2001 (7) TMI 32 - HC - Income Tax

Summary

Issues Involved:
The judgment addresses the following Issues:
1. Ownership of super structure on leased land at 7, Pretoria Street, Calcutta.
2. Assessment of rental income under 'Income from house property' or 'Income from business'.
3. Assessment of consideration received from sale of first floor and interest in land under 'Capital gain'.

Ownership of Super Structure:
The assessee, an individual, leased land at 7, Pretoria Street, Calcutta, and developed a multi-storeyed building with family members. Dispute arose regarding ownership of the building. The Assessing Officer considered rental income as 'Income from business', contrary to the assessee's claim of 'Income from house property'. The Commissioner of Income-tax (Appeals) and the Tribunal held in favor of the assessee, considering the lease terms empowering construction and dealings with the property. Legal precedents supported the view that the lessee, by constructing on leasehold property, is deemed owner. The Tribunal's decision to assess rental income as 'Income from house property' was upheld.

Assessment of Rental Income:
The Tribunal's decision to treat rental income as 'Income from house property' was based on the lessee's rights under the lease deed to construct and deal with the property during the lease period. The consistent treatment of rental income in subsequent years as 'Income from house property' further supported this classification. The Tribunal's order was upheld due to the lessee's deemed ownership rights and the specific terms of the lease empowering construction and property dealings.

Assessment of Capital Gain:
Regarding the sale proceeds of the first floor and interest in land, the Tribunal classified the land sale as 'long-term capital gain' and the building sale as 'short-term capital gain'. This classification was supported by legal precedents emphasizing the separate treatment of land and building for capital gains tax purposes. The judgment agreed with this approach, requiring the assessee to apportion the sale proceeds between land and structure. The Tribunal's decision to tax capital gains separately for land and building was upheld.

In conclusion, all three issues were decided in favor of the assessee, affirming the Tribunal's decisions. The judgment disposed of the reference accordingly.