1994 (12) TMI 326 - AAR - Income Tax

Whether the applicant is liable to income-tax on the sum received by him on July 6, 1992, towards arrears of rent for the period up to March 31, 1992, in the assessment year 1993-94?

Summary

Issues:
1. Application under section 245Q(1) of the Act filed by the applicant.
2. Determination of tax liability on arrears of rent received by the applicant.
3. Interpretation of provisions under sections 22 to 27 of the Income-tax Act.
4. Assessability of arrears of rent as income from house property.
5. Applicability of the principle of income from other sources.
6. Timing of assessability of arrears of rent for tax purposes.
7. Effect of filing return including arrears of rent on approaching the authority for a ruling.
8. Implementation of the ruling by the tax department.

Analysis:
1. The applicant filed an application under section 245Q(1) of the Act seeking a ruling on the tax liability of arrears of rent received. The initial application was defective but later corrected and filed on November 10, 1994.
2. The applicant, a non-resident, received arrears of rent for the Jalandhar property in 1992. The question was whether this amount was liable to income tax for the assessment year 1993-94.
3. The income from house property is computed under sections 22 to 27 of the Act. Section 23 determines the annual value of the property for tax purposes, which includes the rent received or receivable by the owner.
4. The excess amount received by the applicant as arrears of rent for the period up to March 31, 1992, was not taxable under section 23 as it exceeded the actual rent derived for the previous year.
5. The arrears of rent cannot be assessed as income from other sources based on established legal principles, even though the amount is considered income and received during the previous year.
6. The timing of assessability of arrears of rent was deemed to be in the financial year 1992-93, relevant to the assessment year 1993-94, as per the accrual or receipt basis under section 23.
7. Filing the return including the arrears of rent did not preclude the applicant from seeking a ruling as there was no pending dispute with the tax department, and the applicant voluntarily disclosed the amount.
8. The ruling stated that the applicant was not liable to income tax on the arrears of rent for the assessment year 1993-94. The responsibility to implement the ruling rested with the applicant to seek necessary relief from the tax department.

Conclusion:
The judgment clarified the tax liability of the applicant regarding arrears of rent, emphasizing the provisions of the Income-tax Act and established legal principles governing the assessment of income from property. The ruling provided a clear determination that the arrears of rent received by the applicant were not subject to income tax for the specified assessment year.