TMI Blog1969 (6) TMI 14X X X X Extracts X X X X X X X X Extracts X X X X ..... essable in the assessee's hands as the property had been sold on the 29th March, 1956, to Messrs. Punjab Produce Investment Co. Ltd. before the beginning of the accounting year in question. It was stated that under an oral agreement dated March 27, 1956, the assessee agreed to sell the property to the aforesaid purchaser and in accordance with this agreement delivery of possession was given to the purchaser on March 29, 1956. It was stated further that the purchaser paid the whole of the consideration money on the 16th April, 1956, which was credited in the assessee's books in the suspense account. An agreement for sale was drawn up on April 28, 1956. The deed of conveyance transferring the property was executed on the 17th March, 1958, and was registered oh 8th July, 1958. The Income-tax Officer was of opinion that ownership was not transferred until registration of the deed of conveyance. In the premises, during the accounting year in question the ownership remained vested in the assessee. The Income-tax Officer included the property's bona fide annual value in the assessee's total income. The Appellate Assistant Commissioner was also of the same view. He said that the prop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom the date so specified. Learned counsel refers to section 47 of the Indian Registration Act, 1908, and submits that this section does not lay down that the date of commencement would be the date of execution of the document. Mr. Roy submits further that his argument can be substantiated, also by referring to various sections of the Transfer of Property Act. In section 55, sub-sections (4) (5) and (6) of the Transfer of Property Act, it is provided, for instance, that the seller is entitled to the rents and profits of the property till the ownership thereof passes to the buyer and the buyer is entitled, where the ownership of the property has passed to him, to the rents and profits thereof, but all these provisions become applicable " in the absence of a contract to the contrary ". Then again, section 19 of the Transfer of Property Act, inter alia, provides : " Where, on a transfer of property, an interest therein is created in favour of a person without specifying the time when it is to take effect, or in terms specifying that it is to take effect forthwith or on the happening of an event which must happen, such interest is vested, unless a contrary intention appears from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court, during the period that an assessee's property remains vested in the Custodian of Evacuee Property by virtue of section 6(1) of the Pakistan (Administration of Evacuee Property) Ordinance, 1949, as evacuee property, the right of the assessee to claim to be the owner of the property is taken away by the statute, and he cannot be said to be the owner of the property for the purpose of section 9 of the Indian Income-tax Act, 1922. Neither can the annual letting value of the property so vested be included in the assessee's income, nor can he be allowed deductions under section 9. Mr. Roy cites this authority of the Delhi High Court in support of his contention that the word " owner " in section 9 of the 1922 Act must mean a person having control and domain over the property. In other words, " ownership " in section 9 refers to possession of those rights in relation to property which results in the earning of income. The reason is that income-tax is a tax on income and unless a parson has out of the property, either actual or potential earning capacity, he cannot be charged under section 9. It should be pointed out that under section 6(1) of the Pakistan (Administration o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income of the respondent. I do not see how it can possibly be so described. It was part of the income arising from the sequestrated estates vested in the trustee for the respondent's creditors. Any income that did arise from those estates, was income of the trustee as such, and he (and he alone) had the right to put it into his pocket as income. It was not income that went or could go into the pocket of the respondent as income in any of the years in question. How then can it be said to have reached his pocket as income on his subsequent reinvestiture ? What was he reinvested in ? It is said that he was reinvested in whatever substance remained of the radical right belonging to him all along. But the radical right of a bankrupt in his sequestrated estate is nothing but a right of reversion to the balance remaining after the creditors are satisfied for which balance he is entitled to call the trustee to account. It is not, I think, a specific right to any particular assets, or a right which applies specifically to that part of the reversion which originated from revenue on the one hand and that part which originated from capital on the other hand. The argument for the respondent mu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 64 and 165. A Division Bench of this court in Hall Anderson (Pvt.) Ltd. v. Commissioner of Income-tax had to consider a similar case. The assessee carried on business as general drapers, outfitters, furnishers and warehouse-owners. It entered into an agreement on November 29, 1946, for the sale of its undertaking including all its immovable and movable properties and assets to a public company with effect from December 1, 1946. The assessee undertook to execute a conveyance or any other document which might be necessary for the portions of the premises which did not pass by delivery of possession. Possession of all the properties was delivered on December 1, 1946. For some reason or other, there being no suggestion that it was with the intention of avoiding payment of any tax, the sale deed for the immovable properties was not executed until the 26th February, 1949. The sale deed recited that it was executed " for the purpose of formally transferring the lands, hereditaments and premises " mentioned in the agreement for sale. This court had held that the word " sale " was not defined in the Indian Income-tax Act, 1922, and in order to find out the legal implication of a " sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the