1971 (9) TMI 2 - SC - Income Tax

Assessee s property vested in Custodian of Evacuee Property in Pakistan whether the assessee can said to be the owner of such property and income from it could be assessed in his hands - assessee is not the owner because he cannot exercise any rights in that property except with the consent of the Custodian - held that the assessee was not the owner of Nedous Hotel during the relevant assessment years for the purpose of section 9 of the Act. Hence these appeals fail and they are dismissed

Summary

Issues Involved:
1. Ownership of property for computation of income under Section 9 of the Income-tax Act, 1922.
2. Interpretation of the term "owner" under Section 9 of the Act.
3. Legal implications of the Pakistan (Administration of Evacuee Property) Ordinance, 1949 on ownership.

Detailed Analysis:

1. Ownership of Property for Computation of Income Under Section 9 of the Income-tax Act, 1922:
The primary issue was whether the assessee continued to be the owner of the property for the purposes of income computation under Section 9 of the Income-tax Act, 1922. The Delhi High Court had previously answered this question in the negative, leading the assessee to appeal.

2. Interpretation of the Term "Owner" Under Section 9 of the Act:
The court examined the term "owner" as used in Section 9 of the Act, which states: "The tax shall be payable by an assessee under the head 'Income from Property' in respect of the bona fide annual value of property consisting of any buildings or lands appurtenant thereto of which he is the owner." The court had to determine whether "owner" referred to the legal owner or the person with a beneficial interest in the property. The assessee argued that despite the property vesting in the Custodian, they retained ownership as they had the ultimate right to the property. The revenue countered that "owner" referred to the person entitled to the income from the property, which in this case was the Custodian.

3. Legal Implications of the Pakistan (Administration of Evacuee Property) Ordinance, 1949 on Ownership:
The court analyzed the provisions of the Ordinance, which vested all evacuee property in the Custodian and granted the Custodian extensive powers over the property, including taking possession, realizing income, and even selling the property. The Ordinance aimed at the administration of evacuee property and not its management, implying a transfer of ownership rights to the Custodian. The court concluded that the Custodian, having all the powers of an owner, was the legal owner of the property. The evacuee, in this case, the assessee, only retained a residual beneficial interest, which did not equate to ownership under Section 9 of the Act.

Conclusion:
The court concluded that for the relevant assessment years, the assessee was not the owner of the Nedous Hotel for the purposes of Section 9 of the Income-tax Act, 1922. The Custodian, vested with all ownership rights, was deemed the legal owner. Therefore, the appeals were dismissed, and the assessee's claim was denied. No order as to costs was made in these appeals.