Practical ownership under income-tax law limits notional annual value for flats sold, possessed, and enjoyed by purchasers.

For section 22, ownership is to be understood in a practical sense where a builder has sold flats as stock-in-trade, received full consideration, and delivered possession to purchasers in exclusive enjoyment; in such circumstances, the absence of registered conveyances does not necessarily leave the builder as the owner for notional annual value purposes. The text also states that the statutory annual value under section 23(1)(a) is the reasonable letting value, and that municipal valuation, being aligned with that standard, should not be ignored or exceeded on the facts considered. The stated result is that the builder was not liable to be assessed on the flats' notional annual value.

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Issues: Whether flats sold by the assessee-builder but conveyed only by possession and agreement for sale could still be treated as owned by the assessee for the purpose of assessment of annual value under section 22 of the Income-tax Act, 1961, and whether the annual value could exceed the municipal valuation.

Analysis: The assessee had constructed multi-storeyed flats as stock-in-trade and had sold them against full consideration, delivering possession to the purchasers, who were in exclusive enjoyment and were themselves being assessed on the income from the flats. The absence of registered conveyances did not, on the facts, leave the assessee with the kind of ownership contemplated by section 22, because the assessee had parted with all practical rights in the flats and retained only a formal obligation to execute conveyances when the purchasers complied with registration requirements. The concept of ownership in section 22 had to be understood in a practical sense, consistent with the principle that tax law should not be applied so as to produce oppression or double assessment. On annual value, the relevant measure under section 23(1)(a) was the sum for which the property might reasonably be expected to let from year to year, and the municipal valuation, being in pari materia with the statutory standard and reflecting reasonable letting value, could not be ignored or exceeded on the facts found.

Conclusion: The assessee was not liable to be assessed on notional annual value of the flats under section 22, and the answer to the referred ownership question was in the negative and in favour of the assessee. The annual value issue was not separately answered.

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