1996 (1) TMI 4 - SC - Income Tax

It is not clear to us whether the question referred pertains only to one issue, viz., whether the income received by Surrendra Overseas should be included in the total income of the assessee or does it also comprehend the other issue, viz., whether the said income should be assessed under the head Income from house property or under the head Profits and gains of business or profession - Matter remanded

Summary

Issues:
1. Interpretation of whether the income received by a company should be included in the total income of the assessee.
2. Determination of whether the income should be assessed under the head "Income from house property" or "Profits and gains of business or profession."
3. Clarification on whether the issue of assessing the income as business income was concluded in previous proceedings.
4. Analysis of the impact of a sub-lease not being registered on the transfer of interest in the property and the taxation of the income.

Analysis:
The Supreme Court heard an appeal by the Commissioner of Income-tax against a judgment favoring the assessee regarding the taxation of income received by a company, Messrs. Surrendra Overseas Limited, from a sub-lease of leasehold property. The Tribunal had held that since the company was not the owner of the property, the income could not be taxed in its hands. The Income-tax Officer sought to include this rental income in the assessee's assessment, contending that the income should be taxed as income from house property. The Commissioner of Income-tax (Appeals) determined that the income should be assessed under the head 'Business' without specifying the quantum. The Tribunal upheld this decision, leading to an appeal by the Revenue, which was dismissed. The High Court observed a new fact about a multi-storeyed building constructed on the sub-leased premises but did not address key issues raised by the Tribunal.

The Supreme Court found discrepancies in the High Court's judgment, noting ambiguity in the referred question's scope and lack of consideration for the main issue of the unregistered sub-lease's impact on the transfer of property interest. The Court emphasized the need for clarity on whether the income should be assessed as income from house property or business income and whether the issue of business income assessment was conclusively decided in prior proceedings. The Court highlighted the Tribunal's reasoning that the income would remain taxable for the assessee if not taxed in the hands of the sub-lessee due to the unregistered sub-lease. Consequently, the Court set aside the High Court's judgment and remitted the matter for fresh consideration, emphasizing the need for a comprehensive analysis in line with the Tribunal's findings.