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High Court Of Delhi
COMMISSIONER OF INCOME TAX - Appellant
Versus
HANS RAJ GUPTA - Respondent
I.T.R. 61 of 1972
Decided On : 09/11/1981
INCOME TAX - Assessment - Income from property - Ownership - Transfer of property - Registration - Whether income from immovable properties should be taxed in the hands of the legal owner or in the hands of the connected companies which are using the properties by virtue of payments pertaining to sale price.
Fact of the Case:
The assessee, Mr. Hans Raj Gupta, owned immovable properties at Shahdara, Palwal, Dadri, and Kosi, which were registered in his name. In 1950, he allegedly sold the Shahdara property to a connected company, M/s. Raj Enamel Works Ltd., and the properties at Palwal, Dadri, and Kosi to another connected company, M/s. Hans Raj Gupta and Co. Ltd. However, the properties continued to remain registered in the name of the assessee. The Income-tax Officer assessed the assessee for the income from these properties for the assessment year 1951-52, holding that the sale was not complete and the assessee remained the owner.
Finding of the Court:
The Tribunal, relying on the decision of the Delhi High Court in Commissioner of Income-tax, Punjab, Jammu and Kashmir and Himachal Pradesh v. R. B. Jodhamal Kuthiala, held that the income from the properties should not be taxed in the hands of the assessee as he had lost dominion over the properties by accepting the consideration. The Tribunal also held that the subsequent conduct of the parties fortified this fact and that there was no suggestion that the company was a benamidar of the assessee.
Issues: Whether the income from the immovable properties should be taxed in the hands of the legal owner i. e. the assessee or in the hands of the connected companies which are using the properties by virtue of payments pertaining to sale price.
Ratio Decidendi: The Court held that the income from the properties should be taxed in the hands of the assessee as he remained the legal owner despite the payment of the purchase price and other factors. The Court observed that the resolutions of the purchasing companies and the payment of purchase price by them could not have the effect of depriving the seller of his ownership, nor could the fact that the purchases continued in possession of the property without payment of rent be equated with a conveyance. The Court further held that the entries in the account books of the vendor and the vendee are not relevant for the purpose of determining whether a sale of immovable property has taken place.
Final Decision: The Court answered the question in the affirmative and in favor of the Revenue, holding that the assessee was liable to be assessed in respect of the income from the properties for the assessment year 1951-52.
( 1 ) AT the instance of the Commissioner of Income-tax, the Income-fax Appellate Tribunal has referred for our opinion the following question of law :
"whether on the facts and in the circumstances of the case, the assessee was liable to be assessed in respect of the income for the whole year from properties at Shahdara, Palwal, Dadri and Kosi for the assessment year 1951-52 ?"
THE assessee Mr. Hans Raj Gupta is an individual whose main source of income was from his share in three firms. The matter pertains to the assessment year 1951-52, the corresponding previous year being the year ending on 31st March. 1951. The assessee owned some immovable properties at Shahdara, Palwal, Dadri and Kosi which were registered in his name. However, it is alleged that in 1950, the Shahdara property was sold by the assessee to a connected company known as M/s. Raj Enamel Works Ltd. and payment received; the properties at Palwal, Dadri and Kosi were also sold to a connected company M/s. Hans Raj Gupta and Co. Ltd. and the monies were received in July, 1950. But the properties continued to remain registered in the name of the assessee.
( 2 ) THE share-holders of M[s. Raj Enamel Works Ltd. had passed a resolution on 23rd May, 1950 to the effect that the free hold property comprising of the land on which the workshop of the company was situated together with all other buildings, be purchased from Lala Hans Raj Gupta for a value of Rs. 2 lakhs.
( 3 ) THEREAFTER Rs. 2 lakhs were received for the Shahdara property and the said amount was credited to the property account in the books of the assessee. The company showed this properety as its asset; since it was "being used for the company s own business, no rent was being charged and the assessment was made accordingly.
( 4 ) BUT prior to the resolution, the Central Investment Limited had purchased shares to the extent of Rs. 2 lakhs of M]s. Raj Enamel Works Ltd. This was, after a chain of intermediaries, ultimately traceable to the assessee. On receipt of Rs. 2 lakhs, the assessee settled his overdraft liability with United Commercial Bank and released the said property which was pledged.
( 5 ) FOR the assessment year 1951-52, the Income-tax Officer took the view that the assessee continued to be the legal owner of the property. He, therefore, computed the income under section 9 of the Indian Income-tax Act, 1922 and taxed it in his hands. The Income-tax Officer observed that the sales of the immovable properties to M/s. Raj Enamel Works Ltd. and M/s. Hans Raj Gupta and Co. Ltd. were not supported by transfer deeds nor were they duly registered. He, therefore, concluded that the sale was not complete. As such Mr. Hans Raj Gupta remained the owner of the properties. The payment of Rs. 2 lakhs by M/s. Raj Enamel Works Ltd. could at best be treated as a deposit. The resolutions of the purchasing company could not materially alter the legal position.
( 6 ) ON appeal, the Appellate Assistant Commissioner confirmed the order of the Income-tax Officer.
( 7 ) ON further appeal to the Income-tax Appellate Tribunal, the assessee contended that he was nor liable to be taxed as the income from property could be taxed only in the hands of the beneficial owner i. e. the company; the property was the company s asset and had been shown as such in its balance sheet the assessments of the company had been completed on that basis; that before 1956 a company was entitled to keep property registered in the name of a Director and Mr. Hans Raj Gupta was a Director of the company; that the company was not doing well and in order to save stamp duty etc. , registration had not taken place; that in any case, the company had become the complete owner of the property by adverse possession. The Full Bench decision of this Court in Commissioner of Income- tax, Punjab, Jammu and Kashmir and Himachal Pradesh v. R. B. Jodhamal Kuthiala, (1968) 69 I. T. R. 598 (1) was relied on.
( 8 ) ON the other hand, the revenue s cont
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