A license is defined under Section 52 (Chapter VI) of the Indian Easement Act, 1882. The definition of license reads as follows:
“Where one person grants to another, or to a definite number of other persons, a right to do, or continue to do, in or upon the immovable property of the grantor, something which would, in the absence of such right be unlawful, and such right does not amount to an easement or an interest in the property, the right is called a license.”
Under Section 28 of the Registration Act, 1908, every document should be registered under Section 17 of the said Act, has to be presented for registration in the office of Sub-Registrar within whose sub-district the whole or some portion of the property to which such document relates is situate.
Under Section 55 (1) of the Maharashtra Rent Control Act, 1999, any agreement for Leave and License or letting of any premises entered into between the landlord and the tenant or the licensee as the case may be should be in writing and should be registered under the Registration Act, 1908.
The possession of a licensee is not a juridical possession but only an occupation with the premission of the licenser. While the actual occupation remains with the licensee, the control or possession of the property is with the licensor through his licensee.
Difference between Lease and Licence:
The Deed of Lease, under -lease or sub-lease creates an interest or transfer an interest in the property in favour of the Leasee during the period of lease; while license is only a permission to use or occupy or enjoy the premises and to do certain things or acts which otherwise will amount to trespass. Therefore an agreement of leave and license under no circumstances can be charged with stamp duty under Article 36 of Schedule I of the Bombay Stamp Act.”
The Licensor (Owner of the flat) can file an application for eviction under Section 24 of the Maharashtra Rent Control Act, 1999 if the Licensee not ready to vacate flat/premises after expiry of the Licence period.
In one of the High Court judgement Amit B. Dalal V/s Rajesh K. Doctor, the Writ Petition was filed by Petitioner under Sec. 24 of Maharashtra Rent Control Act 1999, the dispute was regarding flats given on leave and licence agreement but the said agreement not registered under registration Act. The competant authority directed petitioner to vacate the flat then Petitioner preferred revision which also rejected by Ld. Additional Commissioner, hence the Writ Petition filed in High Court issue was regarding effect of non registration of agreement of agreement of Leave and Licence – Leave and Licence agreement not required registration under Registration Act. Sec. 49 of registration Act, applicable only to documents u/s 17 of Registration Act or under Transfer of Property Act. Unregistered document which require registration u/s 55 of Registration Act can be read in evidence provided same is proved and same is otherwise admissible in evidence WP dismissed.
What does Sec.24 of Maharashtra Rent Control Act, 1999 says?:
Section 24: “Landlord entitled to recover possession of premises given on licence on expiry….
(1) Notwithstanding anything contained in this Act, a licensee in possession or occupation of premises given to him on licence for residence shall deliver possession of such premises to the landlord on expiry of the period of licence; and on the failure of the licensee to so deliver the possession of the licensed premises, a landlord shall be entitled to recover possession of such premises from a licensee, on the expiry of the period of licence, by making an application to the Competent Autority, and, the Competent Autority, on being satisfied that the period of licence has expired, shall pass an order for eviction of a licensee.
(2) Any licensee who does not deliver possession of the premises to the landlord on expiry of the period of licence and continues to be in possession of the licensed premises till he is dispossessed by the Competent Autority shall be liable to pay damages at double the rate of the licence fee or charge of the premises fixed under the agreement of licence.
(3) The Competent Autority shall not entertain any claim of whatever nature from any other person who is not a licensee according to the agreement of licence. Explanation.For the purposes of this section,
(a) the expression “landlord” includes a successor-in-interest who becomes the landlord of the premises as a result of death of such landlord; but does not include a tenant or a subtenant who has given premises on licence;
(b) an agreement of licence in writing shall be conclusive evidence of the fact stated therein.”
The Rights of the Landlord/owner is protected by the said judgment.

