2001 PLP 3747 (PTD)

The word "owner" has not been defined in the Income Tax Act, 1961. Section 27 of the Income‑tax Act reads thus (i) an individual who transfers otherwise than for adequate consideration any house property to his or her spouse, not being a transfer in connection with an agreement to live apart, or to a minor child not being a married daughter, shall be deemed to be the owner of the house property so transferred; (ii) the holder of an impartible estate shall be deemed to be the individual owner of all the properties comprised in the estate; (iii) a member of a cooperative society, company or other association of persons to whom a building or part thereof is allotted or leased under a house building scheme of the society, company or association, as the case may be, shall be deemed to be the owner of that building or part thereof; (iiia) a person who is allowed to take or retain possession of any building or part thereof in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882 (4 of 1882), shall be deemed to be the owner of that building or part thereof: (iiib) a person who acquires any rights (excluding any rights by way of a lease from month to month or for a period not exceeding one year) in or with respect to any building or part thereof, by virtue of any such transaction as is referred to in clause (f) of section 269UA, shall be deemed to be the owner of that building or part thereof; (iv) 'annual charge' means a charge to secure, an annual liability, but does not include any tax in respect of property or income from property imposed by a local authority, or the Central or a State Government; (v) 'capital charge' means a charge to secure the discharge of a liability of a capital nature; (vi) taxes levied by a local authority in respect of any property shall be deemed to include service taxes levied by the local authority in respect of the property." Under the general law undoubtedly a person derives right, title and interest in respect of an immovable property only when a registered instrument is executed in his favour but would that mean that the same meaning has to be adhered to in all situations? The answer to the aforementioned question must be rendered in the negative "owner" has been defined in the Canadian Law Dictionary, at page 271, to mean: "The person who is beneficially entitled to a right. However, the term is frequently used to denote a person who is beneficially entitled to a corporeal thing such as land, chattels, goods, animals, etc. The term also has the extended meaning of denoting the person who has the dominion or control over a thing although the title to the same may be in another, such as a conditional sale's purchaser. The term also has the extended meaning of a person whose right to a thing is short of entire beneficial ownership such as a lessee for a term of years. " In Black's Law Dictionary, the word "owner" has been stated to mean "The person in whom is vested the ownership, dominion, or title of property; proprietor. He who has dominion of a thing, real or personal, corporeal or incorporeal, which he has a right to enjoy and do with as he pleases, even to spoil or destroy it, as far as the law permits, unless he be prevented by some agreement or covenant which restrains his right. The term is, however, a nomen generalissimum, and its meaning is to be gathered from the connection in which it is used and from the subject‑matter to which it is applied. The primary meaning of the word as applied to land is one who owns the fee and who has the right to dispose of the property, but the term also includes one having a possessory right to land or the person occupying or cultivating it. The term 'owner' is used to indicate a person in whom one or more interests are vested for his own benefit. The person in whom the interests are vested has 'title' to the interests whether he holds them for his own benefit or for the benefit of another. Thus the term 'title' unlike 'ownership', is a colourless word; to say without more that a person has title to certain property does not indicate whether he holds such property for his own benefit or as trustee. Restatement, Second, Trusts, $ 2, Comment (d); Restatement of Property, $ 10. " In Webster's New 20th Century Dictionary, second edition at page 1279, the word "owner" has been stated to mean‑‑‑to possess, to hold as personal property. Thus, the word "owner" is capable of being assigned a wider meaning. It is true that in Parthas Trust (1988) 169 ITR 334 (FB), the Kerala High Court has held that the said word should be used in the context of the provisions of the Transfer of Property Act and the Registration Act. A mere right of user may not make the person using the property the owner thereof; but in a case of this nature when the intention of the parties is absolutely clear and where even the vendor had admitted that they had sold the properties at the time of entering into the agreement for sale, a wider meaning should be attributed. It has not been disputed that vendors, in terms of the provision of the Income‑tax Act, would be entitled to the benefits of capital gains tax in such a situation. The fact remains that the assessee had been carrying on business upon treating the assets as its own property and, thus, in that context whether in law such a title had vested in him or not may not be very relevant. If a strict construction to such word is made, in a case of defective title though the assessee is the holder of a registered deed, he would not be entitled to depreciation. Registration of the deed alone does not make a person the holder of title if the same had been done in violation of any statute or if certain formalities as required under the statute had not been complied with, say for example, in a case where prior approval of, the Government or an authority is necessary before the deed of sale ‑is executed or similar such causes. In R.B. Jodha Mal Kuthiala v. CIT (1971) 82 ITR 570, the apex, Court had the occasion to consider one of such questions where despite vesting of the property in custodian the same did not mean loss of ownership. In the context of section 9 of the Indian Income‑tax Act, 1922, the apex Court referred to Stroud's Judicial Dictionary and held that the meaning which is required to be given to the word "owner" must not be such as to make that provision capable of being made an instrument of oppression. The Patna High Court in Raja P.C. Lall Chaudhary v. CIT (1948) 16 ITR 123 held a receiver not to be an'owner. The apex Court also referred with approval to the decision of this Court in Nawab Bahadur of Murshidabad v. CIT (1955) 28 ITR 510 and Addl. CIT v. U.P. State Agro Industrial Corporation Ltd. (1981) 127 ITR 97 (All.) and upon considering various case‑law and dictionaries held that the expression "building owned by the assessee in section 32 of the Income‑tax Act, 1961" has