INCOME TAX ACT, 1961

Section 23(1)

Income from house property - Taxability under section 23(1) - Mesne profit and interest thereon received at discretion of Civil Court for unauthorized occupation of immovable property by tenant -

Assessee received mesne profits and interest on mesne profits under direction of Civil Court for unauthorised occupation of immovable property of assessee by the erstwhile tenant of assessee and claimed it to be capital reeipt. AO taxed the same under section 23(1).Held: Capital asset of assessee, i.e., the property in question was earning revenue for assessee by way of rent till so long as the lease subsisted. After termination of lease, the erstwhile tenant continued to occupy premises unauthorisedly. It was in lieu of the rent which assessee would have otherwise derived from tenant, that mesne profits and interest thereon had been awarded. So far as capital asset of assessee was concerned, the same had remained intact. It was not assessees case that there was any damage to property/capital asset inasmuch, as, building structure was damaged, and that damages have been awarded by the Court on account of such physical damage. Even title of assessee in respect of capital asset remained intact. Accordingly, mesne profits and interest thereon was liable to tax under section 23(1).

Distinguished:CIT v. Smt. Lila Ghosh 1994 TaxPub(DT) 228 (Cal-HC). Followed:<./i>CIT v. Uberol Sons (Machines) Ltd. (2012) 193 DLT 148 (DSB) : 2013 TaxPub(DT) 164 (Del-HC).