Podar Cement Case Study

FACTS
Podar Cement i.e. Respondent in the present case is a company and the assessee for the purposes of Income Tax Act, 1961. Malabar Industries P. Ltd. Are the builders and they constructed a building named “Silver Arch” on the Nepeansena Road, Bombay. Podar Cement owns four flats i.e. flat no. 231, 232, 241 and 242 in the building “Silver Arch” constructed by the Malabar Industries. Out of all the four flats which are mentioned before, two of them were directly purchased by the Podar Cement Ltd. And the remaining two were purchased by the sister concern of the Podar Cement and thus, consequently by the Podar Cement. In August, the full consideration for the four flats was paid to the builders by the Podar Cement Ltd. After the consideration
included this rental income from the flats as assessable as ‘Income from other sources’ under Section 56 of Income Tax Act, 1961. The reason for the same stated by the Podar Cement Ltd. was that they were not the legal owner of the flats. This is because as the title of the property had not been transferred to Co-operative Societies which was made by the Podar Cement Ltd. and thus the ownership was not transferred in the name of Podar Cement Ltd. and thus, the rental income from the flats cannot be ‘Income from House Property’ under Section 22 of the Income Taxt Act, 1961 as they only have possession of the flats and not the
appealed in front of the Commissioner (Appeals). The Commissioner (Appeals) by an order upheld the views which were stated by the Income Tax Officer in his order. Then, Podar Cement Ltd. filed an Miscellaneous application before the appellate authority under Section 154 of the Income Tax Act. The contention raised by the Podar Cement Ltd. was that the Income Tax Authorities are bound to calculate the rent of the flats on the basis of the standard rent chargeable and not on the basis of the actual rent receivable calculated on the basis of the other flats in the locality. The appellate authority accepted the contention of the Podar Cement Ltd and rectified the earlier order. Podar Cement Ltd. was still not satisfied with the orders given by the appellate authority and thus they preferred two appeals and contented that the rental income received from the four flats must have been assessed under Section 56 of the Income Tax Act as ‘Income from other sources’ and not as ‘Income from House Property’ under Section 22 of the Income Tax Act. The revenue authorities also preferred appeal against the rectified order passed by the Appellate