MAHARNAI YOGESHWARI KUMARI VS COMMISSIONER OF INCOME- TAX
1997 P T D 585
[213 I T R 541]
[Rajasthan High Court (India)]
Before V.K. Singhal and V. G. Paishikar, JJ
MAHARNAI YOGESHWARI KUMARI
versus
COMMISSIONER OF INCOME-TAX
D.B. Income-tax Reference No. 36 of 1984, decided on 21/07/1994.
Income-tax--
----Income from property ---Assessee executing sale-deed and transferringproperty---Sale-deed presented for registration in December, 1970, but registration only in 1975---Income from property not assessable in hands of assessee for assessment year 1972-73---Indian Income-tax Act, 1961, S.22-- Indian Transfer of Property Act, 1882, S. 53-A.
Under the Income-tax Act the assessing authority has power to assess income from property in the hands of the real owner of the property.
Section 53-A of the Transfer of Property Act, 1882, debars a transferor from exercising the rights of an owner after he has received full consideration and handed over possession under the contract.
The assessee had sold her half share in a property to a trust under an assignment deed, dated September 29, 1970, which was presented before the Sub-Registrar for registration on December 24, 1970. The deed was registered on May 17, 1975. The assessee submitted before the assessing authority that the income from such property could not be assessed in her hands as she was legally divested of her title The assessing authority rejected the assessee's contention and held that the title to immovable property could pass only from the date of registration. The Tribunal came to the conclusion that unless there is transfer of property by a registered sale-deed the title in respect thereof did not pass and the assessee being the owner of the property, the income had to be assessed in the hands of the assessee. On a reference:
Held, that since the assessee had already executed the sale-deed and had presented the same for registration before the Sub-Registrar on December 24, 1970, and the income from the said property was received by the transferee, the assessee could not be considered to be the owner thereof The income from the property was not assessable in her hands for the assessment year 1972-73.
Alpati Venkataramiah v. CIT (1965) 57 ITR 185 (SC); CIT v. Biman Behari Shaw Shebait (1968) 68 ITR 815 (Cal).; CIT v. Ganga Properties Ltd. (1970) 77 ITR 637 (Cal).; CIT v. Jhanzie Tea Association (1989) 179 ITR 295 (Cal.); CIT v. Modem Flats (Pvt.) Ltd. (1967) 65 ITR 67 (Bom.); CIT v. Nawab Mir Barkat Ali Khan (1974) Tax LR 90 (AP); CIT v. (Addl.) v. U.P. State Agro Industrial Corpn. Ltd. (1981) 127 ITR 97 (All.); Gobardhan Bar v. Gana Dhar Bar AIR 1941 Cal 78; Hall and Anderson (P.) Ltd. v. CIT (1963) 47 ITR 790 (Cal.); Hamda Animal v. Avadiappa Pathar (1991) 1 SCC 715; Hiralal Agrawal v. Rampadarath Singh AIR 1969 SC 244; Jodha Mal Kuthiala (R.B.) v. CIT (1971) 82 ITR 570 (SC); Joseph Swaminathan (P.) v. CIT (1984) 145 ITR 198 (Mad). Kala Rani (Smt.) v. CIT (1981) 130 ITR 321 (P & H); Naresh Chandra Dutta v. Grish Chandra Das AIR 1936 Cal. 17; Nawab Sir Mir Osman Ali Khan (Late) v. CWT (1986) 162 ITR 888 (SC); Pal Chowdhury (K.C.) v. CIT (1962) 46 ITR 1 (Cal.); Ramkumar Mills P. Ltd. v. CIT (1989) 180 ITR 464 (Kar).; Ram Saran Lall v. Mst. Domini Kuer AIR 1961 SC 1747; (1962) 2 SCR 474; Savita Mohan Nagpal (Smt.) v. CIT (1985) 154 ITR 449 (Raj.); Sirehmal Nawalkha v. CIT (1985) 156 ITR 714 (Raj.)) and Tilakdhari Singh v. Gour Narain AIR 1921 Pat. 150 ref.
Vineet Kothari for the Assessee.
