INCOME TAX OFFICER v. SMT. SARLA PAREEK
[Citation -1984-LL-0523-2]

Citation 1984-LL-0523-2
Appellant Name INCOME TAX OFFICER
Respondent Name SMT. SARLA PAREEK
Court ITAT
Relevant Act Income-tax
Date of Order 23/05/1984
Assessment Year 1979-80
Judgment View Judgment
Keyword Tags income from house property • private limited company • concept of real income • annual letting value • immovable property • conveyance deed • special bench • annual value • legal owner • legal title • real owner
Bot Summary: The assessee's case before the ITO was that the flat had remained vacant during the whole of the accounting year when she was not the owner of the flat and o annual value thereof could added to her income. The ITO observed that she was held to be the owner of the felt in the earlier year and in view of the decision of the Calcutta High Court in the case of Liquidator, Mohmudabad Properties Ltd. vs. CIT 83 ITR 470, the annual value thereof was liable to be added in her income. Reference was made to the decision of the Calcutta High Court in the case of CIT vs. Ganga Properties Ltd. 77 ITR 637, wherein it has been held that income from property could be assessed only in the hands of the legal owner and the legal owner is the person to whom property has been transferred by way of registered document in case of property of the value of Rs. 100 and above. CIT vs. Sahay Properties Investment Co. 34 CTR 382: 144 ITR 357, wherein after considering the decision of the Calcutta High Court in Ganga Properties Ltd. 77 ITR 637 their Lordships were of opinion that the most important power of ownership is the right to exclude others from possession and the proprietary right is essentially a guarantee of the exclusion of other persons from the use of handling of the thing. What the Calcutta High Court had decided was that unless the owner had transferred his rights in the immovable property he was still liable to tax on the annual value of the house owned by it. 2 SOT 103, that when the assessee had dominion over the flats allotted to them, though there were certain common obligations peculiar to the multistoried structures which were the responsibilities of the company they could be treated as the owners of the flats and the real income received by them is their income from house property and not income from other sources. The whole facts and circumstances would have to be seen and it would to be found out as to whether the owner is being taxed to annual value in accordance with the decision of the Calcutta High Court in Ganga Properties Ltd. In that case, the assessee may be exempted but if it is found as matter of fact that the registered owner is not being considered to be its owner either by him or by the department and has been effectively the full owner for all purposes she may be liable for it.


H. S. AHLUWALIA, J. M. This appeal involves very ticklish issue. dispute relates to annual value of flat at 15, Sarat Chattarjee Avenue, Calcutta-29, for purpose of computation of assessee's income. assessee's case before ITO was that flat had remained vacant during whole of accounting year when she was not owner of flat and, therefore, o annual value thereof could added to her income. ITO, however, observed that she was held to be owner of felt in earlier year and in view of decision of Calcutta High Court in case of Liquidator, Mohmudabad Properties Ltd. vs. CIT (1972) 83 ITR 470 (Cal), annual value thereof was liable to be added in her income. He, therefore, added sum of Rs. 15,000 in this behalf. On appeal, it was argued before AAC that though assessee had been given occupation of flat, conveyance deed had not been registered in her name during relevant account year. Therefore, she was not legal owner of flat and so national income could arise to her. Reference was made to decision of Calcutta High Court in case of CIT vs. Ganga Properties Ltd. (1970) 77 ITR 637 (Cal), wherein it has been held that income from property could be assessed only in hands of legal owner and legal owner is person to whom property has been transferred by way of registered document in case of property of value of Rs. 100 and above. AAC accordingly deleted addition. Revenue has come up in second appeal before us. We have heard representative of parties at length in this appeal. On behalf of Revenue, it was contended that though Calcutta High Court had decided in manner in which AAC has taken it much water had flown through into ganges thereafter. In this behalf reference was made to commentary at p. 325 of Law and Practice of Income-tax (7th Edn. (1976) Vol. I) by Kanga and Palkhivala which reads as under: "The Calcutta and Bombay High Courts have held that till deed of conveyance is executed seller should be assessed under this section as owner" even if he ha put purchaser in full possession of property and has received sale of property and has received sale price. This unduly strict view may result in double taxations seller would continue to be assessable under this section in respect of bona fide annual value while buyer would