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Income Tax Appellate Tribunal, “A” BENCH, MUMBAI
Before: SHRI JOGINDER SINGH, JM & SHRI SANJAY ARORA, AM
सुनवाई क� तार�ख / : 09.12.2015 Date of Hearing घोषणा क� तार�ख / : 12.02.2016 Date of Pronouncement आदेश / O R D E R Per Sanjay Arora, A. M.: This is an Appeal by the Revenue directed against the Order by the Commissioner of Income Tax (Appeals)-24, Mumbai (‘CIT(A)’ for short) dated 06.9.2013, allowing the Assessee’s appeal contesting its assessment u/s.143(3) of the Income Tax Act, 1961 (‘the Act’ hereinafter) for the assessment year (A.Y.) 2010-11 vide order dated 30.10.2012.
(A.Y.2010-11) Dy. CIT vs. Ajaykumar Abhay Jain 2.1 The sole issue arising per the instant appeal by the Revenue is the head of income under which the income by way of license fee, received from M/s. Eros Multimedia P. Ltd. (EMPL), in respect of a property at Vira Industrial Estate, A-6, Veera Desai Road, Off Jayprakash Narayan Road, Andheri (W), Mumbai-400 058, ‘purchased’ by the assessee, along with two others, vide indenture of sale dated 14.5.1991, is assessable, i.e., whether u/s. 22 as ‘income from house property’ (IFHP) or u/s. 56 as ‘income from other sources’ (IFOS). The tax implication of the asesssability under different heads of income is on account of deductions exigible in computing the taxable income, which are specific to the head of income. Section 22 of the Act mandates that the annual value of a house property, of which the assessee is the owner, is assessable as IFHP. The question, therefore, boils down to whether the assessee is the owner of the house property under reference or not? The assessee, relying on the decision in the case of CIT vs. Poddar Cement Pvt. Ltd. [1997] 226 ITR 625 (SC), states of having received rent in his (joint) own right, so that he is the owner of the property. That, in our view, would not by itself prove ownership. A tenant may sublet or sub-lease a property, where the terms of the rent/lease agreement so permit, receiving rent, and only in his own right. That would not, however, enable him to stake a claim of ownership, and rent received would be assessable only as IFOS u/s.
That the amount stands received in his own right, only makes it in the nature of income in the hands of the assessee, a fact which is not in dispute. Rather, the purchase deed dated 14.5.1991, duly registered, is a prime document, evidencing the assessee as the owner, along with two co-owners, namely Vijaykumar S. Jain and Vishal R. Jain. True, page 3 of the purchase deed mentions of litigation. However, the same, as it appears, is only by tenants/licensees to whom sheds had been let out, and continues from the time the assessee’s vendors, Manubhai P. Cholia and Dhun Maneksha Colah, partners in M/s. Meera Chemcial Works and M/s. Meera Pulverizers, purchased the property in 1973 (refer page 13 of the impugned order). The dispute with the tenants – which would extend to their rights as (A.Y.2010-11) Dy. CIT vs. Ajaykumar Abhay Jain tenants, would not impinge on the assessee as the owner; he merely entering into the shoes of the previous owner/s. All that can be said is that the assessee, by virtue of the purchase deed, purchased a property encumbered by tenancy, or subject to suits against, as it appears, eviction, filed by the tenants in the Small Causes Court at Mumbai. How could that, we wonder, impinge on the assessee’s title to the property? There is no adverse claim or title (ownership) and, accordingly, the assessee can only be said to be an owner, though perhaps cannot, in view of the dispute as to the legal possession of the property, be said to be an absolute owner. That however would not make him any less an ‘owner’, or rent income there-from as not on account of ownership. In fact, the assessee, subsequent to the purchase, entered into a development agreement dated 30.5.2005, vide which the three co-owners (the assessee and two others) were to get 50% of the constructed area, the balance 50% to be retained by the Builder (for developing the property). The constructed area, of which the assessee got his share on the completion of the construction, is only in lieu of the rights in land, which along with some sheds thereon, was purchased in May, 1991. How could then it be said that the assessee’s right in land is disputed? Again, who, other than the assessee, could be said to be the owner of the premises, the basement and the parking space leased to EMPL vide Agreements dated 20.6.2007 and 03.9.2007.
