Rita Kuchal, 1st floor, C-37 South Entension-1, New Delhi Pan No-IOPK2995G (Appellant) vs ITO Ward-32(2), New Delhi(Respondent)

INCOME TAX APPELLATE TRIBUNAL
BEFORE SHRI J. S. REDDY, ACCOUNTANT MEMBER
AND
SHRI A. T. VARKEY, JUDICIAL MEMBER
DELHI BENCH “F”: NEW DELHI
 

(ITA No. 6154/Del/2013) 
(Assessment Year: 2009-10)

Appellant by : Sh. Prabhat Agarwal CA
Respondent by : Sh. Vikram Sahay, Sr. DR

O R D E R

PER A. T. VARKEY, JUDICIAL MEMBER

The Assessee has filed the present appeal against the impugned order dated 03/9/2013 passed by the Ld. Commissioner of Income Tax (Appeals)-XXVI, New Delhi on the following grounds:-

“I. On the facts and circumstances of the case, the order of assessment U/S 143(3) of the Income Tax Act, 1961 (herein after the Act) passed by the Ld. A.O. is bad, both in the eye 

of law and on the facts.

2. On both the facts and circumstances of the case, the Ld.A.O. has erred both on the facts and in law, in holding that "No ownership proof in the name of Ms. Rita Kuchal is produced for the said property" without considering and appreciating the documents placed on assessment record in this regard and taxing the rental income from such property i.e. Flat No. 21, Hope apartments, Sector J 5, Gurgaon under the head "Other Sources" thereby disallowing the claim of standard deduction u/s 24(b) of the Income Tax Act, 1961 (herein after the Act) to the extent of 30% of rental income and municipal taxes paid in relation to such property during the relevant financial year.property i.e. Flat No. 21, Hope apartments, Sector J 5, Gurgaon under the head "Other Sources" thereby disallowing the claim of standard deduction u/s 24(b) of the Income Tax Act, 1961 (herein after the Act) to the extent of 30% of rental income and municipal taxes paid in relation to such property during the relevant financial year.

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3. Without prejudice to ground no. 2 above, the Ld. AO has erred in not allowing the deduction of municipal taxes paid in respect of property i.e. Flat No. 2 J, Hope apartments, Sector 15, Gurgaon, u/s 57 of the Income Tax Act, 1961 while taxing the Income from such property as chargeable under 

4. On both the facts and circumstances of the case, the Ld. A.O. has erred both on the facts and in law, in disallowing car insurance expenses paid in the relevant financial year but to the extent pertaining to next year ignoring the fact that the appellant was neither maintaining regular books of accounts nor was she required to do so, accordingly her income under the head "Other Sources" was chargeable to 

5. On the facts and circumstances of the case, the Ld CIT (A) has erred In dismissing the appeal of the appellant without 

6. On the facts and circumstances of the cases, the Ld. CIT(A) has erred in rejecting the contentions raised in ground no. 2 

2. The facts in brief are that the assessee has shown income under the head "Capital Gains", "House Property", and "Other Sources" in her Return of Income (ROI). The assessee has stated that she had not maintained any regular books of accounts in accordance with the provisions of section 44AA,of the Income Tax Act,1961(herein after the Act), as she was not required to do so. The income from house property from Flat No. 21, Hope apartments, Sector - 15, Gurgaon is being shown by assessee since the Assessment Year 2007-08 onwards and this house property, a flat in the Co-operative group housing society allotted by such society to her father, has been stated to have been received as gift from her father. However, till date, this flat did not get transferred in the appellant's name, though all requisite details have been stated to have been filed, before the Co-op. society. The AO did not accept the ownership of flat of the appellant; therefore, he assessed the receipt of stated rent under the head "Other Sources". Accordingly, he disallowed statutory deduction u/s 24 (30% towards repairs amounting to Rs. 35,612/-) and payment of Municipal taxes amounting to Rs.

1,292/-. The appellant had shown income from Motor Car also. It has been stated by her that the car, purchased on 08.02.2009, was given on lease/hire to M/s Jai Prakash Associates Ltd. In respect of this car, the assessee had claimed deduction of entire payment of insurance premium of Rs.18,420/- of car on cash basis, however, the AO allowed insurance premium attributable to two months and disallowed remaining holding that it pertained to the subsequent assessment year. 

3. Aggrieved the assessee filed appeal before the Ld. CIT(A), who vide impugned order dated 3.9.2013 has dismissed the appeal of the assessee.According to the ld CIT(A) the transfer of the house property is not in accordance with law because the Gift Deed of immovable property was not registered by payment of stamp duty. And he relied on the judgment of the Supreme Court in the case of Suraj Lamps & Industries Pvt. Ltd. Vs. State of Haryana and Anr. 183 (2011) DLT 1 (SC), which he reproduced in the impugned order as under:-

"Advantages of Registration

10. In the earlier order dated 15.5.2009, the objects and benefits of registration were explained and we extract them for ready reference : & quot; The Registration Act, 1908, was enacted with the intention of providing orderliness, discipline and public notice in regard to transactions relating to immovable property and protection from fraud and forgery of documents of transfer. This is achieved by requiring compulsory registration of certain types of documents and providing for consequences of non-registration. 

