TMI Blog1992 (7) TMI 113X X X X Extracts X X X X X X X X Extracts X X X X ..... was also payable along with the instalment as above. As per clause 3 of the agreement, the seller. viz., the assessee would continue to be in possession of the entire property till the sale transaction was duly completed. However, the seller agreed to give a licence to the buyer to use temporarily an approximate 2.000 sq. ft. area of the flat on payment of the first instalment. It was further stated that the seller does not thereby part with the possession of the said area and that they continued to be in possession and that the use by the party of the second part is purely in the capacity as licensee and that the said licence is liable to be revoked by the seller at any time for non-payment of the instalment as per clause 2. A portion of the building admeasuring 240 sq. ft. was already in the occupation of one M/s. Janso Exports Pvt. Ltd. and it was agreed between the seller and the buyer that M/s. Janso Exports Pvt. Ltd. will be in the occupation of the cabin admeasuring 240 sq. ft. till the payment of the last instalment together with the interest thereon by the buyer and the sale transaction was completed and possession handed over to the buyer. It was further stipulated that M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vant previous year. In this view of the matter, he deleted the addition of Rs. 25,74,000 made under the head capital gains. As for the alleged lease rent computed on notional basis in a sum of Rs. 4,08,000, the learned CIT (Appeals) held that as no transfer of property had taken place during the previous year the assessee continued to be the owner and, therefore, the appellant was rightly entitled to receipt of lease rent for actual possession and in this view of the matter, he sustained an addition of Rs. 4,08,000 as income from other sources. As for the inclusion of Rs. 1,65,389 under other sources towards interest the CIT (Appeals) held that under the agreement the assessee was entitled to receive interest on the unpaid consideration and thus the addition was upheld. Further he held that as the prospective buyer had to incur expenditure on maintenance etc. the assessee was not entitled to any deduction therefrom. Thus the appeal of the assessee was partly allowed. For the assessment year 1988-89, the CIT (Appeals) following his earlier order upheld the addition of Rs. 6,00,000 as lease rent assessed under the head other sources. The department is not on appeal against the order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ranted to the agreement holder, possession also continued to rest with the appellant. Therefore, the rent which it would fetch if let out can be included in the income of the appellant. He relied on the following cases :-- (i) Ramkumar Mills (P.) Ltd. v. CIT [1989] 180 ITR 464 (Kar.) ; (ii) CIT v. Sultan Bros (P.) Ltd. [1982] 142 ITR 249 (Bom.) (iii) CIT v. Hans Raj Gupta [1982] 137 ITR 195 (Delhi) ; (iv) CIT v. Syed Saddique Imam [1978] 111 ITR 475 (Pat.) (FB); (v) CIT v. Zoroas trian Building Society Ltd. [1976] 102 ITR 499 (Bom.); and (vi) CIT v. Tamil Nadu Agro Industries Corpn. Ltd. [1987] 163 ITR 61 (Mad.). To a question from the Bench that the assessment has been made under other sources as regards the rental income and not income from house property he submitted that if the income cannot be assessed under other sources at least it should be assessed under income from house property. He had also reservations about the passing of possession to the vendee though the authorities below had proceeded on the basis that the possession was handed over to the vendee. In this connection, he referred to the agreement between the appellant and the other party and emph ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d fixtures situated at Tower ' E ' Maker Towers at Plot Nos. 73-A, 74, 83, 84 and 85 of Block V, Backbay Reclamation, Cuffe Parade, Bombay-400 005 (hereinafter be referred to as the ' said property '). Whereas the party of the second part is interested in buying the said property and the party of the first part is interested in selling the said property to the party of the second part and now this Agreement witnesseth and the parties hereto have mutually agreed to as follows : 1. That the party of the first part shall sell the said property and the party of the second part shall purchase the said property with all rights and maintenances free of all encumbrances for the price of Rs. 25,74,000 (Rupees twenty-five lakhs and seventy-four thousands only) at the rate of Rs. 1100 per sq. ft. 2. The said consideration shall be paid by the party of the second part in four equal instalments which will fail due on 12-7-1984, 12-10-1984, 12-1-1985 and the last instalment on or before 30-6-1985. On the remaining principal amount interest at 15 per cent per annum shall be payable by the party of the second part along with the principal amount on the due dates indicated above. If default in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... part for all the losses, expenses, demands that may arise in the event of the sale not being completed in favour of the party of the second part within the stipulated time due to any fault or latches on their part or the sale of the said property being challenged by anyone. 