D.S. Shishodia, Senior Advocate, with S. Bhamdawat for the Commissioner.
JUDGMENT
V.K. SINGHAL, J.---The Income-tax Appellant Tribunal has referred the following question of law arising out of its order, dated September 29, 1979, in respect of the assessment year 1972-73 under section 256(1) of the Income-tax Act, 1961:
"Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that property income of Rs.1,00,228 pertaining to 1/2 share of Tiecicon House, Bombay, is assessable in the assessment of the assessee for the assessment year 1972-73?"
The brief facts of the case which are relevant for the determination of the above question are that the assessee had purchased a 1/2 share in the immovable property known as Tiecicon House from one Shri S.N. Desai by an assignment deed dated March 29, 1967, which was not registered. The assessee had sold the said 1/2 share to Eklingii Trust under an assignment deed dated September 29, 1970, which was presented before the Sub Registrar for registration on December 24, 1970. The deed so presented was registered on May 17, 1975. The assessee submitted before the assessing authority that the income from such property could not be assessed in her hands as she was legally divested of her title by the deed dated September 21, 1970, which was presented for registration on December 24, 1970, and registered on May 17, 1975. The assessing authority rejected the assessee's contention and held that the title to immovable property could pass from the date of registration and he accordingly assessed the income of Rs1,00,228 relating to the 1/1 share of such property in the assessments of the assessee.
On appeal before the Appellate Assistant Commissioner, it was held that the said income could not be added in the total income of the assessee, and the appeal was allowed. The Income-tax Officer was directed to ask the appellant to produce the original copy of the sale-deed so as to verify the fact of registration from the Sub-Registrar and if the fact of registration is found to be correct then to exclude the income of this property from the total income of the assessee.
The matter was challenged by the Revenue before the income-tax Appellate Tribunal and the Tribunal came to the conclusion that unless there is transfer of property by a registered sale-deed, the title in respect thereof does not pass and the assessee being the owner of the property, the income has to be assessed in the hands of the assessee.
The submission of learned counsel for the assessee is that the sale is complete on the date the sale-deed was executed and at any rate on the date it was presented for registration before the Sub-Registrar and, therefore, the assessee ceased to be the owner thereof in view of the provisions of section 47 of the Indian Registration Act. It is also submitted that in accordance with the provisions of section 53-A of the Transfer of Property Act, Eklingji Trust remained in possession of. the property and was owner of the same during the relevant assessment year. It is further submitted that under section 22 of the Income-tax Act, it was Eklingji Trust alone who could exercise its right as owner of the said property, and after the submission of the sale-deed before the Sub-Registrar, the assessee ceased to have any right, title or interest in the said property. The assessee had received the full price and the transferee was in possession of the property and was realising the rent from the tenants.
The submission of learned counsel for the Department is that immovable property in more than Rs.100 could be transferred by a registered instrument only and since there was no sale as defined under section 54 of the Transfer of Property Act, there was no transfer of ownership. Since the registration of the property under section 49 of the Registration Act was complete in 1975, it was only at that point of time that the property was transferred in favour of Eklingji Trust. It is further submitted that in the case of Ram Saran Lall v. Mst. Domini Kuer, AIR 1961 SC 1747, the majority view of the apex Court with regard to the interpretation of the provisions of section 47 of the Registration Act was as under (at page 1749):
"We do not think that the learned Attorney-General's contention is well-founded. We will assume that the learned Attorney-General's construction of the instrument of sale that the property was intended to pass under it on the date of the instrument is correct. Section 47 of the Registration Act does not, however, say when a sale would be deemed to be complete. It only permits a document when registered, to operate from a certain date which may be earlier than the date when it was registered The object of this section is to decide which of two or more registered instruments in respect of the same property is to have effect. The section applies to a document only after it has been registered. It has nothing to do with the completion of the registration and, therefore, nothing to do with the completion of a sale when the instrument is one of sale. A sale which is admittedly not completed until the registration of the instrument of sale is completed, cannot be said to have been completed earlier because by virtue of section 47 the instrument by which it is effected, after it has been registered, commences to operate from an earlier date. Therefore, we do not think that the sale in this case can be said in view of section 47 to have been completed on January 31, 1946. The view that we have taken of section 47 of the Registration Act seems to have been taken in Tilakdhari Singh v. Gour Narain, AIR 1921 Pat. 130. We believe that the same view was expressed in Naresh Chandra Dutta v. Girish Chandra Das, ILR 62 Cal. 979; AIR 1936 Cal 17, and Gobardhan Bar v. Gana Dhar Bar, ILR 2 Cal. 270; AIR 1041 Cal. 78."
