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TMI Blog2023 (12) TMI 1026X X X X Extracts X X X X X X X X Extracts X X X X ..... unt of business expenses amounting to Rs. 43,62,446/- on the ground that appellant has no money lending business whereas assessee claims that the money lending business was dormant and the assessee was in litigation with the debtors to recover the principal and interest. 3. Heard and perused the matter on record. 4. In regard to ground no 2 the Ld. Counsel for assessee has submitted that that during the assessment year under consideration assessee purchased this property i.e. First Floor, Laxmi Commercial Building, Tulsi Pipe Road, Dadar, Mumbai West through Agreement to Sell and Purchase dated 01.04.2014 entered into between assessee HUF and Ashok J. Thapar (Individual) for a total consideration of Rs. 5,12,52,316/- (PB 9-11). However, before the assessment year under consideration, i.e. in preceding years this property was taken out by the assessee on lease from Shri Ashok J. Thapar and was sublet out to LIC of India, and the Rental income received from sub-letting was being shown by the assessee as income from business of sub leasing the property. However, when assessee purchased this property and has taken the possession of the property vide Agreement Sell and Purchase dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i Bapat Marg, Dadar (W).Mumbai -400028". 4.4 It is further submitted by ld. Counsel that in this Deed it is also specifically mentioned that Assessee HUF has paid a total consideration of Rs. 5,12,52,316/-. 4.5 He pointed out that in the subsequent assessment year again, Ld. AO considered the Rental income as Income from Other Sources, against which also assessee filed appeal before the Ld. CIT(A)-20, New Delhi and the Ld. CIT(A) vide order passed dated 12.02.2020 (PB 80-85) deleted the addition made by the Ld. AO holding that the rent received by the assessee is to be assessed as Income from House Property. He refered to the observations made by the Ld. CIT(A) in para 4.1 at page 3 of his order for AY 2016-17 and same are reproduced here under:- ".... However, from the facts of the case, it is noticed that the assessee was in possession of the property and had paid the entire amount of Rs. 5,12,52,316/ - during the year as per the agreement to sell and purchase dated 1st April 2014 and as per copy of ledger account produced during the appellate proceedings. It is further seen that the property in question was a lease hold property and could not be registered. It could and was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f judgments various Hon'ble courts have held that income from sub-letting the property in Income from House Property and is to be assessed under Income from House Property. Reliance is placed on the following judgments to support the legal propositions canvassed Smarts (P.) Ltd. vs. CIT, High court of Delhi, 166 taxman 53; Akola Trading Company Pvt. Ltd. vs. ITO, in ITA No. 6481/Mum/2013 order dated 01.03.2017, ITAT Mumbai Bench; Commissioner of Income Tax Vs. M/s. Vegetable Products Ltd., 88 ITR 0192 (SC). 6. In regard to the ground No. 3 it was submitted by Ld. Counsel of assessee that Ld. AO disallowed the claim of expenses incurred by the assessee for an amount of Rs. 43,62,446/- relating to business carried out by the assessee of money lending and that it is not in dispute that this business was being carried out by the assessee for the last more than one decade, but due to litigation going on between the assessee and the parties who borrowed the money from the assessee, this business of the assessee was in lull during the year under consideration. This fact is also not denied that the litigation was going on between the assessee and the debtors and was pending before the Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sary for the maintenance of establishment and to keep the litigation alive, Therefore, considering the facts and circumstances of the case, the action of the AO in disallowing the expenditure of Rs. 38,09,851/- is not tenable and accordingly, the AO is directed to allow the expenditure. The additions of Rs. 38,09,851/- is therefore deleted. " 7. The ld. DR has, however, opposed the aforesaid contentions on both the counts and has stressed on the fact that since the sale deed was not a registered document it did not create an ownership on the assessee and, therefore, the receipts were rightly treated as 'Income from other sources' disallowing claim u/s 24(a) of the Act. The ld. DR has heavily relied on the judgement of the Hon'ble Supreme Court in the case of Suraj Lamp & Industries Pvt. Ltd. vs. State of Haryana and Anr., 183 (2011) DLT 1 (SC) to contend that the Hon'ble Supreme Court has held that the documents like general power of attorney, agreement to sell and Will do not bestow any title on a person and these documents cannot be considered certainly by the courts. 7.1 This was rebutted by the ld. AR by relying on the order of the coordinate Bench in the case of Rita Kuchal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ood assigned. The assessee has relied on a letter dated 10.06.2016 titled as 'transfer deed' wherein, on the basis of this transaction on 01.04.2014 and the fact of payment of consideration, the builder recognized that all the rights entitled of the property now vested with the assessee from 13th April, 2014 onwards. 