M.A. Unneerikutty vs Commissioner of Income Tax

K.S. Paripoornan, J.—At the instance of an assessee to Income Tax, the Income Tax Appellate Tribunal (in short, "the Tribunal") has referred the following three questions of law for the decision of this court :

"(1) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in assessing the annual, letting value of ''Kalpaka Tourist Home'' building in the hands of the assessee ?

(2) Whether the Appellate Tribunal had materials to come to the conclusion that the company, Kalpaka Tourist Home (Pvt.) Ltd., was not the owner of the property, for the assessment of property income ?

(3) Whether the Tribunal was right and had materials to fix the proportion of annual letting value at seven-eighth in the hands of the assessee and his wife ?"

The respondent is the Revenue. We are concerned with the assessment years 1976-77 to 1979-80. In April 1970, the assessee and his wife purchased a plot of land on which there was an old building. The old building was pulled down. Thereafter, a hotel building was constructed thereon. A company was floated by name "Kalpaka Tourist Home (Pvt.) Ltd." which was incorported on March 13, 1972. The construction of the hotel building was started in 1970 and completed in 1976. The assessee and his wife were the only two shareholders in the limited company. The company commenced its business on January 18, 1974. The assessee as well as his wife invested amounts in the construction of the building. The amount invested by them was satisfied by issuing shares of the company to them. During the relevant assessment years, the Income Tax Officer included the income from property of Kalpaka Tourist Home (Pvt.) Ltd. in the hands of the assessee by estimating its annual value. It was so done taking the view that the land on which the building stood was not transferred to the company by a registered deed. The plea that the company was the owner of the building was negatived. The annual letting value was estimated. In appeals, the Commissioner of Income Tax (Appeals) estimated the annual letting value of the property at Rs. 75,000 and held that only five-sixth income could be assessed in the hands of the assessee. In the second appeal filed by the assessee before the Tribunal, it was held that the company cannot be considered to be the owner because there is no instrument of sale deed in favour of the company. The Tribunal also held that out of seven-eighth portion of the property income, the assessee should bear five-sixth and his wife should bear one-sixth. It is thereafter, at the instance of the assessee that the above questions of law have been referred for the decision of this court.

We heard counsel for the assessee as also counsel for the Revenue. The company, Kalpaka Tourist Home (Pvt.) Ltd., claimed depreciation in respect of the building for the assessment year 1977-78 for which the accounting period ended on March 31, 1977. It was disallowed by the assessing authority holding that the company was not the real owner of the property. The Commissioner of Income Tax (Appeals) concurred with this view. The Tribunal confirmed the decisions of the authorities below. The company came up before this court in ITR No. 162 of 1984 ( Kalpaka Tourist Home (P.) Ltd. Vs. Commissioner of Income Tax (Central), ). The question referred to this court was whether the Appellate Tribunal was justified in disallowing the claim of depreciation of the applicant-company in respect of its buildings on the ground that the applicant (assessee) was not the owner of the building. A Bench of this court in ITR No. 162 of 1984, by the judgment dated October 15, 1987 Kalpaka Tourist Home (P.) Ltd. Vs. Commissioner of Income Tax (Central), ), held that the assessee cannot be considered as the owner of the building since there is no registered deed conveying the ownership of the property to the assessee. It was further held that since the assessee is not the owner, it is not entitled to depreciation. This court upheld the decision of the Appellate Tribunal in disallowing the claim of depreciation put forward by the company. The decision rendered in ITR No. 162 of 1984 Kalpaka Tourist Home (P.) Ltd. Vs. Commissioner of Income Tax (Central), ) has become final. In the light of the above decision, it follows that the applicant (assessee) herein is the owner of the building "Kalpaka Tourist Home (Pvt.) Ltd." and so the Appellate Tribunal was justified in assessing the annual letting value of the building of "Kalpaka Tourist Home (Pvt.) Ltd." in the hands of the assessee. Kalpaka Tourist Home (Pvt.) Ltd. is not the owner of the property for the assessment of property income. We answer question No. 1 referred to us by the Appellate Tribunal in the affirmative, against the assessee and in favour of the Revenue. We answer question No. 2, referred to us, also in the affirmative, in favour of the Revenue and against the assessee.

The Appellate Tribunal referred to various facts and circumstances in paragraphs 9 and 10 of its appellate order dated May 24, 1985, and after calculation of the relevant details came to the conclusion that the assesser and his wife should be taken to have seven-eighth share in the property income and the assessee herein should bear five-sixth portion and his wife one-sixth. The finding aforesaid is a pure finding of fact, based on material. It is not open to interference by this court, in exercise of its advisory jurisdiction. Therefore, we answer question No. 3 in the affirmative, against the assessee and in favour of the Revenue.

The Income Tax references are answered accordingly.

A copy of this judgment under the seal of this court and the signature of the Registrar will be forwarded to the Income Tax Appellate Tribunal, Cochin Bench.