1. These six appeals filed by the same assessee are heard together and disposed of by this common order for the sake of convenience.
2. The assessee is an individual. He derives income from salary as an officer of Bird & Co. He also derives income from directors' fees, commission and interest. The first common ground in these appeals relates to the extent of the assessee's interest in the income from the property situated at 23A/418, Diamond Harbour Road, Calcutta. The case of the assessee before the ITO was that he had no interest in the said income at all. The ITO held that the assessee had one-third interest in the income of the aforesaid property. On appeal, the Commissioner (Appeals) held that the assessee's interest in the income of the aforesaid property extended only to one-third of that portion of the said income, which could be attributable to the cost of the land vis-a-vis the cost of construction of the building thereon. The assessee has come up in appeal contending that the Commissioner (Appeals) should have held the extent of the assessee's interest in the said income as nil. On the other hand, the department has come up in appeal contending that the Commissioner (Appeals) should have held that the assessee's interest in the said income extended not only to that portion which is attributable to the cost of land alone but to the entire income derived from the said property. As stated earlier, we are now considering the assessee's appeals only. Of course, in the course of our discussion, there would be findings that would affect the departmental appeals also.
3. The brief facts relating to the dispute before us in these appeals may now be stated. Late Amar Nath Ghosh had entered into an agreement on 29-12-1943 with Hindustan Co-operative Insurance Society Ltd. to buy a plot of land and had paid a sum of Rs. 1,000 as earnest money for the same. However, the land was requisitioned under the Defence of India Act and the sale could not take place soon after the said agreement.
Amar Nath Ghosh died on 10-3-1947 leaving behind his widow Smt.
Prokriti Devi and his only unmarried daughter Uttara Devi. The assessee married Uttara Devi on 2-6-1948. In the meantime, Hindustan Cooperative Insurance Society Ltd. was succeeded by the Life Insurance Corporation of India. On 29-12-1953, a conveyance deed was executed by the LIC in pursuance of the said agreement to sell, dated 29-12-1943. In this conveyance deed, the vendees have been shown as three persons, viz., Smt. Prokriti Devi, Smt. Uttara Devi and the assessee. The conveyance deed does not specify the individual shares of the three vendees.
Consequently, their shares have to be understood as equal in accordance with the established principles of law. On the same date, viz., 29-12-1953, a mortgage deed mortgaging the land in favour of the LIC was executed in respect of the unpaid purchase price of Rs. 6,400. In this mortgage deed, the assessee was shown as one of the three mortgagors. On 27-8-1965, the mortgage was redeemed. In this deed of redemption, the assessee has been shown as one of the mortgagors. It is on record that the unpaid purchase price of Rs. 6,400 was paid by the assessee before us. Subsequently, it appears that the widow and the daughter of late Amar Nath Ghosh came to hold the view that the rights and interests under the agreement to sell dated 29-12-1943 accrued only to them as legal heirs and successors of late Amar Nath Ghosh and that the assessee had no interest whatsoever in the same. Hence, the assessee executed a deed of gift on 31-10-1972, conveying his one-third interest to his wife. It may be stated in this connection that the conveyance deed dated 29-12-1953, the mortgage deed dated 29-12-1953, the redemption deed dated 27-8-1965, as well as the deed of gift dated 31-10-1972 are all registered documents.
4. Regarding the cost of construction of the house on the aforesaid land, enquiries were made in the file of Smt. Uttara Devi. In the assessment order for the year 1973-74, in the file of Smt. Uttara Devi, the cost of construction shown at Rs. 1,77,543 has been accepted as properly explained. This sum of Rs. 1,77,543 contained an item of Rs. 48,425 as loan from the assessee to his wife. Thus, the fact that the assessee gave a loan of Rs. 48,425 towards the construction of the house has been accepted by the ITO. In other words, there is nothing in the assessment order to suggest that any amount has come from the assessee towards the construction of the house except the aforesaid loan.
