JUDGEMENT
O.P. Jain, Judicial Member -
(1.)THIS appeal by the assessee is directed against the order of the CIT( A) dated 30 March, 198 5, relating to the assessment year 1981-82.
(2.)The only issue relates to the assess ability of Rs. 3,90,335, being the rent of 43 flats claimed to have been sold by the assessee to 43 persons. The brief facts giving rise to the present appeal are as follows :
The assessee firm carries on the business of constructing property and selling them to various parties. The assessee firm had obtained a plot of land belonging to Shri U.S. Halwasia and Shri B.P. Halwasia on lease. The lease rent is said to M/s Ganeshdas Ram Kumar at Rs. 11,300 per annum. The assessee firm started construction of certain flats over this land and invited applications from prospective purchasers. On receipt of such applications, the flats, which were under construction, were allotted to the prospective purchasers. The price of the flats was agreed to be paid in installments. The last installment of 10 per cent of the price was agreed to be paid by the prospective purchaser, hereinafter referred to as the purchaser, on completion of the building and handing over of its possession to him. The entire sale price was thus deposited by the purchaser. On completion of these flats, they were let out to the State Bank of India on a monthly rent of Rs. 1,34,590. It was claimed by the assessee that is has let out the said flats to the State Bank of India on behalf of the purchasers and the rent is paid by the Bank directly to the purchasers of the flats. The assessee's case, therefore, was that the rental income of the said 43 flats is not assessable in the hands of the assessee and it does not belong to him. It was also the case of the assessee that the flats in question belonged to the purchaser and not to the assessee. On enquiry, it was found by the assessing officer that the flats have not so far been transferred to the purchasers and no deed of conveyance has been executed or registered. He was of the view that unless and until the flats are transferred to the purchasers and deed of conveyance is executed and registered in their favour, they cannot be deemed to be the owners. On enquiry, it was also found by the assessing officer that in the Municipal records, the property stands entered in the name of the four partners of the firm as co-owners. He also examined the lease deed executed between the assessee and the State Bank of India and from its perusal he found that it is the assessee, who is the lessor and will issue valid receipts for payment of rent. He also noted that as per the covenant appearing in the lease deed, the rent is payable to the assessee by the State Bank of India and the State Bank will have dealing only with the assessee. In the circumstances, the assessing officer had concluded that the property belongs to the assessee firm and he completed the assessment accordingly. The five months' rent, after making the statutory deductions, was worked out at Rs. 3,90,335 and was added to the income of the assessee.
(3.)THE assessee carried the matter in appeal before the CIT(A). It was submitted before him that all that was required to transfer the property had been completed except the. legal requirement of registration of property in the name of the actual owners, that the income arising oh account of letting out the property belonged to individual owners and the assessee had no interest whatsoever in the same. It was further submitted that the assessee had executed the lease deed in its capacity as an attorney of the flat owners and not on its own behalf. THE assessee's interest only relates to the common passages, staircase and lifts, etc. which are still the properties of the assessee. It was also submitted on behalf of the assessee that though there was a provision in the lease deed for the payment of rent to the assessee as holders of power of attorney on behalf of the flat owners, the actual payment of rent was directly made to flat owners by the Bank inasmuch as all the 43 flat owners had opened their accounts with the State Bank of India, Hazratganj Branch, Luck now, and the rent was being deposited in their accounts. It was also submitted that the assessee had at no stage received the rent on behalf of the flat owners nor had any occasion to issue any rent receipt. Thus in substance, the assessee's case was that it had received the sale price of the 43 flats and had delivered possession to the purchasers, and the purchasers are in occupation, control and possession of the property and they are the owners of the flats within the meaning of Section 22 of the Income-tax Act and, therefore, the ITO was not justified in treating the rental income as income of the assessee. THE learned CIT( A) agreed with the contentions advanced on behalf of the assessee. He observed that under the Income-tax Act, it is the income from property that is assessable and not the ownership. He also observed that the property had been purchased by 43 owners as per agreements and everything has been done, namely, the consideration has been paid, possession taken and effective control being exercised. It was under this right and effective control that these owners had given special power of attorney to Shri M.L. Agrawal (partner of the assessee firm) to act on their behalf to negotiate and lease out the property to the State Bank of India. He also observed that it was on account of their effective ownership that the rent was being received by them individually and the lessee, the State Bank of India, having duly recognised the real ownership, was paying the rent directly into their personal account maintained by it. He also agreed that it is a faut that the property income is being enjoyed by the individual 43 owners inasmuch as they had given general power of attorney to Shri M.L. Agrawal to act on their behalf to enter into the lease agreement, that the list of 43 owners was duly attached with the lease agreement and the State Bank of India is actually paying rent directly to the said 43 owners. In the end, he concluded that the assessee was not at all the owner of the property within the meaning of Section 22 of the Income-tax Act and, therefore, it was not liable for assessment of income from the building so far as the first to sixth floors are concerned, which have been sold to the 43 owners. He accordingly deleted the assessment of this income from the hands of the assessee, namely, Rs. 3,90,335. THE correctness of that order is being challenged in appeal before the Tribunal.