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Issues: (i) Whether legal ownership of immovable property passed to the purchaser on the date of the agreement and delivery of possession, before execution and registration of the conveyance. (ii) Whether, for assessment under section 9 of the Indian Income-tax Act, 1922, the assessee could be excluded from tax on the ground that the purchaser was the beneficial owner.
Issue (i): Whether legal ownership of immovable property passed to the purchaser on the date of the agreement and delivery of possession, before execution and registration of the conveyance.
Analysis: In the case of a sale of tangible immovable property, title passes only by a registered instrument. A registered document operates from the date of execution, and registration does not create a new title but perfects the title created by the deed. Delivery of possession or an agreement stating an earlier operative date does not by itself transfer ownership. The agreement and conveyance in the present case showed only a contemplated sale until the conveyance was executed.
Conclusion: Legal ownership did not pass to the purchaser on 29 March 1956.
Issue (ii): Whether, for assessment under section 9 of the Indian Income-tax Act, 1922, the assessee could be excluded from tax on the ground that the purchaser was the beneficial owner.
Analysis: Section 9 fastens liability on the owner of the property in respect of its bona fide annual value. Indian law does not recognise divided legal and beneficial ownership in the manner of English equitable ownership for this purpose. The expression "of which he is the owner" refers to the legal owner, and the tax on income from property is assessable in the hands of that owner alone.
Conclusion: The assessee remained liable under section 9 and could not escape assessment on the basis of alleged beneficial ownership in the purchaser.
Final Conclusion: The reference was answered against the assessee and the annual value of the property remained assessable in its hands for the relevant assessment year.
Ratio Decidendi: For purposes of section 9 of the Indian Income-tax Act, 1922, ownership means legal ownership, and a sale of immovable property takes effect only upon execution of the registered conveyance, not upon prior agreement or delivery of possession.
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