TaxTMI 
TaxTMI 
1992 (3) TMI 154
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....Proclamation V/1117(ME) dated 28-11-1941 issued by the Maharaja of Cochin. The properties comprised in the estate of the joint family were initially managed by the Diwan Peshkar of the erstwhile Cochin State. On the formation of the State of Kerala, the properties, excepting the temples and the properties belonging to them, were managed by the District Collector, Ernakulam. As for the temples and the properties belonging to them, by a Notification issued by the Government of Kerala on 17-11-1961, the Secretary, Haindava Seva Sangam (a registered charitable society) was appointed to manage the affairs of the three temples and the properties appertaining thereto. As provided in Proclamation V/1117(ME), a majority of the adult members of the joint family made a request to the Government of Kerala seeking restoration of the management of the estate of the joint family, and by order dated 6-1-1966 the Government of Kerala directed that the whole estate including the three temples be handed over to the joint family, w.e.f. 1-2-1966. Thereupon, some disputes arose as to the restoration of the management of the two temples in question to the joint family. The vicissitudes of these dispu....
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....eriod of 99 years on an annual Pattam of Rs. 200. On the restoration by the Government of Kerala of the management of the said temple to the joint family in compliance with the order and judgment dated 30-8-1973 of the High Court of Kerala in OP 6510 of 1971, the said Narayanan Kariba executed in favour of the assessee before us a fresh lease deed on 28-12-1973, which was registered as Document No. 458 of 1974. Under the said deed the period of currency of the lease was fixed at 20 years, with the assessee or his legal heirs having the right to terminate the agreement or to renew it on the same terms for further periods. The recital portion of this document adverts to the fact that the proprietorship and possession of the said temple together with the properties appertaining to it stood vested with the said Narayanan Kartha by virtue of the order and judgment dated 30-8-1973 of the High Court in OP 6510/71. In 1974, 30 members (including some minors of the taravad) filed before the First Addl. Subordinate Judge, Ernakulam another partition suit bearing O.S. No. 284/1974. The 67 defendants named in the plaint included C. N. Narayanan Kartha (D.1) and the assessee before us (D.....
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....y Nos. 133, 134/1, 135/3, 135/4 and 135/5. Under column 7 meant for furnishing the details of the price and the date on which it was to be paid, the certificate contains the notation "Saujanyam", and under column 8 (remarks) C. N. Narayanan Kartha is shown as the " Janmi ". 5. We may now notice some material facts in which the controversy before us has had its genesis. On the said piece of land (admeasuring 75 cents) the assessee put up a three storeyed structure designed to be let as shops/offices. Before the lower authorities this superstructure has been described as a shopping complex. The superstructure comprised 64 units with an aggregate area of 1441.76 sq. mtrs. The superstructure was put up at a total cost of Rs. 15,80,400. The construction of the suprerstructure was spread over the period 1977 to 1981. We shall presently be noticing the mode and mechanics of funding of the construction of the said superstructure. For the nonce, however, it would suffice to note that the assessee was taking Pakidi from the prospective tenants and that a few of the units were let even by 1979. Clearly, the assessee was renting office/shops as and when the construction of the lower storey ....
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....the said land as per the Pattam deed No. 424 of 1971 executed by Shri Narayanan Kartha, the Karanavar of Cheranalloor Swaroopam in favour of Radhakrishna Kartha (the assessee) for an annual Pattam of Rs. 200 p.a. A true copy of the said deed is herewith enclosed. As per the said deed, an obligation is created on the assessee for the proper maintenance and upkeep of the temple including the conduct of pooja etc. As an obligation is created, the expenditure incurred by the assessee for the temples is an allowable expenditure (It is an outgoing from the receipts). According to the custom prevailing for the last so many years, the temple should conduct Thalapoli festival in every year. For the reasons stated above, the expenditure met by the assessee for the conduct of pooja, Thalapoli etc. should be allowed as a deduction. During the year under reference the assessee sold some portion of the lease hold land for a sum of Rs. 1,62,000. The details of such sales are as under : (a) P. M. Radhakrishnan, Kushour Rs. 40,000.00 (b) A. F. Mathew Rs. 97,000.00 (c) Thoms, son of Mathew Rs. 25,000.00 -------------------------- Rs. 1,62,000.00 ------------------------- As t....
