The Income Tax Appellate Tribunal, Kolkata bench while upholding the order of CIT (A), held that sub-licensee of business assets cannot be deemed as ‘owner’ for the purpose of computing Rental Income under the provisions of the Income Tax Act, 1961.
In instant case, assessee acquired five shops from her late husband in terms of his last will. Her husband had acquired these shops from a company under deed of sub-license between Happy Homes & Hotels Pvt. Ltd. (Licensee and Sankar Lal Saraf as sub-licensee) and he paid a sum of Rs. 3, 77,576/- as premium to M/s Happy Homes & Hotels Pvt. Ltd.
Ignoring the aforesaid facts, the AO in the reassessment proceedings observed that the assessee is the owner of five shops and since there was no rental income offered by the assessee under the head income from house property in respect of these five shops, he deputed his Inspector for ascertaining the fair market value of rent for these five shops.
For this purpose AO granted standard deduction @ 30% towards repairs and determined the net rental income of Rs. 8,40,000/- under the head income from house property and completed the reassessment.
The assessee appealed before CIT (A) and contended that the addition made by AO is not correct since she is not the owner. The CIT (A) deleted the addition made by AO.
Aggrieved, the Revenue is in appeal before the tribunal and the bench found that the provision being deemed to be let out would apply only when the assessee prima facie is the owner of the property. The same cannot be made applicable for business assets.
The ITAT observed that these shops were used for the purpose of her business in the capacity of sub-licensee which is not in dispute.
The bench upheld the first appellate authority’s finding that the assessee is not the owner of these five shops hence, the provision of Section 22 of the Act cannot be invoked in the instant case.
“We find that the provision being deemed to be let out would apply only when the assessee prima facie is the owner of the property. The same cannot be made applicable for business assets. In the instant case, the assessee had used these five shops for the purpose of her business in the capacity of sub-licensee. These facts are not in dispute. Hence there is no scope for assessment of rental income on notional basis on fair market value determined by the Inspector of Income Tax,” the bench said.
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