Post the termination of sub lease agreement, the lessee is not meant to collect rent and add it as an income to the owner : Bombay HC
TITLE : T.V. Patel Pvt. Ltd.v The Dy. Commissioner of Income Tax
CITATION : Income Tax Appeal No.699 of 2002
CORAM : Hon’ble Justice G.S Kulkarni and Hon’ble Justice Jitendra Jain
DATE: 4th December, 2023
INTRODUCTION :
The appeals relate to the assessment year 1986-87, 1987-88, 1988-89, 1990-91, 1991-92 and 1993-94 for deciding the question of law on whether an Assessing Officer was justified in reopening the assessment under Section 148 of the Income Tax Act.
FACTS :
The appellant entered into an agreement with Bombay Builders to construct a building and sell 30 flats to the appellant. Bombay builders was substituted with IDBI through a tripartite agreement. IDBI on various accounts have failed to pay the rent and a suit was filed by the appellant. On 20th March 1989, an assessment order under section 143 read with section 148 of the Act for the assessment year 1986-87 came to be passed and the rent on account of sub-lease agreement of the Appellant with IDBI amounting to Rs.3,42,720/- was added as income of the Appellant including the other assessment years. The assessing officer held that no amount is due from IDBI as lease and rent and therefore the question of taxing does not arise.
COURT’S ANALYSIS
The court had to examine whether the sub-lease rent of Rs.3,42,720/- sought to be taxed accrues or arises to the appellant in the assessment year 1986-87. The court held that the right to receive Rs.3,42,720/- under the sub-lease agreement is not a subsisting right in favour of the Appellant which too is a subject matter of civil dispute. Further, it was held that the determination of the amount payable by the IDBI to the Appellant as prayed for by the Appellant in its suit is to be determined by the Small Causes Court. The appellant had terminated the agreement upon the return of cheques and therefore the same is not justified as an income revenue of Rs.3,42,720 to be taxed.
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Written by- Sanjana Ravichandran