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2018 (5) TMI 250 - AT - Income TaxComputation of income from house property - assessee submitted that the land does not belong to the assessee and the superstructure belongs to the assessee. The assessee received a composite rent for land and building - whether AO is not justified in taking the rent which relates to land on which the superstructure was standing? - whether assessee can reduce the rent paid for the land, which was taken on lease for the purpose of constructing superstructure while computing income from house property? - Held that:- As per Section 22 of the Act, the annual value of the property consists of any building or land appurtenant thereto of which the assessee is the owner. Wherever a right was acquired in respect of any building or part thereof by way of lease for a term not less than 12 years, it has to be construed as transfer. The annual value to be computed is in respect of building and land appurtenant thereto for which the assessee is the owner. In this case, admittedly, the assessee is not the owner of the land. The building was put up by the assessee on the land belonging to other persons. Under the common law, double ownership in respect of building is permissible. In respect of the lease, what was transferred to the assessee is a right to occupation and enjoyment on the land. The other rights relating to ownership continues to remain with the original owner. Therefore, the amount payable / paid as a lease rent for occupation and enjoyment of the land, which belongs to third party, has to be necessarily reduced while computing annual rental value under Sections 22 and 23 of the Act. The market value of the land and cost of construction of the building has to be estimated for the purpose of determining the annual rental value. In case, the assessee is not the owner of the land on which the superstructure was constructed, the market value of the land or the lease rent paid / payable for the land needs to be excluded. This Tribunal is of the considered opinion that for computing the annual rental value of the building, the lease rental paid or payable by the assessee as per lease deed has to be excluded. The rent received or receivable by the assessee for the building has to be reduced from the rent paid or payable by the assessee in respect of land to the land owners. - Decided in favour of assessee
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