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....r daily needs of the temples. On that ground alone, the petitioner is not liable to be taxed. The property in which the buildings were situate, belongs to Cheranalloor Swaroopam which is a joint Hindu family. The assets of the said joint Hindu family were managed by the District Collector, by a royal proclamation issued by the erstwhile Cochin State as proclamation No. 1117. There was a condition in the said proclamation that if 2/3 of the members of the Swaroopam requires, the Government was bound to surrender the assets of the Swaroopam and management of the temples, and as such, when demanded by the members of the Swaroopam the Government handed the immovable properties and movable properties to the Karanavan of the Swaroopam in the year 1971. But the temples and properties attached to the temples were surrendered by District Collector only by the decision of the Hon'ble High Court in O.P. 6510/71. The petitioner was appointed as administrator of the temples and its properties. The members of the Swaroopam filed petition suit as OS 134/70 & 264/74 in the Sub-Court Ernakulam for a preliminary decree for partitioning the movable (sic) properties of the Swaroopam including the p....
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....rt. 9. The first appellate authority declined to interfere in the matter for both the years. 10. Thereupon the assessee moved the Tribunal. On an examination of the facts of the case, the learned Judicial Member took the line that the entirety of rental income and the capital gains could not be assessed in the hands of the assessee. The assessee is liable to tax only on the income in proportion to his share as determined by the Sub-Court. On his part, the learned Accountant Member took the line that the matter needed to be restored to the Assessing Officer for fresh consideration and decision on the issue relating to the ownership of the shopping complex put up by the assessee. In this regard the following considerations weighed with the learned Accountant Member : (i) Though the ITO had had that the superstructure belonged to the assessee, yet he had not brought on record all the material necessary for adjudicating the said issue. The controversy was centered on the ownership of the shopping complex put up by the assessee on the land in question. (ii) The legal position in India is that while the land may belong to one person the superstructure may belong to another. I....
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....er was issued in his name. (D) The total cost of construction was Rs. 15,80,400 which, according to the assessee, was funded as follows : (i) Advance (Pakidi) received from tenants Rs. 12,62,400 (ii) From Gosri Chit Funds Rs. 1,11,000 (iii) Loan from Bank of Cochin Rs. 75,000 (iv) Accumulated savings of Kanikka collections Rs. 1,00,000 (v) Sale of gold bonds Rs. 32,000 ------------------------- Total . . . Rs. 15,80,400 ------------------------- (E) The Assessing Officer found that the factum of the assessee's having received an aggregate sum of Rs. 12,62,400 as and by way of advance (Pakidi) was daily supported by the agreements entered into by the assessee with the respective tenants. From a perusal of the rental agreements between the assessee on the one hand, and the tenants of the shops/offices in the shopping complex on the other, the Income-tax Officer found that both the pakidi and the monthly rent were being received by the assessee in his individual capacity. In this regard, the Income-tax Officer found that, significantly, as respects the advance received by the assessee, in some of the rental agreements, a charge is created on the personal ....
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....r the building was completed. He, therefore, held that the investment to the extent of Rs. 32,000 was also not proved. (J) The loan from the bank, the advances (Pakidi) from the tenants, the money from the Gosri Chit Funds - all these having been obtained by the assessee in his individual capacity, the Income-tax Officer concluded that the funds for putting up the shopping complex in question came from the assessee in his individual capacity and not from the coffers of the joint family of which he was a member. (K) There was yet another consideration which weighed with the Income-tax Officer when he came to the conclusion that the shopping complex belonged to the assessee. The Income-tax Officer found that right from 1982 the assessee was selling, from time to time, shops/offices in the said shopping complex and that in the recital portion of the relevant sale deeds, the assessee had unequivocally represented that he was the owner of the building and that he had right to deal with it including the right to dispose them. Further, the assessee had clearly given the assurance that in the event of any loss to the purchaser due to defective title, existence of prior charges and th....
