TMI Blog2014 (7) TMI 1206X X X X Extracts X X X X X X X X Extracts X X X X ..... sessees are directed against separate orders of the CWT(A)-II, Nashik relating to the respective assessment years mentioned therein. Since common issues are involved in all these appeals, therefore, these were heard together and are being disposed of by this common order for the sake of convenience. 2. First we take up WTA No.12/PN/2014 for A.Y. 2005-06 in the case of Mrs.Sangita M. Biyani as the lead case. 2.1 This is the second round of litigation before the Tribunal. Facts of the case, in brief, are that in response to notice u/s.17 of the Wealth Tax Act the assessee filed return of net wealth on 22-11-2011 declaring net wealth of ₹ 68,75,500/-. Subsequently, the assessee filed again the return of net wealth on 05-07-2012 in which the net wealth was declared at ₹ 22,32,400/-. Since the original return was filed in compliance to notice u/s.17 on 22-11-2011 and not filed u/s.14 of the Wealth Tax Act, 1957 the Assessing Officer treated the return filed on 05-07-2012 as Nonest. He, however, took into consideration the information submitted in the return filed on 05-07-2012. From the details furnished by the assessee during the course of assessment proceedings the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 So far as the remaining immovable properties are concerned which are not covered by the valuation report of UCO Bank, the Assessing Officer noted that although these are not under mortgage during the year under consideration, however, they were valued as on 24-01-2003 as per valuation report of UCO Bank and Bank of Maharashtra. The value being more than the valuation shown in the working submitted on 26-12-2012 was taken by the Assessing Officer for valuation purpose for the reason that the Fair Market Value on 24-01-2013 was accepted earlier by the assessee for obtaining loan from the bank. According to him this value holds good even for future years as value of land does not depreciate. He accordingly made addition of ₹ 2,60,53,598/- being the difference between the valuation declared by the assessee and the valuation report of UCO Bank and Bank of Maharashtra made on 24-01-2003. The WTO thus determined the net wealth of the assessee at 5,06,60,544/- as against the declared net wealth of ₹ 1,73,05,200/- in the original return. 3. In appeal the CWT(A) upheld the action of the Assessing Officer. On further appeal by the assessee the Tribunal upheld the action of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd., the same do not belong to the appellant, but belong to the bank in view of provisions of section 2(m) vis-a-vis section 4 of W.T. Act. It is undisputed fact that as per provisions of section 2(m) of the Act, for arriving at taxable wealth of assessee under W.T. Act, -the assessee is required to be the owner of the asset i.e. the asset should belong to the assessee. In the case under appeal, the plots offered to the bank as collateral security for obtaining loan by a company belonged to /owned by the appellant. The appellant herself in the return of wealth filed has mentioned the said assets as belonging to her and has offered to tax the value of the said assets as considered by her to wealth tax. Merely because the said assets have been offered as collateral security that too in respect of loan obtained by a company mortgaging its own assets does not become the asset belonging to the bank. 6.1 Further, the appellant has also referred to section 4 in support of his alternative contention. On perusal of the said section, it appears that the appellant is referring to the provisions of sub-section (8) of section 4 of the W.T. Act, which is reproduced below: (8) A person - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision is not relevant to decide the issue under appeal i.e. whether the plots of land belonging to an individual, offered as collateral security to a bank in respect of loan obtained by a company (in which the said individual is director) shall be regarded as belonging to the bank and not to the individual. ii) Nawab Sir Mir Osman AM Khan Vs. CWT (1986) 162 ITR 888-894 (SC). This decision relates to A.Y. 1957-58. In this case, the assessee had sold immovable property and had received sale consideration and the purchasers were also in rightful possession of the property, however, the legal title continued to belong to the assessee in the absence of registered sale deed. On these facts, it was held that the property belonged to the assessee and was to be included in his net wealth. The decision is not relevant to decide the issue under appeal. The issue to be decided in the case under appeal is as to whether the plots of land belonging to an individual offered as collateral security to a bank in respect of loan obtained by a company (in which the said individual is director) shall be regarded as belonging to the bank and not to the individual. iii) M. Thirumani Mudlia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The issue to be decided in the case under appeal is whether the plots of land belonging to an individual offered as collateral security to a bank in respect of loan obtained by a company (in which the said individual is director) shall be regarded as belonging to the bank and not to the individual. v) Nawab Mir Barkat Ali Khan Vs. CWT (1997) 226 ITR 654-669 (AP-FB) The issue involved in this case can be noted from head notes of the said case which are reproduced below: Net wealth-Belonging to assessee-Scope of s.2(m)- A properly which has been tram/erred by the individual in favour of another under any disposition settlement, trust, covenant, agreement or arrangement will cease to belong to him. and cannot be brought within the fold of belonging to u/s. 2(m) notwithstanding the fact that the transfer was. not effected as contemplated u/s.54 of Transfer of Property Act or under the. Registration Act- Assessee executed agreement of sale in respect of certain properties and delivered possession to purchasers-Also retroceded certain properties in favour of various Sahebzadas and Sahebzadis by firmans-Agreement and the firmans not on record-Matter remanded to Tribunal to gath ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Corporation. On these facts, the court had noted from the terms of the documents that there was transfer of interest in immovable property belonging to the assessee to the Kerala Financial Corporation for the purpose of securing payment of money advanced by it to the company by way of loan. The court held that the right of the assessee in the property mortgaged in terms of the document dated 22/9/1969 was only that of the right of equity of redemption. In this case, the company could not repay the loan and hence the property mortgaged by shareholders was to be sold and on these facts the Hon'ble