Uppu Karunasesh, CHENNAI V. JCIT, CHENNAI

ITA 979/CHNY/2015

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 5259 (ITAT-CHENNAI)
• Duration Of Justice: 2 year(s) 11 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-04-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 17-07-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 30-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASISH TRIPATHI
• Assessee Lawyers: D ANAND
• Section: 27

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI . . . , , ' # BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER ./ ITA NOS.978 & 979/CHNY/2015 & '& / ASSESSMENT YEARS : 2009-10 & 2010-11 SHRI UPPU KARUNASESH, M/S PASS ASSOCIATES, NO.90, ARMENIAN STREET, 4 TH FLOOR, ORIENT CHAMBERS, CHENNAI - 600 001. PAN : AAHPK 8083 C V. THE JOINT COMMISSIONER OF INCOME TAX, MEDIA RANGE, THE DEPUTY COMMISSIONER OF INCOME TAX, MEDIA CIRCLE I, CHENNAI - 600 034. ()*/ APPELLANT) (+,)*/ RESPONDENT) )* - . /APPELLANT BY : SHRI D. ANAND, ADVOCATE +,)* - . /RESPONDENT BY : SHRI ASISH TRIPATHI, JCIT / - 0' / DATE OF HEARING : 02.02.2018 12' - 0' / DATE OF PRONOUNCEMENT : 27.04.2018 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER: BOTH THE APPEALS OF THE ASSESSEE ARE DIRECTED AGA INST THE COMMON ORDER PASSED BY THE COMMISSIONER OF INCOME T AX (APPEALS) - 14, CHENNAI, DATED 16.03.2015, FOR THE ASSESSMENT Y EARS 2009-10 AND 2010-11. THEREFORE, WE HEARD BOTH THE APPEALS TOGE THER AND DISPOSING OF THE SAME BY THIS COMMON ORDER. 2 I.T.A. NOS.978 & 979/CHNY/15 2. THE ONLY ISSUE ARISES FOR CONSIDERATION IN BOTH THE APPEALS IS COMPUTATION OF INCOME FROM HOUSE PROPERTY. 3. SHRI D. ANAND, THE LD.COUNSEL FOR THE ASSESSEE, SUBMITTED THAT THE ASSESSEE HAS LET OUT TWO PROPERTIES DURING THE YEARS UNDER CONSIDERATION. THE FIRST PROPERTY IS SITUATED AT D OOR NO.10, SPURTANK ROAD, CHENNAI-31. ACCORDING TO THE LD. COUNSEL, TH E ASSESSEE RECEIVED RENTAL INCOME OF 98,21,750/-. THE SERVICE TAX PAID BY THE ASSESSEE WAS TO THE EXTENT OF 2,31,750/-. ACCORDING TO THE LD. COUNSEL, THE ASSE SSEE HAS TAKEN THE LAND ON LEASE AND CONSTRUCTED BUILDIN G, THEREFORE, THE LEASE RENT PAID FOR THE LAND HAS TO BE REDUCED TO THE EXT ENT OF 4,80,000/-. THE BALANCE AMOUNT AVAILABLE FOR THE ASSESSEE IS ONLY 91,10,000/-. IN RESPECT OF THE PROPERTY KNOWN AS KARUNA ENCLAVE AT ANNANAGAR, CHENNAI-40, ACCORDING TO THE LD. COUNSEL, THE TOTAL RENT ADOPTED BY THE ASSESSING OFFICER WAS 2,72,57,210/-. ACCORDING TO THE LD. COUNSEL, THE ASSESSEE HAS PAID SERVICE TAX TO THE EXTENT OF 5,50,166/-. THE LEASE RENT PAID TO THE LAND OWNER WAS 30,00,000/-. THE ASSESSEE HAS ALSO PAID EQUIPMENT HIRE CHARGES TO THE EXTENT OF 21,25,000/- AND THE BALANCE RENT AMOUNT IS 2,15,82,044/-. ACCORDING TO THE LD. COUNSEL, THIS WAS OFFERED FOR TAXATION BY THE ASSESSEE. 