ACIT 10(1), MUMBAI v. LATE SHRI SOBHRAJ BHAROMAL TALREJA, MUMBAI

ITA 4582/MUM/2009 | 2005-2006
Pronouncement Date: 21-05-2010 | Result: Dismissed

Appeal Details

RSA Number 458219914 RSA 2009
Assessee PAN AABPT3366R
Bench Mumbai
Appeal Number ITA 4582/MUM/2009
Duration Of Justice 9 month(s) 15 day(s)
Appellant ACIT 10(1), MUMBAI
Respondent LATE SHRI SOBHRAJ BHAROMAL TALREJA, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 21-05-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted I
Tribunal Order Date 21-05-2010
Assessment Year 2005-2006
Appeal Filed On 06-08-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES I MUMBAI BEFORE SHRI. R.S. PADVEKAR (J.M.) AND SHRI. RAJENDR A SINGH (A.M.) ITA NO.4582/MUM/2009 ASSESSMENT YEAR : 2005-2006 ACIT 10(1) R.NO.455 AAYAKAR BHAVAN M.K. RD. MUMBAI 400 020. VS. LATE SHRI SOBHRAJ BHAROMAL TALREJA (THROUGH LEGAR HEIR SMT. RAJKUMARI SOBHRAJ TALREJA) 103/104 RICKASHE APARTMENT ST. ANTHONY RD. BANDRA (W) MUMBAI. PAN : AABPT3366R (APPLICANT) (RESPONDENT) APPLICANT BY : SHRI VIKRAM GAUR SR. A.R. RESPONDENT BY : NONE. O R D E R PER R.S. PADVEKAR J.M. THIS APPEAL HAS BEEN FILED BY THE REVENUE CHALLENG ING THE IMPUGNED ORDER OF THE LEARNED CIT(A)-X MUMBAI DATED 22.05.2 009 FOR THE ASSESSMENT YEAR 2005-2006. THE REVENUE HAS TAKEN THE FOLLOWI NG EFFECTIVE GROUNDS: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW THE LEARNED CIT(A) HAS ERRE D IN DIRECTING THE ASSESSING OFFICER TO CONSIDER THE ASSESSEE AS D EEMED OWNER OF THE PROPERTY BY VIRTUE OF SECTION 27(II)(B ) OF THE I.T. ACT AND TAX AND THE LEASE INCOME UNDER HEAD INCOME FRO M HOUSE PROPERTY INSTEAD OF INCOME FROM OTHER SOURCE IGN ORING THE FACT THAT THE ASSESSEE FAILED TO THE FILE FORM NO.3 7-I BEFORE THE APPROPRIATE AUTHORITY AND THEREFORE NOT SATISFIED T HE CONDITION AS PER THE PROVISIONS OF SECTION 269UA(F) AND 269UC TO CALL IT AS A TRANSFER. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AS WELL AS IN LAW THE LEARNED CIT(A) HAS ERRED IN DIR ECTING THE ASSESSING OFFICER TO ALLOW 30% OF THE PROPERTY INCO ME U/S.24(1)(I) IGNORING THE FACT THAT THE INCOME IS A SSESSABLE UNDER THE HEAD INCOME FROM OTHER SOURCES AND NOT UNDER THE HEAD INCOME FROM HOUSE PROPERTY. ITA NO.4582/MUM/2009 A.Y.: 2005-2006 2 2. IN THIS CASE ASSESSEE HAS MOVED ADJOURNMENT APPL ICATION BUT THE SAME WAS REJECTED. IT WAS SEEN THAT THE ISSUE ARI SING FROM THIS APPEAL HAS BEEN DECIDED BY THE TRIBUNAL IN THE ASSESSEES OWN CASE IN THE PRECEDING ASSESSMENT YEAR. THE ISSUE WHICH ARISES FOR OUR CONSIDERATION IS WHETHER THE ASSESSEES INCOME FROM LEASE OUT PROPERTY IS TA XABLE UNDER THE HEAD INCOME FROM HOUSE PROPERTY OR INCOME FROM OTHER SOURCE. THE ASSESSEE IS RECEIVED RENT FROM M/S. E FUND INTERNATIONAL PVT. L TD. AMOUNTING TO RS.36 17 712/- AND HAS ALSO SHOWN THE PAYMENT OF LE ASE RENT TO THE M/S. SAM PROPERTIES PVT. LTD. OUT OF THE RENT RECEIVED F ROM ABOVE RS.5 92 368/-. M/S. SAM PROPERTIES PVT. LTD. HAS PURCHASED A PROPE RTY NAMED INFINITY IN THE YEAR 2000. THE COMPANY ENTERED INTO LEASE AGR EEMENT WITH ITS DIRECTORS ASSESSEE AND HIS WIFE FOR