Affordable housing is a term we use for residential units in India’s urban areas which are affordably priced with respect to households that fall within a specific limited income range. There is no single set of parameters to define what an affordable housing unit should cost in India. This is because the pricing and feasibility to developers of affordable housing is a function of the city, location within the city, type of project being built and also the construction technology employed.
In India, is appropriate to judge the affordability of a home on three broad parameters – the monthly income of prospective buyers from the target segment, the size of the home and, of course, its price. There is another element that should be mentioned, namely the target clientele itself. We tend to look at the word ‘affordable’ solely in terms of the LIG (lower income group) segment. For this segment, affordable housing would mean 200-300 square foot dwellings priced at between 7-12 lakh.
But what about people who earn more than the average factory labourer but still cannot afford to buy a decent 1 BHK flat of 300-450 square feet within ten to fifteen kilometres of their workplaces? They too need affordable housing – housing appropriately priced for the middle class. The home buyers in this segment can afford to buy flats in the price range of Rs. 30-35 lakh via home loans. Obviously, they expect a certain standard of living, comforts and facilities for this expense. However, but even such flats are hard to come by in our larger cities. This is the case even in Pune.
Today, around 30% of India’s population lives and works in urban areas. This means that they occupy less than 2% of the land available in the country. If we zoom in on Maharashtra, it emerges that close to 60% of the overall population lives in urban locations. Distressingly, a closer look at a city like Mumbai reveals that over 50% of its citizens live in slums. Mumbai’s slums occupy less than 4% of the land available in the city. Obviously, the affordable housing quotient has gone badly wrong in Pune’s prosperous neighbouring city. However, the problem is larger than just one city, which continues to get negative press only because of its exorbitantly high property rates and enormous annual inward migration.
Despite everything being said on the matter, the shortage of affordable housing in India is getting worse instead of better. The country’s urban population of 285 million has multiplied itself by five over the last half century. It is projected that it will continue to increase at this fast pace, and that 50% of all Indians will be living in urban areas by the end of the next three decades. So, if the shortage for housing for the lower income segment stands at 25 million today and there is no increase in the pace of supply of affordable housing launches, what will this figure look like in 30 years?
Let us look at the situation from a real estate market point of view. There is, in fact, a gigantic market for affordable housing in India. Currently, it is valued at anything between Rs. 5-10 trillion. What is really being done to address this huge market – especially the one constituted by the ever-growing middle class? There are next to no Government incentives for projects with flats in the Rs. 30-35 lakh bracket.
While the only answers to this question in Mumbai seem to lie in small projects on the far outskirts of the city, Pune presents a far more encouraging picture. Developers of township properties in Pune have now begun addressing this market with an internationally inspired property development model called integrated townships. This model is based on maximum value for money to buyers, based on high-grade common infrastructure and shared facilities in more cost-effective, yet progressive areas like the Pimpri Chinchwad Municipal Corporation.

Service Tax was levied on Renting of Immovable property service from 01.06.2007 by the Finance Act, 2007. The definition of the words ‘renting of immovable property’ has been given in clause (90a) of Section 65 of the Finance Act, 1994. The said definition is reproduced hereunder for ready reference:

(90a) “renting of immovable property” includes renting, letting, leasing, licensing or other similar arrangements of immovable property for use in the course or furtherance of business or commerce but does not include —

(i) renting of immovable property by a religious body or to a religious body; or

(ii) renting of immovable property to an educational body, imparting skill or knowledge or lessons on any subject or field, other than a commercial training or coaching centre;

Explanation 1.—For the purposes of this clause, “for use in the course or furtherance of business or commerce” includes use of immovable property as factories, office buildings, warehouses, theatres, exhibition halls and multiple-use buildings;

Explanation 2.— For the removal of doubts, it is hereby declared that for the purposes of this clause “renting of immovable property” includes allowing or permitting the use of space in an immovable property, irrespective of the transfer of possession or control of the said immovable property;

The taxable service of renting of immovable property on which service tax was levied has been defined in sub-clause (zzzz) of Section 65 (105) of the Act, reproduced hereunder:

(zzzz) to any person, by any other person in relation to renting of immovable property for use in the course or furtherance of business or commerce.

Explanation 1.—For the purposes of this sub-clause, “immovable property” includes—

(i) building and part of a building, and the land appurtenant thereto;

(ii) land incidental to the use of such building or part of a building;

(iii) the common or shared areas and facilities relating thereto; and

(iv) in case of a building located in a complex or an industrial estate, all common areas and facilities relating thereto, within such complex or estate,

but does not include-

(a) vacant land solely used for agriculture, aquaculture, farming, forestry, animal husbandry, mining purposes;

(b) vacant land, whether or not having facilities clearly incidental to the use of such vacant land;

(c) land used for educational, sports, circus, entertainment and parking purposes; and

(d) building used solely for residential purposes and buildings used for the purposes of accommodation, including hotels, hostels, boarding houses, holiday accommodation, tents, camping facilities.

Explanation 2.—For the purposes of this sub-clause, an immovable property partly for use in the course or furtherance of business or commerce and partly for residential or any other purposes shall be deemed to be immovable property for use in the course or furtherance of business or commerce;

Thus, from the aforesaid definitions it appears that service in relation to renting of immovable property for the use of business/commercial activity was brought under the service tax net.

