2018 (12) TMI 1062 - AT - Income Tax

Income from House Property - rental income received from subletting - whether the assessee can be treated as owner or deemed owner of the subject property to consider the rental income received from subletting to Movielabs Films P. Ltd. as income from house property? - Held that - Before treating the assessee as owner or deemed owner of the property for treating the income derived from subletting of the property as house property income, the Department must bring material on record to establish such fact. From the tenancy agreement submitted in the Paper Book it appears that the assessee is in possession/occupation of the property as a monthly tenant. Therefore, it was incumbent upon the AO to bring material on record to establish that the assessee is enjoying property having ownership rights - it is also necessary to examine whether the provisions of Section 269UA(f)(i) is applicable to the present case or not. Since the aforesaid factual aspects have not been properly examined before treating the rental income as income from house property, restore the issue to the AO for de novo adjudication. - Decided in favour of assessee for statistical purposes

Summary

Issues Involved:
1. Addition of rental income under "Income from House Property."
2. Ownership status of the property and treatment of rental income.

Issue 1: Addition of Rental Income under "Income from House Property":
The appeal pertains to the addition of ?28,80,000 under the head "Income from House Property." The Assessing Officer (AO) treated the rental income received from subletting the property as income from house property. The AO relied on the agreement with the subletter, where the assessee was considered the absolute owner of the property. Despite the assessee's objections, the AO added back the amount under the said head. The First Appellate Authority upheld the AO's decision, citing judicial precedents.

Issue 2: Ownership Status of the Property and Treatment of Rental Income:
The core issue revolved around whether the assessee could be deemed the owner of the property, affecting the treatment of rental income. The assessee contended that they were a monthly tenant, not the owner, as per the lease agreement. The Department argued the assessee was a deemed owner. The Tribunal found that the Department needed to establish the ownership status conclusively before treating the income as from house property. The matter was remanded to the AO for fresh consideration, emphasizing the need for proper examination and adherence to relevant legal precedents.

The Tribunal's decision highlighted the importance of establishing ownership rights before categorizing rental income as from house property. The matter was remanded for further examination, emphasizing the need for a conclusive determination of ownership status. The Tribunal's approach ensured a fair and thorough reconsideration of the issues involved, providing an opportunity for the assessee to present their case effectively.