REEMA ANUP KARNANI, MUMBAI V. ACIT CIR 20(2), MUMBAI

ITA 253/MUM/2011

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 2918 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 9 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-10-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 16-02-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 11-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: MUKESH ADVANI
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Diversion of income

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE SHRI N.K . BILLAIYA, ACCOUNTANT MEMBER AND SHRI AMARJIT SINGH , JUDICIAL MEMBER / I .T.A. NO . 253/MUM/2011 ( / ASSESSMENT YEAR : 2006 - 07 MR S . REEMA ANUP KARNANI, JUHU DHARA COMPLEX, NEW LINK ROAD, ANDHERI (W), MUMBAI - 400 053 / VS. THE ACIT 20(2), PIRAMAL CHAMBERS, 6 TH FLOOR, LALBAUG, MUMBAI - 400 012 ./ ./ PAN/GIR NO. : AABPK 4495J ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY: SHRI MUKESH ADVANI / RESPONDENT BY: SHRI VIVEK ANAND OJHA / DATE OF HEARING : 14 .10. 2015 / DATE OF PRONOUNCEMENT : 21 .10 .2015 / O R D E R PER N.K. BILLAIYA, AM: THIS APPEAL BY THE ASSESSEE IS PREFERRED AGAINST THE ORDER OF THE LD. CIT(A) - 31 , MUMBAI D ATED 29 .10.201 0 PERTAINING TO ASSESSMENT YEAR 200 6 - 0 7 . 2. THE GRIEVANCE OF THE ASSESSEE IS TWO FOLD. THE FIRST GROUND RELATES TO THE ADDITION OF RS. 44 LAKHS ON ACCOUNT OF DEEMED LEASE RENT AND THE SECOND GROUND RELATES TO THE ADDITION OF RS. 1.32 LAKHS BEING DEEMED I NTEREST EARNED BY THE ASSESSEE . ITA. NO. 253/M/2011 2 3. THE RIVAL CONTENTIONS WERE HEARD. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE SUBMISSIONS MADE BY THE RESPECTIVE REPRESENTATIVE. WE HAVE CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND HAVE CAREFULLY PERUSED THE DOCUMENTARY EVIDENCES BROUGHT ON RECORD AND REFERRED TO DURING THE COURSE OF THE HEARING. 4. FACTS EMERGING OUT OF THE ASSESSMENT ORDER ARE THAT THE ASSESSEE HAS PURCHASED FLATS IN MULTISTORIED BUILDING CALLED SAMSHIBA VIDE AGREEMENT DATED 1 0.5.2005 FOR A CONSIDERATION OF RS. 3.75 CRORES. WHILE SCRUTINIZING THE RETURN OF INCOME, THE ASSESSING OFFICER FOUND THAT THE ASSESSEE HAS NOT SHOWN ANY INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY BEING ANNUAL LET OUT VALUE OF THE FLATS IN SAMSHIB A APARTMENT VIDE SHOW CAUSE NOTICE DATED 25.11.2008 , T HE AO ASKED THE ASSESSEE TO SHOW CAUSE WHY RENT RECEIVED OR RECEIVABLE AT ANNUAL LETTING VALUE OF THE SAID FLAT SHOULD NOT BE TAXED AS PER SEC. 22 & 23 OF THE ACT FOR THE PERIOD OF 11 MONTHS I.E. MAY 2005 TO MARCH, 2006. 4.1. IN RESPONSE TO THIS SHOW CAUSE NOTICE, THE ASSESSEE VIDE LETTER DATED 1.12.2008 SUBMITTED A DETAILED REPLY WHICH READ AS UNDER: WITH REFERENCE TO YOUR LETTER DT 25 . 11 . 