Immovable property lease transfer under IT hammer

Font Size

Print

Feedback

Email

Discuss

: is pure rental income the incidence of taxation will be higher.

So when the matter went before the ITAT it was referred to a Special Bench. The dispute started way back in 1979 when the assessee -- Atma Ram Properties (P) Ltd -- executed an agreement for getting the possession of the building.

However, the full ownership was not transferred to the assessee at that time. So the tribunal agreed with the assessee company that the investment made by it was not merely to earn a meagre rental income but to exploit the said property acquired as stock-in-trade commercially in the course of its business. Accordingly, the tribunal held that the the rental income earned by the assessee was assessable to tax under Section 28 as ‘‘income from business’’.

This is not the end of the story as the same ghost of “income from business’’ started haunting Atma Ram Properties (P) Ltd when a sale deed for Scindia House was registered in 1980 and the assessee thereby became the owner of the said property.

In 1992-93 it was noted by the tribunal that there has been a material change in the facts involved in the assessee’s case. In assessment year ( AY) 1980-81,the assessee was not the owner of the property in the previous year relevant to AY 1980-81 whereas as a result of execution and registration of sale deed on May 31, 1980, he had become the owner thereof in the subsequent years. This material change in the factual position, however, escaped the attention of the tribunal, which resulted in inadvertently categorising the rental income chargeable under the head “income from business’’.

Entry of goods

The constitutional validity of the Haryana Local Area Development Tax Act (Entry Tax), 2000 was challenged on two grounds: The Act is violative of Article 301 and is not saved by Article 304; the Act in fact seeks to levy sales tax on inter-state sales, which is outside the competence of the state legislature.