Whether as per S. 26, any income which is chargeable under head ‘Income from house property’ is to be assessed in hands of co-owners if their shares are ascertainable and such income cannot be taxed in hands of AOP — Held, Yes.

ACIT v. S. Prabhakar Kamath

A.Ys. : 1995-96 to 1998-99

Dated : 30-4-2007

Whether as per S. 26, any income which is chargeable under
head ‘Income from house property’ is to be assessed in hands of co-owners if
their shares are ascertainable and such income cannot be taxed in hands of AOP — Held,
Yes.

The assessees, four individuals, purchased a plot of land
and thereafter constructed a commercial complex thereon. Each co-owner had
equal undivided share in the entire property. A part of the said complex was
given on rent. The assessees filed their individual returns separately, in
status of co-owners and showed the rental income under the head ‘House
property’. The Assessing Officer issued a notice u/s.148 to the assessees
stating that there was an AOP in existence and income from the commercial
complex was chargeable to tax in the hands of the AOP. Accordingly, the rental
income had been taxed as business income in the hands of the AOP. On appeal,
the Commissioner (Appeals) held that since share of all members was equal,
rental income should be assessed in the individual hands of the co-owners as
per S. 26.

On Revenue’s appeal, the ITAT observed that :

(1) It was an admitted position that rental income from
the property had been assessed in the hands of the individual co-owners upto
the A.Y. 1994-95.

(2) When the revenue had taken a stand that rental income
upto the A.Y. 1994-95 was assessable in the hands of individual co-owners,
then it could not take a different stand for the subsequent years,
particularly in view of S. 26. As per S. 26, any income which is chargeable
under the head ‘Income from house property’ is to be assessed in the hands
of co-owners if their shares are ascertainable and such income cannot be
taxed in the hands of the AOP.

Hence, rental income in question chargeable under the head
‘Income from house property’ was to be taxed in the individual hands of the
co-owners.