be assessable under heard "Income from other sources" in respect of rents received by him from tenants who have attorney to him. These decisions must be regarded as incorrect in light of Supreme Court's judgment in Jodhamal Kuthiala vs CIT (1971) 82 ITR 570. See also decision in (1970) 83 ITR 464 in which it was held that assessee whose house property vested in Custodian of Evacuee Property cannot be assessed under this head since word "owner" must mean, in context of this section, person who can exercise rights of owner and is entitled to income from property; and that this section cannot be so construed. "It is true that equitable considerations are irrelevant in interpreting tax law. But, these laws, like all other laws, have to be interpreted reasonably and in consonance with justice. circumstances of case may indicate that assessment should be made not on person who has bare husk of legal title but on person who has beneficial ownership of property in practical sense." It was also urged that concept of legal ownership has undergone drastic change in modern time. These days we do not have any person as exclusive owner of any building. land normally belonged to somebody else and due to construction of multistoried building thereon same portion of land is under occupation of several persons in certain proportions according to utility they derived from flat they have occupied. ownership in sense in which Calcutta High Court took it has become somewhat obsolete conception. Reference is also made to decision of Patna High Court in case of Addl. CIT vs. Sahay Properties & Investment Co. (1983) 34 CTR (Pat) 382: (1983) 144 ITR 357 (Pat), wherein after considering decision of Calcutta High Court in Ganga Properties Ltd. (1968) 77 ITR 637 (Cal) their Lordships were of opinion that most important power of ownership is right to exclude others from possession and proprietary right is essentially guarantee of exclusion of other persons from use of handling of thing. fact that assessee was not registered owner did not stand in way of his being taxed on annual letting value when he had been empowered to use property in whatsoever manner he like to receive and enjoy instruct thereof with further right to obtain deed whenever he liked. similar decision has been given by Madras High Court in P. Joseph Swaminathan vs. CIT (1984) 145 ITR 198 (Mad) wherein again it has been held that province of ITO to din out who is real owner of property so as to fix liability for income-tax on that owner irrespective of fact that property stands registered in name of another person. It appears that there is some force in Departmental contention and Calcutta High Court decision cannot straight away help assess. What Calcutta High Court had decided was that unless owner had transferred his rights in immovable property he was still liable to tax on annual value of house owned by it. It does not necessarily follow that no other person who actually derives income from said property and derives income from said property and does not pay it to owner can never be liable to tax on same. He may not be liable to tax on national income. But if he has earned any income, concept of real income would render him liable to tax. Recently, as Special Bench of Tribunal had no occasion to consider question of liability of assessee in respect of annual value for flat in multistoried building maintained and managed by private limited company which was technically owner of land. Although assessee was not strictly owner in technical sense of term, it was held by Special Bench in ITO vs. R. K. Sawhney & Ors. (1983) 2 SOT 103 (Del) (SB), that when assessee had dominion over flats allotted to them, though there were certain common obligations peculiar to multistoried structures which were responsibilities of company they could be treated as owners of flats and real income received by them is their income from house property and not income from other sources. In present case, ITO has already stated that in earlier year annual value of this flat was included in assessee's income in view of decision in (1972) 83 ITR 470 (Cal). We do not know what had happened to case of that year. What had happened to case of that year. whole facts and circumstances would have to be seen and it would to be found out as to whether owner is being taxed to annual value in accordance with decision of Calcutta High Court in Ganga Properties Ltd. (supra). In that case, assessee may be exempted but if it is found as matter of fact that registered owner is not being considered to be its owner either by him or by department and has been effectively full owner for all purposes she may be liable for it. full facts in matter have to be found out and them same case be decided. appeal is accordingly accepted and matter is restored back to file of AAC for fresh decision in light of our aforesaid observations. In result, appeal shall be deemed to have been allowed for statistical purposes. *** INCOME TAX OFFICER v. SMT. SARLA PAREEK
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