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TMI Blog1984 (7) TMI 117X X X X Extracts X X X X X X X X Extracts X X X X ..... 978. This flat was purchased by the assessee with the intention of providing residence to its general manager. Before the ITO it was submitted on behalf of the assessee that it had no intention to let out this property. An amount equal to 10 per cent of the salary of the general manager was recovered from him and credited in the account. In the return filed by the assessee the net income of Rs. 235 was shown under the head ' Income from house property ' with reference to the recovery made from the general manager. The ITO, in the draft assessment order prepared by him, took the view that the assessee was liable to tax on notional income in respect of this flat. Considering the prevailing rent in the neighbourhood, the ITO estimated a rent of Rs. 1,200 per month in respect of this property. As the assessee was in possession of the same in the accounting year for a period of 9 months, the income from this property was computed on the basis of rental income for 9 months at the rate of Rs. 1,200 per month at Rs. 10,800. After making allowance for outgoings net rental income was computed at Rs. 7,298. It further appears that against the draft assessment order proposing to bring to tax t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany. He also found that the activity of letting out the flat to the assessee's employee has a definite nexus with its business and so the income received by the assessee in such a circumstance is the income received in the course of carrying on of the business. Consequently, the Commissioner (Appeals) recorded a finding that the assessee is not liable to be assessed in respect of any notional income from the flat under the head ' Income from house property ' and that rent received from the general manager is to be regarded as taxable business receipt. The ITO was, accordingly, directed to include the said receipt in computation of business income. In accordance with these findings the Commissioner (Appeals) deleted the inclusion of Rs. 7,298 in the total income as ' Income from house property '. Aggrieved, the revenue has come up in appeal before us. 5. Shri S.P. Chaliha, the learned departmental representative, has contended before us that as full consideration for the flat had been paid by the assessee and it had been put in possession thereof and was in full enjoyment of the property, for all practical purposes, it became the owner of the property within the meaning of secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e case of R.B. Jodhamal Kuthiala. It was further submitted that in the case of Salkia Transport Associates, cited on behalf of the revenue, the question involved related to allowance of depreciation under section 32 of the Act on motor vehicles and that the ratio laid down in that case by the Calcutta High Court does not at all support the contention advanced on behalf of the revenue. 7. The second limb of the argument advanced on behalf of the assessee by Shri R.N. Bajoria, is that the income derived from the flat let out to the assessee's general manager for his residence has to be assessed as business income. Elaborating, it was submitted that the flat purchased by the assessee with the intention of providing residence to its general manager constituted its business asset and, therefore, the income derived therefrom accrued to the assessee, while carrying on its business activity, the income so derived in the course of carrying on of the business is taxable as business income. In support of this submission reliance was placed on the decision of the Patna High Court in Jamshedpur Engg. Machine Mfg. Co. Ltd.'s case, the decision of the Punjab High Court in Delhi Cloth Genera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion the decision of the Supreme Court in R.B. Jodha Mal Kuthiala's case relied upon by the assessee in that case it was found that there has been only a transfer by way of sub-lease and not a sale divesting the transferor of all rights of ownership in the property. It was, thus, held by the Calcutta High Court that the assessee remained the owner of the property and was assessable as such. This authority also goes to support the submissions made before us on behalf of the assessee. 11. The Patna High Court in the case of Sahay Properties Investment Co. (P.) Ltd. has no doubt taken a view which is favourable to the assessee. However, as we are bound by the decisions of the Calcutta High Court in the cases referred to above, we hold that for the assessment year under appeal, notional income from the flat purchased by the assessee cannot be assessed under the head ' Income from house property '. 12. From the facts found by the Commissioner (Appeals) it is evident that the assessee purchased the aforesaid flat with the intention of providing a residence for its general manager. Till today this property has not been let out to any person other than an employee of the assessee-com ..... X X X X Extracts X X X X X X X X Extracts X X X X
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