1990 (10) TMI 149 - AT - Income Tax

Summary

Issues:
- Assessment of property income in the hands of the legal owner.
- Interpretation of legal ownership in the absence of a registered document.
- Application of Andhra Pradesh High Court decisions in determining property ownership for tax assessment purposes.

Analysis:
1. The case involved two appeals by the revenue against the orders of the Appellate Assistant Commissioner for the assessment years 1981-82 and 1982-83. The primary issue revolved around the assessment of property income in the hands of the legal owner, Miss Surma M. Pestonjee, who had let out an immovable property in Hyderabad. The property was purportedly sold in November 1980, but the transfer was not formalized by a registered document until April 1982.

2. The Income-tax Officer assessed the property income for the entire year for the two assessment years under consideration, arguing that since there was no registered transfer of the property to the vendee during the relevant years, the assessee continued to be the legal owner. In contrast, the Appellate Assistant Commissioner held that the income should only be assessable in the assessee's hands up to October 1980, following the decision in the case of CIT v. Sahney Steel & Press Works (P.) Ltd.

3. The revenue contended that income from property must be assessed in the hands of the legal owner, emphasizing that under Indian law, there is no distinction between a 'beneficial owner' and a 'legal owner.' They relied on various judicial precedents, including decisions by the Calcutta High Court and the Privy Council, to support their argument.

4. The assessee, on the other hand, relied on the decision in the case of Sahney Steel & Press Works (P.) Ltd. and the Supreme Court case of R.B. Jodha Mal Kuthiala to argue that the transferee should be considered the owner of the property in the relevant previous year, even without a registered conveyance deed.

5. The Tribunal analyzed the legal concept of ownership in the context of property income assessment, emphasizing that legal ownership of immovable property can only be transferred by a registered document. They referred to the Andhra Pradesh High Court decisions, particularly in the case of Nawab Mir Barkath Ali Khan, to establish that income from property must be assessed in the hands of the legal owner, even in the absence of a registered conveyance deed.

6. Citing additional cases such as S.B. [House & Land] (P.) Ltd. v. CIT and CIT v. Trustees of H.E.H. the Nizam's Miscellaneous Trust, the Tribunal reinforced the principle that legal ownership remains with the seller until a registered document is executed. Therefore, they concluded that the income from the property in question for the relevant period should be assessed in the hands of the assessee, upholding the Income-tax Officer's decision and allowing the revenue's appeals.