INCOME TAX

Circular No. 9

Dated 25/3/1969

INCOME FROM HOUSE PROPERTY

section 22 - INCOME FROM PROPERTY [CORRESPONDING TO SECTION 9(1) OF THE 1922 ACT]

Tenant co-partnership co-operative housing societies - Whether legal ownership in flats can be said to vest in individual members themselves and not in co-operative society

1. Instructions were issued in 1955 to the effect that in the case of tenant co-partnership co-operative housing societies, the income from each building should be assessed in the hands of the individual members to whom it had been allotted, notwithstanding the facts that the technical legal ownership in the property in such cases vested in the society. However, it has now been represented to the Board that in the case of tenant co-partnership co-operative housing societies, the societies are usually only lessees of the flats and the legal ownership of the flats really vests in the individual members themselves.

2. The normal procedure in such cases is that an agreement is entered into between the builder and each purchaser of the flat in the building proposed to be constructed. The purchaser pays the entire cost of the flat in instalments spread over the period of the construction. As soon as the building is completed, the builder gives the possession of flats to the various purchasers, who then join together to form a co-operative society. The builder who had originally purchased the land or taken it on lease, transfers the land and the building thereon to the co-operative society. The society then allots the tenancy in the flats to the members in such a way that each member gets the tenancy rights over the flat which he has purchased.

3. The Board are advised that under the above arrangement, the legal ownership in the flats can be said to vest in the individual members themselves and not in the co-operative society. Hence, for all purposes (including attachment and recovery of tax, etc.) the individual members should be regarded as the legal owners of the property in question.

Circular : No. 9 [F. No. 8/2/69-IT(A-I)], dated 25-3-1969.