The Commissioner Of Income Tax – 7, Mumbai v. The Commissioner Of Income Tax – 7, Mumbai

IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO.2431 OF 2009 The Commissioner of Income Tax – 7, Mumbai..Versus The Commissioner of Income Tax – 7, Mumbai......Appellant.VersusM/s.Normandy Developments Private Limited ......Respondent. Ms.Padma Divakar for the appellant. Mr.P.J. Pardiwala, senior Advocate with Mr.Atul K. Jasani for the respondent. CORAM : Dr.D.Y. Chandrachud & J.P. Devadhar, JJ. DATE : 7[th] January, 2010. P.C. : 1.The following question of law has been formulated in the appeal by the revenue against the judgment of the Income Tax Appellate Tribunal dated 9[th ]February 2009. The issue pertains to the assessment year 2001-2002. i)Whether, on the facts and in the circumstances of the case, the Hon’ble Tribunal, in law, was correct in appreciating the terms and conditions of the lease agreement between the assessee and lessor before holding that the rental income was assessable under the head `Income from House Property’ instead of `Income from other Sources’ as determined by the A.O. and duly confirmed by Ld. CIT (A) ? 2.The assessee took premises on lease from M/s.Printers India by an agreement dated 24[th] April 1996. The term of the lease was 10 years (Counsel appearing on behalf of the revenue and counsel appearing on behalf of the assessee have agreed in stating before the Court that the term of 75 years mentioned in para 8.1 of the order of the Tribunal is incorrect and must be read as 10 years and the date of the agreement should be read as 24[th] April 1996). The assessee had furnished a refundable security deposit of Rs.6,00,00,000/- (Rupees Six Crore only) to M/s.Printers India. The assessee had in turn sub-leased the premises and the rental income was assessed at Rs.79,39,854/-. The Assessing Officer and the Commissioner of Income Tax (Appeals) assessed the income under the head of `Income from Other Sources’. The Tribunal has modified the order of the Commissioner of Income Tax (Appeals) by directing that the income should be assessed under the head of `Income from House Property’. 3.Section 27 (iiib) provides that for the purposes of sections 22 to 26, a person who acquires any rights (excluding any rights by way of a lease from month to month or for a period not exceeding one year) in or with respect to any building or part thereof, by virtue of any such transaction as is referred to in clause (f) of Section 269UA, shall be deemed to be the owner of that building or part thereof. Clause (f) of Section 269UA refers to transactions by way of sale, exchange or lease for a term of not less than twelve years. The contention of the revenue is that the lease that is referred to in Section 27(iiib) must be for a term of not less than twelve years as described in Section 269UA. a person who acquires any rights in or with respect to any building or part thereof, by virtue of a transaction as is referred to in clause (f) of Section 269UA is deemed to be the owner of a building or part thereof. However, the bracketed portion of clause (iiib) excludes certain transactions; these being the acquisition of rights under a lease which operates from month to month or for a period not exceeding one year. Hence, where the acquisition of rights under a lease is otherwise than by way of a lease from month to month or is for a period in excess of one year, the exclusion will not apply. If the contention of the revenue were to be accepted, the bracketed portion of clause (iiib) of Section 27 would cease to have any significance. In the present case, the lease was admittedly for a period of ten years and would, therefore, not fall within the exception carved out by clause (iiib) of Section 27. 4.In these circumstances, we do not find any error in the order of the Tribunal. The Appeal does not give rise to any substantial question of law and shall accordingly stand dismissed. (J.P. Devadhar, J.) (Dr.D.Y. Chandrachud, J.)