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Who is treated as ‘owner’?

As per section 27 of Income Tax Act’1961, Owner of house property means not only the legal owner, i.e. the person in whose name the property stands, but also-

(i)  the person who has transferred the property without adequate consideration to his/her spouse (otherwise than in connection with an agreement to live apart) or to a minor child , not being a married daughter .

(ii) a member of a Co-operative society, Company or A.O.P. to whom a building or a part of building or part of building is allotted or leased under a house building scheme.

(iii) a person in possession of the property in part performance of a contract within the meaning of Section 53A of Transfer of Property Act. The person, who have paid consideration and take possession of flat or building as per “agreement for sale” will come in this category even though the transfer is not yet registered.

(iv) a person having lease right in the property under a lease for a period exceeding 12 years, in the aggregate including the term for which the lease may be extended.

(v) the holder of an impartible estate shall be deemed to be the individual owner of all the properties comprised in the estate.

Thus allottees of flats in group housing schemes and persons  who purchase properties on the basis of power  of attorney , or under long term leases are  liable to pay tax on the income  from the property , so acquired.

Some important judicial rulings

It is not right to say that whosoever owns land automatically owns superstructure thereon -ITO v. Ansal Properties & Industries (P) Ltd. [1985]13 ITD 478 (Delhi).

Where assessee had been allotted a flat by DDA under hire- purchase agreement, no notional income from such flat could be assessed in assessee’s hands. The assessee was not the owner of the property and notional income under section 22 could be assessed only in the hands of the owner and not in the hands of the tenant which the assessee was during the currency of the hire-purchase agreement. Thus, notional income from flat could not be assessed in the assessee’s hands.  ITAT-Delhi -ITO v. Amar Singh [1982]14 TTJ (Delhi)1.

The assessee and his wife became members of a Society jointly. Subsequently, the assessee resigned as a member from the Society and his wife became the sole member/owner of the flat. The WTO had accepted the wealth-tax return of the assessee’s wife for the assessment year 1980-81, wherein she had shown loan of Rs. 68,246 taken by her from her husband (the assessee) which was invested in the said flat apart from her own investment. However, in income-tax proceedings, the ITO came to the conclusion that the flat in question was jointly owned by the assessee and his wife, as, according to him, the investment made by the assessee’s wife was out of two bank accounts which were in the joint name of the assessee and his wife. In this view of the matter, the ITO came to the conclusion that 50 per cent of the income from the house property had to be taxed in the hands of the assessee. Where ownership of property  belonged to assessee’s wife only ,then merely on basis that bank accounts from which investment in property was made, were maintained in the joint names, a part  of income could not be taxed in husband’s hands. – Dr.  Ajit Shirodkar v. First ITO [1989] 34 TTJ (Bom.)112.

If purchaser has been put in possession of property on his paying full consideration, he can be treated as ‘owner’ for the purpose of section 22, even though no registered document as required u/s 54 of Transfer of Property Act, has been executed in his favour -CIT v. Dr. S.k. Kishore [2002]124Taxmann732 Delhi

For purpose of Section 22 ‘Owner’ is a person who is entitled to receive income in his own right and as such, where a ‘house property’ is handed over to a purchaser to enjoy fruits of that property by contractor/builder the purchaser is to be treated as ‘owner’ of that property for purpose of section 22 even though no registered documents as required under section 54 of the Transfer of Property Act or the Registration Act are executed. – CIT v. Poddar Cement (P)Ltd. [1997] 226 ITR 625(SC)

Delhi High Court held that Assessee can be treated as ‘owner’ for purpose of section 22 even though no registered document as required under section 54 of the Transfer of Property Act, had been executed in his favour. – CIT v. Dilijinder Shiv Dayal Singh[2002]125  Taxman453[Delhi].

However earlier the Apex Court had held in the case of Alapati Venkataramiah v. CIT [1965]57 ITR185 (SC) that the date of sale or transfer is the date when the sale or transfer take place, and for the purpose of determining that date, entries in the account books are relevant. In case of immovable property, the date of execution of sale deed is the date of transfer. This decision was followed in Ghanshyamdas Kishan Chander v. CIT [1980] 121 ITR 121(A.P) and CIT v. F.X. Periera And sons (Travancore) Pvt. Ltd 184 ITR 146(ker).

Conclusion

The definition of transfer in relation to capital assets, u/s 2(47) has been amended w.e.f asst. year 1988-89 to include any transaction involving the allowing  of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act,1882.As the said definition of Transfer do not cover transfer of stock in trade, controversy exists about its applicability in cases  of builders/ promoters in view of the aforesaid decision of the Supreme Court in the case of Alpati Venkataramiah (supra). In absence of clear definition various views and possible and therefore it’s suggested that the Government should do the needful to remove the prevailing confusion.

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