TMI Blog2002 (6) TMI 176X X X X Extracts X X X X X X X X Extracts X X X X ..... ross-objections. W.T.A. No. 181/Alld/94: 6. The department has taken following grounds in this appeal- (1) "On the facts and in the circumstances of the case, tile Ld. CIT(A) (CWT(A)) has erred in law in directing the Assessing Officer to exclude the value of property at B.N. Road, Lucknow from the wealth of the assessee. The Ld. CIT(A) (CWT(A)) has failed to appreciate that no agreement dated 6-6-1975 purported to have been made in discharge of the Dower Debts was filed before the Assessing Officer and acceptance of this fresh evidence by him was in violation of Rule 46A of the I.T. Rules, 1962." (2) "On the facts and in the circumstances of the case, the Ld. CIT(A) [CWT(A)] has erred in law in directing the Assessing Officer to exclude the value of structure on the plot of land at C-145, Nirala Nagar, Lucknow and also the value of other assets of Hotel Tourist from the net wealth of the assessee. (The Ld. CIT(A)'s (CWT(A)'s) order dated 25-2-1994 in A.No. 11 /Ward 1(2) Lko/91-92 in the case of M/s. Hotel Tourist referred to, has not been accepted by the Department and an appeal has been preferred before the I.T.A.T.)." Ground No. 1: 7. Ground No. 1 challenges the orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10. In appeal, the issue was taken up before the Ld. CWT(A). He was of the view that since the wife of the assessee was in possession of the property in terms of agreement dated 6-6-1975, which related to gift of property made in discharge of the dower debt, the property shall be deemed to be 'belonging to' the wife of the assessee in view of explanation 1 below section 2(m) of the W.T. Act read with section 27(iiia) of the Income-tax Act introduced with effect from 1-4-1988. According to him, therefore, the value of property is to be excluded from the net wealth of the assessee. Thus, after accepting the plea of the assessee, he directed the Wealth-tax Officer to exclude the value of this property from the net wealth. 11. Before us, Shri Prasenjit Singh, Ld. Sr. DR submitted that in absence of any registered document, the transfer of property was not completed. The Ld. DR placed reliance on the order of the Wealth-tax Officer and submitted that the Ld. CWT(A) was not justified in admitting fresh evidence i.e. agreement dated 6-6-1975 at the appellate stage and has violated the provisions contained under section 46A of I.T. Act, 1962. 12. The Ld. Counsel for the assessee, Shr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gum, he made reference to the tax assessment year for 1992-93, assessment for 1993-94 and assessment for subsequent years. 15. The Ld. Counsel further made reference to the AD returns and computations relating to assessment under section 16 of W.T. Act, of Major S. Qureshi for assessment years 1983-84 to 1989-90 and income-tax assessments for these years. He also made reference to the Ad of filing returns and computations relating to assessment under Income-tax Act and W.T. Act pertaining to Smt. Arjumand Bano Begum for assessment years 1986-87, 1987-88, 1988-89 and 1989-90. Copies of these papers have been filed by him in supplementary paper book and are available at pages 202 to 235 of the paper book. On the basis of these documents, the Ld. Counsel tried to demonstrate that the property at B.N. Road, Lucknow was not included in the net wealth of the assessee in these assessment years and was duly shown by Smt. Arjumand Bano Begum in her returns. According to him, the lady was being assessed under income-tax Act for rental income from this property. 16. The Ld. Counsel also made reference to the gift tax return for the assessment year 1986-87 filed by Major S. Qureshi, a copy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -1986, in response to which the Lucknow Nagar Mahapalika recorded name of Smt. Arjumand Bano Begum in place (if Major S. Oureshi. Thus oral gift was accepted by Smt. Arjumand Bano Begum and on the basis of this oral gift, she acted upon treating herself as owner of the property. The husband or other heirs did not object to this transaction of gift. Major S. Qureshi also excluded this property from his wealth tax returns and income from this property was not shown by him after 1986-87 as is evident from the returns available on paper book. On the other hand, Smt. Arjumand Bano Begum had shown income from this property in her computation for assessment year 1986-87 available at page 217 of the paper book. In view of these facts, the position is clear that the assessee, after making gift of the property in the name of his wife in lieu of dower debt, did not treat himself as the owner of that property. In other words, after gift, the property belonged to Smt. Arjumand Bano Begum. 