appeals [IT Appeal Nos. 5005 to 5007] are by department. assessee in this case is private limited company, Gajria Electrical Industries Co. (P.) Ltd. Appeals [IT Appeals Nos. 1739 to 1743] are by assessee, Neelam Traders, firm consisting of three partners. All these appeals are consolidated and disposed of by this common order. 2. Gajria Electrical Industries Co. (P.) Ltd. has 22 shareholders. One thing common to all shareholders is that they are closely related to director, Shri Hiranand Gajria. assessee has income from commission business and property. latter consists of rent received from property known as 'Mistry Bhavan', situated in Dinshaw Wachha Road, Bombay. 3. company purchased this property in May 1972. rent received of Rs. 5,31,007 included rent received from three firms Latesh Kumar & Co. of Rs. 39,794, Chandra Trading Co. Rs. 24,000 and Neelam Traders Rs. 27,832. Part of premises allegedly let out to above firms had been in turn let out by these firms recovering rents of Rs. 88,284, Rs. 70,200 and Rs. 1,07,385 respectively. difference between above two amounts relating to each of firms was sought to be assessed in their hands and assessee claimed that amounts allegedly received by it through these firms of Rs. 39,794, Rs. 24,000 and Rs. 27,832 alone should be basis of property income assessment in its hands. ITO, however, in his draft assessment order based property computation on amounts of Rs. 88,284, Rs. 70,200 and Rs. 1,07,385 received by firms. IAC apparently relying on certain orders of Tribunal directed ITO to base property income computation in respect of two firms Lateshkumar & Co. and Chandra Trading Co. on amounts paid to assessee of Rs. 39,794 and Rs. 24,000 respectively. In case of Neelam Traders, however, he agreed with draft order of ITO that property income included in assessment of assessee should be based on figure of Rs. 1,07,385 paid to Neelam Traders rather than Rs. 27,832 paid by Neelam Traders to assessee. basis of inclusion can be traced from two paragraph Nos. 9 and 12 of assessment order for year 1978-79 and they run as under: "9. Here again, it can be clearly seen that setting up of firm was only with view to siphon off part of assessee's profits. 12. Considering findings above, it is understood that firms have been formed to avoid taxation of assessee. In circumstances, actual rentals receivable by assessee-company will include difference of rent received and rent paid by three firms." ITO followed same procedure for subsequent two assessment years as well. On appeal, Commissioner (Appeals) directed ITO to compute income of house property on basis of actual rent received or receivable from Neelam Traders. He held that ITO had failed to prove that transaction between assessee and Neelam Traders was not genuine. Specifically he referred to following grounds as justifying deletion: "1. appellant purchased disputed property. 2. In order to avoid any loss, it entered into agreement with Neelam Traders to get as much rental income as was being paid to original owner. 3. That letter dated 10-6-1972 establishes that Neelam Traders did make efforts to achieve higher rent. 4. That Neelam Traders is not financed by appellant. 5. That no question of benamidari can be established on basis of three points required to be considered on basis of directions issued by Tribunal." department has challenged above order of Commissioner (Appeals). 4. learned counsel for department has pointed out that before ITO in proceedings under section 144B of Income-tax Act, 1961 ('the Act') assessee did not contest inclusion of income on basis of rent received by Neelam Traders. He referred in particular to paragraph No. 4 of directions of IAC: "Shri Gajria has not seriously contested this issue. Hence, no interference is called for." According to learned counsel, this itself indicated that rent received by Neelam Traders from outside party was in effect received by assessee. Apart from this there were several other circumstances justifying ITO's stand. 5. Neelam Traders was firm of three partners all of whom were related to moving force behind assessee-company Shri Gajria. Two of partners were in fact shareholders in assessee-company. assessee purchased property in 1972 when present tenants, viz., International Computers Ltd. 'ICL' was occupying premises. Neelam Traders was constituted in October 1972, long after property was purchased and long after tenant came into building. assessee could not have let out premises to Neelam Traders at all, since there was no question of obtaining vacant possession. assessee is owner of property and has to be assessed on actual receipts from property in terms of specific provisions of law. There was in fact no dispute between assessee and ICL. real tenant was ICL and what rent tenant paid only mattered. All parties except ICL are related to main owner Shri Gajria of assessee-company. flat was actually let out to ICL even before Neelam Traders was born. Referring to letter of 10-6-1972 it is pointed out that even before partnership came into existence, this letter seems to have been written up, which, according to learned counsel, was clear indication of self-serving purpose behind letter. Referring to position of other two firms, Latesh Kumar and Chandra Trading Co., it is pointed out that Tribunal at no stage has addressed itself to or decided relationship between these firms and assessee with regard to property income. Since property income had not been assessed in assessee's hands, and it was returned by these firms assessment was upheld by Tribunal. That, according to learned counsel, does not in any case support assessee's stand. 