Law:

Section:

Section 22 of the Income-tax Act, 1961 [Corresponding to section 9, of the Indian Income-tax Act, 1922] - Income from house property - Chargeable as - Assessment years 1952-53, 1955-56 and 1956-57 - Assessee was half owner of a hotel in Lahore - With creation of Pakistan said hotel was declared an evacuee property and consequently, vested in Custodian in Pakistan - As per relevant Evacuee Property Ordinance All rights that evacuee had in property he left in Pakistan were exercisable by Custodian excepting that he could not appropriate proceeds for his own use - ITO held that since property in question vested in Custodian, no income or loss from that property could be considered in assessee's case - However, Tribunal held that assessee still continued to be owner of property for purpose of computation of loss - Whether section 9 of 1922 Act brings to tax income from property and not interest of a person in that property, and therefore, for purpose of section 9 of 1922 Act, owner must be that person who could exercise rights of owner, not on behalf of owner but in his own right - Held, yes - Whether therefore, though assessee had residual interest in property left in Pakistan, he was not owner of said property for purpose of section 9 of 1922 Act - Held, yes FACTS The assessee-firm deriving income from interest on securities, etc. had purchased a hotel in Lahore by raising loans from a bank as well as from one 'R'. The bank loan was partly repaid. Thereafter, by an arrangement, 'R' accepted a half share in the said property in lieu of the loan advanced and also one-third of the outstanding liability of the bank. With the creation of Pakistan, the hotel was declared an evacuee property and, consequently, vested in the custodian in Pakistan. For the assessment years 1952-53, 1955-56 and 1956-57, the assessee claimed losses on account of interest payable to the bank, but showed the gross annual letting value from the said property at nil. Since the property had vested in the custodian in Pakistan, the ITO held that no income or loss from that property could be considered in the assessee's case, and, thus, disallowed the assessee's claim in respect of interest paid…

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