Summary
The assessee was a .,registered firm deriving income from securities, property, business and other- sources. In 1946 it purchased a hotel in 'Lahore for a sum of Rs. 46 lacs.
For that purpose it raised a loan of Rs. 30 lacs from a bank and a loan of Rs. 18 lacs from one R. The 'loan taken from the, bank was largely repaid but with R the assessee came to an agreement whereby R accepted a half share in the said property in lieu of the loan advanced and-. also 1/3rd of the outstanding liability of the bank. This arrangement came into effect on November 1, 1951. After the creation of Pakistan, Lahore became a part of Pakistan and the hotel in question was declared evacuee property. As such it came to vest in the Custodian in Pakistan. In its returns for the assessment years 1952-53, 1955-56 and 1956-57 the assessee claimed certain amounts as losses on account of interest payable to the bank but showed the gross annual letting value from the said property at Nil. The Income-tax Officer held that since the property had vested in the Custodian no income or loss from that property could be considered in the assessee's case. The Appellate Assistant Commissioner confirmed the order of the Income-tax Officer. The Appellate Tribunal however came to the conclusion that the assessee still continued to be the owner of the property for the purpose of the computation of loss, and the interest paid was a deductible allowance under s. 9(1) (iv) of the Income-tax Act, 1922. In. reference the High Court on an analysis of the various provisions of the Pakistan (Administration of Evacuee Property) Ordinance.15 of. 1949 came to the conclusion that for the purpose of s. 9 of the Act-the assessee could not be considered as the owner of that property: 'In the assesee's appeal to this Court it was contended that the property vested in the Custodian only for. the purpose of administration and the assessee still continued to be its- owner.HELD : Under the Pakistan (Administration of Evacuee Property) Ordinance 1949 the evacuee could not take possession of his property. He could not lease that property. He could not sell the property without the consent of the custodian. He could not mortgage that property. He could not realise the income of the property.All the rights that the evacuee had in the property were exercisable by the Custodian excepting that he could not appropriate the proceeds to his own use. The evacuee had only a beneficial interest in the property. In the eye of the law the Custodian who had all the powers of the owner was the owner of the property. His position_ was no less than that a Trustee. [643 F-644 A]Section 9 of the Income-tax Act,- 1922, brings.to tax the income from property and. not the interest of a. person in the property. A property cannot be owned by two persons, each one having independent and exclusive right over it.Hence for the purpose of s. 9 the owner must be 640that person who can exercise the rights of the owner, not on behalf of the owner but in his own right. Accordingly the assessee was not the owner of the property in question during the relevant assessment years for the purpose of s. 9 of the Act. [644 D]It is true that equitable considerations are irrelevant in interpreting tax laws. But those laws like all other laws have to be interpreted reasonably and in consonance with justice. If the thousands of evacuee who left practically all their properties as well as businesses in Pakistan had been considered as the owners of those properties and businesses as long as the 'ordinance' was in force then those unfortunate persons would have had to pay income-tax on the basis of the annual letting value of their properties and on the income, gains and properties of the business left by them in Pakistan though they did not get a paisa out of those properties and business. Fortunately no one in the past interpreted the law in the manner suggested by the assessee. [644 E-G]Official Assignee for Bengal (Estate of Jnanendra Nath Pramanik), 5 I.T.R. 233, Commissioner of Inland Revenue v.Fleming, 14 T.C. 78 and .Sir Currimbhoy Ibrahim Baronetcy Trust v. C.I.T., Bombay, 2 I.T.R. 148, applied.Amar Singh v. Custodian, Evacuee Property, Punjab, [1957]S.C.R. 801, distinguished.P.C. Lai Choudhary v. C.I.T., 16 I.T.R. 123 and Nawab Bahadur of Murshidabad v. C.I.T., West Bengal, 28 I.T.R.510, considered.See the full content of this document
Extract
Jodha Mal Kuthiala VS. Commissioner Of Income Tax, Punjab, Jammu &kashmir, Himacha
PETITIONER: JODHA MAL KUTHIALA Vs.RESPONDENT: COMMISSIONER OF INCOME TAX, PUNJAB, JAMMU &KASHMIR, HIMACHALDATE OF JUDGMENT09/09/1971BENCH: HEGDE, K.S.BENCH: HEGDE, K.S.GROVER, A.N.CITATION: 1972 AIR 126 1972 SCR (1) 639 1971 SCC (3) 369CITATOR INFO : R 1984 SC 420 (38)E&D 1987 SC 522 (17)ACT: Income-tax Act, s. 9(1)-Property left by evacuee in Pakistan-Administered by Custodian under provisions of Pakistan (Administration of Evacuee Property) Ordinance 15 of 1949-Evacuee whether continues. ,owner' of property for purpose of s. 9 of the Income-tax Act, 1922.JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 1970 to 1973 of 1968.Appeals from the judgment and order dated September 20, 1967 of the Delhi High Court in Income-tax Reference Nos. 2 :and 3 of 1967.V.C. Mahajan and H. K. Puri, for the appellant (in all the appeals)V.S. Desai, R. N. Sachthey and B. D. Sharma, for the respondent (in all the appeals).The Judgment of the Court was delivered by Hegde, J. In these appeals by certificate, the only question arising for decision is : "whether on the facts and in the circumstances of the case, the assessee. continued to be the owner of the property for the purposes of computation of income under S. 9 of the Income-tax Act, 1922" (to be he...
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