4. REFERRING TO SECTION 24 OF THE INCOME-TAX ACT, 1 961 (IN SHORT 'THE ACT'), THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED TH AT THE LAND DOES NOT 3 I.T.A. NOS.978 & 979/CHNY/15 BELONG TO THE ASSESSEE. THE SUPERSTRUCTURE BELONGS TO THE ASSESSEE. THE ASSESSEE RECEIVED A COMPOSITE RENT FOR LAND AND BUILDING. THEREFORE, ACCORDING TO THE LD. COUNSEL, THE RENT R ECEIVED BY THE ASSESSEE IN RESPECT OF LAND WAS DIVERTED BY OVERRID ING TITLE TO THE LANDLORD. THEREFORE, ACCORDING TO THE LD. COUNSEL, THE ASSESSING OFFICER IS NOT JUSTIFIED IN TAKING THE RENT WHICH RELATES T O LAND ON WHICH THE SUPERSTRUCTURE WAS STANDING. 5. SHRI D. ANAND, THE LD.COUNSEL FOR THE ASSESSEE, FURTHER SUBMITTED THAT THE THIRD FLOOR FLAT AT NO.10, SPURTANK ROAD B ELONGS TO ONE M/S SANDESH & SANKALP SYNDICATES. THE ASSESSEE, IN FAC T, TOOK THE PROPERTY FROM THE ABOVE SAID LANDLORD ON MONTHLY RENT OF 40,000/-. AS PER THE RENTAL AGREEMENT, THE ASSESSEE WAS ALLOWED TO SUB-L EASE THE PROPERTY. ACCORDINGLY, THE ASSESSEE SUB-LET THE PROPERTY. TH EREFORE, ACCORDING TO THE LD. COUNSEL, THE LEASE RENT PAYABLE TO THE ORIG INAL OWNER, NAMELY, M/S SANDESH & SANKALP SUNDICATES HAS TO BE REDUCED WHIL E COMPUTING INCOME FROM HOUSE PROPERTY UNDER SECTION 24 OF THE ACT. 6. REFERRING TO SECTIONS 22 AND 23 OF THE ACT, THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT FOR THE PURPOSE OF DETERMIN ING ANNUAL RENTAL VALUE OF THE HOUSE PROPERTY, THE ASSESSEE SHALL BE THE OWNER OF THE PROPERTY. FURTHER, ACCORDING TO THE LD. COUNSEL, S ECTION 25B OF THE ACT IN CATEGORICAL TERMS EXPLAINS THAT THE OWNER OF THE P ROPERTY MEANS THE 4 I.T.A. NOS.978 & 979/CHNY/15 OWNER OF THE BUILDING OR LAND APPURTENANT THERETO. IN THIS CASE, ACCORDING TO THE LD. COUNSEL, THE ASSESSEE IS THE OWNER OF TH E SUPERSTRUCTURE IN RESPECT OF THE BUILDING AT ANNANAGAR. HOWEVER, ACC ORDING TO THE LD. COUNSEL, IN RESPECT OF FLAT AT 10, SPURTANK ROAD, T HE ASSESSEE IS ONLY LESSEE, THEREFORE, THE ASSESSING OFFICER IS NOT JUS TIFIED IN COMPUTING THE CAPITAL GAIN. REFERRING TO SECTION 26 OF THE ACT, THE LD.COUNSEL SUBMITTED THAT IN RESPECT OF CO-OWNERS OF THE BUILDING AND LA ND APPURTENANT THERETO, WHEN THE SHARES OF CO-OWNERS ARE DEFINITE, THE SAME SHALL NOT BE ASSESSED AS ASSOCIATION OF PERSONS. BUT, THE RESPE CTIVE SHARE WILL BE ASSESSED IN RESPECT OF CO-OWNER. REFERRING TO SECT ION 27 OF THE ACT, THE LD.COUNSEL SUBMITTED THAT THE TERM OWNERSHIP AS D EFINED IN SECTION 27 OF THE ACT REFERS SPECIFICALLY THE BUILDING AND NOT THE LAND THERETO. A PERSON ACQUIRES ANY RIGHT BY WAY OF LEASE FROM MONT H TO MONTH OR FOR A PERIOD NOT EXCEEDING ONE YEAR IN RESPECT OF ANY BUI LDING OR PART THEREOF, BY VIRTUE OF SECTION 269UA OF THE ACT, SHALL BE DEE MED TO BE THE OWNER OF THE BUILDING. 