JODHA MAL KUTHIALA versus COMMISSIONER OF INCOME TAX, PUNJAB, JAMMU & KASHMIR, HIMACHAL PRADESH AND PATIALA

Citation: [1972] 1 S.C.R. 639 · Decided: 09-09-1971 · Supreme Court of India · Bench: K.S. HEGDE · Disposal: Dismissed

Cited by 2 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

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639' 
JODHA MAL KUTHIALA 
v. 
COMMISSIONER OF INCOME TAX, PUNJAB, JAMMU & 
KASHMIR, HIMACHAL PRADESH AND PATIALA 
September 9, 1971 
[K. S. HEGDE AND A. N. GROVER, JJ.J 
Income-tax Act, s. 9(1)-Property left by evacuee in Pakistan-Ad-
ministered by Custodian under provisions of Pakistan (Administration of 
Evacuee Property) Ordinance 15 of 1949--£vacuee whether 
continues 
'owner' of property for purpose of .s. 9 of the Income-tax Act, 1922. 
The assessee was a registered firm deriving income from securities, 
property, business and other sources. 
In 1946 it purchased a hotel in 
Lahore for a sum of Rs. 46 la.as. 
For that purpose it raised a loan of 
Rs. 30 lacs from a bank and a loan of Rs. 18 lacs from one R. The 
loan taken from the bank was largely repaid but with R the assessee came 
to an agreement whereby R accepted a half share in the said property in 
lieu of the loan advanced and also I/3rd of the outstanding liability of 
the bank. 
This 
arrangement came into effect on November 1, 1951. 
After the creation of Pakistan, Lahore became a part of Pakistan and 
the hotel in question was declared evacuee property. 
As such it came to 
vest in the Custodian in i Pakistan. 
In its returns for the assessment years 
1952-53, 1955-56 and 195&-57 the assessee claimed certain amounts as 
losses on account of interest payable to the bank but showed the gross 
annual letting value from the said property at Nil. The Incomectax Officer 
held that since the property had vested in the Custodian no income or 
loss from that property could be considered in the assessee's case. 
The 
Appellate Assistant Commissioner confirmed the order of the Income-tax 
Officer. The Appellate Tribunal however came to the conclusion that 
the assessee still continued to be the owner of the property for the pur-
pose of the computation of loss, and the interest paid was a deductible 
allowance under s. 9(1) (iv) of the Income-tax Act, 1922. 
In reference 
the High Court on an analysis of the various provisions of the Pakistan 
(Administration of Evacuee Property) Ordinance 15 of 1949 came to the 
conclusion that for the purpose df s. 9 of the Act the assessee could not 
be considered as the owner of that property. In the assessee's appeal to· 
this Court it was contended that the property vested in the Custodian only 
for the purpose of administration and the assessee still continued to be· 
its owner. 
HELD.: Under the Pakistan (Administration of Evacuee 
Property) 
Ordinance 1949 the evacuee could not take possession of his property. He 
could not lease that property. He could not sell the property without 
~e consent of the custodian. 
He could not mortgage that property. He 
could not realise the income of the property. All the. rights that the 
evaC'Uee had in the property were exercisable by the Custodian excepting 
that he could not appropriate the proceeds to his own use. 
The evacuee 
had only a beneficial interest in the property. In the eye of the law the 
Custodiau who hacl all the powers of the owner was the owner of the 
property, 
His position was no less than that a Trustee. (643 F-644 A] 
Section 9 of the Income-tax Act, 1922, brings to tax the income from 
property and not the interest di a person in the property. A property , 
cannot be owned by. two persons, each one having independent and ex· 
elusive right over it. Hence for the purpose of s. 9 the owner must be· 
640 
SUPREME COURT REPORTS 
[1972] 1 S.C.R 
that person who can exercise the rights of the owner, not on behalf of the 
owner but in his own ri~t. Accordingly the assessee was not the owner 
of the property in question during the relevant assessment yeaTs for the 
purpose of s. 9 of the Act.. [644 DJ 
It is true that equitable considerations are irrelevant in interpreting tax 
laws. But those laws like al! other laws have to be interpreted reasonably 
and in consonance with justice. 
If the 
thousands of evacuee who left 
practically all their properties as well as businesses in Pakistan had been 
considered as the owners of those properties and businesses as long 
as 
the 'ordinance' was in force then those unfortunate 
persons would have 
had to pay income-tax on the basis· of the annual letting value of their 
properties and on the income, 
gains and properties of the business left 
by them m Pakistan though they did not get a paisa out of those pro-
perties and business. 
Fortunately no one in the past interpreted the law 
in the man

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