M/S. J.G. EXPORTS,CHENNAI vs. ITO, CHENNAI

आदेश / O R D E R

PER BENCH:

These are appeals filed by the assessee directed against

orders dated 27.05.2016 of the ld. Commissioner of Income Tax

(Appeals)-5, Chennai for the impugned assessment years. Grounds

taken by the assessee for all the years are common and these are

reproduced hereunder:-

ITA Nos.2372-2378/2016. :- 2 -:

1 ‘’The order of the Learned Commissioner of Income Tax (Appeals) -5 is not in accordance with law and is therefore unsustainable

These appeals have been filed with a delay of two days. 2.

Condonation petition has been filed. Reason shown for the delay

seems to be justified. Ld. Departmental Representative did not raise

any serious objection. Delay is condoned. Appeals are admitted

A reading of the grounds raised by the assessee clearly 3.

show that it is aggrieved on treatment of rental income received by it,

under the head ‘’Income from House Property’’ and disallowance of the

claim of lease rental paid on the land.

for assessment year 2005-06 shown the income from rental under the

head ‘’Income from Business/Profession’’. However, according to him,

for assessment years 2008-09, 2009-10 and 2010-2011, assessee had

shown such rental income under the head ’Income from Other

ITA Nos.2372-2378/2016. :- 3 -:

Sources’’. Ld. Counsel fairly admitted that assessee had itself shown

the very same income under the head ‘’income from House Property’’

for assessment years 2006-07, 2007-08 and 2011-12. However, as

per the ld. Authorised Representative, the ld. Assessing Officer had

considered the rental income under the head ‘’Income from House

Property’’ for all the years. As per the ld. Authorised Representative,

even for those years, where assessee had shown rental income under

the head ‘’income from other sources, ld. Assessing Officer had

considered the gross rent without netting off the lease rent paid on

the land. Further, as per the ld. Authorised Representative, since the

building on which assessee had received rent was situated on a leased

land, authorities below ought have considered the rent received, net of

the lease rent paid for the land, under the head ‘’Income from Other

Sources’’ and not under the head ‘’income from House Property’’. Ld.

Authorised Representative submitted that ld. Assessing Officer had

relied on Sub Section (iiib) to Sec. 27 of the Income Tax Act, 1961 (in

short ‘’the Act’’) for considering the assessee as the owner of the

house property. As per the ld. Authorised Representative the said

section clearly referred to sub section (f) to Section 269 UA of the Act.

According to him, by virtue of Section 269(f) of the Act, assessee could

be deemed as an owner only when the conditions for part

performance mentioned in Section 53A of the Transfer of Property Act,

ITA Nos.2372-2378/2016. :- 4 -:

1882 was satisfied. According to him, the land on which assessee had

constructed the building, from which it was earning the rental income,

was taken on lease without executing any lease agreement as such.

Hence, according to him, Section 53A of the Transfer of Property Act

had no applicability. Contention of the ld. Authorised Representative

was that the land was not owned by the assessee and hence the

rental from the building situated in such land could be considered only

under the head ‘’Income from Other Sources’’ and not from the head

‘’income from House Property’’. As per the ld. Authorised

Representative if the rentals were considered under the head ‘’Income

from Other Sources’’ assessee will be eligible to set off the lease rental

paid for the land as expenditure laid out wholly and exclusively for the

purpose of earning the rental income from the building. Thus, as per

the ld. Authorised Representative necessary directions had to be given

to the authorities below for correctly assessing the rental income

under the head ‘’Income from Other Sources’’ and not as “Income from

House Property’’.

assessee was the owner of the building. According to him, assessee

had rented it out to multiple tenants and was earning rental income

therefrom. As per the ld. Departmental Representative , by virtue of

judgments of Hon’ble Jurisdictional High Court in the case of Keyaram

ITA Nos.2372-2378/2016. :- 5 -:

Hotels P. Ltd vs. DCIT, 373 ITR 494 and that of Keyaram Hotels P. Ltd

vs. ACIT, 300 ITR 118, such income could be considered only under

the head ‘’Income from House Property’’. Ld. Departmental

Representative also pointed out that Special Leave Petition filed

against the above judgment was dismissed by Hon’ble Apex Court and

reported (2015) 235 Taxmann 512.

