TMI Blog1986 (10) TMI 2X X X X Extracts X X X X X X X X Extracts X X X X ..... sion in his net wealth within the meaning of section 2(m) of the Wealth-tax Act, 1957? (ii) Whether, on the facts and in the circumstances of the case, the assessee's right to receive the sum of Rs. 25 lakhs O.S. from the State Government was an asset for the purposes of inclusion in his net wealth under the Wealth-tax Act, 1957 ? " The year involved in this case is the assessment year 1957-58 under the Wealth-tax Act, 1957 (hereinafter called " the Act "). It may be mentioned that the valuation date is the first valuation date after coming into operation of the Act which came into force on April 1, 1957. The assessee was the Nizam of Hyderabad, an individual. There were several questions involved in the assessment with all of which the present appeal is not concerned. So far as concerns the first question indicated hereinbefore which was really question No. (ii) in the statement of the case before the High Court, it may be mentioned that the Wealth-tax Officer had included a total sum of Rs. 4,90,775 representing the market value of certain immovable properties in respect of which, although the assessee had received full consideration money, he had not executed any registere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yderabad states, inter alia, that Nizam's Sarf-e-khas estates should not continue as an entirely separate administration independent of the Diwani administrative structure. The Sarf-e-khas, it was stated in that letter, should, therefore, be completely taken over by the Diwani, its revenue and expenditure, being merged with the revenues and expenditure of the State. Thereafter, we have extracted the relevant portion of the letter which stipulated for the payment of Rs. 25 lakhs. The other parts of the agreement contained in that letter are not relevant for the present purpose. The Wealth-tax Officer treating the said sum as an annuity and, secondly, as an asset or property, capitalised the same at Rs. 99,78,572 and included that amount as an asset of the assessee. The Appellate Assistant Commissioner agreed with the view taken by the Wealth-tax Officer. The Tribunal, however, refused to call it an annuity and characterised it as an annual payment for surrender of life interest. The Tribunal, therefore, held that the capitalised value of such life interest be added to the net wealth and taxed. The High Court in the judgment under appeal agreed with the view taken by the Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e purchasers to the vendor and where the purchasers have been put in possession by the vendor, the vendees have the right to retain that possession and resist any suit for eviction. The purchasers can also enforce a suit for specific performance for execution of a formal registered deed if the vendor was unwilling to do so. But, in the eye of the law, the purchasers cannot be and are not treated as legal owners of the property in question. It is not necessary, in our opinion, for the purpose of this case to be tied down with the controversy whether in India there is any concept of legal ownership apart from equitable ownership or not or whether under sections 9 and 10 of the Indian Income-tax Act, 1922, and sections 22 to 24 of the Income-tax Act, 1961, where II owner " is spoken of in respect of house properties, the legal owner is meant and not the equitable or beneficial owner. Salmond on Jurisprudence, twelfth edition, discusses the different ingredients of " ownership on pages 246 to 264. " Ownership ", according to Salmond, denotes the relation between a person and an object forming the subject-matter of his ownership. It consists of a complex of rights, all of which are righ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he vendees and the assessee was the lawful owner of these properties. The vendees were, however, in rightful possession of the properties as against the vendor in view of the provisions of section 53A of the Transfer of Property Act, 1882. The scheme of the Act has to be borne in mind. It has also to be borne in mind that unlike the provisions of the Income-tax Act, section 2(m) of the W.T. Act uses the expression " belonging to " and as such indicates something over which a person has dominion and lawful dominion and he should be the person assessable to wealth-tax for this purpose. In CWT v. Trustees of H. E. H. Nizam's Family (Remainder Wealth) Trust [1977] 108 ITR 555 (SC), the question as to what is the meaning of the expression " belonging to " was raised (page 594 of the report) but this court did not decide whether the trust property belonged to the trustee and whether the trustee was liable under section 3 of the Act apart from or without reference to section 21 of the Act. The case was disposed of in terms of section 21 of the Act. In CIT v. Nawab Mir Barkat Ali Khan [1974] Tax LR 90, it was held by the Andhra Pradesh High Court that when a vendor had agreed to sell h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lature has deliberately and significantly not used the expression " assets owned by the assessee " but " assets belonging to the assessee ", in our opinion, is an aspect which has to be borne in mind. The Bench decision of the Calcutta High Court in CIT v. Ganga Properties Ltd. [1970] 77 ITR 637, rested on the terms of section 9 of the Indian Income-tax Act, 1922, and the court reiterated again that in Indian law, beneficial ownership was