Case Law Details
In this case assessee has tenancy rights in the premises. The assessee has let out the premises and is showing receipt as business income. However, authorities below have given finding that assessee is only subletting the property and receiving of house properly income. The authorities below have relied upon the decision of Hon’ble Delhi High Court in the case of CIT vs D S Singh 186 CTR 387 and the Hon’ble apex court decision in the case of Poddar Cement 226 ITR 625. We find that in light of the facts of the case and the case laws relied upon by the authorities below it is clear that the amount received by the assessee on account of subletting the property is only income from house property and has to be treated as such. In such circumstances there is no justification of allowing expenses against the house property income other than that provided as deduction under the scheme of computation of house property income.
Brief Facts of the Case
1. The assessee is a private limited company engaged in the business of providing table space, cabin space and other infrastructural facilities to its clients occupying the place. It furnished its return of income for A.Y.2010-11 on 05.07.2011 disclosing total income of Rs.14,38,437/-. The assessment was made u/s.143(3) of the Act on 31.12.2012 determining total income of Rs.18,43,5801-. In the previously mentioned assessment order dated 27.11.2012, the LAO has decided the issue vide paragraph No.6(i) and 6(ii) on page 3 and 4 of the relevant assessment order, as extracted under:-
“Hon’ble Delhi High Court held that where the assessee in occupation of rented premises sub-let a portion thereof and claimed that income from such sub-letting was assessable as business income, the department was justified in assessing the said income under ‘Income from house property; in view of the fact that the assessee was in full control in his capacity as a tenant, and had earned income by subletting of the property. In situations of this type, there is nothing to suggest that ownership of the premises is essential for levying tax under the head “Income from house property”- Smarts (P.) Ltd. v. CIT [2008] 166 Taxman53(Delhi).
In view of forgoing paras and the introduction of section 27(iiib) of the Act by the Finance Act, 1987, by virtue of this provision in case of a lease for a term of not less than 12 years, the lessee is regarded as the owner of the property for the purposes of section 22 to 26 of the Act. On 31.12.2012, the assesse’s representative filed the copies of rent receipts from 1986. Therefore, in the assessee’s ease the assessee is in possession of the said property since 1986 i.e. exceeding 12 years. Therefore, the assessee is deemed owner of the property for purpose of determining “Income from House property.”
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