Judgement

HEGDE, J.:- In these appeals by certificate, the only question arising for decision is: "whether on the facts and in the circumstances of the case, the assessee continued to be the owner of the property for the purposes of computation of income under Section 9 of the Income-tax Act, 1922" (to be hereinafter referred to as the Act). A Full Bench of the Delhi High Court speaking through S.K. Kapur J. answered that question in the negative. Being dissatisfied with that decision the assessee has brought these appeals.

2. Now turning to the facts of the case, the concerned assessment years are 1952-53, 1955-56 and 1956-57, the relevant accounting periods being financial years ending March 31, 1952, March 31, 1955 and March 31, 1956. The assessee is a registered firm deriving income from interest on securities, property, business and other sources. Sometime in the year 1946 it purchased the Nedous Hotel in Lahore for a sum of Rs. 46 lakhs. For that purpose it raised a loan of Rs. 30 lakhs from M/s. Bharat Bank Ltd., Lahore and a loan of Rs. 18 lakhs from the Raja of Jubbal. The loan taken from the bank was partly repaid but as regards the loan taken from the Raja, the assessee came to an agreement with the Raja under which the Raja accepted a half share in the said property in lieu of the loan advanced and also 1/3rd of the outstanding liability of the bank. This arrangement came into effect on November 1, 1951. After the creation of Pakistan, Lahore became a part of Pakistan. The Nedous Hotel was declared an evacuee property and consequently vested in the Custodian in the Pakistan.

3. In its return for the relevant assessment years, the assessee claimed losses of Rs. 1,00,723/-, Rs. 1,16,599/- and Rs. 1,16,599/- respectively but showed the gross annual letting value from the said property at Nil. The loss claimed was stated to be on account of interest payable to be on account of interest payable to the bank. Since the property in question had vested in the Custodian of Evacuee Property, in Pakistan, the Income-tax Officer held that no income or loss from that property can be considered in the assessee s case. He accordingly disallowed the assessee s claim in respect of the interest paid to the bank. The Appellate Assistant Commissioner confirmed the order of the Income-tax Officer. In second appeal the Tribunal came to the conclusion that the assessee still continued to be the owner of the property for the purpose of computation of loss. The Tribunal held that the interest paid is a deductible allowance under Section 9 (1) (iv) of the Act. In arriving at that conclusion, the Tribunal relied on its earlier decision in the case of the assessee in respect of the assessment year 1951-52. Thereafter at the instance of the assessee, the Tribunal submitted the question set out earlier. The High Court on an analysis of the various provisions of the Pakistan (Administration of Evacuee Property) Ordinance, 1949 (XV of 1949) (to be hereinafter referred to as the Ordinance ) came to the conclusion that for the purpose of Section 9 of the Act, the assessee cannot be considered as the owner of that property.

4. It was urged by Mr. V. C. Mahajan, learned Counsel for the assessee that the High Court erred in opining that the assessee was not the owner of the property, for the purpose of Section 9 of the Act. According to him the property vested in the Custodian only for the purpose of administration and the assessee still continued to be its owner. He contended that the expression "owner" means the person having the ultimate right to the property. He further contended that so long as the assessee had a right to that property in whatever manner that right might have been hedged in or restricted, he still continued to be the owner. On the other hand, it was contended on behalf of the Revenue that the Income-tax is concerned with income, gains and profits. Therefore for the purpose of that Act, the owner is that person who is entitled to the