Decided on February 21,1994



A.Kalyanasundharam, - (1.) THE assessee-HUF has filed this appeal, aggrieved by the order of CIT(A)-IX, New Delhi dated 25-10-1991, THE main grievance of the appellant-HUF is that, the income that has been received by it from the lease of the flat in Nirmal Towers should not have been assessed under the head 'Income from house property', because, the said flat is not registered in its name, for being treated as owner of the flat. THE claim of the appellant is that, all along the income so earned was being assessed as income from other sources, following the Delhi High Court decision in Sushil Ansal v. CIT[ 1986] 160 ITR 308. THE change made by the assessing authorities, is based on the amendment to Section 27(iii) of the Act, which speaks of flats being given by companies that build it under their house building schemes. THE plea of the appellant is that, the company that had built the said building and allotted the flat on lease basic has no such scheme and therefore, the said section has no applicability to the appellant. In order to appreciate the issue in its true perspective, it would be necessary to bring out the facts, which is so brought out in the following paragraphs.
(2.) The appellant had paid a total of Rs.1,30,900 to Shree Nirmal Commercial (P.) Ltd. (henceforth referred to as SNCPL) between 28-12-1965 to 29-6-1966. On 25-10-1967, the company allotted 265 equity shares of Rs. 100 each and adjusted the amount lying in credit with it. On 8-11-1967, the appellant paid a further sum of Rs.30,400 and on 13-1-1968 paid another Rs. 500 and on 16-1-1968, the company issued a further 5 equity shares of Rs. 100 each and adjusted the value of the shares from the account of the assessee with it. On 31-3-1968, the company transferred from the account of the assessee Rs.1,24,685 to an account styled 'Irrevocable Deposit', leaving a balance of Rs.10,250 to the credit of the assessee. The above amounts so transferred to the irrevocable deposit account by the company, was towards the share of the assessee on the portion or space on the commercial building that was constructed by the company, which the company has licensed it to the shareholder. The company entered into an agreement on 8-6-1988, by referring to the five equity shares held by the appellant and was awarded 'the right of occupation either by himself or through his nominee or nominees to be approved by the Directors of such portion of any immovable property of the company as may be determined by the Directors and upon the terms contained in an agreement to be entered into between the company and its shareholder . . . provided that such occupation shall be subjected to payment of such compensation as may be fixed from time to time'.
(3.) THE agreement stipulated in Clause 1 that, the shareholder is entitled to the right of occupation of the licensed premises and that the shareholder shall accordingly enter upon and occupy the licensed premises upon the terms hereinafter contained. In Clause 2, it was stated that, "the company agrees that the shareholder is entitled to occupy and/or to nominate a person to be approved by the Directors of the company, which approval shall not be unreasonably withheld to occupy the licensed premises in the said building subject, however, to the provisions hereof and to the provisions of the Articles of Association of the company and the company hereby grants to the shareholder or his nominee, subject to the provisions hereof and to the Articles of Association of the company, permission, leave and licence to occupy and use the licensed premises". Clause 3 stipulated keeping in deposit on payment of interest of Rs. 4,500. Clause 6 stipulated payment of compensation as may be fixed by the company. Clause 8 stipulated that the directors of the company shall determine what items of expenditure in connection with the licensed premises shall be borne by the shareholder in full. It also stated that, if the shareholder wishes to incur certain expenditure on the licensed premises, he shall obtain the permission from the directors in writing, as to whether such expenditure is to be borne by the company or by the shareholder.;

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