1967 (9) TMI 30 - HC - Income Tax

Assessee not property owner, loss claim denied under Income-tax Act. Currency conversion allowed.

The High Court held that the assessee was not the owner of the property during the relevant years due to complete vesting in the custodian under evacuee ... Pakistan (Administration of Evacuee Property) Ordinance, 1949 - section 9 of Indian Income Tax Act, 1922 - Whether the assessee was the owner of the property known as N Hotel in Pakistan in the relevant accounting year - Whether the assessee was entitled to the loss claimed by it by conversion of the purchase price from Pakistan currency to Indian currency Issues Involved: Ownership of property, entitlement to claim loss, conversion of purchase price from Pakistan currency to Indian currency, and computation of income under section 9 of the Indian Income-tax Act, 1922.Issue 1: Ownership of PropertyThe primary question was whether the assessee was the owner of the property known as Nedous Hotel Pakistan during the relevant accounting years. The property was purchased in Lahore in February 1946, but later vested in the Custodian of Evacuee Property, Lahore. The Income-tax Officer decided that the property, having vested in the Custodian, meant the assessee ceased to be the owner within section 9 of the Indian Income-tax Act, 1922. The Tribunal, however, held that the property vested in the Custodian only for preserving and managing, and the title of the owner was not affected. The High Court, upon reviewing various provisions of the evacuee legislation in Pakistan, concluded that the property became completely vested in the custodian, resulting in complete divestiture of the evacuees. Thus, the assessee was not the owner within section 9 during the years in question.Issue 2: Entitlement to Claim LossThe second issue was whether the assessee was entitled to claim the loss of Rs. 1,70,104 in respect of the ownership of the said property. Since the High Court concluded that the assessee was not the owner of the property during the relevant years, it followed that the assessee could neither include the annual letting value in its income nor claim the deductions for the losses under section 9. Therefore, the High Court answered this question in the negative and against the assessee.Issue 3: Conversion of Purchase PriceThe third issue was whether the assessee was entitled to the loss claimed by converting the purchase price from Pakistan currency to Indian currency in respect of the business carried on at Hoshiarpur. The Tribunal had accepted the assessee's contention regarding the conversion of Pakistan currency into Indian currency for arriving at the correct purchase price. The High Court agreed with this approach, stating that if purchases are made in a foreign currency, the purchase price should be calculated based on the Indian rupee, and profit or loss should be arrived at on that basis. Therefore, the High Court answered this question in the affirmative and in favor of the assessee.Issue 4: Computation of Income under Section 9The final issue was whether the assessee continued to be the owner of the property for the purposes of computation of income under section 9 of the Indian Income-tax Act, 1922. The High Court held that the assessee was not the owner within section 9 during the relevant years due to the complete vesting of the property in the custodian under the evacuee legislation. Consequently, the assessee could not be considered the owner for the purpose of computing income under section 9.Separate Judgments:HARDY J. and ISMAIL J. concurred with the judgment delivered, agreeing with the conclusions reached. The references were answered accordingly, with no order as to costs.