2014 (7) TMI 338 - AT - Income Tax

Rental income from office premises income taxable in the hands of assessee or company - Held that - The assessee had not produced any evidence before any authority including us to prove that he was compelled to receive the rent in the name of a corporate entity it is difficult to understand as to how a corporate entity has shown income from a premises that was neither owned by it nor was it taken on rent by it - returns filed by both the parties do not depict their true incomes - the assessee had not shown the income accrued to him in the return thus, FAA was justified in holding that income from the Oberoi Gardens property was to be assessed in his hands Decided against Assessee. Annual letting value of adjacent self-occupied house property Held that - There were two agreement for the flats no. 1301 and 1302 for the residential property situated at Hurray Nirmal Lifestyle - the assessee has made a claim that they were being used a single unit, that they had common entrance - AO had made no inquiry in this regard at the time of assessment thus, the matter is liable to be remitted back to the AO for fresh adjudication Decided partly in favour of Assessee. Annual value of self-occupied house property Held that - The AO and the FAA have not denied the fact the property remained vacant for the year, that the AO had adopted ALV based on cost of acquisition of the property, that the assessee had taken Municipal ratable value for ALV purposes - method adopted by the assessee was as per law - As the property remained vacant , so, adopting municipal ratable cannot be termed incorrect method of calculating House property income thus, the order of the FAA is set aside Decided in favour of Assessee. Taxability of Net receipts on surrender of LIC pension policy Capital receipt or not - assesssee contended thatm, no claim was made u/s. 80CCC when money was deposited Held that - AO had admitted that the assessee had not claimed deduction under the provisions of chapter VI A of the Act, that he had had received an amount in dispute by surrendering lifetime pension policy and life insurance policy from ICICI Prudential life insurance - These two factors in themselves are sufficient to hold that money received by the assessee is a capital receipt and not taxable - Provisions of section 2 of the section 80CCC are very clear Decided in favour of Assessee.

Summary

Issues:
1. Taxability of rental income from office premises
2. Annual letting value of self-occupied house property
3. Annual value of another self-occupied house property
4. Tax treatment of surrender of LIC pension policy

Issue 1: Taxability of Rental Income from Office Premises
The Assessing Officer (AO) found that the assessee, who was a Director in a company, had rented out office premises to another company but had not offered the rental income in his personal return. The AO held that the rental income should be taxed in the hands of the assessee as the property owner. The First Appellate Authority (FAA) agreed with the AO's assessment. The Appellate Tribunal noted that the premises belonged to the assessee, and there was no evidence to support the claim that the rent had to be received in the name of a corporate entity. Therefore, the Tribunal upheld the decision that the rental income should be assessed in the hands of the assessee.

Issue 2: Annual Letting Value of Self-Occupied House Property
The AO considered one of the self-occupied house properties as deemed let out due to the existence of two agreements for adjacent flats owned by the assessee. The FAA upheld the AO's decision. However, the Tribunal observed that the AO had not conducted any inquiry into whether the two flats were being used as a single unit. Therefore, the Tribunal remitted the matter back to the AO for fresh adjudication after physical verification of the property to determine if the flats should be considered as one house property.

Issue 3: Annual Value of Another Self-Occupied House Property
The AO calculated the annual value of another self-occupied property based on a percentage of the property's cost of acquisition. The FAA supported this calculation. However, the Tribunal found that as the property remained vacant, adopting the municipal ratable value for calculating the annual value was a correct method. Therefore, the Tribunal reversed the FAA's decision and ruled in favor of the assessee.

Issue 4: Tax Treatment of Surrender of LIC Pension Policy
The AO treated the amount received on surrendering a pension policy as income from other sources as the deduction under section 80CCC was not claimed. The FAA agreed with this treatment. However, the Tribunal noted that the surrender amount was a capital receipt, and the assessee had not claimed the deduction under section 80CCC. Therefore, the Tribunal decided in favor of the assessee, ruling that the amount received on surrendering the policy should not be taxed as income from other sources.

In conclusion, the Appellate Tribunal partly allowed the appeal filed by the assessee, ruling in favor of the assessee on the issues related to the annual value of self-occupied house properties and the tax treatment of the surrender of the LIC pension policy.