MONTHLY LEASE RENT OF RS.98 725/-. THE ASSESSEE ENTERED INTO ANOTHER SUB LEASING AGREEMENT WITH THE M/S. E FUND INTERNATIONAL PVT. LTD. AND LEASE RENT FIXED FOR RS .1 95 552/- PER MONTH FOR THE FIRST 3 YEARS WITH CLAUSE FOR INCREASE IN EVERY 3 YEARS. THE ASSESSEE AND ANOTHER DIRECTOR WHO IS SPOUSE OF THE ASSESSEE DEC LARED THE RENT RECEIVED FROM M/S. E FUND INTERNATIONAL PVT. LTD. UNDER THE HEAD INCOME FROM HOUSE PROPERTY. THIS IS A REPETITIVE ISSUE ARISI NG FROM THE ASSESSMENT YEAR 2002-2003 & 2003-2004. WHEN THIS ISSUE REACHED BEFO RE THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2002-20 03 & 2003-2004 THE TRIBUNAL HAS HELD THAT ASSESSEE WAS OWNER OF THE PR OPERTY WITHIN THE MEANING SECTION 27(IIIB) R.W.S. 269UA(F) OF THE ACT AND ACCORDINGLY HELD THAT THE LEASE INCOME FROM SUBLETTING OF THE PROPERTY TO M/S. E FUND INTERNATIONAL PVT. LTD. IS TO BE ASSESSED UNDER THE HEAD INCOME FROM HOUSE PROPERTY. THE OPERATIVE PART OF THE TRIBUNAL OR DER READS AS UNDER: 3. .THE ISSUE BEFORE US IS THAT WHETHER THE CONDITIONS PRESCRIBED U/S.27(IIIB) OF THE ACT ARE S ATISFIED IN THIS CASE AND WHETHER THE ASSESSEES COULD BE CONSIDERED AS THE DEEMED OWNER OF THE PROPERTY AND WHETHER THE INCOME OF THE PREMISES IS ASSESSABLE AS INCOME UNDER THE HEAD INC OME FROM HOUSE PROPERTY OR INCOME FROM OTHER SOURCES. WE FI ND THAT THE CONDITIONS OF SEC.27(IIIB) OF THE ACT ARE SATISFIED IN THIS CASE AND ACCORDINGLY THE ASSESSEE CAN BE SAID TO BE DE EMED OWNER OF THE PROPERTY AND THEREFORE THE INCOME IS ASSESSABLE ITA NO.4582/MUM/2009 A.Y.: 2005-2006 3 AS INCOME UNDER HEAD INCOME FROM HOUSE PROPERTY IN THE HANDS OF THE ASSESSEES. THE PLAIN READING OF PROV ISION OF SEC.27(IIIB) PROVIDES ON THAT IF AN AGREEMENT OF LE ASE OF PROPERTY IS FOR MORE THAN 12 YEARS THEN THE PERSON WOULD BE CONSTRUED TO BE DEEMED OWNER OF HE PROPERTY BY VIRT UE OF SUB- SECTION (IIIB) OF THE SEC.27 OF THE I.T. ACT. IT PROVIDES THAT THE CASES WHERE THE LEASE IF FROM MONTH TO MONTH OR FOR A PERIOD NOT EXCEEDING ONE YEAR WITH THE LEASE IF FROM MONTH TO MONTH OR FOR A PERIOD NOT EXCEEDING ONE YEAR WITH RESPECT TO ANY BUILDING OR PART THEREOF SHALL BE EXCLUDED FROM THE PROVISIO N OF SEC.27(IIIB) OF THE ACT. THE PROVISION OF SEC.27( IIIB) REFERS TO THE PROVISION OF SEC.269UA(F) AND ACCORDINGLY THE PROVI SION OF SEC.27(IIIB) HAS TO BE READ WITH PROVISION OF SEC.2 69UA(F) OF THE ACT IN ORDER TO ADJUDICATE WHETHER THE ASSESSEE COU LD BE CONSIDERED AS DEEMED OWNER OF THE PROPERTY. THE SECTION 269UA(F) HAS DEFINED TRANSFER IN RELATION TO ANY IMMOVABLE PROPERTY MEANS TRANSFER OF SUCH PROPERTY BY WAY OF SALE OR EXCHANGE OR A LEASE FOR THE TERM OF NOT LESS THAN 1 2 YEARS. THUS A COMBINED READING OF SEC.27(IIIB) AND SEC.269 UA(F) LAYS DOWN THAT IF AN AGREEMENT OF LEASE OF PROPERTY IS F OR MORE THAN 12 YEARS THEN THE PERSON WOULD BE CONSTRUED TO BE A DEEMED OWNER OF A PROPERTY. IN THE PRESENT CASE THE ASSE SSEES HAVE TAKEN THE PROPERTY ON LEASE FOR A PERIOD FOR MORE T HAN 12 YEARS. WE FIND THAT THE TERM IN THE LEASE DEED FOR TERMINA TION OF LEASE TERM BY GIVING SEX MONTHS NOTICE