COMMISSIONER OF INCOME TAX, BIHAR, PATNA Vs. MITHILA PROPERTIES PUBLICATION & CONTRACTOR ENTERPRISES (P) LTD., MUZAFFARPUR : PUJA BAZAR (P) LTD., MUZAFFARPUR : SREE LAL KEJRIWAL ATMARAM KEJRIWAL

JUDGEMENT

(1.) IN all these references and appeals common questions of law with little variation on facts arise and, as such, they were heard together and are being disposed of by this common judgment. Tax Case No. 19 of 1987. Puja Bazar (Pvt.) Ltd., the assessee Company took on lease, worn out structure with shops and hutment built over an area of land measuring 30,000 sq.feet, known as Nawal Market. According to the terms of the lease -deed the lessee i.e. the assessee Company was to carry out necessary developments of the demised premises at its own cost and further to cause electric and other sanitary fittings as deemed necessary. It was also to acquire water connection at its own cost.

(2.) According to the terms of the lease, the assessee Company was to bear the cost and expenses necessary for the upkeep, maintenance and other services required for the demised properties. In case of breach of the terms and conditions of the lease, the lessor was entitled to cancel the lease and forfeit the same and retake possession of the properties. According to the stipulation in the lease -deed, on termination of the lease whether on account of forfeitures by the lessor or surrender by the lessee or for any other reason, the lessee was to deliver peaceful possession of the demised property, alongwith all electrical, water supply and sanitary fittings and fixtures to the lessor or their successor -in -interest as the case may be. In such an event the lessor was to be not held liable to pay value of the building or structure on the demised premises or any compensation for the damage, injury or loss which may be claimed by the lessee.

(3.) THE assessee Company derived income amounting to Rs.1,20,700/ - in the assessment year 1980 -81 from subletting the shops. The assessee claimed that the income was rental but it should be computed as a business income. The Assessing Officer negatived its plea and on appeal by it, the Commissioner of Income Tax (Appeals), in the background of the aforesaid fact held that the entire rental income received by the assessee from the Puja Bazar should be assessed as income from business. The Revenue preferred appeal before the Income Tax Appellate Tribunal inter alia, contending that the lease in question being for indefinite period, the possession of the assessee is not different from that of the absolute owner and therefore the income derived from subletting of the shop shall fall within the category of the income from the house property. The Appellate Tribunal on appraisal of material on record and the clauses of the lease -deed came to the conclusion that the lease was for development of the market by the assessee and in case of non - fulfillment of the condition of the lease -deed the agreement is fit to be terminated and the lessor entitled to secure possession of the land alongwith the construction made by the assessee and that too without any compensation. The Appellate Tribunal also found that to fulfill its obligation the assessee made huge investments of Rs. 5,45,073/ -, Rs. 8,86,766/ -, Rs.3,90,347/ - and Rs. 64,9107 -for the assessment years 1979 -80,1980 -81, 1981 -82 & 1982 -83 respectively. On its finding that continuance of the lease agreement was on strict fulfillment of the obligation cast on the lessee by the lease agreement for development of the properties known as Nawal Market and in view of the above facts the lessee could not be considered as owner of the building and, as such, income derived from subletting of the shop cannot be considered to be income from house property.