9911796707
TMI Blog1985 (1) TMI 87X X X X Extracts X X X X X X X X Extracts X X X X ..... . of Rs. 39,794, Chandra Trading Co. Rs. 24,000 and Neelam Traders Rs. 27,832. Part of the premises allegedly let out to the above firms had been in turn let out by these firms recovering rents of Rs. 88,284, Rs. 70,200 and Rs. 1,07,385 respectively. The difference between the above two amounts relating to each of the firms was sought to be assessed in their hands and the assessee claimed that the amounts allegedly received by it through these firms of Rs. 39,794, Rs. 24,000 and Rs. 27,832 alone should be the basis of property income assessment in its hands. The ITO, however, in his draft assessment order based the property computation on the amounts of Rs. 88,284, Rs. 70,200 and Rs. 1,07,385 received by the firms. The IAC apparently relying on certain orders of the Tribunal directed the ITO to base the property income computation in respect of the two firms Lateshkumar Co. and Chandra Trading Co. on the amounts paid to the assessee of Rs. 39,794 and Rs. 24,000 respectively. In the case of Neelam Traders, however, he agreed with the draft order of the ITO that the property income included in the assessment of the assessee should be based on the figure of Rs. 1,07,385 paid to Neel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5. Neelam Traders was a firm of three partners all of whom were related to the moving force behind the assessee-company Shri Gajria. Two of the partners were in fact shareholders in the assessee-company. The assessee purchased the property in 1972 when the present tenants, viz., International Computers Ltd. 'ICL' was occupying the premises. Neelam Traders was constituted in October 1972, long after the property was purchased and long after the tenant came into the building. The assessee could not have let out the premises to Neelam Traders at all, since there was no question of obtaining vacant possession. The assessee is the owner of the property and has to be assessed on the actual receipts from the property in terms of specific provisions of law. There was in fact no dispute between the assessee and the ICL. The real tenant was the ICL and what rent the tenant paid only mattered. All the parties except ICL are related to the main owner Shri Gajria of the assessee-company. The flat was actually let out to ICL even before the Neelam Traders was born. Referring to the letter of 10-6-1972 it is pointed out that even before the partnership came into existence, this letter seems to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpensation and cannot be considered while applying the provisions of section 23(a) or section 23(b). In order to establish a case of benami the onus was clearly on the revenue. Considering the relevant questions to be asked in this connection, the learned counsel has pointed out that there is no evidence to show that the amount received goes to Shri Gajria. The firm of Neelam Traders had only two partners who are shareholders in the company. There are several other shareholders in the company and certainly one more partner in Neelam Traders. It would not be proper, therefore, to regard two different entities like Neelam Traders and the assessee as having common interests at all. In law Neelam Traders is the real tenant of the assessee. The ICL is on the contrary the licensee of Neelam Traders. The legal position is clear from the lease deeds dated 15-3-1974 between ICL and Neelam Traders and 1-10-1972 between Neelam Traders and the assessee. The ICL stepped into the shoes of the earlier tenant of the premises and by entering into a legal agreement with Neelam Traders it also accepted the fact that they are the tenants or licensees of that firm and having nothing to do with the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd was leased out to the newly constituted firm of Neelam Traders and at the same rent as Rs. 27,832 which ICL was paying to the assessee. The alleged leasing out of the property to Neelam Traders is effected by a lease agreement dated 1-10-1972. By an agreement dated 15-3-1974, Neelam Traders were to lease out the same premises to the International Computers Ltd. Some of the specific provisions of this agreement are clauses 1(v), 2 and 11 which states : "(v) The licensors do and each of them doth hereby grant to the licensee leave and licence to use and occupy the said premises on leave and licence basis for a period of 5 (five) years from the 1st day of October, 1972. 