JUDGMENT
Bhagabati Prasad Banerjee, J.
1. The Tribunal has referred the following question of law to this court under Section 256(1) of the Income-tax Act, 1961 :
” Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that income from vacant lands at Howrah was assessable in the hands of the company even though the legal ownership therein vested in the individual members of the family ?”
2. The assessment years involved are 1970-71, 1971-72, 1976-77 and 1977-78 for which the relevant accounting periods ended on December 31, 1969, December 31, 1970, December 31, 1975, and December 31, 1976, respectively.
3. The facts of the case as they appear from the statement of case are as follows :
4. For the assessment years 1970-71, the Income-tax Officer noted that the income was shown by the assessee at Rs. 66,954 from property only. Before the Income-tax Officer, a reference was made to the decision of the Tribunal in Income-tax Appeals Nos. 5275 to 3277/(Cal) of 1971-72, in which it was held that the income from house property was not assessable in the hands of the assessee-company. The Income-tax Officer took note of another decision of the Tribunal in the case of Ballavdas Iswardas, Hindu undivided family (Appeal Nos. 3554 to 3556/(Cal) of 1976-77) in which it was held that there was a partition of the Hindu undivided family on October 13, 1954. It was noted that the property income, therefore, did not belong to the Hindu undivided family and that the same was assessable in the hands of the individual members of the family. In respect of the income from lands at Howrah, it was submitted that the assessee-company was not the legal owner of the vacant lands and that the income thereof should be considered in the hands of the individual members of the family. The Income-tax Officer observed that the income from vacant lands has been assessed in the hands of the individual members on protective basis. According to the Income-tax Officer, it is not necessary that only the legal income would be assessable under the Act and that the legal effect of the transaction is that the legal ownership remained with the members of the family who by implied consent, have allowed the company to use the lands for its benefit. He, therefore, concluded that the income from vacant lands would be assessed in the hands of the assessee as income from other sources.
5. In respect of the assessment years 1971-72, 1976-77 and 1977-78, the Income-tax Officer, as held in the assessment year 1970-71, assessed the income from vacant lands in the hands of the assessee as income under the head ” income from other sources”.
6. The assessee took up the matter before the Commissioner (Appeals) who, by a consolidated order, sustained the order of the Income-tax Officer. The Commissioner (Appeals) considered the decision of the Tribunal and the decision of the Hon’ble Calcutta High Court in CIT v. Ganga Properties Ltd. [1970] 77 ITR 637. He noted that, in the present appeals, the issue was limited to the taxing of the incomes from vacant lands and not the house properties. He noted that the Tribunal, in its order dated September 4, 1972, in respect of the assessment year 1962-63, has observed that the income to be taxed from rental receipt from vacant land would have to be dealt with on a different footing. He also referred to the provisions of Section 56 of the Act which, according to him, is wide in its scope and includes income of every kind which is not excluded from the total income chargeable to tax. He also referred to the memorandum and articles of association dated October 31, 1953, in order to ascertain the objects of the company. He also made further observation that the members of the Hindu undivided family orally agreed to transfer the house property and lands received by them on partial partition to the company which agreed to issue shares to the co-owners in proportion to their interest in the properties. He found that some consideration had passed between the company and the members of the Hindu undivided family, on the basis of which the company came into possession of the right to the rental income from the house properties as well as from the vacant lands. Considering the facts of the case, he concluded that the assessment orders for all years had to be sustained.
7. The assessee took up the matter before the Tribunal raising various grounds. At the time of hearing, only the first ground of appeal that the Commissioner (Appeals) erred in law in confirming the action of the Income-tax Officer in assessing the income from lands amounting to Rs. 22,442 under the head ” Income from other sources” in the assessee’s assessment was pressed. The Tribunal considered the various facts and factors and took into account the submission made by both the sides. It noted that the present dispute was confined to income from vacant lands. The Tribunal agreed with the Revenue that, for the purposes of assessing income from other sources ownership of the assets or income thereof was not a prerequisite. It found that the income from the lands were noted in the books of account of the company. It held that the income has been correctly included and computed as income from other sources and that the individual members of the family allowed the company to use the lands for its own benefit along with the house properties, and in consideration of the same, certain shares were issued to the individual members. It also held that, as far as the income from the vacant lands was concerned, the same was to be assessed as income from other sources in the hands of the company. The Tribunal found no error in the order of the Commissioner (Appeals).
