Law:

Section:

Section 28(i) of the Income-tax Act, 1961 - Business income - Chargeable as - Assessment years 1977-78 and 1978-79 - Assessee-company leased out certain sites to lessee - Subsequently, with consent of lessee, assessee entered into agreement to sell some of said sites to vendee company - Revenue submitted that assessee continued to be owner of said sites until they stood transferred to vendee in accordance with law thus lease rent accrued to assessee in respect of said sites was liable to be included in its business income - Whether in view of Tribunal's finding that under agreement of sale vendee had become entitled to collect lease rent from date of agreement of sale and was in fact collecting it from lessee, amount of lease rent could not be said to be assessee's business income under section 28 - Held, yes FACTS The assessee was a private limited company which owned certain sites. It had leased the said sites under an agreement to certain lessee. Thereafter, with the consent of the said lessee, the assessee entered into an agreement to sell some of the said sites, which yielded a rent of Rs. 6,000 per annum to a vendee company for the sum of Rs. 80,000. For the relevant assessment years, the assessee claimed that it had ceased to collect lease rent for the said sites after execution of agreement for sale so that said lease rent should not be included in its business income. The revenue, however, submitted, that the assessee continued to be the owner of the said sites until they stood transferred to the vendee in accordance with law, thus, the lease rent that accrued to the assessee in respect of the said sites was liable to be included in the assessee's business income. The Tribunal found that the assessee had infact executed an agreement of sale and that thereunder it was the vendee who became entitled to collect the lease rents from that date. It also found that possession of the said sites had been handed over by the assessee to the vendee and that, in fact, the lease rent for the said sites had not been received by the assessee for the periods under consideration. Accordingly, the Tribunal upheld the assessee's claim. On reference : HELD In the…

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