1962 (5) TMI 47 - HC - Income Tax

Summary

Issues Involved:
1. Jurisdiction of the court under Section 66(2) and Section 66(4) of the Indian Income-tax Act, 1922.
2. Nature of income derived from rent of shops on lands belonging to other parties.
3. Ownership and assessability of income from a house allegedly gifted by the assessee to his wife.

Issue-wise Detailed Analysis:

1. Jurisdiction of the Court under Section 66(2) and Section 66(4) of the Indian Income-tax Act, 1922:

The preliminary objection raised by the income-tax department's counsel was that the court had no jurisdiction to exercise powers under Section 66(4) of the Act in calling for a further statement of the case and a question of law. It was argued that the proper section under which the order dated March 24, 1959, could be passed was Section 66(2) of the Act, and that an application under Section 66(2) must be made within six months of the refusal made under Section 66(1) by the Tribunal. The court examined the application dated July 12, 1958, and the order dated March 24, 1959, and found no explicit mention that the order was passed under Section 66(4) and not Section 66(2). The court concluded that even if the order was assumed to be under Section 66(2), the limitation period could be waived, and no objection regarding limitation was raised at the time of the hearing. Therefore, the court overruled the preliminary objection, stating that the order dated March 24, 1959, was not without jurisdiction and could not be disregarded.

2. Nature of Income Derived from Rent of Shops on Lands Belonging to Other Parties:

The core issue was whether the income of Rs. 2,550 derived as rent from shops on lands belonging to other parties was a revenue receipt assessable to income-tax. The assessee argued that the agreements for the shops were in the nature of usufructuary or self-liquidating mortgages, where the income received was a return of the capital advanced as a loan and not a revenue receipt. The Tribunal, Appellate Assistant Commissioner, and Income-tax Officer treated these agreements as lease agreements. The court carefully examined the agreements dated January 2, 1947, January 8, 1948, June 19, 1947, and May 31, 1948, and concluded that they were self-liquidating mortgages and not lease agreements. The court disagreed with the Tribunal's view and answered the first question in the negative, in favor of the assessee.

3. Ownership and Assessability of Income from a House Allegedly Gifted by the Assessee to His Wife:

The second question was whether there was any material for the finding that the house alleged to have been gifted by the assessee to his wife was still the property belonging to him, making the income from that property assessable as the income of the assessee. The Tribunal found that there was no valid gift as alleged by the assessee and that the transaction was without consideration. The court disagreed with the Tribunal on the point of consideration, stating that the house was transferred in lieu of a dower debt of Rs. 3,000. However, the court noted that the house was still in the name of the assessee in municipal records and that a gift without simultaneous transfer of possession is not valid. The court upheld the Tribunal's finding that the house belonged to the assessee and not his wife, answering the second question in the affirmative and against the assessee.

Conclusion:

The first question was answered in the negative and in favor of the assessee, while the second question was answered in the affirmative and against the assessee. The court directed the parties to bear their own costs.