Commissioner of Income-tax Vs. Sarabhai Chemicals Pvt. Ltd. - Court Judgment

D.A. Mehta, J.

1. At the instance of the Commissioner of Income-tax, the Income-tax Appellate Tribunal, Ahmedabad Bench 'C', has referred the following question of law for the opinion of this court:

'Whether, the Appellate Tribunal is right in law in allowing reduction of Rs. 2,69,194 on account of property income ?'

2. The assessment year is 1979-80 and the relevant accounting period is commencing from July 1, 1977, and ending on June 30, 1978. The assessee entered into an agreement for sale on February 28, 1977, whereby the industrial undertaking and the business of the assessee were transferred to one Eiscop (P.) Ltd.; pursuant to the aforesaid agreement for sale, a deed of assignment was executed on June 28, 1977. Immovable properties which were part and parcel of the industrial undertaking were transferred under a duly executed registered document on February 2, 1978. In view of these facts, the Income-tax Officer was of the view that as the assessee was the legal owner of the property in question, till conveyance was duly registered, proportionate property income, i.e., from July 1, 1977 to February 2, 1978, should be assessed in the hands of the assessee. He accordingly brought to tax a sum of Rs. 2,69,194 being the proportionate annual letting value for seven months.

3. The Commissioner of Income-tax (Appeals) came to the conclusion that the assessee-company was left with merely a technical or formal ownership of the immovable property and as the immovable property formed part of the industrial undertaking whose control and management vested with the vendee, there was no question of assessing the proportionate income from property in the hands of the assessee. The Tribunal confirmed the view taken by the Commissioner of Income-tax (Appeals) in the appeal of the Revenue and, hence this reference.

4. We have heard Mr. Akil Qureshi, learned standing counsel for the Revenue and Mr. R. K. Patel, the learned counsel representing the assessee-respondent. In our opinion, the question is concluded by the decision of the apex court in the case of CIT v. Podar Cement (P.) ltd. : [1997]226ITR625(SC) as well as a Full Bench decision of our court in CIT v. Mormasji Mancharji Vaid : [2001]250ITR542(Guj) . In the case of Podar Cement (P.) Ltd. : [1997]226ITR625(SC) , the apex court has held that the property cannot be owned by two persons, each one having independent and exclusive right over it. Hence, for the purpose of Secttion 9 of the Indian Income-tax Act, 1922, the owner must be 'that person who can exercise the rights of the owner, not on behalf of the owner but in his own right'. Therefore, in light of the aforesaid ratio the liability to pay tax on income from property is clearly on the person who receives or is entitled to receive the income from property in his own right.

5. In light of the facts stated hereinbefore and applying the ratio of the aforesaid decisions to the facts of the case, we do not find any infirmity in the order of the Tribunal. The Tribunal was right in allowing the reduction of Rs. 2,69,194 on account of property income. The question is answered in the affirmative, i.e., in favour of the assessee and against the Revenue.

6. The reference is disposed of accordingly with no order as to costs.