not been used in the sense that a person will be considered to be an owner of the building under section 32 if he is in a position to exercise the rights of the owner not on behalf of the person from whom the title vests but in his own rights. As noticed hereinbefore, the other High Courts have also taken the same stand. Recently in CIT v. Podar Cement (Pvt.) Ltd. (1997) 226 ITR 625, the apex Court although was concerned with the scope of the word "owner" within the meaning of section 22 of the Act, referred to R.B. lodha Mal Kuthiala v. CIT (1971) 82 ITR 570 (SC) and other decisions including the Division Bench decision of this Court in General Marketing and Manufacturing Co. Ltd. (1996) 222 ITR 574 and held (page 641): "It would thus be seen that where the possession of a property is acquired, with a right to exercise such necessary control over the property acquired which it is capable of, it is the intention to exclude others which evinces an element of ownership. To the same effect and with a more vigorous impact is the subject dealt with by Dias on Jurisprudence (fourth edition, at page 400): 'The position, therefore, seems to be that the idea of ownership of land is essentially one of the 'better right' to be in possession and to obtain it, whereas with chattels the concept is a more, absolute one. Actual possession implies a right to retain it until the contrary is proved, and to that extent a possessor is presumed to be owner.' Again, at page 404, the learned author says: Special attention should also be drawn to the distinction between 'legal' ownership recognised at common law and 'equitable' ownership recognised at equity. This occurs principally when there is a trust, which is purely the result of the peculiar historical development of English Law. A trust implies the existence of two kinds of concurrent ownerships, that of the trustee at law and that of the beneficiary at equity'." It has further been observed (page 642): "Thus, the juristic principle from the view‑point of each one is to determine the true connotation of the term 'owner' within the meaning of section 22 of the Act in its practical sense, leaving the husk of the legal title beyond the domain of ownership for the purpose of this statutory provision. The reason is obvious. After all, who is to be taxed or assessed to be taxed more accurately a person in receipt of money having actual control over the property with no person having better right to defeat his claim of possession or a person in legal parlance who may remain a remainder man, say, at the end it extinction of the period of occupation after, again say, a thousand years? The answer to this question in favour of the assessee would not merely be doing palpable injustice but would cause absurd inconvenience and would make the Legislature to be dubbed as being a party to a nonsensical legislation. One cannot reasonably and logically visualise as to when a person in actual physical control of the property realising the entire income and usufructs of the property for his own use and not for the use of any other person, having the absolute power of disposal of the income so received, should be held not liable to tax merely because a vestige of legal ownership or a husk of title in the long run may yet clothe another person with the power of a residual ownership when such contingency arises which is not a case even here. " As regards the person in possession of the property in part performance of the contract, it was held that he would be the owner. Upon noticing that the High Courts are sharply divided on the issue, it was held (page 653): "We are conscious of the settled position that under the common law, 'owner' means a person who has got valid title legally conveyed to him after complying with the requirements of law such as the Transfer of Property Act, Registration Act, etc. But, in the context of section 22 of the Income‑tax Act, having regard to the ground realities and further having regard to the object of the Income‑tax Act, namely, to tax the income, we are of the view, owner is a person who is entitled to receive income from the property in his own right. " Although the aforementioned decision was rendered in the context of section 22 of the Act, having regard to the underlying principles enumerated therein, we are of the view that the same principles would also apply in the matter of interpretation of section 32 of the Act. For the reasons aforementioned, the answers to Questions Nos. 1, 2 and 3 are rendered in the negative, i.e. in favour of the assessee and against the Revenue. Re : Questions Nos. 4 and 5: So far as Questions Nos. 4 and 5, we may note that although elaborate arguments have been made by learned counsel appearing on behalf of the petitioner urging that a director is an agent of the company within the meaning of the provisions of the Companies Act relying on or on the basis of the decisions in R.K. Dalinia v. Delhi Administration (1962) 32 Comp. Cas. 699 (SC); Globe Motors Ltd. (In Liquidation) v. Mehta Teja Singh & Co. (Agencies) (1984) 55 Comp. Cas. 445 (Delhi) and Chevalier I.I. Iyyappan v. Dharmodayam Co. AIR 1966 SC 1017. But it appears that a finding of fact had been arrived at by the Tribunal that the persons who had advanced loan were not the purchasing agents, selling agents or other agents within the meaning of clause (vii) of section 40A(8) of the Income‑tax Act. It has been held: "The persons to whom this interest was paid can neither be called as a purchasing agent or selling agent or they cannot be called as an agent in the terms of other agent because it was not paid in the course of the assessee's business but for acquiring the assets of the company. The words in the course of or for the purpose of the assessee's business mean running of business of the company and not for acquisition of the asset to bring the company into existence. The case cited by learned counsel in the case of CIT v. Kalani Asbestos (P.) Ltd. (1989) 180 ITR 55 (MP) is‑ not applicable for this case. In that case it was held that if interest is paid for the current accounts of the company, section 40A(8) of the Act does not apply. In this case it cannot be said that the directors had maintained a current account which connotes regular transaction during the year by way of withdrawals and deposits. In this case certain amounts were advanced for purchase of the estate of the company and no regular transactions are embodied therein." As the findings recorded therein are pure findings of fact, questions Nos. 4 and 5 do not arise for consideration. These references are answered accordingly. In the facts and circumstances of this case there will be no order as to costs. Let a xeroxed copy of this judgment countersigned by A.R. (Court) be forwarded to the Income‑tax Appellate Tribunal. DEBI PRASAD SIRCAR‑I, J.‑‑‑I agree. M.B.A./635/FC Reference answered.