1981 (2) TMI 60 - HC - Income Tax

Summary

Issues Involved:
1. Ownership of the property.
2. Applicability of s. 53A of the Transfer of Property Act.
3. Determination of annual value of the property.
4. Assessment of property income despite non-receipt of rent.

Summary:

1. Ownership of the Property:
The court held that the assessee-family continued to be the legal owner of the property till 31st May, 1966. The Tribunal pointed out that there could be no two opinions on this matter, as the position of law was clear and settled by the decision of the Supreme Court. The argument that ownership should be correlated to the income enjoyable from the property was not accepted. The court emphasized that the actual enjoyment of the income or rent has little to do with the assessability under ss. 22 and 23 of the I.T. Act.

2. Applicability of s. 53A of the Transfer of Property Act:
The Tribunal rejected the contention based on s. 53A of the Transfer of Property Act because there was no formal agreement of sale in writing as required under that section. The court concurred, noting that the Tribunal had found as a fact that there was no written agreement between the assessee and the company.

3. Determination of Annual Value of the Property:
The ITO included the income from the property computed on the basis of the annual letting value of Rs. 72,000, rejecting the assessee's contention that the municipal valuation should be used. The AAC and the Tribunal upheld this decision, stating that the rent of Rs. 6,000 per month was the standard rent by virtue of s. 5(1)(b)(iii) of the Bombay Rent Control Act. The court noted that the determination of the annual value of the property was essentially a question of fact and no question of law could arise therefrom.

4. Assessment of Property Income Despite Non-Receipt of Rent:
The court held that the assessee could be assessed on the income from the property even though it had not realized any rent for the financial year 1965-66. The court pointed out that the assessment of property income under the I.T. Act is based on the annual value of the property as determined under ss. 23 to 27, which may not necessarily correspond with the actual income received. The court rejected the contention that there was a diversion of income by overriding title, noting that the facts did not establish any such agreement compelling the assessee to waive the rent. The court also referred to its earlier decision in Kartar Singh v. CIT [1969] 73 ITR 438, which held that even where the owner has diverted the income from house property at source, he would continue to be liable to pay income-tax on the annual letting value.

Conclusion:
The court answered the referred question in the affirmative and in favor of the department, holding that the amount of Rs. 72,000 could be treated as part of the assessee's total income for assessment year 1966-67. The department was entitled to its costs, with counsel's fee set at Rs. 300.