Beneficial ownership under house property tax rules includes entitlement to enjoy income, and the clarificatory amendment operates retrospectively.

Income from flats is chargeable under the head "Income from house property" where the person in possession under an agreement for sale has paid consideration and is entitled in his own right to enjoy the property and receive its income; formal registered title is not essential for section 22. The contrary view requiring registered conveyance was rejected. The Finance Act, 1987 amendment to section 27 enlarging the deemed ownership category was treated as declaratory and clarificatory, not a substantive change, and therefore applies retrospectively. The interpretation of "owner" in the house property provisions was thus confirmed to include beneficial entitlement to income.

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Issues: (i) Whether income from flats is chargeable under the head "Income from house property" under section 22 of the Income-tax Act, 1961, or under section 56 as income from other sources, having regard to the meaning of "owner"; (ii) Whether the amendment to section 27 of the Income-tax Act, 1961 by the Finance Act, 1987 enlarging the meaning of owner is clarificatory and retrospective.

Issue (i): Whether income from flats is chargeable under the head "Income from house property" under section 22 of the Income-tax Act, 1961, or under section 56 as income from other sources, having regard to the meaning of "owner".

Analysis: The charging provision in section 22 taxes the annual value of property of which the assessee is the owner. The expression "owner" was construed in the context of the statutory scheme and the earlier decision under the corresponding provision of the old Act. The decisive consideration was whether the assessee was entitled to receive the income from the property in his own right, and not merely whether a formal registered conveyance had been executed. The Court preferred the view that a person in possession under an agreement for sale, who has paid consideration and is entitled to enjoy the property and its income, can be treated as owner for the purpose of section 22. The contrary view, which insisted on registered title as a condition precedent, was rejected.

Conclusion: The income from the flats is assessable under section 22 as income from house property, and not under section 56 as income from other sources; the answer is in favour of the Revenue.

Issue (ii): Whether the amendment to section 27 of the Income-tax Act, 1961 by the Finance Act, 1987 enlarging the meaning of owner is clarificatory and retrospective.

Analysis: The amendment introducing clauses enlarging the deemed ownership category was examined against the background of conflicting High Court views and the memorandum explaining the Finance Bill. The Court treated the amendment as supplied to remove doubt and cure an obvious omission in the existing law. On that basis, it was held to be declaratory and clarificatory rather than a substantive change in law, and therefore applicable retrospectively.

Conclusion: The amendment is clarificatory and retrospective, and it supports the Revenue's construction of section 22.

Final Conclusion: The statutory expression "owner" in the house property provisions was construed to include the person entitled to receive the income in his own right, and the later amendment to section 27 was held to confirm that interpretation.

Ratio Decidendi: For the purpose of section 22, ownership is determined by the right to receive and enjoy the income from the property in one's own right, and a clarificatory amendment enlarging deemed ownership operates retrospectively.

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