TaxTMI 
TaxTMI 
2020 (3) TMI 602
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....s. 31,50,000/- towards Amenities) received by six others from M/s Diesel Fashion India Reliance Pvt. Ltd. as Rent Income of the appellant disregarding the Tripartite Leave & License Agreement (Registered) executed between the Appellant (licensor), other co-licensors and M/s Diesel Fashion India Reliance Pvt. Ltd. (licensee), which entitled the licensors to only a part of the rent received from M/s Diesel Fashion India Reliance Pvt. Ltd. for part of the property owned and licensed out by them. 2. On the facts and the circumstances of the case and in law, the learned CIT(A) erred in asserting on para 5.13 of page 13 that, "....rent from entire property ought to be offered for taxation in the hands of the appellant firm only" disregarding the lease agreement entered in to between the appellant firm and six other persons (coincidentally family members of the partners of the firm) for leasing out part of the property to six other persons, prior to the tripartite Leave and License Agreement executed and registered with M/s Diesel Fashion India Reliance Pvt. Ltd. 3. On the facts and the circumstances of the case and in law, the learned CIT(A) erred in upholding the findings of the Ass....
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.....45 Lacs to claim deduction of service tax for Rs. 3.07 Lacs. 3.2 During assessment proceedings, it transpired that the assessee had entered into two agreements with M/s Diesel Fashion India Reliance Pvt. Ltd. (DFIRPL). One agreement was for leave and license agreement whereas the other agreement pertained to amenities charges in respect of same property. As per leave and license agreement dated 28/08/2009, the assessee was entitled for rent of Rs. 10 Lacs per month whereas as per amenities agreement dated 28/08/2009, the assessee was entitled for amenities charges of Rs. 6 Lacs per month. The details of the agreement have been elaborated in subsequent paragraphs. 3.3 The documents on record would reveal that the assessee being owner of a commercial premises comprising-off of basement, Ground Floor & First Floor admeasuring about 7043 Square feet situated in a building known as 'Western Wind', Plot No.22A TPS Santacruz No.-II, CTS No. 1029/1, Juhu Tara Road, Mumbai (hereinafter referred to as licensed premises), entered into Leave & License Agreement on 20/04/2009 with 6 persons namely Mr. Shachin Jagdish Nanavati, Mrs. Himadri Shachin Nanavati, Shachin Jagdish Nanavati HUF, Mr. ....
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....fered their respective share in the rent and amenities charges to tax while filing their respective returns of income for the year under consideration. 3.7 In the above background, Ld. AO observed that the assessee before letting out said premises to M/s DFIRPL, gave the premises on rent to various family members for a rent of Rs. 2.10 Lacs per month. When DFIRPL approached the assessee to take the premises on rent, the previous lessees were occupying the said premises and therefore, the assessee firm had apportioned rent to the family members and took net rent to the profit & loss account. On the basis of stated factual matrix, Ld. AO observed that in terms of Sec.23 of the Income Tax Act, if the rent received or receivable was higher than the sum for which the property might reasonably be expected to let out, the rent received or receivable would be the annual value of the property, Therefore, the total rent received from M/s DFIRPL was to be taken as rent in the hands of the assessee. It was also observed that when the assessee was the owner of the premises then how the rent could be apportioned between family members of the partners when they were not the owners of the proper....
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....ing clubbing of rental income in the hands of the assessee, the assessee, inter-alia, relied upon the decision of Bombay High Court rendered in Akshay Textiles Trading Agencies Pvt Ltd. (304 ITR 401) and also on the decision of Hon'ble Calcutta High Court in CIT V/s Indra & Co. (268 ITR 240) for the submissions that only the actual rent received by the assessee was to be brought to tax. The attention was drawn to the fact the leave and license agreement was entered with 6 persons on 20/04/2009 which was much before subsequent leave and license agreement entered into by the assessee and other 6 persons with M/s DFIRPL. It was submitted that the licensors had to spend huge amount in making structural changes in the building in order to lease it to M/s DFIRPL which was evident from the terms of the agreement. The said fact would materially alter the market value / rental value of the property. The assessee also brought on record difference between the two agreements entered into on 20/04/2009 & 28/08/2009. A plea was also raised that the income could not be taxed twice since the respective share in the income was already offered by 6 persons to tax in their own tax returns. The detai....
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.... from sub-letting could not be charged to tax under the head Income from House Property. When the assessee was the sole owner of the property, the entire income was to be offered to tax by the assessee. The plea that other person offered the same to tax would be of no relevance. The rental income earned by other persons by sub-letting was chargeable under the head Income from other sources or as business income and it was illegal on the part of the family members to offer the income under the head Income from House Property. Therefore, Ld. AO should have taken corrective measures about income shown as income from house property by the family members. Finally, the plea raised by the assessee was rejected and it was held that the entire rental income was to be treated as Income from House Property in the hands of the assessee. Aggrieved, the assessee is under further appeal before us. 6. Upon due consideration of factual matrix as enumerated in preceding paragraphs, the undisputed position that emerges is that before leave and license agreement dated 28/08/2009 entered into by the 7 licensors with M/s DFIRPL, there was a pre-existing agreement dated 20/04/2009 between the assessee a....