The decision in the case of Hiralal Agrawal v. Rampadarath Singh, AIR 1969 SC 244, has also been relied upon where it was observed (at page 250):
"This contention; however, cannot be accepted in view of the decision in Ram Saran Lall v. Mst. Domini Kuer (1962) 2 SCR 474; AIR 1961 SC 1747, where this Court rejected an identical contention. Mr. Desai tried to distinguish that case on the ground that it was based on Muhammadan Law which by custom applied to the parties there. But the decision is based not on any principle of Muhammadan Law but on the effect of section 47 of the Registration Act, the majority decision clearly laid down that the sale there was completed only when registration of the sale-deed was completed as contemplated by section 61 of the Registration Act and, therefore, the Talab-i-Mowasibat made before the date of completion of registration was premature and a suit based on such a demand of the right of pre-emption was premature and must, therefore, fail. "
Reliance has also been placed on the decisions in the case of R.B. Jodha Mal Kuthiala v. CIT (1971) 82 ITR 570 (SC) and CIT v. Biman Behari Shaw Shebait (1968) 68 ITR 815 (Cal.) and also on the case of CIT v. Ganga Properties Ltd. (1970) 77 ITR 637 (Cal.) on the basis of which it has been submitted that it is only the legal owner who is to be assessed in, respect of the income from the property.
Reliance has also been placed on the decision in the case of Hall and Anderson (Pvt). Ltd. v. CIT (1963) 47 ITR 790 (Cal). K.C. Pal Chowdhary v. CIT (1962) 46 ITR 1 (Cal and Alpati Venkataramiah v. CIT (1965) 57 ITR 185 (SC).
We have considered over the matter. Section 47 of the Registration Act provides that a registered document shall operate from the time from which it would have commenced to operate if no registration thereof had been required or made, and not from the time of its registration. From a perusal of section 47 of the Registration Act it is evident that it is applicable in respect of a document which is not required to be registered and if it is required to be registered and is not registered, then it-will be effective from the date of commencement on which it would have commenced to operate, i.e., the date of execution and not from the date of its registration. Section 48 provides that all non-testamentary documents duly registered under the Registration Act, and relating to any property, whether movable or. immovable, shall take effect against any oral agreement or declaration relating to such property, unless where the agreement or declaration has been accompanied or followed by delivery of possession and the same constitutes a valid transfer under any law for the time being in force. In the case of CIT v. Jhanzie Tea Association (1989) 179 ITR 295 (Cal), where the assessee, a non-resident company, entered into an agreement of sale of a tea estate with effect from January 1, 1969, and three other estates with effect from January 1, 1970, but the deeds of conveyance in favour of the purchasers were not executed within the relevant previous year, the Calcutta High Court held that there was diversion of income by overriding title and the income from tea business from January 1, 1969, in the case of one tea estate and from January 1, 1970, in respect of the other three tea estates was not liable to be assessed in the hands of the assessee. While interpreting the provisions of section 9 of the Indian Income-tax Act, 1922, the apex Court has held in the case of R.B. Jodha Mal Kuthiala (1971) 82 ITR 570 that the owner must be the person who can exercise the rights of the owner, not on behalf of the owner but in his own right. Section 54 of the Transfer of Property Act contemplate that for a valid transfer of the ownership an immovable property having value of more than Rs.100 the same should be by a registered document.
