2007 (12) TMI 312 - AT - Income Tax

Summary

Issues Involved:
The judgment deals with the issue of chargeability of arrears of rent received during a specific assessment year, pertaining to a property jointly owned by the assessee and two co-owners, and the subsequent assessment and taxation of these arrears by the revenue authorities.

Details of the Judgment:

Assessment Year 2000-01:
The assessee, along with co-owners, owned a property leased to State Bank of India. Arrears of rent were released by the bank for the period 1-7-1994 to 31-3-1999, totaling Rs. 11,57,884 in the accounting year relevant to the assessment year 2000-01. The assessee did not offer these arrears to tax in the return of income, stating that annual value of rental income cannot exceed for more than 12 months. The Assessing Officer disagreed and taxed the arrears in the assessment year. The CIT(A) later deleted this addition. However, the Assessing Officer reopened the assessment under section 148, assessing the arrears for the impugned assessment year.

Arguments and Judicial Interpretation:
The assessee contended that the arrears of rent should not be taxed in the year of receipt as the percentage of increment was not stipulated in the agreements. The Tribunal examined the lease agreement and noted that there was no specific increment mentioned until 1999 when the rent was increased. Referring to legal precedents, including judgments from the Calcutta High Court and various Tribunals, it was held that arrears of rent received after the close of the relevant previous year are not liable to be assessed under income from house property. The Tribunal concluded that the arrears of rent cannot be assessed even in those years to which it relates, setting aside the order of the CIT(A) and deleting the additions made by the revenue authorities.

Conclusion:
The Tribunal allowed the appeals of the assessee, ruling in favor of the assessee regarding the taxation of arrears of rent received during the assessment year 2000-01.