2008 WHEREIN YOU HAVE GIVEN AN OPPORTUNITY TO THE ASSESSEE TO SHOW CAUSE AS TO WHY THE INCOME OF RS. 44,00,000 / - BEING LEAVE & LICENSE RENT FROM FLAT AT SAMSHIBA APARTMENTS FOR THE PERIOD OF 11 MONTHS BE ADDED TO ASSESSEE'S INCOME AS SHE HAD PURCHASED THE FLAT ON 1 0 TH MAY 2005 FROM MR. SAMIR BOJWANI & BEING THE OWNER OF FLAT, SHE IS ENTITLED TO THE LEAVE & LICENSE RENT OF RS. 44,00,000 / - , WHICH IS LIABLE TO BE CHARGED TO TAX UNDER THE HEAD INCOME FROM HOUSE PROPERTY AS PER PROVISIONS OF SECTION 22 & 23 OF THE INCOME TAX ACT 1961. ITA. NO. 253/M/2011 3 TO THIS, WE WOULD LIKE TO SUBM IT THAT THE ASSESSEE HAS PURCHASED THE FLAT AT 'SAMSHIBA' VIDE AGREEMENT DT 10 TH MAY 2005 ON 'OWNERSHIP BASIS' FROM THE VENDOR MR. SAMIR NARAIN BHOJWANI SUBJECT TO LEAVE & LICENSE AGREEMENT WHICH WAS EXECUTED BETWEEN THE VENDOR & THE LICENSEE NAMELY ACCOR RADHA KRISHNA CORPORATE SERVICES PVT. LTD ON 2 7 TH NOVEMBER 2004 AND REGISTERED AT THE OFFICE OF THE SUB - REGISTRAR OF ASSURANCES AT BANDRA UNDER NO BDR 1 - 01304 - 2005 ON THE 14 TH FEBRUARY 2005. IN OTHER WORDS, THE LEAVE & LICENSE A GREEMENT WAS EXECUTED BY THE VENDOR NAMELY SAMIR BHOJWANI WITH ACCOR RADHA KRISHNA CORPORATE SERVICE PRIVATE LIMITED ON 27 TH NOVEMBER 2004 WHICH IS PRIOR TO THE DATE OF AGREEMENT OF SALE WHICH WAS EXECUTED WITH THE ASSESSEE ON 10 TH MAY 2005 WITH MR. SAMI R BHOJWANI. UNDER THE SAID LEAVE AND LICENSE AGREEMENT THE VENDOR I. E. MR. SAMIR BHOJWANI AS LICENSOR THEREIN HAS RECEIVED FROM THE LICENSEE A SUM OF RS.88, 00, 000 / - BEING LICENSE FEES FOR A PERIOD OF 22 MONTHS AND THE VENDOR WAS ENTITLED TO RETAIN THE SAME. THE PURCHASERS NAMELY ASSESSEE COVENANT WITH THE VENDOR AS PER THE AGREEMENT DT . 10LH MAY 2005 THAT THEY S H 1ALL NOT C LAIM FROM THE VENDOR ANY PART OF THE SAID SUM OF RS. 88,00,000/ - BEING THE LICENSE FEES FOR THE PER I OD O F 2 2 MONTHS I.E. FROM 1 ST FEBRUARY 2005 TO 30TH NOVEMBER, 2006 . IT WAS ALSO AGREED BETWEEN THE THREE PARTIES I.E. THE VENDOR, PURCHASER & THE LICENSEE THAT, IN THE EV ENT OF THE LICENSEE BEING DESIROUS OF CONTINUING THE SAID LEAVE & LICENSE AGREEMENT BEYOND 30 TH NOVEMBER, 2006, THE PURCHASERS SHALL BE ENTITLED TO FROM. THE LICENSEE ALL THE LICENSE FEES FOR THE BALANCE PERI OD OF 11 MONTHS COMMENCING ON 1 ST DECEMBER 2006 TILL 31 ST OCTOBER 2007 AMOUNTING TO RS. 44,00,000/ - . IN PARA 8 ON PAGE 14 OF THE AGREEMENT DT 10 TH MAY 2005 IT IS CLEARLY STATED THAT 'THE PURCHASERS ARE ENTITLED TO RECEIVE THE PHYSICAL POSSESSION OF THE SAID PREMISES ONLY ON EXPIRY OF THE LICENS E PERIOD ON 31 ST OCTOBER 2007 OR 011 EARLIER TERMINATION THEREOF IN ACCORDANCE WITH THE TERMS AND 5 CONDITION CONTAINED IN THE LEAVE AND LICENSE AGREEMENT & UPON THE PURCHASERS REPAYING THE SAID INTEREST FREE SECURITY DEPOSIT OF RS. 12,00,000 / - TO M/ S . ACCOR RAD H A KRISHNA CORPORATE SERVICES PRIVATE LIMITED OF THE SAME HAS BEEN RECEIVED BY THE PURCHASERS AS STATED IN CLAUSE (6) HEREIN ABOVE WRITTEN. ' ITA. NO. 253/M/2011 4 BASED ON THE ABOVE SAID AGREE 'LENT THE ASSESSEE WHO I.E. THE PURCHASER MADE AN LEAVE AND LICENSE AGREEMENT WITH A CCOR RADHA KRISHNA CORPORATE SERVICES PVT. LTD., ON 16TH FEBRUARY 2006 & REGISTERED THE DOCUMENT WITH THE SUB - REGISTRAR ON 22ND FEBRUARY 2006 FOR A PERIOD 11 MONTHS FROM 1 ST DECEMBER 2006 TO31ST OCT 2007. IT CAN BE SEEN FROM THE PARA 2 & 2 A OF THE SAI D LEAVE & LICENSE AGREEMENT THAT THE PERIOD OF LICENSE SHALL BE OF 21 MONTHS COMMENCING FROM 1 ST FEBRUARY 2006 TILL 31 ST OCTOBER 2006. IT CAN BE SEEN FROM PARA 1 (F) THAT UPON THE EXPIRY OF LEAVE & LICENSE AGREEMENT THE DEPOSIT WOULD BE REFUNDED BY THE NEW LICENSORS. FROM THE ABOVE IT IS ABUNDANTLY CLEAR THAT THE POSSESSION OF THE FLAT WAS GIVEN BY THE VENDOR TO THE PURCHASERS ON 16TH FEBRUARY 2006. ON RECEIVING THE POSSESSION THE PURCHASERS HAVE MADE A FRESH LEAVE & LICENSE AGREEMENT WITH THE LICENSE E ON THE SAME DATE. NOW AS THE POSSESSION HAS BEEN RECEIVED ON 16TH FEBRUARY 2006, AS PER THE PROVISIONS OF SECTION 2 (47) (V) OF THE INCOME TAX ACT 1961 'TRANSFER IN RELATION TO CAPITAL ASSET INCLUDES ANY TRANSACTION INVOLVING THE ALLOWING OF THE POSSES SION OF ANY IMMOVABLE PROPERTY TO BE TAKEN OR RETAINED IN PART PERFORMANCE OF A CONTRACT OF THE NATURE REFERRED TO IN SECTION 53 A OF THE TRANSFER OF PROPERTY ACT 1882. SINCE THE ASSESSEE HAS RECEIVED THE POSSESSION OF PROPERTY ON 16TH FEBRUARY 2006, THE TRANSFER DATE WOULD BE EFFECTIVE FROM 16 TH FEBRUARY 2006 & NOT ON 10LH MAY 2005. EVEN IF THE TRANSFER DATE IS TAKEN FROM 16 TH FEBRUARY 2006 THE ASSESSEE WO ULD BE ENTITLED FOR RENT FROM 1 ST DECEMBER 2006. THE SUM OF RS. 44,00,000 / - RECEIVED FROM ACCOR R ADHA KRISHNA CORPORATE SERVICES PRIVATE LIMITED ON 16TH FEBRUARY 2006, PERTAINS TO ADVANCE RENT OF RS. 44,00,000 / - I. E. RS. 4,00,000 / - PER MONTH FROM 1 ST DECEMBER 2006 TO 3 1 ST MARCH 2007 WHICH IS OFFERED FOR TAX IN THE FINANCIAL YEAR 2006 - 07 RELEVANT TO ASSESSMENT YEAR 2007 - 08. ITA. NO. 253/M/2011 5 AS THE ASSESSEE HAS NOT RECEIVED ANY RENT DURING THE FINANCIAL YEAR THERE IS NO REASON WHY THE SAME SHOULD BE TAXED IN THE FINANCIAL YEAR 2005 - 06. WITHOUT PREJUDICE TO ABOVE, WE WOULD LIKE TO RETERIATE THAT 1 ST APRIL, 2005 TO 3 1 ST MARCH, 2006 WAS PAID BY THE LICENSEE I .E. ACCOR RADHAKRISHNA CORPORATE SERVICES P VT. LTD., TO MR SAMIR BHOJWANI & THE ASSES S EE HAS AGREED IN THE AGREEMENT THAT THEY WILL NOT HAVE ANY CLAIM ON THE SAID RENTALS HENCE THE SAME WAS NOT OFFERED BY HER AS HER INCOME IN THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2006 - 07. FROM THE FACTS OF THE ABOVE CASE IT IS VERY