2010 (11) TMI 798 - HC - Income Tax

Income from house property - deemed owner - Whether the ITAT has not erred in directing AO not to charge the annual letting value of the West Tower under the head income from house property since the principle of res judicata does not apply in income-tax proceedings? - assessee took ground predicated on the provisions of section 27(iii) r.w.s. 269 UA (f) (ii) and submitted that under those provisions, it would be a sub-licensee as deemed owner would be charged to tax in his hands Held that - Tribunal examined the licence agreement entered into between the NDMC and the assessee on the basis of which it has come to the conclusion that it is the NDMC, which is the owner of the premises and remains to be the owner of the premises in question . The Tribunal has further accepted the submissions of the assessee that in view of the provisions of section 27 (iii) of the Act, it is the sub-licensee who would be deemed owner of those premises which the sub-licensees whereof transferred to the present occupiers and those occupiers are paying rent/licence fee to the sub-licensees. On that basis, the Tribunal has set aside the addition made by the AO and deleted this component of income holding that the same would not be chargeable to tax, Tribunal in deciding the aforesaid issue is perfectly justified. There is no reason to interfere with the same - in favour of the assessee.

Summary

Issues involved:
1. Exemption allowed subject to exceptions.
2. Condoning delay in refilling appeals.
3. Admitting substantial questions of law regarding the annual letting value of a property under 'income from house property'.

Analysis:
1. The judgment begins by allowing exemption subject to exceptions in a specific case, as mentioned in CM No.15141/2010 in ITA No.1255/2010. The Court disposes of the matter accordingly.

2. The judgment addresses the issue of condoning the delay in refilling appeals in CM No.15140/2010 in ITA No.1254/2010 and CM No.15142/2010 in ITA No.1255/2010. The delay is condoned based on the reasons stated in the applications, and the applications are disposed of accordingly.

3. The main issue revolves around substantial questions of law related to the annual letting value of a property under 'income from house property'. The Court deliberates on whether the ITAT erred in directing the Assessing Officer not to charge the annual letting value of the West Tower under the said head, citing the principle of res judicata not applying in income-tax proceedings. The judgment provides a detailed analysis of the facts leading to this question. It outlines that the property in question, known as the West Tower, was sub-licensed by the assessee to various parties for specific purposes. The sub-license agreements permitted sub-licensees to transfer the sub-licenses to third parties, with transfer charges payable to the assessee. The Assessing Officer proposed to fix the annual letting value of the West Tower, which the assessee contested on several grounds, including not being the actual owner, consistency in previous assessments, and the nature of sub-licenses not constituting 'letting' under the Act.

4. The judgment further details the Assessing Officer's position, asserting that the assessee, as the licensee, was deemed the owner due to the license agreement with NDMC and the sub-licensing activities. The AO sought to fix a notional annual letting value for taxation purposes. The Court highlights the previous history of reassessment proceedings and the subsequent addition of rent/licence fees to the annual letting value. The assessee's appeals to the CIT (A) and the Tribunal challenged this addition, ultimately leading to the Tribunal's decision in favor of the assessee, emphasizing the sub-licensees as the deemed owners under section 27(iii) of the Act.

5. In conclusion, the judgment upholds the Tribunal's decision, dismissing the Revenue's appeals across different assessment years. It affirms that the Tribunal's approach was justified, and clarifies that the assessee is not entitled to depreciation for the purpose in question. The Court answers the question of law in favor of the assessee and against the Revenue, resulting in the dismissal of all appeals.