TMI Blog1992 (9) TMI 129X X X X Extracts X X X X X X X X Extracts X X X X ..... Satish Chand Jain to construct a multi-storeyed building on the aforesaid plot. Shri Jain at the relevant time was also Managing Director of the company, known and styled as M/s Indraprastha Builders (P) Ltd.. Under the said agreement the three brothers were to retain 1/2 share of multi-storeyed building and Shri Satish Chand Jain was to retain the balance of 50%. The three brothers also entered into a second agreement on the same date with M/s Indraprastha Builders (P) Ltd. As per the said agreement 1/2 portion of the structure to be constructed was to be given on lease @ Rs. 3 per sq. ft. per month for a period of 5 years with option to renew. Under the agreement each of the brothers was given an advance of Rs. 50,000 which was to remain interest free deposit with the lessees. 4. The construction of multi-storeyed building was carried till July, 1981. Completion certificate was granted by Municipal Corporation ofDelhion3rd Aug., 1981. The three brothers let out on 26th Feb., 1983 1/2 share of the property on rent to Oriental Bank of Commerce on monthly rent of Rs. 80,277.27 i.e. @ Rs. 850 per sq. ft. M/s Indraprastha Builders (P) Ltd. let out other 1/2 portion to the same bank ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould be assessed in the hands of the assessee. Alternatively, it was pleaded that if whole rent is to be assessed in the hands of three brothers proper deduction of sum of Rs. 10,200 which was anually charged over the property be allowed under s. 24(1)(iv) or 24(1)(vi) of IT Act, 1961. It was further contended that Shri S.C. Jain should have been summoned and compelled to appear before the Assessing Officer to depose regarding investment. The observations of Assessing Officer regarding investment were also assailed before the CIT(A). 7. The learned CIT(A) perused various agreements between assessees and Shri S.C. Jain, M/s Indraprastha Builders (P) Ltd. and the bank. He was of the view that no comments were called for on the question of investment. He observed that the first agreement with Shri J.C. Jain was implemented only in part because 1/2 of the property has not, in fact, been transferred to Shri Jain. This portion was let out by M/s Indraprastha Builders (P) Ltd. and this fact was clear from their return wherein 50 per cent of return was shown. On consideration of second and third agreement, the learned CIT(A) held that only 50 per cent of the constructed area was let out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is assessable in the hands of the assessees. In the cross objections the assessees have objected to addition of rental income @ Rs. 3 per sq. ft. 8. Shri Nautiyal, learned Departmental Representative strongly assailed conclusion of the learned CIT(A) before us. He emphasised that Shri S.C. Jain was not produced before the Assessing Officer to explain investments in the superstructure. The agreement with Shri S.C. Jain was unregistered and was invalid under s. 107 of the Transfer of Property Act and could not make Shri Jain or M/s Indraprastha Builders (P) Ltd. the lessee or sub-lessee of the building, without registered document, no right, title or interest could pass to Shri Jain or to M/s Indraprastha Builders (P) Ltd. As a necessary corollary, the three brothers continued to be the owner of property. The entire letting value, therefore, was to be assessed in the hands of three brothers. Shri Daljit Singh, the learned counsel of the assessees, on the other hand, supported the impugned order of learned CIT(A). It was emphasised that only real income which the three brothers were entitled to receive from bank could be assessed. Learned counsel relied upon the lease agreements wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Supreme Court, it is observed, would be "complete answer to an attempt to assess the company." 11. In the case of Nawab Mir Usman Ali Khan vs. CWT the Supreme Court was concerned with the question of liability of wealth-tax of certain properties belonging to late Nizam of Hyderabad. The Court considered the question as to what was the real import of expression "assets belonging to the assessee" in s. 2(m) of the WT Act, 1957. The Court held that under the above expression "assets" (immovable property) unless transferred or conveyed through registered deed would continue to belong to the legal owner and would be assessable in his hands despite the fact that somebody else was equitable owner. In the decision it is specifically observed that the Court was not concerned with the term "owner" used in s. 22 of the IT Act, 1961 with which we are concerned. The Court specifically held as under: "In the instant case, we have noticed, the position is different. We are not concerned with the expression `owner'. We are concerned whether the assets, in the facts and circumstances, belonged to the assessee any more." In the case of State Bank of Travancore vs. CIT, the Supreme Court was c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agreement with son relating to immovable property not being a registered document did not transfer any interest to the son and, therefore, assessee continued to be sole owner of the entire property. The High Court, however, held that as per agreement dt.5th Nov., 1964assessee's son Nitin Mohan was entitled to 50 per cent of net income of building. He thus had an overriding interest which may not be in the nature of a charge on the property yet the same constituted an obligation created by a paramount title. In view of the agreement 50 per cent of the net income was diverted by an overriding or superior title to son Nitin Mohan and same would not constitute the income of the assessee. 13. In the case of Park Hotels (P) Ltd. vs. CIT the assessee-company held on lease certain premises. It executed a sublease in favour of M/s Surendra Overseas Ltd. under which the latter company paid premium to the assessee and rent of Rs. 15,000 per annum in respect of a multi-storeyed building built on portion under sub-lease. The said multi-storeyed building was let out to various tenants on rent by M/s Surendra Overseas Ltd. The lease in favour of M/s Surendra Overseas Ltd. was unregistered. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (long lessees) of plot without parting with any interest. Shri Jain or M/s Indraprastha Builders (P) Ltd. did not become lessee or sublessee of the land. Learned counsel for the assessee referred to s. 53A of the Transfer of Property Act but as per the settled law doctrine of part performance embodied in the above section has limited application and can be used only as a good defence to protect possession. It cannot create right, title or interest in immovable property. We, therefore, agree with the Assessing Officer that three brothers did not part with any interest in land to Shri Jain or to M/s Indraprastha Builders (P) Ltd. The dispute before us relates to income derived from building and not from land. It was, therefore, necessary to address to the question as to who was the owner of the multi-storeyed construction let out to the bank. The Assessing Officer on the basis of authority of Sushil Ansal treated the three brothers as owner of the superstructure also. He applied the rule that whatever is fastened to the land goes with the ownership of the land. In other words, ownership of superstructure must follow ownership of land over which it is built. But this rule which is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are called for." We have great difficulty in subscribing to the above view. The question of ownership of building could not be disposed of without considering question of investment in the superstructure as the person making investment in the superstructure is to be treated as owner of building. The assessment of income being under the head "house property", it is imperative to determine question of ownership. The learned CIT(A) while deciding the appeal in favour of assessees relied upon decision of Calcutta High Court in the case of Park Hotels (P) Ltd. and on the theory of real income. As already noted, the theory of real income has its limitation and cannot effect accrual of income or deemed income assessable on ownership basis under the statutory provisions. The case of Park Hotels (P) Ltd. has no application to the facts before us. In the said case Calcutta High Court held that rental income was not "business" income and there was no question of adding any notional income under the above head. But, in the present case it is an undisputed position that income is to be assessed under the head "house property" and "business". It is impossible to contend that notional income b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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