House property income taxable in transferor's hands where conveyance is unregistered and legal title has not passed.

Income from house property remains assessable in the transferor's hands where the conveyance is unregistered and legal title has not passed, even if consideration has been paid, possession delivered, tenants attorned, and rent received by the transferee. The Bombay HC followed its earlier Division Bench ruling and held that legal ownership is material for section 22 of the Income-tax Act, 1961; mere delivery of possession does not make the transferee the owner for assessment purposes. The Court also noted that it was bound by the prior Division Bench view and could not adopt contrary decisions of other High Courts. Accordingly, the property income was held assessable in the assessee's hands.

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Issues: Whether income from the house property was assessable in the hands of the assessee under section 22 of the Income-tax Act, 1961, despite payment of consideration, delivery of possession, and attornment of tenants before execution and registration of the conveyance.

Analysis: The Court followed its earlier Division Bench decision holding that for assessment under the house property provision, legal ownership remains material where the sale deed is not registered and the transferee cannot be treated as owner merely because possession has been delivered and rent is being received by the purchaser. The Court noted that section 22 of the Income-tax Act, 1961 is substantially similar to section 9 of the Indian Income-tax Act, 1922, and that the earlier decision had already considered the effect of the Supreme Court authority relied upon by the assessee. The Court held that it was bound by the prior Division Bench ruling and could not adopt the contrary views expressed by other High Courts.

Conclusion: The question was answered in the affirmative, and the income from the property was held assessable in the hands of the assessee.

Ratio Decidendi: For assessment of income from house property, where the conveyance is unregistered and title has not legally passed, the transferor remains liable to assessment notwithstanding delivery of possession and receipt of rent by the transferee.

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