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Income Tax Appellate Tribunal, ‘ B’ BENCH : CHENNAI
Before: SHRI ABRAHAM P.GEORGE & SHRI GEORGE MATHAN
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:-
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1 ‘’The order of the Learned Commissioner of Income Tax (Appeals) -5 is not in accordance with law and is therefore unsustainable
The Learned Commissioner of Income-Tax (Appeals)- ought not to have held that the income from property situated at No.9 Chandrappa Mudali Street, Sowcarpet, Chennai 600 079 should be assessed under the head "Income from Property" instead of Income from Business especially when the appellant was not the owner of the land and only owned the superstructure on land belonging to someone else.
The Learned Commissioner of Income-Tax (Appeals)-5 ought to have appreciated the fact that the appellant firm had paid lease rental for the land taken on lease and ought to have allowed the outgo on this score’’.
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.
Ld. Counsel for the assessee submitted that assessee had 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
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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,
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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’’.
Per contra, ld. Departmental Representative submitted that 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
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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.