S.P. Kapur, Judicial Member
1. This batch of appeals is by the revenue and since common issues are involved in relation to all the years and since we have been addressed in one set by both the parties, more so, common paper books and written notes having been placed on our file, as of necessity and for the sake of convenience, all these appeals are being disposed of by this common order.
2. The assessment years involved being 1974-75, 1975-76, 1977-78 and 1978-79, respectively, the accounting periods ended with 30-4-1973, 30-4-1974, 30-4-1976 and 30-4-1977. The assessments for all the years have been framed under Section 143(3), read with Section 144B, of the Income-tax Act, 1961 ('the Act'). The respondent assessee is a resident private limited company and in the assessment orders for the assessment years 1974-75 and 1975-76, the status shown is non-industrial company while for the other two assessment years the status shown is private limited company only.
3. Common issue involved for all the years is that on the facts and in the circumstances of the case, the income from buildings, namely 'Surya Kiran', 'Ansal Bhavan' and 'Asha Deep' should be taxed in the hands of the assessee because the assessee, a builder company, is not the owner of these buildings. At the assessment stage it was held as above while at the first appellate stage the learned Commissioner (Appeals) held that no case has been made out to tax the assessee-builder company on notional income from house property on the basis that the assessee is the owner of multi-storeyed buildings in which these various flats have come into being under different contracts with different persons for the purpose of constructing residential or commercial units for them. The learned first appellate authority also held that in relation to the contention of the assessee put forth before him as to there being an overriding title created at source in favour of the flat owners, he was not deciding the said aspect of the case since, according to him, he having held that no notional income from house property was assessable in the hands of the assessee, the second facet of the case was not. material, hence, not considered.
4. In relation to the assessment years 1974-75, 1975-76 and 1977-78, there is an additional grievance of the revenue which reads, 'On the facts and in the circumstances of the case, the Commissioner (Appeals) was not justified in holding the company as an industrial company'.
5. The order of the learned Commissioner (Appeals) is a common one in relation to the assessment years 1974-75, 1975-76 and 1977-78 while in relation to the assessment year 1978-79 he has followed his earlier order and in this view of the matter, we are reproducing the facts as also the reasoning of the lower authorities from the file relating to the assessment year 1974-75 which gives a verbatim account of the feed back of facts and the contention of the parties since the revenue was represented before the learned Commissioner (Appeals) by the learned assessing officer as also the learned IAC. These paragraphs also incorporate the reasoning of the learned Commissioner (Appeals) and we reproduce hereunder the said discussion in verbatim.
The assessee is engaged in construction of multi-storeyed buildings in different parts of Delhi city. The assessee had constructed three buildings on plots of land which were owned by the assessee. It constructed multi-storeyed buildings thereon, which are named Surya Kiran, Ansal Bhavan and Asha Deep. All these buildings are situated in the vicinity of Connaught Place in New Delhi. Certain other buildings have also been constructed by the assessee at Rajindra Place and Nehru Place. But the income from these properties has not been taxed in the hands of the assessee on notional basis, because, though these lands have been taken possession of in an open auction by the DDA and the entire purchase price has been paid to the DDA by the assessee the land in question has not yet been registered in the name of the assessee. The notional income from the three properties, Surya Kiran, Ansal Bhavan and Asha Deep, has been taxed on the ground that the assessee is the owner of these properties. It is the ITO's/IAC's interpretation of Section 22 of the Act, that the word 'owner' occurring in that section makes it obligatory on the Income-tax authorities to tax income on notional basis as provided for in Sections 23 to 27 of the Act in the hands of the owner irrespective of the fact as to whether he is entitled to receive any income therefrom.
The further facts which are admitted on both sides, in this connection, are that the assessee before starting construction activity had entered into agreements with prospective buyers of the finished flats for their own use and it is only after part advances had been received for the purpose of construction that the construction was commenced. As and when the construction proceeded, further advances were to be made by the prospective purchasers. The entire building was, therefore, constructed with the monies provided by the prospective purchasers and, according to the agreements made with the prospective purchasers before starting construction, the finished flats were to be handed over to the prospective purchasers subject to certain conditions, but the right to earn any income from these flats by way of any rent or even by way of self-occupation was never contemplated in favour of the assessee.
As a matter of fact also, it is admitted on both sides that the assessee had never earned rental income from these flats.
It is further admitted that after the buildings were complete, another stamped agreement for sale was entered into with each prospective buyer and immediately thereafter the possession of flats was handed over to the prospective purchasers. These prospective buyers thereafter have either earned rentals from these flats by letting them out and are being assessed by the ITO under the head 'Income from other sources' in respect of this source, or they have occupied the flats themselves. The agreements provided that the prospective purchasers can transfer their rights in these flats to a third party without any let or hindrance from the assessee.
The assessee-company has retained certain rights in the constructed building. One of them was that on transfer of the flats from one hand to another the assessee-company would be entitled to receive transfer charges valued at 2 per cent of the consideration passing on transfer. Such consideration money received has been returned by the assessee-company as business income and taxed as such.
For the purpose of maintenance of the building, a society of the flat owners has been formed and contributions are made to the said society by the individual members. This society is not registered under any Act and is being treated by the Income-tax authorities as an AOP and its income is being taxed on that basis. In the AOP the assessee-company is also represented.