6. learned counsel for assessee has pointed out that even according to ITO position was same with regard to all three firms. Even so ITO has not added income of those two firms to total income of assessee. He has followed strange position with regard to Neelam Traders. ITO has treated this firm as benami of assessee and basis of property income assessment is also benamiship. In draft assessment order ITO wanted to make addition in respect of all three parties, but clearly IAC removed addition in respect of two parties. According to learned counsel, what applied to those two persons apply also to Neelam Traders. 7. Referring to computation of property income itself assessee being owner, property income has to be assessed on basis of section 23 of Act. expression 'let out from year to year' means 'let out in law'. According to decisions, maximum that can be considered in this context is standard rent. According to learned counsel, standard rent is prescribed by section 5, clause (10), of Rent Control Act. In present case premises were let out for first time at Rs. 27,832. This alone could be standard rent. Under section 23(a) nothing more can be expected to be added. Section 23(b) refers to income received or receivable by owner which in present case would be same figure of Rs. 27,832. Reference is made in this connection to decisions of Supreme Court in cases of Dewan Daulat Rai Kapoor v. New Delhi Municipal Committee [1980] 122 ITR 700 and Mrs. Sheila Kaushish v. CIT [1981] 131 ITR 435. 8. What Neelam Traders received was licence fee or compensation and cannot be considered while applying provisions of section 23(a) or section 23(b). In order to establish case of benami onus was clearly on revenue. Considering relevant questions to be asked in this connection, learned counsel has pointed out that there is no evidence to show that amount received goes to Shri Gajria. firm of Neelam Traders had only two partners who are shareholders in company. There are several other shareholders in company and certainly one more partner in Neelam Traders. It would not be proper, therefore, to regard two different entities like Neelam Traders and assessee as having common interests at all. In law Neelam Traders is real tenant of assessee. ICL is on contrary licensee of Neelam Traders. legal position is clear from lease deeds licensee of Neelam Traders. legal position is clear from lease deeds dated 15-3-1974 between ICL and Neelam Traders and 1-10-1972 between Neelam Traders and assessee. ICL stepped into shoes of earlier tenant of premises and by entering into legal agreement with Neelam Traders it also accepted fact that they are tenants or licensees of that firm and having nothing to do with assessee. 9. facts lie in small compass. One R.K. Mistry was owner of property 'Mistry Bhavan'. assessee-company purchased this property in May 1972. At time of purchase ICL was tenant of property. ICL seems to have been in property at least from year 1965 or 1966 onwards. Prior to that date another party, Hollerith India Ltd., were tenants. ICL continued to pay rent of Rs. 27,832 which apparently previous tenant was also paying. After assessee purchased property from Mistries, ICL continued to be tenant. In light of circumstances of case, ICL was protected tenant under rent regulations and could continue in occupancy of premises. standard rent being defined in Rent Control Acts, apparently there was nothing which prevented ICL from exercising its right to maintain same rent as it paid earlier. No evidence of substantial nature indicating any dispute between tenant ICL or landlord assessee in May 1972 is available. There is also no evidence as to any rent dispute between these two parties after that date. Apparently, therefore, tenancy of ICL with assessee-company was and could have continued uninterrupted. 10. By document dated 22-2-1973 partnership of Neelam Traders was brought into existence consisting of three partners Shyam, Monica and Neelam having shares of 34 per cent, 33 per cent and 33 per cent. partnership was deemed to have commenced from 1-10-1972. Clause 3 of partnership deed states business of partnership to be: ". . . that of real estate and investment, i.e., to purchase and/or acquire flats, godowns, garages or other premises either on ownership basis or on lease or tenancy basis and to sell or sub-demise or give it on lease and licence basis or let it out on monthly tenancy or otherwise dispose it off to such person or persons and at such price compensation rent and on such terms and conditions s parties hereto may from time to time agree upon and/or such other business or businesses as parties hereto may from time to time agree upon." According to assessee, premises already occupied by ICL and for which under protection of Rent Control Act it was paying specific rent and in respect of which there was no dispute either from side of tenant or landlord was leased out to newly constituted firm of Neelam Traders and at same rent as Rs. 27,832 which ICL was paying to assessee. alleged leasing out of property to Neelam Traders is effected by lease agreement dated 1-10-1972. By agreement dated 15-3-1974, Neelam Traders were to lease out same premises to International Computers Ltd. Some of specific provisions of this agreement are clauses 1(v), 2 and 11 which states: "(v) licensors do and each of them doth hereby grant to licensee leave and licence to use and occupy said premises on leave and licence basis for period of 5 (five) years from 1st day of October, 1972. 