Section 17 of the Registration Act clearly provides that any document (other than testamentary instruments) which purports or operates to create, declare, assign, limit or extinguish whether in present or in future &quot, any right, title or interest & quot; whether vested or contingent of the value of Rs. 100 and upwards to or in immovable property. 

Section 49 of the said Act provides that no document required by Section 17 to be registered shall, affect any immovable property comprised therein or received as evidence of any transaction affected such property, unless it has been registered. Registration of a document gives notice to the world that such a document has been executed. Registration provides safety and security to transactions relating to immovable property, even if the document is lost or destroyed. It gives publicity and public exposure to documents thereby preventing forgeries and frauds in regard to transactions and execution of

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documents. Registration provides information to people who may deal with a property, as to the nature and extent of the rights which persons may have, affecting that property. In other words, it enables people to find out whether any particular property with which they are concerned, has been subjected to any legal obligation or liability and who is or are the person/s presently having right, title, and interest in the property. It gives solemnity of form and perpetuate documents which are of legal importance or relevance by recording them, where people may see the record and enquire and ascertain what the particulars are and as far as land is concerned what obligations exist with regard to them. It ensures that every person dealing with immovable property can rely with confidence upon the statements contained in the registers (maintained under the said Act) as a full and complete account of all transactions by which the title to the property may be affected and secure extracts/copies duly certified & quot; Registration of documents makes the process of verification and certification of title easier and simpler. It reduces disputes and litigations to a large extent.

.......................

16. We therefore reiterate that immovable property can be legally and lawfully transferred / conveyed only by a registered deed of conveyance. Transactions of the nature of GPA ales or SA/GPF/Will transfers do not convey title and do not amount to transfer, nor can they be recognized or valid mode of transfer of immovable property. The courts will not treat such transactions as completed or concluded transfers or as conveyances as they neither convey title nor create any interest in an immovable property. They cannot be recognized as deeds of title, except to the limited extent of Section 53A of the Transfer of Property Act. Such transactions cannot be relied upon or made the basis for mutations in Municipal or Revenue Records. What is stated above will apply not only to deeds of conveyance in regard to freehold property but also to transfer of leasehold property. A lease can be validly transferred only under a registered Assignment of Lease. It is time that an end is put to the pernicious practice of SA/GPA/WILL transactions known as GPA sales. (emphasis added) 

17. It has been submitted that making declaration that GPA sales and SA/GPA/WILL transfers are not legally valid modes of transfer is likely to create hardship to a large number of persons who have entered into such transactions and they should be given sufficient time to regularize the transactions by obtaining deeds of conveyance. It is also submitted that this decision should be made applicable prospectively to avoid hardship. 

18. We have merely drawn attention to and reiterated the well-settled legal position that SA/GPA/WILL transactions are not 'transfers' or 'sales' and that such transactions cannot be treated as completed transfers or conveyances. They can continue to be treated as existing agreement of sale. Nothing prevents affected parties from getting registered Deeds of Conveyance to complete their title. The said 'SA/GPA/WILL transactions' may also be used to obtain specific performance or to defend

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possession under section 53A of TP Act. If they are entered before this day, they may be relied upon to apply for regularization of allotments/leases by Development Authorities. We make it clear that if the documents relating to 'SA/GPA/WILL transactions' has been accepted acted upon by DDA or other developmental authorities or by the Municipal or revenue authorities to effect mutation, they need not be disturbed, merely on account of this decision. 

19. We make it clear that our observations are not intended to in any way affect the validity of sale agreements and powers of attorney executed in genuine transactions. For example, a person may give a power of attorney to his spouse, son, daughter, brother, sister or a relative to manage his affairs or to execute a deed of conveyance. A person may enter into a development agreement with a land developer or builder for developing the land either by forming plots or by constructing apartment buildings and in that behalf execute an agreement of sale and grant a Power of Attorney empowering the developer to execute agreements of sale or conveyances in regard to individual plot of land or undivided shares in the land relating to apartments in favour of prospective purchasers. In several States, the execution of such development agreements and powers of attorney are already regulated by law and subjected to specific stamp duty. Our observations regarding 'SA/GPA/WILL transactions' are not intended to apply to such bonafide/genuine transactions."

4 Thereafter, the Ld CIT(A) held as follows

“ 5.1 A gift of immovable property, which is not registered, is bad in law and cannot pass any title to the Donee. A valid gift of immovable property can be made only by a registered instrument and none else. According to section 123 of The Transfer of Property Act (TPA), it is invalid if a gift of a property is not registered in accordance with the section 17(1)(a) of Registration Act. 

