Ownership under section 22 turns on adverse possession, part performance, and the effect of invalid transfer documents.

For section 22 of the Income-tax Act, a purchaser in possession under an agreement of sale was not shown on these facts to have acquired adverse ownership merely because consideration had been paid and possession delivered before conveyance, so the assessee remained the owner for tax purposes. By contrast, where properties were handed over under firmans treated as invalid transfer documents, possession was treated as adverse to the transferor and had matured into ownership by adverse possession before the assessment year, so the ownership burden could not be fastened on the assessee for those properties.

---

---

Issues: (i) Whether the assessee remained the owner, within the meaning of section 22 of the Income-tax Act, 1961, of properties sold to outsiders where consideration had been received and possession delivered but conveyance deeds were executed later; and (ii) whether the assessee was liable to be taxed as owner under section 22 of the Income-tax Act, 1961 in respect of properties handed over under firmans without proper deeds of conveyance.

Issue (i): Whether the assessee remained the owner, within the meaning of section 22 of the Income-tax Act, 1961, of properties sold to outsiders where consideration had been received and possession delivered but conveyance deeds were executed later.

Analysis: The question turned on whether a purchaser in possession under an agreement of sale, capable of invoking section 53A of the Transfer of Property Act, 1882, could be treated as holding adversely to the owner so as to acquire title by prescription under section 27 read with articles 64 and 65 of the Limitation Act, 1963. The Court declined to accept that proposition on the materials before it and held that no clear authority was shown to establish that such possession necessarily became adverse ownership after twelve years in the circumstances of the case.

Conclusion: The assessee was held to remain the owner for the purpose of section 22, and the answer to this issue was against the assessee.

Issue (ii): Whether the assessee was liable to be taxed as owner under section 22 of the Income-tax Act, 1961 in respect of properties handed over under firmans without proper deeds of conveyance.

Analysis: The Court treated the firmans as invalid documents of transfer and applied the settled principle that possession under an invalid deed of transfer is adverse to the transferor. On that basis, the transferees' possession had ripened into ownership by adverse possession before the relevant assessment year, and the ownership burden under section 22 could no longer be fastened on the assessee.

Conclusion: The issue was answered in favour of the assessee and against the Revenue.

Final Conclusion: The reference was answered partly against the assessee and partly in his favour, with the first question decided for the Revenue and the second for the assessee, and the proceeding was brought to a close with no order as to costs.

Ratio Decidendi: A transferee in possession under an invalid deed of transfer may acquire title by adverse possession, but a purchaser in possession under an agreement of sale invoking part performance was not shown on these facts to be necessarily adverse to the owner for the purpose of section 22 of the Income-tax Act, 1961.

---