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Tax Publishers
ACIT v. C.J. International Hotels Ltd. [ITA Nos.
254 & 255/DEL/2018, dt. 26-8-2020] : 2020 TaxPub(DT) 3390 (Del.-Trib.)
Notional addition of annual value under income from house
property on sub-licensed property
Facts:
Assessee a 5-Star hotel was licensed a piece of lawn by the
New Delhi Municipal Corporation (NMDC) for 99 years. On the same lawn there was
the hotel premises which they were running offering it as business income
besides a separate West Tower property as well. As per the license agreement with
NMDC the assessee had sub-licensed West Tower to certain people for 9 years and
11 months and those sub-licensees were further allowed to sub-license the said
premises which they did and if at all one of the sub-licensee had to part with
their sub-license they were to pay certain sums of money to assessee. The
sub-licensees were collecting rent for their part of the premises and offering
it to tax under house property. The sub-licensees were paying their rent to
NMDC. The assessee had taken interest free deposits from the sub-licensees
which was also disclosed in their balance sheet under unsecured loans. As and
when if any of the sub-licensees cancelled their obligations what ever was paid
to the assessee that was offered to tax by the assessee as their business
income. It was the case of the assessing officer that the said annual value of
the West tower be taxed under income from house property in the hands of the
assessee for which he assessed the annual value of the West tower at Rs. 6.96
crores and taxed it under section 23. This was reversed by the Commissioner
(Appeals) on the plea of the assessee that they were not the owners under
section 27(iii) read with section 269UA(f)(ii). Aggrieved the department went
in higher appeal to ITAT -
Held in favour of the assessee/against the department that
the addition under house property could not be sustained based on the
assessees own case of earlier years.
Editorial Note: The
case in favour of the assessee at the Delhi high court in CIT v. C.J.
International Hotels Ltd. (2011) 197 Taxman 230 (Delhi) : 2011
TaxPub(DT) 0634 (Del-HC) is to be referred to. Apparently there is a SLP
filed by the department in the Apex court against this decision. The plea of
the assessee was they were not the owner and only a licensee and it was the
sub-licensees who were paying rent to NMDC who were the actual owners besides
the fact that they were also offering their income under house property. The
debate here is can a notional or nominal ownership without conferring any rights
on the property be taxed under house property which is what went in favour of
the assessee.
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