2006 (9) TMI 358

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....sees are co-owners of the lease-hold rights in respect of a building in plot No. 2, Block-K, Connaught Circus, New Delhi (hereinafter referred to as ("the property") having acquired the lease-hold rights from the Government. The assessees had sublet the property to one M/s. Rhone Poulence (India) Ltd. (hereinafter referred to as 'RPIL'). The sub-tenant, RPIL was paying a rent of Rs. 2.66 lakhs per annum, which was the agreed rent between the assessees and the sub-tenant. The property was capable of fetching much greater rent than what was being paid by the sub-tenant. The assessees could not get back possession from the sub-tenant as the tenancy was subject to the Delhi Rent Control Act (hereinafter referred to as 'DRCA') and the assessees ....

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....ey paid on moneys borrowed to pay RPIL, from the income chargeable to tax under the head 'Income from house property'. 5. Notice of hearing of these appeals were sent by Registered Post A. D. to the assessees at the address given in Form No. 36. Till date acknowledgement of service has not been received nor have the postal letters have been returned un-served. In the circumstances service of notice is presumed. None appeared for the assessees when the case was called for hearing. We, therefore, proceed to decide the appeals ex parte, on merits after hearing the learned Departmental Representative. 6. The claim of the assessees for deduction was disallowed by the Assessing Officer for the reason that the money paid by the assessees to ....

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....bmissions of the ld. Departmental Representative, who principally reiterated the stand as taken by the Assessing Officer. We have considered the submissions. In the present cases, the assessees had only a lease-hold interest over the property. As lessees they had the right to sublet and derive rental income from the property. This rental income was brought to tax under the head 'Income from-house property'. Under section 24(1)(vi) of the Act where capital is borrowed to acquire the property the rental income from which is brought to tax under the head 'Income from house property', the interest paid on such borrowed capital is allowed as a deduction. The crucial expression used in section 24(1)(vi) of the Act is "where the property has been ....