9911796707
|
Home
Issues:
Assessment of income from property and unpaid purchase price interest in the hands of the vendor. Analysis: The case involved a dispute regarding the assessment of income from a property and interest received on the unpaid purchase price by the vendor. The vendor had entered into an agreement to sell a building, receiving consideration in instalments with interest. The vendee took possession of the building, constructed additional floors, collected rent from tenants, and paid interest on the purchase price. The vendor claimed the interest as income from the property in the return of income. The Income-tax Officer accepted the return, treating the amount as the rental value. However, the Commissioner revised the assessment, considering the notional income from the property and the interest as taxable in the hands of the vendor. The Tribunal held that as the vendor had not declared the income under the head "Income from other sources," the Commissioner could not add it under that head. The Commissioner's powers under section 263 of the Income-tax Act were discussed, emphasizing the need to send the matter back to the Income-tax Officer for reassessment if a particular head of income was not part of the initial assessment. The vendor's liability to be taxed on rental income was analyzed, stating that for the purposes of section 22 of the Act, the vendor could no longer be considered the owner after parting with possession and recognizing the vendee's right to receive rent. The judgment referred to a Supreme Court case to define the term "owner" under section 22 of the Income-tax Act, concluding that the vendee, entitled to receive rental income, should be treated as the owner. The interest received by the vendor was deemed income from other sources, subject to deductions for expenses incurred. The Tribunal's error in not taxing the interest in the vendor's hands due to incorrect reporting was highlighted, emphasizing the Commissioner's power to ensure proper assessment under the correct head. The case was remanded to the Income-tax Officer for reassessment, clarifying that interest on the unpaid purchase price was taxable under "Income from other sources," while rental income was not taxable for the vendor.
|
