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TMI Blog1976 (2) TMI 146X X X X Extracts X X X X X X X X Extracts X X X X ..... difficulties and incurred debts to the tune of about Rs. 70,000. The creditors filed an insolvency petition but the petition was ultimately dismissed because it was held that the firm had no means to discharge the debts. Subsequently, the business was started in the name of B. V. S. Rao, son of Bala Seshaiah. After the death of Itikala Kollayya his son Bala Seshaiah and his son B. V. S. Rao carried on joint Hindu family business. In fact B. V. S. Rao applied on May 8, 1966, for a certificate of registration to the sales tax department of the State and was given the same. B. V. S. Rao who was a minor had applied for the certificate through his guardian Bala Seshaiah. Thereafter the sales tax department continued to make assessments in the name of B. V. S. Rao. Thus for the years 1966-67, 1967-68 and 1968-69, the provisional assessments were made in the name of B. V. S. Rao, the minor. It is not disputed that during all these years the business was run in the name of B. V. S. Rao, the minor grandson of Kollayya. There are also materials on the record to show that B. V. S. Rao had informed the sales tax department that the business was in fact carried on by the joint Hindu family and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Seshaiah the father of B. V. S. Rao. It appears that on September 16, 1968, Itikala Kollayya and Kovvuru Narasimhaiah, i.e., the partners of the dissolved firm, executed a registered deed of trust by which the properties mentioned in Schedule B were vested in the trustees for the purpose of paying off the creditors who were named in Schedule A of the trust deed. Thirteen persons were named in Schedule A. According to the assessees, the creditors mentioned in Schedule A had obtained decrees against the settlors and it was for the purpose of discharging the previous debts of those creditors that the trust was executed. Subsequently, it appears that the assessments were made against the joint Hindu family on January 18, 19 and 24, 1971, and penalties were also imposed on the assessees for not paying the sales tax. The sales tax authorities, therefore, made the assessment in the name of the joint Hindu family for the first time on January 18, 1971, and prior to that the assessments were made in the name of the minor B. V. S. Rao. The sales tax department having found that the assessees had constituted a trust in respect of the properties and as the amounts could not be realised ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the creditors mentioned in Schedule A. The moment the trust deed was executed by Kollayya and Narasimhaiah the title to those properties vested in the trustees and thus put beyond the reach of the sales tax department. It cannot be said in the circumstances that the trustees were holding the properties either on account of or on behalf of the joint Hindu family, because they had acquired an independent title under the trust. In our opinion, the contention put forward by the learned counsel for the appellants is sound and must prevail. The learned counsel appearing for the respondent, however, submitted that the mere fact that the members of the joint Hindu family were aware that they had incurred the sales tax liability because they were dealers in foodgrains and had conducted a number of sales was sufficient to show that the trust deed was fraudulent and unlawful. It was also submitted that under section 17(1) of the Andhra Pradesh General Sales Tax Act, the sales tax authorities could realise the sales tax dues even from the trustees and the execution of the trust deed would not stand in the way of the recoveries sought to be made against the petitioners. We would first cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y section 53 of the Transfer of Property Act, 1882, the relevant portion of which runs thus: "53. (1) Every transfer of immovable property made with intent to defeat or delay the creditors of the transferor shall be voidable at the option of any creditor so defeated or delayed." Before analysing the ingredients of the section mentioned above, it may be necessary to state the admitted facts: (1) that at the time when the trust was executed no assessment order against the joint Hindu family which was managed by one of the executants of the trust had been passed. Thus there was no real debt due from one of the executants of the trust at the time when the trust was executed; (2) that the trust did not have for its object any unlawful purpose; (3) that the names of the creditors were clearly mentioned in Schedule A of the trust as also the properties some of which had already been sold to liquidate debts of the settlors; (4) that under the trust the executants did not reserve any advantage or benefit for themselves; and (5) there is no material in the present case to show that the creditors mentioned in Schedule A had obtained collusive decrees or that they were aware of the debts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent is to create a valid title in the trustees and a valid and enforceable trust for the benefit of the creditors as soon as the deed has been executed and the creditors have assented to it. It is thus clear that under the said deed of arrangement, the petitioners as trustees became the legal owners of the properties assigned to them, holding the trust premises upon trust to collect them in the first instance and after selling them to distribute the sale proceeds thereof rateably amongst the various creditors, a list of whom was annexed to Schedule 11 to the deed of arrangement. It follows, therefore, that the trustees were not holding the sale proceeds which they deposited with the said bank in a separate account in their names as agents of the said firms or any one of them, nor were they the transferees of or successors to those businesses ............ It is also not possible to say that the bank was a person from whom any amount of money was due to any one of the aforesaid firms who were the dealers in respect of the arrears of tax. That being the position, the very first condition necessary for the application of section 39 is totally wanting in this case." The facts of the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this question only and cannot be projected further. Where a transfer is made by the assessee after the assessment order has been passed against him in favour of persons who are either relatives or friends of the assessee and the said transfer prima facie appears to be colourable or fraudulent, it is open to the sales tax department to ignore such a transaction and proceed against the transferee on the basis that the transaction is a sham one and no title has in fact passed under the transfer. But this is quite different from proceeding against a transferee who has acquired an independent title under the transfer even before the assessment is made against the transferor. The sales tax authorities under section 17 of the Andhra Pradesh General Sales Tax Act can only determine the jurisdictional facts and cannot proceed beyond that. In Katikara Chintamani Dora v. Guatreddi Annamanaidu [1974] 2 S.C.R. 655., it was ruled by this Court that a Tribunal possesses the power to determine a jurisdictional fact which gives the jurisdiction or empowers the Tribunal to try a certain issue. This, however, does not empower the Tribunal to be a judge in its own cause and determine or decide compl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r. The contention is devoid of force. As rightly pointed out by Mr. Bhandare, when the impugned notice dated July 20,1970, was issued to M/s. Uma Traders with copy to Itikala Kollayya Setty by the respondent, the tax had not been quantified; the assessments were made subsequently. So long as the tax had not been assessed and quantified, it could not be said that any specific debt due to the revenue from the assessee had come into existence. The question of such a non-existent debt, being a first charge on the property at the date of the execution of the trust deed, did not arise. The contention of the respondent on this score is, therefore, overruled. In this view of the matter, we feel that it cannot be said in the present case that the trust deed executed by the settlors is prima facie fraudulent or a colourable transaction. It will, however, be open to the sales tax authorities to avoid the document by bringing a properly constituted suit, if so advised. We would also like to make it clear that any observation regarding the validity of the document that has been made in this case by us will be confined only to the materials that have been placed before us and will not prejudic ..... X X X X Extracts X X X X X X X X Extracts X X X X
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