Relevant Notification: -

Notification No. 24/2007-ST, dated 22.05.2007 granted exemption to the taxable service of renting of immovable property, from so much of the service tax leviable thereon as in excess of the service tax calculated on a value which is equivalent to the gross amount charged for renting of such immovable property less taxes on such property, namely, property tax levied and collected by local bodies.

Thus, the amount paid as property tax on the immovable property was not to be included in the assessable value on which service tax was leviable. However, it was provided that the amount of interest charged on the amount of property tax and the penalty paid to the local authority would not be excluded from the assessable value on which service tax was chargeable.

Relevant Circular: -

CBEC issued Circular No. 98/1/2008-ST, dated 04.01.2008 wherein the following issue was raised: -

Commercial or industrial construction service [section 65(105)(zzq)] or works contract service [section 65(105)(zzzza)] is used for construction of an immovable property. Renting of an immovable property is leviable to service tax [section 65(105)(zzzz)].

Whether or not, commercial or industrial construction service or works contract service used for construction of an immovable property, could be treated as input service for the output service namely renting of immovable property service under the CENVAT Credit Rules, 2004?

The following clarification was given in this regard: -

Right to use immovable property is leviable to service tax under renting of immovable property service.

Commercial or industrial construction service or works contract service is an input service for the output namely immovable property. Immovable property is neither subjected to central excise duty nor to service tax.

Input credit of service tax can be taken only if the output is a ‘service’ liable to service tax or a ‘goods’ liable to excise duty. Since immovable property is neither ‘service’ or ‘goods’ as referred to above, input credit cannot be taken.

Thus, the said Circular denied taking of Cenvat credit by the landlords/lessors in respect of service tax paid on input service being Commercial or Industrial Construction service.

Judgment of the High Court of Delhi on Renting of Immovable Property Service: -

The Notification No. 24/2007-ST, dated 22.05.07 and the Circular No. 98/1/2008-ST, dated 04.01.08 came to be challenged in the case of Home Solution Retail India Ltd v/s Union of India [2009-TIOL-196-HC-DEL-ST]. The basic issue raised in this case was whether the Finance Act, 1994 envisaged the levy of service tax on letting out/renting out of immovable property per se? Or the service tax was levied on the service provided in relation to the renting of immovable property. It was contended therein that the said Notification and Circular were giving an erroneous interpretation of the Section 65 (90a) and Section 65 (105) (zzzz) of the Finance Act, 1994 (as amended by the Finance Act, 2007) and therefore they were ultra vires of the Finance Act, 1994.

The verdict of the High Court of Delhi was as under:

High Court observed that service tax is a value added tax. It is a tax on value addition provided by a service provider.

High Court held that it is clear that we have to understand as to whether renting of immovable property for use in the course or furtherance of business or commerce by itself is a service. There is no dispute that any service connected with the renting of such immovable property would fall within the ambit of Section 65(105)(zm) and would be exigible to service tax.

High Court has held that the activity of renting of immovable property without any additional service being rendered would not fall under “Renting of Immovable property service”. If any additional services are provided along with renting of immovable property then such services would fall under “Renting of Immovable property service” like landlord/lessor providing furniture, provision of air conditioning service etc. This means that the landlords/lessors must start to charge service tax on the services provided to tenants in addition to renting of immovable property.

High Court held that Section 65(105) (zzzz) does not in terms entail that renting out of immovable property for use in the course or furtherance of business of commerce would by itself constitute a taxable service and be exigible to service tax under the Act.

Consequently, the interpretation placed by the impugned notification and circular on the said provision is not correct and the same are ultra vires the said Act and to the extent that they authorize levy of service tax on renting of immovable property per se, they are set aside.

Thus, decision has lead to emergence of new issues regarding the said service. The detailed analysis of the judgment of the High Court was done in our Article titled “Renting of Immovable Property- Delhi High Court Decision”. The implications of the said judgment were also discussed in this article. You can view the aforesaid article on our website in article section.

Appeal against the decision of High Court: -

The Department filed a Special Leave Petition before the Supreme Court against the judgment of the Delhi High Court. The appeal was pending however, no stay was granted against the decision of the High Court. As a consequence, most of the assessee has stopped paying service tax. Even the tenants have stopped service tax to the landlords.

Post Developments: -

After the judgment was passed by the High Court of Delhi in the case of Home Solution Retail India Ltd, it was noticed that some of the clients who had taken the immovable property on rent had stopped paying service tax to the property-owners/landlords. This lead to the Department issuing Circular No. 336/10/2009-TRU, dated 15.07.2009 asking the field formations to go on collecting the service tax on the renting of immovable property. It was said therein that the issue had not reached finality as appeal against the decision of the High Court was pending before the Apex Court. As such, the service providers should be asked to pay the tax or show cause notice should be issued to them to protect the interest of revenue.

