Interest on advances received under Sub-Lease Agreement with defective Title

Shri. Chetan Dass Vs. Joint Commissioner of Income tax (ITAT Bangalore)

Initial lease for a period of ten years expired on 19.05.1988 and there was no extension of lease agreement in favour of the assessee. On account of the above, we are of the opinion that once the assessee did not have any right to remain in possession of lease, there was no occasion for the assessee to enter into a sub-lease agreement initially with Tapovan Builders in the year 1987 and thereafter with Bangalore Hospitals Ltd. Moreover the existence of both the sub-lease agreements was dependent upon the clear and marketable title of the assessee, on the basis of which the assessee can execute the sub-lease agreement in favour of these two sub-lessees. Once the title of the assessee is under cloud, there is no occasion for the assessee to execute the sub-lease agreement in favour of these two entities.

Further both the sub-lease agreements were only a prelude to the agreement as neither the title of the assessee was clear nor the assessee could put these two entities into possession, nor these two entities have paid the remaining amount of Rs. 10 lakhs and Rs. 45 lakhs respectively.