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inspecting Assistant Vs. B.i.C.C. Ltd. - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Mumbai
Decided On
Judge
Reported in(1985)11ITD364(Mum.)
Appellantinspecting Assistant
RespondentB.i.C.C. Ltd.
Excerpt:
.....i.e., on the basis of the sum, for which the property could reasonably be expected to let from year to year. for this purpose, the commissioner (appeals) relied on the rent recovered by the assessee from the property in the immediately preceding year.6. the assessee is, therefore, in appeal against this decision of the commissioner (appeals) on the ground that the commissioner (appeals) erred in upholding the order of the iac determining the income from house property at rs. 28,000 as against rs. 10,615 computed by the assessee. it was the assessee's case that since no rent was received during the year, the annual value of the property under section 23 should be determined by taking the municipal rateable value of the property. further, it was submitted that because of the bombay.....
Judgment:
1. The revenue and the assessee have filed these cross-appeals against the order of the Commissioner (Appeals) dated 21-2-1983 in the assessee's appeal for the assessment year 1979-80. In the assessment proceedings before the IAC, the assessee had disclosed income from house property for a period of seven months only up to 31-7-1978. The IAC, however, found that the property was sold and the registration deed of the property was dated 21-12-1978. According to him, the title of the property passed on 21-12-1978 on registration. Therefore, the income from house property had to be included up to 21-12-1978. He accordingly, proceeded to determine the assessee's income from house property up to 21-12-1978.

2. The assessee appealed before the Commissioner (Appeals) on one of the grounds being that the income from house property had been computed up to 21-12-1978 on the basis of the registration of the conveyance, though the conveyance for the sale of the property had been executed on 4-8-1978. Having heard the assessee, the Commissioner (Appeals) accepted the assessee's reliance on Section 47 of the Indian Registration Act, 1908, that the effect of registration of the transfer deed of the property would operate from the date of the sale, i.e., the date of conveyance. According to him, though in the case of immovable property, the instrument of transfer had to be registered, the effective transfer of the title was the date of the relative deed and not the date of registration. He, therefore, directed the IAC to compute the assessee's property income only up to 3-8-1978 for the assessment year under consideration.

3. The revenue is, therefore, in appeal against the order of the Commissioner (Appeals) holding that the property income was assessable only up to the period of 4-8-1978, which was the date of conveyance and not up to the period 21-12-1978 which was the date of registration. On this issue, the learned departmental representative has relied on the Bombay High Court decision in the case of CIT v. Modern Flats (P.) Ltd. [1967] 65 ITR 67 to the effect that unless the transfer deed was registered, the ownership of the property cannot be deemed to have passed to the new owner. Further, reliance is placed on the Delhi High Court decision in the case of CIT v. Hans Raj Gupta [1982] 137 ITR 195, which is also to the same effect. On behalf of the assessee, reliance is placed on the Gujarat High Court decision in the case of Arundhati Balkrishna v. CIT [1982] 138 ITR 245, which is to the effect that for the purpose of levy of capital gains, the transfer of the property was completed on the date of sale, i.e., the date of the conveyance and not the date of registration. Further, reference is also made to the Supreme Court decision in the case of Hiralal Agrawal v. Rampadarath Singh AIR 1969 SC 244. Further reference is also made to another Supreme Court decision in the case of Ram Saran Lall v. Domini Kuer AIR 1961 SC 1747. Finally the learned Counsel for the assessee has relied on the Tribunal's decision in the case of Sir Hirji Cawasji Jehangir v.GTO [1983] 3 ITD 132 (Bom.). At this stage, the attention of the learned Counsel was invited to an earlier decision of the Gujarat High Court in the case of Darbar Shivrajkumar v. CGT [1981] 131 ITR 647 where the learned Judges had held that the title of the transferee did not relate back to the date of the execution of the gift deed. The date of the completion of the transfer of immovable property was on the date of registration of the conveyance deed. The learned Counsel was, however, unable to reconcile the two decisions.

4. We have carefully considered the facts and circumstances of the case and the arguments on either side. The conveyance of the property was executed on 14-6-1978. It was lodged with the Registrar on 4-8-1978.

