Law:

Section:

Section 24 of the Income-tax Act, 1961 - Income from house property - Deductions - Assessment years 1998-99 to 2000-01 - Trust which owned shares in assessee-company, advanced a certain amount to assessee from which assessee purchased two properties and let them out - Assessee in its return did not show rental income from properties - Assessee contended that since company desired to provide for interest/compensation for money provided by trust, assessee had transferred rental income arising from properties to trust directly by overriding title and, therefore, same should be treated as income of trust - Assessing Officer held that since assessee was legal owner of property, rental income was to be assessed in hands of assessee - In appeal, it made an alternative plea that if rental income was to be assessed, an interest payment at 18 per cent should be considered for deduction under section 24(1)(iv) - Whether since in memorandum of understanding it was agreed that rental income would be treated as return on investment by trust and there was no stipulation as regards interest on money advanced by trust, unilateral offer by assessee to have a return at 18 per cent was totally uncalled for - Held, yes FACTS The promoters of the assessee-company were the trustees of 'L' Trust. 'L' Trust owned shares in the assessee-company. Trust advanced a sum of Rs. 72,46,000 to assessee. With this money assessee purchased two properties and let them out. When the assessee filed its return for assessment years 1991-92 and 1992-93, it did not show the rental income from properties. During the assessment proceeding, assessee contended that since the company desired to provide for interest/compensation for the money provided by the trust, the assessee had transferred the rental income arising from the properties to the trust directly by overriding title and filed a MOU dated 28-3-1994 and, therefore, the same should be treated as income of trust. Assessing Officer, however, after noting that Memorandum of Understanding was a self-serving document on which no reliance could be placed, held that shares of the assessee were not beneficially held by the trust, and the assessee was the…

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