Thereafter, some assessees have again approached the Delhi High Court challenging the TRU instructions as well as some of the letters issued by some of the filed officers. The Delhi High Court observed that since the operation of the decision given in the Home Solution Retail India Ltd’s case was not stopped by any order of the Apex Court and therefore, the Board could not have instructed their officers to pursue the matter with tax payers calling them to pay service tax not they could resort to other means under law to protect the Revenue. The Delhi High Court did not pass any further orders on the assurance of the ASG appearing for the Government that corrective steps will be taken by issuing further instructions, in suppression of earlier instructions, to the officers not to write such letters demanding the payment of service tax or threatening coercive steps.

Amendments proposed in Budget 2010: -

However, before the Apex Court could take a decision in the SLP filed by the Government against the judgment of the High Court, or even before the ink of the assurance given by ASG has dried, the Government has introduced retrospective amendments regarding the service of ‘renting of immovable property” in the Finance Act, 1994.

In the Budget 2010-11 announced on 26.02.2010 the Government has retrospectively amended the definition given in Section 65(105) (zzzz) of the Finance Act, 1994 to provide that the activity of ‘renting’ itself is a taxable service. The amendment was introduced retrospectively from 01.06.2007.

The Government also proposed to introduce a clause to protect all the action taken by the Department officers for recovering service tax on renting of service from 01.07.2007 onwards.

Outcome: -

With the retrospective amendment introduced so, the effect of the judgment of the Delhi High Court was wiped clean.

All the controversies raised were silenced once and for all. This was being done with retrospective effect. Now, all the landlords, who have not paid the tax, have to pay the tax along with interest. They will ask the tenants to pay the same. Even they will be ready to pay the tax but the interest will be in account of landlord only.

Alternatives available with the Assessee: -

In view of the amendments introduced by the Budget 2010, the assessees have only two options are available with them. Firstly, they can simply pay the service tax levied on the renting of immovable property and put an end to litigation. The second option with the assessee is to once again approach the High Court and contend that the renting falls under the State List and Centre cannot impose tax on the same. As such, he can challenge the constitutional validity of the levy of service tax on renting of immovable property.

Conclusion: -

The clear cut message given by the Government that one should not fight with the Government. They have the weapon of retrospective amendment available with them. The proverb “IT IS DIFFICULT TO LIVE IN ROME AND FIGHT WITH POP” clearly fits the situation. Nobody is going to penalize the officer who has not properly drafted the wrong provisions. Now, the assessee is also realizing that it is better to pay tax and not to fight with the department. Even if he wins after a long battle then the department will come with a retrospective amendment. In the last, he has to pay the tax.

The second very dangerous outcome is that the Government is amending the law when it is pending before Apex Court. They have not waited till the outcome of Supreme Court. Earlier, the retrospective amendments were done when the decision of Highest Court of India goes against the department but this time amendment is done even if the matter is pending with the Court. Even the department has assured the Delhi High Court that they will instruct the officers not to write letter for depositing the tax. On the contrary, they have come with a retrospective amendment. We can see the retrospective amendments on tribunal decisions also in times to come.

Prepared By:

CA Pradeep Jain

Sukhvinder Kaur, LLB

Courtsey :http://www.taxguru.in/

A. Rights and Liabilities of the Lessor –
(a) The lessor is bound to disclose to the lessee any material defect in the property, with reference to its intended use, of which the former is and the latter is not aware, and which the latter could not with ordinary care discover;
(b) The lessor is bound, on the lessee’s request to put him in possession of the property;
(c) The lessor shall be deemed to contract with the lessee that, if the latter pays the rent reserved by the lease and performs the contract binding on the lessee, he may hold the property during the time limited by the lease without interruption.
The benefit of such contract shall be annexed to and go with the lessee’s interest as such, and may be enforced by every person to whom that interest is for the whole or any part thereof from time to time vested.

