree for specific performance of contract for the sale or lease of immovable property, which reads as under:-
Where a decree for the specific performance of a contract for the sale or lease of immovable property orders that, the purchase-money or other sum be paid by the purchaser or lessee, it shall specify the period within which the payment shall be made.
21. It is evident from Rules 12 & 12A of Order XX that the assessee had the option to sue for specific performance of the contract. So, however, the assessee chose to file a suit for possession of the property and for mesne profit. It is also observed from Rule 12 quoted above that the Court has the power to grant mesne profit for the period of wrongful possession not more than three years after the date of decree. In the case of Bhagwati v. Chandramaul A 1966 SC 735, their Lordships have held that the mesne profits have to be calculated from the date the defendant has come into wrong possession and that as per Order XX, Rule 12, the power of the Court to grant mesne profit is restricted to the period of three years from the date of decree. In the case of Bhagwant v. Radhakisan A 1959 B 536, it was held that where decree is for payment of mesne profits until delivery of possession, it is implied that mesne profits are not to be allowed for more than three years in any case. In the case of Lucy v. P. Mariappa A 1979 SC 1214, it was held that Rule 12, Order XX does not empower a Court to pass a final decree with respect to mesne profits for a period exceeding three years from the date of decree. The decree must be construed in conformity with requirements of all the alternatives mentioned in Rule 12(1)(c). In the case of Radhanath v. Chandi 36 C 66 FB, it was held that three years is to be computed from the date of the appellate decree.
22. Thus the following position emerges from the aforementioned discussions:
(i) Firstly, mesne profit is to be granted for the period of wrongful possession.
(ii) Secondly, mesne profit cannot exceed the period of three years from the date of passing of the decree.
23. In this case, when the terms of the consent terms and decree are carefully considered, it becomes abundantly clear that the agreement dated 1-9-1989 comes to an end with the operation of the consent decree. In other words, the terms and conditions of the agreement under which M/s. Imkemex India Ltd. had occupied the premises got terminated on 26-10-1989. It is specifically provided in the consent terms that the possession of the property with M/s. Imkemex India Ltd. shall be governed by the consent terms from the date of the decree. Thus, M/s. Imkemex India Ltd. was in the lawful possession of the property from 26-10-1989 onwards, subject to payment of compensation provided in the consent decree. It is nobody's case that there was a breach in the terms and conditions of the consent decree by the licensee/lessee. As such, the licensee/lessee was in lawful possession of the property at least from 26-10-1989. Therefore, there was no question of granting of mesne profits for the period for which the licensee was under lawful possession of the property.
24. The question required to be considered now is as to whether it is open to the Revenue authorities and the appellate authorities to interpret the decree of the Court contrary to the specific language used by the Court in the judgment. In this connection, it would be relevant to refer to the definition of the "judgment" under Section 2(9) of the C.P.C. The 'judgment' is defined as under:-
(9) "Judgment" means the statement given by the Judge of the grounds of a decree or order;.
In the case of Dineshwar Prasad Bakshi v. Parmeshwar Prdsad Sinha A 1989 Pat. 139 at 142, it was held that Court must state the grounds for its conclusion and passing of a mere decree mechanically without application of mind does not satisfy the requirement of the judgment. In the case of Bengal SM v. Aisha A 1947 C 106 confirmed in appeal in A 1966 C 120 and A 1969 SC 1133, it was held that trial judge acting extra cursum curiae with consent of both parties to the suit, is not required to act strictly and follow the procedure of the court. It was pointed out that the decision resembles an award, but it is a judgment and a decree can be drawn up on agreed basis though such a decree or order is not appealable.
25. When the consent terms and the decree passed by the Court are carefully perused, it is not difficult to hold that the decree is not based on any grounds or reasoning, but is solely based on the terms and conditions as mutually agreed upon between the plaintiffs and the defendants. Their Lordships of the Supreme Court in the case of Lakahmi Shanker Srivdstava v. Slate (Delhi Administration) AIR 1979 SC 451 held that the decisions based on concession of the parties do not constitute binding precedence. Since in this case, the parties to the suit have utilized the process of the Court to obtain a decree on the mutual terms and conditions, the term 'mesne profit' used in the consent decree, which has become part of the consent decree, docs not become binding for the Revenue authorities or the appellate authorities and it would, in our view, be open to the taxing authorities to consider the real nature of the grant in a suit on the facts and in the circumstances of the case.