7. REFERRING TO SECTION 53A OF TRANSFER OF PROPERTY ACT, 1982, THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT IN RELAT ION TO IMMOVABLE PROPERTY, FOR THE PURPOSE OF TRANSFER, THERE SHOULD BE A REGISTERED DOCUMENT. IN THIS CASE, THERE WAS NO REGISTERED DO CUMENT, THEREFORE, THERE WAS NO TRANSFER AT ALL. PLACING RELIANCE ON THE JUDGMENT OF APEX COURT IN BALBIR SINGH MAINI (398 ITR 531), THE LD.C OUNSEL SUBMITTED THAT 5 I.T.A. NOS.978 & 979/CHNY/15 THE ASSESSABLE INCOME FROM HOUSE PROPERTY IS ONLY A FTER REDUCING THE LEASE RENTAL FOR ACQUIRING THE SUB-LEASE. AT THE B EST, ACCORDING TO THE LD. COUNSEL, BY VIRTUE OF SECTION 26 OF THE ACT, THE AS SESSEE CAN BE CONSIDERED AS CO-OWNER ALONG WITH THE OWNER OF THE LAND AND THE SHARES OF OWNERSHIP IS DEFINITE, THEREFORE, IT HAS TO BE A SSESSED AS PER THE SHARE. HENCE, ACCORDING TO THE LD. COUNSEL, THE ASSESSEE H AS RIGHTLY DECLARED THE TAXABLE INCOME IN RESPECT OF HIS RIGHT / SHARE ON THE SUPERSTRUCTURE OF THE BUILDING. 8. SHRI D. ANAND, THE LD.COUNSEL FOR THE ASSESSEE, FURTHER SUBMITTED THAT AS FAR AS THE LAND AND OTHER EQUIPMENTS ARE CO NCERNED, THE ASSESSEE IS NOT THE OWNER, THEREFORE, THE RENT PORT ION WHICH RELATES TO LAND AND OTHER EQUIPMENTS SHALL BE REDUCED FROM THE TOTAL RENT RECEIVED BY THE ASSESSEE. HENCE, ACCORDING TO THE LD. COUNS EL, THE ASSESSING OFFICER IS NOT JUSTIFIED IN COMPUTING THE INCOME FR OM HOUSE PROPERTY BY DISALLOWING THE LEASE RENTAL PAID BY THE ASSESSEE T OWARDS THE LAND AND SUB-LEASE OF THE BUILDING. THE LD.COUNSEL HAS ALSO PLACED HIS RELIANCE ON SECTION 17 OF THE REGISTRATION ACT, 1908 AND SUBMIT TED THAT WHEN THE LEASE OF IMMOVABLE PROPERTY WAS FROM YEAR TO YEAR O R FOR ANY TERM EXCEEDING ONE YEAR, THE LEASE DEED HAS TO BE COMPUL SORILY REGISTERED. IN THIS CASE, ACCORDING TO THE LD. COUNSEL, THE LEASE DEED IS NOT REGISTERED, THEREFORE, IT CANNOT BE CONSTRUED AS TRANSFER OF PR OPERTY WITHIN THE MEANING OF REGISTRATION ACT, 1908. 6 I.T.A. NOS.978 & 979/CHNY/15 9. ON THE CONTRARY, SHRI ASISH TRIPATHI, THE LD. DE PARTMENTAL REPRESENTATIVE, SUBMITTED THAT THE ASSESSEES MAIN SOURCE OF INCOME WAS FROM VARIOUS PROPERTIES AS STATED IN THE ASSESS MENT ORDER AT PAGES 2 AND 3. THE ASSESSEE CLAIMED BEFORE THE ASSESSING O FFICER THAT HE PAID 4,25,000/- TOWARDS LEASE FOR THE LAND, EQUIPMENTS S UCH AS LIFT, PLANT AND OTHER AMENITIES. IN RESPECT OF THE PROPERTY AT KAR UNA ENCLAVE, ANNANAGAR, ACCORDING TO THE LD. D.R., THE ASSESSING OFFICER FOUND THAT THE ACTUAL RENT RECEIVED BY THE ASSESSEE PARTAKES T HE CHARACTER OF RENT, THEREFORE, IT IS ASSESSABLE AS SUCH. ACCORDING TO THE LD. D.R., THE LEASE AMOUNT SAID TO BE PAID TO THE ORIGINAL LANDLORD CAN NOT BE CONSTRUED LIKE TAXES PAID TO THE LOCAL AUTHORITIES IN RESPECT OF T HE PROPERTY, THEREFORE, THAT CANNOT BE REDUCED WHILE COMPUTING THE INCOME F ROM HOUSE PROPERTY AS PER SECTION 23 OF THE ACT. 10. REFERRING TO SO-CALLED EQUIPMENTS SUCH AS LIFT AND OTHER AMENITIES, THE LD. D.R. POINTED OUT THAT LIFT, AIR- CONDITIONER, ETC. ARE PART OF THE BUILDING, THEREFORE, THE RENT RELATING TO LIFT, AIR-CONDITIONER AND OTHER AMENITIES CANNOT