B. Rights and Liabilities of the Lessee. –
(d) If during the continuance of the lease any accession is made to the property, such accession (subject to the law relating to alluvion for the time being in force) shall be deemed to be comprised in the lease;
(e) If by fire, tempest or flood, or violence of an army or of a mob or other irresistible force, any material part of the property be wholly destroyed or rendered substantially and permanently unfit for the purposes for which it was let, the lease shall, at the option of the lesee, be void:
Provided that, if the injury be occasioned by the wrongful act or default of the lessee, he shall not be entitled to avail himself of the benefit of this provision;
(f) If the lessor neglects to make, within a reasonable time after notice, any repairs which he is bound to make to the property, the lessee may make the same himself, and deduct the expense of such repairs with interest from the rent, or otherwise recover it from the lessor;
(g) If the lessor neglects to make any payment which he is bound to make, and which, if not made by him, is recoverable from the lessee or against the property, the lessee may make such payment himself, and deduct it with interest from the rent, or otherwise recover it from the lessor;
(h) The lessee may even after the determination of the lease remove, at any time whilst he is in possession of the property leased out but not afterwards all things which he has attached to the earth; provided he leaves the property in the state in which he received it;
(i) When a lease of uncertain duration determines by any means except the fault of the lessee, he or his legal representative is entitled to all the crops planted or sown by the lessee and growing upon the property when the lease determines, and to free ingress and egress to gather and carry them;
(j) The lessee may transfer absolutely or by way of mortgage or sub-lease the whole or any part of his interest in the property, and any transferee of such interest or part may again transfer it. The lessee shall not, by reason only of such transfer, cease to be subject to any of the liabilities attaching to the lease;
Nothing in this clause shall be deemed to authorise a tenant having an untransferable right of occupancy, the farmer of an estate in respect of which default has been made in paying revenue, or the lessee of an estate under the management of a Court of Wards, to assign his interest as such tenant, former or lessee;
(k) the lessee is bound to disclose to the lessor any fact as to the nature or extent of the interest which the lessee is about to take, of which the lease is, and the lessor is not aware, and which materially increases the value of such interest;
(l) the lessee is bound to pay or tender, at the proper time and place, the premium or rent to the lessor or his agent in this behalf;
(m) the lessee is bound to keep, and on the termination of the lease to restore, the property in as good condition as it was in at the time when he was put in possession, subject only to the changes caused by reasonable wear and tear or irresistible force, and to allow the lessor and his agents, at all reasonable times during the term, to enter upon the property and inspect the condition thereof and give or leave notice of any defect in such condition; and, when such defect has been caused by any act or default on the part of the lessee, his servants or agents, he is bound to make it good within three months after such notice has been given or left;
(n) if lessee becomes aware of any proceeding to recover the property or any part thereof, or of any encroachment made upon, or any interference with, the lessor’s rights concerning such property, he is bound to give, with reasonable diligence, notice thereof to the lessor;
(o) the lessee may use the property and its products (if any) as a person of ordinary prudence would use them if they were his own; but he must not use or permit another to use the property for a purpose other than that for which it was leased, or fell or sell timber, pull down or damage buildings belonging to the lessor or work mines or quarries not open when the lease was granted, or commit any other act which is destructive or permanently injuries thereto;
(p) he must not, without the lessor’s consent, erect on the property any permanent structure, except for agricultural purposes;
(q) on the determination of the lease, the lessee is bound to put the lessor into possession of the property.
This provision is of great importance as it covers rights and obligation of the lessor and lessee among themselves. However, this is so provided there is no contract contrary or usages which are contrary to the same.
Section 111 provides how leases are to be determined. The said Section reads as under :-
“111. A lease of immovable property determines –
(a) by afflux of the time limited thereby.
(b) where such time is limited conditionally on the happening of some event – by the happening of such event.
(c) Where the interest of the lessor in the property terminates on, or his power to dispose of the same extends only to the happening of any event – by the happening of such event.
(d) In case the interests of the lessee and the lessor in the whole of the property become vested at the same time in one person in the same right.
(e) By express surrender; that is to say, in case the lessee yields up his interest under the lease, to the lessor by mutual agreement between them.
(f) By implied surrender.
(g) By forfeiture; that is to say, – (1) in case the lessee breaks an express condition which provides that, on breach thereof, the lessor may re-enter; or (2) in case the lessee renounces his character as such by setting up a title in a third person or by claiming title in himself; or (3) the lessee is adjudicated as insolvent and the lease provides that the lessor may re-enter on the happening of such event; and in any of these cases the lessor or his transferee gives notice in writing to the lessee of his intention to determine the lease.
(h) On the expiration of a notice to determine the lease or to quit or of intention to quit, the property leased, duly given by one party to the other.

