2016 (10) TMI 1200 - AT - Income Tax

Rental income received by the Assessee - Assessed as Income from Other sources OR Income from House property - deemed ownership - Held that - In the past years, the issue has been consistently decided by the Tribunal in favour of the assessee, starting with the lead order for assessment year 2005-06 as held that the owners of the property M/s. Vrindavan Lal Goverdhan Lal have allowed the assessee firm to create sub-tenancy with the regard to the premises and has given their premises for creating the sub-tenancy in favour of ICICI Bank, Ltd. for a period of 15 years on certain terms and conditions as detailed in their letter dated 24/11/2000 addressed to the assessee, copy thereof filed in the compilation before us. The assessee become a deemed owner in accordance with provision of section 27(iiib) r.w.s. 269UA(f)(i) of the Act - no mistake in the order of CIT(A) in holding that the assessee is the deemed owner of the premises u/s 27(iiib) of the Act and the order of the CIT(A) is confirmed and the grounds of appeal of the revenue are dismissed.

Summary

Issues involved:
1. Taxation of rental income received by the assessee from ICICI Bank Ltd.
2. Classification of income as 'income from house property' or 'income from other sources'.
3. Determination of deemed ownership under section 27(iiib) r.w.s. 269 UA.

Analysis:

Issue 1: Taxation of rental income
The appeal concerns the tax treatment of rent amounting to ?68.02 lacs received by the assessee from ICICI Bank Ltd. The assessee declared this income under 'income from house property,' while the Assessing Officer taxed it as 'income from other sources' since the property was sub-let to ICICI Bank Ltd. The Tribunal noted that in previous years, it had ruled in favor of the assessee, considering the arrangement and deeming the assessee as the owner under section 27(iiib) r.w.s. 269 UA. The Tribunal emphasized the long possession of the premises by the assessee and the sub-tenancy agreement with ICICI Bank Ltd., leading to the conclusion that the assessee was a deemed owner entitled to deductions under section 24(a) of the Act.

Issue 2: Classification of income
The dispute centered on whether the rental income should be classified as 'income from house property' or 'income from other sources.' The CIT(A) and Assessing Officer contended that the assessee was a mere licensor, thus the income was taxable under 'income from other sources.' However, the Tribunal disagreed, citing the detailed arrangement and agreements between the parties. The Tribunal found that the CIT(A) erred in not recognizing the assessee as a deemed owner under section 27(iiib) r.w.s. 269 UA, as established by previous Tribunal decisions in the assessee's favor. Consequently, the Tribunal directed the Assessing Officer to treat the sub-tenancy rent receipts as assessable under 'income from house property.'

Issue 3: Determination of deemed ownership
The Tribunal scrutinized the concept of deemed ownership under section 27(iiib) r.w.s. 269 UA. It highlighted the factual background, including the sub-tenancy agreement with ICICI Bank Ltd. and the terms set out in the agreement with the property owner. The Tribunal emphasized that the CIT(A) failed to provide substantive reasons for disregarding the previous Tribunal decisions that deemed the assessee as the owner. The Tribunal overturned the CIT(A)'s decision and directed the Assessing Officer to tax the rental income under 'income from house property' based on established precedents.

In conclusion, the Tribunal allowed the appeal of the assessee, setting aside the CIT(A)'s order and directing the tax treatment of the rental income in line with previous favorable decisions for the assessee.

This detailed analysis provides a comprehensive overview of the judgment, addressing each issue involved and the Tribunal's reasoning behind its decision.