Ownership of building controls section 9 taxation; unregistered licence, consent decree and later leases did not convey title.

Income from the Khedgalli property was assessable under section 9 of the Indian Income-tax Act, 1922 only if the assessee-company was the owner of the building. The revenue failed to establish such ownership: the land belonged to the assessee, but the building was constructed at the cost of prospective flat purchasers and was not shown to have initially vested in the assessee or the licensees. An unregistered licence, an unregistered consent decree, or later leases could not convey title; at most, the leases created estoppel. Section 108(h) of the Transfer of Property Act, 1882 did not assist because it applies to leases, not licences. Accordingly, the income was not assessable under section 9.

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Issues: Whether the income from the Khedgalli property was assessable under section 9 of the Indian Income-tax Act, 1922, on the footing that the assessee-company was the owner of the building.

Analysis: For section 9 to apply, the revenue had to establish that the assessee was the owner of the building. The land admittedly belonged to the assessee, but the building was erected at the cost of the prospective flat purchasers and was not shown to have initially belonged to the assessee or to the licensees. Title to immovable property could not pass by an unregistered licence or by an unregistered consent decree, and the terms relied upon in the licence and decree spoke only of possession and not conveyance of title. The subsequent leases with the flat owners created at most an estoppel and did not operate as a conveyance of title. Section 108(h) of the Transfer of Property Act, 1882, and any analogous principle could not help the revenue, because the provision applies to leases, not licences, and no immediate vesting of title in the lessor was shown.

Conclusion: The assessee-company was not the owner of the building for the purposes of section 9 of the Indian Income-tax Act, 1922, and the income was not assessable under that provision.

Ratio Decidendi: Income from a building standing on another's land is assessable under section 9 only if the assessee is shown to be the owner of the building, and title to such building cannot be created by an unregistered licence, an unregistered consent decree, or a later lease that merely operates by estoppel.

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