10. Now, for the purpose of section 24(a) of the Act, the conveyance of the title seems to be not of much consequence. We are of considered opinion that judgement of the Hon'ble Supreme Court in the case of Suraj Lamps & Industries (supra) is in regard to transfer and conveyance of a title for civil consequences between private parties. However, with regard to the fiscal purposes, between assessee and Revenue, where on the basis of existence of an interest in an immovable property, certain rights or interest including those right to executed further convey the title are involved, the documents like GPA, sale agreement or Will have to be considered valid and effective for all purposes for creating a liability on assessee or to give benefit to the assessee. Although in the judgement relied by the ld. AR in the case of Rita Kuchal (supra) there is no specific discussion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase of Suraj Lamps and Industries Pvt. Ltd. (Supra), wherein, the Hon'ble Supreme Court delivered the judgment in a different context and highlighted the well settled law on the importance of registration of property as per the Registration Act and frowned upon the menace of transaction being done of immovable property by General Power of Attorney and the said case has nothing to do with the Income Tax Act 1961, which we are dealing with. However we find that the aforesaid order of the Hon'ble High Court of Delhi bolsters the case and claim of the appellant. Since there is no dispute that income/rent from the flat No-21, Hope Apartments, Sector-15, Gurgaon is received by the assessee/appellant then ITA No.6154/Del/2013 as per the Income Tax Act, owner is the person who is entitled to receive income in his own right. Respectfully following the order of the Hon'ble High Court in the case of CIT vs. Smt. Kamla Sondhi (Supra) as held by the Hon'ble Supreme Court in Podar Cement (supra), we set aside the order of the revenue authorities and decide the issues in dispute in favour of the assessee by accepting the Appeal of the assessee." 11. Thus, the judgement which the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... well as the income thereof. Can it then be said that the recipient of the income being the assessee only having an absolute and exclusive control over the property without any let or hindrance on the part of the so-called vendor which, indeed, under law it was not entitled to do, as we shall presently show, shall be immune from the taxing provision in Section 22 of the Act? The answer in our view is clearly in the negative. The reason is simple. The consideration money has been paid in full. The assessee has been put in exclusive and absolute possession of the property. It has been empowered to deal with the income as it likes. It has been empowered to dispose of and even to alienate the property. ......" 12 Thus, furthermore, the ld. DR could not defend the argument that in the subsequent years the CIT(A) has deleted the addition made by the AO holding that the rent received by the assessee is to be assessed as 'income from house property.' Thus, we are inclined to allow this ground no 2. 13. Now, coming to the ground No.3, it comes up that the whole stress of the ld. AR was on the fact that the Tribunal in AY 2011-12 and CIT(A) in AY 2012-13, 2013-14 and 2014-15 and in subsequ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal which needs rectification. We, accordingly, modify the findings of the Tribunal at para 5 of its order and the same read as under: "Though the interest income is treated as income from other sources, the expenses incurred by the assessee and claimed as business expenses have to be considered income from sub leasing and money lending business of the assessee." 13.2 However, what is material is the fact that in that year the assessee was found to be earning interest income and that justified the claim of being into money lending business. In AY 2013-14, the ld.CIT(A) has accepted the claim of the assessee only on the finding that in earlier years the Department had accepted the assessee's claim of doing business of money lending. In AY 2014- 15, the ld. CIT(A)-11, New Delhi, has restricted the disallowance to 5% rather than 15% as made by the AO on the basis of possibility of personal usage. The order of the ld.CIT(A) shows that in that year the assessee had shown himself to be engaged in the business of leasing of properties only and there was no adjudication on the question of money lending business. In AY 2016-17, the ld. CIT(A)-20, New Delhi, relied on the Tribunal d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icer submitted that it is also engaged in money lending business besides being engaged in leasing of property business. The expenses claimed were incurred wholly and exclusively for business purposes and therefore deserve to be allowed. The Assessing Officer did not have any reasons to rely on the last submission of the appellant because the appellant had not shown any income from mo.ney lending business and high expenditures have been claimed under heads such as salary, repair and maintenance, vehicle running and maintenance and depreciation etc. totaling to Rs. 43,62,446/-. The Assessing Officer therefore disallowed the expenditure. 6.1.7 The appellant during appeal hearing submitted that it did not earn any interest on money lending in this year because the parties to whom loans were advanced have stopped paying interest and principal amount and the matter is under litigation. Expenses have been made on litigation to recover the same. But the money lending business has not seized to exist. The appellant further submitted that expenses were made to maintain office establishment and on legal and professional charges but however personal use of vehicle running and maintenance inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eration and that cheque was dishonoured. Thus, the averments in the complaint do not at all indicate that the money claimed to have been standing as a loan was ever given as a loan for the purpose of money lending business. In fact, in AY 2012-13, there was an issue of undisclosed income of Rs. 12 lakhs wherein the AO had made an addition of Rs. 12 lakhs on the ground that the assessee has been showing interest income from M/s Sunil Mantri Realty Ltd. on accrual basis. M/s Sunil Mantri Realty Ltd., had paid interest and deducted tax which was reflected in 26AS, but, there was lack of reconciliation. The order of ld.CIT(A) for AY 2012-13 at page 94 of the paper book vide para 5.3 show that there is a mention of cheque of Rs. 4,10,00,000/- given by the debtor on 01.09.2013 which could not be encashed and for which the assessee has filed the case and the ld.CIT(A) had confirmed the addition of Rs. 12 lakhs. Thus, we are of the considered view that what ld. AR has relied in regard to the previous or subsequent years about the money lending business of the assessee is not sustainable in the facts discussed above from the perspective of ld.CIT(A) and we do not consider that there is any ..... 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