When the flats are transferred from one hand to another, they are not registered under the Transfer of Property Act, 1882.
It is also admitted that there is no legal impediment in getting the individual flats registered in favour of the individual flat owners under the Transfer of Property Act as is being done in the three-or four-storeyed building constructed by the DDA. The only difficulty in this respect is that the Land and Development Officer has not yet finally authorised the commercial use of the plots on which the buildings have been constructed as is required to be done under the existing rules. For example, the Land and Development Officer had in 1970 authorised the commercial use but left the question of commercialisation charges to be levied to be decided later in respect of the plot on which Surya Kiran building stands. Later, a dispute emerged between the Land and Development Officer and the assessee in this respect. The Land and Development Officer is demanding Rs. 9,51,410 plus interest on delayed payments, while the assessee company's claim is that they are entitled to pay only Rs. 5,56,862.79 in respect of the said plot. The matter is now pending in the High Court. Till the issue of commercialisation charges is settled, the Land and Development Officer in law can exercise his right of re-entering the property on the ground that full commercialisation charges have not been paid. It is this impediment which is standing in the way of final transfer of the flats to the flat owners.
It is also admitted on both sides that the assessee-company has been treated as a building contractor. The entire activity has been treated as a commercial activity and the assessee-company has been taxed on the profit accruing to it as a result of this activity on the differences between the cost of land plus cost of construction and the sale price receivable by it.
Shri Batra, the learned representative for the assessee, has urged that, on the above facts, the assessee-company is liable to be assessed and was actually assessed on income arising to it as a result of construction activity done by the company and on difference between the cost of land and cost of construction of the building on the one hand and the sale price on the other hand. He further urged that the overriding title was created in this case at its source in favour of the third party, i.e., the flat owners, even before the income accrued or arose and, therefore, in accordance with several decisions, such income cannot be taxed in the hands of the assessee. The decisions cited by him in this connection are as follows: CIT v. D.R. Naik  7 ITR 362 (Bom.), CIT v. Mrs. Jayalakshmi Duraiswami  53 ITR 525 (Mad.), Raja Bejoy Singh Dudhuria v. CIT  1 ITR 135 (PC), CIT v. Tata Sons Ltd.  7 ITR 195 (Bom.), Raja Shiva Prasad Singh v. CIT  10 ITR 249 (Pat.) and CIT v. Sitaldas Tirathdas  41 ITR 367 (SC); and several others.
Shri Batra next drew attention to the fact that various flat owners are also being invariably assessed to Income-tax in respect of rental income and also to wealth-tax as owners of these flats. The department has, however, been taxing the rental income as income from other sources, but this, according to Shri Batra, is incorrect. In wealth-tax also, it is the right to occupy the flat which is being valued and the department's plea is that so far as the purchasers in this case are concerned, they cannot be treated as owners of the flats. Shri Batra urged that these views are not correct as the Supreme Court has held in the case of R.B. Jodha Mal Kuthiala v. CIT  82 ITR 570, that the term 'owner' may have a variety of meanings depending upon the context in which it is used. According to him, the owner should be one who is entitled to receive income from this source whose ownership is to be decided for the purpose of income-tax.
Shri Batra also referred to the decision of the Bombay High Court in the case of CIT v. Fazalbhoy Investment Co. (P.) Ltd.  109 ITR 802 that in cases where the structure was built with the instalments of the intending buyers, the income from property should be taxed in the hands of the buyers and not in the hands of the builder, as in such circumstances the builder is not the owner of the flats. Shri Batra also cited the decision in the case of CIT v. Mahendra J. Shah  118 ITR 902 (Bom.), to the similar effect.
Shri Batra finally urged that since the ITO has already assessed the income from sale of these flats in the hands of the assessee-company, it must be construed that the rights of ownership, if they even existed in the hands of the assessee, were transferred and profit thereon has been taxed as business activity. According to him, the income from that source cannot again be taxed in the hands of the assessee on any basis, notional or real.
The ITO has reiterated the arguments contained in the directions given to him by the IAC under Section 144B(4). His views in the matter may be quoted from the instructions issued by him to the ITO as follows:
There are no two opinions about the proposition of law that under the provisions of the Income-tax Act income from property is an artificially defined income and the tax liability arises from the fact that the assessee is the owner of the property. It is also generally accepted in law that liability to tax does not depend on the power of the owner to let the property or on the capacity of the owner to receive the bona fide annual value of the property. As held by the Bombay High Court in the case of CIT v. Zorostrian Building Society Ltd.  102 ITR 499 even when the purchaser is put into possession with all the other rights incidental thereto, in the absence of a registered sale deed, the transferee could not be regarded as the owner. The annual letting value of a property has, therefore, to be assessed in the hands of the owner by virtue of a fiction of the law.
In the instant case notwithstanding the fact that some of the flat owners by virtue of their being in possession of the flats are enjoying income therefrom which is probably being taxed in their hands as income from other sources, the assessee who continues to be the owner of the buildings in question in the eyes of law has necessarily to be taxed on the annual letting value of the property within the meaning of Section 22 of the Income-tax Act. This is the correct position under the existing provisions of Section 22.
Further, the ITO had proposed an addition of Rs. 30,37,440 as annual letting value of Hans Bhavan, another building constructed by the assessee-company. This was directed by the IAC to be deleted from the draft assessment order because 'there is only an agreement to sell between the two parties and no actual execution of the sale deed'.
