COMMISSIONER OF WEALTH TAX VS SMT. DAMYANTI DEVI JHUNJHUNWALLA
1994 P T D 672
[203 I T R 142]
[Calcutta High Court (India)]
Before Ajit K. Sengupta and Shyamal Kumar Sen, JJ
COMMISSIONER OF WEALTH TAX
Versus
Smt. DAMYANTI DEVI JHUNJHUNWALLA
Matter No. 1354 of 1986, decided on 31/01/1991.
Wealth tax--
---- Net wealth---Amount paid for purchase of share in flat---No registration or conveyance of flat to assessee---Assessee receiving rent from flat---Right of assessee to get conveyance executed and right to receive rent and profits from property had to be valued and included in net wealth---Indian Wealth Tax Act, 1957.
The assessee owned a one-third share in a flat in Bombay. She paid Rs.50,686 in November 1975, for acquiring the said flat. While making assessment, the Wealth Tax Officer included the said amount in the net wealth of the assessee on the ground that no execution or registration of conveyance was made in respect of the flat transferred. On a perusal of the assessee's record, the Commissioner of Wealth-tax found that the assessment so made was erroneous and prejudicial to the interests of the Revenue. He held, that the value of the said flat should be determined on rental basis by allowance of outgoings. He, therefore, initiated proceedings under section 25(2) of the Wealth Tax Act, 1957, and determined the value of the said flat at Rs.1,40,600. The Tribunal set aside the order of the Commissioner of Wealth-tax. On a reference:
Held, that the assessee had been earning rental income of Rs.2,000 per month from the flat. She had acquired a right under the agreement of purchase to let out the flat without being the owner thereof by virtue of a registered deed of conveyance. This right was an asset and had to be valued for the purpose of assessment under the Wealth Tax Act. The assessee had a right to get the conveyance executed and registered in her favour. Iii such a case, the value of the asset could not be the amount of investment made in the acquisition of the flat, but the rents, issues and profits derived from such an investment had to be taken into account for determining the value of such an asset. The Commissioner of Wealth-tax was justified in invoking the provisions of section 25(2).
Madgul Udyog v. CIT (1990) 184 ITR 484 (Cal.) and (Late) Nawab Sir Mir Osman Ali Khan v. CWT (1986) 162 ITR.888 (SC) ref.
S.K. Mitra and R.C. Prasad for the Commissioner.
JUDGMENT
AJIT K. SENGUPTA, J: --In this reference under section 27(1) of the Wealth Tax Act, 1957, for the assessment year 1976-77, the following question of law has been referred to this Court:
"Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the Commissioner of Wealth-tax was wrong in invoking the provisions of section 25(2) of the Wealth Tax Act, 1957, inasmuch as the Wealth Tax Officer had not committed any error in excluding the value of the immovable property from the net wealth of the assessee because the ownership of the said property was not transferred by the vendor to the assessee by execution and registration of a deed of sale?"
Shortly stated, the facts are that the assessee owned one-third share of a flat at 127, Jolly Maker Chamber No.11, Bombay, from which she earned rental income of Rs.2,000 per month. She paid Rs.50,686 in November, 1975, for acquiring the said flat. While making assessment, the Wealth Tax Officer included the said amount in the net wealth of the assessee on the ground that no execution or registration of conveyance was made in respect of the flat transferred.
On a perusal of the assessment record, the Commissioner of Wealth -tax found that the assessment so made was erroneous and prejudicial to the interests of the Revenue. He held that the value of the said flat should be determined on rental basis by allowance of outgoings. He, therefore, initiated proceedings under section 25(2) of the Wealth Tax Act, 1957, and determined the value of the said flat at Rs.1,40,600.
Aggrieved, the assessee came in appeal before the Tribunal against the said order of the Commissioner of Wealth-tax. It was contended that the Commissioner of Wealth-tax was not justified in invoking the provisions of section 25(2) of the Wealth Tax Act inasmuch as the Wealth-tax Officer had not committed any error in determining the value of the assessee's interest in the flat in question. It was submitted that, since the immovable asset in question was not transferred to the assessee by execution and registration of a deed, the ownership of the property was not transferred to the assessee. It was urged that, although the assessee was in possession of the immovable asset, she was not the owner of the property in question. The Tribunal allowed the assessee's appeal.
At the hearing before us, the contentions urged before the Tribunal have been reiterated. Our attention has been drawn to a decision of this Court in the case of Madgul Udyog v.CIT (1990) 184 ITR 484. There, it was held that the concept of ownership is not merely a word of technical legal meaning, but it should be interpreted in its broadest possible meaning. If a bundle of rights constitute ownership of the transferee, the mere fact that conveyance was not registered would not detract from the fact of the assessee having the ownership of such flat.
In our view, the principle laid down in Madgul Udyog's case (1990) 184 ITR 484 (Cal.), will not apply to the assessment made under the Wealth Tax Act. The Supreme Court in. (Late) Nawab Sir Mir Osman Ali Khan v.; CWT (1986) 162 ITR 888, considered a similar case under the Wealth Tax Act. There the assessee, the Nizam of Hyderabad, had received full consideration for certain immovable properties from the purchasers but he had not executed any registered sale-deeds in favour of the vendees. There, the Supreme Court held that the value of the properties was to be included in the wealth of the assessee for the purpose of assessment to wealth-tax as they were assets belonging to him. The liability to wealth-tax arises because of the belonging of the asset and not otherwise. Mere, possession or joint possession, unaccompanied by the right to be in possession or ownership of property would, therefore, not bring the property within the definition of "net wealth" for it would not then be an asset "belonging" to the assessee.
In view of the aforesaid decision of the Supreme Court the immovable property being the flat in question may not belong to the assessee in the sense in which it has been explained by the Supreme Court. But the assessee without being an owner let out the flat and has been earning rental income of Rs.2,000 per month. The assessee has acquired'] right under the agreement of purchase to let out the flat without being the owner thereof by virtue of a registered deed of conveyance. This right is an asset and has to be valued for the purpose of assessment under the Wealth Tax Act. The assessee has a right to get the conveyance executed and registered in her favour. In such a case, the value of the asset cannot be the amount of investment made in the acquisition of the flat, but the rents, issues and profits derived from such an investment have to be taken into account for determining the value of such an asset. In our view, therefore, the Commissioner of Wealth-tax was justified in invoking the, provisions of section 25(2) of the Act.
For the foregoing reasons, we answer the question in this reference in the negative and in favour of the Revenue.
There will be no order as to costs.
SHYAMAL KUMAR SEN, J: --I agree.
M.B.A./150/T.F. Reference answered.