High court of delhi
Ocean Structures (P.) Ltd.
v.
Assistant Commissioner of Income-tax
Madan b. lokur and DR. s.muralidhar,jj
IT appeals No.392 of 2007
October 25, 2007
Section 22 of the Income-tax Act, 1961 - Income from house property -
Chargeable as - Assessment year 1999-2000 - Assessee constructed a building and
under a licence agreement with a firm, parted with possession of premises to be
used by firm for its business – Consideration for said use was certain
percentage of sale proceeds of firm – Assessing Officer found that assessee and
licensee were not independent entities but were closely connected to each other
and entire arrangement of said licence agreement was a colourable device to
make income from house property appear as income from business - Whether on
facts, income earned by assessee was chargeable as income form house property
and not as business income - Held, yes
The assessee constructed a building and entered into a licence agreement with a firm to let it use the premises for its business for a consideration which was to be a certain percentage of the sale proceeds of the firm. In its return of income, the assessee showed that amount so received as business income. The Assessing Officer, after discussing the terms of the licence, concluded that the assessee and the licensee were not independent entities but were closely connected to each other and that the licence agreement had been drafted in a such manner so as to make the receipt of the income from the house property appear to be business income. He, therefore, treated the income as income from house property and not as business income.
On appeal, the Commissioner (Appeals) held that the income earned by the assessee was business income and not income from house property and that this was duly evidenced by the size of commission received by the assessee which only a commercial complex carrying commercial activities can fetch. On revenue’s appeal, the Tribunal concluded upheld the order of the Assessing Officer and charged the income in question under the head ‘income from house property’.
On appeal :
There was no infirmity in the finding of fact arrived at by the Assessing
Officer that the entire arrangement of the licence agreement was a colourable
device to make the income from house property appear as income from business.
The Commissioner (Appeals), without adverting to the finding of the Assessing
Officer that the licensor and the licensee were not independent entities but
were closely connected to each other, came to a conclusion that the commission
paid to the assessee was not income from house property. It was apparent from
the licence agreement that the assessee had merely parted with the possession
of the premises for the purposes of earning income therefrom. Further, the
conclusion of the Commissioner (Appeals) that the quantum of the consideration
was determinative of whether the income was business income or income from
house property could not be upheld. Accordingly, there was no infirmity in the
conclusions on facts arrived at by the Assessing Officer which had been
affirmed by the Tribunal. [
No substantial question of law arose for consideration of the High Court
and, therefore, the appeal was to be dismissed.
[