The issue regarding taxability/non-taxability of surrender of Tenancy rights is giving sleepless nights to millions of Tenants, especially in city like Mumbai where Pugree system is in great vogue.
The decision of the Special Bench constituted by the Bombay Tribunal in the case of Cadell Wvg. Mill Co. (P) Ltd. V/s. ACIT reported in (1995) 55 ITD 137 (Bom.) sent shocking waves to millions where in the Tribunal had taken stand that the amount received on surrender of tenancy right was casual income and taxable and that only where permission was granted to the tenant at any time by the Landlord under the terms of the contractual tenancy or where any permission to sub-lease was obtained by the tenant from the Landlord, the surrender of tenancy rights even by the statutory tenant is a valid transfer of capital asset.

Recently on similar facts and issues the Special Bench constituted under the Delhi Tribunal in the case
The amount received on surrender of Tenancy rights is a Capital Receipt.
It can be charged to tax only under Capital Gains.
But chargeability failed because of the decision of the Apex Court in the case of BC Srinivas Shetty reported in 128 ITR 294/5 Taxman 1(c) provisions cannot be applied was regarded as never intended by section 45 to be subject of charge.
That the amendment made in section 55(2) by the Finance Act 1994 taxing the receipts as Capital Gains was only prospective in operation.
For arriving at the aforesaid decision the Delhi Court decision and distinguished the issues with the High Court which have taken a contrary view.
In order to treat the receipts as Capital receipts reliance was placed in the case of BAWA SHIV Charan Singh V/s. CIT (1984) 149 ITR 29 (Delhi) where it was held Property is a term of widest import and it signifies every possible interest which a person can acquire, hold and enjoy. Tenancy right is a Capital Asset. When the interest of the Lessor is a parted with, the price paid would be premium or salami, but the periodical payments by the lessee for continous enjoyment of the benefits under the lease are in the nature of rent, the former is a capital receipt the letter a revenue receipt.
The apex court in Universal Radiators V/s. CIT (1993) 201 ITR 800 /68 Taxmann 45 (SC) has held that the eligibility to tax is different from liability to pay tax. Since the amount falls within the ambit of eligibility to tax the same is outside the purview of exempt income. The Allahabad Court in Smt. Anand Bala Bhusan V/s. Cit (1995) 83 Taxmann 548 (all.) has stated that Section 10(3) applies to casual and non-recurring income which are not chargeable U/s. 45 of the Act. The term All receipts in Section 10(3) cannot enlarge the scope of Section 10(3). Similarly the Delhi High Court has distinguished the decision of the Bombay Tribunal is Cadell wvg. Case stating that the said case was rendered with reference to the provision of the Bombay Rents, Hotels, Lodging House Rates Control Act, 1947. Section 12 thereof only entitled the statutory tenant to continue to be in possession till standard rent or permitted increase are paid. Therefore, the statutory tenant did not have an estate or interest capable of being transferred placing reliance in the case of Anan Niwas P.Ltd. V/s. Anandji Kalyanji pedhi AIR 1979 SC 144. The said Section of the Bombay Act entitlked statutory tenant to continue to be in possession till standard rent or permitted increases are paid, nothing further whereas under DRC Act, rights of a statutory tenant were held to be heritable.
The Delhi Tribunal has also held that the decision of the Allahabad High Court in CULABCHANDS case reported in 192 ITR 495 wherein it was held the receipts were of casual and non-recurring nature and provisions of section 10(3) are applicable is not correct because the said decision is revered by the Calcutta High Court in B.K. Roy (P) Ltd. V/s. CIT (1997) 211 ITR 500, Karnataka High Court in Joy ICW Creams (Bang.) P.Ltd and Cadell Wvg, Mills Coo. Pvt. Ltd. (Bom. Tribunal) also the same Allahabad High Court on similar facts in the case of Smt. Anand Bala Bhushan V/s. CIT (1995) 83 Taxmann 548 (all.) head held that the receipts of compensation was nto of the nature of ordinary income and, therefore, the question of treating the same as a casual receipt for the purposes of income tax did not arise.
The Delhi Tribunal has stated that under the Delhi Rent Control Act a tenant even after the determination of the tenantncy continues to have an interest in the tenanted premises as held in SMT. Gian Devi Anand V/s. Jeevan Kumar AIR 1985 SC 796.
Further under the following cases :
Surrender of tenancy rights in a premises for ownership rights in another premises does not constitute a transfer :
(1991) 192 ITR 382 (S.C.) A. Basper
(1984) 148 ITR 99 (Bom) Nila Products
(1981) 129 ITR 448 (Bom.) Mrs. Shirinbai P.Pundole
(1979) 117 ITR 581 (Cal.) A. Gasper
In view of the decision of the Delhi Tribunal I am of the view that on representations made the Bombay Tribunal may reconsider or review its decision because if section 5(3) of DRC Act prohibits the tenant from claiming or receiving payment in consideration of relinquishment transfer or assignment of his tenancy, and section 48(1)(b) of DRC Act prescribes penalty for contravention of the provisions of Section 5 of DRC Act the similar provisions are also available in the Bombay Rent Act and even under the Bombay Rent Act a tenant continues to have an interest in the tenanted premises.

