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TMI Blog2009 (10) TMI 647X X X X Extracts X X X X X X X X Extracts X X X X ..... ble to tax. The facts necessary for the disposal of the appeal are stated in brief. 2. The assessee is a registered firm. Shri Rakesh Kumar, Raj Kumar Gupta and Shri Sanjay Kumar, Raj Kumar Gupta were the partners of the firm having equal sharing ratio. A firm named M/s. Ashish Theatres is also a registered firm whose partners are Shri Raj Kumar Gupta (HUF) and Smt. Kantaben Gupta. The said firm is the owner of a commercial complex known as Ashish Chambers at Ashish Theatre, Mahul Road, Chembur. The assessee-firm vide agreement dated 1-1-1999, acquired tenancy rights on the said premises from the owners of M/s. Ashish Theatres. In the tenancy agreement, the rate of rent payable by the assessee-firm is shown at Rs. 10 per sq. feet and, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... converted into a lease agreement for 15 years from 1-4-2004 and thus the assessee will be deemed to be the owner of the property, in the light of provisions of section 27( iii )( b ), read with clause ( f ) of section 269 UA of the Act. Since the assessee is a deemed owner, standard deduction is permissible under section 24( a ) of the Act. 4. The Assessing Officer noticed that the lease agreement dated 1-4-2004 was on Rs. 100 stamp paper, purchased on 8-7-2004 which has been made effective from 1-4-2004 and the agreement having neither been registered nor notarized, it has no legal sanctity. He further observed that the lease agreement dated 8-7-2004 is only a self-serving document, particularly in the light of the fact that the partn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowed from the ALV. It was also contended in the revised grounds that while computing the ALV gross rent received by the assessee should not be taken into consideration but only the net rent, after deducting the rent paid by it to the owner firm, has to be taken into consideration. 6. The learned counsel appearing on behalf of the assessee submitted that there is no dispute with regard to agreement between the assessee-firm and M/s. Ashsih Theatres and no effort was made by the tax authorities to verify the correctness of the lease agreement for 15 years with effect from 1-4-2004. The agreement was disbelieved mainly on the ground that it is not a registered document and it was a colourable transaction so as to reduce the tax liability ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t was not registered. Assessing Officer cannot ignore the claim of the assessee as a deemed owner; in this regard, learned counsel relied upon the decision of the ITAT Calcutta A Bench in the case of Asstt. CWT v. Anupam Pictures (P.) Ltd. [1997] 60 ITD 640. In the aforecited decision the Bench observed that so long as the lessor accepts rent from a tenant-in-possession under a void lease, a inference of tenancy would follow and thus despite a registered agreement, so long as there is no dispute with regard to period of lease, it has to be accepted as a lease for a period of more than 12 years. It was thus contended that the impugned transaction is neither a colourable devise nor a lease transaction for a period of less than 12 years ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not in dispute that the assessee paid a sum of Rs. 6,11,550 to M/s. Ashish Theatres. It is well-settled that if there is an agreement though not registered and both the parties acted upon the agreement whereby the original owner accepted the lease rent it has to be assumed that the lease is valid though the possession of the property was taken under a voidable lease agreement. In other words, in the absence of a registered lease agreement, an agreement cannot be treated as a valid piece of evidence under the Transfer of Property Act but, upon accepting the fact that parties have acted upon the agreement, the factum of giving the property on lease for 15 years cannot be disputed. In the case of CIT v. Podar Cements (P.) Ltd. [1997] 226 I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ), it has to be assumed that the definition of the expression transfer under section 269UA( f )( i ), has to be considered to be in existence, in which event a lease for a term of not less than 12 years makes the lessee a deemed-owner and consequently the income earned by the deemed-owner is assessable to tax under the head Income from house property . Since the assessee as well as M/s. Ashish Theatres have filed their respective returns and declared income which is assessable on the higher tax slab, it cannot be said that there is a colourable transaction so as to reduce the tax liability and thus one has to recognize legitimate tax planning. So long as it is within the letter of the law, rental income is assessable under the head ..... X X X X Extracts X X X X X X X X Extracts X X X X
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