Real ownership governs house-property taxation where sold property no longer exists in rentable form.

Income from house property under sections 22 and 23 is assessed on the basis of real and effective ownership, not bare legal title alone. Where a vendor has sold the property, the transferee is in possession, and the original building has been converted into commercial flats so that it no longer exists in a form capable of yielding rent, the vendor cannot be taxed on notional annual value merely because registration has not been completed. The later insertion of section 27(iiia) reflects the legislative treatment of such deemed ownership situations for sections 22 to 26.

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Issues: Whether income from house property could be assessed in the hands of the vendor where the property had been sold without registration and had been converted by the transferee into commercial flats, so that the property in its original form no longer existed.

Analysis: Sections 22 and 23 of the Income-tax Act, 1961 bring to tax the annual value of property in the hands of its owner, and the annual value is the amount for which the property may reasonably be expected to let from year to year. A mere subsisting legal title does not, by itself, compel assessment where the property has ceased to exist in the form capable of yielding rent. The transferee's possession and conversion of the original building into commercial flats left the assessee with only a residual or hollow title. The later insertion of section 27(iiia) of the Income-tax Act, 1961 also showed that the legislature addressed such situations by deeming certain possessors to be owners for sections 22 to 26.

Conclusion: Income from the property was not assessable in the assessee's hands and the deletion made by the appellate authority was .

Ratio Decidendi: For taxing house-property income under sections 22 and 23, ownership must be understood in a real and effective sense, and where the property sold no longer exists in a form capable of yielding rent, the vendor cannot be assessed on notional annual value merely because legal title has not been formally registered in the transferee's favour.

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