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Issues Involved:
1. Whether the CIT(Appeals) was justified in deleting the sum of Rs. 4,48,345 as income from house property in the absence of a registered deed of conveyance. 2. Application of section 60 of the Income-tax Act, 1961 by the Assessing Officer. 3. Relevance of the judgments in the cases of CIT v. Ganga Properties Ltd. and Madgul Udyog v. CIT. Detailed Analysis: Issue 1: Deletion of Income from House Property The primary controversy revolves around whether the CIT(Appeals) was justified in deleting the sum of Rs. 4,48,345 as income from house property. The assessee-company transferred certain godowns to its sister concern, M/s Surrendra Overseas Ltd. (SOL), without executing a registered deed of conveyance. The assessee-company handed over possession and received full consideration for the property. The Assessing Officer assessed the rental income under section 22 of the Income-tax Act, 1961, arguing that the assessee-company continued to be the 'legal owner' due to the absence of a registered deed. The CIT(Appeals) deleted this addition, leading to the revenue's appeal. Issue 2: Application of Section 60 The Assessing Officer applied section 60 of the Income-tax Act, 1961, to assess the rental income. The CIT(Appeals) opined that this application was unjustified as the Tribunal's order dated 26-6-1979 did not direct the use of section 60. However, upon remand, the Tribunal had instructed the Assessing Officer to adjudicate the point afresh in accordance with law, without specific restrictions on the application of section 60. The Tribunal found no error in the Assessing Officer's approach and held that the CIT(Appeals) was incorrect in criticizing the application of section 60. Issue 3: Relevant Judgments The Tribunal considered the judgment in CIT v. Ganga Properties Ltd., which held that: - A registered document is necessary for the sale of immovable property. - In Indian law, there is only one owner, the legal owner. - Income from property refers to the income of the legal owner, who is assessable to taxes. The Tribunal distinguished the recent judgment in Madgul Udyog v. CIT, which dealt with the business of constructing and selling flats as stock-in-trade, not as capital assets. The Tribunal noted that the Madgul Udyog case did not overrule the principles established in Ganga Properties Ltd. but distinguished it based on the nature of the business involved. Conclusion The Tribunal concluded that the legal ownership of the property remained with the assessee-company due to the absence of a registered deed of conveyance. As per sections 22 to 24 of the Income-tax Act, 1961, the legal owner is liable for tax on the bona fide annual value of the property. The Tribunal emphasized that the income from property is an artificially defined income, and the liability arises from ownership, not from the receipt of income. Therefore, the assessee-company was liable to pay tax on the rental income of Rs. 4,48,345, and the CIT(Appeals) erred in deleting the addition made by the Assessing Officer. Final Judgment The Tribunal vacated the order of the CIT(Appeals) and confirmed the order of the Assessing Officer, allowing the revenue's appeals.
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