K N RAZDAN Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) This reference under Section 256(1) of the Income-tax Act, 1961, relates to the assessment years 1979-80, 1981-82 and 1982-83. The facts leading to this reference are that the assessee, an individual, purchased two office flats bearing Nos. 13A and 12F in premises No. 46C, Chowringhee Road, Calcutta, in terms of an agreement for sale dated December 4, 1972, from Western Building Corporation which had constructed the said property. The assessee took possession of both these office flats and let these out to two different tenants and received rents from such tenants. No conveyance deed in respect of either of these said two flats has been executed by Western Building Corporation in favour of the assessee so far. The assessee did not offer the aforesaid rental income for taxation in his own hands from the very beginning on the ground that, in the absence of any conveyance deeds, he was not the legal owner of either of these two flats. The flats being immovable property, no title in respect thereof could pass in favour of the assessee without a deed of conveyance being executed by Western Building Corporation and duly registered with the Registrar of Assurances. Since such deed was not executed and/or registered in favour of the assessee, it was submitted on behalf of the assessee that the said rental income could not be assessed in the hands of the assessee and the same was assessable in the hands of the builder, Western Building Corporation. The assessee placed reliance on the decision of this court in CIT v. Ganga Properties Ltd. [1970] 77 ITR 637. In addition to the aforesaid submissions in the course of the assessment proceeding, it was also, inter alia, contended on behalf of the assessee that various clauses of the agreement dated December 4, 1972, when read as a whole, clearly show that the transfer in question was revocable within the meaning of Section 63 of the Income-tax Act, 1961, and in view of the provisions of Sections 60 and 61 of the said Act, the aforesaid rental income, though received by the assessee, was assessable in the hands of the Western Building Corporation. The Income-tax Officer did not accept the aforesaid contentions and assessed the rental income in the hands of the assessee under the head "Income from other sources". The Income-tax Officer was of the view that the assessee had duly paid the agreed consideration to the Western Building Corporation and had received possession of the said flats from the seller. The assessee had thereafter let out these two flats to Security Services and Personnel (P.) Ltd. and Messrs. Jypti Ltd. and was actually deriving rental income therefrom and he was, therefore, assessable in respect of the rental income. It may be noted that the rental income was assessed by the Income-tax Officer under the head "Income from other sources" in the assessment year 1979-80 and under the head "Income from house property" in the assessment years 1981-82 and 1982-83.

(2.) In appeals filed by the assessee against the aforesaid assessments, the Appellate Assistant Commissioner of Income-tax, following the decision of the Tribunal in the case of the assessee in the earlier years, upheld the assessee's contention and held that the rental income could not be assessed in the hands of the assessee. It may be noted that, in the earlier years, the Tribunal had upheld the contention of the assessee based on the decision of this court in the case of Ganga Properties [1970] 77 ITR 637.

(3.) The Department filed an appeal against the aforesaid order of the Appellate Assistant Commissioner to the Income-tax Appellate Tribunal, Calcutta, and contended that, since the assessee was not the legal owner of the two office flats in question, the rental income, in view of the decision of this court in CIT v. Ganga Properties Ltd. [1970] 77 ITR 637 and of the Supreme Court in Nawab Sir Mir Osman Ali Khan (Late) v. CWT, was not assessable as "Income from house property" ; but the same was assessable under the head "Income from other sources". On behalf of the assessee, reliance was, inter alia, placed on the decision of the Bombay High Court in CIT v. Smt. T.P. Sidhwa [1982] 133 ITR 840. The Tribunal, however, following the principles laid down by the Delhi High Court in the case of Sushil Ansal v. CIT [1986] 160 ITR 308 upheld the contention of the Department and held that the rental income received by the assessee was assessable in his hands under the head "Income from other sources".