2014 (7) TMI 208 - AT - Income Tax

Income from house property Quantum of rent subjudice to HC - Income from letting out of office at commercial premises Held that - The matter with regard to the quantification of the rent payable to the assessee is subjudice before the Bombay high court, even as the assessee alleges of no continuing arrangement with NIACL in-as-much as the lease agreement expired on 13.05.1994, and which has not been extended further - the standard rent stands fixed by the Small Causes Court at a much lower sum - it needs to be appreciated that the original agreement has expired, and which has not been extended, and which could only be at the instance of and upon agreement between the parties thereto - The standard rent could apply only to a tenant and not to one who occupies the property illegally - the compensation or rent toward the same, even from any illegal tenant, would stand to be assessed as income from house property - the income continues to be assessed at the returned sum of ₹ 30.264 lacs being in terms of the original agreement. - it shall be subject to any downward revision that may be directed by the high court, before whom the matter is subjudice Decided partly in favour of Assessee.

Summary

Issues:
Assessment of rental income as 'income from house property' or 'business income' for the assessment year 2005-06.

Analysis:
The case involves an appeal by the Assessee against the Order by the Commissioner of Income Tax (Appeals) partly allowing the assessee's appeal contesting the assessment under section 143(3) of the Income Tax Act, 1961 for the assessment year 2005-06. The Assessee, an individual, entered into a lease agreement in 1984 to let out office space at a commercial premises in Mumbai. The Assessing Officer brought the rental amount to tax as 'income from house property'. The Assessee contended that she was neither the owner nor the deemed owner of the premises as the agreement had expired in 1994 with no extension clause. The Assessee argued for the rental income to be assessed as 'business income' or at a reduced amount based on a court order. The CIT(A) assessed the rental income as 'income from house property'. The Tribunal considered the facts and decided that the income should continue to be assessed at the returned amount, subject to any revision directed by the high court where the matter was subjudice.

The Tribunal noted that the standard rent of the property was fixed at a lower sum by the Small Causes Court, but emphasized that the original agreement had expired and not been extended. The Tribunal highlighted that the standard rent could apply only to a tenant and not to one occupying the property illegally. However, any compensation or rent received, even from an illegal tenant, would be assessed as 'income from house property'. The Tribunal decided that the income would be assessed at the returned amount, pending any revision directed by the high court where the matter was subjudice. Any increase directed by the high court would be assessable as income for the relevant year when directed by the court.

In conclusion, the Tribunal disposed of the Assessee's appeal by deciding that the rental income should be assessed at the returned amount, subject to any revision directed by the high court where the matter was subjudice. The decision was pronounced in open court on June 13, 2014.