Deemed ownership fails for month-to-month tenancy, so rental receipts are taxable as income from other sources, not house property.

A month-to-month, revocable tenancy that does not create a lease for a term of not less than twelve years does not give rise to deemed ownership under section 27(iiib) read with section 269UA(f)(i) of the Income-tax Act, 1961. On that basis, the assessee cannot be treated as an owner for section 22 purposes, and rental receipts from the tenanted property are not taxable as income from house property. The document also notes that the arrangement was not a case of part performance under section 53A of the Transfer of Property Act, 1882. Accordingly, the receipts were assessable as income from other sources and the corresponding deduction under section 24 was not allowable.

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Issues: Whether the rental income from the tenanted property was assessable as income from house property on the basis of deemed ownership, or as income from other sources, and whether deduction under section 24 was allowable.

Analysis: The tenancy agreement showed that the assessee paid rent month to month, the arrangement was conditional and revocable on breach or non-payment, and no term of twelve years or more was created. The arrangement did not fall within the deemed ownership fiction under section 27(iiib) read with section 269UA(f)(i) of the Income-tax Act, 1961. The Court also noted that the case was not one of part performance under section 53A of the Transfer of Property Act, 1882. Since the lease was not shown to be a qualifying long-term lease and remained a month-to-month tenancy, the assessee could not claim status as owner for section 22 purposes. The authorities were therefore justified in taxing the sub-lease receipts under the head income from other sources and in denying the corresponding deduction under section 24.

Conclusion: The rental receipts were not assessable as income from house property, the assessee was not a deemed owner, and the treatment of the income as income from other sources was upheld.

Ratio Decidendi: A month-to-month or otherwise revocable tenancy that does not create a lease for a term of not less than twelve years does not confer deemed ownership under section 27(iiib) read with section 269UA(f)(i) of the Income-tax Act, 1961 for the purpose of taxing rental receipts under section 22.

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