1981 (2) TMI 72 - HC - Income Tax

Actual possession key in determining property ownership for tax purposes.

The High Court held that ownership for tax purposes under section 22 of the Income-tax Act, 1961 does not solely depend on a registered sale deed but also ... Income From Property, Owner Issues involved: The judgment involves the interpretation of ownership of a house property u/s 22 of the Income-tax Act, 1961 for the assessment years 1968-69 and 1969-70.Interpretation of Ownership under Section 22:The case involved whether the assessee could be regarded as the owner of the house property in question as per section 22 of the Income-tax Act, 1961 for the assessment years 1968-69 and 1969-70. The assessee purchased the property in 1964, undertook construction, and completed the house in 1967. The sale deed was executed in 1969. The Income Tax Officer (ITO) issued notices to include income from the self-occupied property, which the assessee contested, claiming not to be the owner until the sale deed was executed. The ITO taxed the income, which was upheld by the Appellate Authority and the Tribunal. The assessee argued that possession alone, without the sale deed, should not attract tax under section 22. The revenue contended that the assessee occupied the property and was in a position to earn income, relying on a Supreme Court judgment. The High Court held that ownership for tax purposes does not solely depend on a registered sale deed, but on actual occupation and ability to earn income. The Court referred to the Supreme Court's observation that the focus is on income receipt from the property, not just legal ownership.Application of Supreme Court Precedent:The Court referred to the Supreme Court's decision in R. B. Jodha Mal Kuthiala v. CIT [1971] 82 ITR 570, emphasizing that ownership for tax purposes is not limited to legal title through a sale deed. The Court noted that if an assessee is in occupation of a building as an owner in all aspects except for a sale deed, they are liable to income tax u/s 22 of the Act. The Court highlighted that in the present case, the assessee occupied the house after the agreement to sell in 1964 and was capable of earning income from the property. The Court also pointed out that all payments were made at the time of the agreement to sell in 1964, not during the execution of the sale deed in 1969. The Court distinguished a judgment of the Andhra Pradesh High Court, stating that the Supreme Court's decision in R. B. Jodha Mal Kuthiala's case prevails for interpreting section 22 of the Act.Conclusion:The Court answered both questions in favor of the revenue and against the assessee, emphasizing that ownership for tax purposes is not solely contingent on a registered sale deed but on actual occupation and the ability to earn income from the property.