2015 (12) TMI 700 - AT - Income Tax

Appeal partially allowed: Deduction granted for literary work, no rental income addition. Ownership without probate. Adoption issue dismissed.

Dilip Loyalka Versus Assistant Commissioner of Income-tax, Circle -1

The Tribunal partly allowed the appeal, permitting the deduction under section 80QQB for the literary work and eliminating the addition of notional rental ... Disallowance of deduction u/s 80QQB - royalty - assessee has authored book on income tax problems in question answer form. - whether the assessee is eligible for claim of deduction u/s. 80QQB of the Act on receipt of royalty for literary work? - Held that:- The government i.e. CBDT has recognised assessee's work by awarding him Pratyaksh Kar Sahitya Puruskar on his Hindi Edition of the same book as second best literary work on Income Tax in Hindi. It is a fact that the assessee has authored this book on income tax problems in question answer form. His book is on a complex issue which really needs intellect and knowledge. He has received royalty on the same - The assessee's authored book is a literary work in term of section 80QQB of the Act and accordingly, assessee is entitled to deduction u/s. 80QQB of the Act. - Decided in favour of assessee. Notional rental income - whether the assessee can be treated as owner of the property in the absence of probate of the will and consequently, notional rental income can be assessed in the hands of the assessee? - Held that:- We find from the facts of the case that though the assessee has disclosed the property received from mother through will in his Balance Sheet but claimed that he is not owner as the will is not probated. There is no doubt that a will exists and it has not been probated. This is a concurrent finding of both the authorities below. In such circumstances, when the will is not granted probate, whether notional income can be assessed in the hands of the assessee. This issue has been answered by Hon'ble Supreme Court in the case of Mrs. Hem Nolini Judah (since deceased) v. Mrs. Isolyne Sarojbashini Bose [1962 (2) TMI 84 - SUPREME COURT]. From the above admitted facts of the case that the will is not probated and precedent cited, we are of the view that no notional rent can be assessed in the hands of the assessee while computing income of the assessee under the head income from house property because the assessee is not the owner of the house property. Accordingly, we delete this addition - Decided in favour of assessee. Issues Involved:1. Disallowance of deduction claimed under section 80QQB.2. Treatment of the assessee as the owner of the house property without probate of the will.3. Adoption of municipal value of the house property.Detailed Analysis:Issue 1: Disallowance of Deduction Claimed Under Section 80QQBThe first issue concerns the disallowance of a deduction claimed by the assessee under section 80QQB amounting to Rs. 99,000/-. The assessee received royalty for his book on income tax and claimed this deduction. The Assessing Officer (AO) disallowed the deduction, arguing that the book on income tax is not a literary work as per the Explanation to section 80QQB, clause (b), which excludes printed material in a 'question and answer' format from being considered literary works.The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the AO's decision, stating that the book is a rearrangement of existing material without any imaginative or creative input, thus failing to qualify as a literary work under section 80QQB. The CIT(A) further analyzed various case laws related to the Indian Copyright Act and concluded that the definition of 'literary work' under the Copyright Act differs from that under the Income Tax Act, 1961.The Tribunal examined whether the book authored by the assessee qualifies as a literary work under section 80QQB. The Tribunal referred to the definitions and precedents, including the Indian Copyright Act, 1957, and judgments from the Supreme Court and Kerala High Court, which recognized works involving skill, labor, and creativity as literary works. The Tribunal concluded that the assessee's book is a literary work under section 80QQB and allowed the deduction.Issue 2: Treatment of the Assessee as the Owner of the House Property Without Probate of the WillThe second issue is whether the assessee can be treated as the owner of the property in the absence of probate of the will, and consequently, whether notional rental income can be assessed in the hands of the assessee. The AO noted that the assessee included a house property inherited from his late mother in his Balance Sheet and assessed notional rental income of Rs. 48,000/-.The assessee argued that the will has not been probated, and thus, he should not be considered the owner of the property. The CIT(A) confirmed the AO's decision. The Tribunal referred to the Supreme Court's judgment in Mrs. Hem Nolini Judah v. Mrs. Isolyne Sarojbashini Bose, which held that a will must be probated to establish the right of a legatee or executor. Since the will in question was not probated, the Tribunal ruled that no notional rent could be assessed in the hands of the assessee, and deleted the addition.Issue 3: Adoption of Municipal Value of the House PropertyThe third issue concerns the adoption of the municipal value of the house property. The assessee argued that the municipal value of the property was Rs. 6140/-, whereas the AO arbitrarily assessed the annual value at Rs. 48,000/-. Since the Tribunal ruled that the assessee is not the owner of the house property due to the lack of probate, this issue became infructuous and was dismissed.Conclusion:The appeal of the assessee was partly allowed. The Tribunal allowed the deduction under section 80QQB for the literary work and deleted the addition of notional rental income, ruling that the assessee is not the owner of the house property without probate of the will. The issue regarding the adoption of the municipal value was dismissed as infructuous.