9. Any dispute arising under this Agreement shall have the jurisdiction of Bombay High Court. In witness whereof the parties hereto have set their respective hands and signature on the day, month and year first above written in the presence of.---" Merely because the expression ' licence ' is used by both parties, it cannot be held that possession was not handed over. Factually M/s. Coromondal Indag Products Pvt. Ltd., Bombay, had entered the premises and was in physical possession of it. It is the usual practice in metropolitan cities to use the term ' licence ' as against the expression ' possession '. It should also be seen in what context the expression ' licence ' is used. It is used in this case in the context of an agreement to sell the property on payment of consideration in instalments. Further the presence of clauses 5 6 lend support to the view that possession was given to the vendee. Therefo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itle or obtaining of the ownership. When such a vital condition regarding the ownership of the asset is not satisfied, the claim for deduction is bound to be rejected ". Dealing with the Allahabad High Court decision in the case of Addl. CIT v. U.P. State Agro-Industrial Corpn. Ltd. [1981] 127 ITR 97 which proceeded to decide the issue under section 32 by applying the ratio laid down by the Supreme Court in the case of R.B. Jodha Mal the Hon'ble High Court of Kerala at page 346 was of the view that the decision of the Supreme Court was rendered in the context of section 9 of the Income-tax Act which corresponds to section 22 of 1961 Act and the things stated therein do not contain anything which would induce them to take a different view of the construction of section 32. At this stage it is necessary to refer to the decision of the Supreme Court in Nawab Sir Mir Osman Ali Khan v. CUT [1986] 162 ITR 888. At page 895 the Supreme Court observed as follows : " We are not concerned with the expression ' owner '. We are concerned whether the assets, in the facts and circumstances of the case, belonged to the assessee any more. This court had occasion to discuss section 9 of the Indian ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... question in that case could only be described as a delusion and a snare so long as the sons continued to occupy the property which they were entitled to under the will and to describe the assessee's right as owner of the property would be a complete misnomer. Therefore, the court was construing a will and section 22 of the Income-tax Act, 1961, as to who were the owners of the will. In all these cases, as was reiterated by the Calcutta High Court in S.B. (House Land)(P.)Ltd. v. CIT [1979] 119 ITR 785, the question of ownership had to be considered only in the light of the particular facts of a case. The Patna High Court in Addl. CIT v. Sahay Properties Investment Co. (P.) Ltd. [1983] 144 ITR 357 was concerned with the construction of the expression ' owner ' in section 22 of the Income-tax Act, 1961. There, the assessee had paid the consideration in full and had been in exclusive and absolute possession of the property, and had been empowered to dispose of or even alienate the property. The assessee had the right to get the conveyance duly registered and executed in its favour, but had not exercised that opinion. The assessee was not entitled to say that because of its own def ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 22 would not be attracted. 12. Even assuming that the property is capable of being let out and the assessee is the full owner thereof, notwithstanding the agreement, we hold that it is not the rent as calculated by the authorities that could be the subject-matter of tax. In such cases, where tenancy laws are in force or the Rent Control Act is in force only the standard rent under the Municipal Laws or under the Rent Control Act that is relevant for purpose of computation of income as has been held by the Supreme Court in the case of Amolak Ram Khosla v. CIT [1981] 131 ITR 589. In this view of the matter also there is no justification to bring to tax the impugned amounts either under other sources or under house property. Thus, the amount of Rs. 4,08,000 and Rs. 6,00,000 respectively for the assessment years 1986-87 and 1988-89 are deleted. 13. Another point at dispute is about the taxability of Rs. 1,65,389 under other sources for the assessment year 1986-87. The appellant had received interest on the payments from the vendee and it was this that was brought to tax. 14. We have heard rival submissions. We do not accept the contention of the assessee that the interest ..... X X X X Extracts X X X X X X X X Extracts X X X X
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