I have carefully considered the arguments on both sides. To appreciate the controversy, we have to see the facts in their proper perspective and then apply the law in their context.
Let us turn our attention to the nature of relationship existing between the assessee-company and the flat owners. The assessee owned three plots of land on which the multi-storeyed buildings were to be constructed for residential purposes. It invited persons who may wish to procure such flats for such purposes as units of self-contained accommodation in the proposed multi-storeyed buildings to provide for finances for the same as the builder did not have such huge resources. Though the plots of land on which the said multi-storeyed buildings were to stand were owned by the assessee-company, the prospective flat owners could not own any definite portion of the ground, even after they had taken possession of the fully constructed flats. Similarly, in the very nature of such a venture, the lifts, the staircases, the passages, the corridors, etc., which were necessary to give access to the prospective flat owners to their flats for their enjoyment could not be exclusively owned by any flat owner. They had to be jointly owned by all the prospective flat owners in some form or the other, e.g., a society or a limited company composed of them or their use for the purposes of enjoyment of the flats otherwise provided for.
Before the building could be started, plans had to be got approved from the concerned municipal authorities, the permission for using the land for such commercial purposes was to be obtained by the assessee and for this purpose, besides the flat owners and the builders, the other governmental agencies had to come into the picture. The prospective flat owners were not intended to be given more rights than those which were incidental to the peaceful enjoyment of the flats which they were to own as residential or commercial units. Nor were interests in such other rights material to them. To make such a venture possible, separate agreements had to be entered into by the builder with a view to procure finances with a number of prospective buyers before such a construction could be undertaken. These individual agreements had to anticipate and provide for all the factors which would come into play as a result of a large number of prospective buyers owning self-contained flats in one multi-storeyed building on the one hand and the involvement of Government authorities before, during and after the completion of the multi-storeyed buildings on the other. The builder had also to ensure that funds would come to him as required and to provide for the same in the agreements once the construction commenced and to ensure that he got. his share of profit before the possession was handed over to the prospective flat owners. The residuary rights over the land, which were not material for the purposes of flat owners, were in these circumstances, meant to continue to vest in the builder. These included the right to construct more flats if more storeys were permitted to be built by the authorities at any future date. In the nature of things, such a building could not have been started to be constructed without providing for such eventualities. The cost of the flats had to be paid by the prospective owners in instalments depending on the construction work to be performed at each stage. To ensure that such funds would be forthcoming as per plan, the assessee had also to take note of the transfer of the right to possess such a flat, if any, in the meanwhile, by the original prospective owner to somebody else as future instalments would then be payable by such transferee. It is probably for this purpose that the assessee also made a condition in such agreements that such transfer would be registered with it at a cost of 2 per cent of the value of the transfer of such right. This would enable the assessee to identify the person who would pay further instalments.
We have to see the nature of these transactions entered into by the builder with the prospective flat owners. The flats in question were, thus, completed as per plans and possessions handed over to the flat owners on realisation of full dues payable to the assessee. As the question of commercialisation charges to be paid to the Government is still not settled, something more may be payable by the flat owners on this account although, vis-a-vis, the Government authorities, the appellant would be liable. But that is as per contracts previously entered into. Essentially, the contract between the parties was that the assessee-company, i.e., the builder, would provide the residential units at a particular cost. The size, the location and the specifications of the flats were predetermined. It is common ground that the difference in the cost to the builder and the price agreed upon for sale is being correctly taxed as the business income of the assessee arising out of construction activity. Similarly, it is common ground that 2 per cent of transfer value of the right to own the flats arising out of the contract is being taxed in the hands of the assessee as business income. In these circumstances, the basis on which the ITO has taxed the income from these flats, as if the assessee was the owner of the flats, does not appear to be tenable. The flats were constructed as a part of the contract between the builder and the flat owners. No one could own them before they had come into existence. Since they had come into existence as a result of the contract, the builder could not own them even after they were constructed as he could never dispose them of in any other manner or use them in any other manner for his own benefit except in the manner provided for in the contract, i.e., to earn the difference between his cost and the sale price. Such a profit cannot be taxed except on the ground that the assessee is a building contractor in respect of these flats. There is, thus, a contradiction involved in the position, the department has adopted in treating the assessee as the owner of the same property which the appellant has constructed for the flat owners with flat owners' funds and on the profit of which he was also taxed as a building contractor. Further, even if the assessee can ever be said to have owned these flats (which in the circumstances would not be correct), it has already transferred them on receipt of the sale price and has been taxed on profits arising therefrom. In such circumstances he cannot again be taxed on notional income from the same flats. In interpreting the provisions of the same Act a consistent attitude has to be adopted and two contradictory positions cannot be taken at the same time, whether the income is being taxed on a real basis or a notional basis. From what I have been able to gather, the argument of the ITO/IAC to this is that notwithstanding all the contractions, since the land is owned by the assessee, it must be held in law that the building over that land is owned by it and that since property income is taxed on a 'notional' basis, actual receipt of income or even the right, to receive income is not material for the purposes of Sections 22 to 27. We have, therefore, to critically examine this position in detail.