8. In this case, it is not in dispute that there was a partial partition of the immovable property of the Hindu undivided family known as Ballaydas Ishwardas of Howrah on October 13, 1953. After the said partial partition of the properties, they were pooled together by the members of the family and a limited company by the name of B. E. Properties (P.) Ltd. was promoted. The company was incorporated on March 31, 1953. Seven members of the said Hindu undivided family formed the company. The individual members to the family orally agreed to transfer house properties and lands received by them on partial partition to the company and the company, in consideration thereof, agreed to issue its shares to the co-owners in proportion to each co-owner’s interest in the property. No deed of conveyance, however, transferring the properties was formally executed. Income from the said house properties and lands were received by the company. It is also the admitted position that the expenditure relating to collection and administration of the lands and buildings were mixed up together by the company. The company received the income from the said properties. The scope of Section 56 was very wide and under it income of every kind which is not excluded from the total income can be brought to tax. It is not the requirement of the provisions of Section 56 that, in order to charge income-tax in respect of income from other sources, it has to be established that the assessee is the owner of the property. The question is that income of every kind which is not excluded from the total income under the Act shall be chargeable to income-tax under the head ” Income from other sources”. In the facts and circumstances of this case, even though no formal deed of conveyance was executed, the provisions of Section 53A of the Transfer of Property Act, 1882, are to be noted which provides that, under such circumstances, the doctrine of partial performance would apply which debars the right to the property of the owner after the property is transferred for consideration. In our view, the Tribunal has correctly decided this point that the income of the assessee from the said property is chargeable under Section 56 of the Income-tax Act. On behalf of the assessee, a reference was made to the decision of the Supreme Court in V. Venugopala Varma Rajah v. Commr. of Agrl I T. [1972] 84 ITR 466. In that case, there were 12 members of a Malabar family and a karar was executed to which all the 12 members of the family were parties. There was an arrangement for providing maintenance which was the obligation of the family. The properties mentioned in the karar continued to be the properties of the tarwad. Further, the arrangement under the karar would not even be considered as a permanent arrangement. The Supreme Court ultimately held that the income was the income of the family and it was merely applied to discharge the obligation of the family, namely, the obligation to maintain its junior members. It reached the hands of the family as soon as it reached the hands of any of the members of the family who were entitled to receive it on behalf of the family. The members of the family received that income on behalf of the family and applied the same in discharging the obligation of the family. In this particular case, no such thing has happened. In this particular case, the property was transferred to the company, the shares were allotted as the consideration money and further from the memorandum of association, it appears that the company was floated for the purpose of taking over the said property and that, in the books of account of the company, the income was shown. Accordingly, the above case law cited is not applicable to the facts and circumstances of this case.
9. The next decision cited is the decision of the Supreme Court in Provat Kumar Mitter v. CIT [1961] 41 ITR 624. In that case, the assessee who was a registered holder of 500 ordinary shares in a limited company assigned to his wife by way of a deed of settlement, the right, title and interest to all dividends and sums of money which might be declared or which may be due and payable in respect of those shares for the term of her natural life and covenanted to deliver and endorse over to her any dividend warrant or other document of title to such dividends or sums of money and to instruct the company to pay such dividends and sums of money to her. In that case, the Supreme Court held that the said deed of assignment was, in its true nature, only a contract by the assessee to transfer, or make over, to his wife in future all dividends that would be declared in respect of the shares as the company could pay the dividends only to the registered holder of the shares. Therefore, in that case, only after the dividend was received by the husband, it was given to his wife. The Supreme Court held that the case was one of application of income after it had accrued and not a case of diversion of any sum of money before it had been received by the assessee. The ratio of this decision is also not applicable to the facts and circumstances of this case.
10. Reference was also made to the provisions of Section 60 of the Act, which provides that all income arising to any person by virtue of a transfer where there is no transfer of the assets from which the income arises, shall be chargeable to income-tax as the income of the transferor and shall be included in his total income. The provision of Section 60 does not cover the case before us. Here, the income has not been transferred but the property has been transferred and the income whereof was received by the company which is not only in possession but also enjoying the income and, for the transfer of the property, there was a consideration, viz., the allotment of shares of the company to such members of the family in proportion to their shares. No registered deed of conveyance that was required for transfer of property was made though the fact is that the transferee was in possession of the property. This is a clear case where the company who is in possession continued to be in possession of the property and received income from such property. Therefore, the provision of Section 60 of the said Act does not apply at all in this case. Accordingly, the question of law referred to this court in this reference is answered in the affirmative and in favour of the Revenue.
11. There will be no order as to costs.
Subas Chandra Sen, J.
12. I agree.