1986 (8) TMI 112 - AT - Income Tax

Summary

Issues Involved:
1. Ownership of the property at 2B, Shashi Sekhar Bose Road, Calcutta.
2. Adherence to the previous order by the predecessor CIT(A).
3. Allowance of expenses in the computation of rental income under the head 'other sources'.

Detailed Analysis:

1. Ownership of the Property:

The primary issue was whether the assessee was the owner of the property at 2B, Shashi Sekhar Bose Road, Calcutta. The CIT(A) upheld the ITO's computation that the assessee was not the owner of the property. The assessee argued that it had been in possession of the property for several years, enjoying rental income, and there was no other claimant. The ITO noted that the property was purchased by Shri P.L. Murarka in his own name and was still under his occupation. The ITO emphasized that the filing of an affidavit or passing a resolution by the Board of Directors did not change the legal position regarding ownership, as there was no legal transfer or registration of the deed. The CIT(A) referred to Section 54 of the Transfer of Property Act, 1832, and noted that the affidavits and resolutions were ineffective in transferring ownership. The Tribunal upheld the CIT(A)'s decision, citing the Supreme Court's ruling in Alapati Venkataramiah vs. CIT, which stated that title to assets could not pass without a registered conveyance.

2. Adherence to the Previous Order by the Predecessor CIT(A):

The assessee contended that the CIT(A) erred in law by not following the order of his predecessor given in the past. The CIT(A) noted that the predecessor AAC had ignored the provisions of Section 54 of the Transfer of Property Act. The Tribunal agreed with the CIT(A), referencing the Supreme Court's decision in CIT vs. Central India Industries Ltd., which stated that an erroneous order does not confer a right to insist that the error be carried forward. The Tribunal concluded that the CIT(A) was justified in not following the previous erroneous order.

3. Allowance of Expenses in the Computation of Rental Income:

The assessee raised an alternative ground that the CIT(A) erred in not allowing expenses such as Corporation Tax, salary, audit fees, and interest on the loan in the computation of rental income under the head 'other sources'. The CIT(A) found that as the property was not transferred to the assessee, no loan existed, and no interest was payable. The Corporation Tax was payable by the owner, and since the assessee was not the owner, no deduction was allowable. The salary was not deductible as the property was occupied by Shri P.L. Murarka. No materials were provided to justify the deduction of miscellaneous expenses or audit fees. The Tribunal upheld the CIT(A)'s decision, finding no material or justification to interfere with the order.

Conclusion:
The appeals by the assessee were dismissed. The Tribunal upheld the CIT(A)'s decision on all grounds, confirming that the assessee was not the owner of the property, the previous erroneous order need not be followed, and no deductions for expenses were allowable in the computation of rental income.