Disputed title

Depends upon the judgement. Usually, rents received in earlier years is not required to be paid back, or its compensated by LUMSUM amount. In case of later, the amount is deductible in the year of payment.

Dear Dhirajlal Sir

Case 1 Court orders A to reimburse B with all the rent he got over the previous years.

what will be the tax treatment in this case in hands of A and B in the year of judgement.

What will happen for all the assessments of A and B of all those previous years which have already been finalised?

Case 2 court doesnt talk about rent but hands over teh property to B and B starts recieving future rents.

What will be the tax conseuqences in thsi case both in hands of A and B?

regards

Case 1. Rarely such orders seen, but as I said the compensation paid to B is treated as capital loss, or may be claimed as loss in P&L acc.

Case 2. Here no query arises as for income of earlier times or future date, as all future rents will be taxable in the hand of B.

Only capital gets deducted from BS of A and gets added up in BS of B.

Shivani,

Essential conditions for taxing income under this head:

Income from house property is taxable in the hands of its legal owner in whose name the property stands. "Owner‟ for this purpose means a person who can exercise the rights of the owner not on behalf of the owner but in his own right. A person entitled to receive income from a property in his own right is to be treated as its owner, even if no registered document is executed in his name.

It clearly says it all. A person needs to be taxed if he has been receving income "in his own right" (Deemed owner). hence in your case Mr. A who had been receiving income & got assessed till the date of dispute settlement- status would not change. taxes paid by him will remain as far as Act is concerned. however from the date of dispute settlement Mr. B will get assessed & taxed for income from house property.