Case Law Details
Nahalchand Laloochand (P) Ltd. Vs. DCIT (ITAT Mumbai)
The issue under consideration is whether assessee is considered as monthly tenant or deemed owner of the premises u/s.27(iiib) read with Section 269UA(f)(i) of the Act and accordingly whether rental income is taxable u/s.22 as ‘income from house property’ or not?
ITAT states that, the assessee was in occupation of Kantilal House since the year 1948 and continues to do so even today which prima-facie would establish that the premise was taken under long-term lease. In the absence of any written contract, the submissions that tenancy was on ‘month to month’ basis would require higher degree of evidence. The entire onus was placed on assessee to prove the same by clinching evidences in the background of the fact that the assessee entered into long term lease agreement extending beyond a period of 12 years with Bank of Baroda. It was also observed that when the assessee was not sure of the period of tenancy, then how could it enter into a lease agreement with a nationalized bank for a period of 12 or more years. Therefore, heavy onus was casted upon assessee to prove that he was tenant on monthly basis as covered by exception provided u/s 27(iiib) and the lease was not a period exceeding 12 years to attract the provisions of Section 269UA(f). ITAT find that except for letter from legal heirs of the deceased landlord which merely stated that the assessee has paid monthly rents, no other evidence could be adduced by the assessee to substantiate the fact that tenancy was on ‘month to month’ basis despite being specifically directed by the Tribunal to do so. In such eventuality, the only documents that would be available to adjudge the assessee’s claim would be in the shape of lease agreements entered into by the assessee with Bank of Baroda. From the perusal of the same, it is observed that despite assertions by the assessee that tenancy was on ‘month to month’ basis and the same could be terminated by tendering 15 days’ notice, the assessee conveniently entered into longterm lease agreement for aggregate period exceeding 12 years and that too with a Nationalized Bank, who require approval of regulatory authorities to open /operate the branches. Further, the setting up of branch would entail heavy infrastructure cost for the Bank. In the said background, it is difficult to acquiesce to the fact that Bank would agree to enter into such long-term lease agreement for as many as 12 years despite being fully aware of the fact that the tenancy was on ‘month to month’ basis and the premise could be got vacated by landlord by giving a very short notice. The same would not be possible unless there is assurance of high degree of successful performance of the lease agreement.
Hence, the entire facts and circumstances do not convince ITAT to accept the argument that the tenancy was on ‘month to month’ basis and the assessee was covered in the exceptions contained in Sec. 27(iiib). ITAT rely on the decision of Hon’ble Supreme Court rendered in CIT V/s Durga Prasad More (82 ITR 540) wherein it was observed that the authorities were entitled to took into the surrounding circumstances to find out the realities of the recitals made in the documents. Keeping in view the entirety of facts and circumstances, we hold that the tenancy was not on ‘month to month’ basis as asserted by the assessee but it was for aggregate period exceeding 12 years in terms of Sec. 269UA(f)(i). Accordingly, for the purpose of Sec. 27(iiib) r.w.s. 269UA(f)(i), the assessee was deemed owner of the property and therefore, the stated income was rightly brought to tax by revenue authorities as Income from House Property. Resultantly, the appeal filed by the assessee is dismissed.
FULL TEXT OF THE ITAT JUDGEMENT
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