1985 (3) TMI 110 - AT - Income Tax

Summary

Issues Involved:
1. Jurisdiction of the Commissioner under section 263 of the Income-tax Act, 1961.
2. Ownership and taxation of income from property.
3. Double taxation of the same income.
4. Consistency in the treatment of income for tax purposes.

Detailed Analysis:

1. Jurisdiction of the Commissioner under section 263 of the Income-tax Act, 1961:

The assessee questioned the jurisdiction of the Commissioner under section 263, arguing that an appeal was pending before the first appellate authority, which should bar the Commissioner's jurisdiction. This argument was rejected, with the Tribunal affirming that the pendency of an appeal does not limit the Commissioner's jurisdiction under section 263. The authorities cited by the Commissioner supported this conclusion.

2. Ownership and taxation of income from property:

The primary dispute was whether the assessee should be taxed on the 'notional income' from flats for the period between handing over possession and the registration of the sale deed. The Tribunal acknowledged that the assessee continued to be the nominal or 'legal' owner of the flats until registration, despite having received full consideration and handed over possession. The Tribunal referred to section 53A of the Transfer of Property Act, which protects the purchaser's rights but does not make them the 'owners' in the strict sense. The Tribunal noted that the Supreme Court in the case of R. B. Jodha Mal Kuthiala v. CIT emphasized that 'owner' in the context of section 22 of the Act means a person who can exercise his right over the property as the owner during the relevant period. The Tribunal concluded that the purchasers, being in possession and enjoyment of the flats, were effectively the 'owners' for tax purposes, despite the legal title remaining with the assessee.

3. Double taxation of the same income:

The Tribunal highlighted that the income from the property cannot be taxed in the hands of both the assessee and the purchasers. It noted that the purchasers had already been assessed on the income from the flats in their own income-tax and wealth-tax assessments. Citing the Supreme Court decision in Laxmipat Singhania v. CIT, the Tribunal reiterated that the same income cannot be taxed twice. Therefore, taxing the income in the hands of the assessee would result in double taxation, which is impermissible.

4. Consistency in the treatment of income for tax purposes:

The Tribunal observed that there was inconsistency in the revenue's approach, where the same transaction was treated differently for computing business income and property income. The Tribunal emphasized that the revenue should not be inconsistent in taxing the same income under different heads or in the hands of different persons. The Tribunal also referenced Board's Circulars, which supported a reasonable approach in such circumstances, indicating that individual members of a co-operative housing society should be assessed on the income of their flats, even if the ownership rested with the society.

Conclusion:

The Tribunal set aside the order of the Commissioner under section 263, restoring the order of the ITO. It also reinstated the appeal regarding the quantum of income, directing the Commissioner (Appeals) to dispose of it afresh in accordance with the law. Both appeals by the assessee were allowed.