BE REDUCED WHILE COMPUTING INCOME FROM HOUSE PROPERTY. ACCORDING TO THE LD. D.R., THE LIFT, AIR -CONDITIONER AND OTHER AMENITIES ARE INSEPARABLE FROM BUILDING, THEREFORE, THE RENT RELATING TO SAME CANNOT BE BIFURCATED FROM THE ACTUAL RENT RECE IVED BY THE ASSESSEE. THEREFORE, ACCORDING TO THE LD. D.R., THE ENTIRE AM OUNT RECEIVED BY THE 7 I.T.A. NOS.978 & 979/CHNY/15 ASSESSEE FOR LETTING OUT PROPERTY HAS TO BE ASSESSE D. AT THE BEST, THE MUNICIPAL TAX, WATER TAX PAID BY THE ASSESSEE CAN B E REDUCED. ACCORDING TO THE LD. D.R., THE PARLIAMENT HAS ALLOW ED 30% STATUTORY DEDUCTION IN RESPECT OF THE ANNUAL RENT AND ALSO IN TEREST, IF ANY, FOR ACQUIRING THE PROPERTY. APART FROM THAT, THE ASSES SEE CANNOT CLAIM ANY DEDUCTION WHILE COMPUTING THE INCOME FROM HOUSE PRO PERTY. THEREFORE, ACCORDING TO THE LD. D.R., THE CIT(APPEALS) HAS RIG HTLY CONFIRMED THE ORDER OF THE ASSESSING OFFICER. 11. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EIT HER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE DISPUTE IS, IN COMPUTATION OF RENTAL INCOME FROM TWO HOUSE PROPERT IES. THE FIRST PROPERTY IS AT ANNANAGAR KNOWN AS KARUNA ENCLAVE AN D THE OTHER PROPERTY IS AT NO.10, SPURTANK ROAD, CHENNAI. IN R ESPECT OF KARUNA ENCLAVE, THE ASSESSEE HAS TAKEN A PIECE OF LAND ON LEASE, ON A MONTHLY RENTAL BASIS AS PER THE LEASE AGREEMENT. THE ASSES SEE HAS PUT UP A SUPERSTRUCTURE / BUILDING AND ALSO LET OUT THE SAME . FROM THE ORDER OF THE CIT(APPEALS) IT APPEARS THAT THE ASSESSEE HAS CONST RUCTED 56,656 SQ.FT. OF BUILDING AND LET OUT ON MONTHLY BASIS TO M/S OFF ICE TIGER DATABASE SYSTEMS INDIA PVT. LTD. FOR A MONTHLY RENT OF 22,25,587/-. IN RESPECT OF THE PROPERTY AT 10, SPURTANK ROAD, THE ASSESSEE CLA IMS THAT HE HAS TAKEN THE LAND ON LEASE FOR A MONTHLY RENT OF 40,000/-. THE ASSESSEE HAS ALSO PUT UP A CONSTRUCTION AND LET OUT THE SAME TO M/S COX AND KINGS 8 I.T.A. NOS.978 & 979/CHNY/15 INDIA PVT. LTD. AND M/S STRATBIZ CONSULTING PVT. LT D. WHILE COMPUTING INCOME FROM HOUSE PROPERTY, THE ASSESSEE HAS REDUCE D THE LEASE RENTAL PAID TO LAND OWNERS. THE QUESTION ARISES FOR CONSI DERATION IS WHILE COMPUTING INCOME FROM HOUSE PROPERTY UNDER SECTIONS 23 AND 24 OF THE ACT, CAN THE ASSESSEE REDUCE THE RENT PAID FOR THE LAND, WHICH WAS TAKEN ON LEASE FOR THE PURPOSE OF CONSTRUCTING SUPERSTRUC TURE? WE HAVE CAREFULLY GONE THROUGH THE PROVISIONS OF SECTIONS 2 3 AND 24 OF THE ACT WHICH READ AS FOLLOWS:- SECTION 23 OF THE ACT (1) FOR THE PURPOSES OF SECTION 22, THE ANNUAL VALU E OF ANY PROPERTY SHALL BE DEEMED TO BE - (A) THE SUM FOR WHICH THE PROPERTY MIGHT REASONABLY BE EXPECTED TO LET FROM YEAR TO YEAR ; OR (B) WHERE THE PROPERTY OR ANY PART OF THE PROPERTY IS LET AND THE ACTUAL RENT RECEIVED OR RECEIVABLE BY THE OWNER IN RESPECT THER EOF IS IN EXCESS OF THE SUM REFERRED TO IN CLAUSE (A), THE AMOUNT SO RECEIVED O R RECEIVABLE ; OR (C) WHERE THE PROPERTY OR