Substance over form treated sale-agreement receipts as interest-like income, not rent, for tax purposes.

An agreement for sale did not transfer ownership or confer any right to the rents and profits of the property, so the assessee was not the landlord. Although tenant collections were rent in the vendor's hands, amounts passed on to the assessee were not rent in the assessee's hands. The arrangement also involved an element of mortgage by deposit of title deeds, and the payments represented the commercial return for use of the advance, not income from property. Applying the substance-over-form principle, the receipts were treated as the commercial equivalent of interest and assessable under the head "Income from other sources".

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Issues: Whether the monthly receipts obtained under the agreement for sale were rent assessable as house property income or, in substance, interest assessable under the head "Income from other sources".

Analysis: The agreement did not confer ownership of the property on the assessee, and a mere agreement for sale did not create any right in the property beyond a right to demand conveyance. The vendor remained the owner and the sums collected from the tenants were rent only in the vendor's hands. When the vendor passed on equivalent amounts to the assessee, those payments were not rent in the assessee's hands because the assessee was not the landlord and had no right to the rents and profits of the property. The arrangement also contained an element of mortgage by deposit of title deeds, and the payments represented the commercial return for the user of the advance of Rs. 25 lakhs. Under the legal character of such a transaction, the substance of the receipt prevailed over the label attached by the parties.

Conclusion: The receipts were not rent; they were the commercial equivalent of interest and were rightly assessable under the head "Income from other sources". The assessee's challenge failed and the Department succeeded.

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