Deemed ownership of leasehold property supports taxation of rental receipts as income from house property.

Rental income from property held under a long-term lease and developed by the assessee was treated as assessable under the head income from house property rather than income from business. Section 22 taxes the annual value of property owned by the assessee, and the scope of ownership is enlarged by section 27, including deemed ownership in specified cases. Section 269UA(f) further recognises certain long-term lease transactions for the purposes of sections 22 to 26. On the stated facts, the leasehold rights were sufficient to attract deemed ownership, so the rental receipts fell within house property income and the Revenue's appeal succeeded.

---

---

Issues: Whether lease rentals received by the assessee from the property developed on lease were assessable as income from business or as income from house property.

Analysis: Section 22 of the Income-tax Act, 1961 brings to tax the annual value of property of which the assessee is the owner under the head income from house property. The scope of ownership for this purpose is enlarged by section 27, including deemed ownership in specified cases, and section 269UA(f) treats long-term lease transactions as transfers for the purposes of sections 22 to 26. On the facts, the assessee had obtained the property on lease, developed it, and derived rental income by letting it out. The lease arrangement conferred rights sufficient to treat the assessee as owner for the purposes of section 22. The earlier decision relied upon by the assessee did not assist, because the later statutory expansion of deemed ownership applied, and the principle in Poddar Cement and the reasoning in Chennai Properties supported assessment under the head house property.

Conclusion: The rental income was assessable as income from house property and not as income from business, and the Revenue's appeal succeeded.

Ratio Decidendi: For the purposes of section 22 of the Income-tax Act, 1961, ownership includes deemed or beneficial ownership arising from statutorily recognized leasehold rights, so rental income from such property is taxable under the head income from house property.

---