AND TAKING PERMISS ION TO SUBLETTING THE PROPERTY ARE THE NORMAL CONDITIONS I N MOST OF THE LEASE AGREEMENTS. WE FIND THAT THE LEASE IN THIS CASE IS NOT ON MONTH TO MONTH BASIS AND IS FOR A PERIOD OF 15 YEAR S AND ACCORDINGLY THE ASSESSEES ARE THE DEEMED OWNER OF THE PROPERTIES. MERELY BECAUSE THE ASSESSEES HAVE NOT COMPLIED WITH THE PROVISION OF CHAPTER XX-C OF THE I.T. ACT BY FILING THE FORM NO.37-I BEFORE THE APPROPRIATE AUTHORITY IS N O GROUND TO CONCLUDE THAT THE INCOME OF THE ASSESSEE CAN BE TAX ED AS INCOME FROM OTHER SOURCES. THE QUESTION OF TAXA BILITY OF THE INCOME FROM THE PROPERTY HAS TO BE DECIDED BY DETER MINING THAT WHETHER THE CONDITIONS PRESCRIBED U/S.27(IIIB) R.W. S. 269UA(F) ARE SATISFIED IN THIS CASE OR NOT. WE FIND THAT THE OBJECTION OF THE ASSESSING OFFICER THAT IN CLAUSE-11 OF THE LEAS E DEED EXECUTED BETWEEN THE ASSESSEES AND M/S. SAM PROPERT IES PVT. LTD. IT IS PROVIDED TAT IF THE LESSEE DESIRES TO T ERMINATE THE LEASE BEFORE THE EXPIRY OF INITIAL PERIOD OF 3 YEAR S IT SHALL BE ENTITLED TO DO SO BY GIVING 6 MONTHS PRIOR NOTICE T O THE LESSOR IN WRITING AND THE LESSEE SHALL BE LIABLE TO PAY THE L ESSOR THE LEASE RENT FOR THE UNEXPIRED PORTION OF THE THREE YEARS I NITIAL LEASE PERIOD IS NOT SUSTAINABLE IN LAW. THE EXPLANATIO N TO SEC.269UA(F) OF THE ACT PROVIDES THAT A LEASE WHICH PROVIDES FOR THE EXTENSION OF THE TERM THEREOF BY A FURTHER TERM OR TERMS ITA NO.4582/MUM/2009 A.Y.: 2005-2006 4 SHALL BE DEEMED TO BE A LEASE FOR A TERM OF NOT LES S THAN 12 YEARS IF THE AGGREGATE OF THE TERM FOR WHICH SUCH LEASE IS TO BE GRANTED AND FURTHER TERM OR TERMS FOR WHICH IT CAN BE SO EXTENDED IS NOT LESS THAN 12 YEARS. THE CASE OF T HE ASSESSEE IS ON A MUCH STRONGER FOUNDATION IN AS MUCH AS LEAS E DEED EXECUTED BY THE ASSESSEES WITH THE COMPANY IS FOR 1 5 YEARS AS THE INITIAL LEASE PERIOD OF THE AGREEMENT. IN THE SE FACTS OF THE CASE WE HAVE NO HESITATION OF HOLDING THAT ASSESSE E HAS FULFILLED ALL THE CONDITIONS PROVIDED IN THE PROVIS ION OF SEC.27(IIIB) R.W.S. 269UA(F) OF THE ACT AND ACCORDI NGLY WE HOLD THAT THE CIT(A) WAS JUSTIFIED IN HOLDING THAT THE A SSESSEES CAN BE CONSIDERED AS DEEMED OWNER OF THE PROPERTY AND I N DIRECTING THE ASSESSING OFFICER TO TAX PROPERTY INC OME UNDER THE HEAD INCOME FROM HOUSE PROPERTY. IN THIS VIEW OF THE MATTER WE CONFIRM THE ORDER OF THE CIT(A) ON THIS ISSUE AND THE GROUND APPEAL NO.1 IN BOTH THE APPEALS OF THE REVEN UE IS DISMISSED. 3. THE LEARNED CIT(A) HAS FOLLOWED THE ORDER OF TRI BUNAL AND ALLOWED THE CLAIM OF THE ASSESSEE. WE FIND NO REASON TO INTERF ERE WITH THE ORDER OF THE LEARNED CIT(A) AS FACTS ARE IDENTICAL IN THIS YEAR. 4. IN THE RESULT APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED ON THIS DAY OF 21 ST MAY 2010. SD/- (RAJENDRA SINGH) (ACCOUNTANT MEMBER) SD/- (R.S. PADVEKAR) (JUDICIAL MEMBER) MUMBAI DATED 21 ST MAY 2010. JANHAVI COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS)- MUMBAI 4. COMMISSIONER OF INCOME TAX CITY- MUMBAI 5. DEPARTMENTAL REPRESENTATIVE BENCH I MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR ITAT MUMBAI