Income Tax Appellate Tribunal - Kolkata
Income-Tax Officer vs Mrs. Bilas Razdan on 5 June, 1987
Equivalent citations: [1987]22ITD567(KOL)
ORDER
Y. Upadhyay, Vice President
1. These two appeals by the department are heard together and are being disposed of by this common order for the sake of convenience.
2. The assessee is an individual. The assessee purchased a flat being No. 12G in Everest Building, 46C, Chowringhee Road, Calcutta from M/s. Western Building Corporation. This flat was leased out to M/s. C. Itch & Co. Ltd. The gross rent received by the assessee amounted to Rs. 88,124 and Rs. 71,052 during the two years under appeal. The assessee pleaded before the Income-tax Officer that the flat was not registered in her name and, therefore, she was not the owner of the flat within the meaning of Section 22 of the Income-tax Act, 1961 and hence it was not assessable in her hands as income from house property. This plea of the assessee was not accepted. Therefore, the ITO, after deducting the municipal taxes and maintenance expenses took the income from the flat at Rs. 71,052 and Rs. 71,276 respectively for the years under appeal.
3. The assessee came up in appeal before the Appellate Asstt. Commissioner and relied on the order of the Tribunal in her own case in ITA No. 1642 (Cal.)/85 dated 8-11-85 for the assessment year 1980-81 and the AAC, following the said order of the Tribunal, deleted the additions of the income from 'house property'.
4. The departmental representative very strongly supported the order of the ITO and contended that the assessee was in the possession of the flat and she exercised her right. Accordingly, the assessee leased out the flat to a limited company and derived rental income. Under the circumstances, the income from the flat must be assessed as income from other sources. He placed reliance on the decision in the case of Sushil Ansal v. CIT [1986] 160 ITR 308 (Delhi).
5. Shri N.K. Poddar, the counsel for the assessee, on the other hand, filed a copy of the agreement between the assesses and M/s. Building Corpn. dated 4th December, 1972 and various orders of the Tribunal including the case of this very assessee. His first argument was that the finding given by the AAC should not be reversed and the income cannot be assessed in the hands of the assessee. He referred to the provisions of Sections 60 to 63 of the Income-tax Act and the Clauses 5, 11, 15, 16, 17, 19, 25, 27 and 35 of the aforesaid agreement and urged that it was an irrevocable agreement in view of Clause 35 of the agreement and, therefore, the income cannot be charged to tax in the hands of the assessee. The second argument taken by the counsel was that the Tribunal in the assessee's own case had accepted that the income was not assessable in the hands of the assessee. He submitted that ordinarily the Tribunal should follow its earlier decision. The third objection taken by the assessee's counsel was that the decision in CIT v. Ganga Properties Ltd. [1970] 77 ITR 637 (Cal.) and CIT v. Smt. T.P. Sidhwa [1982] 133 ITR 840 (Bom.) are in favour of the assessee and, therefore, the decision of the Delhi High Court in Sushil Ansal's case (supra) should be ignored in this case.
6. The facts leading to the present controversy are that the assessee had purchased a flat on the basis of an agreement dated 4th December, 1972 while the building was under construction. According to the assessee's counsel, the assessee was given possession of the flat in the accounting year 1973-74. The assessee had leased out the flat and earned income. The admitted position is that at the relevant time the flat was not registered in the name of the assessee. Therefore, it is correct that the income from the said flat cannot be assessed under Section 22 of the Act because the assessee was not the owner within the meaning of that Section and in view of the decision in Ganga Properties Ltd.'s case (supra) and Nawab Sir Mir Osman Ali Khan v. CWT [1986] 162 ITR 888 (SC).