2.2 We, next, consider the Revenue’s charge of the receipt in respect of the municipal tax, claimed u/s. 24(a) at Rs.34,81,325/-, being not in the name of the assessee, the person who claims ownership, but in the names of two business entities, i.e., Bhairamji Jijibhoy Pvt. Ltd. and Mira Chemicals. In this regard, we find that the assessee has furnished a letter from M/s. Satya Dev Member’s Association (dated 20.9.2012), which states that Rs.25 lacs has been paid by the assessee to the Municipal Corporation directly, while the balance Rs.9,81,325/- has been paid by it. Why should, we wonder, the Association (or any other) pay the municipal tax? What (A.Y.2010-11) Dy. CIT vs. Ajaykumar Abhay Jain is this Association, which the assessee vide his letter dated 24.9.2012 states of having not been framed? Even so, it could at best act as a collecting agency, collecting tax from Members and remitting it to the Corporation, in which case it would be for the full amount, i.e., for the entire property. Surely, some arrangement is in place, which has not been disclosed or explained. The same, in fact, is paid at Rs.13 lacs (on 12.8.2009), stated as inclusive of Rs.9.81 lacs claimed by the assessee. To whose account is the balance, and how is the same (ratio) worked out? As regards the assessee paying a lower sum, i.e., than that claimed, is it that the assessee has claimed excess municipal tax, or conversely, is it that the assessee is the owner only of the property corresponding to the amount paid by him? In fact, even here we find that of Rs.25 lacs (supra), Rs.15 lacs has been paid by the assessee, and the remaining Rs.10 lacs is by M/s. Shadilal and Sons and the assessee (refer para 5.1.2 of the impugned order). Who is this entity, i.e., Shadilal and Sons, and why should it pay on assessee’s behalf, i.e., assuming the entire amount claimed to be the assessee’s share of the municipal tax. Is the amount (claimed by the assessee) paid by the Association, or Shadilal and Sons for that matter, paid on assessee’s behalf, receiving the amount subsequently from him? There is no indication, though, to this effect. Further, even if the payers are not paid by him, does the assessee acknowledge his debt to them for the same? How has the assessee, or these persons, treated the amount paid/claimed in their accounts, which treatment though may not be determinative of the matter? We find no contention or explanation on this or other related aspects. We, it may be clarified, can understand that the Municipal Corporation issues receipts in the name/s of the person/s who is an owner/s on its records, but the payment of tax would only be by the owner (or on his behalf). The matter, in any case, needs to be explained. What, after all, is the status of the persons paying municipal tax vis-à-vis the assessee’s property, is a question that begs an answer. Further, as posed by the A.O., why, in- spite the purchase deed, a registered document, the ownership has not been registered in the name of the assessee (and, presumably, other co-owners as well) in the records (A.Y.2010-11) Dy. CIT vs. Ajaykumar Abhay Jain of the Municipal Corporation despite a lapse of two decades? This becomes rather perplexing considering that the builder has retained, ostensibly as an owner, 50% of the constructed area. The said construction as well as that falling to the share of the other two co-owners, may be or, rather, would have been sold/transferred by them to others. Non-transfer of title in the name of the owners (assuming it to be so for other co-owners as well) would cause problems for the subsequent transfer of title. The ownership contemplated u/s. 22 is of the house property, i.e., the constructed area, and which in a given case may be independent of ownership of land, as where it is on a lease-hold land or in respect of which the owner pays ground rent. In the present case, the assessee had purchased industrial sheds, i.e., an industrial plot with sheds, so that non-conveyance thereof in his name is not understood. Then, again, the assessee purchasing property from Manubhai P. Cholia and Dhun M. Colah, partners in Mira Chemcial Works and Meera Pulverizers respectively, what is the locus standi of the persons, i.e., Bhairamji Jijibhoy Pvt. Ltd. and Mira Chemicals, in whose names the receipts (toward tax) stand issued by the Municipal Corporation. These aspects, not addressed by the impugned order, raise doubts on the assessee’s status as an owner, i.e., vis-à-vis a protected tenant, and would require being satisfactorily answered. That is, their import cannot be limited to the deductibility of the municipal tax only - which, subject to the satisfaction of the condition of payment, follows in consequence, and may have implication as to ownership as well. No doubt, the purchase deed as well as the absence of adverse claim/s (in-as-much as there is no such finding) are important aspects in assessee’s favour, but we cannot help noticing that some aspects of the transaction remain unexplained and/or obscure in view of which the status of ownership cannot be stated as a fact. The plaints/responses, i.e., the proceeding in the eviction suits; development agreement as well as the lease agreements, are also not on record, and may be relevant. We may though clarify that an absolute ownership is not a condition for s. 22, and the beneficial ownership to the exclusion of others, of the house property, would be sufficient to attract s. 22 (Poddar Cement (P) Ltd. (supra)).
(A.Y.2010-11) Dy. CIT vs. Ajaykumar Abhay Jain
We, in view of the foregoing, restore the matter back to the file of the ld. CIT(A) to adjudicate afresh per a speaking order in accordance with law. He shall address and resolve the issues highlighted by us. Further, he having remitted the matter for verification to the file of the A.O., giving directions on a related aspect, i.e., deductibility of municipal tax, is at liberty to seek his report or any of the aspects deemed relevant. The findings by the A.O. with regard to the said issue may also be relevant. We decide accordingly.