1986 (3) TMI 73 - HC - Income Tax

Court rules unregistered sale deed insufficient for ownership, income correctly assessed under 'Income from other sources.'

The court concluded that the assessee could not be considered the owner of the flats without a registered sale deed, resulting in the income being ... Income From House Property Issues Involved:1. Ownership of the property for tax purposes.2. Classification of income derived from the property.Summary:Issue 1: Ownership of the Property for Tax PurposesThe primary issue was whether the assessee could be treated as the owner of three flats in the building 'Akashdeep' for the purpose of income tax assessment. The assessee claimed ownership based on an agreement to sell, payment of the purchase price, and possession of the flats. However, the Income-tax Officer (ITO) assessed the income as 'income from other sources' because the ownership was not registered. The Appellate Assistant Commissioner (AAC) accepted the assessee's contention, but the Appellate Tribunal reversed this decision, stating that without a registered sale deed, the title remained with the company. The Tribunal followed the precedent set by CIT v. Meatles Ltd. [1972] 84 ITR 37 (Delhi), concluding that the assessee could not be considered the owner.Issue 2: Classification of Income Derived from the PropertyThe second issue was whether the income derived by the assessee from the flats should be assessed under the head 'Income from house property' or 'Income from other sources.' The ITO assessed it under 'Income from other sources,' denying deductions for repairs. The AAC directed the ITO to assess it under 'Income from house property,' allowing statutory relief for repairs. The Tribunal, however, upheld the ITO's view, stating that the assessee could not claim ownership without a registered sale deed. The court noted conflicting judicial opinions on this matter but decided to follow its consistent line of decisions, which required a registered instrument for ownership transfer.Court's ConclusionThe court held that the assessee could not be treated as the owner of the flats without a registered sale deed. Consequently, the income derived was correctly assessed under 'Income from other sources.' The court also rejected the argument that the income could not be taxed at all if not assessed under 'Income from house property,' citing that income from property not owned by an assessee could be assessed u/s 56. The court suggested that the Central Board consider formulating guidelines or legislative amendments to address such issues. The two questions referred were answered in the affirmative and in favor of the Department, with no order as to costs.