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TMI Blog1992 (3) TMI 12X X X X Extracts X X X X X X X X Extracts X X X X ..... her of these two flats. The flats being immovable property, no title in respect thereof could pass in favour of the assessee without a deed of conveyance being executed by Western Building Corporation and duly registered with the Registrar of Assurances. Since such deed was not executed and/or registered in favour of the assessee, it was submitted on behalf of the assessee that the said rental income could not be assessed in the hands of the assessee and the same was assessable in the hands of the builder, Western Building Corporation. The assessee placed reliance on the decision of this court in CIT v. Ganga Properties Ltd. [1970] 77 ITR 637. In addition to the aforesaid submissions in the course of the assessment proceeding, it was also, inter alia contended on behalf of the assessee that various clauses of the agreement dated December 4, 1972, when read as a whole, clearly show that the transfer in question was revocable within the meaning of section 63 of the Income-tax Act, 1961, and in view of the provisions of sections 60 and 61 of the said Act, the aforesaid rental income, though received by the assessee, was assessable in the hands of the Western Building Corporation. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... following question of law has been referred to this court : "Whether, on the facts and in the circumstances of the case, the rental income derived by the assessee was assessable in the hands of the assessee as income from other sources under section 56 of the Income tax Act, 1961 ?" The reference was earlier disposed of by this court on October 3, 1988, and the said question was answered in the negative and in favour of the assessee on the concessions made by the learned advocates, following the decision of this court in the case of CIT v. Ganga Properties Ltd. [1970] 77 ITR 637. Subsequently, the judgment delivered in this case was recalled by the order dated August 31, 1989, and this case, along with other cases of the assessee and his wife, Smt. Bilas Razdan, were set down for further hearing. We have heard at length the submissions of the learned advocates of the parties. Learned counsel for the assessee, Mr. Poddar, made lengthy submissions to persuade us to hold that the assessee has no assessability in respect of the income derived from the flats by way of letting. His argument is two-pronged. In the first instance, he contended that the assessee being in possession o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etermination since the question centres on the assessability of the assessee in respect of the rents from the flats which he holds under a sale agreement on payment of the consideration for sale, i.e., a holder on part performance under section 53A of the Transfer of Property Act, 1882. Still this issue bears on the question : If the assessee is the owner, the Tribunal should have held him assessable in respect of the rents under the head "Income from house property". The expression "owner" is a many-shaded word and can also include an occupant of the property enjoying all the benefits of an owner in the properties. It is worthy of note that the Legislature itself inserted a new clause (iiia) in section 27 which says "that a person allowed to retain possession of a building or part thereof in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882, shall be deemed to be the owner of that building or part thereof". The debate that learned counsel has raised is perhaps guided by the apprehension of our taking a view that the case is one that attracts section 23 for the purpose of assessment of the rental income in the hands of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... buyer shall pay the premium thereof and shall not surrender or allow the insurance policy to lapse or to be forfeited. The assessee as the buyer is also required to produce to the vendors the policy or policies of such insurance and the receipt for the last premium paid in respect thereof. Under clause 18, the assessee must become a member of a co-operative housing society or a limited company to be formed at the instance of the vendor in the manner laid down in the agreement and the buyer must sign all papers and documents and must do all other acts, deeds and things as the vendor may require of him for safeguarding the interest of the vendor and all the other purchasers of the office rooms in the said building. Clause 18 clearly lays down that violation to comply with any of the provisions of the agreement would mean determination of the agreement and that the earnest money paid by the assessee shall stand forfeited to the vendors. In clause 35 of the said agreement for sale, it has been mentioned that, if the buyer neglects, omits or fails for any reason whatsoever to pay to the sellers any of the amounts, as and when the same would become due and payable by the buyer, under t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . CIT [1958] 33 ITR 492 (Cal). In that case, the court held that, even where there is an out and out sale, there will be a revocable transfer within the meaning of section 16(1)(c) of the Indian Income-tax Act, 1922, corresponding to section 61 of the Income-tax Act, 1961, if the transaction provides for retransfer of the income or the assets to the transferor or even if it merely gives him a right to reassume power over the income or the assets ; and this will be so in both cases whether the retransfer or reassumption of power is direct or indirect. The qualification that the power to cause a retransfer of the assets is not to be exercised by the seller except in certain contingencies is a normal provision, and does not have the effect of taking the transaction out of the first proviso to section 16(1)(c) of the 1922 Act corresponding to section 63(a) of the Income-tax Act, 1961. The proviso says nothing about an absolute or unqualified provision, but covers all provisions whether or not the retransfer or reassumption of power is made dependent on a contingency. The agreement for sale, in the case, clearly contains a provision which, according to Mr. Poddar, makes the said agr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upon breach of Any of the conditions of the lease. The nomenclature of the agreement as sale agreement is immaterial. The clauses as mentioned by learned counsel only show that the right which the assessee has purchased under the sale agreement is in substance a lease right governed by section 111 of the Transfer of Property Act, 1882. The right of the lessor to re-enter may arise under clause (g) of section 111 ibid. A lease may be for perpetuity. Whether a transaction is a lease in perpetuity or not shall have to be inferred from the construction of the various clauses of the instrument. The clauses particularly referred to by him only poignantly show that the right that the assessee had bought was in the nature of a leasehold right. The income derived by letting out the flats held on a lease subordinate to the vendor's right as the lessor shall be income not assessable under the head "Income from house property" but under the head "Income from other sources". On perusal of some other clauses of the agreement for sale besides those referred to by learned counsel, we find that the agreement is not in substance one for sale. Clause (5) of the agreement states, "Nothing containe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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