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Issues involved: Determination of the head under which impugned income is assessable to tax.
Summary: The appeal was filed by the assessee-firm against the Order dated 11-2-2008 passed by the CIT (A)XXII, Mumbai, pertaining to the assessment year 2005-06. The main issue revolved around the head under which the impugned income is assessable to tax. The assessee-firm acquired tenancy rights on a commercial complex and permitted its use by another party on a leave and license basis. The Assessing Officer contended that the income should be assessed under the head "Income from other sources" as the assessee was not the owner of the property. The assessee argued that it should be considered a deemed owner under specific provisions of the Income-tax Act. The Assessing Officer treated the compensation and service charges received by the assessee-firm as "income from other sources" due to a perceived colorable transaction to reduce tax liability. The Assessing Officer disallowed the claim of deduction of 30% from the compensation/service charges. The CIT(A) affirmed this decision. The assessee then appealed to the Appellate Tribunal, arguing for deemed ownership status and specific deductions in the calculation of rental income. The Tribunal considered the validity of the unregistered lease deed in detail. It noted that the Assessing Officer did not verify the lease agreement's authenticity or call upon the original owner during assessment proceedings. The Tribunal cited legal precedents to support the view that registration is not mandatory to establish ownership for tax purposes. It emphasized that legitimate tax planning within the law should be recognized. The Tribunal directed the Assessing Officer to re-consider the claim of deduction and assess the income earned under the head "Income from house property." In conclusion, the appeal filed by the assessee was treated as allowed for statistical purposes.
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