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1. Taxability of income from vacant lands in the hands of a company when legal ownership vests in individual family members. Analysis: The case involved a dispute regarding the taxability of income from vacant lands at Howrah in the hands of a company, despite legal ownership residing with individual family members. The Income-tax Officer initially assessed the income from vacant lands in the hands of the individual family members on a protective basis. However, the Commissioner (Appeals) upheld the assessment, citing the company's possession of the right to rental income from the lands, even without a formal deed of conveyance. The Tribunal also affirmed the assessment, emphasizing that ownership of assets was not a prerequisite for taxing income from other sources. The Tribunal noted that the company had correctly included the income from the lands in its books and had benefited from using the lands with the consent of the family members. The court considered the partial partition of the family's property, leading to the formation of a company where the family members agreed to transfer properties in exchange for shares. Despite the absence of a formal deed of conveyance, the court applied the doctrine of partial performance under section 53A of the Transfer of Property Act, 1882, to deem the income as chargeable under section 56 of the Income-tax Act. The court distinguished this case from precedent involving family arrangements, emphasizing the formal transfer of property to the company and the issuance of shares as consideration. Additionally, the court rejected the applicability of case law concerning income application and diversion, highlighting the company's possession and enjoyment of the property's income. Furthermore, the court addressed the provisions of section 60 of the Act, clarifying that the income was received by the company after the transfer of the property, not merely by virtue of a transfer of income. As the company continued to possess the property and derive income from it, the court ruled that section 60 did not apply. Ultimately, the court answered the referred question in favor of the Revenue, affirming the taxability of the company's income from the property. In conclusion, the judgment clarified the tax treatment of income from vacant lands held by a company despite legal ownership residing with individual family members. The court emphasized the company's possession and enjoyment of the income, the doctrine of partial performance, and the inapplicability of certain case laws and statutory provisions, ultimately upholding the assessment of the income in the company's hands under the Income-tax Act.
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