Section 22 of the Income-tax Act, 1961, reads as under:---
"22. The annual value of property consisting of any buildings or lands appurtenant thereto of which the assessee is the owner, other than such portions of such property as he may occupy for the purposes of any business or profession carried on by him the profits of which are chargeable to income-tax, shall be chargeable to income-tax under the head Income from house property'. "
The Bombay High Court in the case of CIT v. Modern Flats (Pvt.) Ltd. (1967) 65 ITR 67 held that since the assessee had transferred all its rights, title and interest nothing was left with him and hence the assessee was not liable to tax. The Allahabad High Court in the case of Addl. CIT v. U.P. State Agro Industrial Corporation Ltd. (1981) 127 ITR 97, has held that the assessee is entitled to claim depreciation in respect of the assets even if the conveyance deed has not been executed and registered in his favour. In the case of Smt. Kala Rani v. CIT (1981) 130 ITR 321, the Punjab and Haryana High Court observed that it is not necessary that the assessee must be. the owner of the property by virtue of sale-deed in his favour and he can be assessed in respect of the income derived from the property. This Court in the case of Smt. Savita Mohan Nagpal v. CIT (1985) 154 ITR 449 applied the principles of overriding title even in respect of assessment in income under the head "Income from house property". Since the buyer was already assessed to income-tax in respect of rental income it was held that there is no question of assessing the assessee-firm again. The Madras High Court in the case of P. Joesph Swaminathan v. CIT (1984) 145 ITR 198 has observed that the basis of liability is ownership of the property. The Act does not pin down the assessing authorities to the registered owner of the house property as decisive of the question of assessability. In whosoever name the house property may stand or get registered, it would yet be within the Province of the Income-tax Officer to find out who the real owner of the property is so as to fix the liability for income-tax on that owner in respect of that property. In the case of Nawab Sir Mir Osman Ali Khan v. CWT (1986) 162 ITR 888, the apex Court interpreted the Wealth Tax Act and held that the property in respect of which a registered sale-deed has not been executed, though consideration for sale has been received and possession has been transferred to the purchaser, legally does not belong to the vendee and it continues with the vendor.
Section 22 of the Income-tax Act has created charge on the income in respect of annual value of the property consisting of any buildings or lands appurtenant thereto of which the assessee. is the owner, other than such portions of such property as he may occupy for the purposes of any business or profession carried on by him the profits of which are chargeable to income-tax under the head "Income from house property". The question, therefore, arises as to whether the words "of which the assessee is the owner" can be applicable only to a registered owner or also to such person in whose favour of the registered sale-deed has not been executed but a sale agreement has been executed, possession in the property has been given and consideration for sale has been paid. Section 53-A of the Transfer of Property Act contemplates that when any person contracts to transfer for consideration any immovable property by writing signed by him or on his behalf from which the terms necessary to constitute the transfer can be ascertained with reasonable certainty, and the transferee has, in part performance of the contract, taken possession of the property or any part thereof, or the transferee, being already in possession, continues in possession in part performance of the contract and has done some act in furtherance of the contract, and the transferee has performed or is willing to perform his part of the contract, then, notwithstanding that the contract, though required to be registered, has not been registered, or where there is an instrument of transfer, that the transfer has not been completed in the manner prescribed, therefore, by the law for the time being in force, the transferor or any person claiming under him shall be debarred from enforcing against the transferee and persons claiming under him any right in respect of the property of which the transferee has taken or continued in possession, other than a right expressly provided by the terms of the contract. The proviso to the aforesaid section contemplates that nothing in that section shall affect the rights of a transferee for consideration who has no notice of the contract or of the part performance thereof. If the view that without there being conveyance, the transferor continues to be the owner is taken, still a question arises that the income has not been received by the owner and, therefore, whether the assessment of the transferee could be made by considering that there was diversion of income or the transferor has ceased to have any right in respect of the income received? The section debars the transferor from enforcing his right to the property. In the case of Hamda Animal v. Avadiappa Pathar (1991) 715, it was held by the apex Court that the document after is registration relates back to the date of execution of the sale-deed. Though under the income-tax law, the benefit of ownership is unknown, but still if the income is assessed in the hands of the transferor who has not received the income from the property whether such a transferor can be made liable to make the payment of tax. Various decisions given by different High Courts have taken different views. The view of the Calcutta, Bombay, Delhi and Allahabad High Courts as mentioned above is on one hand, whereas the view of the Andhra Pradesh High Court in the case of CIT v. Nawab Mir Barkat Ali Khan (1974) Tax LR 90 and the Karnataka High Court in the case of Ramkumar Mills (P.) Ltd. v. CIT (1989) 180 ITR 464 is different. So far as the view taken by the apex Court in the case of Osman Ali Khan (1986) 162 ITR 888 is concerned that was in the context of the Wealth-tax Act where the language of the section was different. Section 53-A debars a transferor from exercising the rights of an owner after he has received full consideration and handed over possession under the contract. The transferor in a case where he has executed the document and received consideration and even handed over possession of the property, cannot exercise any right of an owner. This Court in the case of Rajputana Hotels (Pvt.) Ltd. v. State of Rajasthan (D.B. Civil Writ Petition No.511 of 1989, decided on May 27, 1992). while interpreting the provisions of the Rajasthan Land and Building Tax Act, 1964, has held that the person who is entitled to receive the rent in assessable in respect of a property even if it is not registered in his name.