It has been held by the Courts that it is their duty "to find out what the Legislature must be taken to have really meant by the expression which it has used, without necessarily attributing to it a precise appreciation of the technical appropriateness of its language".--ITC v. Gibbs  10 ITR (Suppl.) 121 (HL) 132, and Gautam Sarabhai v. CIT  52 ITR 921, 930 (Guj.). The Court is entitled, and indeed bound, when construing the terms of any provision found in a statute to consider the context--CGT v. N.S. Getti Chettiar  82 ITR 599, 605 (SC) and CIT v. Casino (P.) Ltd.  91 ITR 289 (Ker.). In the context of the Act it has been held in a number of cases that those sections which impose the charge should be strictly construed, but those which deal merely with the machinery of assessment and collections should not be subjected to a rigorous construction but should be construed in a way that makes the machinery workable--Gursahai Saigal v. CIT  48 ITR 1 (SC) and Banarsi Debi v. ITO  53 ITR 100 (SC).
The Act was put on the statute book to levy taxes on income. Section 4 of the Act, the charging section, lays down that Income-tax shall be charged for any assessment year in accordance with and subject to the provision of the Act in respect of total income of the previous year of every person. The word 'person' has been defined in Section 2(37) of the Act. The scope of the 'total income' in respect of which such a person is to be charged to Income-tax is defined in Section 5 of the Act. It included such income which a person receives or which is deemed to be received on his behalf or which accrues or arises or is deemed to accrue or arise to him. No person can be charged on an income which does not accrue or arise to him or which he cannot receive either himself or through an agent. As the Privy Council held in Patiala State Bank, In re,  9 ITR 95 (Bom.), "Income-tax is a tax on a person in relation to his income.... The tax is not made a charge on the income upon which it is levied". The revenue must, therefore, determine who is the person entitled to the income either through receipt or accrual because no one can be charged to tax on income which some other person is entitled to receive now or at some other time by virtue of its accrual. For the same reason, two persons cannot be separately charged to tax in respect of the same income. Even where a provision is made, like in Section 64 of the Act, that the income of a person would be charged in the hands of some other person, the charge is not made on two persons in respect of the same income.
The word 'income' is defined in Section 2(24). The definition is inclusive but any receipt, etc., which cannot be covered by this generic term cannot form a subject of charge under Section 4 and Income-tax cannot be levied in respect of such receipts, etc. It is for this reason that Sub-clauses (ii) to (ix) have been added in Section 2(24), so as to bring such actual or deemed receipts within the scope of the charge under Section 4. As mentioned earlier, it is only that 'person' who receives such income or to whom such income accrues who would be chargeable on it.
Once the scope of the charge is defined as above, the assessable income has to be computed. The manner in which such computation is to be made has been laid down in Chapter IV of the Act. The provisions of this Chapter are not, therefore, to be read as levying any further charge independently of Section 4 or as independently enlarging the scope of assessable income as circumscribed by Section 5. An income which is not chargeable under the charging section or which does not come under the definition of income under Section 2(24) cannot become chargeable by virtue of certain words occurring in the sections meant to provide for computation of assessable income. Chapter IV is headed 'Computation of total income'. It lays down the herds under which income shall be computed under the Act and then goes on to deal with the details of the manner in which computations would be made in respect of each such head. The income from house property is to be computed in the manner laid down in Sections 22 to 27. The basis of computation given in respect of this source is notional. But by virtue of the fact that a notional method has been provided for computation, it cannot be interpreted as a charging section nor as providing for enlargement of the definition of the word 'income'.
It is in the above light that we have to interpret Section 22, which reads as under:
The annual value of property consisting of any buildings or lands appurtenant thereto of which the assessee is the owner, other than such portions of such property as he may occupy for the purposes of any business or profession carried on by him the profits of which are chargeable to Income-tax shall be chargeable to Income-tax under the head 'Income from house property'.
It would be noted that under this section what is provided for is the mode of computation in respect of 'property' 'of which the assessee is the owner'. The ownership with which this section is concerned is that of the 'property' and not merely the 'land'. If only 'land' is owned, the computation in respect of any income arising out of such land would be computable under Sections 56 to 59 of the Act and not under Sections 22 to 27. There is nothing in Section 22 which can be construed as meaning that whosoever owns the land owns the superstructure thereon also.
Even otherwise the position of law in this respect is well settled that the ownership need not vest in the same persons. Even on the stand taken by the ITO he had first to determine the question whether the assessee could be said to own the superstructures in this case within the meaning and in the context of which the word 'owner' has been used in Section 22 because the word 'owner' has not been defined in the Income-tax Act.
