Vildirect: IncomeTax-caselaws-1985-VIL-38-ITAT-DEL

1985-VIL-38-ITAT-DEL

Equivalent Citation: ITD 016, 272,

Income Tax Appellate Tribunal DELHI

Date: 22.11.1985

S. SOHAN SINGH.

INCOME TAX OFFICER.

BENCH

Member(s) : S. K. CHANDER., V. P. ELHENCE.

JUDGMENT

Per Shri S.K. Chander, Accountant Member --- The assessee is in appeal before us against the order of the AAC dated11-5-1984 relating to the assessment year 1983-84.

2. The issue before us is whether, on the facts and in the circumstances of the case, lease rent received by the assessee for the terrace floor of house No. 1/5B, Asaf Ali Road, New Delhi is assessable as income from house property or 'income from other sources' as done by the ITO.

3. Parties have been heard. We find that the assessee Shri Sohan Singh son of Shri Ram Singh owns property No. 1/5B, situated atAsaf Ali Road,New Delhi. The ground floor and second floor of this house were in occupation of various tenants but the terrace floor was lying vacant and was in physical possession of the assessee. The assessee entered into an agreement with one Vinod Kumar Bansal son of Puranmal Bansal resident of 12-E, Kamla Nagar, New Delhi for lease of the terrace floor on the terms and conditions mentioned in lease deed made on 8-4-1984 appearing at pages 9 to 12 of the paper book. As per the terms of this lease deed, the lessor agreed to let out the terrace floor to the lessee for a term of five years to begin with. The lessee was entitled to make temporary structure on the above said terrace floor at his own risk and responsibility considering the rules and by-laws of the Municipal Corporation ofDelhior Delhi Development Authority. During the continuance of this lease or its renewal the lessee was entitled to use the terrace floor for his own use or sublet the same, assign or otherwise, part with the possession of the same or portion thereof to any person or persons for commercial purposes only. However, the liability of the payment of the rent of Rs. 2,000 per month for the said terrace floor by the lessee to the lessor remained fastened upon the lessee only.

4. The assessee filed the return of income on3-6-1983declaring income of Rs. 57,150 for the assessment year under appeal. The assessee claimed before the ITO that income of Rs. 16,514 from the abovementioned leased property be taxed as income from house property. However, the ITO held that the said income could not be treated as income from house property since no superstructure was available as a building for the lessee. In the absence of superstructure's income earned cannot be treated as income from house property. It was, therefore, to be taxed, according to the ITO, as income from other sources. This assessment was completed on28-6-1983and was challenged in appeal before the learned AAC. The AAC upheld the order of the ITO.

5. Before us, the learned counsel for the assessee submitted that terrace was the part of the building. The income derived by the assessee from the letting out of the terrace floor was, therefore, income from house property. It could not be treated as income from other sources. On the other hand, the learned departmental representative submitted that terrace is nothing but an open piece of land and if it is let out, the income therefrom can be taxed only as income from other sources and not as income from house property. He submitted that the concept of what is house can be had from the judgment of the Orissa High Court in the case of CWT v. K.B. Pradhan [1981] 130 ITR 393. It was submitted that keeping in view the concept of a house as described in this judgment, the claim of the assessee has to be rejected and as such there is no substance in the appeal of the assessee which may be dismissed.

6. We have given careful consideration to the rival submissions. Income from house property has to be taxed under section 22 of the Income-tax Act, 1961 ('the Act'). This section provides that the annual value of the property consisting of any buildings or lands appurtenant thereto of which the assessee is the owner, other than such portions of such property as he may occupy for the purposes of any business or profession carried on by him the profits of which are chargeable to income-tax, shall be chargeable to income-tax under the head 'Income from house property'. Now there is no definition of buildings provided in the statute yet it is clear that the meaning of the word 'building' cannot be restricted merely to a dwelling house. The legislature has in its legislative wisdom used the wider term, namely, building instead of the word 'house' though the income is to be taxed under the head 'Income from house property'. It is also to be appreciated that the income which is to be taxed as income from house property is not restricted to merely the buildings but can also be derived from 'lands appurtenant thereto'. Now if there is a land appurtenant to the building and income therefrom has to be taxed under the head 'Income from house property' it is difficult to appreciate the contention of the revenue that income from the terrace of the building may be taxed under the head 'Income from other sources'.

7. Terrace is not like an open piece of land as contended by the revenue. The terrace is an integral part of the building. The terrace floor of the demised premises before us has been leased out on specific terms and conditions contained in the lease deed dated8-4-1982and some of the terms and conditions of this covenant we have incorporated in this judgment above. From these conditions, it becomes clear that the lessee was also entitled to put up temporary structure on the terrace for proper use and occupation thereof. The income from such terrace floor, therefore, could not be termed as income from an open piece of land taxable as income under the head 'Income from other sources'. It is very clearly coming within the ambit of the meanings of the words 'annual value' envisaged in section 22. If that be so, the taxable income has to be worked out taking into consideration the manner and method provided for determining the annual value in sections 23, 24 and 25 of the Act. The authorities below, therefore, erred in rejecting the claim of the assessee. The claim of the assessee that income from terrace floor received under the lease deed was to be taxed as 'income from house property' is, therefore, accepted. The orders of the authorities below on this point are set aside. The ITO is directed to compute the taxable income from the letting out of terrace floor treating the annual rent received as if it were to be taxed as income from house property.

8. Before we close, we would like to mention that the judgment of the Hon'ble Orissa High Court relied upon by the revenue is of no avail to it because in the said judgment, the Hon'ble High Court was considering the term 'house' for the purpose of wealth-tax. The facts of the case before us are entirely different and, therefore, the ratio of the said judgment is not applicable to the case before us. Appeal allowed.

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