At last, the new unified Maharashtra Rent Control Bill has been passed by the Maharashtra Legislature. It is learnt that the bill is sent for the assent of the President. After the signature of the President of India, it will become and Act and will come into force on such date as may be notified by the Government in the Gazette.
Under Section 55, all tenancy agreements, including leave and licence agreements, must be in writing and are to be compulsorily registered after the commencement of the Act. It will be the responsibility of the landlord to get such written agreements registered. If he fails to get the agreements registered, the contention of the tenant about its terms and condition shall prevail, unless proved otherwise. Further, if the landlord fails to register the agreement, he shall be punished with imprisonment which may extend to three months or with fine upto five thousand rupees or with both, under Sub-Section (3) of the said Section 55.
The Joint Committee on the Bill, in its Report dt. 20th April 1999, has also observed that the Committee has unanimously decided to protect all the existing tenancy before the date of commencement of this Act, but after the commencement of this Act, there should be no tenancy without agreement. Every such tenancy agreement has to be registered and the responsibility of getting such agreements registered should be on the landlord. If the tenancy is created without registered agreement, there will be no protection of law and the landlord contravening these provision on conviction be punished with imprisonment as laid down in Section 55 (3) of the Act.
This appears to be a major departure from the previous provisions relating to the agreements of tenancy and the leave and licence agreements. The prosecution and punishment for non-registration of agreements by the landlords appear to be very harsh. No landlord would be pleased to give his hard earned flat to the tenant/licensee and would like to go to jail for non-registration of the agreement. He will rather be happy to keep the premises vacant instead of giving it either on rent or on leave and licence basis. This will cause acute shortage of the stock of houses available. There is every possibility that if the landlord has given the premises without registration of agreement, he will try to use force to get back the possession. The litigation in the Court may be minimised, but lawlessness is likely to be increased which is not healthy a sign between the relationship of landlords and tenants. Another difficulty in registration of such agreement would be that so many leave and licence agreements are executed each day. The office of the Sub-Registrar is already over burdened. The office takes sufficient long time for the return of registered documents, and these agreements registration will be then additional burden. No machinery is provided in the act for registration of such agreement with penalty may adversely effect their relations. I think, other States have not made such provision in their respective Rent Act legislations for the compulsory registration of tenancy agreement with penalty. If any other state has enacted such provisions, it would be useful to examine its result and consequences in relation between the landlord and the tenant.

The Bombay Rent Act was promulgated on 13.2.1948. One does not know whether it was an auspicious or an in auspicious day. However I may state that when it was promulgated it was a very fair Act both for the tenants as well as the landlords. At the time of the inception of the Act it was stated in very clear terms under its section 13(I) (e) that no tenants shall give his premises or part thereof or transfer or assign the same to the third party under any circumstances. The Government thought that the Rent Act and there would be plenty of accommodation which would be available and the law will be scrapped within a few years. However this pious hope of the Government did not fructify. In fact the housing situation deteriorated day by day and there was an acute shortage of accommodation.

Right from 1949, the community of landlords who were building of Landlords who were building houses and giving them on rent, completely vanished. The result was that only the tenants themsevels who had some premises to spare, gave part of its to others with a veiw to make some profit. Such plractice as rampant in the State of Maharashtra and especially in the city of Bombay which lasted form 1949 to 1959.
All of a sudden the Maharashtra Government issued an ordinance called ordinance III of 1959, which stated that even though there was unlawful subletting, such unlawful sub-tenant would become the lawful sub-tenant provided he has obtained the entire premises or part of the premises which was not less than a room exclusively prior to 21st May 1959.

One fails to understand as to why the date 21 of May was selected. However the fast remains that it was selected. Moreoever all such subtenant were given a right to be declared as direct x tenants of the landlords in case of the determination of the tenancy of the main tenant.

Indeed this was the first blow given to the community of Landlords. They were obliged to accept a rank outsider as their tenant when they had nothing to do so with him and had not even seen him during their lifetime. What could the landlords do under such circumstances ? They challenged Ordinance III of 1959. The Court whilst giving a classic judgement stated that the said ordinance does not offence either Section 14 or 19 of the constitutions of indian and as such the said Ordinance was declared completely lawful. It is worthwhile nothing that the scarcity of housing remained and that too in a big way, housing activity, as I have already stated had completely come to a stand-still for the last many years. No a new class of people called promoters-cum-developers descended on the scene. They sold owneership flats and thereafter formed Housing Co-operative socities and then went away.

