1990 (11) TMI 194 - AT - Income Tax

Summary

Issues Involved:
1. Taxability of the sum of Rs. 1,02,000 received by the assessee.
2. Classification of the income received by the assessee, whether it is "rent" or "interest."
3. Applicability of relevant case laws cited by the assessee and the CIT (Appeals).

Detailed Analysis:

1. Taxability of the Sum of Rs. 1,02,000 Received by the Assessee:
The primary issue revolves around whether the sum of Rs. 1,02,000 received by the assessee is taxable. The Income Tax Officer (ITO) had held that this sum is chargeable to tax under the head "Income from other sources," arguing that it was a return on the money advanced by the assessee. The Commissioner of Income-tax (Appeals) [CIT(A)] disagreed, stating that the sum was in reality income from house property, but since the assessee was not the owner of the property, it could not be taxed under this head. The CIT(A) also held that it could not be taxed under "Income from other sources," relying on the Supreme Court's decision in Nalinikant Ambalal Mody's case.

2. Classification of the Income Received by the Assessee:
The assessee contended that the sum of Rs. 1,02,000 was rental income, which should normally be assessed under "Income from house property." However, since the assessee was not the owner of the property, it argued that the income could not be taxed under this head. The Department, on the other hand, argued that the sum was in the nature of interest, as it was a return on the Rs. 25 lakhs advanced by the assessee to the vendor.

The Tribunal examined the terms and conditions of the sale agreement dated 16-8-1979. Clause (6) of the agreement stipulated that the vendor would pay the entire rent collected from the property to the assessee. The Tribunal noted that the rent collected by the vendor from the tenants was a measure of the commercial equivalent of interest for the sum of Rs. 25 lakhs advanced by the assessee. Therefore, the Tribunal concluded that the monthly payments received by the assessee from the vendor were not "rent" but were the commercial equivalent of interest.

3. Applicability of Relevant Case Laws Cited by the Assessee and the CIT (Appeals):
The assessee and the CIT(A) relied on several case laws, including Nalinikant Ambalal Mody v. S.A.L. Narayan Rao, CIT, Laxmipat Singhania v. CIT, CIT v. Hansraj Gupta, and CIT v. Sultan Bros. (P.) Ltd. The Tribunal found these cases distinguishable, noting that they went on the footing that the income received by the assessees therein was rent to start with. In this case, the Tribunal determined that the income was not rent but interest.

Conclusion:
The Tribunal held that the CIT(A) was not justified in allowing the assessee's appeal. The sum of Rs. 1,02,000 received by the assessee was rightly assessable under the head "Income from other sources." Consequently, the Tribunal set aside the impugned order of the CIT(A) and restored the order of the assessing officer. The Departmental appeal was allowed.