7. However, the fact is that the assessee is under the possession of the flat. The assessee has exercised her right. She is enjoying the benefit of the flat and receiving rental income. Now the question is whether the assessee could be taxed on the said income or not. The assessment of the lease rent in the hands of the assessee was perfectly justified under Section 56 of the Act. The assessee purchased the flat on the basis of the agreement dated 4th December, 1972 and the possession of the flat was given to the assessee and she enjoyed the benefit. Therefore, the possessory right which vested in the assessee has been exercised for her wilful gain during these years. The legal right only perfects the title but it does not deprive the assessee of enjoying and exercising her possessory right. The assessee, under the said circumstances, has rightly been assessed and the assessment could only be made under the head 'Other sources'. This view is well-supported by the decision in Sushil Ansal's case (supra) and the unreported decision of the Hon'ble Calcutta High Court in the case of Park Hotel (P.) Ltd. v. CIT [IT Reference No. 88 of 1986]. As these two decisions are available supporting the above view including one from Hon'ble Calcutta High Court, the decision in Smt. T.P. Sidhwa's case (supra) could not be followed.
8. A question has been raised by the assessee's counsel that the Tribunal in its earlier order decided the issue in favour of the assessee and the income assessed by the ITO has been deleted. The counsel has filed various orders of the Tribunal. The orders of the Tribunal have been carefully perused. The argument of the assessee is correct that ordinarily, the Tribunal should follow its own earlier decision provided there is no change in the facts and if there are certain changes in the facts, the same must be considered by the Tribunal; otherwise, the case may be referred back to a larger Bench. There is no dispute on this proposition. However, the two High Court decisions on the issue are available and they have been cited above. Once the High Court decision is available, under whose jurisdiction a Bench of the Tribunal functions, it becomes binding on the part of the Bench to follow that decision. Under the said circumstances, the persuasive force of the Tribunal's order no longer exists.
9. Much argument has been made by the counsel for the assessee on Sections 60 to 63 of the Act to show that it was an irrevocable agreement and, therefore, the income could not have been taxed in the hands of the assessee. Section 60 is the first section of Chapter V. Chapter V is in respect of 'income of other persons, included in assessee's total income'. The learned authors of tax books on this issue have commented that such method is adopted by the taxpayer in the disposal of a part of the property in such a way that the income should no longer be received by him, while at the same time he retains powers over, or interest in, the property or its income. The statute, therefore, provides that in such circumstances the income which ostensibly belongs to a person other than the assessee will also be included in the assessee's total income. The word 'transfer', as urged by the assessee's counsel, has been defined in Section 63(b) and the 'transfer' includes any settlement, trust, covenant, agreement or arrangement. Particular attention was drawn on Clause 35 of the agreement. The whole argument made by the assessee's counsel resorting to Sections 60 to 63 of the Act for exclusion of the income being an irrevocable agreement is fallacious. The agreement was between the assessee and the builder. The builder constructed a multistoreyed building and a flat had been booked by the assessee. Under the said circumstances, an agreement had been executed between the assessee and the builder or the owner. Certain conditions had been incorporated in the agreement, fulfilment of which were necessary for the execution of the final deed in favour of the assessee. Clause 35 of the agreement does not contain a clause of irrevocable agreement. This clause is only a condition which is ordinarily kept in an agreement for the purchase of an immovable property. If all the clauses of the agreement are read together, it could not be found that the builder retained the ownership of the property while the income should be derived by the buyer. The agreement is a normal agreement for purchase of an immovable property. There is transfer of the asset by agreement within the meaning of Section 63 and, therefore, Section 60 is not applicable. Transfer, in this case, has become complete in all respects but for registration of the Sale Deed and, therefore, there is no application of Sections 61 and 62.
10. The facts of the case have been discussed earlier. It is a simple case where the assessee has been given the possession of the flat and the assessee was deriving rental income therefrom. Once the assessee was deriving income from her possessory right, the charging section of the Income-tax Act was applicable and the income so derived by the assessee was assessable under Section 56 of the Income-tax Act. Under the said circumstances, the finding of the AAC on this point is reversed and the ITO's computation of income for both the years under appeal is maintained.
11. In the result, both the appeals are allowed.