5. It appears that the assessment order for the year 1973-74 was originally made under Section 143(3) of the Income-tax Act, 1961 ('the Act'), but the same was set aside by the Commissioner under Section 264 of the Act on 20-3-1980. The Commissioner set aside the original assessment which held that the assessee was owning benami properties in the names of his wife and minor son. The Commissioner directed the ITO to make proper enquiries and do the assessment again. In pursuance of the said directions of the Commissioner, the ITO made a fresh assessment on 29-3-1982, which is the subject-matter of appeal before us. In this assessment order, the ITO has narrated the facts beginning from the agreement to sell dated 29-12-1943 to the date of gift deed on 31-10-1972. From the above facts, the ITO drew the following conclusions: For all these reasons, I am unable to accept the submission of the authorised advocate and I hold that the assessee is very much one-third owner of this property at Diamond Harbour Road, Calcutta.
The point to note at this stage is that the ITO treated the assessee as one-third owner of not only the land but also of the building standing thereon.
6. The assessee appealed against the aforesaid order of the ITO to the Commissioner (Appeals), who, after examination of the facts, held as under: Considering all the aspects, I would hold that the appellant's share in the entire property bears the same proportion as the cost of land bears to the cost of construction of the property, the income which is derived from letting out of this property could be said to be attributable to the land in that proportion and should be included in the appellant's hand.
Two things are to be noted in connection with this finding of the Commissioner (Appeals). She refers to the appellant's share in the entire property and not his share in the land alone. Secondly, she refers to the denominator of the fraction as the cost of construction of the property instead of the cost of land plus such construction.
7. Shri G.N. Singh, the learned representative for the assessee, urged before us that the revenue authorities erred in their decision. He stated that the assessee never acquired any right under the agreement to sell dated 29-12-1943 because, on that date, he was an outsider to the family of late Amar Nath Ghosh. All the rights and interests under that agreement were inherited only by the widow and the daughter and nothing accrued to the assessee. Consequently, the assessee did not acquire any right in that land. Again, as the assessee did not invest any money of his own in the construction of the house with a view to becoming its owner or part-owner, he never acquired any right in the structure built on the land. It is true that the assessee gave a sum of Rs. 48,425 as loan to his wife which was used by the latter for the construction of the house. It is also true that the assessee was living with his wife and mother-in-law and looking after the affairs of the family. But the assessee had no legal right in the property merely because of the above facts or even otherwise. Consequently, he urged that no part of the income of the property was assessable in the hands of the assessee and the action of the ITO to the contrary needed to be cancelled. Without prejudice to the above arguments, he stated that at the worst, the assessee can be treated as an owner of one-third portion of the land alone and not of the house that was built thereon. The income attributable to the land has to be arrived at by multiplying the total income from the house with the fraction whose numerator is the cost of the land and whose denominator is the cost of the land plus the construction of the building. Out of the income so arrived, one-third thereof can be attributed towards the share of the assessee. He clarified that this was his alternative ground. In this connection, he also pointed out that the loan of Rs. 48,425 given by the assessee to his wife has been shown as an asset in the wealth-tax returns of the assessee and shown as a debt in the wealth-tax returns of Smt. Uttara Devi.
8. Shri G.P. Nanda, the learned representative for the department, on the other hand, supported the orders of the revenue authorities. He stated that the whole arrangement, right from the beginning, was a family arrangement by virtue of which the assessee became one-third owner of the entire property because of Sections 61 and 63(b) of the Act. He urged that the arrangement made by the assessee amounted to a transfer and so the income diverted by that transfer is assessable in the hands of the assessee by virtue of Section 64 of the Act. In this connection, he relied on the decision in the case of S.P. Jaiswal v.CIT  130 ITR 643 (Punj. & Har.). In that case, it was held that whether an advance can be regarded as a loan or not did not depend upon the fact whether any interest was charged on the same. What is decisive is the circumstances as to whether the advance was made to meet some genuine need for loan. According to Shri Nanda, the loan given by the assessee in the present case was really not a loan but a transfer of funds by virtue of which the assessee acquired ownership in the house property. In this connection, Shri Nanda wanted to introduce a new piece of evidence being extract from the objection petition dated 12-4-1976 in the case of the original assessment for 1973-74 in the case of this very assessee (the assessment of which was set aside under Section 264). He drew our attention to paragraph No. 5 thereof, wherein the assessee has stated that a sum of Rs. 30,486 withdrawn by the assessee from his own account was spent towards the cost of construction of 'our new Alipore house property'. Shri Nanda made emphasis on the fact that the assessee was calling the property as 'our property' which fact, according to him, showed that the property belonged to the assessee also. He also referred to the decision in the case of CIT v. Durga Prasad More  82 ITR 540 (SC) for the proposition that all the surrounding circumstances have to be taken into account for arriving at a factual finding relating to the ownership of an asset. For the above reasons, Shri Nanda urged that the assessee was in fact the one-third owner of the entire property and the Commissioner (Appeals) erred in reducing the interest of the assessee to one-third portion of the income attributable to the land alone. In this connection, he took us through the common grounds of appeal taken in the six departmental appeals. All these grounds relate to the above facts. Shri Nanda stated before us that his arguments in respect of the departmental appeals were also the same as recorded above.
