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2006 (1) TMI 457 - AT - Income TaxNature of income - Rental income - Income from house property Or business income - expenses incurred for earning interest income - HELD THAT:- We find that the assessee has been enjoying the tenanted premises uninterruptedly for the last 9 years with the permission to sublet or to make addition or alteration in the tenanted premises without effecting the stability of the building. The assessee has sublet this premises by virtue of lease and license agreement for a period of 3 years initially commencing from 1st of February, 1995 with two further renewal options of three years and one year respectively, which shall be exercised at the sole discretion of the licensee, meaning thereby, it was known to every body that assessee is not a temporary tenant for a period of less than a year. He was rather a permanent tenant i.e., lessee in perpetuity and kept on letting out the property for a period of more than 7 years in part and with that understanding the licensee has paid a sum as interest-free security deposit. Having read both these lease and license agreements, we are of the considered opinion that it is not a case where it can be held that assessee has taken the lease from month to month or for a period not exceeding one year or excluded from the clutches of sub-section (iiib) of section 27 of the I.T. Act. We, therefore, hold that assessee acquires a permanent right in tenancy in the property with the permission to sublet and make an addition and alteration in the property, as such, he is deemed owner of the property as per provision of section 27(iiib) of the I.T. Act. In the instant case, assessee has subletted this property only to one person against the fixed rent which according to the assessee was called to be a license-fee. From the perusal of the record, we do not find any iota of evidence on the basis which it can be said that assessee was engaged in the business of licensing the tenanted premises as there was only one tenant in the premises and assessee was not required to do any other activity except recovering rent. We, therefore, of the considered view that rental income earned by the assessee on subletting of the tenanted property is income from house property and not a business income and the assessee is only entitled to those deductions permissible u/s 24(1)(i) of the I.T. Act. We, therefore, do not find any infirmity in the order of the CIT(A). In the result, the appeal of the assessee is dismissed.
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