26. As rightly argued by the Ld. Departmental Representative, the parties by mutual agreement cannot bind third parties by their agreement or conduct. This view is supported by the decision of Calcutta High Court in the case of Smt. Aloka Lata Sett (supra). In the said case there was a gift made by the assessee under a deed executed on 13-4-1973 registered on 13-7-1973. The assessee was maintaining her previous year as per Bengali calendar year. The question was whether the gift could be included in the assessment for assessment year 1973-74 according to the Bengali calendar year or whether such gift was to be included in the assessment for assessment year 1974-75 on the basis of date of registration. Their Lordships of the Calcutta High Court held that the value of the gifted property was includible for assessment year 1974-75 as between the donor and the donee the registered document may take effect from the date of execution but as regards a third party, the point of time at which the deed becomes effective is when it is registered. Their Lordships of the Calcutta High Court have pointed out that if the registered document is held to be effective against the Revenue which is not a party to the deed from the date of execution, it will entail great hardship, because the Revenue will have no knowledge of the date of execution of the document and the document can only be effected against the Revenue from the date of registration. Their Lordships have, accordingly, held that the deed of gift in the present case so far as the Revenue is concerned would not be the date when the document was executed but the date when it was registered.
27. Taking the totality of the facts and circumstances into consideration including the decision of the jurisdictional High Court in the case of Smt. Aloka Lata Sett (supra), we are of the view that the mere fact that the term 'mesne profit' is used in the consent terms and incorporated in the consent decree by the Court of Small Causes is of no consequence insofar as the facts and circumstances of this case clearly justify the conclusion that the amount granted to the appellant does not fall within the definition of 'mesne profit' as per Section 2(12) read with Order XX, Rule-12 of First Schedule of C.P.C. We are, therefore, of the considered view that from 26-10-1989 the amount payable to the appellants monthly for user of the property is nothing but a compensation for lawful user of the property not falling within the ambit of mesne profits. We, accordingly, uphold the assessment of Rs. 14,40,000 received by the assessee in each of the assessment years 1996-97 and 1997-98 as revenue receipt.
28. In the light of our above finding, it would not be necessary for us to deal with the rival contentions in regard to the applicability of the decision of the jurisdictional High Court in the case of Smt. Lila Ghosh (supra) or the decision of the Supreme Court in the case of P. Mariappa Gounder (supra). So, however, the matter having been vehemently argued by the counsels of both sides, we without prejudice to our above finding deal with this aspect of the matter also. This exercise, we consider, is also necessary in view of the fact that in the event of our decision being reversed by any superior authority it would be necessary to consider as to whether the amount received by the assessee even as mesne profit is liable to tax on the facts and in the circumstances of this case either as revenue receipt or capital receipt.
29. We may first refer to the decision of the Hon'ble Supreme Court in the case of P. Mariappa Gounder (supra). This decision was rendered by the Supreme Court on an appeal against the decision of the Madras High Court in the case of P. Mariappa Gounder (supra). The facts of this case are that the assessee had agreed to purchase a tile factory under an agreement dated 22-5-1950 from the vendor. When the vendor did not convey the property as promised the appellant filed a suit for specific performance against the vendor. The suit was ultimately decreed by the Supreme Court by its judgment dated April 22, 1958. In terms of this decree, the appellant was required to deposit a sum of Rs. 85,000 within 30 days of the decree and thereupon the title in the property was to be conveyed to the appellant. The Supreme Court also passed a decree declaring that the appellant was entitled to mesne profits against the respondent. The Supreme Court directed the trial court to hold an enquiry and then to determine the amount of mesne profits which was payable by the respondent vendor to the appellant. The trial court determined the quantum of mesne profits at Rs. 57,093 by its order dated December 22, 1962. The amount of mesne profits was received by the appellant in the accounting year relevant for the assessment year 1964-65. The ITO held that the mesne profit constitutes the assessee's taxable income in the assessment year 1964-65 since the assessee actually received the amount only during the relevant previous year. The AAC agreed with the view that the mesne profits constituted taxable income but took the view that the mesne profit had accrued to the assessee in the year in which the trial court, acting on the remand by the Supreme Court, quantified the amount of mesne profits, which was in the previous year ending March 31, 1963, relevant to the assessment year 1963-64. The Tribunal also held that the mesne profit is taxable as income but took the view that the mesne profit should be held to have accrued the moment the Supreme Court declared the assessee's right thereto which was in the previous year ended March 31, 1959 relevant to assessment year 1959-60. On reference, the Madras High Court held that the mesne profits had to be assessed as taxable income in the hands of the assessee. It was further held that it cannot be said that the mesne profit had accrued at any point of time earlier to its actual determination by the trial court because it was only at the time the amount became a certain tangible amount, it can be said to accrue to the assessee as income. The Court pointed but that the trial court has fixed the quantum of mesne profit only 22-12-1962, i.e., during the accounting year ending on 31-3-1963 and, consequently, the same was assessable to tax in assessment year 1963-64.
