Kirpal, J.
1. The grievance of the petitioners is that, in respect of built-up space in Nirmal Commercial Building, Bombay, the petitioners are being treated as owners by virtue of the provisions of section 27(iii) of the Income-tax Act, 1961. The contention of the petitioners is that a part of the building of which the petitioners are licensees, is owned by a separate juristic entity, viz., Nirmal Commercial Ltd., and that the petitioners are not the owners thereof but are merely licensees. Because income there from has been taxed in the hands of the petitioners by virtue of the assessment orders which have been passed by the assessing authority at Delhi, the petitioners have challenged the said assessment orders and have also challenged the virus of section 27(iii) of the Act.
2. As regards the assessment orders, the petitioners have already filed appeals against the same. In view of the fact that the petitioners have availed of the alternative remedy open to them under the Act, we do not propose to exercise our jurisdiction under article 226 of the Constitution. The petitioners have adequate alternative remedy and questions of fact and law can be agitated before the appellate authorities.
3. The virus of section 27(iii), however, cannot be agitated before the authorities constituted under the Act. We, thereforee, propose to deal with this contention in this petition.
4. It is submitted by learned counsel for the petitioners while relying upon Bacha F. Guzdar v. CIT : [1955]27ITR1(SC) , Andhra Pradesh State Road Transport Corporation v. ITO : [1964]52ITR524(SC) , CIT v. B. M. Kharwar : [1969]72ITR603(SC) and Calcutta Tramways Co. Ltd. v. CWT : [1972]86ITR133(SC) that a shareholder of a company does not become the owner of the property of the company. The submission of learned counsel is that a shareholder and a company are two distinct juristic entities and that, if the company owned property on its own behalf, its shareholders cannot be regarded as the owners of that property which is owned by and registered in the name of the company. According to learned counsel, section 27(iii) of the Act purports to set at naught the said principle because it seeks to vest ownership rights in the property of the company in the shareholders.
5. Section 27(iii), before its amendment by the Finance Act of 1987, inter alia, provided that for the purposes of sections 22 to 26 of the Act, a member of a co-operative society to whom a building or a part thereof is allotted under a house building scheme shall be deemed to be the owner of the building or part thereof. This provision was amended with effect from April 1, 1988, and, in addition to the same being applicable to co-operative societies, the said sub-section was also made applicable to companies and other associations of persons. The provision, as it now stands, provides that, if a member of a co-operative society, company or other association of persons to whom a building belongs is allotted a building or a part thereof under the scheme of the society, company or association, then that person is deemed to be the owner of that building or part thereof.
6. There is an inherent fallacy in the argument of learned counsel for the petitioners that such a member or shareholder is deemed to be the owner of the building in the genuine legal sense. As is evident from the provision of section 27(iii) itself, such a member, as contemplated by section 27(iii) is deemed to be an owner only for the purposes of sections 22 to 26 of the Income-tax Act. In other words, the legal ownership will not vest in such a person but, in order to decide under what head he should be taxed, section 27(iii) deems such a member to be the owner. Once he is deemed to be the owner, then income from the house property will be taxed under the provisions of sections 22 to 26 of the Act. We may here note that there was a conflict of judicial opinion in this regard, viz., under which provision of the Income-tax Act can income from house property be taxed if a member of an association of persons or a company is allotted a building but the sale deed has not been registered in his name. This court, in the case of Sushil Ansal v. CIT : [1986]160ITR308(Delhi) , had come to the conclusion that an allottee of a flat in a multi-storeyed building is not the owner and, thereforee, income from house property will be taxed only under the head 'Other sources', viz., under section 56 of the Act. It is quite obvious that, in order to mitigate the hardships of a large number of flat and property owners who derived their right, title and interest from co-operative societies, companies or associations of persons an amendment was made in section 27(iii). By being deemed to be the owner for the purposes of sections 22 to 26, such member would now become entitled to the deductions which are available under these provisions. The tax is to be computed not under section 56 but will have to be computed under sections 22 to 26. This being so, it is wrong to contend that section 27(iii) vests the property of the company in the members or shareholders.
7. In any case, we do not find any case being made out for our coming to the conclusion that section 27(iii) is ultra vires. The Income-tax Act is replete with deeming provisions, for example, if a closely held company does not declare dividend, then, under certain circumstances, dividend is deemed to have been declared. Another example is where the income of a spouse and minor children are clubbed together. These are deeming provisions which are enacted by Parliament in exercise of its legislative competence under List I of the Seventh Schedule to the Constitution. We find no legislative infirmity in Parliament enacting a provision like section 27(iii). Such a provision is in fact of assistance and help to members of co-operative societies, companies and associations of persons who are allotted buildings or flats. We also do not find that said provisions being in conflict with any of the other provisions of the Constitution. We cannot agree with learned counsel for the petitioners that this provisions is arbitrary.
8. It is contended by learned counsel for the petitioners that there is no house building scheme and, thereforee, section 27(iii) does not apply. This is a contention on the merits and can be agitated by the petitioner before the authorities under the Act.
9. It is also contended that there is double taxation in this case. The submission of learned counsel is that the company is being taxed under the Wealth-tax Act as well as the Income-tax Act. It is quite evident that it is only for the purposes of sections 22 to 26 of the Income-tax Act that the person liable to pay tax is the one provided by section 27(iii).
10. Any contention with regard to the interpretation of section 27(iii) can be agitated before the appellate authorities.
11. The petition is disposed of in the aforesaid terms. The interim orders are vacated.