COMMISSIONER OF INCOME-TAX VS SURESH AMICHAND SHAH (HUF), 2001 PTD-GUJARAT-HIGH-COURT-INDIA 3440 (1997)

(a) Income‑tax‑‑‑

‑‑‑‑Reference‑‑‑Property‑‑‑Owner‑‑‑Flats transferred to vendees but registration not completed‑‑‑Supreme Court decision that in such cases vendees were to be treated as owners for purposes ‑of S.22‑‑‑Question regarding person chargeable on income from flats could not be referred‑‑ Indian Income Tax Act, 1961, Ss.22 & 256.

The Supreme Court has held in CIT v. Podar Cement (P.) Ltd. (1997) 226 ITR 625, that though under the common law "owner" means a person who has got valid title legally conveyed to him after complying with the requirements of law such as the Transfer of Property Act, the Registration Act, etc., in the context of section 22 of the Income Tax Act, 1961, having regard to the ground realities and further having regard to the object of the Income‑tax Act, namely to tax the income, "owner" is a person who is entitled to receive income from the property in his own right. The requirement of registration of the sale deed in the context of section 22 is not warranted:

Held, that in view of this decision, the question whether vendees who were in possession though registration was not executed, could be assessed under section 22 as owners of the flats, could not be referred.

CIT v. Podar Cement (P.) Ltd. (1997) 226 ITR 625 (SC) fol.

(b) Income‑tax‑‑‑

‑‑‑‑Reference‑‑‑Question decided by Supreme Court cannot be referred‑‑ Indian Income Tax Act, 1961, 5.256.

Mihir Joshi for the Commissioner.

J.P. Shah for the Assessee.

JUDGMENT

R.K. ABICHANDANI, J.‑‑‑In these applications made by the Revenue under section 256(2) of the Income Tax Act, 1961, the following two questions are proposed by the applicant for the opinion of this Court:

"(1)On the facts and in the circumstances of the case and in law, the Income‑tax Appellate Tribunal was not justified in confirming the order of the Commissioner of Income‑tax (Appeals), Surat, whereby it is an admitted fact that during the assessment year under appeal no final deeds of the flats, etc.; were executed and no registration was effected in favour of prospective buyers as contemplated under section 54 of the Property Act. In absence of such legal obligation, the assessee was a legal and real owner of the said property and the property income was rightly taxed in the hands of the assessee under sections. 22 and 23 of the Income Tax Act?"

(2)On the facts and in the circumstances of the case and in law, the Income‑tax Appellate Tribunal further erred in holding that if the property income is taxed in the hands of the assessee, there will be double taxation as the flat owners have also declared property income in their income‑tax returns and wealth in the wealth‑tax returns?"

In the applications which were made under section 256(1) of the. Act before the Tribunal for referring these questions for the opinion of this Court, the Tribunal held that the flat owners who were handed over these flats by the owner under an agreement to purchase, were being taxed by the Department and that the assessee was left only with a husk of the legal title. It was held that what was being taxed under section 22 of the Act was the income from house property or the annual value of the property of which the assessee is the owner. The Tribunal referring to its reasoning given in paragraph 11 of the order, held that no referable questions were involved.

The assessee had constructed a multi‑storeyed building known as "Dhawalgiri Flats" consisting of 48 flats and one Health Club with Swimming Pool. During the assessment year 1980‑81, the assessee handed over possession of the flats to the prospective purchasers. Agreements to sell were entered into in respect of such flats and funds obtained as per the agreements for constructing the flats. The final deeds, however, could not be executed and registered and, therefore, technically the assessee remained the legal owner of the flats, which were already, handed over to the purchasers.

The Supreme Court has now in CIT v. Podar Cement (Pvt.) Ltd. (1997) 226 ITR 625, held that though under the common law "owner" means a person who has got valid title legally conveyed to him after complying with the requirements of law such as the Transfer of Property Act, the Registration Act, etc., in the context of section 22 of the Income Tax Act, 1961, having regard to the ground realities and further having regard to the object of the Income‑tax Act, namely, to tax the income, "owner" is a person who is entitled to receive income from the property in his own right. The requirement of registration of the sale deed in the context of section 22 is not

In view of, the decision of the Supreme Court in CIT v. Podar Cement (Pvt.) Ltd. (1997) 226 ITR 625, we are of the opinion that the point is concluded and no question requiring the opinion of this Court under section 256 arises in these matters. These applications are therefore rejected. Rule is discharged in each of them with no order as to costs.

MBA./324/FCApplications rejected