30. Against the said decision of the High Court, an appeal was filed to the Hon'ble Supreme Court. Their Lordships of the Supreme Court affirmed the decision of the Hon'ble High Court. A perusal of the judgment of the Supreme Court reveals that the issue as to whether the mesne profit is liable to tax was not specifically considered and decided by the Hon'ble Supreme Court. It seems that the assessee had challenged the order of the Madras High Court mainly on the ground of year of assessability. Their Lordships ultimately held "In our opinion, therefore, the High Court was right in deciding the reference in favour of the Department. We accordingly dismiss the appeals but in the circumstances of this case award no costs."
31. The issue that arises for consideration is as to what is the effect of the decision of the Hon'ble Supreme Court in the case of P. Mariappa Gounder (supra). The general principle is that the decision of the court is a binding precedence on the issue which has been raised and decided-by the Court. In this case, as already pointed out, the issue as to whether the mesne profit was liable to tax at all was not dealt with by the Hon'ble Supreme Court. So, however the issue was specifically dealt by the Hon'ble Madras High Court against which appeal was filed to the Supreme Court. In this connection it would be relevant to consider the decision of the Madras High Court in the case of P. Mariappa Gounder (supra). A perusal of the decision reveals that the questions before the Hon'ble High Court, which have been decided, are as under:
(1) Whether the mesne profits decreed by the Supreme Court is of an income nature?
In regard to this, their Lordships of the Madras High Court at pages 681-and 682 held as under:-
Mr. K. Srinivasan, learned counsel for the assessee, referred to a few reported cases dealing generally with payment of compensation for depriving taxpayers of their properties. Those cases are distinguishable on the ground that the deprivation suffered by the assessees therein was of capital assets of which the assessees were the true owners. In the present case, the award of mesne profits is an award of compensation for the true owner's deprivation of the yearly income from the property, which is a different thing altogether. The true principle to be applied is that where compensation is paid for deprivation of a capital asset or for a restraint on trading or the conduct of a business undertaking as such, it would be a capital receipt in the hands of the recipient of the compensation. A similar consideration will prevail in cases where compensation is received for immobilization, sterilization, destruction or loss of an assessee's capital asset even without affecting his business as such. In such cases it can truly be said that the compensation is in substitution, not of income. But of the very source of income. Mesne profits are not of that kind. Even the measure of mesne profits, as the definition in the Code of Civil Procedure makes clear, is the income which the person in wrongful possession derives from the property or might with due diligence have obtained from the property. Mesne profits are, therefore, a substitute for actual returns from investment. In this category must be included any sum awarded by a court in restitution of interest, dividends or any other yield out of property, in contract to awarding compensation, recompense or damages for any loss, sterilisation or damage to capital assets as such.
As illustration of courts upholding the assessment of compensation for deprivation of the taxpayer's income, may be cited a decision or two. In Spence v. IRC [1941] 24 TC 311 (C Sess), a seller of shares obtained a decree against the purchaser. The decree set aside the sale on the ground of fraudulent misrepresentation by the purchaser. Under the decree, the shares were retransferred to the seller. The purchaser was also directed to pay to the seller a lump sum which included the amount of the dividends received by the purchaser while the shares stood in his name. It was held that the amount of dividends recovered from the purchaser was assessable as income of the decree-holder. It was pointed out that the decree for compensation was relatable to the dividends which the decree-holder had been deprived of by the fraudulent purchaser.
In Gobardhandas Jagannath v. CIT [1955] 27 ITR 225 (Pat.), a land belonging to the family of the assessee at Gaya was taken possession of by the Aviation Division of the Central Public Works Department for a number of years. A sum of Rs. 8,272 was paid by that Department as and for their use and occupation of the lands. The question was whether that amount was income taxable in the hands of the family. The Patna High Court held that it was. The court pointed out that the assessee was prevented during the period in question from enjoying the usufruct of the land and was not permanently deprived of the use of the land and that the amount of Rs. 8,272 represented merely the loss of income suffered by the assessee for the period during which the Government Department was in occupation of the land and hence it was rightly treated as bearing the character of income liable to be taxed in the hands of the assessee.
