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TMI Blog2010 (8) TMI 490X X X X Extracts X X X X X X X X Extracts X X X X ..... und of appeal common in all the cases. ITA No. 1277/Ahd./2006 (Assessee: Shri Punitkumar Shantilal Shah) 4. This appeal by the assessee is directed against the order of the learned CIT(A)-IV, Ahmedabad dated 24-2-2006 for assessment year on the following effective grounds of appeal: "1. The CIT(Appeals) erred in holding that the rental income of Rs. 11,23,695 was income from other sources and not income from house property as claimed by the appellant. 2. The CIT (Appeals) erred in so far as she did not make a distinction between the lease of Acme property and Sahar Plaza property which are a perpetual lease and the leases in Centre Point which are for a period of 12 years with the right of extension. 3. The CIT (Appeals) in view of her decision on the first ground erred in holding that the appellant was not entitled to the deduction of 30 per cent of Rs. 11,23,695 equal to Rs. 3,37,109" 5. The learned Counsel for the assessee did not press ground No. 4 with regard to deduction under section 80-IA of the IT Act. The same is accordingly dismissed as withdrawn. 6. We have heard the learned representatives of both the parties, perused the findings of the autho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... performance of a contract of the nature referred to in section 53A of the Transfer of Pricing Act, 1882 (4 of 1882), shall be deemed to be the owner of that building or part thereof; * a person who acquires any rights (excluding any rights by way of a lease from month to month or for a period not exceeding one year) in or with respect to any building or part thereof by virtue of any such transaction as is referred to in clause (f) of section 269UA, shall be deemed to be the owner of that building or part thereof. According to the Assessing Officer, as per section 27(iiib) of the IT Act if the rights are acquired by means of a lease from month to month or for a period not exceeding one year, then the lessee cannot be treated as deemed owner for the purpose of section 22 to section 26 of the IT Act. It was further stated by the Assessing Officer that as per section 107 of the Transfer of property Act, lease of immovable property from year to year or for any term exceeding one year or reserving yearly rent, can be made by a registered instrument. In other leases by agreement accompanied by delivery of possession and therefore, if a lease agreement is not registered, it will be tre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase from month to month basis) and therefore the appellant does not fall under the category of deemed owner as envisaged by section 27(iiib) of the Act. The A.O. has placed reliance on section 107 of the Transfer of Property Act, 1882. As per section 107 of the Transfer of Property Act, 1882 a lease of immovable property from year to year, or for any term exceeding one year or reserving a yearly rent, can be made only by a registered instrument. All other leases of immovable property may be made either by a registered instrument or by agreement accompanied by delivery of possession. It is contention of the A.O. that since the lease agreement entered into by the appellant is not registered the appellant is deemed to be tenant for month-to-month basis and therefore hit by section 27(iiib) of the Act. The A.O. has mainly contended that hit lease deed should have been registered. We most respectfully submit that the Assessing Officer has not appreciated the facts relevant to the appellant in a proper perspective. As per section 107 of the TOPA a lease of immovable property from year to year or for a term exceeding one year can be made only by a registered instrument. We submit that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the A.O. that the appellant is a tenant for month to month basis. We would like to mention that still the appellant would be considered as owner of the property as per the TOPA, 1882. It is specifically provided in the TOPA that lease for a period of less than one year (month to month basis) may be made either by a registered instrument or by agreement accompanied by delivery of possession (emphasis supplied) Your kind office would appreciate that factually it is accepted that the appellant has been given the possession of the property. The Assessing Officer has not controverted this fact. Therefore, it is not necessary to register the document. We therefore submit that even if the contention of the Assessing Officer is held to be correct than also it cannot be held that the appellant is not the owner of the property. We most respectfully submit that the contention of the A.O. that since the agreement it not a registered document the appellant cannot be held to be owner is not as per law. It may also be mentioned that even if the agreement is not registered it a valid, agreement under section 17 of the Registration Act and is therefore admissible in evidence under section 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umbai should be allowed as "Income from, house property" rather than "Income from other sources" considered by the Assessing Officer 9. The learned CIT(A) considering the submissions of the assessee and material on record and considering the agreement of tenancy dated 16-3-2000 rejected the claim of the assessee and upheld the order of the Assessing Officer in treating the income as income from other sources. The findings of the learned CIT(A) in Paras 3.6 to 3.11 are reproduced as under : 3.6 The submission of the appellant is duly considered. As can be seen from the above that it is the claim of the appellant that it is covered by the provisions of section 269UA(f)(i) of the IT Act, according to which- "transfer - (i) in relation to any immovable property referred to in sub-clause (I) of clause (d), means transfer of such property by way of sale or exchange or lease for a term of not less than twelve years, and includes allowing the possession of such property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882 (4 of 1882). Explanation.-For the purposes of this sub-clause, a lease whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so long as the Second Party continues to deligently pay the month rent, if demanded. 8. The Second Party can sublet and/or underlet the said premises. 9. the Second Party are hereunder empowered and. authorized to carry on any repairs, renovation or interior to the said premises. However, without causing any damage to the foundation of the building and any structural damages. 10. the Second Party shall be entitled to carry on the business by having any understanding with any other person or any agent, associate partner or any association of persons as they may deem, fit. 11. the Second Party have also been empowered to obtain separate independent water connection, if required, at their own cost and the First Party shall not object to the same for any reason whatsoever. 12. The First Party shall carry out all major repairs at their own cost in the said premises, which may arise due to the reasons other than normal wear and tear. 13. The parties hereto shall render all co-operation to ensure the effective implementation of these presents. 