TMI Blog2018 (5) TMI 250X X X X Extracts X X X X X X X X Extracts X X X X ..... elonging 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 re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riding title to the landlord. Therefore, according to the Ld. counsel, the Assessing Officer is not justified in taking the rent which relates to land on which the superstructure was standing. 5. Shri D. Anand, the Ld.counsel for the assessee, further submitted that the third floor flat at No.10, Spurtank Road belongs to one M/s Sandesh Sankalp Syndicates. The assessee, in fact, took the property from the above said landlord on monthly rent of ₹ 40,000/-. As per the rental agreement, the assessee was allowed to sub-lease the property. Accordingly, the assessee sub-let the property. Therefore, according to the Ld. counsel, the lease rent payable to the original owner, namely, M/s Sandesh Sankalp Sundicates has to be reduced while computing income from house property under Section 24 of the Act. 6. Referring to Sections 22 and 23 of the Act, the Ld.counsel for the assessee submitted that for the purpose of determining annual rental value of the house property, the assessee shall be the owner of the property. Further, according to the Ld. counsel, Section 25B of the Act in categorical terms explains that the owner of the property means the owner of the building or la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me from house property by disallowing the lease rental paid by the assessee towards the land and sub-lease of the building. The Ld.counsel has also placed his reliance on Section 17 of the Registration Act, 1908 and submitted that when the lease of immovable property was from year to year or for any term exceeding one year, the lease deed has to be compulsorily registered. In this case, according to the Ld. counsel, the lease deed is not registered, therefore, it cannot be construed as transfer of property within the meaning of Registration Act, 1908. 9. On the contrary, Shri Asish Tripathi, the Ld. Departmental Representative, submitted that the assessee s main source of income was from various properties as stated in the assessment order at pages 2 and 3. The assessee claimed before the Assessing Officer that he paid ₹ 4,25,000/- towards lease for the land, equipments such as lift, plant and other amenities. In respect of the property at Karuna Enclave, Annanagar, according to the Ld. D.R., the Assessing Officer found that the actual rent received by the assessee partakes the character of rent, therefore, it is assessable as such. According to the Ld. D.R., the lease amo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om house property, the assessee has reduced the lease rental paid to land owners. The question arises for consideration is while computing income from house property under Sections 23 and 24 of the Act, can the assessee reduce the rent paid for the land, which was taken on lease for the purpose of constructing superstructure? We have carefully gone through the provisions of Sections 23 and 24 of the Act which read as follows:- Section 23 of the Act (1) For the purposes of section 22, the annual value of any property shall be deemed to be - (a) the sum for which the property might reasonably be expected to let from year to year ; or (b) where the property or any part of the property is let and the actual rent received or receivable by the owner in respect thereof is in excess of the sum referred to in clause (a), the amount so received or receivable ; or (c) where the property or any part of the property is let and was vacant during the whole or any part of the previous year and owing to such vacancy the actual rent received or receivable by the owner in respect thereof is less than the sum referred to in clause (a), the amount so received or receivable : Prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tructed with capital borrowed on or after the 1st day of April, 1999 and such acquisition or construction is completed within three years from the end of the financial year in which capital was borrowed, the amount of deduction under this clause shall not exceed two lakh rupees. Explanation Where the property has been acquired or constructed with borrowed capital, the interest, if any, payable on such capital borrowed for the period prior to the previous year in which the property has been acquired or constructed, as reduced by any part thereof allowed as deduction under any other provision of this Act, shall be deducted under this clause in equal instalments for the said previous year and for each of the four immediately succeeding previous years. Provided also that no deduction shall be made under the second proviso unless the assessee furnishes a certificate, from the person to whom any interest is payable on the capital borrowed, specifying the amount of interest payable by the assessee for the purpose of such acquisition or construction of the property, or, conversion of the whole or any part of the capital borrowed which remains to be repaid as a new loan. Explanat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rty. 14. We have carefully gone through the copy of the lease agreement in the light of the provisions of Section 269UA(f) of the Act, which is available at paper-book. The copy of the lease deed in respect of the property at Annanagar available at page 1 was for a period of ten years from 1st May, 2008 to 30th April, 2018. Similarly the lease deed available at page 15 also is for a period of ten years. A copy of the lease agreement available at page 133 in respect of the property at No.10, Spurtank Road, Chennai, is for a period of six years commencing from 01.04.2008. Therefore, it is obvious that all the lease agreements of vacant land was less than 12 years as provided in Section 269UA(f) of the Act. Therefore, it cannot be construed as a transfer within the meaning of Section 27(iiib) of the Act. Therefore, the assessee is not the owner of the land both in respect of Karuna Enclave and in respect of the property at 10, Spurtank Road. The question now arises for consideration is whether the lease rental paid by the assessee to the owner of the land is allowable as deduction while computing the income from house property? The genuineness of lease transaction is not in dispu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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