Kerala High Court had held that the said mortgaged property was not liable to wealth tax. In the case under appeal, the property was offered to bank as collateral security. The property was not mortgaged with the bank by entering into separate agreement between the company, the bank, the secured creditors, unsecured creditors and the shareholders of the company. In the case under appeal, the company which has obtained the loan has not been destroyed by natural calamities and has riot goes into liquidation. The company has not been revived with the help of loan from financial institut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut the same belong to the appellant. The appellant has not brought 0.11 record any evidence showing that in the revenue record of the State Government, the ownership of the plots has been transferred to the bank and the appellant is not the owner of the plots. In view of the above facts, the alternative contention of the appellant that the impugned plots offered as collateral security do not belong to the appellant but belong to bank is rejected. The addition made by the A.O. to wealth returned and the wealth assessed by the A.O. is confirmed. 8. During the course of appellate proceedings, the appellant has tiled submission dated 13/5/2014 claiming that she has filed miscellaneous petition u/s. 35 of the W.T. Act, 1957, before Hon'ble ITAT, Pune and has requested to keep the appellate proceedings in abeyance till the decision by the Bench of Hon'ble ITAT. The request of the appellant cannot be accepted as the Hon'ble ITAT, Pune has not directed the undersigned to keep the appeal under consideration in abeyance. The Hon'ble ITAT vide its order dated 30/1/2014 has directed the undersigned to decide the alternative contention of the appellant afresh. 9. Before pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns, and the value of the book debt created by the company in favour of the assessee would be nil. The Ld. CWT(A) failed to appreciate this legal and mandatory provisions of law while confirming the wealth assessed by the WTO. In fact and law the valuation was nil that is no taxable wealth in the hands of this assessee. It be held accordingly. 4) On the facts and circumstances of the case and in law the Ld. CWT(A) failed to appreciate the facts argued before him that the Liabilities of the company far exceeded the assets of the company which included mortgage loans of the assessee. In this case in this assessment year the Liabilities exceeded by ₹ 30,94,26,712/-. The book debt does not represent any value to the assessee until it is realized and therefore, not includible in the Wealth of the assessee. The Ld. CWT(A) decided the remanded appeal without considering this legal aspect of the matter. The remanded appeal order of the Ld. CWT(A) is perverse and not sustainable in law. It be set aside. 5) On the facts and circumstances of the case and in law and in view of the fact that the Liabilities of the company far exceeded its assets value, and in view of the provisions o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be set aside. 10) On the facts and circumstances of the case and in law the Ld. CWT(A) was not right in appreciating the Hon'ble Kerala High Court judgment in CIT v. Mrs. Thressiama Abraham (1997) 227 ITR 812 (kerala) in a way he has appreciated it is a misnomer and appears to be under some misconception of law. The Ld. CWT(A) failed to appreciate the legal proposition so interpreted by the Hon'ble High Court. The Ld. CWT(A) having not correctly decided the issues as known to law her order be set aside after quashing the additions to wealth sustained by him as made by the WTO. 11) On the facts and circumstances of the case and in law the observations of the Ld. CWT(A) that the company has not failed to repay the loan to the bank and the bank has not taken steps even to sale the mortgaged property for recovery of loan, therefore, question of selling the property offered as a collateral security never arises. Thus reliance placed on Mrs. Thressiamma case (supra) is misplaced. The observations are not borne by the facts. The company has even failed to pay the interest component of the loan leave aside the repayment of Loan itself. The Bank has already put to auction t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es) : The assessee was a shareholder in a company. She was having substantial interest in the company as more than 20 per cent, of the shares of the company were held by her close relatives. The company was running at a loss and when the factory was destroyed by fire, it went into voluntary liquidation on July 27, 1965. In the light of a policy announced by the Central Government for revival and reconstruction of industrial undertakings which were discontinued because of extensive damage or destruction to their building, machinery, etc., as a result of natural calamities, the contributories of the company met on July 10, 1967, and decided to revive the company utilising an amount of ₹ 6 lakhs by way of loan from the Kerala Financial Corporation, a Government undertaking. A compromise or arrangement for reconstruction of the company was thereupon proposed between the company and its members and creditors and under orders passed by the court on December 20, 1967, the liquidator of the company convened, separate meetings of the shareholders, secured creditors and unsecured creditors to consider the compromise or arrangement. Meetings were held on February 27, 1968, and the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessment years 1977-78 to 1981-82. The Tribunal also found that considering the balance sheet of the company and also the fact that the entire loan to the Financial Corporation was not wiped out even after the sale of the assessee's mortgaged property, a sum of ₹ 10,80,000 shown in the accounts of the company to the credit of the assessee could not represent any value to the assessee until it was realised. The Tribunal therefore deleted the addition of ₹ 10,80,000 for the assessment years 1982-83 to 1986-87. On a reference : Held, that in the light of the decision of the High Court in the income- tax case of the assessee (see [1997] 227 ITR 802) there was not much scope for the Revenue to contend that the relevant document was not a deed of mortgage. The terms of the document made it clear that there was a transfer of interest in specific immovable property belonging to the assessee, to the Kerala Financial Corporation for the purpose of securing payment of money advanced by it to the company by way of loan. The right to sell mortgaged properties had been given to the corporation even without any further consent from the mortgagor company or co-mortgagors, in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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