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Issues: (i) Whether the assessee was the owner of the constructed area and the rental receipts were assessable under the head "Income from house property"; (ii) Whether the Commissioner was justified in invoking section 263 of the Income-tax Act, 1961 on the ground that the assessment order was erroneous and prejudicial to the interests of the Revenue.
Issue (i): Whether the assessee was the owner of the constructed area and the rental receipts were assessable under the head "Income from house property".
Analysis: The majority held that the construction agreement and the later lease deed, read as a whole, showed that the assessee was not conferred ownership of the superstructure. The documents were treated as creating only a leasehold interest in the constructed area for a limited term, with substantial restrictions on use, alteration, and enjoyment, and with the lessor retaining significant control. The assessee was therefore not regarded as the owner within section 22 of the Income-tax Act, 1961. The deeming provision in section 27(iiib) was also held inapplicable on the facts.
Conclusion: The rental receipts were not assessable under the head "Income from house property" and the finding was against the assessee.
Issue (ii): Whether the Commissioner was justified in invoking section 263 of the Income-tax Act, 1961 on the ground that the assessment order was erroneous and prejudicial to the interests of the Revenue.
Analysis: Since the assessee was not the owner of the property, the Assessing Officer's acceptance of the receipts as house property income was held to be an incorrect application of law. The majority further held that the order caused loss of revenue and that the view taken by the Assessing Officer was not a plausible view on the documented facts. The statutory conditions for revision were therefore satisfied.
Conclusion: The Commissioner validly exercised jurisdiction under section 263, against the assessee.
Final Conclusion: The assessment could not stand on the footing that the assessee was the owner of the property, and the revisional interference was upheld.
Ratio Decidendi: For assessment under section 22, ownership must be real and effective on the facts and documentation; where the assessee is only a lessee with restricted rights, rental receipts cannot be taxed as house property income, and acceptance of such a claim may be revised under section 263 if it results from an unsustainable view of law.
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