ANY PART OF THE PROPERTY IS LET AND WAS VACANT DURING THE WHOLE OR ANY PART OF THE PREVIOUS YEAR AND OWIN G TO SUCH VACANCY THE ACTUAL RENT RECEIVED OR RECEIVABLE BY THE OWNER IN RESPECT THEREOF IS LESS THAN THE SUM REFERRED TO IN CLAUSE (A), THE AMOUNT SO RECEIVED O R RECEIVABLE : PROVIDED THAT THE TAXES LEVIED BY ANY LOCAL AUTHORI TY IN RESPECT OF THE PROPERTY SHALL BE DEDUCTED (IRRESPECTIVE OF THE PREVIOUS YEA R IN WHICH THE LIABILITY TO PAY SUCH TAXES WAS INCURRED BY THE OWNER ACCORDING TO T HE METHOD OF ACCOUNTING REGULARLY EMPLOYED BY HIM) IN DETERMINING THE ANNUA L VALUE OF THE PROPERTY OF THAT PREVIOUS YEAR IN WHICH SUCH TAXES ARE ACTUALLY PAID BY HIM. EXPLANATION FOR THE PURPOSES OF CLAUSE (B) OR CLAUSE (C) OF THI S SUB-SECTION, THE AMOUNT OF ACTUAL RENT RECEIVED OR RECEIVABLE BY THE OWNER SHALL NOT INCLUDE, 9 I.T.A. NOS.978 & 979/CHNY/15 SUBJECT TO SUCH RULES AS MAY BE MADE IN THIS BEHALF , THE AMOUNT OF RENT WHICH THE OWNER CANNOT REALISE. (2) WHERE THE PROPERTY CONSISTS OF A HOUSE OR PART OF A HOUSE WHICH? (A) IS IN THE OCCUPATION OF THE OWNER FOR THE PURPO SES OF HIS OWN RESIDENCE ; OR (B) CANNOT ACTUALLY BE OCCUPIED BY THE OWNER BY REA SON OF THE FACT THAT OWING TO HIS EMPLOYMENT, BUSINESS OR PROFESSION CARRIED ON A T ANY OTHER PLACE, HE HAS TO RESIDE AT THAT OTHER PLACE IN A BUILDING NOT BELONG ING TO HIM, THE ANNUAL VALUE OF SUCH HOUSE OR PART OF THE HOUSE SHALL BE TAKEN TO BE NIL. (3) THE PROVISIONS OF SUB-SECTION (2) SHALL NOT APP LY IF? (A) THE HOUSE OR PART OF THE HOUSE IS ACTUALLY LET DURING THE WHOLE OR ANY PART OF THE PREVIOUS YEAR ; OR (B) ANY OTHER BENEFIT THEREFROM IS DERIVED BY THE O WNER. (4) WHERE THE PROPERTY REFERRED TO IN SUB-SECTION ( 2) CONSISTS OF MORE THAN ONE HOUSE? (A) THE PROVISIONS OF THAT SUB-SECTION SHALL APPLY ONLY IN RESPECT OF ONE OF SUCH HOUSES, WHICH THE ASSESSEE MAY, AT HIS OPTION, SPEC IFY IN THIS BEHALF ; (B) THE ANNUAL VALUE OF THE HOUSE OR HOUSES, OTHER THAN THE HOUSE IN RESPECT OF WHICH THE ASSESSEE HAS EXERCISED AN OPTION UNDER CL AUSE (A), SHALL BE DETERMINED UNDER SUB-SECTION SECTION 24 OF THE ACT INCOME CHARGEABLE UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY' SHALL BE COMPUTED AFTER MAKING THE FOLLOWING DEDUCTIONS, NAM ELY : (A) A SUM EQUAL TO THIRTY PER CENT. OF THE ANNUAL V ALUE ; (B) WHERE THE PROPERTY HAS BEEN ACQUIRED, CONSTRUCT ED, REPAIRED, RENEWED OR RECONSTRUCTED WITH BORROWED CAPITAL, THE AMOUNT OF ANY INTEREST PAYABLE ON SUCH CAPITAL : PROVIDED THAT IN RESPECT OF PROPERTY REFERRED TO IN SUB-SECTION (2) OF SECTION 23, THE AMOUNT OF DEDUCTION SHALL NOT EXCEED THIRTY THO USAND RUPEES : PROVIDED FURTHER THAT WHERE THE PROPERTY REFERRED T O IN THE FIRST PROVISO IS ACQUIRED OR CONSTRUCTED WITH CAPITAL BORROWED ON OR AFTER THE 1ST DAY OF APRIL, 10 I.T.A. NOS.978 & 979/CHNY/15 1999 AND SUCH ACQUISITION OR CONSTRUCTION IS COMPLE TED WITHIN THREE YEARS FROM