Beneficial ownership of property controls taxation of rent, and reassessment fails when the income belongs to the transferee in substance.

Where possession and beneficial enjoyment of a property have passed under an agreement to sell, rental income from that property accrues in substance to the transferee and cannot be assessed again in the transferor's hands merely because the registered sale deed was executed later. The article also notes that reassessment under section 147(b) was unsustainable where the income did not belong to the assessee in substance and had already been assessed in the transferee's hands. The departmental appeal therefore failed, and the annulment of reassessment was sustained.

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Issues: Whether rental income from the first floor of the property, after agreement to sell and delivery of possession to the assessee's son, could be assessed in the assessee's hands for the relevant period; and whether the reassessment under section 147(b) was sustainable.

Analysis: The assessee had received substantial consideration under the agreement to sell and had handed over possession of the floor to the transferee, who enjoyed the rental income from January 1982 onwards. The income from the same property had already been assessed in the son's hands under section 143(3) of the Income-tax Act, 1961. In these circumstances, the assessee could not be treated as the person liable to be taxed on that rental income merely because the sale deed was registered later. The reopening and reassessment could not stand where the income did not belong to the assessee in substance and the same income had already been assessed in another person's hands.

Conclusion: The rental income was not assessable in the assessee's hands, and the reassessment was unsustainable.

Final Conclusion: The departmental appeal failed and the order annulling the reassessment was sustained.

Ratio Decidendi: For income-tax purposes, where possession and beneficial enjoyment of property have passed under an agreement to sell, rental income accrues to the transferee in substance and cannot be taxed again in the transferor's hands.

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