By this time the tenants invented a new scheme calls the “Leave and License system” they went on giving their premises to outsiders, not on subtenancy basis but on leave and licence basis. It was on the assumption that leave and licence did not create any inherent right in the premises and that the licensee could be forced to vacate the premises after the licence period was over. In fact the Courts of Law gave a Stamp of authority to their contention by stating that the Licensee must quit the premises after the licence period was over.

Thereafter 14 long years passed. The Maharashtra government in 1973 passed another Act called then Maharashtra Act XVII of 1973 Section 15A. The said section stated that any licensee who had obtained the premises which was not less than room prior to 1st February 1973 became a Deemed Tenant or a Protected Licensee of the premises.

The question here is when there is no written leave and license agreement but only an oral leave and licence what can happen ? 1 have to make ti clear that even those persons who have obtained the premises on oral leave and licence agreement and if they could prove the same by proper evidence , then they would also protected under the provisions of Section 15A of the Bombay Rent Act by the decision of the Courts.

Once again the system of leave and licence stopped and the tenants as well as the owners of ownership flats, stopped giving the premises on leave and licence basis. Once again here was acute shortage of residential accommodation and once again Maharashtra government started thinking about it.

Then a new Section call Section 13A-2 was introduced in the Bombay rent Act. It stated as under:

Notwithstanding anything contained in this Act, a licensee possession or occupation of premises given to him on licence for residence shall deliver possession of such premises to the landlord on expiry of the period of licence and on the failure of the licensee to so deliver the possession of the licensed premises a landlord shall be entitled to recover possession of such premises form a licensee premises a landlord shall be entitled to recover possesion of such premises form a licensee on the expiry of the period of licensee by majing an application to the competent. Authority and the competent Authority on being satisfied that the period of licence has expired shall pass an order for eviction of a licensee.

Any licensee who does not deliver possession of the premises to the landlord on empty of the period of licence and continues to be in possession of the licensed premises till he is dispossessed by the competent authority shall be liable to pay damages to double the rate of tthelicence fee or charge fo the premises fixed under the agreemetn of licence.

By this time, being assured by the Maharashtra Government the owners of ownership flats once again started giving their premises on leave and licnce basis which indeed received housign shortage to a very great extent. This law cam into force from 1st October 1987.

The same law is repeated into under seciton 25 of the Maharashtra Rent Control Bill 1993 which has not become and Act as yet. It is hoped that Government would not now change the law and allow the present law of leave and licence to remain in force as it has really solved scarcity of housing to a very large extent. In my opinion it should also apply to commercial premises

The Supreme Court of India gave an important verdict whereby any changes or use of residential or business land by the tenant without prior written permission taken from the owner may lead to him being asked to vacate the said land or property.

Setting aside the ruling of the Allahabad High Court on this matter, the Supreme Court Panel of Judges comprising of Chief Justice Mr. V. N. Khare and Justice Mr. Ashok Bhaan gave the owner the right to ask the tenant to vacate the residential land or business establishment if any changes are done to it without the owner’s permission.

The above verdict was in context of the case between Mr. Bharat Lal Baranwal vs. Virendra Kumar Aggrawal. In 1970, Mr. Baranwal had given Mr. Aggrawal one of his three rooms on rent for using as a book store.

But in 1976 Mr. Aggrawal, without the permission of his owner Mr. Baranwal, started paper production in the room taken on rent. Also in 1986, He brought a printing machine and started utilising all the three rooms owned by Mr. Baranwal.

Mr. Baranwal filed a petiton in the Appellate Court. However, the Appellate Court quashed his petition saying that using the rented premises for mechanised paper production by Mr. Aggrawal was in no way a violation of the Rent Laws.

Mr. Baranwal appealed in the Revision Court. The Revision Court set aside the Appellate Court decision and gave rights to the owner to ask the tenant to vacate the rented premises.

However, the Allahabad High Court set aside the Revision Court Jugdement and ratified the Appellate Court Verdict.

Then Mr. Baranwal appealed in the Supreme Court. Referring to Article 20 (2)(D) of the Urban Building Act, the Supreme Court gave its verdict that Mr. Aggrawal had violated the Rent Laws by using the other rooms along with the room rented to him by Mr. Baranwal and thus ratified the Revision Court’s earlier Verdict.