THE END OF THE FINANCIAL YEAR IN WHICH CAPITAL WAS BORROWED, THE AMOUNT OF DEDUCTION UNDER THIS CLAUSE SHALL NOT EXCEED TWO LA KH RUPEES. EXPLANATION WHERE THE PROPERTY HAS BEEN ACQUIRED OR CONSTRUCTED WITH BORROWED CAPITAL, THE INTEREST, IF ANY, PAYABLE ON SUCH CAPI TAL BORROWED FOR THE PERIOD PRIOR TO THE PREVIOUS YEAR IN WHICH THE PROPERTY HAS BEEN ACQUIRED OR CONSTRUCTED, AS REDUCED BY ANY PART THEREOF ALLOWED AS DEDUCTION UN DER ANY OTHER PROVISION OF THIS ACT, SHALL BE DEDUCTED UNDER THIS CLAUSE IN EQ UAL INSTALMENTS FOR THE SAID PREVIOUS YEAR AND FOR EACH OF THE FOUR IMMEDIATELY SUCCEEDING PREVIOUS YEARS. PROVIDED ALSO THAT NO DEDUCTION SHALL BE MADE UNDER THE SECOND PROVISO UNLESS THE ASSESSEE FURNISHES A CERTIFICATE, FROM THE PERSON T O WHOM ANY INTEREST IS PAYABLE ON THE CAPITAL BORROWED, SPECIFYING THE AMOUNT OF I NTEREST PAYABLE BY THE ASSESSEE FOR THE PURPOSE OF SUCH ACQUISITION OR CON STRUCTION OF THE PROPERTY, OR, CONVERSION OF THE WHOLE OR ANY PART OF THE CAPITAL BORROWED WHICH REMAINS TO BE REPAID AS A NEW LOAN. EXPLANATION FOR THE PURPOSES OF THIS PROVISO, THE EXPRESSION 'N EW LOAN' MEANS THE WHOLE OR ANY PART OF A LOAN TAKEN BY THE ASSESSEE S UBSEQUENT TO THE CAPITAL BORROWED, FOR THE PURPOSE OF REPAYMENT OF SUCH CAPI TAL. 12. THE TERM ANNUAL VALUE IS DEFINED IN SECTION 2 2 OF THE ACT. AS PER SECTION 22 OF THE ACT, THE ANNUAL VALUE OF THE PROPERTY CONSISTS OF ANY BUILDING OR LAND APPURTENANT THERETO OF WHICH THE A SSESSEE IS THE OWNER. SECTION 27 OF THE ACT DEFINES OWNERSHIP. SECTION 27(IIIB) OF THE ACT READS AS FOLLOWS:- 27 (IIIB) A PERSON WHO ACQUIRES ANY RIGHTS (EXCLUDING ANY RI GHTS BY WAY OF A LEASE FROM MONTH TO MONTH OR FOR A PERIOD NOT EXCEEDING ONE YEAR) IN OR WITH RESPECT TO ANY BUILDING OR PAR T THEREOF, BY VIRTUE OF ANY SUCH TRANSACTION AS IS REFERRED TO IN CLAUSE (F) OF SECTION 269UA, SHALL BE DEEMED TO BE THE OWNER OF T HAT BUILDING OR PART THEREOF ; 11 I.T.A. NOS.978 & 979/CHNY/15 13. THEREFORE, WHEREVER A RIGHT WAS ACQUIRED IN RES PECT OF ANY BUILDING OR PART THEREOF BY WAY OF LEASE FOR A TERM NOT LESS THAN 12 YEARS, IT HAS TO BE CONSTRUED AS TRANSFER. FOR THE PURPOS E OF CONVENIENCE, THE PROVISIONS OF SECTION 269UA(F) OF THE ACT IS REPROD UCED HEREUNDER:- 269UA (F) 'TRANSFER,'-- (I) IN RELATION TO ANY IMMOVABLE PROPERTY REFERRED TO IN SUB-CLAUSE (I) OF CLAUSE (D), MEANS TRANSFER OF SUCH PROPERTY BY WAY OF SALE OR E XCHANGE OR LEASE FOR A TERM OF NOT LESS THAN TWELVE YEARS, AND INCLUDES ALLOWIN G THE POSSESSION OF SUCH PROPERTY TO BE TAKEN OR RETAINED IN PART PERFORMANC E OF A CONTRACT OF THE NATURE REFERRED TO IN SECTION 53A OF THE TRANSFER OF PROPE RTY ACT, 1882 (4 OF 1882). EXPLANATION FOR THE PURPOSES OF THIS SUB-CLAUSE, A LEASE WHICH PROVIDES FOR THE EXTENSION OF THE TERM THEREOF BY A FURTHER TERM OR TERMS SHALL BE DEEMED TO BE A LEASE FOR A TERM OF NOT LESS THAN TWELVE YEARS, I F THE