Property income ownership test under section 22 extends beyond legal title; flats' income taxed as house property.
For purposes of property income taxation, ownership under section 22 is not confined to strict legal title; a person entitled to receive the property income in her own right may be treated as the owner even if the sale deed is not registered. On that basis, income from the commercial flats was held assessable under the head "Income from house property" and not under "Income from other sources". The reference was answered against the Revenue and in favour of the assessee.
Issues: (i) Whether the assessee could be treated as the owner of the commercial flats for the purpose of section 22 of the Income-tax Act, 1961. (ii) Whether the income from the commercial flats was assessable under the head "Income from house property" and not under "Income from other sources".
Issue (i): Whether the assessee could be treated as the owner of the commercial flats for the purpose of section 22 of the Income-tax Act, 1961.
Analysis: In the context of section 22, ownership is not confined to strict legal title under the common law. The relevant test is whether the person is entitled to receive income from the property in her own right. Registration of the sale deed is not indispensable where the statutory object is to tax the income from property.
Conclusion: The assessee was to be treated as the owner for the purpose of section 22.
Issue (ii): Whether the income from the commercial flats was assessable under the head "Income from house property" and not under "Income from other sources".
Analysis: Once the assessee is regarded as the owner within the meaning of section 22, the income derived from the flats falls under the statutory head applicable to property income. The contrary head of assessment was therefore not sustainable.
Conclusion: The income from the flats was assessable under "Income from house property".
Final Conclusion: Both reference questions were answered against the Revenue and in favour of the assessee, and the reference was finally disposed of.
Ratio Decidendi: For the purpose of section 22 of the Income-tax Act, 1961, owner means a person entitled to receive income from the property in her own right, and strict legal title or registration of the conveyance is not essential.
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AI Drafter ✕
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