CLEAR THAT THE RENTAL INCOME WAS NEVER RECEIVED BY THE ASSESSEE NOR WAS IT SUPPOS ED TO RECEIVE THE SAME AS PER CLAUSE 4 & 5 OF THE AGREEMENT OF SALE DT 10 TH MAY 2005, SINCE THIS INCOME NEVER REACHED THE ASSESSEE SHE IS NOT ENTITLED TO PAY THE TAX ON THE INCOME WHICH WAS NEVER RECEIVED BY HER, NOR WAS SHE ENTITLED TO RECEIVE THE SAME. UNDER THE SCHEME OF THE ACT, IT IS THE TOTAL INCOME OF AN ASSESSEE, COMPUTED UNDER THE PROVISIONS OF THE ACT THAT IS ASSESSABLE TO INCOME TAX. SO MUCH OF THE INCOME WHICH AN ASSESSEE IS NOT ENTITLED TO RECEIVE BY VIRTUE OF AN OVERRIDING TITLE CREATED IN F AVOUR OF A THIRD PARTY WOULD GET DIVERTED AT SOURCE & THE SAME CANNOT BE ADDED IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE. THE PRINCIPLE IS SIMPLE ENOUGH BUT MORE OFTEN THAN NOT, AS IN THE INSTANT CASE, THE QUESTION ARISES AS TO WHAT WAS THE CRITERIA TO DETERMINE, WHEN DOES THE INCOME ATTRIBUTABLE TO THE ASSESSEE GET DIVERTED BY OVER RIDING TITLE? THE DETERMINATIVE FACTOR IS THE NATURE & EFFECT OF THE ASSESSEE'S OBLIGATION IN REGARD TO THE AMOUNT IN QUESTION. WHEN A THIRD PERSON BECOMES ENTITLED TO RECEI VE THE AMOUNT UNDER AN OBLIGATION OF AN ASSESSEE EVEN BEFORE HE COULD LAY A CLAIM TO RECEIVE IT AS HIS INCOME, THERE WOULD BE DIVERSION OF INCOME BY THE OVERRIDING TITLE, BUT WHEN AFTER RECEIPT OF THE INCOME BY THE ASSESSEE, THE SAME IS PASSED ON TO A THIR D PERSON IN DISCHARGE OF THE OBLIGATION OF THE ASSESSEE, IT WILL BE A CASE OF APPLICATION OF INCOME BY THE ASSESSEE & NOT OF DIVERSION OF INCOME BY OVERRIDING TITLE. ' CONSEQUENTLY THE LEAVE & LICENSE RENT OF RS. 6,00,000/ - (FOR THE PERIOD 16 TH FEBRUARY 2006 TO 3 1 ST MARCH 2006 @ RS. 4,00,000/ - PER MONTH) WHICH THE ASSESSEE WAS NEVER ENTITLED TO RECEIVE THE SAME CANNOT BE CHARGED TO TAX. IN OUR OPINION THE TRUE ITA. NO. 253/M/2011 6 TEST IS WHETHER THE AMOUNT SOUGHT TO BE DEDUCTED, IN TRUTH, NEVER REACHED THE ASSESSEE AS HIS IN COME. OBLIGATIONS, NO DOUBT, THERE ARE IN EVEVY CASE, BUT IT IS THE NATURE OF THE OBLIGATION WHICH IS THE DECISIVE FACT. THERE IS A DIFFERENCE BETWEEN AN AMOUNT WHICH A PERSON IS OBLIGED TO APPLY OUT OF HIS INCOME & AN AMOUNT WHICH BY THE NATURE OF THE OBL IGATION CANNOT BE SAID TO BE A PART OF THE INCOME OF THE ASSESSEE. WHERE BY THE OBLIGATION INCOME IS DIVERTED BEFORE IT REACHES THE ASSESSEE, IT IS DEDUCTIBLE; BUT WHERE THE INCOME IS REQUIRED TO BE APPLIED TO DISCHARGE AN OBLIGATION AFTER SUCH INCOME R EACHES THE ASSESSEE, THE SAME CONSEQUENCE, IN LAW, DOES NOT FOLLOW. IT IS THE FIRST KIND OF PAYMENT WHICH CAN TRULY BE EXCUSED & NOT THE SECOND. THE SECOND PAYMENT IS MERELY AN OBLIGATION TO PAY ANOTHER A PORTION OF ONE'S OWN INCOME, WHICH THE INCOME NEVER REACHES THE ASSESSEE, WHO EVEN IF HE WERE TO COLLECT IT, DOES SO, NOT AS PART