The Supreme Court has discussed this question in R.B. Jodha Mal Kuthiala's case (supra). They have held as follows:
The question is who is the 'owner' referred to in this section ? Is it the person in whom the property vests or is it he who is entitled to some beneficial interest in the property ? It must be remembered that Section 9 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 Section 9, the owner must be that person who can exercise the rights of the owner, not on behalf of the owner but in his own right. (p. 575)
About the meaning of the word 'owner', the following from Pollock on Jurisprudence, 6th edn. (1929) had been pointed out by the revenue:
Ownership may be described as the entirety of the powers of use and disposal allowed by law .... The owner of a thing is not necessarily the person who at a given time has the whole power of use and disposal; very often there is no such person. We must look for the person having the residue of all such power when we have accounted for every detached and limited portion of it; and he will be the owner even if the immediate power of control and use is elsewhere. (p. 579)
On this their Lordships' observation was:
...Suffice it to say that those observations are inapplicable to the case of the 'owner' under Section 9 of the Act. (p. 579)
About the principle to be adopted for the purpose of Section 9 of the Indian Income-tax Act, 1922 (analogous to Section 22 of the 1961 Act) it was held as follows:
...As mentioned earlier that section seeks to bring to tax income of the property in the hands of the owner. Hence, the focus of that section is on the receipt of the income. The word 'owner' has different meanings in different contexts. Under certain circumstances a lessee may be considered as the owner of the property leased to him. In Stroud's Judicial Dictionary, 3rd edition, various meanings of the word 'owner' are given. It is not necessary for our present purpose to examine what the word 'owner' means in different contexts. The meanings that we give to the word 'owner' in Section 9 must not be such as to make that provision capable of being made an instrument of oppression. It must be in consonance with the principles underlying the Act. (p. 578)
It is only in the context of the above decision of the Supreme Court that any reasonable approach can be attempted on the facts of this case. Judgments relied upon by the revenue where the question involved was as to the point of time at which the ownership in an immovable property was transferred under the Transfer of Property Act are not, therefore, to my mind, relevant as in those cases the transferors were complete owners who could dispose of the property in any manner they liked. This is not so in this case. The construction of the property was started under contracts and agreements, funds were to come from the prospective buyers, the builder at no time was entitled to deal with these flats as an owner, the possession was handed over on completion of flats and on payment of full dues as agreed upon and the builder had been assessed on the profits arising out of such construction as a building contractor as also on transfer fees resulting by exchange of the flats either during construction or thereafter. It is difficult to see how he could be considered as an 'owner' of these flats and taxed on 'notional' income therefrom under Section 22.
The Bombay High Court while considering a similar question in respect of computation of income from residential flats in a multi-storeyed building has laid down in the case of Fazalbhoy Investment Co. (P.) Ltd. (supra) as under:
There could be no doubt in this case that though the assessee was the owner of the land initially, it was not the owner of the flats, or, collectively of the building put up on the land. The building was constructed by JBCC out of the contributions made by the flat-owners towards the cost of the construction thereof; and when the construction was completed, the flat-owners actually went into possession of their respective portions. On these facts, the revenue had not proved that JBCC or its partners, G and R, were the owners of the flats or the building.
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The assessee-company did not have even a vestige of title to the said building and the mere fact that the lease deeds were executed by the flat-owners in order to settle outstanding disputes, cannot establish that a title which the assessee did not have till then, came to be vested in it. The only effect of the execution of the said leases by the flat-owners was that, since they assumed the character of lessees of the assessee, they would thereafter be estopped from denying that the assessee had a title to the property by virtue of Section 116 of the Evidence Act.
The building had been constructed with the moneys of the flat-owners who were in actual possession of the respective flats in the building. Therefore, neither Section 108(h) of the Transfer of Property Act, nor any principle analogous thereto, could be of any assistance to the revenue for contending that the assessee-company was the owner of the building standing on the plot. Therefore, the income from the property was not assessable under Section 9 of the Act. (pp. 803-804)
The facts in the assessee-company's case are on all fours with the case mentioned above.
The ratio of decisions in R.B. Jodha Mal Kuthiala's case (supra) and Fazalbhoy Investment Co. (P.) Ltd.'s case (supra) is that for the purpose of the Act, it is the right to receive income which is important to identify the 'owner' under Section 22 and it is the person who is entitled to receive such income to the exclusion of everyone else who is such an owner and no other person. It is not denied in this case that the flat-owners have such a right to the exclusion of everyone else. The assessee cannot, therefore, be considered as an owner for the purposes of Section 22. Only this approach to my mind would make for a harmonious interpretation of Sections 2(24), 2(31), 4, 5, 14 and 22 of the Act in the light of what I have discussed earlier about the scheme, the intent and the purpose of the Act.
The case relied upon by the learned IAC in his instructions to the ITO in this case, namely, CIT v. Zorostrian Building Society Ltd.  102 ITR 499 (Bom.) is not material in this connection as it was common ground in that case that the assessee had owned the house property and had right to receive income from that house property in the first instance. The position of the cases of CIT v. D.L.F. Housing Construction (P.) Ltd.  128 ITR 773 (Delhi) and of D.C. Anand & Sons v. CIT  131 ITR 77 (Delhi) was also the same. There was no doubt that the transferor in each of these cases had full rights of ownership which he meant to transfer. In the case before us the builder, i.e., the appellant-company, neither had any right at any stage to receive income from these flats except by way of earning profit as per the contracts entered into even before the flats came into existence nor to dispose them of as a complete owner as the flats were constructed as a result of the contracts.
In this connection reference may also be made to the decision of the Delhi High Court in the case of Addl. CIT v. Vidya Prakash Talwar  132 ITR 661. Although the question which their Lordships were considering was whether the capital gains earned on sale of a house property were exempt under Section 54 of the Act, the observations made by their Lordships in this connection are material. Their Lordships stated as follows:
... House property for the purposes of Section 54 has the same meaning as the concept of house property under Sections 22 to 27 which make it clear that the expression 'house property' takes into account an independent residential unit. In fact, there can be no doubt, that the section takes into account all independent residential units particularly in these days when multi-storeyed flats are becoming the order of the day ...(p. 664)
The confusion in our case appears to emerge from the view that the owner of the land is the owner of the superstructure. As said earlier, it is settled law that it is not necessarily so. However, in their view, the revenue considers that since the flats are immovable property, a transfer must be by registered deed. Even without this requirement the flats are nevertheless changing hands. So the relevance of registration is not clear in this context. In reality the assessee is left with no rights on the lands after handing over possession of flats in terms of the contracts, except a right to construct further storeys, provided the authorities permit, the same.
