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Judgment
F.I. Rebello, J.—Income Tax Reference No. 3 of 1994 is in respect of the assessment years 1976-77, 1977-78, 1978-79, 1979-80, 1980-81, 1979-80. Income Tax Reference No. 1 of 1994 is in respect of the assessment years 1984-85 and 1985-86. In respect of both the References, the learned tribunal has referred several questions for determination of this Court. In our opinion, if question No. 2 is answered, there will be no need to answer the other questions referred to. The question for consideration before us reads as under:
Whether the Appellate Tribunal erred in law in holding that the property would stand transferred only with effect from the date of registration of the Deeds of Conveyance of flats?
A few facts may now be set out. The assessee had 1/3rd share in the property known as Bhaktawar building. The other shares were held by other persons. The property consists of five flats jointly owned by the co-owners and 32 flats occupied by the tenants. Another three flats at the relevant time were in possession of the Court Receiver. Out of 32 flats, 9 flats were sold prior to the accounting year relevant to the assessment year 1976-77. This transfer of 9 flats was accepted by the Income Tax Officer in assessment year 1975-76. Out of remaining 23 flats, 19 were sold on different dates during the accounting year relevant to the assessment year 1978-79 and in respect of the balance, conveyances were executed in the subsequent accounting years. The Assessing Officer held that the assessee was the owner of the 23 flats in dispute as mere execution of conveyance deed was not enough without the deed being registered as required under the provisions of the Registration Act. Since that has not been done, the Assessing Officer held that the assessee continued to be the owner of the 23 flats. On reference to the respective Commissioner u/s 146(3), the order of the Assessing Officer was upheld. In appeal on behalf of the assessee, an emphasis was led on the provisions of the Maharashtra Apartment Ownership Act, 1970 and the Maharashtra Apartment Rules, 1972. Based on this act and rules, it was contended that the transfer made by the assessee was complete and the ownership cannot be attached to the assessee so as to assess the income therefrom in the assessees hands. The learned Commissioner did not agree with the contention as advanced on behalf of the assessee and held that the assessee was rightly treated as owner of the property. Against which, the assessee preferred an appeal before the I.T.A.T. The contentions urged before the Commissioner were also urged before the I.T.A.T. The learned I.T.A.T. confirmed the orders of the Commissioner (Appeals). The tribunal has been pleased to make the reference. After hearing parties with their consent, the question has been reframed to address the issue which arises.
At the threshold on behalf of the appellant, the learned counsel submits that the concept of ownership considering the provisions of the Transfer of Property Act read with Registration Act is different in the context of the provisions of the Income Tax Act. What is to be considered for the purpose of Income Tax Act are the provisions of Section 22 of the Act of 1963. In support thereof, the learned Counsel has placed reliance on the judgment of the Supreme Court in Commissioner of Income Tax, Bombay etc. Vs. M/s. Podar Cement Pvt. Ltd. etc., .
In Podar Cement (supra), the assessee was the owner of four flats in a building called as "Silver Arch", Nepeansea Road, Bombay. The builder of the said building was M/s. Malabar Industries Pvt. Ltd. Out of the four flats, two were directly purchased by the respondent company from the builders and the other two were purchased by its sister concern and subsequently by the assessee. The possession of the flats was taken after payment of consideration in full some time in August, 1973. The flats in question in fact had been let out to various persons. The rental income from these flats were included in the Return of the assessment for the assessment years in question, namely, 1975-76 and 1976-77. It was submitted on behalf of the assessee that the rental income of the flats was assessable as income from other sources u/s 56 of the Act and not as Income from house property u/s 22 of the Income Tax Act. The submission was based on the contention that the assessee was not the legal owner of the property in the flats and as such the income from the flats could not be assessed as income from house property. The Assessing Officer assessed the income as income from house property. In an appeal preferred, the order of the Assessing Officer was upheld. In the appeal before the I.T.A.T. it held that income from the flats cannot be taxed as income from house property u/s 22 of the Act. Reference was made at the instance of the Revenue to the High Court. The High Court confirmed the view taken by the tribunal and held that the income in question was assessable u/s 56 of the Act. The matter was taken up in appeal before the Supreme Court. The Supreme Court for the purpose of considering the contentions considered Section 9(1) of the Old Act as also Section 22, 27 and 56 of the Act of 1961. The learned Supreme Court then from the submissions of the parties observed as under: "...that the controversy revolves around the meaning to be given to the word "of which the assessee is the owner" occurring in Section 22 of the Act."