AGGREGATE OF THE TERM FOR WHICH SUCH LEASE IS TO BE GRANTED AND THE FURTHER T ERM OR TERMS FOR WHICH IT CAN BE SO EXTENDED IS NOT LESS THAN TWELVE YEARS; (II) IN RELATION TO ANY IMMOVABLE PROPERTY OF THE N ATURE REFERRED TO IN SUB-CLAUSE (II) OF CLAUSE (D), MEANS THE DOING OF ANYTHING (WH ETHER BY WAY OF ADMITTING AS A MEMBER OF OR BY WAY OF TRANSFER OF SHARES IN A CO-O PERATIVE SOCIETY OR COMPANY OR OTHER ASSOCIATION OF PERSONS OR BY WAY OF ANY AG REEMENT OR ARRANGEMENT OR IN ANY OTHER MANNER WHATSOEVER) WHICH HAS THE EFFECT O F TRANSFERRING OR ENABLING THE ENJOYMENT OF, SUCH PROPERTY. 14. WE HAVE CAREFULLY GONE THROUGH THE COPY OF THE LEASE AGREEMENT IN THE LIGHT OF THE PROVISIONS OF SECTION 269UA(F) OF THE ACT, WHICH IS AVAILABLE AT PAPER-BOOK. THE COPY OF THE LEASE DEE D IN RESPECT OF THE PROPERTY AT ANNANAGAR AVAILABLE AT PAGE 1 WAS FOR A PERIOD OF TEN YEARS FROM 1 ST MAY, 2008 TO 30 TH APRIL, 2018. SIMILARLY THE LEASE DEED AVAILABLE AT PAGE 15 ALSO IS FOR A PERIOD OF TEN YEARS. A CO PY OF THE LEASE AGREEMENT AVAILABLE AT PAGE 133 IN RESPECT OF THE P ROPERTY AT NO.10, 12 I.T.A. NOS.978 & 979/CHNY/15 SPURTANK ROAD, CHENNAI, IS FOR A PERIOD OF SIX YEAR S COMMENCING FROM 01.04.2008. THEREFORE, IT IS OBVIOUS THAT ALL THE LEASE AGREEMENTS OF VACANT LAND WAS LESS THAN 12 YEARS AS PROVIDED IN S ECTION 269UA(F) OF THE ACT. THEREFORE, IT CANNOT BE CONSTRUED AS A TR ANSFER WITHIN THE MEANING OF SECTION 27(IIIB) OF THE ACT. THEREFORE, THE ASSESSEE IS NOT THE OWNER OF THE LAND BOTH IN RESPECT OF KARUNA ENCLAVE AND IN RESPECT OF THE PROPERTY AT 10, SPURTANK ROAD. THE QUESTION NOW AR ISES FOR CONSIDERATION IS WHETHER THE LEASE RENTAL PAID BY T HE ASSESSEE TO THE OWNER OF THE LAND IS ALLOWABLE AS DEDUCTION WHILE C OMPUTING THE INCOME FROM HOUSE PROPERTY? THE GENUINENESS OF LEASE TRAN SACTION IS NOT IN DISPUTE. THE LEASE RENT PAID BY THE ASSESSEE IS AL SO NOT IN DISPUTE. WHAT IS DISPUTED BY THE REVENUE IS ALLOWABILITY OF SUCH LEASE RENT PAID BY THE ASSESSEE. 15. WE HAVE CAREFULLY GONE THROUGH THE PROVISIONS O F SECTION 22 OF THE ACT. THE ANNUAL VALUE TO BE COMPUTED IS IN RES PECT OF BUILDING AND LAND APPURTENANT THERETO FOR WHICH THE ASSESSEE IS THE OWNER. IN THIS CASE, ADMITTEDLY, THE ASSESSEE IS NOT THE OWNER OF THE LAND. THE BUILDING WAS PUT UP BY THE ASSESSEE ON THE LAND BELONGING TO OTHER PERSONS. UNDER THE COMMON LAW, DOUBLE OWNERSHIP IN RESPECT O F BUILDING IS PERMISSIBLE. IN OTHER WORDS, UNDER COMMON LAW, LAN D MAY BELONG TO ONE PERSON AND BUILDING MAY BELONG TO ANOTHER PERSON. THEREFORE, WHEN THE ASSESSEE TOOK THE LAND ON LEASE AND PUT UP CONSTRUC TION AND LET OUT THE 13 I.T.A. NOS.978 & 979/CHNY/15 BUILDING FOR LEASE, THE LEASE RENT PAID OR PAYABLE IN RESPECT OF THE LAND TO THE LAND OWNER HAS TO BE EXCLUDED WHILE COMPUTING T HE ANNUAL VALUE OF THE PROPERTY. IN RESPECT OF THE LEASE, WHAT WAS TR ANSFERRED TO THE ASSESSEE IS A RIGHT