2. licensee agrees to pay to Licensors compensation at rate of Rs. 1.50 per sq. ft. per month for first year of licenced period, i.e., up to 30th day of September, 1973 and at rate of Rs. 2 per sq. ft. per month for second year of licenced period, i.e., from 1st day of October, 1973 to 30th day of September, 1974 and thereafter from 1st day of October, 1974 at rate of Rs. 2.25 per sq. ft. per month till expiry of licenced period. said compensation shall be payable in advance on or before 5th day of each and every succeeding month. licensee has paid to licensors sum of Rs. 30,000 (Rupees Thirty thousand only) receipt whereof is hereby acknowledged by licensors, and which amount shall be adjusted and set off against last instalments of monthly compensation payable by licensee to licenors as provided herein. 11. licensors shall renew this licence agreement on receipt of notice in writing in that behalf from licensee at least three months before expiration of these presents for further period of five years at monthly compensation of Rs. 3 per sq. ft. or at market rate prevailing at time of renewal whichever is lower but otherwise on same terms and conditions herein contained." During assessment year 1978-79 under above clauses, ICL paid to Neelam Traders Rs. 1,07,385. Another document of importance referred to in course of hearing is letter dated 10-6-1972 written to Neelam Traders by ICL which is as under: "Dear sirs, 1. With reference to discussion we had with your Shri Shyam R. Gajria i n connection with recognising our occupation of premises on first floor in Mistry Bhavan which we received from Hollerith India Ltd., we shall appreciate if you get confirmation from owners to this effect. 2. We appreciate your services in solving our long dispute with owners in connection with our occupation. 3. On receiving consent from owners we shall exchange agreement between us. 4. Thanking you, Yours faithfully, For & on behalf of INTERNATIONAL COMPUTERS (INDIA) PRIVATE LIMITED. Sd/- S. KRISHNAMOORTHY Assistant Company Secretary." 11. It is on basis of above facts that assessee claimed that it received only sum of Rs. 27,832 as income from property and ITO held that entire amount of Rs. 1,07,385 is to be taxed in his hands. Commissioner (Appeals) seems to have decided issue on ground of Neelam Traders being benami of assessee-company. He applied well laid tests to find out whether these lead to ITO's conclusion. In case of benami as has been clarified in case of Prakash Narain v. CIT [1982] 134 ITR 364 (All.) to which reference was made by learned counsel for assessee, onus is on person who claims benami to prove it. essential ingredients are 'to trace source and origin of amount and find out its ultimate destination' as laid down in CIT v. Daulat Ram Rawatmull [1973] 87 ITR 349 (SC). Since these conditions were not satisfied, Commissioner (Appeals) held that Neelam Traders cannot be regarded as benami of assessee. In our view, this approach of Commissioner (Appeals) suffers from fallacy. ITO in first place has not stated that Neelam Traders are benamies of assessee. technical requirements of establishing benami, therefore, well expounded in decided cases do not, therefore, require to be satisfied. question of onus also, therefore, on this basis is not relevant. What ITO has done is looking apparently to all circumstances to come to inevitable conclusion that interposition of Neelam Traders between assessee and ICL was only exercise in diversion of income for tax evasion. Commissioner (Appeals) has laid stress on legal relationship suggested by various agreements, etc., between parties. In fact stressing legal unvulnerability of these agreements Commissioner (Appeals) has accepted genuineness of transactions. He has also hinted at several disputes, etc., between assessee and tenant justifying intervention of Neelam Traders. While apparently no evidence, not even from assessee's own side not to speak of outside corroborative and external evidence, is available for any disputes with tenants and landlord or any problems to be solved Commissioner (Appeals) has laid stress on some of these. At any rate, even he has not spelt out details of such problems requiring resolution and calling for intervention of Neelam Traders. 12. On contrary facts make it clear that ICL was protected tenant under Rent Control Act. There was no dispute between tenant and landlord. In fact, years back ICL had succeeded previous tenant Hollerith India Ltd. Subsequent to that there has been change of ownership also. If ICL had gone to court to sustain its tenancy even at same rent, nothing could have helped assessee in dispute. To say, therefore, and that to without any evidence in this regard that some one has to intervene in dispute would be imagination running riot. As pointed out earlier Neelam Traders is comprised of two of relatives of main and central shareholder and director of assessee-company. Granting that intervention of outsider is necessary for settling disputes, certainly junior relatives of director who formed firm for purpose are not fittest persons to interfere. Whatever these people can do in field of conciliation certainly director of assessee-company could have done theory, therefore, again unsupported by evidence, of disputes between tenant and landlord being settled