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TMI Blog1985 (3) TMI 110X X X X Extracts X X X X X X X X Extracts X X X X ..... net addition of Rs. 39,830. This addition was disputed in the appeal filed before the Commissioner (Appeals). The appeal was also taken up for hearing. The Commissioner (Appeals) was of the view that property income till date of registration was to be assessed in the assessee's hands and had even heard the assessee's objection therein, as he had obviously contemplated enhancement. The assessee objected to jurisdiction of the Commissioner to enhance an income by taking into consideration a new source of income. Meanwhile, the matter was brought to the notice of the administrative Commissioner, who found that not all flats which had been handed over to the purchasers were yet registered in their names, though the agreement for sale provided for registration on completion of the flats. He took the view that the 'notional income' from these flats had to be assessed in the assessee's hands as income from property. He issued a notice under section 263 of the Income-tax Act, 1961 ('the Act') for including such income in the assessee's hands. 3. The assessee objected to the Commissioner's notice under section 263 both on the question of jurisdiction and merits. The fact that the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as, subsequently, confirmed by the Supreme Court. He, therefore, claimed that the view expressed by the Andhra Pradesh High Court in the case as followed by the Commissioner should be deemed to have been impliedly overruled along with the view of the Calcutta High Court in the case of Ganga Properties Ltd. and the similar view of the Bombay High Court in the cases of CIT v. Union Land Building Society (P.) Ltd. [1972] 83 ITR 794, CIT v. Zorostrian Building Society Ltd. [1976] 102 ITR 499 and some other cases though rendered later. He claimed that earlier the Bombay High Court's view in the case of CIT v. Modern Flats (P.) Ltd. [1967] 65 ITR 67. The Punjab and Haryana High Court in the case of Smt. Kala Rani v. CIT [1981] 130 ITR 321 (where liability was confirmed in the case of purchaser) and the Madras High Court in the case of Mrs. M. P. Gnanambal v. CIT [1982] 136 ITR 103 laid down incorrect law and cited few other cases which may not be strictly relevant to the issue besides citing the decision of the Tribunal, Special Bench in ITO v. R.K. Sawhney [1982] 2 ITD 207 (Delhi) which supported his contention that mere title can not fasten liability. He contended that what is contem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e legal owner. He also pointed out to the decision of the Supreme Court in the case of CIT v. T. N. Aravinda Reddy [1979] 120 ITR 46, where it was held that relief under section 54 of the Act was admissible to the assessee on the basis that the word 'purchased' or 'sale' should have wider interpretation in a commercial sense and not with reference to a law taxation. He argued that the 'owner' should also be interpreted in the same popular sense. He also claimed that the authorities are not consistent in their view as the flat owners in possession have already been assessed on their income and that the present attempt amounts to double taxation. He contended that there is no consistency even in the same assessment as handing over possession is treated as sale for computation of income from sale itself as business income but not so for the purposes of computation of income from property. 6. The learned departmental representative took us over the provisions of the Transfer of Property Act, 1882, the Registration Act and the Stamp Act. He pointed out that a registered deed of conveyance alone can confer legal ownership even as held in the cases of Ganga Properties Ltd. and Zorostria ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted towards cost. The agreement also assures peaceful possession and enjoyment of the property to the purchaser from the date of his possession. Agreement also makes it clear that the cost of registration has to be borne by the purchaser. The schedule to the agreement identifies the flat under agreement of sale. The assessee has consistently reckoned the date of handing over possession as the date of sale in its accounts year after year and such computation has been accepted for the purposes of computation of business income subject to other adjustments warranted by law. These flats have also been registered sooner or later in regular sale deeds in a standard form. The fact that possession had already been handed over is mentioned in the final formal sale deed. The assessee has filed the dates on which the registrations have been effected. There has been a gap between the date of handing over of possession and registration. Meanwhile, each flat was assigned a different municipal number and the purchaser was assessed to municipal tax in his own name. It is contended that delay in registration had been partly due to uncertainties of the urban land ceiling laws. the failure of the pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e decision of the Supreme Court was rendered in the context of the estate duty law, the inference that taxation laws should follow 'legal' ownership in the view that concept of beneficial ownership is unknown in the Indian property laws does not appear to be unqualified even as a very general proposition. 9. We do not, however, have to go into the larger question of ownership in the absolute sense. For the purpose of depreciation, the ownership of asset in question is a precondition and the issue may have to be considered in the stricter sense. Even there, the Allahabad High Court in the case of U. P. State Agro Industrial Corpn. Ltd. has preferred a more liberal view though the Delhi High Court in the case of Hindustan Cold Storage Refrigeration (P.) Ltd. had taken a stricter view. But this controversy, in our opinion, need not detain us for long. For the purposes of section 22, we are concerned with computation of income and it stands to reason that ownership has to be understood in that context. It is not correct to say, as canvassed by the learned counsel for the assessee that the words 'of which the assessee is the owner' in section 22 qualifies only the words 'annual valu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cause either party sought to back out of the transaction but only because registration was delayed due to reasons beyond the control of the parties. Unless there were such reasons beyond control, we cannot assume, as had been done by the Commissioner, that the seller merely tried to put off registration when no facts or purpose for such an action is mentioned or indicated. As pointed out by the Supreme Court in R. B. Jodha Mal Kuthiala's case extracted by the Patna High Court in Addl. CIT v. Sahay Properties Investment Co. (P.) Ltd. [1983] 144 ITR 357 while referring to section 9 of the 1922 Act analogous to section 22 of the 1961 Act. As mentioned earlier that section seeks to bring to tax income of the property in the hands of the owner. Hence, the focus of that section is on the receipt of income. [Emphasis supplied] The word 'owner' has different meanings in different contexts. The High Court then proceeded to cite various authorities like Stroud's Judicial Dictionary (referred by the Supreme Court) as well, Pollock on Jurisprudence, Dias on Jurisprudence and Paton's Text-book on Jurisprudence for the following conclusion stated in Stroud's Judicial Dictionary as what 'owner' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccept the revenue's interpretation in this case, the income will be taxed in one hand while it is enjoyed by another who is a total stranger. The fact that the income from property computed under section 22 is 'notional' can only mean that it is measured notionally as in the case of self-occupied property or in the case of tenanted property with reference to the rent which it may fetch if let from year to year without going by actual rent received alone. It cannot mean that one person's income is taxed in the hands of another notionally. Unless as under section 64 of the Act, there are specific provisions to include income of one in the hands of another, there is absolutely no warrant for such an attempt. No doubt, there had been some conflict of views among the High Courts on this point. But, since the Supreme Court has categorically laid down that ownership is with reference to income and since it is the assessee's claim that it had no right over the income as per agreement of sale and that the claim that it had not enjoyed any income is a matter of record, we should accept the assessee's claim. 10. Since the revenue has sought to bank upon the decision of the Andhra Pradesh Hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r section 22, we could not have possibly held that, say, the rental income by one of the purchasers in possession on hiring out the premises or capital gains on transfer of his right to possession and other rights under the agreement will not be assessable at all, since such income will still be assessable as income from other sources or capital gains as it is income and has income character. No doubt, the authorities have been inconsistent in having a different concept of sale for the purposes of computation of business income and for income from property. Even assessing such inconsistency is permitted by law by providing different basis for computing the income from the two sources, we do not think it is open to the revenue to be inconsistent in taxing the same income in two hands even if two different persons are sought to be taxed under the different heads of income. We are informed that in the case of most of the purchasers in possession, the assessments have been made and tax collected and such assessments by and large, became final wherever there is liability. On this sole ground that there cannot be double taxation of the same income, the order of the Commissioner under sec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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