R.K. Gulati, J. - (1.) THIS is a reference under Section 256(1) of the Income-tax Act, 1961 (for short "the Act"), both at the instance of the Commissioner of Income-tax, Meerut, and the assessee, Abdul Qayume. It arises out of the income-tax proceedings for the assessment year 1973-74.
(2.) THE assessee was the owner of a property known as New Market, Shahghasa Bazar, Meerut. He sold it to one Dharam Das Jain subject to a stipulation to purchase it back. In pursuance of the said agreement, the assessee, along with Dharam Das Jain, by a registered sale deed dated February 12, 1963, sold the said property to two persons, namely, Vishnu Kumar Gupta and Sheelal Gupta (hereinafter referred to as the "Guptas"), for a consideration of Rs. 30,000. On the same day, a contemporaneous document was executed by the Guptas agreeing to resell the property to the assessee for that amount within a period of three years. By another document of the same date, the property was given on lease to the assessee. Subsequently, an agreement for reconveyance was renewed on three occasions, the last being on November 9, 1970, but for a consideration Rs. 45,000. In the year under consideration, the Guptas along with the assessee sold different portions of the property to six near relatives and to two educational institutions for amounts aggregating to Rs. 81,000. Out of this amount, Rs. 45,000 was received by the Guptas and the balance amount of Rs. 36,000 was paid to the assessee. THE stamp duty for the eight sale deeds was paid on the total amount of Rs. 1,40,000. The assessee, in his income-tax return, declared a capital gain of Rs. 19,000 treating himself to be the owner of the property and the Guptas as mortgagees. The amount of gains was returned after adjusting from the total sale consideration, the amount received by the Guptas, the cost of acquisition of the property, statutory allowances and certain other amounts which were claimed as expenditure. The Income-tax Officer, however, computed the taxable gains at Rs. 54,848. In doing so, he disallowed the amount of Rs. 45,000 and certain other amounts claimed as expenditure. The Income-tax Officer also invoked the provisions of Sub-sections (1) and (2) of Section 52 of the Act and adopted the figure of Rs. 1,40,000, the amount on which the stamp duty was paid, the full value of consideration for the transfer as the fair market value of the asset on the date of the transfer for the purposes of computing the capital gains.
(3.) THE assessee challenged the assessment in appeal, contending, inter alia, that he was not liable to tax on any capital gains, for the Guptas were the owners of the property and not the assessee. In the alternative, if the assessee had any interest in the property, capital gains should have been assessed proportionate to that interest only. THE application of the provisions of Section 52 of the Act as well as the disallowances, etc., were also challenged. THE appeal was dismissed in all other respects except that some relief was allowed in the computation of taxable gains. Being still aggrieved, the assessee appealed to the Income-tax Appellate Tribunal which was allowed substantially. The Tribunal held that the provisions of Section 52 had no application. The ass'essee was not the owner of the disputed property, but the assessee was liable to capital gains tax in respect of Rs. 36,000. The Tribunal also allowed partial relief with regard to the expenses claimed.;