Rental income from lease-like possession under a sale agreement remains taxable as income from other sources.

Rental income from office flats held under an agreement for sale was treated as assessable as income from other sources, because the assessee was only in possession and letting the flats, not under an arrangement conferring ownership for income-tax purposes. Clauses requiring payment of outgoings, insurance, membership obligations, and permitting re-entry on breach did not make the transaction a revocable transfer under section 63. Construed as a whole, the document created a lease-like interest with a lessor's right of re-entry for valuable consideration, so the statutory concept of revocable transfer did not govern the arrangement.

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Issues: Whether rental income from office flats held under an agreement for sale without registered conveyance was assessable as income from other sources under section 56 of the Income-tax Act, 1961.

Analysis: The assessee had possession of the flats and derived rent from letting them out, but the agreement contained clauses requiring payment of outgoings, insurance obligations, membership obligations, and a right of re-entry on breach. The Court held that these clauses did not make the arrangement a revocable transfer within section 63 of the Income-tax Act, 1961. On a construction of the document as a whole, the arrangement was in substance a lease-like interest with a lessor's right of re-entry, not an outright sale conferring ownership for income-tax purposes. The Court further held that the statutory concept of revocable transfer did not govern the transaction because the transfer was in the nature of a lease for valuable consideration.

Conclusion: The rental income was assessable in the hands of the assessee as income from other sources and the reference was answered against the assessee.

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