is absolutely baseless. We are not sure that if there was real dispute, even outsider could have resolved it in manner that its resolution is subsequently said to have taken place. ICL as protected tenant both as to tenancy as well as rent would certainly not have agreed in arbitration even by outsider if it only increased its rental nearly four times for no particular reason. More than that, it certainly would not have agreed to annual escalation of rent which agreement with Neelam Traders stipulates. limit of absurdity is reached by fact that agreement with Neelam Traders restricts tenancy to five years whereas under normal law of land ICL could have continued paying same rent and stayed unmolested in premises for any length of time till Rent Control Laws continue in State. picture given by assessee's learned counsel of too many things going wrong in tenant- landlord relationship calling for intervention of closely-related brother or sister to resolve dispute appears to be too unrealistic to be believed. facts, therefore, do not indicate any reason why firm of type of Neelam Traders should have been interposed in flow of rental from tenant to assessee landlord. 13. events mentioned above show things at still more unrealistic stage. assessee was owner of property. ICL was tenant even on day of purchase, i.e., May 1972. firm came into existence on 22-2-1973. partnership deed referred to its coming into existence with effect from 1-10- 1972. There is no evidence placed before us to show that business of Neelam Traders who were to act as estate agent, etc., have really done so. Apparently between 1971 to-date they have not entered into any other business transaction than this particular leasing out to ICL. lease agreement between ICL and Neelam Traders is dated 15-3-1974. Curiously even this lease agreement speaks of lease for period of five years from 1-10-1972. Apart from other discrepancies, dispersal of dates May 1972, 1-10-1972, 22-2- 1973 and 15-3-1974 cast in time frame work would itself defeat very claim of assessee that all is real and genuine in these agreements. On top of it l l comes letter dated 10-6-1972 written to Neelam Traders which even according to deed of 22-2-1973 was supposed to have come into existence with effect from 1-10-1972 only. letter has been reproduced fully in para 10 above. It deals with discussion with Shyam R. Gajria and seeks confirmation of certain agreements long before Neelam Traders came into existence, before any lease agreement was made out or any worthwhile action was taken at all. reference in para 2 of this letter to 'solving our long dispute with owners in connection with our occupation' only adds comic tinge to whole problem. reading of all these documents with historical relationship between landlord and tenant in present case would certainly indicate that what is claimed is not correct. 14. We are concerned with computing property income of assessee in relation to this property. ultimate tenant of property is ICL who have been in property from 1966 (about) onwards to-date. Since relationship of tenant and landlord existed between assessee and ICL only for entire period any compensation for tenancy whether called rent, lease rent or by any other name is payable by ICL only to assessee. Alternatively, and for same reason whatever ICL pays in respect of unchanged occupation of premises from 1966 onwards, at any rate from 1972 onwards, should go only to owner of property, viz., assessee. We do not see any reason why any outsider should come into this legal relationship of landlord and tenant between parties, or consideration for tenancy landlord receives from tenant. In other words, if facts as to tenancy and persons constituting landlord and tenant are fixed it is automatic to deduce that consideration or compensation for tenancy should be paid by tenant only to landlord and none else. In practice tenant may pay rent fully or partly to anyone else designated by landlord provided he gets requisite discharge for same. landlord likewise may direct rent to be paid to anyone else on his behalf provided he can give discharge for landlord to tenant. None of these would affect factual position of tenancy and rent paid by tenant. fact that entire rent paid by tenant as consideration for occupation of premises is not paid to landlord but someone else would not alter position as to extent of compensation paid by tenant for his occupancy. 14A. question, therefore, to be answered in present case is as to who are tenants and landlord and what compensation tenant pays landlord. In our view, Commissioner (Appeals)'s attempt to go into question of benami is clearly erroneous. He has not addressed himself to proper questions to be asked in case. All arguments, therefore, as to benami or otherwise nature of relationship is also not relevant to question of determining property income of assessee. At any rate, there is no allegation that assessee is not owner of property. question of benami arises normally in connection with ownership of asset. income from asset follows ownership. We are not conceptually able to see situation where asset is owned by some one but income therefrom goes to someone else. In other words, ownership of property being with one and fixed there could clearly be no question of benami relationship in law. s to income from that property considered as source of income all that can be happened would be that income may be transferred either by handing over or as gift or in any other