S.A. Hakeem, J.In this reference under s. 256(1) of the IT Act, 1961 (the Act) made at the instance of the Revenue, the following questions of law have been referred for opinion of this Court :

"(1) Whether, on the facts and in the circumstances of this case, the Tribunal was right in holding that no addition can be made as income from house property under the provisions of ss. 22 to 26, in respect of the built up premises on the plot of land sublet by her on the premise that she cannot be held to be the owner till the Court finally decides in her favour in the action she has raised against the sub-tenant in Civil Court

(2) Whether, on the facts and in the circumstances of this case, the Tribunal was right in holding that rent or compensation which the assessee is entitled to recover from the sub-tenant is chargeable only in the year of receipt since the rent income from the sub-lease is assessable under the head "income from other sources"

2. The facts may be briefly stated as under :

The assessee is an individual. The matter pertains to the asst. yr. 1982-83. A plot of land bearing No. 35A of K. H. Road, Bangalore, belonging to the assessees father is held by the assessee under a registered lease for a period of 90 years commencing from February, 1974. In pursuance of a clause authorising the assessee to grant a sub-lease, the assessee had sub-let the plot to a company called M/s Vasanth Colour Laboratories Pvt. Ltd. (sub-tenant) under a lease deed dt. 5th July, 1975 for a period of 30 years. In accordance with the terms of the lease, the sub-lessee company had to construct a building on the said plot within 5 years at a cost of Rs. 10,00,000, which had to be delivered to the assessee at the end of the lease period of 30 years. It is further provided that on breach of any of the terms of the lease, the assessee is entitled to determine and forfeit the lease in which event the sub-tenant was liable to hand over possession of the plot with the building constructed thereon to the assessee.

3. Allegedly, when the sub-tenant fell in arrears of rent in contravention of the relevant condition under the lease deed, a legal notice was issued on 23rd Feb., 1980 whereby the tenancy was terminated and the assessee exercised her right to forfeit the lease. According to the notice, a sum of Rs. 1,32,000 was due towards arrears of rent upto 5th Feb., 1980. In the reply, the sub-tenant disputed not only the arrears of rent, but also the assessees right to forfeit the lease. Thereupon, in February, 1981, the assessee instituted a suit seeking a decree against the sub-tenant for (i) recovery of rental arrears; (ii) damages for use and occupation; and (iii) delivery of vacant possession of the plot with the building thereon, and other incidental reliefs. The suit is being contested by the sub-tenant. 4. In the return of income for the asst. yr. 1982-83, while declaring a total income of Rs. 25,430, the assessee had not declared any income from the building constructed and occupied by the sub-tenant at No. 35-A, K. H. Road, Bangalore. In the assessment, the ITO made an addition of Rs. 2,88,000 as "income from house property" on the ground that the assessee having exercised her right of forfeiture under the lease deed, had become the owner of the building. The amount was quantified on the basis of the assessees claim for compensation against the sub-tenant at the rate of Rs. 29,700 per month for wrongful use and occupation of the building. On that basis, the ITO fixed the annual letting value of the property at Rs. 3,56,400 and after allowing the permitted deductions, the house property income was fixed at Rs. 2,88,000.

4. In her appeal, the assessees contention was that her right to ownership of the building had been disputed and since the matter is sub judice, she cannot be held to be the owner of the property for the purpose of IT assessment and as such no inclusion should be made as income from house property. The CIT(A) having accepted the said contention, directed deletion of Rs. 2,88,000 from the assessment, against which the Revenue filed a second appeal to the Tribunal challenging the order of the CIT(A). The Tribunal also upheld the contention of the assessee to the effect that she cannot be held to be the owner of the building till declaration by the Court and that no house property income could be added under s. 22 of the Act.

5. The consistent stand of the Revenue, which is reiterated by Sri H. L. Dattu, learned counsel for the Revenue, is that by virtue of such determination of the lease under s. 111(g) of the Transfer of Property Act and exercise of the right of forfeiture, the assessee had automatically become the owner of the building. The contention of the assessee was that she has not become the owner of the property and that she was entitled only to damages arising out of the breach of contract.

6. It cannot be disputed that the question whether the lease is validly terminated and whether the forfeiture has come into effect are the issues pending adjudication in the suit before the City Civil Court and unless a final determination is made thereon, the question of the assessee becoming the owner of the building does not arise. In the facts and circumstances, the CIT(A) as well as the Tribunal have upheld the assessees contention on the ground that since the dispute between the assessee and the sub-tenant has arisen out of a contract, which is pending adjudication before a Civil Court, it cannot be held that there is an automatic forfeiture of the lease, and as such, the assessee cannot be held to have become the owner of the building in question. In this context, the Tribunal has also rightly held that the right of an assessee in regard to a matter in dispute in a Court of law would get transformed into real and permanent one only when the Court finally expresses its opinion. Till then, it is an inchoate or uncertain right. It is further clear that in case of forfeiture under s. 111(g) of the Transfer of Property Act, the Court has a discretionary power to intervene and give relief against forfeiture as provided under ss. 114 and 114A of the Transfer of Property Act. Therefore, till the issue is finally decided in the civil proceedings, the right of the assessee is inchoate in nature. We are, therefore, in full agreement with the view taken by the Tribunal in holding that no house property income in the case of the assessee can be added under s. 22 of the Act.

7. The next question is in regard to the order of the CIT(A) directing the ITO to tax the lease amount due to the assessee in respect of the accounting period under the lease agreement. Aggrieved by this part of the order, the assessee had appealed to the Tribunal. The assessees contention was that she was following cash system of accounting so far as lease rent is concerned and, on the facts of the case, it is chargeable only under the head "income from other sources". As the assessee had determined the lease by issue of a legal notice w.e.f. 24th Feb., 1980, she is entitled to mesne profits or compensation for wrongful use and occupation from that day onwards in case her claim for forfeiture is upheld by the Court. Since the assessee is consistently following the cash system of accounting, even if it is compensation for wrongful use and occupation, it would be assessable in the year of receipt. The assessee had specifically made a note to the statement furnished with the return for 1982-83 that the income received as rent or compensation would be offered for taxation in the year of receipt. Such a commitment has also been made in the asst. yrs. 1984-85, 1983-84 and 1981-82 and it was mentioned that the same has been accepted by the Department. In the circumstances, the Tribunal has rightly held that whether rent or compensation which the assessee is entitled to receive, would be chargeable only in the year of receipt. We do not find any error in this finding of the Tribunal either.

8. In view of the above discussion, we answer both the questions in the affirmative and against the Revenue.