TMI Blog1996 (9) TMI 168X X X X Extracts X X X X X X X X Extracts X X X X ..... floors to be built to any other person with the previous consent of Mehrotra, the lessor. There was a further stipulation for payment by the assessee of service charges or rent or levy on the constructed area at the rate of Re. 1 per sq. ft. subject to the further condition that it will be increased to Rs. 1.50 per sq. ft. as soon as the floors are let out by the assessee to outsiders. 2. The memorandum containing the aforesaid conditions was executed in Rs. 5 stamp paper. The same was not registered under the Registration Act and this fact constitutes common ground. 3. The assessee-company commenced construction on the roof in the financial year 1985-86 and it borrowed monies from its shareholders as well as the relatives of the director for the purpose of construction. The constructed space was let out to Indian Bank with effect from 16-3-1987 on a rent of Rs. 25,500 per month. 4. In the assessments to wealth-tax, the WTO was of the view that the assessee was the owner of the building constructed on the roof of the premises and was, accordingly, assessable to wealth-tax under section 40 of the Finance Act, 1983. He was of the view that the building did not constitute the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase of CIT v. Smt. Damyanti Devi Jhunjhunwalla [1993] 203 ITR 142. 7. On behalf of the assessee heavy reliance was placed on the decision of the Supreme Court in the case of Nawab Sir Mir Osman Ali Khan v. CWT [1986] 162 ITR 888. It was contended on the basis of this decision that the assessee should be the legal owner of the building before wealth-tax is imposed upon him but in the present case there was no valid lease of the roof portion upon which the structure was put up and if the assessee's leasehold rights over the roof portion were themselves non-existent in law, it could never be considered as the legal owner of the structure put up by it upon something the rights over which are non-existent. It was in this connection pointed out that the document entered into between Mehrotra and the assessee can never be considered as a valid lease. Firstly, there was no present demise of the roof portion but there was only an agreement to execute a future demise of the same. Secondly, there was no clear date of commencement of the lease. Thirdly, the agreement was for lease for a period of 30 years and any lease of immovable property for a term exceeding one year can be made only by a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not so made, the lease is void altogether. The other decisions to the same effect have been listed in foot-note (q) in the same page. The lease in the present case is not a valid lease also since it does not satisfy one of the essential conditions, namely, that the demise must be in praesenti, as stipulated by section 105 of the T.P. Act. There is only an agreement to execute and register a lease deed at a future point of time, subject to various obligations being fulfilled by lessor and the lessee. In the case reported in Durga Prasad's case, the Madhya Pradesh High Court held that under section 105 there must be a lease in praesenti under section 105 of the T.P. Act and a document styled as an agreement to lease at a future point of time, in the absence of a formal lease deed executed and registered, cannot satisfy the requirement of the section and at best the arrangement can only be called a licence. However, it has been later held by the Supreme Court in the case of Biswabani (P.) Ltd. after referring to the judgment of the Privy Council cited supra, that if the landlord accepts rent from a tenant in possession under a void lease, an inference of tenancy would follow. In t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t before the lease is executed.'" 9. Thus, we reach the conclusion that the assessee in the present case should be considered to be a tenant from month to month and the tenancy is terminable by 15 days' notice as contemplated by section 106 of the T.P. Act. The argument on behalf of the assessee that it obtained no rights of tenancy cannot, therefore, be accepted. 10. We now proceed to the question as to whether the assessee can be considered to be the legal owner of the structure put up on the roof taken on lease. Here, section 108(h) of the T.P. Act is clear. It says that in the absence of a contract or local usage to the contrary, the lessee may, even after the determination of the lease, remove at any time whilst he is in possession of the property leased but not afterwards, all things which he has attached to the earth, provided he leaves the property in the state in which he received it. The section thus recognises the fact that the lessee is the legal owner of the structure or fixtures put up by him. In India the legal position is that the land can be owned by one person, whereas the building put up on the land can be owned by a different person and this legal position h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me rent, was in enjoyment of the property without any let or hindrance for a number of years before it was sold and yet it claims that it has no ownership rights over the same. The conduct of the assessee is wholly inconsistent with its claims. The fact that the lease is precarious because it is terminable at 15 days' notice and on termination the assessee has to pull down the structure does not affect its rights as owner of the building till the termination of the lease, at best it may be one of the factor to be taken into account while estimating the value of the structure. 12. We are also unable to uphold the view of the CIT(A) that the structure constitutes stock-in-trade in the hands of the assessee, as it has been let out and has produced income. As pointed out by the W.T.O., the assessee is not engaged in the business of property development or of constructing and selling flats/buildings in which case alone the building can be considered as its stock-in-trade. There is no evidence to this effect. A mere letting out of an asset does not lead to the conclusion that it represents stock-in-trade. In this connection, reference may be made to the Gujarat High Court in H. Mohmed ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
