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TMI Blog2018 (2) TMI 1987X X X X Extracts X X X X X X X X Extracts X X X X ..... . 1,00,00,000/- as deposit in respect of Poddar Chambers office premises given on leave and licence basis from last many years, (ii) the Ld. CIT(A) erred in overlooking the fact that the assessee had received another deposit of Rs. 1,75,00,000/- in March 2012 in respect of granting leave and licence of residential premises situated in Abhilasha Building, (iii) the Ld. CIT(A) erred in estimating of Rs. 27,50,000/- calculated at 10% on the above amount of Rs. 2,75,00,000/- interest-free deposit and confirming the same as income of the assessee, (iv) the Ld. CIT(A) erred in confirming the action of the Assessing Officer (AO) to determine the annual value of the property u/s 23 of the Act and (v) the Ld. CIT(A) erred in ignoring the fact that the assessee was not the owner of the property given on leave and licence basis and that the provisions of section 23 empowering the AO to determine the annual letting value of the property are not applicable to her. 3. Briefly stated, the facts of the case are that the assessee has declared leave and licensee fee of Rs. 4,80,000/- received by her from the office premises situated in Poddar Chambers, under the head 'Income from Other Sources'.&nb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore, the Ld. CIT(A) upheld estimated income of Rs. 27,50,000/- on Rs. 2,75,00,000/- which is only 10% of the amount. 5. Before us, the Ld. counsel of the assessee submits that the assessee has declared an amount of Rs. 4,80,000/- being leave and licence fee from office premises situated in Poddar Chambers. The assessee is not an owner of the said Poddar Chambers premises. She is a tenant of the said premises and has granted leave and licence rights to the licensee. Therefore, she has declared leave and licence fees of Rs. 4,80,000/- received by her under the head 'Income from Other Sources'. She has not claimed 30% deduction available to the owners of premises when the income is declared as 'Income from House Property'. Had she been the owner of the office premises, then the income from leave and licence fees would have been declared under the head 'Income from House Property'. As per the Ld. counsel, it is true that the assessee had received security deposit of Rs. 2,75,00,000/- from the licensee. However, since the assessee was not the owner of the office premises, provisions of section 23 are not applicable to her. There are no similar provisions available in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ning thereof be deemed and include heirs, executors, administrators and assignees] of the ONE PART: And ASIT C. MEHTA INVESTMENT INTERMEDIATES LIMITED, a company incorporated with limited liabilities under the Indian Companies Act, 1956 and having its Registered Office at Nucleus House, 5th Floor, Saki Vihar Road, Andheri (E), Mumbai 400072, "ACMIIL" hereinafter called "the Licensee" [which expression shall unless it be repugnant to the context or meaning thereof to mean and include its assignees of the OTHER PART. Whereas 1. The licensor is a tenant of G.R. Podar Foundation having office at Podar Chambers, S.A. Brelvi Road, Mumbai 400001 hereinafter called the foundation. 2. The foundation owns a building known as Podar Chambers situation at S.A. Brelvi Road, Mumbai 400001. 3. The Licensor as such tenant is entitled to use and occupy an office unit admeasuring approx. 850 sq. ft. along with lift of 100 sq. ft. bearing office No. 67A on the third floor of the said building [hereafter referred to as "the Premises"] 4. The Licensee has requested the Licensor to grant to it the temporary license to use and occupy part of the premises ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e paid by the Licensee to the Licensor during the each month." 7.1 The first statute which is relevant for a leave and licence is the Indian Easement Act, 1882. Section 52 of the said Act defines a 'licence' as a right granted by one person to another to do something in or upon the grantor's immoveable property, which act would, in the absence of such a right, be unlawful. It further states that a licence must not amount to an easement or an interest in the property. Thus, a licence is only permission or a right to do something upon an immoveable property. It is solely a personal right or privilege granted to the licensee by the licensor. A licence does not confer any interest in the immoveable property. It is for this reason that a licensee cannot maintain an action for possession of the property in his own name. Thus the crux of a licence is that it is always a right or a permission and never transfers ownership of the property. Under the leave and license agreement, the legal ownership and the possession of the property remains with the licensor, the assessee in the instant case. 7.2 Let us now turn to the receipt of interest-free security deposit by the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... et out, the actual amount of rent received or receivable shall form part of the income from house property. Ordinarily, the notional interest that may accrue on security deposit would not form part of income from house property. However, where payment of the security deposit is to circumvent real rent, the same shall fall within its ambit as income from house property. Interest on the security amount of Rs. 35,00,000 will be treated as income of the assessee. Thus, in the facts, as noticed above, it is considered appropriate to hold that interest @ 9% per annum on the security amount of Rs. 35,00,000 would be just to meet the ends of justice and the same will be treated as taxable income of the assessee under the head 'Income from house property' relating to the land and building. (Paras 17 & 19) Their Lordships concluded that where the security deposit is to circumvent real rent, the same shall fall within its ambit as income from house property; in the facts and circumstances, interest @ 9% per annum on security deposit of Rs. 35,00,000, which was received by the assessee from the tenant, would be treated as taxable income of the assessee under the head 'Income from hou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The two issues i.e. 'Leave and License Fee' and 'Security Deposit' in the instant appeal are interconnected and part of the same transaction. To persuade the Tribunal to adopt, in relation to closely integrated situation, a step by step, dissecting approach, would be a denial rather than an affirmation of the true judicial process. 7.6 We find from the list of Directors of Asit C. Mehta Investment Intermediates Ltd, given to us by the Ld. counsel in response to a query by us, that the assessee (Licensor) is the Managing Director in Asit C. Mehta Investment Intermediates Ltd (Licensee). The receipt of Rs. 2,75,00,000/- by the assessee as interest-free security deposit from the licensee-company in which she herself is the Managing Director cannot be ignored while computing the annual letting value. 7.7 Respectfully following the aforesaid judgment rendered by their Lordships of the Hon'ble Punjab and Haryana High Court narrated at para 7.2 hereinbefore, we are of the considered view that the security deposit in the instant case is to circumvent real rent and the same shall fall within the ambit of 'Income from House Property'. However, takin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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