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2020 (3) TMI 602 - AT - Income TaxIncome from house property - sharing of revenue between the assessee and 6 other co-licensors - sham transaction or not - Treating the Rent and Amenities charges on account of Rent and Amenities received as Rent Income of the appellant - HELD THAT:- As before leave and license agreement dated 28/08/2009 entered into by the 7 licensors with M/s DFIRPL, there was a pre-existing agreement dated 20/04/2009 between the assessee and other 6 persons. As per terms of this agreement, certain license was granted to these persons against license fees for valuable consideration of ₹ 2.10 Lacs with respect to 60% of the licensed premises. As per Clause-15 of the agreement, the licensees had a right to assign, sub-license or to grant on leave and license basis, the licensed premised to third parties without prior consent of licensors. Pursuant to said agreement, the assessee as well as other 6 persons, entered into subsequent leave and license agreement with M/s DFIRPL. The terms of the said agreement have duly been recognized in leave and license agreement dated 28/08/2009 and the share of the assessee and other 6 persons find specific mention in this agreement. The aforesaid agreement has been executed by the 7 licensors and licensee and the same is a registered document. Pursuant to the terms of both the agreements, the transactions have been carried out and assessee as well as other 6 persons have offered their respective share of income in their own tax returns. There is nothing illegal in both the agreements. This being the case, the agreement dated 20/04/2009 could not be termed as sham agreement or an artificial structure with a view to evade tax liability. The said argument would be further weakened by the fact that proportionate income has already been offered to tax by the assessee as well as other 6 licensors. The observations of Ld. CIT(A) that the said income should have been offered as Income from House Property by the 6 persons could not be a ground to make impugned additions in the hands of the assessee. It is also fortified by the fact that learned first appellate authority, himself, observed that Ld. AO should have taken corrective measures about income shown as income from house property by the family members. However, the said error, in our considered opinion, could not empower Ld. CIT(A) to confirm the additions in the hands of the assessee.If the tax payer was in a position to carry a transaction in two alternative ways, one of which would result in lower tax liability, the assessee would be at liberty to choose that particular method. In the present case, we find nothing illegality in both the leave and license agreement entered into by the assessee. The terms of the agreement were duly honoured by the respective parties and it could not be said that the earlier agreement was a sham agreement. The rule of consistency would also favor assessee’s case since similar apportionment done in AY 2010-11 has been accepted by the revenue. We hold that the clubbing of rental & amenities income of 6 persons, in the hands of the assessee, would not be sustainable in the eyes of law. AO is directed to recompute the income by taking assessee’s share of rental income and amenities charges under the head Income from House Property. The rental income of ₹ 25.20 Lacs earned by the assessee from 6 persons would also be taxable under the head Income from House Property. The statutory deductions, as available as per law, shall be provided to the assessee. Accordingly, the appeal stands allowed.
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