Legal ownership controls house-property taxation; possession under an agreement to sell does not transfer ownership without registration.

For house-property taxation under section 22 of the Income-tax Act, annual value is chargeable in the hands of the person who is owner in law. An agreement to sell, delivery of vacant possession, receipt of consideration, and protection under section 53A of the Transfer of Property Act do not by themselves transfer legal title. Ownership passes only on execution and registration of the sale deed, and the vendor remains the owner until a registered conveyance is completed. The court therefore applied the legal-owner test and answered the referred question in favour of the Revenue, against the assessee.

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Issues: Whether, for the purposes of section 22 of the Income-tax Act, 1961, ownership of immovable property passes only on execution and registration of a sale deed, or whether delivery of possession and transfer of rights under an agreement of sale is sufficient to shift ownership for house-property taxation.

Analysis: The annual value under section 22 is chargeable in the hands of the person who is the owner in the eye of law. An agreement to sell, delivery of vacant possession, receipt of consideration, and the protection of section 53A of the Transfer of Property Act, 1882 do not by themselves confer legal title on the purchaser. The reasoning drawn from the decision under the Wealth-tax Act was treated as applicable to section 22, and the line of authority holding that a vendor remains the owner until a registered conveyance is executed was preferred.

Conclusion: Ownership for the purposes of section 22 is not transferred merely by handing over possession or other incidental rights; it passes only on execution and registration of the sale deed. The answer to the referred question was therefore in the affirmative, against the assessee.

Ratio Decidendi: For house-property taxation, the liable owner is the legal owner under Indian law, and an agreement of sale with possession and contractual rights does not displace ownership until title is transferred by a registered instrument.

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