INCOME TAX ACT, 1961

Section 23

Income from house property - Annual letting value - AO taxed notional rent on property sub-licenced by assessee - No rent/licence fee received by assessee

Assessee-company was engaged in running 5 Star Super Deluxe Hotel. AO noticed that assessee owned property adjacent to Hotel Building known as West tower located in the same compound in which hotel building was located. This building was not used for hotel business of assessee and had different entrance and other infrastructural services such as lifts, stairs and parking slots, etc. Assessee-company had sub-licenced offices and apartment in this building to various parties and sub-licence was given to various parties for a period of 9 years and 11 months which was renewed on the request of sub-licencee. Assessee was not charging any rent, lease, or licence fee from these parties. It had received interest free security deposits in the year of original sub-licenced period to which the assessee-company showing as unsecured loan in its balance sheet. AO took the view that assessee received rent in the garb of interest free security deposit from sub-licencee of the property and same was to be taxed under the head 'Income from house property'. Held: In view of section 27(iii) it was the sub-licencee who would be 'deemed owner' of concerned premises and assessee could not be liable to pay any such tax fixing letting value on notional basis when, in fact, no such amount of rent/license fee was received by assessee.

Relied:CIT v. C.J. International Hotels Ltd. (2011) 197 Taxman 230 (Del) : 2011 TaxPub(DT) 634 (Del-HC).

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2013-14 & 2014-15

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