We have considered the rival contentions and perused the 6.

orders of the authorities below. It is not disputed by the ld. Authorised

Representative that for assessment years 2006-07, 2007-08 and 2011-

12, assessee itself had shown the rental income under the head

‘’Income from House Property’’ in the returns filed by it. For

assessment years 2008-09, 2009-10 and 2010-2011, assessee had

shown such income under the ‘’Income from Other Sources’’. It is only

for assessment year 2005-06, among the various years in appeal

before us, that assessee had shown the rental income under the head

‘’Income from Business/Profession’’. What we note from the

assessment orders for the impugned assessment years is that assessee

had not carried on any export business though, it had in its name the

word ’’Exports’’. It has not been disputed by the assessee that the

House Property located at No.9, Chandrappa Mudali Street Sowcarpet,

Chennai 600 079, on which it was earning the rental income was

constructed by it, though it was situated in a leased land. Ownership

ITA Nos.2372-2378/2016. :- 6 -:

of the building therefore vested with the assessee. May be assessee

was not sure under which head of income, the rentals had to be

shown. However, income earned by the assessee by exploiting the

property by letting it out de hors, any commercial or business activity

is chargeable under the head ‘’Income from House Property’’ as held

by Jurisdictional High Court in the case of Keyaram Hotels P. Ltd

(supra). Argument of the ld. Authorised Representative is that,

assessee could not be considered as owner of the property since the

land was a leased one and Section 27(iiib) would not be attracted.

According to him, lease agreement for leasing the land on which the

building was constructed by the assessee was only an oral one and

not a written one. However, in our opinion answer to the question lies

in Section 22 of the Act, which is the charging section. Section 22 of

the Act is reproduced hereunder:-

‘’The annual value of property consisting of any buildings or lands appurtenant thereto of which the assessee is the owner, other than such portions of such property as he may occupy for the purposes of any business or profession carried on by him the profits of which are chargeable to income-tax, shall be chargeable to income-tax under the head "Income from house property".

A reading of the above section clearly show that annual value of the

property which is in the nature of a building is to be charged under

the head ‘’ Income from House Property’’, if the assessee is the owner

of the such building. Admittedly assessee was the owner of the

ITA Nos.2372-2378/2016. :- 7 -:

building though it might not be the owner of the land. It is not

essential that a person who owns a building should be owner of the land upon which it stands for assessing the rental income under the

head ‘’Income from House Property’’. In the circumstances, we are of the opinion that lower authorities were justified in considering the

rental income under the head ‘’Income from House Property’’. Once income is assessed under the head ‘’Income from House Property’’,

assessee will be eligible only for allowance mentioned in Section 24 of the Act. We thus do not find any reason to interfere with the orders of

the lower authorities.

In the result, the appeals of the assessee stand dismissed. 7.

Order pronounced on Wednesday, the 11th day of October, 2017, at Chennai.

Sd/- Sd/- (जॉज� माथन) (अ�ाहम पी. जॉज�) (GEORGE MATHAN) (ABRAHAM P. GEORGE) �या�यक सद�य/JUDICIAL MEMBER लेखा सद�य/ACCOUNTANT MEMBER

चे�नई/Chennai �दनांक/Dated:11th October, 2017. KV आदेश क� ��त�ल�प अ�े�षत/Copy to: 1. अपीलाथ�/Appellant 3. आयकर आयु�त (अपील)/CIT(A) 5. �वभागीय ��त�न�ध/DR 2. ��यथ�/Respondent 4. आयकर आयु�त/CIT 6. गाड� फाईल/GF