COMMISSIONER OF INCOME-TAX vs. GAEKWAD & COMPANY

ITR/42/1993HC GujaratGJHC24021160199317 February 2005Author: HONOURABLE MR. JUSTICE D.A.MEHTA,HONOURABLE MS. JUSTICE HARSHA DEVANI5 pages
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What were the facts?

The Income Tax Appellate Tribunal (Tribunal) deleted the income from a property known as "Jadhav Bungalow" from the assessee's total income for assessment years 1980-81, 1981-82, 1982-83, and 1984-85 (in one reference) and 1979-80 (in another reference). The Commissioner of Income-tax (Revenue) challenged this deletion. The Tribunal's decision was based on its prior order for assessment year 1977-78, where it found that the assessee had purchased the property but never obtained possession due to ongoing litigation and a High Court stay. The Tribunal noted that the assessee was not in a position to exercise rights of ownership. The Revenue sought a reference to the High Court on this issue.

What did the High Court hold?

The High Court held that the Tribunal was justified in deleting the income from the property known as "Jadhav Bungalow." The Court relied on the ratio of the Apex Court decision in Commissioner of Income-Tax v. Podar Cement Pvt. Ltd. (1997) 226 ITR 625, which in turn applied the principle from Jodha Mal Kuthiala (R.B.) v. CIT [1971] 82 ITR 570 (SC). The principle states that for the purpose of the Income Tax Act, an "owner" is a person entitled to receive income from the property in their own right. Applying this to the facts, the Tribunal found that the assessee was not in a position to exercise the rights of an owner, as they had not obtained possession of the property due to ongoing litigation and a High Court stay. Therefore, the Tribunal's deletion of the income was upheld. The question referred to the Court was answered in the affirmative, in favour of the assessee and against the revenue. The reference was disposed of accordingly.

What were the issues?

1. Whether, on the facts and in the circumstances of the case and in law, the Appellate Tribunal is right in law in deleting the income from property known as "Jadhav Bungalow"? Assessee's Contention: The assessee argued that they purchased the property but never received possession. They had acquired the property along with a decree against the original owner, Shri Jadav, who had failed to hand over possession. The assessee had been trying to execute the decree to obtain possession, but faced multiple suits from Shri Jadav and his relatives, leading to a High Court stay on possession proceedings. The assessee contended that they were not in a position to exercise the rights of an owner. They also pointed out that the Income Tax Officer accepted the non-declaration of income from this property for assessment years 1972-73 to 1975-76, and the Revenue did not take any remedial action under Section 263 of the Income Tax Act, 1961, possibly because no income could be estimated. Revenue's Contention: The Revenue contended that the Tribunal was not justified in deleting the income from the property. The specific arguments of the Revenue are not explicitly detailed in the judgment, but their challenge to the Tribunal's deletion implies disagreement with the assessee's claim of not being in possession or exercising ownership rights.

Which sections of the Income-tax Act were involved?

Section 256(2),Section 263

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

INCOME TAX REFERENCE No 42 of 1993

AND INCOME TAX REFERENCE NO. 335 OF 1993

For Approval and Signature:

HON'BLE MR.JUSTICE D.A.MEHTA and HON'BLE MS.JUSTICE H.N.DEVANI

============================================================ 1. Whether Reporters of Local Papers may be allowed : NO to see the judgements?

2.

To be referred to the Reporter or not? : NO 3. Whether Their Lordships wish to see the fair copy : NO of the judgement?

4.

Whether this case involves a substantial question : NO of law as to the interpretation of the Constitution of India, 1950 of any Order made thereunder?

5.

Whether it

The order continues below.

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