- (1.) AGAINST the assessee-company, proceedings for liquidation were started. During the pendency of the proceedings, to discharge debts owed to its directors, the company passed a resolution on January 27, 1978, to give the building of the company to the directors. The resolution was approved by the shareholders on January 28, 1978. On January 31, 1978, the company recorded in its accounts that with effect from February 1, 1978, the building would belong to the directors on the basis of the resolution referred to above and that the company would have no right or interest therein. Finally, a registered deed was executed in favour of the directors on January 2, 1980. The building was already in the possession of tenants and with effect from February 1, 1978, the directors started receiving rent from the tenants. When proceedings for the assessment year 1978-79 were taken up by the Income-tax Officer, he wanted to add the rental income from February 1, 1978, in the income of the company on the plea that the sale deed was executed only on January 2, 1980, and from that date only, the company ceased to be the owner and not from February 1, 1978. Factually, the company was not receiving the rent and it was the directors who were receiving the rent. The Income-tax Officer decided the matter against the company and so did the Appellate Assistant Commissioner.
(2.) WHEN the matter came to the Tribunal, it took notice of the decision reported as Smt. Kala Rani v. CIT [1981] 130 ITR 321, of this court in which a converse proposition was being propounded by the Revenue, and decided the matter in favour of the company and observed that from February 1, 1978, the company ceased to be in possession of the building and income by way of rent received by the directors could not be included in the income of the company.
(3.) AT the instance of the Revenue, the Tribunal has referred the following question for opinion : "whether on the facts and in the circumstances of the case, the Appellate Tribunal is right in law in excluding the income of the aforesaid house property for the months of February and March, 1978, from the total income of the appellant-company for the assessment year 1978-79 ?";