TMI Blog1994 (9) TMI 122X X X X Extracts X X X X X X X X Extracts X X X X ..... the income from house property as under and brought the same to tax : r 29,146 sq. ft. at the rate of Rs. 2.25 per sq. ft. per month for 12 months Rs. 7,86,942 Add : Contribution from Members towards maintenance Rs. 72,228 --------------------------- Rs. 8,59,170 Less : Municipal Taxes Rs. 23,993 --------------------------- Rs. 8,35,177 Less : Deduction towards 1/6th for repairs Rs. 1,39,196 --------------------------- Rs. 6,95,981 Less : Deduction under section 24 Insurance premia paid Rs. 1,245 -------------------------- Rs. 6,94,226 or Total income Rs. 6,94,740 ------------------------- The Assessing Officer did not agree with the contention of the assessee that the shareholders were in possession and enjoyment of the property and as one of the objects of the company was to enable the shareholders to have a flat in the metropolitan town, by receiving not only capital but also contributions from them for the construction of the flats and as the company further did not derive any rental income from the shareholders, there was no case for assessing the company on notional rent. The assessee appealed and relied on the following decisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a Rani v. CIT [1981] 130 ITR 321 (Punj. Har.) ; (3) Mrs. M.P. Gnanambal v. CIT [1982] 136 ITR 103 (Mad.) ; (4) Addl. CIT v. Sahay Properties Investment Co. (P.) Ltd. [1983] 144 ITR 357 (Pat.) ; (5) P. Joseph Swaminathan v. CIT [1984] 145 ITR 198 (Mad.) ; (6) Saiffuddin v. CIT [1985] 156 ITR 127 (Raj.) ; (7) Nawab Sir Mir Osman Ali Khan v. CWT [1986] 162 ITR 888 (SC) ; (8) Madgul Udyog v. CIT [1990] 184 ITR 484 (Cal.) ; (9) Shree Nirmal Commercial Ltd. v. CIT [1992] 193 ITR 694 (Bom.). Sri K. R. Prasad, the learned counsel for the assessee contended that the Finance Act, 1987, has amended section 27 of the IT Act, 1961 and the Finance Minister in his Budget speech to the Parliament at para. 77 had stated that the amendment proposed was only clarificatory in nature in CIT v. Mussadilal Ram Bharose [1987] 165 ITR 14 (SC) and being a clarificatory amendment it is retrospective in operation. He referred to section 6 of the Finance Act, 1987, which sought to substitute clause (iii) to section 27 of the I.T. Act --- 166 ITR 7 (sic). Since it was only a " substitution ", it amounted to clarificatory in nature and retrospective in operation and for this proposition he re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Association of the assessee-company clause 9 is as follows : " Members who are allotted shares in the above company shall rank in priority for the allotment of flats, apartments, offices, or shops though as between members of equal duration such members holding the larger number of shares shall be given preference and as between members equally qualified, if the circumstances so necessitate their right to allotment shall be determined by lot. " In pursuance of the above-mentioned clauses found in the Memorandum of Association and Articles of Association of the assessee-company, the company obtained share capital, raised loans from its members and also received contribution from the members which were kept in building fund account. The company called (owners) entered into an agreement with Arihant Construction Company called (developers) and the agreement is found at page 28 of the paper book. The task of constructing the multi-storeyed building consisting of apartments, flats, etc., for the benefit of the members of the assessee-company was entrusted to Arihant Construction Company. The latter was allowed to enter into separate agreements with prospective members for the all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o become members of the company. In other words, the flats or the space in the multi-storeyed building stand allotted to the members only and not to any outsiders. The assessee has furnished before us the agreement to sell executed between Sri K.V. Shah as vendor and Smt. Kantidevi and Smt. Sushama M. Jain as vendees. The agreement to sell is dated 11-4-1985 and is at page 36 of the paper book and the same is as follows : " Whereas Vendor is the absolute owner and in possession of a Flat bearing No. 61, in the VI Floor, Chandraloka Apartments, No. 27-28, V Cross Gandhinagar, Bangalore-9, having purchased the same from its owners Arihant Construction Co., under an agreement dated 18-10-1980. And whereas the Vendor is in possession and enjoyment of the said flat since the date of purchase. And whereas the Vendor has decided to sell the aforesaid flat, more fully described in the schedule herein to the purchasers for a consideration of Rs. 2,50,000 (Rupees two lakhs fifty thousand only) free from all encumbrances to which the purchasers have agreed to purchase. And whereas the parties desire that the terms of this Sale be reduced to writing this agreement is executed on the day, mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers to acquire flats or apartments through it. So, if regard is had to the substance of the transaction rather than its form, we have no hesitation in holding that the person coming to possession and enjoyment of a flat or apartment on payment of the proportionate cost of construction to the developers is the real owner in respect of the flat or apartment that falls to his share. 