9. Shri G.N. Singh replied that the case of S.P. Jaiswal (supra) does not apply to the facts of the present case. In that case, the ITO never accepted the advance as loan and so it was held that it was not a loan.
In the case before us, the fact that the assessee advanced a loan and did not make an outright contribution has been accepted both in the Income-tax and wealth-tax files of Smt. Uttara Devi as well as the wealth-tax file of the assessee.
10. We have considered the contentions of both the parties as well as the facts on record. In our opinion, the assessee did become one-third owner of the land under consideration because of the several registered deeds of conveyance and mortgage referred to earlier. It is now well settled that no person can get any interest in an immovable property except by a registered document. Conversely, if a person has acquired an interest in an immovable property by virtue of a registered deed, he will not be regarded in law as having no interest therein, in spite of his verbal denial or other evidence short of another registered document depriving him of the earlier ownership already acquired.
Otherwise, there was no need for the assessee to execute a deed of gift of his interest in the land in favour of his life Hence, we come to the conclusion that the assessee was indeed one-third owner of the land under consideration. The assessee had one-third interest because he was one of the three vendees whose individual shares were not specified in the deed of sale and so the legal presumption is that the shares of the vendees are equal.
11. Coming to the assessee's interest in the super structure built on the land, we find no evidence to hold that the assessee ever acquired any such interest. The case of S.P. Jaiswal (supra) is indeed distinguishable on facts. Apart from the distinction pointed out by the learned representative for the assessee, we find that in the reported case, the advance was not used by the recipient and so the Court held that there was no need for that advance and so it was not a genuine loan. In the case before us, the sum of Rs. 48,425 advanced by the assessee has been spent away in the construction of the house. This fact shows that there was a genuine need for the loan for the construction of the house which was supplied by the assessee. Again, there is no evidence whatsoever either in the municipal records or elsewhere that the assessee is a part-owner of the house. The income from the house is being deposited in an account belonging to the mother and daughter. It is only they and not the assessee who collected the rent from the house under their signature. The assessee comes nowhere in the picture so far as the house is concerned. Nor has he invested with an intention of becoming part-owner any funds in the construction of the house. Hence, we come to the conclusion that the assessee gave a loan and did not acquire any right in the income resulting from the house constructed on the land under consideration. We have also considered the case of Durga Prasad More (supra) in this connection, and, following the principles laid down therein, we have come to the aforesaid conclusion.
12. Coming to the quantum of income (i.e., one-third) to be included in the hands of the assessee, it is evident that the same should be proportionate to the amount invested by the assessee in the asset producing the income. Thus, the net income from the house property has to be multiplied by a fraction, the numerator of which is the cost of the land and the denominator of which is the total cost of land and construction of the house. The amount so arrived at has to be divided into three parts and only a part thereof has to be included in the assessee's income because he is the owner of only one-third portion of the land, and no part of the house at all. We direct that the assessments for all the years be modified accordingly.
13. We have considered the extract from the letter dated 12-4-1976 filed by Shri Nanda before us. That letter was given in connection with the original assessment, which no longer exists because the same has been set aside. In the reassessment made by the ITO, no reference has been made to this letter at all. Hence, it is doubtful as to whether this piece of evidence can at all be pressed into service at this late stage. Be that as it may, paragraph No. 5 of the letter merely says that the assessee gave a certain amount which was used in the construction of their house. We have already found that the assessee gave a loan for the construction of the house. As the assessee was staying with his wife and mother-in-law, it was natural for him to describe the house under consideration as 'our house'. The mere statement that a certain house belongs to somebody will not make him the owner, as has been stated earlier. We, therefore, do not see anything in this letter which furthers the case of the department.
Hence, our conclusion in the earlier paragraph stands.
14 to 23. These paras are not reproduced here as they involve minor issues.]