As already mentioned earlier, in the very nature of things, the 'ownership' in many respects, as for example, that of the land on which building is standing, the common staircases, path-ways, corridors, lifts, etc., have to be vested jointly in the different holders of the property as a whole. For this purpose, it is provided that ownership of land, etc., shall not be deemed to have been transferred to any individual flat-owner. The contracts provide for formation of co-operative society or a limited company after all the formalities have been completed with the municipal authorities and the Land and Development Officer, etc. Without such an arrangement, the proper use of their residential or commercial flats by the individual flat owners would not be possible. It is, therefore, an incidence of owning a flat in multi-storeyed building. On this basis it cannot be said that the building as a whole is owned by the builder until the land is transferred to a limited company or a co-operative society. In this connection CIT v. Madras Cricket Club  2 ITR 209 (Mad.), Ballygunge Bank Ltd. v. CIT  14 ITR 409 (Cal.), Sri Ganesh Properties Ltd. v. CIT  44 ITR 606 (Cal.) and Sakarchand Chhaganlal v. CED  73 ITR 555 (Guj.) are relevant. Neither can it be said that on such transfer the flats would belong to such registered society or limited company. The income from the residential flats will remain receivable by the individual flat owners alone to the exclusion of everybody else. Similarly, the flats would remain transferable by them alone under their own rights. In fact there would be no displacement of their rights in this respect, vis-a-vis, the builder who would be replaced by a society or a limited company. Therefore, simply because some further acts are to be performed in which certain Government authorities are involved can have no effect, in the circumstances of this case, as to the person who would be taxable on income from the flats whether on a real basis or on a notional basis. As stated earlier, notional basis adopted in Sections 22 to 27 is a mode of computation and not capable of forming a basis of charge on a person who is not entitled, by any stretch of imagination, to the income from these flats. Otherwise, in the view the revenue has taken, the liability to Income-tax would depend on whether or not the land is transferred. The assessee has constructed similar multi-storeyed buildings in Greater Kailash and Rajinder Nagar. The income from these is not being taxed because although the land was purchased in auction by the assessee from the DDA and full consideration has been paid, the instrument of transfer has not been executed by the DDA for many years now. The moment the said instruments are executed, the assessee, according to the revenue, would become liable for income on notional basis of computation in respect of such properties also. On the same basis the IAC has directed the ITO to delete the addition of Rs. 30,37,440, in respect of notional income from Hans Bhawan. So the assessee's taxability, in this view, depends on what the DDA or the registration authority, etc., do or omit to do and has no relation to the fact whether he is entitled or not entitled to receive any income from the property. I cannot imagine that the Legislature would ever have intended the word 'owner' in Section 22 to be interpreted in such a manner. It is contrary to the very object, the intent and scheme of the Act. In fact, the revenue itself is not sure of its position. No income was meant to be taxed simultaneously in two hands. Here it is being taxed simultaneously not only in the hands of the assessee and the flat-owners but twice in the hands of assessee, namely, on real basis as profit arising out of contracts and on 'notional' basis as if he were still the owner. Some etherial metaphysical concepts appear to be involved in this. Ownership of superstructure (which was never there in the first instance), has been transferred by the assessee to the prospective flat owners (the acid test being that such flats can be transferred by them for consideration) and the assessee is still left with the ownership. Therefore, it must be taxed on a 'notional' basis. This type of reasoning is dealing in contradictory legal fictions and the attitude is not one of administering the law relating to Income-tax in the new situations which have come into being in reality. This has created impossible situation for the department. After all the demands raised are meant to be collected, otherwise the very reason for creating it in the first instance goes. If demands of this magnitude are created every year, ultimately they have to be realised by attachment and sale of the multi-storeyed buildings. In that event, what would happen to the vested interests of the flat owners from whose moneys it was constructed in the first instance ? As I see, impossible situations are created for the department from such legal fictions besides bewildering nightmares for the assessees concerned. I cannot imagine that the Legislature could ever have wanted to create such a situation by putting the word 'owner' in Section 22.
Considering all the facts, I do not consider that any case can be made out to tax the assessee on notional income from house property on the basis that he is the owner of multi-storeyed buildings in which these various flats have come into being under different contracts with different persons for the purpose of constructing residential or commercial units for them.
6. On our part, we have heard at length the learned authorised representatives of the parties. The hearing was spread over various dates and the parties have also filed written notes which are placed on our file. The assessee's paper book (287 pages) has also been perused by us. Judgment order of the Hon'ble Delhi High Court in the case of Addl. CIT v. Smt. Ram Parkash [IT Reference No. 21 of 1975, dated 10-12-1981] has also been considered by us so is the case with the order made by the Tribunal, Bombay Bench 'A', in the case of Eighth ITO/IAC v. PQR [IT Appeal No. 793 (Bom.) of 1981 dated 11-8-1982]. The order, dated 17-9-1982 made by the Tribunal, Delhi Special Bench 'B', in the case of ITO v. R.K. Sawhney  2 ITD 207 has also been considered by us. A standard printed copy of a flat buyer's agreement relating to one of the buildings 'Surya Kiran' has also been perused by us.
