1981 (9) TMI 70 - HC - Income Tax

Summary

Issues Involved:
1. Whether the assessee was liable to be assessed in respect of the income for the whole year from properties at Shahdara, Palwal, Dadri, and Kosi for the assessment year 1951-52.

Summary:

Issue 1: Liability of Assessee for Property Income
The primary issue was whether the assessee, Mr. Hans Raj Gupta, should be assessed for the income from properties at Shahdara, Palwal, Dadri, and Kosi for the assessment year 1951-52. The properties were allegedly sold to connected companies, but the sales were not supported by transfer deeds nor duly registered.

Legal Ownership and Taxation:
The ITO held that the assessee continued to be the legal owner of the properties as the sales were not complete without registered deeds. Consequently, the income was computed u/s 9 of the Indian I.T. Act, 1922, and taxed in the hands of the assessee. The AAC confirmed this order on appeal.

Tribunal's Decision:
The Income-tax Appellate Tribunal, relying on the Full Bench decision in CIT v. R. B. Jodhamal Kuthiala [1968] 69 ITR 598, held that the assessee had lost dominion over the property by accepting the consideration, and thus, the income should not be computed in his hands. The Tribunal excluded the income from the properties from the assessment of the assessee after the receipt of the consideration.

High Court's Analysis:
The High Court examined the applicability of the Full Bench decision in Jodhamal Kuthiala's case and subsequent affirmations by the Supreme Court. It was noted that the ownership of immovable property of value Rs. 100 and above can only be transferred by a registered instrument. The court referred to CIT v. Ganga Properties Ltd. [1970] 77 ITR 637 (Cal) and other precedents to emphasize that legal ownership is necessary for taxation under s. 9 of the Indian I.T. Act, 1922.

Conclusion:
The court concluded that the assessee remained the legal owner of the properties as the sales were not registered. Therefore, the income from the properties had to be taxed in the hands of the assessee. The decision of the Tribunal was overturned, and the question was answered in the affirmative, in favor of the revenue. The revenue was entitled to costs, with counsel's fee set at Rs. 350.