1987 (1) TMI 116 - AT - Income Tax

Summary

Issues Involved:
The issue involves determining whether income from letting out open plinths to FCI should be assessed under 'Income from house property' or 'Income from other sources', and the eligibility for deduction on account of repairs.

Assessment of Income:
The appeal concerned the assessment year 1983-84 where the revenue disputed the AAC's decision to assess income from letting out open plinths to FCI under 'Income from house property' instead of 'Income from other sources', allowing a deduction for repairs. The lease deed clearly stated the letting out of kutcha plinths on open land, leading to a rental income of Rs. 58,402. The ITO initially assessed the income under 'Income from other sources', denying the repair deduction. The AAC, however, agreed with the assessee's representative that the income should be assessed as 'Income from house property', considering the municipal taxes paid by the assessee.

Consistency and Interpretation:
The revenue highlighted the inconsistency in previous assessments and argued that the income should be assessed under 'Income from other sources' for the current year. The Tribunal emphasized the need to interpret whether the open land with kutcha plinths was appurtenant to a building, as per section 22 of the Income-tax Act, 1961, rather than relying on past assessments. The Tribunal found merit in examining the issue on its own merits, disregarding past interpretations.

Land Appurtenance Interpretation:
The assessee argued that the open land with kutcha plinths was appurtenant to a residential house, citing an assessment order for the previous year. The revenue contended that the land was not appurtenant to the house, especially since it was fenced with barbed wire. The Tribunal delved into the legal definitions of 'appurtenant' and 'appendant' to determine the connection between the land and the house. It concluded that the open land let out to FCI was not appurtenant to the house, thus taxable under 'Income from other sources'.

Decision and Conclusion:
Ultimately, the Tribunal reversed the AAC's decision, restoring the ITO's order to assess the income under 'Income from other sources' and rejecting the claim for a fixed deduction for repairs. The appeal of the revenue was allowed based on the finding that the land let out to FCI was not appurtenant to the residential house, hence not taxable under 'Income from house property'.