TMI Blog1986 (3) TMI 73X X X X Extracts X X X X X X X X Extracts X X X X ..... l value of any property for the purpose of this computation was prescribed under section 23 (at the point of time with which we are concerned) to be the same for which the property might reasonably be expected to let from year to year. In other words, though the tax under this head is a tax on income, it is not a tax upon the rents actually derived by an owner from the property but is charged on an artificial or notional income which one could derive from such property even where the owner in fact may derive no income whatever therefrom. This proposition has been laid down in large number of cases and it will be sufficient to refer to the decisions of this court in Kartar Singh v. CIT [1969] 73 ITR 438, CIT v. D.L.F. Housing Construction P. Ltd. [1981] 128 ITR 773 and D. C. Anand Sons v. CIT [1981] 131 ITR 77. The twin concept under sections 22 and 23 which envisage a tax on the owner of the property but at the same time disassociates the tax from the actual derivation or enjoyment of the income from the property has led to the difficulty that comes up for consideration in the present case. A person may become the owner of a building in various ways. He may have inherited the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sts of a number of flats. The assessee claims that he is the owner of three of these flats. He claims that he has paid the entire price thereof and got possession of them. He claims he has absolute rights of disposal over them and that, in fact, he has let them out to different tenants. He is deriving income from the flats. He is paying the municipal taxes in respect thereof. During the previous year under consideration he derived a net income of Rs. 18,403 (after paying the taxes) from these flats by way of rent. He has shown in his return the income from this property by computing the same after deducting municipal taxes as well as the statutory deduction of 1/6th of the annual value on account of repairs as provided in section 24 of the Act. The Income-tax Officer, however, assessed the entire sum of Rs. 18,403 as " income from other sources " and denied the deduction for repairs claimed by the assessee. The short reason given for doing this was, in his own words : " Registration has not been effected regarding ownership of the flats. Income is taken as 'Income from other sources' and no deductions are allowed . " on appeal, the Appellate Assistant Commissioner accepted the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee could claim to be the owner of the three flats in the building Akashdeep in the circumstances mentioned above. The question thus posed is not res integra. It has been considered in several decisions, including decisions of this court, in the context of property income, in the context of the provision which entitles an owner to get depreciation, development rebate on machinery or plant and also in the context of the Wealth-tax Act, 1957, where a person is liable to tax on property belonging to him, The decisions, however, are not uniform and reveal a divergence of judicial opinion. We do not think it is necessary to discuss these decisions at length ; it will be sufficient to indicate their effect. One line of cases has taken the same view as the Tribunal has in this case. These decisions are : (1) CIT v. Modern Flats P. Ltd. [1967] 65 ITR 67 (Bom), (2) CIT v. Ganga Properties Ltd. [1970] 77 ITR 637 (Cal), (3) CIT v. Union Land Building Society P. Ltd. [1972] 83 ITR 794 (Bom), (4) CIT v. Meatles Ltd. [1972] 84 ITR 37 (Delhi), (5) CIT v. Nawab Mir Barkat Ali Khan [1974] Tax LR 90 (AP), (6) CIT v. Zorostrian Building Society Ltd. [1976] 102 ITR 499 (Bom), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... overruled by the decision of the Supreme Court in R. B. Jodha Mal Kuthiala v. CIT [1971] 82 ITR 570. We are unable to accept this contention for two reasons. In the first place, even in some of the earlier decisions of this court, the decision of the Supreme Court has been referred to and its scope has been explained by this court. It is, therefore, not possible for us to hold at this stage that these decisions stand overruled because of the Supreme Court's decision. But that apart, the more important aspect which is relevant for the purposes of this case is that the decision in R. B. Jodha Mal Kuthiala [1971] 82 ITR 570 (SC), even if interpreted in the manner in which the assessee in this case seeks to do, only helps the original owner of the property and not the present assessee. That decision may be directly in point to help Ansal and Sehgal P. Ltd. to contend that the income from the properties (in fact, from all the flats contained in the building " Akashdeep ") cannot be assessed in its hands, merely because regular sale deeds have not been executed by it in favour of the various " purchasers " like the assessee. It can be contended, in view of the agreements of sale and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . P. Sidhwa [1982] 133 ITR 840. In this case, the assessee was in possession of property and derived income from the property much earlier to a regular deed of conveyance in her favour dated February 2, 1963. The question that arose before the Income-tax Officer was whether the income derived by the assessee as rent from the property for the period from April 1, 1959, to February 2, 1963, when she was not the legal owner of the property was chargeable to tax under the head " Income from other sources " under section 12 of the Indian Income-tax Act, 1922, for the assessment years 1960-61 and 1961-62 and under section 56 of the Income-tax Act, 1961, for the assessment years 1962-63 and 1963-64. The Income-tax Officer took the view that although the assessee may not be the legal owner of the property till February 2, 1963, she could be regarded as beneficial owner as regards the property and was assessable under the head " Income from other sources ". This was confirmed by the Appellate Assistant Commissioner but the Tribunal was of the contrary view. The Tribunal, relying on the decision of the Supreme Court in Nalinikant Ambalal Mody v. S. A. L. Narayan Row [1966] 61 ITR 428, held t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vision are not fulfilled. The question, however, related to the true scope of the charge of income under the head " Income from house property " envisaged in sections 22 to 27 of the Act. In our opinion, this head covers only cases of property income in the hands of the owner. It is not intended to cover the assessment of all income from all house properties or land. For instance, section 22 talks only of income from buildings and lands appurtenant thereto. But we think it cannot be said that the intention of the section is to bring to charge the income from all buildings and all lands and that since, by the language of section 22, only the income from land appurtenant to buildings is charged, income from lands not appurtenant to buildings cannot be brought to charge under section 56. So also, it has been held in a large number of decisions since the promulgation of the 1922 Act and the 1961 Act that section 22 only talks of income from property owned by an assessee and that income from house property not owned by an assessee will be assessable under section 56. For instance, if a person takes on lease a property belonging to the owner of the property and subsequently sublets it, t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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