Deemed Ownership - (Section 27) - Definition / Legal Terminology - Income Tax

As per section 27 of the Income tax Act 1961, DEEMED OWNERSHIP- The following persons are deemed to be the owners for the purpose o f Sec 22 to 26 . TRANSFER TO A SPOUSE: In case of transfer of house property by an individual to his or her spouse for inadequate consideration, the transferor would be deemed to be the owner of transferred property. However, transferor will not be deemed to be the owner if the property is transferred in connection with an agreement to live apart. TRANSFER TO A MINOR CHILD: In case of transfer of house property by an individual to his or her minor child for inadequate consideration, the transferor would be deemed to be the owner of transferred property. However, transferor will not be deemed to be the owner if the property is transferred to a minor married daughter. However, If individual transfers cash to his/her spouse or minor child and the transferee acquires a house property out of such cash, the transferor shall not be treated as deemed owner of the house property, such transaction will however attract clubbing provisions. HOLDER OF AN IMPARTABLE ESTATE: Holder of a importable estate shall be deemed to be the individual owner of all properties comprised in the estate. MEMBER OF A CO-OPERATIVE SOCIETY: A member of a housing co-operative society, company or other AOPs to whom a building or part thereof is allotted or leased, shall be deemed to be owner of that building or part thereof allotted to him. PERSON IN POSSESSION OF A PROPERTY: A person who is allowed to take the possession of any building or part thereof in part performance of a contract, shall be the deemed owner of that house property. PERSON HAVING RIGHT IN A PROPERTY FOR A PERIOD NOT LESS THAN 12 YEARS: as per clause (f) of section 269UA M/S. D.N. SINGH VERSUS COMMISSIONER OF INCOME TAX, CENTRAL, PATNA AND ANOTHER - [ 2023 (5) TMI 746 - SUPREME COURT ] In the general scheme of the Income Tax Act, 1961, direct taxation, except in areas such as e-commerce, is inextricably connected to the ownership and not just possession of the underlying asset, creating income. Section 22 of the Act, which provides for taxation of income from house property provides that the assessee must be the owner of such property generating income. Section 45 provides for income tax on capital gains to be imputed on owners of capital assets who transfer such assets and those who convert them for lawful gains. Likewise, section 69A provides as a rule of evidence that for the deeming effect to apply- the assessee must be the owner of money, bullion, jewellery and other valuable articles on which he is unable to proffer a satisfactory explanation. Section 69B provides that; in cases of understated investments the assessee should be the owner of money, bullion, jewellery and other valuable article(s). Hence, determining ownership of impugned goods is an important factor to impute tax liability. Someone having mere possession and without legal ownership or title over the goods, will not be covered within the ambit of Section 69A. An assessee may nevertheless be also regarded as deemed owner if possession is imputed on the assessee and no other person having a better claim is contesting the assessee s claim. In the present case, the assessee was certainly not the owner of the bitumen - but was the carrier who was supplying goods from the consignor- oil marketing companies to the consignee- Road Construction Department. Notably, due to short delivery of goods, the possession of the assessee was unlawful. The inevitable conclusion therefore is that the assessee is not the owner , for the purposes of Section 69A. A person in actual physical control of the property and realising the entire income for his own use may indicate the presence of ownership. The absence of the conveyance needed to complete the transfer may not detract from a person being found to be the owner . The soul of the reasoning appears to be the entitlement to receive the income from the property in his right . In Mysore Minerals Ltd. M.G. Road, Bangalore v. Commissioners of Income Tax, Karnataka, Bangalore- [ 1999 (9) TMI 1 - SUPREME COURT ] Section 32 of the Income-tax Act confers a benefit on the assessee. The provision should be so interpreted and the words used therein should be assigned such meaning as would enable the assessee securing the benefit intended to be given by the Legislature to the assessee. It is also well-settled that where there are two possible interpretations of a taxing provision the one which is favourable to the assessee should be preferred. What is ownership ? The terms own , ownership , owned , are generic and relative terms. They have a wide and also a narrow connotation, The meaning would depend on the context in which the terms are used Black s Law Dictionary (6th edition), defines owner as under : Owner, The person in whom is vested the ownership, dominion, or title of property ; proprietor. He who has dominion of a thing, real or personal, corporeal or incorporeal, which he has a right to enjoy and do with as he pleases, even to spoil or destroy it, as far as the law permits, unless he be prevented by some agreement or covenant which restrains his right. The term is, however, a nomen generalissimum , and its meaning is to be gathered from the connection in which it is used, and from the subject-matter to which it is applied. The primary meaning of the word as applied to land is one who owns the fee and who has the right to dispose of the property, but the term also includes one having a possessory right to land or the person occupying or cultivating it. The term owner is used to indicate a person in whom one or more interests are vested for his own benefit . . . . In the same dictionary, the term ownership has been defined to mean, inter alia, a collection of rights to use and enjoy property, including right to transmit it to others .... The right of one or more persons to possess and use a thing to the exclusion of others. The right by which a thing belongs to some one in particular, to the exclusion of all other persons. The exclusive right of possession, enjoyment and disposal; involving as an essential attribute the right to control, handle, and dispose. Dias on Jurisprudence (4th edition, at page 400) states : The position, therefore, seems to be that the idea of ownership of land is essentially one of the better right to be in possession and to obtain it, whereas, with chattels the concept is a more absolute one. Actual possession implies a right to retain it until the contrary is proved, and to that extent a possessor is presumed to be owner. Stroud s Judicial Dictionary gives several definitions and illustrations of ownership . One such definition is that the owner or proprietor of a property is the person in whom (with his or her assent) it is for the time being beneficially vested, and who has the occupation, or control, or usefruct, of it ; e.g., a lessee is, during the term, the owner of the property demised. Yet another definition that has been given by Stroud is : Owner applies to every person in possession or receipt either of the whole, or of any part, of the rents or profits of any land or tenement ; or in the occupation of such land or tenement, other than as a tenant from year to year or for any less term or as a tenant at will .