1989 (6) TMI 51 - HC - Income Tax

Summary

Issues Involved:
1. Transfer of property ownership u/s 22 of the Income-tax Act.
2. Applicability of section 53A of the Transfer of Property Act.
3. Interpretation of "ownership" in the context of income tax liability.

Summary:

1. Transfer of property ownership u/s 22 of the Income-tax Act:
The primary issue was whether the ownership of property is transferred only by execution and registration of a sale deed and not by other acts such as delivering vacant possession and giving all rights of interest in the property, including the right of realization of rent. The court concluded that for the purposes of section 22 of the Income-tax Act, 1961, ownership is transferred only by execution and registration of a sale deed. Despite the delivery of possession and transfer of rights, the assessee remained the legal owner and was liable for tax under section 22.

2. Applicability of section 53A of the Transfer of Property Act:
The assessee argued that under section 53A of the Transfer of Property Act, the transfer of possession and rights should exempt them from tax liability. The court held that while section 53A provides a defense to protect possession, it does not confer legal ownership. Thus, the assessee remained the owner in the eyes of the law until a registered sale deed was executed.

3. Interpretation of "ownership" in the context of income tax liability:
The court examined various precedents, including the Supreme Court's decision in Nawab Sir Mir Osman Ali Khan v. CWT [1986] 162 ITR 888 (SC), which held that properties not transferred through a registered sale deed legally belong to the vendor. The court applied this reasoning to section 22 of the Income-tax Act, concluding that the legal owner is liable for tax on property income. The court also discussed the decision in R. B. Jodha Mal Kuthiala v. CIT [1971] 82 ITR 570 (SC), clarifying that the peculiar circumstances of statutory vesting in that case did not apply to voluntary transactions under section 22.

In conclusion, the court affirmed that the assessee continued to be the owner of the property for tax purposes until a registered sale deed was executed, thereby answering the question in the affirmative and against the assessee.