1992 (7) TMI 113 - AT - Income Tax

Income From House Property Income From Other Sources Income From Property Transfer Of Property

Summary

Issues Involved:
1. Taxability of capital gains from the transfer of property.
2. Taxability of notional lease rent under the head "other sources."
3. Taxability of interest received from the buyer under "other sources."

Issue-wise Detailed Analysis:

1. Taxability of Capital Gains from the Transfer of Property:
The original assessment for the assessment year 1986-87 was reopened to tax capital gains from the transfer of a flat at Maker Towers, Bombay. The assessee had entered into an agreement on 17-7-1984 for the sale of the property to M/s. Coromandal Indag Products Ltd. for Rs. 25,74,000. The sale consideration was to be paid in four instalments, and the seller was to remain in possession until the transaction was completed. Disputes arose due to delayed payments, and the sale deed was not executed and registered. The Bombay High Court recorded a compromise, and the conveyance deed was executed only after 31-3-1991. The CIT (Appeals) held that without a registered deed, the transfer did not occur during the relevant previous year, thus deleting the addition of Rs. 25,74,000 under capital gains. The Tribunal upheld this view, stating that in the absence of a registered deed, the assessee continued to be the owner, and no capital gains tax was applicable for the assessment year 1986-87.

2. Taxability of Notional Lease Rent under the Head "Other Sources":
The Dy. CIT assessed notional lease rent of Rs. 4,08,000 for the assessment year 1986-87 and Rs. 6,00,000 for the assessment year 1988-89 under "other sources," assuming the assessee was the owner and the property was leased. The CIT (Appeals) upheld this inclusion. However, the Tribunal found that the assessee was not in receipt of any benefit and no income accrued to him. The Tribunal noted that possession was handed over to the vendee, and the property was incapable of being let out. Thus, the notional income could not be taxed under "other sources" or "house property." The Tribunal deleted the additions of Rs. 4,08,000 and Rs. 6,00,000 for the respective assessment years.

3. Taxability of Interest Received from the Buyer under "Other Sources":
The assessee received interest of Rs. 1,65,389 from the buyer on the unpaid instalments. The CIT (Appeals) upheld the inclusion of this interest under "other sources." The Tribunal agreed, stating that the interest received was in the nature of income and not part of the sale consideration. Therefore, the addition of Rs. 1,65,389 for the assessment year 1986-87 was upheld.

Conclusion:
The appeal for the assessment year 1986-87 was partly allowed, deleting the notional lease rent but upholding the interest income. The appeal for the assessment year 1988-89 was allowed, deleting the notional lease rent.