Owner for Income-tax purposes: mortgagor liable for annual value where English-form mortgage leaves legal estate with mortgagor.

Where property is subject to an English-form mortgage the legal estate remains with the mortgagor, and a court-appointed receiver exercises custody and management (custodia legis) without acquiring ownership; accordingly, for the purposes of assessment under section 9(1) the mortgagor is the owner liable to tax on the net annual value and may claim the statutory allowance for mortgage interest under section 9(1)(iv). The mortgagee and the receiver are not treated as owners for income-tax liability when a receiver merely manages the property on behalf of entitled parties.

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Issues: Whether, for the charge year 1943-44, the net annual value of house properties under the management of a court-appointed receiver was rightly included in the assessee's assessment under section 9 of the Income-tax Act.

Analysis: The issue required identifying who is the "owner" within the meaning of section 9(1) when property is subject to an English-form mortgage and a receiver has been appointed by the Court. Relevant considerations included (i) the effect of an English-form mortgage under Indian law, (ii) the statutory language of section 9(1) and section 9(1)(iv) which contemplates allowance for interest where property is subject to mortgage, and (iii) the legal status and role of a court-appointed receiver under Order XL, Rule 1 of the Code of Civil Procedure. Authority establishing that an English-form mortgage executed in India leaves the legal estate in the mortgagor was applied. The statutory reference to mortgage interest as an allowance was read as presupposing the mortgagor as the person liable for tax. The receiver's functions and possession were characterised as custodia legis and management on behalf of parties entitled to the property rather than ownership.

Conclusion: The mortgagor is the owner within the meaning of section 9 and is liable to assessment in respect of the net annual value; the mortgagee and the court-appointed receiver are not the owner for the purposes of section 9. The assessment including the house property value was therefore rightly made on the assessee.

Ratio Decidendi: For taxation under section 9(1) of the Income-tax Act, where property is subject to an English-form mortgage the legal estate remains with the mortgagor, and a court-appointed receiver holds and manages the property in custodia legis without becoming owner; accordingly the mortgagor is liable for tax on the annual value and may claim the statutory allowance for mortgage interest under section 9(1)(iv).

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