The Registrar/registered it on 21-12-1978. The question is up to what date the assessee should be held to be the owner of the property for the purposes of computation of the property income in its hands, i.e., whether on registration, the legal consequences of the deed related back to the date of execution of the deed. Under Section 23 of the Income-tax Act, 1961 ('the Act') assessee is to be taxed in respect of the income from property of which it was the owner. We find that the issue had come up before the Bombay High Court in the case of CIT v.Sultan Bros. (P.) Ltd. [1983] 142 ITR 249, wherein, after a comprehensive review of the case law, the learned Judges of the Bombay High Court have held that the property income had to be taxed in the hands of the previous owner till the conveyance deed was registered with the Registrar. We find that while arriving at this decision, they have followed another decision of the same High Court in the case of CIT v. Zorostrian Building Society Ltd. [1976] 102 ITR 499. Even in this case, the learned Judges of the Bombay High Court were concerned with the income from property. The earlier decision of the Bombay High Court in the case of Modem Flats (P.) Ltd. (supra) is also to the same effect. So also, the Delhi High Court decision in the case of Hans Raj Gupta (supra) was relied upon by the learned departmental representative. As to the case law cited on behalf of the assessee, we find that the Gujarat High Court decision in the case of Arundhati Balkrishna (supra) is rendered in the context of Section 45 of the Act as to when the property was transferred. Further, as stated earlier, this decision does not take into consideration the decision of the same High Court in the case of Darbar Shivrajkumar (supra). Apparently, this is a case in curium. In our opinion, in the circumstances, we have to follow the earlier decision in Darbar Shivrajkumar's case (supra) which is in conformity with the Bombay High Court decisions in Modern Flats (P.) Ltd.'s case (supra), Zorostrian Building Society Ltd.'s case (supra) and finally Sultan Bros. (P.) Ltd.'s case (supra). The Supreme Court decision in the case of Hiralal Agarwal (supra) is rendered in the context of Bihar Land Reforms (Fixation of Ceiling on Areas and Acquisition of Surplus Land) Act, 1962. The Supreme Court decision in the case of Ram Saran (supra) is in connection with the date on which a person has to exercise the right of pre-emption under the Mohammedan law. These cases have no application to the facts of the present case.

In our opinion, as stated earlier, considering the latest decision of the Bombay High Court in the case of Sultan Bros. (P.) Ltd. (supra), the revenue is entitled to succeed. The income from the property is to be taxed in the hands of the assessee up to 21-12-1978.

5. In respect of the aforesaid property, the assessee had also objected before the Commissioner (Appeals) to the effect that though no rent was received during the year, the annual value had been taken on the basis of rent received in the past and not on the basis of the municipal rateable value of the property. This issue was decided by the Commissioner (Appeals) on the terms of Section 23(1), i.e., on the basis of the sum, for which the property could reasonably be expected to let from year to year. For this purpose, the Commissioner (Appeals) relied on the rent recovered by the assessee from the property in the immediately preceding year.

6. The assessee is, therefore, in appeal against this decision of the Commissioner (Appeals) on the ground that the Commissioner (Appeals) erred in upholding the order of the IAC determining the income from house property at Rs. 28,000 as against Rs. 10,615 computed by the assessee. It was the assessee's case that since no rent was received during the year, the annual value of the property under Section 23 should be determined by taking the municipal rateable value of the property. Further, it was submitted that because of the Bombay Rents, Hotel Rates and Lodging House Rates (Control) Act, 1944, no property can be reasonably expected to let from year to year above the standard rent. The standard rent should be adopted even if not specifically determined. While on this ground, the learned Counsel for the assessee referred to the fact that the Income-tax Act was amended with effect from 1-1-1978. In this connection, reference is made to the Calcutta High Court decision in the case of CIT v. Prabhabati Bansali [1983] 141 ITR 419. The learned departmental representative has relied on the Calcutta High Court decision in the case of CIT v. Ganga Properties Ltd. [1970] 77 ITR 637.

7. We have carefully considered the facts and circumstances of the case and the arguments on either side. Under Section 23, the assessee is liable to pay income-tax in respect of the annual value of the property of which he is the owner during the year. Annual value of the property would be deemed to be the sum for which the property could reasonably be expected to let from year to year. The decision of the Calcutta High Court in the case of Prabhabati Bansali (supra) is rendered in the context of the Income-tax Act prior to its amendment by the Taxation Laws (Amendment) Act, 1975, and it has, therefore, no relevance to the facts of the present case. Here we are concerned with the calendar year 1978. We find that the law on the subject has finally been laid down by the Supreme Court in the case of Dewan Daulat Rai Kapoor v. New Delhi Municipal Committee [1980] 122 ITR 700 and in the case of Mrs. Sheila Kaushish v. CIT [1981] 131 ITR 435, where it has been laid down that the ITO was under an obligation to compute the income from property on the basis of standard rent. This is the rent at which the property could be expected to be let out from year to year. The property in the instant case is situated in the city of Bombay, to which the provisions of the Bombay Rents, Hotel Rates and Lodging House Rates (Control) Act would apply. Section 5(1)(20) of this enactment reads as under; (a) where the standard rent is fixed by the Court and the Controller respectively under the Bombay Rent Restriction Act, 1939 (Bombay XVI of 1939), or the Bombay Rents, Hotel Rates and Lodging House Rates (Control) Act, 1944 (Bombay VII of 1944) such standard rent; or (b) where the standard rent is not so fixed, subject to the provisions of Section 11: (i) the rent at which the premises were let on the first day of September, 1940; or (ii) where they were not let on the first day of September 1949, the rent which they were last let before that day; or (iii) where they were first let after the first day of September 1949, the rent at which they were first let; or (iv) in any of the cases specified in Section 11, the rent fixed by the Court.

We do not know what would be the 'standard rent' in the case of the property under consideration for the relevant previous year. We, therefore, restore the matter to the IAC for ascertaining the standard rent applying Section 5(1)(10) and to include the same in the assessment.

8 to 13. [These paras are not reproduced here as they involve minor issues.)


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