Section 27

Section 27 — the law in short

What the courts have decided on section 27, in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• Raj Dadarkar & Associates v ACIT Supreme CourtHelps department
  Our deed says sub-letting is our business. Does that make the licence fees business income?
  No. The Supreme Court held the objects clause in a partnership deed is not the conclusive factor in deciding the head of income; with no material showing organised commercial exploitation, the compensation and licence fees from the sub-licensed shops and stalls were assessable as income from house property.
• CIT v Podar Cement (P) Ltd Supreme CourtCuts both ways
  I have paid for the flat and I am in possession, but the conveyance was never registered. Am I the owner for s.22?
  Yes. For s.22 the Supreme Court read 'owner' as the person entitled to receive the income from the property in his own right, not the person holding a registered title. A buyer who has paid the whole consideration and is in possession is therefore assessable on the rent under the house property head even though no conveyance has been registered — which is why the assessee here, who had returned the rent under s.56 and argued it was not the owner, lost. The Court also held the deemed-ownership clauses inserted in s.27 by the Finance Act 1987 to be declaratory and retrospective.
• R.B. Jodha Mal Kuthiala v CIT Supreme CourtHelps department
  The title to a property is still in my name but somebody else has taken over all the rights and the rent — am I still the owner for income from house property?
  No. The Supreme Court held that the 'owner' for house property purposes is the person who can exercise the rights of an owner in his own right, not on behalf of another. A firm whose Lahore hotel had vested in the Pakistan Custodian of Evacuee Property was not the owner: the Custodian had every power of an owner except appropriating the proceeds, so he was the owner in the eye of the law, and the assessee's residual interest was not ownership for the charging section. The firm could not therefore claim the interest as a house property loss.
• Shivani Madan v PCIT High CourtHelps taxpayerValidity unconfirmed
  My husband and I are both on the sale deed. Must half the annual value be taxed on me?
  No. The Delhi High Court held that merely signing the instrument of conveyance raises no presumption that the income is to be assessed in that person's hands; taxability must reflect who actually obtained the benefit of the property, so an equal share cannot be assumed where the deed is silent.
• ACIT v Rcube Projects Pvt Ltd ITATHelps taxpayerValidity unconfirmed
  My client holds commercial space at a metro station under a build-operate-transfer concession and sub-lets it. The officer says it is a deemed owner under section 27 and must offer the receipts as house property. Is that right?
  Not on this decision. The Tribunal held that section 53A of the Transfer of Property Act, on which the deeming provision draws, operates in relation to a transfer of immovable property by way of a registered document where possession has been taken in part performance of the contract, and that a build-operate-transfer concession has none of those characteristics — the building always belongs to the grantor and the concessionaire holds only a licence. There being no basis to treat the concessionaire as a deemed owner, the receipts were business income and not income from house property.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.