seller's interest in the property, for the amount of any purchase money properly paid by the buyer in anticipation of the delivery and for interest on such amount and, when be properly declines to accept the delivery, also for the earnest (if any) and for the costs (if any) awarded to him of a suit to compel specific performance of the contract or to obtain a decree for its rescission. These provisions show that a contract for sale followed by payment of money may create a charge on the property or give rise to a suit for specific performance or rescission ; but it does not have the effect of passing the title thereto. Incidentally again, it may be useful to refer to some of the provisions of section 40 of the Transfer of Property Act which prescribes, inter alia, that where a third person is entitled to the benefit of an obligation arising out of contract, and annexed to the ownership of the immovable property, but not amounting to an interest therein or easement thereon, such right or obligation may be enforced against a transferee with notice thereof or a gratuitous transferee of the property affected thereby, but not against a transferee for consideration and without ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sense in which that was understood when equity was administered by the Court of Chancery in England, and the Transfer of Property Act gives a statutory charge upon the estate to an unpaid vendor unless it be excluded by contract. Such a charge, therefore, stands in quite a different position from a vendor's lien. You have to find something, either express contract, or at least something from which it is a necessary implication that such a contract exists, in order to exclude the charge given by the statute. In the case of Chhatra Kumari Devi v. Mohan Bikram Shah, at page 202, also it is stated : " The Indian law does not recognise legal and equitable estates : ... By that law, therefore, there can be but one 'owner', and where the property is vested in a trustee, the 'owner' must, their Lordships think, be the trustee. " Before we summarise our conclusions we ought to refer to a few other cases and certain provisions of the relevant documents we have to consider in this reference. In Commissioner of Income-tax v. Bhurangya Coal Co., the facts briefly were that on March 16, 1946, the coal company, which was the owner of a colliery, entered into an agreement with the promote ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the property irrespective of the question whether he received that value or not. The income from property is an artificially defined income and the liability arises from the fact that the assessee is the owner of the property. The liability does not depend on the power of the owner to let out the property, as it also does not depend on the capacity of the owner to receive the bona fide annual value (see the decision of the Bombay High Court in D. M. Vakil v. Commissioner of Income-tax, and the decision of the Calcutta High Court in Commissioner of Income-tax v. Biman Bihari Shaw, Shebait). In the instant reference, even if we assume that the Punjab Produce Investment Co. Ltd. was the beneficial owner with effect from the 29th March, 1956 (although there is no such concept in Indian law), the assessee would be liable for income-tax as the legal owner under section 9. Two other cases may be considered in this reference. In Alapati Venkataramaiah v. Commissioner of Income-tax, the appellant owned certain lands and buildings and plant and machinery thereon. He carried on the business of manufacture of tiles and bricks. He entered into an agreement on March 17, 1948, with one V to s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as executed on the 11th May, 1929. No formal notice of the partnership was at any time given by advertisement, circular or otherwise. No alteration of the name under which the practice was carried on, or in the business bank account, was made until after the date of the partnership deed. From the 31st December, 1928, the son was credited with the share of profits to which he was entitled under the partnership deed. Rowlatt J. has held that the partnership constituted by the deed commenced on the date of the deed and there was no evidence before the Commissioners of the existence of the partnership before that date. At page 197 Rowlatt J. says : " I think this is a plain case. There is no sort of doubt at all about the legal position as I understand it. When people enter into a deed of partnership and say that they are to be partners as from some date which is prior to the date of the deed, that does not have the effect that they were partners from the beginning of the deed. You cannot alter the past in that way. What it means is that they begin to be partners at the date of the deed, but then they are to take the accounts back to the date that they mentioned as from which the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iftyfour thousand and two hundred and forty two) and pay to the purchaser its cost of investigation of title, and the purchaser shall thereafter redeliver possession of the said premises to the vendor and return to it the title deeds of the said premises." These clauses in the agreement for sale clearly establish that there is no substance in the contention that the title to the property passed on 29th March, 1956. The agreement puts on record a contemplated sale and the ante-dated arrangement may be relevant for accounting purposes only. The position is further clarified by clause (i) of the conveyance dated the 17th March, 1958, which, inter alia, provides : " ....... the vendor doth hereby as on and from the twenty ninth day of March one thousand nine hundred and fifty six grant sell convey transfer and assign upto the purchaser ....... " In other words, it is by this document of conveyance of the 17th March, 1958, that the title is being conveyed. We may, therefore, summarise our conclusions as follows: 1. In the case of a sale of immovable property a registered document is necessary to give effect to the sale. 2. The sale takes effect from the date of execution ..... X X X X Extracts X X X X X X X X Extracts X X X X
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