Having regard to these considerations, our answer to the question raised by the assessee in this case must be rendered in favour of the Department.
32. In regard to the other issue considered by the Hon'ble-High Court relating to the year of assessability of the mesne profit, their Lordships of the Madras High Court at page 687 held as under:-
Our observations last mentioned provide the answer to the following two questions of law referred to this court by the Tribunal at the instance of the Department on the issue as to the year of accrual of the mesne profit:
1. Whether the mesne profits declared by the Supreme Court accrued to the assessee earlier to the accounting year relevant to the assessment year 1963-64?
2. Whether, on the facts and in the circumstances of the case, the mesne profits received by the assessee is liable to be taxed in the assessment year 1964-65?
33. Complete reading of the decision of the Madras High Court referred to above reveals that the issues before their Lordships were two-fold. Firstly, as to whether the mesne profit is liable to tax and secondly which is the year of assessability - whether the year of grant or the year of quantification. The Hon'ble Supreme Court on appeal dealt with the issue relating to year of assessability only. So, however, the appeal against the decision of the Madras High Court was dismissed in toto. In our view it would be necessary to consider the effect of the dismissal of the appeal. In this connection, reference to the decision of the Hon'ble Supreme Court in the case of Kunhayammed v. State of Kerala [2000] 245 ITR 360' is relevant. In this case their Lordships of the Supreme Court have laid down that once special leave to appeal from an order has been granted by the Supreme Court, the order impugned before the Supreme Court becomes an order appealed against. Any order passed by the Supreme Court on appeal would be an appellate order and would attract the applicability of doctrine of merger. It would not make any difference whether the order is one of reversal or of modification or of dismissal affirming the order appealed against. It would also not make any difference if the order is speaking or non-speaking one.
34. On this issue, their Lordships of Patna High Court (FB) in the case of Smt. Tej Kumari v. CIT following the judgment of Hon'ble Supreme Court in the case of V.M. Salgaocar & Bros. (P.) Ltd. v. CIT [2000] 243 ITR 383 held as under:-
It is well-settled principle of law that when a special leave petition is summarily dismissed under Article 136 of the Constitution, such dismissal does not lay down any law rather it shall be deemed that the-Supreme Court has simply held that it is not a fit case where special leave petition should be granted. The same principle will not apply in a case where civil appeal is dismissed by the Supreme Court holding that the appeal has no merit. When once civil appeal is dismissed after hearing the parties by the Supreme Court holding that the appeal has no merit then such order becomes one which attracts Article 141 of the Constitution, which provides that the law declared by the Supreme Court shall be binding on all the Courts within the territory of India.
35. In the case of P. Mariappa Gounder (supra), their Lordships of the Supreme Court while considering the appeal against the decision of the Madras High Court in the case of P. Mariappa Gounder (supra) in the final conclusion held - "In our opinion, therefore, the High Court was right in deciding the reference in favour of the Department. We accordingly dismiss the appeals but in the circumstances of this case award no costs." The Supreme Court having dismissed the appeal against the order of the Madras High Court and having specifically held that the High Court was right in deciding the reference in favour of the Department, the order of the High Court has merged with the order of the Supreme Court. Thus, the issue relating to the chargeability of mesne profit 'as also the year of assessability have got to be taken as a binding precedence by virtue of the judgment of the Supreme Court in the case of P. Mariappa Gounder (supra). In the light of the above decision of the Supreme, Court, the decision of the jurisdictional High Court in the case of Smt. Lila Ghosh (supra) disagreeing with the view of the Madras High Court is rendered as not binding more so when the Calcutta High Court in the case of Smt. Lila Ghosh (supra) did not lay down the law that mesne profits are not liable to tax in all the circumstances. It is well-settled principle of law that a decision of the Court is not to be applied blindly. The decision of the Court has got to be understood in the context in which it has been rendered. This principle is stated by the Hon'ble Supreme Court in the case of CIT v. Sun Engg. Works (P.) Ltd. [1992] 198 ITR 297'. The decision of the Calcutta High Court in the case of Smt. Lila Ghosh (supra) is to be understood in the light to its own facts and the issue involved on such facts.
