1. This appeal by the revenue is directed against the order of the DCIT(A), Allahabad dated 6.9.1995 for the assessment year 1990-91. The Revenue has filed this appeal on the following grounds:- "1. That the ld.DCIT(A) has erred in law and on the facts of the case in deleting the addition of Rs. 50,679/- which was made by the Assessing Officer as per Provisions of Section 27 read with Section 64 of the Income-tax Act.
2. That the order of the CIT(A) being bad in law may be set aside and the order of the AO be restored." 2. The brief facts of the case are that the assessee is stated to be I.G., Police and derived income from salary and house property. The assessee has constructed a house at Mahanagar, Lucknow and the total cost of construction had been shown at Rs. 6,83,692/-. The rental income derived from this house has been distributed equally between the co-owner, Shri C.K. Malik (assessee), his wife, Smt. Laxmi Malik and his sons, Saurabh Malik and Neeraj Malik whereas the investment in the house had been shown as follows:- The AO asked the assessee that since the investment made by four persons are not equal therefore, why the rent should not be distributed in proportion to their investment made. The contention of the assessee had been that since the four persons are co-owners of the property therefore, the share of the assessee is only 1/4th of the rent. The AO by applying Section 26 of the Income-tax Act, came to the conclusion that since the respective shares of above persons are definite and ascertainable than the share of each person should be included in his total income, according to the shares of investment made by each of them. The net rental income received by four persons was Rs. 62,454/-.
The AO accordingly assessed the income from house-property at Rs. 50,679/- in the hands of the assessee. The assessee feeling aggrieved filed appeal before the DCIT(A), Allahabad. The assessee contended before the appellate authority that since the assessee is owner of the property having 1/4th share therein therefore, the rental income to that extent at 1/4th was liable to be included in his income. The assessee has further contended before the appellate authority that as per Section 45 of the Transfer of Property Act, the rental income in the share of 1/4th could be included in the income of the assessee. The assessee also relied upon the judgment of Allahabad High Court reported in AIR 1929 page 817. The ld.DCIT(A) after considering Section 45 directed that the house property income to the extent of 1/4th is liable to be included in the income of the assessee. The Revenue is in appeal before us on the grounds mentioned above. We may mention here that earlier this case was heard by another SMC Bench, I.T.A.T., Allahabad, but was released. In the appeal papers we find that copy of the judgment of Allahabad High Court reported in AIR 1929-817 in the matter of (Saiyad) Abdullah v. Ahmad and Ors. and copy of mortgage deed executed by the assessee in favour of State of Uttar Pradesh as well as copy of the lease deed dated 29.10.1986 for plot No. A-700(A) situated in Sector C, Mahanagar Housing Scheme, Lucknow, in favour of the assessee and others is filed. It appears that those documents would have been filed earlier at the time of hearing of the appeal by the assessee. Initially, the ld. counsel for the assessee sought adjournment in the matter but it being an old matter, adjournment was refused.
3. We have heard the ld. D.R. and the ld. counsel for the assessee and carefully perused the material available on record. The ld.D.R.strongly supported the finding of the AO. On the other hand, the ld.counsel for the assessee strongly relied upon the order of the DCIT(A).
The ld. counsel for the assessee further relied upon Section 45 of the Transfer of Property Act as well as relied upon the judgment of Allahabad High Court in the case reported in 1929 AIR page 817 (supra).
