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Carrier of Goods Not An ‘Owner’; Bitumen Not A ‘Valuable Article’ U/S 69A of The Income-tax Act

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Published on: 20 May 2023 at 13:32 IST

In a recent ruling, the Supreme Court determined that bitumen does not qualify as a ‘valuable article’ according to Section 69A of the Income Tax Act, 1961. Justices K.M. Joseph and Hrishikesh Roy, forming the bench, made this observation while addressing an appeal challenging the decision of the Patna High Court.

The High Court had upheld the additional tax imposed by the Assessing Officer on the bitumen that was transported by the appellant as a carriage contractor but allegedly not delivered to the intended recipient, the Road Construction Department of the Government of Bihar, as per the instructions.

The High Court, in its ruling, affirmed the additional charges and determined that the assessee was the rightful owner of the bitumen. It further stated that any item possessing value would fall under the category of a “valuable article” as defined by Section 69A of the Act.

However, the Supreme Court overturned these additions made by the Assessing Officer.

The Court reasoned that the assessee, being a mere carrier of goods, did not acquire ownership of the bitumen, but rather held it as a bailee. As a result, the assessee could not be considered the legal ‘owner’ of the bitumen, thereby negating the application of Section 69A.

Regarding the issue of whether the assessee could be considered the owner of the bitumen that was allegedly lifted but not delivered, Justice Joseph made an important distinction. He explained that a bailee, who is a common carrier, is entrusted with the possession of goods but is not the legal owner of those goods.

The purpose of the bailment in such cases is the delivery of the goods by the common carrier, and during the course of the contract, the bailee does not become the owner of the goods. Even in cases where goods are entrusted to the carrier without a contract of sale, the carrier’s possession does not convert them into the owner of the goods. The court referred to Section 27 of the Sale of Goods Act, 1930, which states that a sale by a carrier does not transfer the title to the goods unless it is justified by the conduct of the owner, which would prevent the owner from disputing the buyer’s ownership.

Justice Joseph also addressed the issue of whether a person can be considered an ‘owner’ under Section 69A even if their ownership is illegal. He explained that ownership of contraband or prohibited items does not necessarily conflict with the requirement of Section 69A, which deals with assessing the individual as the owner of the article.

However, the court clarified that if a person is found to be in illegal possession of goods, they cannot be considered the owner under Section 69A unless their ownership is established or when it is evident that someone else is the owner.

The court emphasized that it would be unreasonable to recognize a thief as the owner of the property under Section 69A, as it would disregard the rightful owner and lead to unjust outcomes.

While possession may sometimes justify an assessing officer in finding someone to be the owner, in cases where it is known that the carrier is not the owner and someone else holds ownership, describing the carrier as the owner would result in illegal and unjust consequences.

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