Pawha Builders (P) Ltd. vs Commissioner Of Income Tax
2004 Latest Caselaw 92 Del

JUDGMENT

B.C. Patel, C.J.

1. The assessed being aggrieved by the order passed by the Tribunal in ITA No. 2150/Del/1998 for the asst. yr. 1994-95 decided on 28th Feb., 2003 has preferred this appeal, inter alia raising the question that, the appellant being the owner of the property in question and receiving the entire rent, the Tribunal has committed grave error in arriving at the conclusion that the assessed is not the absolute owner of the property and is entitled to receive only 30 per cent of the annual rent of the property and, therefore, is eligible for a deduction of 1/5th on only 30 per cent of the rent which he was actually receiving.

2. There is an agreement on the record styled as a Collaboration Agreement between S.K. Pawha, P.P. Pawha and Varun Pawha on the one hand and the assessed/appellant on the other. Following are the relevant clauses to be taken into consideration :

"2. It is further agreed between the parties that after the superstructure of the entire building on the said plot has been completed by the second party in accordance with the sanctioned building plans, the property will be given on rent and the rent proceeds will be shared by the first party and the second party in the ratio of 70 per cent and 30 per cent, respectively, from the date of renting of the property.

4. That the owners further assure the builders that they are the exclusive owners of the said plot of land and as such they are competent to enter into this agreement.

11. That the builders shall become owners of the superstructure and the ownership of land rights shall remain with the owners, i.e., the party of the first part. It is further agreed between the parties that after the superstructure of the entire building on the said plot has been completed by the second party in accordance with the sanctioned building plans, the property will be given on rent and the rent proceeds will be shared by the first party and the second party in the ratio of 70 per cent and 30 per cent, respectively.

14. That in case both the parties wish to sell the superstructure and the land beneath, they can do so and divide the proceeds in their respective ratio of 70 per cent and 30 per cent.

16. That the owners shall bear all the outstanding charges, i.e., house tax, electric and water bills, etc., etc., up to the date of signing of this agreement. Thereafter all taxes, liabilities, expenses shall be borne by both the parties or their nominees/assignees in the ratio of 70 per cent and 30 per cent.

17. That the owners undertake to assist and sign immediately all such documents as may be necessary from time to time to enable the builders/ developers, to discharge the obligations undertaken by them without any delay.

18. That the owners and builders have entered into this agreement purely on principal-to-principal basis and nothing stated herein shall be deemed to or construed as a partnership between builders and owners nor shall builders and owners in any manner constitute an AOP. Both the parties shall be liable in respect of income-tax & other fiscal liabilities only in respect of their own share."

3. The learned counsel has relied upon various decisions to convey that he, being the owner of the building in question, is entitled to get the benefit not of 30 per cent but of 100 per cent of the rent in accordance with law. He has relied upon the following decisions :

(i) CIT v. Podar Cement (P) Ltd.

(ii) Tinsukia Development Corporation Ltd. v. CIT

(iii) Addl CIT v. Instrumentation Ltd. (1986) 160 ITR 689 (Raj)

(iv) CIT v. Saiabhai Chemicals (P) Ltd. (2002) 254 ITR 625 (Guj)

4. Suffice to say that in the instant case, considering the aforesaid factual aspect, the Tribunal has decided the matter and in our opinion, there is no question of law. Learned counsel has stated that lease deed has also been produced on record. We have taken a note of it. Inter se arrangement made between the parties is required to be taken into consideration while deciding this matter.

5. Hence, the appeal is dismissed.