The matter can be considered from another angle. Under the Income-tax Act, the assessing authority has power to assess the income in the hands of the real owner. If ' A' purchases the property in the name of ' X', simply because the property is registered in the name of ' X' , ' A' cannot escape his liability. Secondly, there can be a partnership where the partners have contributed the property and the property has become the partnership property, then no registration is required. the income in such a case has to be assessed in the hands of the partnership-firm and not the individuals who have contributed the property. Thirdly, the transferee who has received the income has ally been assessed in respect of income derived from such property as income from the property, whether section 22 can again be invoked against the transferor in respect of such income, fourthly, in respect of a cooperative society the members thereof are given the property on the basis of allotment letters which may or may not be registered. The members thereafter transfer the property from one hand to another and if it is considered that it is only the registered owner or the society who can be assessed to tax, then the person who has enjoyed the income would escape liability of tax. Fifthly, if it is considered that the registered owner alone is liable to pay tax while the income is received by the transferee, the transferee would enjoy the income but the tax will be levied from the registered owner who may or may not be in a position to make the payment of tax. Sixthly, there could be diversion of income by the overriding title as was considered in the case of Savita Mohan (1985) 154 ITR 449 (Raj), seventhly, if the property is in the name of a trust and the beneficiary is entitled to a specific share of the income, whether the other provisions of the Act can be said to be inoperative and, eighthly, there may be some similar other instances.
In the present case, the sale-deed was executed on September 21, 1970, and was presented before the Sub-Registrar on December 24, 1970. Because of some dispute, the sale-deed was registered on May 17, 1975. Nothing was required to be done by the transferor. The sale-deed was presented before the Sub-Registrar on December 24, 1970. Therefore, the income which was received by the transferee was liable to be taxed only in the hands of the transferee. We may also observe that in the case of Sirehmal Nawalkha v. CIT (1985) 156 ITR 714, this Court has held that the gift in respect of a property having the value of more than Rs.100 is valid even if it is not registered. The decision in the case of Jodha Mal Kuthiala (1971) 82 ITR 570 (SC) was in respect of evacuee property and even if the observations made in that case are taken into consideration; it is evident that the transferor ceased to have any right, title or interest in the property after the execution and presentation of the document before the Sub-Registrar and could not have exercise any right of ownership in any manner. In these circumstances, we are of the opinion that since the assessee has already executed the sale -deed and has presented the same for registration before the Sub-Registrar on December 24, 1970, and the income of the said property was received by the transferee, the assessee cannot be considered to be the owner thereof.
Consequently, the reference is answered in favour of the assessee and against the Revenue and it is held that the Tribunal was not justified in holding that property income of Rs.1,00,228 pertaining to 1/2 share of Tiecion House, Bombay is assessable in the assessment of the assessee forthe assessment year 1972-73. No order as to costs.
M.B.A./11187/FCReference answered.