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....eals) agreed with them and upheld " the Assessing Officer's action in bringing to tax the rental income derived by the appellant from the shopping complex as well as the capital gains resulting from the sale of certain shop rooms during the two years under appeal ". Accordingly, he dismissed the two appeals filed by the assessee. 16. It is in these circumstances that the assessee is now before us. 17. Shri Chakkappen Kalliath, the learned counsel for the assessee, took us through the entire gamut of the facts of this case starting right from the 1941 Proclamation of the Maharaja of Cochin. He contended that the assessee filed returns of income for the two assessment years now before us in the status of an Individual under the mistaken belief that that was the legal consequence of the document No. 458/1974 executed by C.N. Narayanan Kartha in favour of the assessee. It was, therefore, that in the said returns the assessee showed not only loss from his profession but also the rental income from the shopping complex. Later on, he realised his mistake and submitted a detailed petition dated 13-12-1985 before the Assessing Officer requesting him not to bring to charge the income i....
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....t family properties. 19. Shri Kalliath next contended that the assessee, acting as the administrator of the Paramara temple had effected improvements to the temple and the temple properties by utilising joint family funds. This is yet another reason why the land in question could not be regarded as that of the assessee. 20. Shri Kalliath then drew our attention to the fact that in OS 284/74 the petitioners had, inter alia, made a specific prayer for a declaration that document No. 458/74 executed in favour of the 7th defendant (the assessee before us) and other documents created thereafter are not binding on the family and the family properties. And on this issue the preliminary decree was passed in the following terms : "A scheme shall also be framed at the final decree stage for the management of the Paramara and Sastha temples..... it is declared that document No. 458/74 (Ext. Al) and the consequential documents are not binding on the family and family properties.... " Thus, there was no question of the piece of land in question being " purchased by the assessee ". 21. Turning next to the finding of the lower authorities that the superstructure, namely the shoppin....
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.... section 223(3). If such claims are filed the respondent will adjudicate on them after issuing notice to and hearing the petitioners and affording them all opportunities to prove their case. This will be done as expeditiously as possible. The petitioners may, if so advised, file their claim petitions before the respondent within a period of two weeks from today and if such petitions are filed the respondent will adjudicate on them within a period of six weeks of receipt thereof after notice to and hearing the petitioners. The respondent will take into account the two decrees for partition in O.S. Nos. 134 of 1970 and 284 of 1974, Sub-Court, Ernakulam as also the impact of the Kerala Joint Family System (Abolition) Act, 1975 in regard to the rights claimed by the petitioners. The respondent will also keep in mind that any action of Dr. R. K. Kartha in derogation of these rights will not be binding on the petitioners. " Pursuant to the said judgment, five members of the family on 26-3-1990 filed suitable common petition before the Assistant Commissioner, Investigation Circle-I, Ernakulam objecting to the attachment of the rent of the shopping complex towards taxes imposed in the n....
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....edings the Accountant Member, Income-tax Appellate Tribunal, Cochin Bench had validly raised the question as to the ownership of the superstructure. Even assuming that, not only by reason of the preliminary decree in OS 284/74 but also by operation of the Kerala Joint Family System (Abolition) Act, 1975, the members of the joint family including the assessee stood possessed of the family properties as tenants-in-common, the assessee was not in any manner barred from putting up the shopping complex on the piece of land in question. In India, it is well settled, the land may belong to one party and the superstructure to the other. The source of the fund utilised for acquiring or constructing the property determines the ownership of the property. Here, the lower authorities have conclusively proved that the construction of the shopping complex was funded not out of funds of the family but funds belonging to the assessee. Thus, neither the advances (Pakidi) nor the loan taken by the assessee in his individual capacity, nor the amounts obtained by the assessee from Gosri Chit Funds could be regarded as flown from the coffers of the joint family. As regards the assessee's allegation t....
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.... therefore, reiterated that the assessee is entitled to succeed. 25. We have looked into the facts of the case. We have heard the rival submissions. 26. The piece of land admeasuring 75 cents and the superstructure (shopping complex) put up by the assessee thereon are at the centre of the controversy in the case before us. And the issue in particular is whether the superstructure also belonged to the members of the erstwhile joint family as tenants-in-common. 27. To resolve the said issue, it is necessary at the outset to notice a maxim of considerable antiquity, namely, quic quid plantatur solo solo credit - whatever is attached to the solid belongs to the soil. According to this maxim, if 'A' builds on 'B's' land, the building becomes the property of 'B'. This maxim, which is at the root of the English law as to fixtures, it is well settled, has not been accepted as an absolute rule of law of this country - see : Narayan Das Khettry v. Jatindra Nath Roy Chowdhry AIR 1927 PC 135 ; Bishan Das v. State of Punjab AIR 1961 SC 1570 ; Atmakur Venkatasubbiah Chetty v. Thirupurasundari Ammal AIR 1965 Mad. 185 ; Mohanmmed Adbul Kadar v. District Collector of Kanyakumar....