36. We have pointed out earlier that the decision of the Calcutta High Court in the case of Smt. Lila Ghosh (supra) is not an authority for the proposition that mesne profits are not liable to tax under all the circumstances. The nature of mesne profits shall have to be determined with reference to the claim made by the plaintiff and granted by the Court. When mesne profit is determined for depriving the taxpayers of their properties, the compensation awarded would be deprivation of entire assets of which the assessee was the true owner. However, when the award of mesne profit is compensation of the true owners and deprivation of the yearly income of the property, the same may have the character of the revenue nature. In the case of Smt. Lila Ghosh (supra), the assessee was the owner of land which was in possession of the lessee. Though the lease had expired in 1970, the lessee did not give possession to the assessee. The assessee filed a suit for eviction of the lessee. The suit was decreed in favour of the assessee in August 1979. While the execution of the said decree and the quantification of the mesne profit was pending, the Government requisitioned the demised property on 24-12-1979. The requisition order was challenged and subsequently a settlement was arrived at. Under the terms of the settlement, the property in question was to be acquired by the State under the Land Acquisition Act, 1894 and the compensation for such acquisition was to be paid to the assessee. Apart from the compensation for acquisition of the said premises, the assessee received a sum of Rs. 2 lakhs from the State on account of mesne profits for the use and occupation of the said premises by the erstwhile tenant. The Assessing Officer had assessed the amount of Rs, 2 lakhs in the hands of the assessee under the head 'income from other sources'. The Tribunal held that the mesne profits of Rs. 2 lakhs arose as a result of transfer of capital asset and the same assessable under the head "capital gains". The Tribunal further held that it was possible to determine the cost of acquisition of asset in question which, according to the Tribunal, consisted of the amount spent by the assessee towards stamp duty and other legal expenses incurred for obtaining the decree. On reference to the Hon'ble High Court it was held that the Tribunal was justified in holding that the mesne profits of Rs. 2 lakhs received by the assessee in this case were in the nature of damages and, therefore, a capital receipt. The Hon'ble High Court, however, disagreed with the Tribunal that the amounts spent towards stamp duty and other legal expenses for obtaining the decree could be said to be the cost of acquisition. Their Lordships, accordingly, held that the capital gain derived by the assessee was not liable to tax there being no cost of acquisition. Reliance was placed on the decision of the Supreme Court in the case of CIT v. B.C. Srinivasa Setty [1981] 128 ITR 294". Thus, it is seen that the decision of the jurisdictional High Court is distinguishable on facts. The land had been taken over by the State Government and apart from compensation, the amount of Rs. 2 lakhs had been granted by the Government as compensation for the period the property was in wrongful possession of the lessee. It was thus evident that the consideration received by the assessee of Rs. 2 lakhs was as part of compensation for acquisition of the land.
37. To reiterate the decision of the Hon'ble Calcutta High Court is not an authority for the proposition that the mesne profits is not liable to tax under any circumstances. The taxability of mesne profits would depend on the nature of deprivation etc. It may also be pertinent to refer to the decision of the Madras High Court in the case of S. Kempadevamma v. CIT [2001] 251 ITR 871. In this case, their Lordships held - "that the money payable for the period subsequent to the date of termination of the lease termed as damages for use and occupation did not on that ground alone render that amount a capital receipt in the hands of the owner. The amount received was an yield from the property and was a revenue receipt. Therefore, the damages awarded to the assessee were in the nature of compensation for loss of profits and hence revenue income." Thus the amount received by the assessee in assessment years 1996-97 and 1997-98 from the licensee is assessable to tax as revenue receipt even if the said amount is said to be mesne profits.
38. We may also consider another aspect of the matter. Assuming for argument sake that the ratio decidendi of the decision of the Supreme Court in the case of P. Mariappa Gounder (supra) is only in regard to the year of assessability and the confirmation of the decision of the Madras High Court by dismissal of the appeal may be considered to be only, obiter dicta, even then it is well-settled that the obiter dicta of the Supreme Court is also binding on the lower courts and the Tribunal and the decision of the Supreme Court dismissing the appeal against the decision of the Madras High Court would thus be binding. The decisions cited in para-8 of this order support this view.
39. Taking the totality of the facts and circumstances of the case into consideration, we in the final analysis hold as under:-
(1) That Rs. 14,40,000 each received by the assessee for assessment years 1996-97 and 1997-98 is not for wrongful possession of the property and, accordingly, does not fall within the ambit of mesne profits and therefore the receipt has rightly been brought to tax as revenue receipt for both the assessment years.
(2) That even if the aforementioned amount is mesne profits the same having been received from the lessee for the user of the property is liable to tax as a revenue receipt,
40. Thus ground Nos. 2 and 3 taken in both the appeals of the assessee for assessment years 1996-97 and 1997-98 are decided against the assessee.
41. We direct the Registry to fix the appeals for hearing before the Division Bench of the Tribunal for deciding the other grounds of appeal in accordance with law.