2014 (10) TMI 549 - SC - Income Tax

Scope of term owner of house property u/s 27(iiib) Pre-requisites of Section 269UA(f)(i) - Whether the tenants from month to month or which are for a period not exceeding one year are excluded from the definition - Held that - Neither the order of the Tribunal nor the order of the High Court indicate any consideration in respect of the house property named Kanti Lal House except observing that the assessee has been a tenant for a long period and that it had let out the premises - No definite finding of fact about the pre-requisites of Section 269UA(f)(i) read with explanation has been recorded either by the Tribunal or by the High Court the matter needs re-consideration for the determination of facts thus, the matter is to be remitted back to the Tribunal for fresh hearing Decided in favour of assessee.

Summary

Issues:
1. Interpretation of Section 27(iiib) of the Income Tax Act, 1961 regarding income from house property.
2. Understanding the definitions of "immovable property" and "transfer" in Section 269UA (d) and (f).
3. Lack of consideration of essential conditions for transfer under Section 269UA(f)(i).
4. Necessity for a definite finding of fact regarding the lease term for immovable property.

Analysis:
The Supreme Court deliberated on the interpretation of Section 27(iiib) of the Income Tax Act, specifically concerning the income from a house property named Kantilal House. The High Court had determined that the assessee, being a long-term tenant who let out the premises to Bank of Baroda, fell under Section 27(iiib) and not the exclusion clause. However, the Court noted the absence of a definitive finding on the essential conditions outlined in Section 269UA(f)(i) regarding the lease term for immovable property.

To delve deeper, the Court examined the definitions of "immovable property" and "transfer" in Section 269UA (d) and (f). It highlighted that a lease for a term of not less than twelve years constitutes a transfer under Section 269UA(f)(i), with the explanation clarifying the calculation of the lease term. The Court emphasized that for a transfer to occur, the lease must provide for an extension resulting in a total term of not less than twelve years.

The Court observed a significant oversight in both the orders of the Income Tax Appellate Tribunal and the High Court, as they failed to consider the crucial aspects related to the lease term requirement under Section 269UA(f)(i) and its explanation. The absence of a factual determination on the lease term posed a flaw in the decision-making process.

Consequently, the Court deemed it necessary to remand the matter to the Income Tax Appellate Tribunal for reconsideration. The civil appeal was allowed, setting aside the impugned orders and restoring the case to the Tribunal for a fresh hearing and disposal in accordance with the law. The parties were directed to appear before the Tribunal on a specified date, with no costs imposed in this regard.