7. At the outset we like to say that to avoid repetition, we adopt as our own the reasoning and conclusions arrived at by the learned Commissioner (Appeals) in the impugned order and in this view of the matter, we do uphold the said order.
8. That apart, in the case of R.K. Sawhney (supra) the Tribunal, Delhi Special Bench 'B', on the facts of a case, which are identical with the facts of the case with which we are seized of, with the only difference that in the present appeals, it is a case of constructing company while before the Special Bench it was the case of an assessee who has got a flat in a multi-storeyed building from a builder company, the Tribunal held as under:
It is primarily necessary to look into the intrinsic nature of the income earned to determine the head of income. It is well settled that such determination is to be made according to the common notions of a practical man. From such a practical point of view, what the assessees, in the instant case, derived as income was by way of exploitation of property over which they had full enjoyment and, hence, such income should be brought under the head 'Income from house property' only.
The only snag is whether the assessees could be treated as 'owners' within the meaning of Section 22. Though ownership does not pass unless there is a valid conveyance deed duly registered, but the assessees had, under the terms and conditions of the agreement, acquired an absolute right of enjoyment and possession of the flats allotted to them. The mere fact that the company was burdened with some common obligations, and owned the land on which the superstructure was built, would not make it the owners of the flats. The obligations imposed on the company were merely for the purpose of effective and efficient use of the building for the common benefit of all the flat owners, which is essential in the context of present day living in multi-storeyed flats. This sort of living is of recent origin and this was not at all thought of at the time when the laws were made. It is, therefore, necessary to give a practical meaning to the provisions of the taxing statute in the light of the various developments that have taken place in the style of living. The meaning to be given to the word 'owner' in Section 22 must not be such as to make that provision capable of being made an instrument of oppression. It must be in consonance with the principles underlying the Act. The assessees had transferable rights, unrestricted enjoyment and full control and dominion over the flats, and had derived income from leasing out the flats. Accordingly, they were the owners of the flats. In the circumstances, the AAC was right in holding that the impugned incomes were assessable as 'income from house property'. (p. 208)
The Tribunal, Delhi Special Bench 'B', referred the following case laws in the said order:
S.G. Mercantile Corpn. (P.) Ltd. v. CIT [19721 83 ITR 700 (SC), CIT v. Modem Flats (P.) Ltd.  65 ITR 67 (Bom.), Smt. Kala Rani v. CIT  130 ITR 321 (Punj. & Har.), R.B. Jodha Mal Kuthiala v. CIT  82 ITR 570 (SC), CIT v. Smt. T.P. Sidhwa  133 ITR 840 (Bom.), Mrs. Roma Base v. ITO  95 ITR 299 (Cal.), CIT v. National Storage (P.) Ltd.  66 ITR 596 (SC), Addl. CIT v. Mercury General Corpn. (P.) Ltd.  133 ITR 525 (Delhi), CIT v. Fazalbhoy Investment Co. (P.) Ltd.  109 ITR 802 (Bom.), Mrs. M.P. Gnanambal v. CIT  136 ITR 103 (Mad.), D.C. Anand & Sons v. CIT  131 ITR 77 (Delhi), CIT v. Col. H.H. Raja Sir Harinder Singh  73 ITR 433 (Punj. & Har.), Ram Gopal Reddy v. Addl. Custodian Evacuee Property  3 SCR 214 and Delhi Motor Co. v. U.A. Basrurkar  2 SCR 720. (p. 209)
Now once the Tribunal, Special Bench, has held as above and further that an assessee who has got a flat in a multi-storeyed building from a builder company is assessable in lieu of rental income received by him as under the income head 'Income from house property', it implies that the said assessee is the owner of the flat and once it is so the builder company cannot be said to be the owner of the said premises since there cannot be any further ownership and the builder company cannot be assessed in lieu of the said income as owner under Section
22. On the facts and in the circumstances of the cases with which we arc presently seized of, in actuality the various assessees who have purchased the flats from the present assessee have been assessed as owners in lieu of income received by them from such flats and as per the finding of the Special Bench of the Tribunal, the income has been assessed under the head of income 'Income from house property' and if that is what the actual facts are, then the assessee-builder company cannot be assessed in relation to those flats since there cannot be two ownerships, i.e., there cannot be a further ownership, vis-a-vis, the assessee-builder company enabling the revenue to assess the income in the hands of the builder company. Respectfully following the ratio laid down by the Special Bench of the Tribunal, we do hold that the assessee-builder company is not assessable on any income as has been assessed in its hands by the assessing officer. On this reasoning also, the impugned orders of the learned first appellate authority for all the assessment years under appeal, stand upheld.
9. Yet the above apart, in Nawab Bahadur of Murshidabad v. CIT  28 ITR 510 at page 525, the Hon'ble Calcutta High Court and in R.B. Jodha Mal Kuthiala's case (supra) at pages 579 and 580, the Hon'ble Supreme Court has held that, 'owner' under the provisions of the Act includes persons who are entitled to the whole income of the property, though they may be under certain restrictions with regard to the disposition or alienation of the property.
