Income-tax---

----Reference---Business---Property---Building contractor constructing flats in pursuance of agreements and handing them over---Tribunal whether justified in holding that income from such transaction was not assessable as business income unless the flats were transferred by registered deed and that annual value of such properties was not assessable in its hands under' S.22-- Question of law---Indian Income Tax Act, 1961, Ss. 22, 28 & 256.

Held, that the questions (a) whether, on the facts and in the circumstances of the case, the Appellate Tribunal was correct in law in holding that no income assessable under the head "Income from business/profession" would arise in cases where the assessee-builders engaged in the business of construction of ownership flats in pursuance of an existing agreement and in lieu of full consideration received, handed over the possession of flats to the purchasers for occupation and unrestricted enjoyment of the same unless the flats were conveyed to them by registered sale-deeds, and (b) whether, on the facts and in the circumstances of the case, the Income--tax Appellate Tribunal was justified in holding that the annual value of the properties of which the assessee-builder was the legal owner could not be assessed in the assessee's hands under section 22 of the Income

Tax Act, 1961, had to be referred.

CIT v. Nawab Mir Barkat Ali Khan 1974 Tax LR 90 (AP); CIT v. Western Estates (1994) 209 ITR 343 (Cal.); Jodha Mal Kuthiala R.B. v. CIT (1971) 82ITR 570 (SC); Madgul Udyog v. CIT (1990) 184 ITR 484 (Cal.) and Vakil D.M. v. CIT(1946) 14 ITR 298 (Bom.) ref.

S.R. Ashok for Petitioner.

Nemo for Respondent.

JUDGMENT

S. PARVATHA RAO. J.---The Commissioner of Income-tax, Andhra Pradesh-I, Hyderabad, has approached this Court by way of the present income-tax case under subsection (2) of section 256 of the Income Tax Act, 1961 "the Act", for short, having been unsuccessful in persuading the Income-tax Appellate Tribunal to refer the following two questions in Revenue Appeal No.293/(Hyd) of 1988 before the Tribunal:

"(1) Whether, on the facts and in the circumstances of the case, the appellate Tribunal is correct in law in holding that no income, assessable under the head Income from business/profession' would arise in case where the assessee-builders engaged in the business of construction of ownership flats in pursuance of an existing agreement and in lieu of full consideration received, handed over the possession of flats to the purchasers for occupation and unrestricted enjoyment of the same unless the flats are conveyed to them by registered sale-deeds'?

(2)Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal is justified in holding that the annual value of the properties of which the assessee-builder is the legal owner, cannot be assessed in the assessee's hands under section 22 of the Income-tax Act, 1961?"

The questions raised relate to the interpretation "owner" in section 22 of the Act. It cannot be said that the questions raised are not questions of law arising out of the order of the Tribunal. Learned counsel for the Revenue draws our attention to the decision of a Division Bench of this Court in CIT v. Nawab Mir Barkat Ali Khan (1974) Tax LR 90, wherein it was held that the expression "owner" in section 22 of the Act applied to owners who were under certain restrictions with regard to the disposition of the properties and that the word "owner" referred to the owner of the property itself and not the owner of its annual value and that it would be immaterial whether the "owner" for the purpose of this section was in a possession and enjoyment of the property or someone else was. The Division Bench relied on the decision of the Bombay High Court in D.M. Vakil v. CIT (1946) 14 ITR 298; AIR 1946 Bom. 35Q. This decision is in favour of the Revenue. The contrary view is taken by the Calcutta High Court in Madgul Udyog v. CIT (1990) 184 ITR 484 followed in CIT v. Western Estates (1994) 209 ITR 343 (Cal). We are of the view that the decision of the Supreme Court in R.B. Jodha Mal Kuthiala v CIT (1971) 82 ITR 570 does not deal with the question at issue.

In the circumstances, we are inclined to allow the Income-tax case. The Income-tax Appellate Tribunal is directed to refer the two questions referred to in paragraph 1 for opinion of this Court, at the earliest.

The income-tax case is accordingly allowed.

M.B.A./1226/FCOrder accordingly.