19. The Assessing Officer while passing assessment order for assessment year 1986-87 considered the issue relating to the gift of property at B.N. Road, Lucknow, by the assessee, in favour of the wife and he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Smt Arjumand Bano Begum. It may also be pointed out that gift of immovable property in lieu of dower debt is treated as sale requiring registration of transfer deed. However, the aspect of deemed ownership cannot be overruled or ignored, because the property may not be legally owned by the person, but if he or she is enjoying possession of the property and also income from it, then being beneficial owner, he or she should also be charged with the tax liability. This issue came for consideration before the Hon'ble Supreme Court of India in the case of R.B. Jodha Mal Kuthiala v. CIT [1971] 82 ITR 570. In that case, the erstwhile owner of the property was required to pay Income-tax on the house property under section 9 even after the said property had been vested with the custodian of Evacuee Property by virtue of section 6(1) of the Pakistan (Administration of Evacuee Property) Ordinance 1949. The contention of the revenue was that notwithstanding vesting of the property in the custodian, the legal ownership remained with the assessee and, therefore, section 9(1) of the old Act was attracted. This contention of the department was repelled by the Hon'ble Supreme Court of India in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Hon'ble Supreme Court of India, is being reproduced below: "Simplification and Rationalisation of Provisions Enlarging the meaning of 'owner of house property' 27. Under the existing provisions of section 22 of the Income-tax Act, any income from house property, is chargeable to tax only in the hands of the legal owner. As per section 27 of: the Income-tax Act, certain persons who are not otherwise legal owners are deemed to be the owners for the purposes of these provisions. Under the Transfer of Property Act, the transfer of ownership can be effected only be means of a registered instrument. However, in recent times various other devices are sought to be employed for transferring one's ownership in property. As a result, there are situations in which the actual owner, say, of an apartment in a Multi-storeyed building, or a holder of a power of attorney is riot the legal owner of a property. In some cases, pending resolution of disputes, the legal as well as the beneficial owners are assessed to tax in respect of the same income. As measure of rationalization, the Bill seeks to enlarge further the meaning of the expression 'owner of the house Property', given in claus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hra Pradesh High Courts is not good law." 27. So far as the Wealth-tax Act is concerned, similar provision introduced in section 2 by clause 75, which is as under: "75. Amendment of section 2. - In section 2 of the Wealth-tax Act, 1957 (27 of 1957) (hereinafter referred to as the Wealth-tax Act), in clause (in), the following Explanation shall be inserted at the end, with effect from the 1st day of April, 1988, namely: "Explanation. - A building or part thereof referred to in clause (iii), clause (iiia) or clause (iiib) of section 27 of the Income-tax Act shall be includible in the net wealth of the person who is deemed under the said clause to be the owner of that building or part thereof." 28. It may be pointed out that the amendment made in section 4(1)((a) and section 2(m) of Wealth-tax Act shall also operate retrospectively of the decision of Hon'ble Supreme Court of India in the case, of Podar Cement (P.) Ltd. 29. Thus, in view of the above referred amendment, the property beneficially owned by a person or belonging to that person is to be included in his or her net wealth. Thus, in the context of the amended provisions which are to be applied retrospectively i.e. t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... registration, there ,vas no legal transfer in favour of the wife. However, the Tribunal also considered the matter from another angle i.e. if there was no legal transfer of the property to the wife, could she still be assessed on account of her income from the property given to her under section 22 of the Act. The Tribunal, after considering the circumstances and facts of the case, held that the assessee who was in occupation of the building as owner to all intents and purposes, except registry in her favour, was liable to tax under section 22 of the I.T. Act. On the basis of the theory of real income also, the Tribunal held that the assessee, namely Shri Sheik Mohd. Arif was not deriving any real income from the property and therefore, same cannot be assessed in his hands. 33. The concept of real wealth and actual wealth, if applied in the present case, will make it clear that the property did not actually and really remain in the name of the assessee, rather it belonged to Smt. Arjumand Bano Begum. The only difference which may be pointed out is that in Wealth-tax Act, different terms have been adopted, however, since the assessee was no more a legal beneficiary of the property ..... X X X X Extracts X X X X X X X X Extracts X X X X
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