In Madras Cricket Club's case (supra) the Hon'ble Madras High Court held that in order that a person may be assessed as the owner of a building under Section 9, it is not necessary that he should also be the owner of the land on which the building stands. CIT v. Abubaker Abdul Rehman  7 ITR 139 (Bom.) is also in point and so is the ratio of the Calcutta High Court in Sri Ganesh Properties Ltd. v. CIT  44 ITR 606 and that of the Mysore High Court in Y.V. Srinivasamurthy v. CIT  64 ITR 292. The order dated 10-12-1981 of the Hon'ble Delhi High Court in the case of Smt. Ram Parkash (supra) also supports the view upheld by us as above. The Tribunal, Bombay Bench, vide order dated 11-8-1982 in PQR's case (supra), on identical facts held, 'though flats are constructed and sold, should the original land owner be taxed on income from property merely because final sale deed is not executed and the property stands in his name ?' The Tribunal answered the above question posed to themselves in the negative.
10. Yet everything apart, in the case of Associated Clothiers Ltd. v. Union of India AIR 1957 Punj. 621, their Lordships of the Hon'ble Punjab High Court defined the word 'ownership' as under:
'Ownership'. A really satisfactory and comprehensive definition of the right of ownership, equally exhaustive and exclusive, has not been attempted so far, because of its obvious difficulties in consequence of changing situations varying with altered circumstances. But the concept of ownership presents no difficulty of general comprehension. The well known and widely understood rights which are exercisable by an owner are--
(1) 'Jus utendi'--the right to the use of the thing;
(2) 'Jus possidendi'--the right to possess a thing;
(3) 'Jus abuntendi'--the right to consume or destroy a thing;
(4) 'Jus despondendi vel transferendi'--the right to dispose of a thing or to transfer it as by sale, gift, exchange, etc.;
(5) 'Jus sibi hapendi'--the right to hold a thing for oneself;
(6) 'Jus alteri non habendi or Jus prohibendi'--the right to exclude others from its use.
Some of those component rights may be overstating and it may also be possible to add to them. In essence the rights of ownership may be conveniently arranged under three heads, Possession, Enjoyment and Disposition.
In Article 46 at page 254 of the 12th Ed. of Salmondon Jurisprudence, it is stated as follows:
As a general rule a thing is owned by one person only at a time, but duplicate ownership is perfectly possible. Two or more persons may, at the same time, have ownership of the same thing vested in them ....
Ownership also means limited ownership and not absolute ownership in every case. Ownership is an aggregate of component rights. Even though an owner parts with some of his rights, as for instance, when he grants a lease of the property, he does not cease to be the owner of the property.
Ownership, beneficial. It means such a right to enjoyment of property as exists where legal title is in one person and the right to such beneficial use or interest is in another and where such right is recognised by law and can be enforced by the Courts at the suit of such owner or of someone on his behalf. One is also said to have the beneficial ownership of land who has done everything to entitle him to a patent from the Government and who, therefore, has the legal right to the patent and all that remains to be done is for the proper officer to issue it. [Associated Clothiers Ltd. v. Union of India, 59 Punj. LR 122: AIR 1957 Punj. 621]. (Judicial Dictionary--8th Edition 1980 by K.J. Aiyer)
The words 'owner of house property' are defined in Section 27 but the said definition raises a fiction since it provides for a deemed owner of house property. Under Section 27(iii), a member of a co-operative society to whom a building or part thereof is allotted or leased under a house building scheme of the society is deemed to be the owner of that building or part thereof for the purposes of Sections 22 to 26, i.e., although co-operative society is the legal owner and the member is only an allottee or a lessee, the member is treated as a owner of the house property for the purposes of the Act and once it is so, there is no reason why, in the absence of any definition in the Act as to the words 'owner of house property', the same analogy should not be extended to the flat owner who has got the flat in a multi-storeyed building from the builder since facts in both the cases remain the same. On this reasoning also, read in the context of the decision of the Special Bench of the Tribunal mentioned above, the flat owners having been assessed on the income received by them as owners in relation to that income and under the head 'Income from house property', the assessee builder cannot be taken to be the owner of the house property for the purposes of Sections 22 to 26.
11. In view of the discussion as above, the impugned orders of the learned first appellate authority stand upheld and like him we are also not discussing the other aspect of the case, viz., that of the effect of an overriding title, vis-a-vis, diversion of income at source.
12. As regards the next issue as to the assessee's claim being an industrial company, on our part, we do follow respectfully the ratio laid down by the Tribunal, Delhi Special Bench, in the case of ITO v. Hydle Constructions (P.) Ltd.  6 ITD 575, and restore this issue to the file of the learned first appellate authority with the directions that the issue be examined afresh and in tune with the said decision of the Tribunal, of course, after calling for from the assessee the requisite material and after giving a reasonable opportunity of being heard to the parties. On this issue, for statistics, the revenue succeeds.
13. In the net result, IT Appeal No. 1304 (Delhi) of 1982 in relation to the assessment year 1974-75, IT Appeal No. 1305 (Delhi) of 1982 in relation to the assessment year 1975-76 and IT Appeal No. 1306 (Delhi) of 1982 in relation to assessment year 1977-78, succeed in part, for statistics, since on one issue we have restored the subject-matter to the file of the learned first appellate authority. IT Appeal No. 1524 (Delhi) of 1982 in relation to the assessment year 1978-79 fails and stands dismissed.