1. ' SALEEM AKHTAR, J.--The applicant filed return for the assessment year 1972-73 but did not declare 1/3rd of the income from the property known as Beach Luxury Hotele as the said property had been sold to his minor sons. It was pleaded that the agreement to sell was entered into between the parties on 22-4- 1971 when sale consideration was received by the applicant and therefore, he was not liable to declare the income of the property. The Income Tax Officer did not agree and held that the title to the property did not pass to the applicant by mere executing an agreement to sell. The applicant maintained that after the agreement to sell he has not received any rent and the beneficial owners i.e, his sons had become the real owners. When the matter came up before the Tribunal it maintained the order of the Assessing Officer. On application made by the applicant the following question has been referred for our opinion:- "Whether in the facts and circumstances of the case the Tribunal was right in holding that the income from property was taxable in the hands of the assessee?
2. ' Mr. Abdu Wadood the learned counsel for the applicant has contended that as the property has been sold to the sons of the applicant he was not liable to declare the income from the property.
3. Income from the property is assessed under section 9 of the Income Tax Act which reads as follows:-
9. (1) The tax shall be payable by an assessee under the head "Income from property in respect of the bona fide annual value of property consisting of any buildings or lands appurtenant thereto of which he is the owner, other than such portions of such property as he may occupy-- for the purposes of any business, profession or vocation carried on by him the profits of which are assessable to tax, subject to the following allowances, namely: (i)...........................
4. (ii)..........................
5. (iii).........................
6. (iv).........................
7. ' Under this provision the owner of the building is liable to pay tax under the head "income from property". Therefore, the charging section makes the onwer of the property liable to pay the tax on income from property. Mr. Wadood has referred to R.B. Jodha Mal Kuthiala v. Commissioner of Income Tax (1971) 82 I T R 570. In this case The assessee had migrated to India leaving his property in Pakistan. This property was declared evacuee property and the Custodian had taken it over Question arose whether the assessee could be taxed under section 9. It was held that for the purpose of section 9 the owner must be that person who can exercise the right of ownership not on behalf of the owner, but in his own right. As the assessee could not exercise any right in that property except with the consent of the Custodian, he had residual beneficial interest which cannot be considered to be ownership for the purpose of section 9. In this case the property had vested in the Custodian by operation of law and therefore the owner who had migrated to India and had been declared evacuee could not be treated as owner because he could not exercise rights of ownership over the property.
8. ' The learned counsel for the applicant by referring to this authority contended that the applicant is not the real owner as he has transferred his right to his minor sons and in fact an agreement has been executed followed by a registered sale-deed. The sale-deed was executed on 2-7-1972 after more than a year of the agreement.
9. ' Mrs. Rashida Patel the learned counsel for the respondent has contended that as is obvious from the assessm ent order the applicant had shown the entire property income in his wealth reconciliation statement therefore he has treated it to be his own property. According to the learned counsel for the respondent by mere agreement to sell, no right is transferred to the purchaser in the immovable property. She has relied on Bachu Bai F.E. Dinshaw v. Commissioner of Income Tax 1967 PTD 170. In this case the assessee sold the property, but it was not conveyed by a deed. The purchaser obtained possession and enjoyed the rental income. Seller was held liable to tax under section 9. After a review of several authorities it was observed as follows:- "The real question is whether in law, in the absence of a registered sale-deed, the assessees are the owners of the property of Mrs. S.G.M. Eduljee. It may be that the purchaser under the agreement may be entitled to retain possession of the property in dispute and may further be entitled to recover its rent. However, this alone would not clothe her with title even according to the above discussion in the two commentaries cited at the Bar."
10. ' In our opinion, the true test under section 9 of the Income-tax Act for assessing the income is to find out who is the owner of the property. It is the owner alonge who can be assessed to income- tax. It may be that the owner may not be able to recover the rent or may be out of possession, or there is no likelihood to reeover the rent from the property owned, but that would not in the least exempt him from his liability to pay income-tax under the said provision of law."
11. ' Mrs. Patel also referred to Rajah Sir MA. Muthiah Chettiar v. Commissioner of Income Tax 1986 PTD
514. In this case the assessee alongwith his wife and sones created a trust and executed a deed on 9-6-1969 describing it an agreement of gift in favour of the trust. Under this agreement of gift it was observed that the donor had put the trustees in possession of the property from that date and he had undertaken to execute a registered sale-deed as soon as exemption was obtained from the Government. After obtaining requisition exemption the assessee executed a gift deed on 8-3-1971 and got it registered. Question arose whether the income should be assesseed in the hand of the assessee for the relevant assessm ent year 1970-71. It was observed as follows:- "It is thus well-established, that where a transfer is effected inter vivos by a donor to a living person, that will have to satisfy the requirements of the Registration Act. Even in a case where no document of gift is necessary, if the parties choose to reduce the transaction in writing, then the requirements of section 123 read with section 5 of the T.P. Act as also the provisions of the Registration Act must be satisfied. In the. Present case even if the agreement, dated 9-2-1969 is taken to be actually evidencing the transaction of a gift, as contended by the learned counsel for the assessee, then for want of registration the said document will be ineffective to transfer the title from the donor to the trust. We cannot, therefore, agree with the learned counsel for the assessee that the agreement of gift, dated 9-2-1969 results in the transfer of ownership from the donor to the trust and, therefore, the income received by the trust after that date should not be taken as the income of the assessee."
12. In the present case the applicant had merely entered into an agreement for sale. Under section 54 of the Transfer of Property Act a contract of sale does not create any right in the property. The right in the property is created on registration of the sale-deed if value of the property is Rs,100 or more.
13. Under section 9 it is the owner of the property who is liable to pay tax. Applying these principles we are of the view that during the assessment year under consideration the applicant was the owner of the property and was liable to pay tax in respect of income under section 9 of the Income Tax Act.
14. ' We, therefore, answer the question in the affirmative.