manner to someone else. No question of benami is relevant in this context. In our view, all decisions cited relating to benami would also not apply to such situation. We have no hesitation in coming to conclusion on facts as above that tenant ICL has parted with as consideration for tenancy sum of Rs. 1,07,385. consideration for tenancy should go as matter of law to landlord. inevitable conclusion is whether landlord received sum of Rs. 1,07,385 directly himself or got it distributed amongst others, in context of landlord tenancy relationship which is all that is relevant to property ownership or property income landlord must be deemed to have received rent paid by tenant. rent stipulated and paid by tenant is also clearly receivable by him. 15. Property income is to be computed under provisions of section 23(1). There could be no quarrel with this proposition. section is also clear as to how it is to be computed. provisions of section 23(1)(a) fixes normal method of fixing annual value for purpose of computing property income. Section 23(1)(b) applies to situation where property is let and annual rent received or receivable by owner in respect thereof is in excess of some referred to in section 23(1)(a). expression used is 'received' or 'receivable' by owner. There is no ambiguity about use of expression 'received'. 'Receivable' would refer to stage where cash has not been received but assessee is 'entitled to receive rent'. legal position in context alone is relevant. Where assessee has let out his premises and rent tenant has to pay is particular amount, that amount would constitute amount of rent 'receivable by owner' in respect of letting. direct application, therefore, of provisions of section 23 to present case would involve application of section 23(1)(b). expression 'receivable' in context also would mean actual rent tenant pays whether it reaches in same form or diminished or enhanced as cash in landlords' hands. We have, therefore, no hesitation in coming to conclusion that property income to be assessed in hands of assessee would be based at Rs. 1,07,395, tenant ICL has parted with as consideration for tenancy. 16. Arguments had been raised before us stating that assessee received only Rs. 27,832. This is standard rent even as per Rent Control Act. Only section 23(1)(a) applies to case. Even if section 23(1)(b) is applied same figure has to be adopted. fallacy involved in this argument has been referred to earlier. There is no reason why between lawful tenant and landlord another party should be interposed to distribute what tenant has to pay as rent to landlord and not to anyone else. In present case assessee has claimed to have interposed Neelam Traders. What we have said above clearly indicates that there was no reason for this interposition. Pushing point to its extreme limit could it be that if all rent of Rs. 1,07,385 is received by Neelam Traders and nothing is received by assessee, assessee has no property income? Or if instead of Neelam Traders, half dozen other persons are interposed rent paid by ICL would be distributed amongst all these persons? answer is clear. rent paid by tenant is receivable b y landlord and landlord only. If landlord for whatever his own reasons distributed amount among one or several other persons and prefers to receive lesser sum, at least in context of tenancy it does not alter legal position or extent of rent receivable. We are not concerned with reasons or capacity in which person interposed like Neelam Traders gets part of rent paid by tenant. It may be loan. It may be gift. It may be just payment ad hoc. This will be relevant only for consideration in hands of interposed person but not assessee as owner of property. We, therefore, held that actual rent receivable and received by landlord, assessee, for letting out of property would be sum of Rs. 1,07,385 and this would be taxable in his hands as property income. 17. learned counsel for assessee has referred to decision made by Tribunal in case of Chandra Trading Co. and Latesh Kumar & Co. We are aware that similar situation obtained in those cases. Tribunal's orders to extent produced before us do not negative propositions at all or conclusions arrived at by us above. On contrary as correctly mentioned by learned counsel for department Tribunal's orders were dealing with case where these firms returned income which was not even taxed in hands of assessee. Tribunal confirmed assessment in hands of these firms. What would have happened in hands of assessee with regard to these receipts has not been decided by Tribunal. It was also not necessary for Tribunal to decide that question. manner in which, therefore, IAC dealt with these persons interposed also in tenant-landlord relationship does not help assessee's case. On contrary it may still be open to ITO to took at this relationship also in correct perspective and tax assessee on correct figure of property income even in respect of these tenancies. We are, however, not concerned with that. arguments advanced by learned counsel for assessee that IAC has dealt with these matters in particular form does not support his claim as far as present dispute before us is concerned. Commissioner (Appeals)'s order is, therefore, reversed on this point and ITO's restored. 18 to 25. [These paras are not reproduced here as they involve minor 18 to 25. [These paras are not reproduced here as they involve minor issues.] *** INCOME TAX OFFICER v. GAJRIA ELECTRICAL INDUSTRIES COMPANY (P) LTD.