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TMI Blog1981 (9) TMI 70X X X X Extracts X X X X X X X X Extracts X X X X ..... nd payment received; the properties at Palwal, Dadri and Kosi were also sold to a connected company, M/s. Hans Raj Gupta and Co. Ltd., and the monies were received in July, 1950. But the properties continued to remain registered in the name of the assessee. The shareholders of M/s. Raj Enamel Works Ltd. had passed a resolution on 23rd May, 1950, to the effect that the freehold property comprising of the land on which the workshop of the company was situated together with all other buildings, be purchased from Lala Hans Raj Gupta for a value of Rs. 2 lakhs. Thereafter, Rs. 2 lakhs were received for the Shahdara property and the said amount was credited to the property account in the books of the assessee. The company showed this property as its asset; since it was being used for the company's own business, no rent was being charged and the assessment was, made accordingly. But prior to the resolution, the Central Investment Ltd. had purchased shares to the extent of Rs. 2 lakhs of M/s. Raj Enamel Works Ltd. This was, after a chain of intermediaries, ultimately traceable to the assessee. On receipt of Rs. 2 lakhs, the assessee settled his overdraft liability with the United Commer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had lost dominion over the property by reason of having accepted the consideration. The subsequent conduct of the parties also fortified, rather than undetermined, this fact. In the ultimate analysis what bad happened was that the assessee bad introduced secret monies into the company by way of share capital which enabled the company to acquire the property from him. But in this arrangement he relinquished effective dominion over the property which the company acquired. There was also no suggestion that the company was a " benamidar " of the assessee; and in the eyes of law the company and the assessee were different entities and had to be so treated. The Tribunal, therefore, excluded the income from the Shahdara property from the assessment of the assessee to the extent it arose after the amount of Rs. 2 lakhs had been received by the assessee. For similar reasons the income from the properties at Palwal, Dadri and Kosi were also excluded to the extent that they arose after the receipt of the consideration received by the assessee. The point in issue before us is whether the income from these immovable properties should be taxed in the hands of the legal owner, i. e., the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom the property unless he chooses not to do so or the circumstances do not permit him to earn income even though he has dominion or control over the property." observed (at p. 444): " It is also to be borne in mind that the question before the Full Bench was different, namely, the impact of the evacuee legislation in Pakistan on the ownership of the assessee. " The court then went on to hold that the tax under s. 9 was upon the owner, legal or beneficial. It was levied not upon the actual income but on notional income represented by the bona fide annual letting value. Even where the owner had diverted the income from the house property at source he would continue to be liable to pay income-tax on the annual letting value subject to specified deductions given in s. 9. In that case, the assessee who had executed a deed of settlement with respect to his house property in favour of his father, as he was desirous of making provision for his maintenance for life, was held liable to be taxed on the income from the property. On a reading of the terms of the deed of settlement, the court came to the conclusion that the assessee had transferred only the income from the property and the ow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s have to be read in the context in which they were made and noticed that under s. 6(1) of the Pakistan (Administration of Evacuee Property) Ordinance, 1949, "all evacuee property shall vest and shall be deemed always to have vested in the Custodian with effect from the 1st day of March, 1947 as such there was no question of any "owner " apart from the Custodian during the period the property remained vested. This position was reiterated in the decision of the Bombay High Court in CIT v. Union Land and Building Society P. Ltd. [1972] 83 ITR 794 and Ganga Properties Ltd.[1970] 77 ITR 637 (Cal) applied. That court also observed that the decision of the Full Bench in R. B. Jodhamal Kuthiala [1968] 69 ITR 598 (Delhi) was based on the court's opinion of the effect of the evacuee property law, i. e., that the title of the assessee was statutorily suspended and virtually put to an end during the period of the legislation, in favour of the Custodian. We also feel that the observation of the Supreme Court in R.B. Jodha Mal Kuthiala [1971] 82 ITR 570, have to be read in the context of that case and the finding of the court that the property vested in the Custodian and he was the legal owne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to. The resolution of M/s. Hans Raj Gupta & Co. (P.) Ltd. passed on 22nd January, 1950, is to the following effect: "RESOLVED" that the following godown premises and buildings be acquired from L. Hans Raj Gupta on the valuation shown, all costs of transfer being borne by the company. Rs. Palwal Godown 12,500 Dadri 3,000 Kosi Kalan 9,500 All costs of transfer shall be borne by the company. Pt. Mela Ram was authorised to take the necessary steps in the direction. Mr. Hans Raj Gupta did not vote on this resolution. Resolved that the company shall take over these premises as from 1st July, 1950, and no rent shall be paid thereon as from date. The rents to be paid to L. Hans Raj Gupta on 30th June, 1950, are hereby confirmed. " As noticed earlier, the sale consideration was paid in consequence thereof and entries made in the respective accounts of the company and the assessee. However, the property which consisted of the factory premises, godown buildings, etc., and was being used by the company continued to be used by it; and no payment for its user was given to or claimed by the assessee. The assessee's claim that he could no longer be considered the owner for the purpose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y referred to, applies squarely to the situation here. It is true that in recent years, parties with a view to avoid heavy stamp duty and registration charges on transfer documents, resort to several types of arrangements by which they attempt to transfer virtual control and dominion even over immovable property from one person to another without drawing up a deed and having it registered. One such common mode is that of entering into an agreement for sale accompanied by delivery of possession leaving the intending purchaser to work out his rights by relying on the doctrine of part performance or otherwise. Such an arrangement has been considered by, this court in the decisions already cited, the Supreme Court in Ram Gopal Reddy v. Addl. Custodian Evacuee Property, AIR 1966 SC 1438, and the Bombay High Court in Union Land and Building Society [1972] 83 ITR 794. The inadequacy of such an arrangement in conveying title to the intended transferee has been pointed out in these decisions. It will also be appreciated that the plea under s. 53A of the Transfer of Property Act is one to be established on facts by the intending purchaser vis-a-vis the intending vendor and will not avail a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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