14. In the event of any dispute between the parties they will serve the notice upon the tenant at the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come from house property. In view of the above facts and circumstances of the case, I upheld the stand of the Assessing Officer and confirm that the Assessing Officer is right in treating the same, as income from other sources, and has rightly rejected the claim of 30 per cent deduction". 10. The learned Counsel for the assessee reiterated the submissions made before the authorities below and filed copy of the agreement of tenancy dated 16-3-2000 and submitted that through this agreement the period of property in question for tenancy was perpetual though the tenancy was month by month basis and the authorities below have failed to consider the case of the assessee as per the deemed ownership of the property prescribed under section 27(iiib) of the IT Act. He has submitted that there was no registration required of this agreement of tenancy. He has also referred to section 269UA(f)(i) of the IT Act as is referred to in section 27(iiib) of the IT Act in support of the contention and submitted that in the case of the assessee tenancy was perpetual, therefore, it was not less than 12 years and as such the authorities below were not justified in rejecting the claim of the assessee. He ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut that, rent was payable month by month and tenancy was not registered as per law. The tenancy cannot be used for illegal purpose and the assessee could not have damage the demise property. The tenancy was not perpetual in nature because it could be terminated on account of non-payment of monthly rent. The learned DR further submitted that in the event of dispute between the parties notices could be given. The learned DR therefore, submitted that the tenancy of the assessee in this case was by way of lease from month to month or for a period not exceeding one year. Therefore, the assessee is not deemed owner of the property in question. The learned DR submitted that conditions of section 269UA(f)(i) of the IT Act are not satisfied in this case and that in the case of Premavati Estates & Investments (P.) Ltd. (supra), the Tribunal came to the finding on examination of the tenancy agreement that the assessee was a permanent tenant and it could not be said that the assessee had taken the lease from month to month or for a period not exceeding one year. The learned DR, therefore, submitted that the authorities below rightly taken the income as income from other sources and denied furt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccupy for the purpose of any business of profession carried on by him, by profit of which are chargeable to Income-tax, shall be chargeable to Income-tax under the head income from house property. Section 27(iiib) of the Income-tax Act provides deemed ownership of the building when such person acquires any right excluding any right by way of lease from month to month or for a period not exceeding one year. Therefore, with respect to any building or part thereof by virtue of any such transactions as is referred to in clause (f) of section 269UA shall be deemed to be owner of that building or part thereof. Section 269UA(f)(i) of the Income-tax provides definition of "transfer" in relation to any immovable property means transfer of such property by way of sale or exchange or lease for a term of not less than 12 years and includes part performance under section 53 of the Transfer of Property Act. In section 27 and 269UA of the IT Act as mentioned above the words "lease of property" is used for the purpose of conferring right upon the person who qualify to become deemed owner of the property as per section 22 of the Income-tax Act. Therefore, it is necessary as per the above provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by a registered instrument or by oral agreement accompanied by delivery of possession. Where a lease of immovable property is made by a registered instrument, such instrument or, where there are more instruments than one, each such instrument shall be executed by both the lessor and the lessee: Provided that the State Government may, from time to time, by notification in the Official Gazette, direct that leases of immovable property, other than leases from year to year, or for any term exceeding one year, or reserving a yearly rent, or any class of such leases, may be made by unregistered instrument or by oral agreement without delivery of possession." 14. Considering the above discussions, relevant provisions of law mentioned above, in the light of agreement of tenancy, it is clear that the tenancy between the assessee and the landlord/owner was for month to month and monthly rent was payable. Further, clauses in the tenancy agreement provide that property could not be used for immoral and illegal purposes and the assessee shall keep the premises in good condition and shall not cause any damage to the property including the foundation and structure to the building in question. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e proposition of law would not apply. Section 27(iiib) of the IT Act further provides the deemed ownership when a person acquires any right on the transactions as is referred clause (f) of section 269UA of the IT Act, would be applicable to the proposed buyer as per scheme of Chapter XX-C of the IT Act. In Chapter XX-C of the IT Act the scheme is provided for purchase of immovable property at the specified amount by the Central Government in certain cases on transfer with the permission of the appropriate authority and on certain conditions the property could vest under the Central Government. Section 269UA is part of Chapter XX-C of the IT Act dealing with the transfer of properties between seller and the purchaser. The object of the new Chapter XX-C of the IT Act as explained by the Board in Circular was "37.5 It is a known fact that proliferation of black money is evident in the transfer of immovable properties. As mentioned in the LTFP one way of tackling the problem of tax evasion is to confer on the Government the pre-emptive right to acquire any immovable property undergoing a transfer for consideration above a certain value. The assumption of the power by the Central Govern ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that rental income from the flats was assessable as income from other sources under section 56 of the IT Act as the assessee company was not legal owner of the flats in question because the sale deed was not executed in the name of the assessee. However, the Assessing Officer assessed the rental income from the flats as income from house property. In the background of the above facts, it was held that requirement of registration of sale deedin the context of section 22 of the IT Act is not warranted. In our respectful opinion, the above decision would not help the assessee because in present case there is no sale and purchase of the property through full consideration. The facts of the case are distinguishable because the assessee claimed in the present appeal that it acquired right through the tenancy agreement which was executed for month to month basis. We may point out that possession of property taken on payment of consideration would be governed by section 53A of the Transfer of Property Act (part performance) but the learned Counsel for the assessee admitted that the case of the assessee is not falling under section 53A of the Transfer of Property Act as is referred in sect ..... X X X X Extracts X X X X X X X X Extracts X X X X
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