Law: Income Tax Act, 1961

Section: 256

(a) Income-tax---Appeal to Supreme Court---Income from house property---Business income ---Assessee holding leasehold rights granting sub-lease---Rental income received by sub-lessee---Not clear whether assess ability of income in hands of assessee had to be determined or whether head of income had to be decided---High Court not dealing with main issue regarding registration of sub-lease---Matter remanded to High Court---Indian Income Tax Act, 1961. Under a deed of assignment, dated September 3, 1966, the assessee obtained the leasehold interest, for the un-expired period of lease, in respect of certain premises in Calcutta. In the accounting year relevant to the assessment year 1971-72, the assessee executed a sub-lease in respect of a portion of its leasehold interest in favour of S, another limited company associated with the assessee. The deed of sub-lease was, however, not registered. For the assessment years 1975-76 to 1979-80, the Income Tax Officer included the rental income received by S in the assessment of the assessee. On appeal, the Commissioner of Income-tax (Appeals) held that the income from the leasehold property was assessable as income from business but did not give directions as to the quantum. The Income Tax Officer thereupon included the income received by S from the sub-leased property in the assessee's income from business. The Commissioner, on appeal, held that the income received by S from the properties sub-leased to it was not to be included in the assessee's income. On further appeal, the Tribunal held that in the absence of registered deed of sub-lease, the assessee continued to be liable to tax on the income received from the said property. It rejected the contention of the assessee that the said income was only a notional one and not actual or real income. The Tribunal directed that (i) the income from leasehold property should be assessed as income from business and (ii) that the income which had to be assessed as income from business from leasehold interest, should be the income as received by S. On a reference of the question whether the Tribunal was right in holding that the income as received by S be assessed as the income…

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