1992 (3) TMI 154 - AT - Income Tax

Summary

Issues Involved:
1. Ownership of the land and superstructure (shopping complex).
2. Taxability of rental income and capital gains.
3. Impact of preliminary decrees and the Kerala Joint Hindu Family System (Abolition) Act, 1975.
4. Source of funds for constructing the superstructure.
5. Obligations and representations made by the assessee.

Detailed Analysis:

1. Ownership of the Land and Superstructure:
The piece of land admeasuring 75 cents was initially managed by the Government of Cochin and later by the District Collector, Ernakulam. The management was restored to the joint family by the Government of Kerala in 1966. The High Court of Kerala directed the Government to restore possession of the temples and properties to the joint family in 1973. The land in question was part of the Paramara temple complex and was leased to the assessee in 1971 and renewed in 1973. The preliminary decrees in OS 134/70 and OS 284/74 and the Kerala Joint Hindu Family System (Abolition) Act, 1975, established that the land belonged to the members of the erstwhile joint family as tenants-in-common. The superstructure was constructed by the assessee between 1977 and 1981.

2. Taxability of Rental Income and Capital Gains:
The assessee filed returns for the assessment years 1982-83 and 1983-84, disclosing income from house property and losses from the profession. The Assessing Officer determined the taxable income, including rental income from the shopping complex and capital gains from the sale of shops/offices. The assessee contended that the rental income and capital gains should be taxed in the hands of the joint family members as tenants-in-common. The Tribunal held that the superstructure belonged to the assessee, and the rental income and capital gains were taxable in his individual capacity.

3. Impact of Preliminary Decrees and the Kerala Joint Hindu Family System (Abolition) Act, 1975:
The preliminary decrees in OS 134/70 and OS 284/74 and the Kerala Joint Hindu Family System (Abolition) Act, 1975, converted the joint tenancy into tenancy-in-common. The properties of the joint family, including the temple properties, were to be partitioned, and a scheme for the management of the temples was to be framed at the final decree stage. The preliminary decree declared that document No. 458/74 and consequential documents were not binding on the family and family properties. However, the Tribunal held that the superstructure was constructed by the assessee with his own funds and was not part of the joint family properties.

4. Source of Funds for Constructing the Superstructure:
The construction of the superstructure was funded by advances (Pakidi) from tenants, loans from Gosri Chit Funds and the Bank of Cochin, accumulated savings from Kanikka collections, and the sale of gold bonds. The Tribunal found that the advances and loans were obtained by the assessee in his individual capacity. The assessee failed to provide evidence that the construction was funded by joint family funds. The Tribunal concluded that the superstructure was constructed with the assessee's own funds and not with joint family funds.

5. Obligations and Representations Made by the Assessee:
The assessee represented himself as the owner of the shopping complex in rental agreements and sale deeds. The rental agreements did not indicate that the assessee was acting on behalf of the joint family. The Tribunal found that the assessee collected advance rents and received monthly rents in his individual capacity. The assessee's obligations to render accounts to the joint family members and the preliminary decree's declaration regarding document No. 458/74 did not affect the ownership of the superstructure. The Tribunal held that the superstructure belonged to the assessee, and the rental income and capital gains were taxable in his individual capacity.

Conclusion:
The Tribunal dismissed the appeals, holding that the superstructure (shopping complex) belonged to the assessee in his individual capacity. Consequently, the rental income and capital gains arising from the shopping complex were taxable in the hands of the assessee as an individual. The Tribunal's decision was based on the findings that the construction was funded by the assessee's own funds, and the representations made by the assessee in rental agreements and sale deeds supported his individual ownership of the superstructure.