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....e source of the funds that had been utilised to acquire or construct the property. In the case before us, the assessee's contention is that the superstructure belongs to the members of the erstwhile joint family who are tenants-in-common in respect of the family properties. It is well-settled that the plea that a property belongs to a joint family will succeed only if the requirements of the doctrine of detriment to the family funds are fully satisfied. We must at once point out that no evidence was at all produced to show that the construction of the superstructure (shopping complex) entailed any detriment to the joint family funds. It is common ground that the assessee had identified five different sources of funds. Of these, only two, namely, the alleged accumulated savings out of Kanikka collections and the sale proceeds of Gold Bonds are relatable to the joint family funds. Even here, neither before the Assessing Officer, nor before the CIT(Appeals), nor even before us, was any evidence produced by the assessee to show that he could have accumulated as much as Rs. 1 lakh out of Kanikka collections. For a fact the admitted position is that no accounts whatsoever were kept for t....
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.... undisclosed sources. This indeed was the finding of the lower authorities and we agree with them. This would mean that as respects the said sum of Rs. 1 lakh, no detriment to the joint family funds has been proved. 35. As regards the sale proceeds (Rs. 32,000) of Gold Bonds, it is clear that the Cold Bonds were purchased from the gold ornaments belonging to the temple. Even here, the requirement of the doctrine of detriment to joint family funds has not been satisfied. The lower authorities had ignored the said sum because the Gold Bonds were sold long after the construction of the superstructure (shopping complex) was complete. There is, as we see it, the further consideration that, as respects the said sum of Rs. 32,000, a debtor-creditor relationship had come into being between the assessee, on the one hand, and the members of the joint family, on the other. In any event, the sum of Rs. 32,000 formed such an insignificant part of the total cost of construction of Rs. 15,80,400 that it would be difficult to import the doctrine of detriment to the family funds. 36. That leaves three sources of funding the construction of the building, namely, (a) Advances (Pakidi) collected....
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....taken collectively and in the status of tenants-in-common? To succeed, what is the nature and extent of the proof that he is required to adduce ? Let us, again, assume that one of the members of the family lays claim to the advance rent collected on the ground that the superstructure belongs to the members of the family as tenants-in-common. To succeed, what is the nature and extent of the evidence that he is required to adduce ? In either case, as we see it, it is necessary for the claimants to show that the superstructure was put up with the aid and assistance of joint family funds, or that there was a prior agreement among the members of the family that the superstructure was to be built for and on behalf of the family members taken collectively and in the status of tenants-in-common. In the case before us, no such evidence is forthcoming. And it is here that the factors relied upon by the lower authorities come into play and tilt the scale in favour of the conclusion that the assessee received the advance rents on his own account. Thus, absent any evidence to prove that the superstructure belongs to the family members, the stipulation contained in some of the agreement....
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....is capacity as a Doctor, that is to say, in his individual capacity. Here again there is no detriment to the joint family funds. 43. One of the points urged by Mr. Kalliath was that because the assessee had created an equitable mortgage by depositing the title deeds of joint family property, the loan taken by the assessee from the bank must be regarded as one taken by the joint family. We are unable to agree. It is a matter of record that the assessee in the first instance approached the bank for a loan for constructing a properly equipped nursing home. For this purpose, he had executed promissory notes naturally in his individual capacity. What was more, he had provided collateral security not only in the form of Mr. Farara's personal surety but also the land admeasuring 2 acres belonging to the said Farara. 44. Further, the mere fact that the title deeds of a property or two of the joint family were deposited with the bank for the purposes of obtaining the loan cannot lead to the conclusion that there was any detriment to the family. 45. In view of the foregoing, therefore, we have no hesitation in rejecting the related arguments of Mr. Kalliath. 46. As for the amount....