After considering various authorities, the learned court observed as under:
One of the most important of these powers is the right to exclude others.
What flows from this proposition is that the assessee should be in a position to exclude all other persons from the use of the property. In other words the assessee must be in exclusive possession in his own right to the exclusion of all others.
Reliance was placed in the case of R.B. Jodha Mal Kuthiala Vs. The Commissioner of Income Tax, Punjab, Jammu and Kashmir, Himachal Pradesh and Patiala, . The learned Supreme Court noted the law as followed by the other High Courts as to how they have understood the ratio of the judgment in Jodhamal (supra). The Rajasthan High Court had addressed the issue as to whether the words "of which the assessee is owner" can be applicable only to the registered owner or also to such persons in whose favour registered sale deed has not been executed but an agreement for sale has been executed and the possession of the property has been given and consideration had been paid. After considering various aspects, the court was pleased to hold that it is not required that the Deed has to be registered. What is to be considered is whether the person who was put in possession can enjoy the property to the exclusion of others. The Supreme Court then noted that the law laid down by the Supreme Court in Jodhamal (supra) has been rightly understood by the High Courts of Punjab and Haryana, Patna, Rajasthan etc and held that the requirement of registration of sale deed in the context of Section 22 is not warranted.
While so holding, it also noted the amendment carried out to Section 27 of the Act by Finance Act, 1987 by substituting some of the clauses with effect from 1.4.1988. The court addressed to itself, a question whether this amendment was clarificatory or declaratory and after considering various aspects was pleased to hold that it had no hesitation to hold that the amendment in the Fiance Bill of 1988 was declaratory/clarificatory in nature, in so far as it relates to Section 27(iii), (iiia) and (iiib) and consequently provisions were retrospective in operation. The learned court then observed that in view of that the views taken by the High Courts of Patna, Rajasthan and Calcutta, gets added support and consequently the contrary view taken by the Delhi, Bombay and Andhra Pradesh High Courts is not good law. The following paragraph may now be reproduced:
We are conscious of the settled position that under the common law owner means a person who has not valid title legally conveyed to him after complying with the requirements of law such as Transfer of Property Act, Registration Act, etc. But in the context of Section 22 of the Income Tax Act having regard to the ground realities and further having regard to the object of the Income Tax Act, namely, "to tax the income", we are of the view, owner is a person who is entitled to receive income from the property in his own right.
It would thus be clear from the law declared by the Supreme Court in the case of Poddar Cement (supra), that there is no requirement that there has to be a registered Deed of conveyance for a person to be treated as an owner for the purpose of Section 22 of the Income Tax Act.
Considering the law as declared, we may refer to the findings recorded in so far as the assessee is concerned. The tribunal in its order dated 16.2.1988, held as under:
Out of the 40 flats, 5 flats were retained by the co-owners and 3 flats continue to be in the possession of the Court Receiver. Nine flats were sold in the earlier years and the transfer was accepted as complete by the Revenue authorities. We are concerned with the status of the balance 23 flats. Out of these 23 flats, 19 were sold to different parties during the accounting year relevant to the assessment year 1976-77. The declaration as required under the Maharashtra Apartment Ownership Act, 1970 was executed by the co-owners some time in July, 1974. Deed of apartment was executed during 1975 in favour of each of the 19 tenants. Registration, however, was done later on after the end of the previous year relevant to the assessment year 1976-77. Similarly, the balance flats were sold in the subsequent assessment years.
From the above facts what emerges is that the flats were initially occupied by the tenants. 19 flats were sold to different parties in the course of assessment year 1976-77. The entire consideration was received in the course of that assessment year. Thus the purchasers were in possession and the entire consideration was paid. Similarly declaration as required under the Maharashtra Ownership Act was executed in July, 1974. The Deed of apartment was executed in 1975 in favour of each of 19 tenants. From the order of the Assessing Officer, however, we find that the rental income has been assessed in the hands of the assessee for the relevant assessment years. From these facts what really emerges is that though rent was not actually received, the A.O. proceeded on the footing that the rent was receivable as there was no registration of the conveyance in favour of the tenants and the assessee continued to be the owner.
On the facts noticed, in our opinion, it may be possible to arrive at the conclusion that the assessee herein ceased to be the owner. However, as relevant sale documents are not available before us, in our opinion, the proper course would be to remand the matter back to the tribunal for answering the issue in the context of the law as laid down in Poddar Cement (supra) and the observations made by us in this judgment.
In the light of the above, question referred is answered in the affirmative in favour of the assessee and against revenue.