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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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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.