INCOME TAX ACT, 1961

Section 23, 27(iiib) & 269UA(f)(i)

Income from house property - Deemed ownership - Sub-letting of premises taken under long-term lease -

Assessee had taken certain premises on lease since 1948 and was in occupation thereof till date. AO held that assessee was deemed owner of said premises under section 27(iiib) read with section 269UA(f)(i) and was not a 'monthly tenant' as claimed by assessee, and consequently, rental income received by assessee from sub-letting of premises to bank was taxable either under section 22 or under section 56. Held: Assessee was in occupation of impugned premises since 1948 and this prima facie would establish that premise was taken under long-term lease. In the absence of any written contract, submissions that tenancy was on 'month to month' basis would require higher degree of evidence. The entire onus was placed on assessee to prove the same by clinching evidences. When assessee was not sure of the period of tenancy, then how could it enter into a lease agreement with a nationalized bank for a period of 12 or more years. Therefore, heavy onus was casted upon assessee to prove that he was tenant on monthly basis as covered by exception provided under section 27(iiib) and lease was not a period exceeding 12 years to attract section 269UA(f) but except for letter from legal heirs of deceased landlord which merely stated that assessee had paid monthly rents, no other evidence could be adduced by assessee to substantiate the fact that tenancy was on 'month to month' basis despite being specifically directed to do so. In such eventuality, only documents available to adjudge assessee's claim was lease agreements entered into by assessee with Bank. From perusal of the same, it was clear that despite assertions by assessee that tenancy was on 'month to month' basis and same could be terminated by tendering 15 days' notice, assessee conveniently entered into long-term lease agreement for aggregate period exceeding 12 years and that too with a Nationalized Bank, which require approval of regulatory authorities to open/operate the branches. Therefore, it could safely be gathered that Bank was assured of peaceful enjoyment of premise for agreed period of lease without any interruptions and for the purpose of section 27(iiib) read with section 269UA(f)(i), assessee was deemed owner of property and therefore, rental income from sub-letting was rightly taxed as Income from House Property.

Relied:CIT v. Durga Prasad More (1971) 82 ITR 540 (SC) : 1971 TaxPub(DT) 0375 (SC).

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