TO OCCUPATION AND ENJOYMENT ON THE LAND. THE OTHER RIGHTS RELATING TO OWNERSHIP CONTINUES TO REMAIN WI TH THE ORIGINAL OWNER. THEREFORE, THE AMOUNT PAYABLE / PAID AS A LEASE REN T FOR OCCUPATION AND ENJOYMENT OF THE LAND, WHICH BELONGS TO THIRD PARTY , HAS TO BE NECESSARILY REDUCED WHILE COMPUTING ANNUAL RENTAL VALUE UNDER S ECTIONS 22 AND 23 OF THE ACT. 16. TAMIL NADU BUILDINGS (LEASE AND RENT CONTROL) A CT, 1960 PROVIDES FOR DETERMINATION OF ANNUAL RENTAL VALUE. IN THE ABSENCE OF ANY METHOD FOR COMPUTATION OF ANNUAL RENTAL VALUE IN TH E INCOME-TAX ACT, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE METH OD PRESCRIBED UNDER TAMIL NADU BUILDINGS (LEASE AND RENT CONTROL) ACT, 1960 HAS TO BE ADOPTED. THE MARKET VALUE OF THE LAND AND COST OF CONSTRUCTION OF THE BUILDING HAS TO BE ESTIMATED FOR THE PURPOSE OF DET ERMINING THE ANNUAL RENTAL VALUE. IN CASE, THE ASSESSEE IS NOT THE OWN ER OF THE LAND ON WHICH THE SUPERSTRUCTURE WAS CONSTRUCTED, THE MARKET VALU E OF THE LAND OR THE LEASE RENT PAID / PAYABLE FOR THE LAND NEEDS TO BE EXCLUDED. THEREFORE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT FOR COMPUTING THE ANNUAL RENTAL VALUE OF THE BUILDING, THE LEASE RENTAL PAID OR PAYABLE BY THE ASSESSEE AS PER LEASE DEED HAS TO BE EXCLUDED. THE RENT RECEIVED OR 14 I.T.A. NOS.978 & 979/CHNY/15 RECEIVABLE BY THE ASSESSEE FOR THE BUILDING HAS TO BE REDUCED FROM THE RENT PAID OR PAYABLE BY THE ASSESSEE IN RESPECT OF LAND TO THE LAND OWNERS. THEREFORE, BY ANY STRETCH OF IMAGINATION, THE RENT PAID OR PAYABLE BY THE ASSESSEE IN RESPECT OF LAND CANNOT F ORM PART OF ANNUAL RENTAL VALUE OR THE ACTUAL RENT RECEIVED OR RECEIVA BLE FOR THE BUILDING. WHAT IS RECEIVED OR RECEIVABLE BY THE ASSESSEE HAS TO CONFINE IN RESPECT OF THE OWNERSHIP OF THE BUILDING SINCE, ADMITTEDLY, THE LAND BELONGS TO THIRD PARTY. THEREFORE, THIS TRIBUNAL IS OF THE CO NSIDERED OPINION THAT THE LEASE AMOUNT PAID OR PAYABLE TO THE LANDLORD OF THE LAND HAS TO BE REDUCED WHILE COMPUTING THE ANNUAL RENTAL VALUE OR INCOME FROM HOUSE PROPERTY UNDER SECTION 22, 23 AND 24 OF THE ACT. 17. IN VIEW OF THE ABOVE, WE ARE UNABLE TO UPHOLD T HE ORDERS OF THE AUTHORITIES BELOW. ACCORDINGLY, THE ORDERS OF BOTH THE AUTHORITIES BELOW ARE SET ASIDE AND THE ASSESSING OFFICER IS DIRECTED TO RECOMPUTE THE RENT RECEIVED OR RECEIVABLE BY THE ASSESSEE AFTER EXCLUD ING THE LEASE AMOUNT PAID OR PAYABLE BY THE ASSESSEE TO THE LANDLORD / O WNER OF THE LAND. 18. IN THE RESULT, BOTH THE APPEALS FILED BY THE AS SESSEE ARE ALLOWED. 15 I.T.A. NOS.978 & 979/CHNY/15 ORDER PRONOUNCED ON 27 TH APRIL, 2018 AT CHENNAI. SD/- SD/- ( ) ( . . . ) (S. JAYARAMAN) (N.R.S. GANESAN) ' / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 4 /DATED, THE 27 TH APRIL, 2018. KRI. - +056 76'0 /COPY TO: 1. &80 /ASSESSEE 2. ASSESSING OFFICER 3. / 90 () /CIT(A)-14, CHENNAI-34 4. CIT-10, CHENNAI 5. 6: +0 /DR 6. ;& < /GF.