5.2 Since the gift deed is not registered, therefore, it is not surprising to note that why the Society, since last 6 years, has not transferred the name of owner. Thus, the appellant is not legally entitled to receive rent as it is correct to infer that the property was not transferred in accordance with the provisions of section 123 of the TPA. The case of the appellant is squarely covered by the decision of Hon'ble Delhi High Court in the case of S. Kartar Singh vis ClT, 73 ITR 438 (Del). Here, also the transferor has transferred the income and not the asset. Thus, in such situation, section 60 of the Income Tax Act gets attracted because there is no valid transfer of asset though the transfer of income derived therefrom is there. 

5.3 As regards the case laws; Poddar Cement and Kamla Sondhi (supra) relied upon by the appellant, it may be mentioned that· these case laws are distinguishable on facts and do not apply to the appellant's case. In these cases, the transfers/transactions 

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were amongst unrelated parties and there is no doubt on payment of purchase price and transfer in accordance with the section 53A of the TPA, whereas there are no such facts in the present case. The question is one of applicability of the principles to the facts in a given case. It has been a well-settled view that the ratio of any decision must be understood in the background of that case. What is of essence in a decision is its ratio and not every observation found therein nor what legally follows from the various observations made in it. It is not a profitable task to extract a suitable sentence here and there from a judgement and to build upon it (vide Ambica Quarry Works v. State of Gujarat, AIR 1987 Supreme Court 1073). In my considered view, the principles enunciated in the cases relied upon by the Ld. Counsel do not render any help to the appellant in the facts and circumstances of the present case because the appellant's case is held to be distinguishable on facts. 

5.4 Keeping in view the facts and discussion in foregoing pages, I am of the considered view that the stated rent is not assessable as income from the house property in the hands of the appellant as the appellant is not the owner of the property in accordance with the provisions of section 22. The rental income from the property under reference, according to me, is assessable in the hands of Shri B. R. Gupta, father of the appellant as section 60 gets attracted here because the income from the property under reference has been transferred without legal transfer of that property to the appellant. Therefore, the disallowances made in impugned order are held justified and thus sustained.”

5. Against aforesaid impugned order of the Ld. CIT(A), assessee is in appeal before us.

6. At the threshold, Ld. Counsel of the assessee has submitted that the issue in dispute is squarely covered by the decision of the Hon’ble High Court of Delhi decided in the case of CIT vs. Smt. Kamla Sondhi dated 20.2.2004 reported in 2004 141 Taxman 278 Delhi and in this behalf he has filed the copy of the aforesaid judgment dated 20.2.2004. 

7. On the contrary, Ld. DR relied upon the order of the Revenue authorities and requested that the same may be upheld. 

8. We have heard the both parties and perused and considered the relevant record available with us, especially the order of the Hon’ble High Court of 

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Delhi decided in the case of CIT vs. Smt. Kamla Sondhi dated 20.2.2004 reported in 2004 141 Taxman 278 Delhi. We find that Hon’ble High Court has adjudicated the issue as under:-

“ORDER The question mentioned herein below has been referred by the Tribunal. However, the notice In the respondent has yet not been effected. Anyhow, notice is not required in the instant case as the case is covered by the decision of the Apex Court in favor of the assessed. The question that has been referred by the Tribunal is as under: 

"Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that rental income from flat in a multistoreyed building is assessable in the hands of the assessed under the head 'Income from house property even though the assessed had not acquired legal title to the ownership of the said property through a registered sale deed in her favor?" 

2. In view of the Supreme Court decision in the case of CIT v. Podar Cement (P) Ltd. (1997) 226 ITR 625 (SC), the answer is required to be given in favor of the assessed and against the revenue. The Apex Court in the said decision has held as under: 

"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 realties 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." 

Accordingly, the reference is answered in favor of the assessed.”

8.1 We find that the Ld CIT(A) got carried away by the judgment of Hon’ble Supreme Court in the case of Suraj Lamps and Industries Pvt. Ltd.(Supra), wherein, the Hon’ble Supreme Court delivered the judgment in a different context and highlighted the well settled law on the importance of registration of property as per the Registration Act and frowned upon the menace of transaction being done of immovable property by General Power of Attorney and the said case has nothing to do with the Income Tax Act 1961, which we are dealing with. However we find that the aforesaid order of the Hon’ble High Court of Delhi bolsters the case and claim of the appellant. Since there is no dispute that income/rent from the flat No-21, Hope Apartments, Sector-15, Gurgaon is received by the assessee/ appellant then

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 as per the Income Tax Act, owner is the person who is entitled to receive income in his own right. Respectfully following the order of the Hon’ble High Court in the case of CIT vs. Smt. Kamla Sondhi (Supra) as held by the Hon’ble Supreme Court in Poddar Cement supra), we set aside the order of the revenue authorities and decide the issues in dispute in favour of the assessee by accepting the Appeal of the assessee. 9. In the result, the appeal of the Assessee is allowed.

9. In the result, the appeal of the Assessee is allowed.

Order pronounced in the Open Court on 22/05/2015.

Copy forwarded to

1. Applicant

2. Respondent 

3. CIT

4. CIT (A)

5. DR:ITAT

ASSISTANT REGISTRAR
ITAT, New Delhi

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