4. We have bestowed our careful consideration to the rival submissions of the parties. We do not agree with the submissions of the ld. counsel for assessee. We find from the copy of the mortgage deed and lease deed filed by the assessee that the assessee his wife and two sons were allotted land bearing plot No. A-700(A) situated in Sector C, Mahanagar Housing Scheme, Lucknow by the Lucknow Development Authority vide lease deed of 1986. According to the lease deed, the assessee was required to pay rental of Rs. 1894.30p. per annum. this plot was constructed by the assessee & others. It is not in dispute that the lease hold rights are personal right to enjoy the property subject to payment of the rent as fixed in the lease deed. The lese deed has nowhere defined the shares of the lessee i.e. the assessee and his family members. Even obviously the lease deed being personal in nature would not define the rights shares of the parties. According to the lease deed, the lessees are entitled to enjoy the property as per the terms contained in the lease deed. We are not mentioning the terms contained in the lease deed as the same are not relevant for the disposal of this appeal. However, it is undisputed that the assessee and his other family members have made investment in this property for the purpose of obtaining the lease as well as for raising the construction. The details of the shares of the investment have already been incorporated above. Section 45 of the Transfer Of Property Act is reproduced here for the sake of convenience:- "45. Joint transfer for consideration. where immovable property is transferred for consideration to two or more persons, and such consideration is paid out of a fund belonging to them in common, they are, in the absence of contract to the contrary, respectively entitled to interests in such property identical, as nearly as may be, with the interests to which they were respectively entitled in the fund; and, where such considerations paid out of separate funds belonging to them respectively, they are, in the absence of a contract to the contrary, respectively, entitled to interests in such property in proportion to the shares of the consideration which they respectively advanced." In the absence of evidence as to the interests in the fund to which they were respectively entitled, or as to the shares which they respectively advanced, such persons shall be presumed to be equally interested in the property." The language of Section 45 of the Transfer of Property Act is very clear and provides that where immovable property is transferred for a consideration to two or more persons and such consideration is paid out of funds belonging to them in common, they are entitled to interest in such property identical as nearly as may be with the interest to which they were respectively entitled in the fund. If such consideration is paid out of separate funds belonging to them respectively then such persons will be entitled to interest in such property in proportion to the shares of the consideration which they respectively advanced. The last requirement of Section is that in the absence of evidence as to the interest in the funds to which they were respectively entitled or as to the shares which they respectively advanced such persons shall be presumed to be equally interested in the property. The third requirement is the exception to Rule. The first two conditions of Section 45 of the Transfer of Property Act clearly specified that in the absence of contract to the contrary, the persons will be entitled to the share in the property according to their shares in the consideration which they have invested or advanced out of common fund or separate fund. If no evidence is available, then all such persons will be presumed to be equally interested in the property. In the cases of the assessee before us, the AO has clearly spelt out the shares of the investment made by the assessee and his family members. The assessee has spent and invested Rs. 5,54,791/-. The wife of the assessee has invested Rs. 1,00,400/-. The other two sons of the assessee have invested Rs. 16,500/- and Rs. 12,000/- respectively.
Therefore, the investment of the assessee is very specific and clear to show that the assessee is entitled to interest in such property in proportion to the shares of the consideration, which he advanced.
Therefore, the conditions of Section 45 of the Transfer Of Property Act would be applicable against the assessee. On the other hand, we find that the DCIT(A) has allowed the appeal of the assessee on the basis of proviso to Section 45. Proviso to Section 45 would be applicable, if no evidence is available. Therefore, the First Appellate Authority acted wrongly in placing reliance of Section 45 and in granting relief to the assessee. We have also considered the judgment of the Hon'ble Allahabad High Court in the matter of Saiyad Abdullah (supra), which was relied upon by the assessee as well as the First Appellate Authority in passing the impugned order. In this authority, it is held:- "In the absence of specification of the shares purchased by two persons in the sale deed, it must be held that both purchased equal shares." There is no quarrel on the legal proposition, but in the case in hand, there is no sale deed in favour of the assessee and others. Only a lease deed was granted by the Lucknow Development Authority, which has defined the personal rights of the parties to enjoy the property. In this appeal, the shares of the investment of various persons are very specific and as such this authority is clearly distinguishable and is not applicable to the facts of this case. The AO has rightly assessed the share of the assessee in the rent according to Section 26 of the Income-tax Act as according to this Section where the respective shares are defined and ascertainable then the share of each person should be included in his total income. In the present appeal., the share of the assessee and others are ascertainable on the basis of investment made by each of them. Therefore, the AO was right in adopting their share in the rent according to investment and has correctly included the same in the income of the assessee. The assessee has not produced any contract contrary to the investment made above in the property and as such the assessee would not be entitled to the benefit of exception under Section 45 of the Transfer of Property Act. Keeping in view the above discussion, we are of the considered view that the DCIT(A) has wrongly allowed the appeal of the assessee. The impugned order is reversed and the order of the AO is restored.