2. The licensee agrees to pay to the Licensors compensation at the rate of Rs. 1.50 per sq. ft. per month for the first year of the licenced period, i.e., up to the 30th day of September, 1973 and at the rate of Rs. 2 per sq. ft. per month for the second year of the licenced period, i.e., from the 1st day of October, 1973 to the 30th day of September, 1974 and thereafter from the 1st day of October, 1974 at the rate of Rs. 2.25 per sq. ft. per month till the expiry of the licenced period. The said compensation s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laims benami to prove it. The essential ingredients are 'to trace the source and origin of the amount and find out its ultimate destination' as laid down in CIT v. Daulat Ram Rawatmull [1973] 87 ITR 349 (SC). Since these conditions were not satisfied, the Commissioner (Appeals) held that Neelam Traders cannot be regarded as the benami of the assessee. In our view, this approach of the Commissioner (Appeals) suffers from a fallacy. The ITO in the first place has not stated that Neelam Traders are the benamies of the assessee. The technical requirements of establishing benami, therefore, well expounded in the decided cases do not, therefore, require to be satisfied. The question of onus also, therefore, on this basis is not relevant. What the ITO has done is looking apparently to all the circumstances to come to an inevitable conclusion that the interposition of Neelam Traders between the assessee and ICL was only an exercise in diversion of income for tax evasion. The Commissioner (Appeals) has laid stress on the legal relationship suggested by various agreements, etc., between the parties. In fact stressing the legal unvulnerability of these agreements the Commissioner (Appeals) ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the tenancy to five years whereas under the normal law of the land ICL could have continued paying the same rent and stayed unmolested in the premises for any length of time till the Rent Control Laws continue in the State. The picture given by the assessee's learned counsel of too many things going wrong in the tenant-landlord relationship calling for intervention of a closely-related brother or sister to resolve the dispute appears to be too unrealistic to be believed. The facts, therefore, do not indicate any reason why a firm of the type of Neelam Traders should have been interposed in the flow of rental from the tenant to the assessee landlord. 13. The events mentioned above show things at a still more unrealistic stage. The assessee was the owner of the property. ICL was the tenant even on the day of purchase, i.e., May 1972. The firm came into existence on 22-2-1973. The partnership deed referred to its coming into existence with effect from 1-10-1972. There is no evidence placed before us to show that the business of Neelam Traders who were to act as estate agent, etc., have really done so. Apparently between 1971 to-date they have not entered into any other business tran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... none else. In practice the tenant may pay the rent fully or partly to anyone else designated by the landlord provided he gets the requisite discharge for the same. The landlord likewise may direct the rent to be paid to anyone else on his behalf provided he can give the discharge for the landlord to the tenant. None of these would affect the factual position of the tenancy and the rent paid by the tenant. The fact that the entire rent paid by the tenant as consideration for the occupation of the premises is not paid to the landlord but someone else would not alter the position as to the extent of the compensation paid by the tenant for his occupancy. 14A. The question, therefore, to be answered in the present case is as to who are the tenants and the landlord and what compensation the tenant pays the landlord. In our view, the Commissioner (Appeals)'s attempt to go into a question of benami is clearly erroneous. He has not addressed himself to the proper questions to be asked in the case. All arguments, therefore, as to the benami or otherwise nature of the relationship is also not relevant to the question of determining the property income of the assessee. At any rate, there is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cular amount, that amount would constitute the amount of rent 'receivable by the owner' in respect of the letting. A direct application, therefore, of the provisions of section 23 to the present case would involve application of section 23(1)(b). The expression 'receivable' in the context also would mean the actual rent the tenant pays whether it reaches in the same form or diminished or enhanced as cash in the landlords' hands. We have, therefore, no hesitation in coming to the conclusion that the property income to be assessed in the hands of the assessee would be based at Rs. 1,07,395, the tenant ICL has parted with as consideration for the tenancy. 16. Arguments had been raised before us stating that the assessee received only Rs. 27,832. This is the standard rent even as per the Rent Control Act. Only section 23(1)(a) applies to the case. Even if section 23(1)(b) is applied the same figure has to be adopted. The fallacy involved in this argument has been referred to earlier. There is no reason why between the lawful tenant and landlord another party should be interposed to distribute what the tenant has to pay as rent to the landlord and not to anyone else. In the present ca ..... X X X X Extracts X X X X X X X X Extracts X X X X
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