OF HIS INCOME, BUT FOR & ON BEHALF OF THE PERSON TO WHOM IT IS PAYABLE'. HENCE THIS IS A CASE OF DIVERSION OF INCOME BY OVERRIDING TITLE AND CERTAINLY NOT A CASE OF APPLICATIO N OF INCOME TO DISCHARGE AN OBLIGATION. RELYING ON THE PRINCIPLE OF DIVERSION OF INCOME BY OVERRIDING TITLE LAID DOWN IN RAJA BEJOY SINGH DUDHURIA (1 ITR 135) AND THE CASE OF CIT V SITALDAS TIRADHDAS (1961) 41 ITR 367 (SC) AND IN THE CASE OF TRAVANCORE SUG AR & CHEMICALS LTD (1973) REPORTED IN 88 ITR 1 (SC) WHEREIN IT WAS HELD THAT THE 'INCOME CAN BE SAID TO BE DIVERTED ONLY WHEN IT IS DIVERTED AT SOURCE SO THAT WHEN IT ACCRUES IT IS REALLY NOT THE INCOME OF THE ASSESSEE BUT IS SOMEBODY ELSE'S INCOME. IT IS, THUS, CLEAR THAT WHERE BY THE OBLIGATION INCOME IS DIVERTED BEFORE IT REACHES THE ASSESSEE, IT IS DEDUCTIBLE. BUT, WHERE THE INCOME IS REQUIRED TO BE APPLIED TO DISCHARGE AN OBLIGATION AFTER SUCH INCOME REACHES THE ASSESSEE IT IS MERELY A CASE OF APPLICAT ION OF INCOME TO SATISFY AN OBLIGATION OF PAYMENT AND, IS THEREFORE, NOT DEDUCTIBLE. AS THE INCOME OF RS. 6,00,000/ - NEVER REACHED THE ASSESSEE & WAS PAID DIRECTLY BY THE ACCOR RADHA KRISHNA CORPORATE SERVICES PRIVATE LIMITED TO SAMIR BHOJWANI AS PER THE TERMS AND CONDITIONS LAID DOWN IN THE LEAVE & LICENSE AGREEMENT AT 27 TH NOV 2004 WHICH WAS REGISTERED WITH THE REGISTRAR HENCE THE ASSESSEE CANNOT BE CHARGED TO TAX ON THE SAME INCOME. ITA. NO. 253/M/2011 7 FURTHER THE ASSESSEE IN ITS AGREEMENT OF SALE DT. 10 TH MAY 2005 AGRE ED WITH THE VENDOR AND LICENSEE THAT SHE WOULD NOT BE ENTITLED TO RECEIVE THE RENT THE RENT UPTO 30 TH NOVEMBER 2006 THOUGH SHE WOULD BE OWNER OF THE PROPERTY AS THIS WAS THE MAIN CLAUSE BASED ON WHICH THE VENDOR HAD AGREED TO SELL THE PROPERTY TO THE ASSE SSEE. HAD THIS CLAUSE WOULD NOT HAVE BEEN AGREED BY THE PURCHASER, THE VENDOR WOULD NOT HAVE SOLD THE PROPERTY TO THE PURCHASER. HENCE THE ASSESSEE, EVEN IF WOULD HAVE RECEIVED THIS INCOME OF RS. 6,00,000/ - THE SAME WOULD BE ON BEHALF OF THE VENDOR MR. S AMIR BHOJWANI AS SHE WAS NOT ENTITLED TO RECEIVE THE RENT AS PER THE TERMS & CONDITIONS OF THE AGREEMENT OF SALE DT 10/05/2005. AS REGARDS YOUR CONTENTION THAT YOU WANT TO 'PRESUME' THAT THE ASSESSEE HAS AGREED NOT TO RECOVER THE RENT FOR THE PERIOD FOR WHICH MR. SAMIR BHOJWANI HAS ALREADY RECEIVED ADVANCE RENT FROM THE TENANT ACCOR RADHA KRISHNA CORPORATE SERVICE PRIVATE LIMITED WITH A TACIT UNDERSTANDING THAT TO THE EXTENT OF RENT WHICH SHOULD ACTUALLY HAVE RECEIVED BY YOU RIGHTLY BEING THE OWNER OF THE FLAT, YOU WILL PAY A LESSER PURCHASE CONSIDERATION TO MR SAMIR BHOJAWANI FOR THE SAID FLAT WHICH YOU HAVE PURCHASED FROM HIM. TO THIS WE WOULD LIKE TO SUBMIT THAT THE INCOME TAX DEPARTMENT CANNOT STEP INTO THE SHOES OF THE ASSESSEE & DICTATE AS TO WHAT