Rental income by practical ownership and right to receive income; business deduction denied without a subsisting lending activity.

Rental receipts were assessable as income from house property where the assessee had acquired the property under an agreement to sell, was in possession, and had the right to receive the income, even though no registered conveyance existed; deduction under section 24(a) was therefore available on that footing. Business expenditure was not allowable where the record for the relevant year did not show a subsisting money lending business, no interest income was earned, and the transactions relied upon were treated as old advances linked to property dealings rather than an active lending ; each assessment year had to be tested on its own facts. The assessee obtained only partial relief.

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Issues: (i) Whether the assessee was entitled to assess the rental receipts from the property under the head income from house property and claim deduction under section 24(a); (ii) Whether the disallowance of business expenditure on the ground that the assessee had no subsisting money lending business was justified.

Issue (i): Whether the assessee was entitled to assess the rental receipts from the property under the head income from house property and claim deduction under section 24(a)

Analysis: The property was acquired under an agreement to sell, possession and consideration had passed, and the builder's transfer deed recognized the assessee's rights from an earlier date. For fiscal purposes, the absence of a registered conveyance did not defeat entitlement to assess rental income as income from house property where the assessee was in possession and entitled to receive the income. The principle applied was that ownership for income-tax purposes is determined in a practical sense by the right to receive income, not merely by formal legal title.

Conclusion: The issue was decided in favour of the assessee.

Issue (ii): Whether the disallowance of business expenditure on the ground that the assessee had no subsisting money lending business was justified

Analysis: The claim of a continuing money lending business was examined against the factual record. The year under appeal did not show any interest income, and the transactions relied upon were treated as old advances connected with property dealings rather than established money lending activity. Though the assessee relied on past and later orders, the Tribunal held that each assessment year is separate and the current year's facts did not justify treating the expenditure as deductible against a money lending business.

Conclusion: The issue was decided against the assessee.

Final Conclusion: The appeal succeeded only on the property-income issue and failed on the expenditure issue, resulting in partial relief to the assessee.

Ratio Decidendi: For income-tax purposes, entitlement to rental income may be determined by effective possession and the right to receive income even without registered legal title, but deduction of business expenditure requires a demonstrated subsisting business nexus in the relevant assessment year.

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