6. Sri C. Abraham, the learned senior departmental representative vehemently argued that the site belonged to the assessee-company and, therefore, the building constructed thereon also belonged to it legally. In our considered opinion the English doctrine of what is attached to the land is part of the land is not applicable to India, and, therefore, merely because the construction was set up on the site owned by the assessee, it cannot be held that the super-structure is also owned by the assessee-company. Further, we are not on the issue whether the property " belonged to " the assessee-company, but rather we are on the issue whether the property is " owned " by the assessee-company. There is a material difference between the expressions " assets belonging to the company " and " assets owned by the comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its name, the assessee was not the owner of the property. In the circumstances, it was held that the assessee must be deemed to be the owner of the property within the meaning of section 22 of the IT Act, 1961, and was assessable as such on the income from the property. This is only an illustrative point, where in certain circumstances, without any registered conveyance in favour of a purchaser, a person can be considered to be 'owner'. It may incidentally be mentioned that this court has granted special leave to appeal against this judgment." After adverting to Salmond's conception of 'ownership" the Apex Court observed as follows : " The position is that though all statutes including the statute in question should be equitably interpreted, there is no place for equity as such in taxation laws. The concept of reality in implementing a fiscal provision is relevant and the Legislature in this case has not significantly used the expression 'owner' but used the expression 'belonging to'. From the discussions found in the case dealt with by the Supreme Court, there is a perceptible difference between the expressions 'owner' and 'belonging to' and therefore we have no hesitation in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing a consistent stand. In the case of Sri Vasantrai C. Shah, one of the flat owners, he has been assessed to tax an an annual letting value of Rs. 6,000. We are not on the issue whether the annual letting value should be taken at Rs. 6.000 per annum in the case of the company. We advert to this fact to show that one of the plot owners has been assessed to property income and thus the department has been adopting inconsistent stand by assessing the flat owner as well as the assessee-company, which is nothing short of double taxation. 8. There is force in the contention of Sri Prasad that clause (iii) of section 27, which defined the ownership of a house property, annual charge etc., as substituted by the Finance Act, 1987 with effect from 1-4-1988 is clarificatory In nature and retrospective in operation. Section 27 defines the ownership of house property and annual charge for purpose of sections 22 to 26 of the IT Act. Clause (iii) of section 27 was as follows : " (iii) a member of a co-operative society to whom a building or part thereof is allotted or leased under a house building scheme of the society, shall be deemed to be the owner of that building or part thereof." Wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... property. The CIT (Appeals) has found that the assessee had collected this amount towards maintenance charges. As the annual letting value was estimated, it was not proper to make a further addition to it in the above sum. He further held that the assessee did not receive the impugned amount as owner of the property, but it was towards the arrangement for maintaining certain common facilities and, therefore, it cannot be added to the annual letting value. 11. Having heard rival submissions, we decline to interfere. The annual letting value, once it is determined, can have no further addition to it. Further, the revenue has not placed any material to say that the charges collected by the assessee-company were in lieu of rent or by way of addition to rent. In the circumstances, we dismiss this ground of appeal. 12. There are other grounds in the assessee's appeal as well as in the revenue's appeal against the levy of interest and cancellation of interest. The only income on which the company has been assessed is the " income from house property " as if it is the owner of the house property consisting of flats, comprised in the multi-storeyed building. As we have held that the cha ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