THE ASSESSEE SHOULD HAVE DONE. AS LONG AS THE TRANSACTION IS NOT A COLORABLE DEVICE THAT INCOME TAX DEPARTMENT CANNOT OVERRULE AN AGREEMENT BETWEEN TWO PARTIES WHICH IS REGISTERED WITH THE REGISTRAR OF IMMOVABLE PROPERTY. AS PER T HE R EGISTERED AGREEMENT OF SALE DT 10 TH MAY 2005 ENTERED INTO BY BOTH THE PARTIES, HAVE MUTUALLY AGREED THAT THE RENT WHICH IS RECEIVED IN ADVANCE BY MR. SAMIR BHOJWANI FOR THE PERIOD 10 TH MAY 2005 TO 30 TH OCT 2006 THE ASSESSEE (I. E. PURCHASER) WILL NOT BE ENTITLED FOR THE SAME & THE ASSESSEE HAS AGREED TO THAT EFFECT. THE ASSESSEE HAS ALSO GIVEN COPY OF CONFIRMATION LETTER FROM MR. SAMIR BHOJWANI ALONG WITH COPY OF ACKNOWLEDGMENT OF INCOME TAX RETURN FILED BY HIM FOR THE ASSESSMENT YEAR 2006 - 07, WHEREIN HE HAS OFFERED THE RENTAL INCOME FOR TAX, HENCE THE L EARNED ASSESSING OFFICER WILL HAVE TAX THE ASSESSEE BASED ON THE FACTS AVAILABLE ON RECORDS UNLESS HE IS ABLE TO PROVE IT IS A COLORABLE DEVISE. ITA. NO. 253/M/2011 8 IN LIGHT OF THE SAID FACTS & CIRCUMSTANCES OF THE CASE, THE ASSESSEE HAS PROVED BEYOND DOUBT THAT THE INCOME WAS NEITHER ACTUALLY RECEIVED BY HER NOR WAS IT THE SAME COULD BE CHARGED TO TAX U/S. 22 OR 23 OF THE INCOME TAX ACT 1961. WITH THIS WE HAVE SUBMITTED YOU ALL THE INFORMATION CALLED FOR, HOWEVER IF YOU REQ UIRE ANY FURTHER INFORMATION IN RESPECT TO THE ABOVE MATTER, WE WOULD BE OBLIGED TO FURNISH YOU WITH THE SAME. 4.2. THE DETAILED SUBMISSIONS MADE BY THE ASSESSEE DID NOT FIND ANY FAVOUR WITH THE AO. THE AO WAS OF THE FIRM BELIEF THAT THE PROVISIONS OF SEC. 22 OF THE ACT ARE CRYSTAL CLEAR AND APPLY ON THE ASSESSEE. THE AO CONCLUDED BY TAKING MONTHLY RENTAL AT RS. 4,00,000/ - AND ADDED A SUM OF RS. 44 LAKHS TO THE TOTAL INCOME OF THE ASSESSEE UNDER THE HEAD INCOME FROM HOUSE PROPERTY. 5. THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) BUT WITHOUT ANY SUCCESS. HOWEVER, AT THE SAME TIME, THE LD. CIT(A) O B SERVED THAT THE ERSTWHILE OWNER MR. SAMIR BHOJWANI HAS TAKEN A SECURITY DEPOSIT OF RS. 12,00,000/ - AND SINCE NOW THE ASSESSEE IS THE OWNER OF THE PROPERTY, INTEREST ON SECURITY DEPOSIT OF RS. 12,00,000/ - SHOULD BE TAXED IN THE HANDS OF THE ASSESSEE. AFTER GIVING A NOT ICE OF ENHANCEMENT, THE LD. CIT(A) F URTHER DIRECTED THE AO TO ADD A SUM OF RS. 1,32,000/ - AS INTEREST ON SECURITY DEPOSIT. 6. AGGRIEVED BY THIS, THE ASSESSEE IS BEFORE US. AS MENTIONED ELSEWHERE VIDE SALE AGREEMENT DATED 10.5.2005, THE ASSESSEE PURCHASED IMPUGNED PROPERTY FROM MR. SAMIR BHOJWANI , PRIOR TO THIS AGREEMENT MR. SAMIR BHOJWANI HAD A LEAVE AND LICENSE AGREEMENT WITH ACCOR RADHAKRISHNA CORPORATE SERVICES PVT. LTD., VIDE AGREEMENT DATED 27.11.2004. THE LICENSE FEE WAS AGREED AT RS. 4,00,000/ - . SINCE THE ITA. NO. 253/M/2011 9 AGREEMENT WAS FOR A PERI OD OF 22 