Leave and licence receipts are not house property income without deemed ownership; section 24 deduction also fails.

Rent received under a leave and licence arrangement could not be assessed as income from house property because the assessee was neither the legal owner nor a deemed owner under the Income-tax Act, 1961. Deemed ownership under section 27(iiib) applies only where rights arise from a transaction covered by section 269UA(f), which requires a lease of not less than twelve years. The agreement here was expressly a licence, did not create any interest in the property, and was terminable on breach, so the statutory conditions were not met. As the receipts were not taxable under section 22, the claim for deduction under section 24 also failed, and the income was assessable as income from other sources.

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Issues: Whether rent received under a leave and licence arrangement could be assessed as income from house property on the basis of deemed ownership, and whether deduction under section 24 was allowable.

Analysis: For income to fall under the head "income from house property", the assessee must be the owner of the property within section 22 of the Income-tax Act, 1961. Deemed ownership under section 27(iiib) arises only where rights are acquired in respect of a building by virtue of a transaction referred to in section 269UA(f), which in turn contemplates a lease for a term of not less than twelve years. The agreement relied on by the assessee was a leave and licence agreement, not a lease; it repeatedly described the arrangement as a licence, did not create an interest in the property, and was terminable on breach. The statutory conditions for deemed ownership were therefore not satisfied. Since the assessee was not the owner or deemed owner, the rental receipts could not be brought under the head "income from house property", and the claim for deduction under section 24 also failed.

Conclusion: The income was correctly assessed as income from other sources, and the disallowance of deduction under section 24 was upheld in favour of the Revenue.

Ratio Decidendi: A leave and licence arrangement does not amount to a lease for the purpose of deemed ownership under sections 27(iiib) and 269UA(f) of the Income-tax Act, 1961; without such deemed ownership, rental receipts cannot be taxed as income from house property under section 22, nor can deduction under section 24 be claimed.

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