Law: Income Tax Act, 1961

Section: 22

Income-tax-----Income from property---Leasehold property---Who is deemed owner of property---To deem lessee as owner of leasehold property, lessee should not only have right to raise new construction on such property but should also actually raise new construction and also derive income from new construction---No new construction raised on property though lease was for 80 years and lessee had right to raise such construction---Lessee not owner of property---Income derived from leasehold property not assessable as income from property---Indian Income Tax Act, 1961, S.22. The assessee was the lessee of a property which was leased out to it by its owner for a period of 80 years. The assessee as lessee had the option to build and rebuild the structure over the leased land and also had the right to demolish the existing structure. The assessee claimed that the income from the leased property had to be assessed under the head "Income from house property" under section 22 of the Income Tax Act, 1961, and not under the head "income from other sources". The Assessing Officer rejected the claim of the assessee on the ground that the assessee was only the lessee of the property and not its owner. The Commissioner (Appeals) affirmed the order of the Assessing Officer. On further appeal, the Tribunal allowed the claim of the assessee on the ground that on a true interpretation of the terms and conditions of the lease deed, the assessee could be held to be the owner of the leased property under section 22 of the Act, since it had the right to demolish the structure over the land and to raise new construction thereon. On a reference: Held, reversing the decision of the Tribunal, that to deem the lessee as the owner of the property, the lessee should not only have the right to raise new construction on the leasehold property but should also, in exercise of such right, have actually raised the new construction and should also be deriving income from such new construction. In the instant case, though the assessee (lessee) had the right to raise a new construction on the leasehold property, yet in exercise of that right it had not actually raised the new construction on the…

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