MONTHS, IT WAS AGREED THAT THE LICENSE FEE OF RS. 88,00,000/ - SHALL BE PAID ON OR BEFORE THE 1 ST FEBRUARY, 2005. IT WAS FURTHER AGREED THAT THE LICENSEE SHALL OVER AND ABOVE THE LICENCE FEES PAID INTEREST FREE REFUNDABLE SECURITY DEPOSIT OF RS. 12,00,000/ - . THE MOST RELEVANT CLAUSE OF THIS AGREEMENT IS CLAUSE 16.1 WHICH READ AS UNDER: THE LICENSEE SHALL BE ENTITLED TO TERMINATE THIS AGREEMENT BY GIVING A PRIOR WRITTEN NOTICE OF MINIMUM THREE MONTHS TO THE LICENSOR PROVIDED HOWEVER THAT SUCH O PTION OF TERMINATION SHALL NOT BE EXERCISED BY THE LICENSEE FOR AN INITIAL PERIOD OF 15 MONTHS, IN CASE THE LICENSEE DESIRES TO TERMINATE THE AGREEMENT, IT WILL HAVE TO GIVE THREE MONTHS PRIOR NOTICE BUT ONLY AFTER 30 TH APRIL, 2006.( EMPHASIZED BY US) 7. KEEPING THESE RELEVANT CLAUSES OF THE LEAVE AND LICENCE AGREEMENT DATED 27.11.2004, LET US NOW CONSIDER THE PURCHASE AGREEMENT DATED 10.5.2005 BY WHICH THE IMPUGNED FLAT WAS PURCHASED BY THE ASSESSEE. VIDE CLAUSE (W) OF THIS AGREEMENT, IT WAS MADE CLEAR T HAT THE IMPUGNED FLATS ARE SUBJECT TO A REGISTER ED LEAVE AND LICENCE AGREEMENT EXECUTED BETWEEN SHRI SAMIR BHOJWANI WITH ACCOR RADHA KRISHNA CORPORATE SERVICE PRIVATE LIMITED . THE TERMS AND CONDITIONS OF THE SAID LEAVE AND LICENCE AGREEMENT WERE ALSO MA DE CLEAR TO THE ASSESSEE. VIDE CLAUSE - 3, THE PURCHASE CONSIDERATION WAS FIXED AT RS. 3.75 LAKHS AND THE STAMP DUTY VALUE HAS BEEN ASSESSED ON THIS CONSIDERATION ONLY. VIDE CLAUSE - 5, IT WAS MADE VERY CLEAR THAT THE PURCHASER (ASSESSEE) SHALL NOT CLAIM FRO M THE SELLER SHRI SAMIR BHOJWANI ANY PART OF THE SAID SUM OF RS. 88,00,000/ - BEING THE LICENSE FEES FOR THE PERIOD OF 22 MONTHS COMMENCING ON 1 ST FEBRUARY, 2005 AND ENDING ON 30 TH NOVEMBER, 2006. VIDE CLAUSE - 7, THE ASSESSEE WAS GIVEN AN OPTION TO CONTINUE THE SAID LEAVE & LICENSE WITH THE SAME LICENSEE I.E. ACCOR RADHA KRISHNA CORPORATE SERVICE PRIVATE LIMITED . THE MOST IMPORTANT CLAUSE IS CLAUSE - 8 WHEREIN IT IS SPECIFICALLY MENTIONED THAT THE PURCHASER ITA. NO. 253/M/2011 10 (ASSESSEE) IS ENTITLED TO RECEIVE THE PHYSICAL POSS ESSION OF THE SAID PREMISES ONLY ON EXPIRY OF THE LICENSE PERIOD I.E. ON 31 ST OCTOBER, 2007. 7.1. CONSIDERING THE AFOREMENTIONED UNDISPUTED FACTS ALL THAT WE HAVE TO SEE IS WHETHER THE ASSESSEE WAS IN A POSITION TO EARN/RECEIVE LEASE RENT IN THE IMPUGNED FLATS WHICH WAS OCCUPIED BY M/S. ACCOR RADHA KRISHNA CORPORATE SERVICE PRIVATE LIMITED FROM SHRI SAMIR BOJWANI. ASSUMING FOR MOMENT THAT THE ASSESSEE WAS THE OWNER OF THE IMPUGNED FLAT THEREFORE LIABLE TO BE TAXED AT THE ANNUAL LET OUT VALUE , A S MENTIONED ELSEWHERE, THERE WAS A SPECIFIC CHARGE ON THE PROPERTY PRIOR TO THE PURCHASE OF THE SAID PROPERTY BY THE ASSESSEE AND BY WAY OF THIS CHARGE SHRI SAMIR BOJWANI RECEIVED THE LEASE