Law:

Section:

Section 4 of the Income-tax Act, 1961 - Income - Diversion of by overriding title - Assessment year 1970-71 - Assessee, a non-resident company, owned certain tea estates - It had agreed to sell one tea estate from 1-1-1969 and three other estates with effect from 1-1-1970 but deeds of conveyance in favour of purchasers were not executed within previous year relevant to assessment year in question - Whether there was diversion of income by overriding title prior to its accrual and, therefore, income from aforesaid tea business from 1-1-1969 in case of one tea estate and from 1-1-1970 in case of other three tea estates was not liable to be assessed in hands of assessee - Held, yes Facts The assessee, a non-resident company, owned certain tea estates. It had agreed to sell one tea estate with effect from 1-1-1969 and the other three tea estates with effect from 1-1-1970, but the deeds of conveyance in favour of the purchasers were not executed within pre- vious year relevant to the assessment year 1970-71. The ITO found that the trading1 results pertaining to the period from 1-1-1969 to 31-3-1970 in case of one estate and from 1-1-1970 to 31-3-1970 in case of the other three estates were not included in the return of income of the assessee. The ITO held that as till the end of the relevant previous year the sale deeds had not been executed in favour of the purchasers and the possession of the tea estates had also not been delivered to the purchasers, the income of the tea estates in question had to be assessed in the hands of the assessee. He, therefore, added back certain amount on account of income from the aforesaid four tea estates in the total income of the assessee. On appeal, the AAC held that the income of the four tea estates for the relevant periods had accrued to the purchasers. The AAC also found that the purchasers had included the income for the period between the agreement for sale and the conveyance for sale, in their printed accounts. The AAC, therefore, deleted the addition made by the ITO. On appeal by the revenue, the Tribunal held that this was a clear case of diversion of income by an overriding title and not a case of application of income…

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