1992 (2) TMI 114 - AT - Income Tax

Rental income deemed assessable under 'Income from other sources' based on possession, not ownership. Tribunal decision

The Tribunal dismissed the appeal, holding that the rental income was assessable under 'Income from other sources' based on possession and dominion over ... Income From House Property, Income From Other Sources, Rental Income Issues Involved:1. Whether the rental income from the flat is assessable under the head 'Income from house property' or 'Income from other sources.'2. Whether the rental income is not assessable under any of the heads of income under the Income-tax Act, 1961.3. Admissibility of the additional ground raised by the assessee before the CIT(Appeals).Issue-wise Detailed Analysis:1. Assessability of Rental Income:The assessee-trust purchased a flat and obtained possession in 1979, subsequently renting it out and earning rental income. The Income Tax Officer (ITO) assessed this income under 'Income from other sources,' rejecting the assessee's claim that it should be assessed under 'Income from house property.' The CIT(Appeals) upheld this decision, referencing a previous Tribunal decision for the assessment year 1981-82. The Tribunal confirmed that the income was assessable under 'Income from other sources,' noting that the assessee did not produce material to indicate that the provisions of section 27(iii) were applicable. The Tribunal emphasized that the income derived from possession and dominion over the property, not ownership, should be assessed under 'Income from other sources.'2. Non-Assessability of Rental Income:The assessee argued that the rental income was not assessable under any head of income, citing decisions from the Bombay High Court and Andhra Pradesh High Court. The Tribunal examined the Supreme Court decision in Nalinikant Ambalal Mody v. S.A.L. Narayan Row, which established that income must be assessed under the head it naturally falls into, and cannot be reassigned based on the timing of receipt. The Tribunal concluded that the principle from Nalinikant Ambalal Mody did not apply to the present case, as the income was derived from possession and dominion over the property, not ownership. Therefore, the rental income was assessable under 'Income from other sources.'3. Admissibility of Additional Ground:The assessee raised an additional ground before the CIT(Appeals), claiming the rental income was not assessable under any head of income. The CIT(Appeals) did not admit this additional ground, reasoning that the assessee was aware of the relevant Bombay High Court decision at the time of filing the appeal. The Tribunal stated that the CIT(Appeals) should have entertained the additional ground, as the first appellate authority's jurisdiction is co-extensive with that of the Assessing Officer. However, upon reviewing the merits, the Tribunal held that the rental income was indeed assessable under 'Income from other sources,' dismissing the appeal.Conclusion:The Tribunal dismissed the appeal, holding that the rental income was assessable under 'Income from other sources' and rejecting the grounds raised by the assessee. The decision underscored that income derived from possession and dominion over property, rather than ownership, fits under 'Income from other sources,' aligning with the Delhi High Court's stance in Sushil Ansal's case and diverging from the Bombay and Andhra Pradesh High Courts' decisions.