RENT FROM THE LICENCEE M/S. ACCOR RADHA KRISHNA CORPORATE SERVICE PRIVATE LIM ITED . THUS, IF THERE IS A IOTA OF DOUBT THAT THE IMPUGNED ALV SHOULD BE TAXED IN THE HANDS OF THE ASSESSEE , I T IS A CLEAR CASE OF DIVERSION OF INCOME BY OVERRIDING TITLE. IN OUR UNDERSTANDING OF THE FACTS, THERE IS NO NEED FOR GOING INTO THE ASSUMPTIONS AS IN THE PURCHASE DEED ITSELF , I T IS CLEARLY MENTIONED THAT THE ASSESSEE WILL GET THE PHYSICAL POSSESSION OF THE SAID PREMISE ONLY AFTER 31.10.2007. THEREFORE, THERE IS NO QUESTION OF ANY ACCRUAL OF RENT DURING THE YEAR UNDER CONSIDERATION. 7.2. THE FA CTS OF THE CASE ARE SQUARELY COVERED BY THE DECISION OF THE PR I VY COUNCIL IN THE CASE OF RAJA BEJOY SINGH BUDHURIA VS CIT BENGAL 1 ITR 135 (PC) AND ALSO BY THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS S ITALDAS T IRATHDAS 41 ITR 367. IN BOTH THESE CASES, THERE WAS A CHARGE FOR MAINTENANCE CREATED AGAINST THE ASSESSEE. IN THE CASE BEFORE US TO O , AS EV IDENT FROM THE ABOVE DISCUSSION, THE LEASE RENT WAS TO GO TO SHRI SAMEER BOJWANI BY VIRTUE OF THE SPECIFIC CLAUSES OF LEAVE AND LICENCE A GREEMENT DATED ITA. NO. 253/M/2011 11 27.11.2004. SINCE IT STOOD PRE - CREATED AGAINST THE ASSESSEE AND IN KEEPING WITH THE ENUNCIATION BY THE PRIVY COUNCIL IN RAJA BEJOY SINGH BUDHURIA (SUPRA), THE INCOME MUST NOT BE DEEMED TO HAVE REACHED THE ASSESSEE, SINCE IT WAS ACTUALLY E ARNED BY SHRI SAMIR BOJWANI. THEREFORE, THE CASE OF THE PRESENT ASSESSEE FA L LS SQUARELY WITHIN THE RATIO OF RAJA BEJOY SINGH BUDHURIA (SUPRA) AS CONSIDERED IN S ITALDAS T IRATHDAS (SUPRA). 7.3. FOR THE ABOVE DISCUSSION, WE DO NOT FIND ANY MERIT IN THE ORDER OF THE LD. CIT(A) ON THIS ISSUE TO BE SUSTAINABLE IN THE EYE OF LAW, THE SAME IS AS SUCH SET ASIDE AND CANCELLED. THE AO IS DIRECTED TO DELETE THE ADDITION OF RS. 44,00,000/ - . 8. THE SECOND GROUND RELATES TO THE ADDITION OF RS. 1,32,000/ - . AS MEN TIONED ELSEWHERE, THE SECURITY DEPOSIT OF RS. 12,00,000/ - WAS TAKEN BY SHRI SAMIR BOJWANI PURSUANT TO THE LEAVE AND LICENCE AGREEMENT ENTRED BY HIM WITH M/S. ACCOR RADHA KRISHNA CORPORATE SERVICE PRIVATE LIMITED AND SINCE AS MENTIONED ELSEWHERE, THE ASSESS EE COULD NOT HAVE EARNED THE RENT DURING THE IMPUGNED ASSESSMENT YEAR. WE DO NOT FIND ANY LOGIC IN TAXING DEEMED INTEREST IN THE HANDS OF THE ASSESSEE. THE AO IS DIRECTED TO DELETE THE SAME. THE FINDINGS OF THE LD. CIT(A) ARE ACCORDINGLY REVERSED. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST OCTOBER , 2015 SD/ - SD/ - ( AMARJIT SINGH ) (N.K. BILLAIYA) /JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED : 21 ST OCTOBER , 2015 . . ./ RJ , SR. PS ITA. NO. 253/M/2011 12 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . / BY ORDER, //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI