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Issues involved: Assessment of income from property u/s 22 of the Income-tax Act, 1961.
Summary: The High Court of Bombay was presented with a reference u/s 256(1) of the Income-tax Act, 1961 regarding the assessment of income from a property owned by a private limited company. The company had agreed to sell the property, received part payment, handed over possession, but the conveyance was not completed within the relevant year. The Income Tax Officer (ITO) assessed the income from the property in the hands of the company. The Appellate Commissioner and the Income-tax Appellate Tribunal had differing views on the matter. The court found that a previous decision regarding a similar case was binding, where it was held that even though the purchaser was in possession, without a registered sale deed, the transferee could not be regarded as the "owner" for tax assessment purposes. The court emphasized the relevance of s. 22 of the Income-tax Act, which deals with the assessment of income from house property. The court noted that other High Courts had taken a different view on the matter, considering aspects like the ability to exercise rights of ownership and occupation of the building. Despite the arguments presented, the court upheld the previous decision, stating that they were bound to follow it. The court concluded that the company was liable to be assessed on the income from the property under s. 22 of the Act. The judgment was made in favor of the revenue, but each party was directed to bear its own costs of the reference.
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