House-property ownership and rental attribution: legal title stayed with the vendor, but rent credited to purchasers was not taxable in its hands.

For house-property taxation under section 22, legal ownership remained with the assessee because the flats had been allotted, consideration paid and possession delivered, but no registered conveyance deed had been executed. The purchasers' possessory rights under section 53A of the Transfer of Property Act did not displace the vendor's legal title. On rental income, the assessee was treated as an agent for the flat purchasers: rent was credited directly to their accounts and the assessee retained only a limited maintenance or service charge. The principal rent was therefore not assessable in the assessee's hands, while the service-related receipt remained taxable if not already offered.

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Issues: (i) Whether the assessee continued to be the owner of the flats for the purposes of section 22 of the Income-tax Act, 1961 despite full payment, delivery of possession and absence of registered conveyance deeds; (ii) Whether the rental income from the flats was assessable in the assessee's hands when the flats were let out by the assessee on behalf of the purchasers and rent was credited to the purchasers' accounts.

Issue (i): Whether the assessee continued to be the owner of the flats for the purposes of section 22 of the Income-tax Act, 1961 despite full payment, delivery of possession and absence of registered conveyance deeds.

Analysis: The flats had been allotted to purchasers, full consideration had been received, and possession had been delivered, but no deed of conveyance had yet been executed or registered. The legal position applied was that, in the absence of a registered transfer, the vendor retains legal title even though the purchaser may have possession and enforceable rights under section 53A of the Transfer of Property Act. On that basis, the purchasers could not be treated as legal owners for the purposes of section 22.

Conclusion: The assessee remained the legal owner of the flats for section 22 purposes, and the purchasers were not the owners in law.

Issue (ii): Whether the rental income from the flats was assessable in the assessee's hands when the flats were let out by the assessee on behalf of the purchasers and rent was credited to the purchasers' accounts.

Analysis: The evidence showed that the assessee acted as an agent for the flat purchasers in arranging the lease, the bank credited rent directly to the individual purchasers' accounts, and the assessee received only a small stipulated amount for maintenance and allied services. Since the rent did not reach the assessee as its own income and was payable to the purchasers, the main rental income could not be brought to tax in the assessee's hands.

Conclusion: The principal rental income was not assessable in the assessee's hands, though the small service-related receipt remained taxable if not already offered.

Final Conclusion: The assessee was held to be the legal owner for section 22 purposes, but the substantive rental income from the flats was not taxable in its hands except for the limited amount attributable to its service charge.

Ratio Decidendi: For the purposes of house-property taxation, registered legal title remains material in determining ownership, but income is not assessable in the hands of a person who merely acts as an agent and does not receive the rent as his own income.

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