Case: Nahalchand Laloochand (P.) Ltd Vs. Assistant Commissioner of Income-tax, Mumbai

1. One of the questions for consideration before the High Court was whether Income Tax Appellate Tribunal was in error in covering the income from house property named Kantilal House under Section 27(iiib) of the Income Tax Act, 1961 (For short, Income Tax Act). The High Court observed that tenants from month to month or which are for a period not exceeding one year are excluded from the definition. However, it held that the assessee was a tenant for a long period and let out the premises to Bank of Baroda and, therefore, the income therefrom would be covered by Section 27(iiib) and not the exclusion clause. Section 27(iiib) reads as under:- Owner of the house property, annual charge, etc., defined.- For the purposes of sections 22 to 26-- ** ** ** (iiib) a person who acquires any rights (excluding any rights 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 part thereof, by virtue of any such transaction as is referred to in clause (f) of section 269UA, shall be deemed to be the owner. 2. For the purposes of Section 27 (iiib), it is necessary to understand the definitions of immovable property and transfer in Section 269UA (d) and (f), which read as under :- 296UA.** ** ** (2)(d) immovable property means-(i) any land or any building or part of a building, and includes, where any land or any building or part of a building is to be transferred together with any machinery, plant, furniture, fittings or other things, such machinery, plant, furniture, fittings or other things also. Explanation. --For the purposes of this sub-clause, land, building, part of a building, machinery, plant, furniture, fittings and other things include any rights therein ; (ii) any rights in or with respect to any land or any building or a part of a building (whether or not including any machinery, plant, furniture, fittings or other things therein) which has been constructed or which is to be constructed, accruing or arising from any transaction (whether by way of becoming a member of, or acquiring shares in, a co-operative society, company or other association of persons or by way of any agreement or any arrangement of whatever nature), not being a transaction by way of sale, exchange or lease of such land, building or part of a building ; (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 exchange or lease for a term of not less than twelve years, and includes allowing the possession of such property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property 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, if the aggregate of the term for which such lease is to be granted and the further term or terms for which it can be so extended is not less than twelve years ; (ii) in relation to any immovable property of the nature referred to in sub-clause (ii) of clause (d), means the doing of anything (whether by way of admitting as a member of or by way of transfer of shares in a co-operative society or company or other association of persons or by way of any agreement or arrangement or in any other manner whatsoever) which has the effect of transferring, or enabling the enjoyment of, such property. 3. Sub clause (i) of Section 269UA(f) makes inter alia transaction of lease for a term of not less than twelve years, a transfer in relation to the immovable property referred to in sub-clause (i) of clause (d). The explanation appended to sub-clause (i) of Section 269UA (f) clarifies that a lease which provide for the extension of term by a further term or terms shall be deemed to be a lease if the aggregate of the term for which such lease is to be granted and the further term or terms is not less than twelve years. The essential condition, therefore, for a transfer of an immovable property referred to in clause (d)(i) of Section 269UA is that lease must be for a term of not less than twelve years. For computing twelve years, it is not necessary that initial term of lease must be less of twelve years, but if the lease provides for extension of lease and such lease has been extended by a further term or terms and the aggregate of such term is not less than twelve years, it is deemed to be a transfer of immovable property and such transferee is deemed to be owner of such immovable property under Section 27(iiib) of the Income Tax Act. 4. Neither the order of the Income Tax Appellate Tribunal nor the order of the High Court indicate any consideration of the above aspects in respect of the house property named Kanti Lal House except observing that the assessee has been a tenant for a long period and that it had let out the premises. No definite finding of fact about the pre-requisites of Section 269UA(f)(i) read with explanation as noted above has been recorded either by the Tribunal or by the High Court. 5. Having regard to the above flaw in consideration of the case, we are satisfied that the matter needs reconsideration by the Tribunal since the question involves determination of facts as indicated above. We, accordingly, deem it appropriate to remand the matter to the Income Tax Appellate Tribunal, Mumbai.

Decision:
1[ds]4. Neither the order of the Income Tax Appellate Tribunal nor the order of the High Court indicate any consideration of the above aspects in respect of the house property named Kanti Lal House except observing that the assessee has been a tenant for a long period and that it had let out the premises. No definite finding of fact about thes of Section 269UA(f)(i) read with explanation as noted above has been recorded either by the Tribunal or by the High Court5. Having regard to the above flaw in consideration of the case, we are satisfied that the matter needs reconsideration by the Tribunal since the question involves determination of facts as indicated above. We, accordingly, deem it appropriate to remand the matter to the Income Tax Appellate Tribunal, Mumbai.