unknown; there was but one owner, namely, the legal owner, both in respect of vendor and purchaser, and trustee cestui que trust. The income from house property refers to the legal owner and further in case of a sale of immovable property, a registered document was necessary. But these propositions as noted hereinbefore rested on the use of the expression in section 9 of the Indian Income-tax Act, 1922. It used the expression " owner " unlike " belonging to ". The Gujarat High Court, in CWT v. Manna G. Sarabhai [1972] 86 ITR 153, held that a spes successionis is a bare and naked possibility such as the chance of a relation obtaining a legacy and that could not form the basis of assessment under section 26 of the Act. At page 174 of the report, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... less identical with the instant appeal on this aspect of the matter. The assessee owned two properties and had agreed to sell one property to a company. The vendees had paid Rs. 30 lakhs in January, 1964, and were put in possession of the property. Thereafter, four instalments of Rs. 17 1/2 lakhs each were paid and the property was conveyed by four deeds executed in' 1970-71 and 1972. It was contended that at the relevant time, the property did not belong to the assessee. It was held by the Gujarat High Court that receipt of part of the sale price and parting of possession would not divest the vendor of immovable property of his title to the property. The doctrine of part performance embodied in section 53A of the Transfer of Property Act had limited application and afforded only a good defence to the person put in possession. The legal position and the relevant clauses of the agreement of sale showed that the assessee was the owner of the property at the relevant valuation dates. Therefore, according to the Gujarat High Court, the property agreed to be sold and which had been parted with was includible as an asset of the assessee. Even in some cases the phrase " belonging to " i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which we shall presently note. The Punjab and Haryana High Court in the case of Kala Rani v. CIT [1981] 130 ITR 321 (P H) had occasion to discuss this aspect of the matter. But the Punjab and Haryana High Court was construing the meaning of the expression " owner " under section 22 of the Income-tax Act, 1961. There, the Division Bench of the Punjab and Haryana High Court held that the assessee occupied the property after the execution of the agreement of sale deed in his favour and after completion of the building, he was in a position to earn income from the property sold to him, though the registered sale deed was executed subsequently in April, 1969. It was held that the assessee was " owner " in terms of section 22 of the Income-tax Act, 1961. The Madras High Court had occasion to discuss this aspect in M. P. Gnanambal v. CIT [1982] 136 ITR 103 (Mad). There the facts were entirely different and the Madras High Court held that the rights with reference to the properties in question in that case could only be described as a delusion and a snare so long as the sons continued to occupy the property which they were entitled to under the will and to describe the assessee's rig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e vendor; and (5) the assessee had not the totality of the rights that constitute title but a mere husk of it and a very important element of the husk. The position is that though all statutes including the statute in question should be equitably interpreted, there is no place for equity as such in taxation laws. The concept of reality in implementing a fiscal provision is relevant and the Legislature in this case has not significantly used the expression " owner " but used the expression " belonging to ". The property in question legally, however, cannot be said to belong to the vendee. The vendee is in rightful possession only against the vendor. Speaking for myself, I have deliberated long on the question whether in interpreting the expression "belonging to" in the Act, we should not import the maxim that " equity looks upon a thing as done which ought to have been done " and though the conveyance had not been executed in favour of the vendee, and the legal title vested with the vendor, the property should be treated as belonging to the vendee and not to the assessee. I had occasion to discuss thoroughly this aspect of the matter with my learned brother and since in view of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bsolute right of the user. The same view is reiterated in Stroud's judicial Dictionary, 4th edn., page 260. The expression it property belonging to " might connote absolute right of the user as well as of the ownership. A road might be said, with perfect propriety, to belong to a man who has the right to use it as of right, although the soil does not belong to him. Under section 53A of the Transfer of Property Act, 1882, where possession has been handed over to the purchasers and the purchasers are in rightful possession of the same as against the assessee and in occupation of the property in question and, secondly, the entire consideration has been paid and, thirdly, the purchasers were entitled to resist eviction from the property by the assessee in whose favour the legal title vested because conveyance has not yet been executed by him and when the purchasers in possession had a right to call upon the assessee to execute the conveyance, it cannot (sic) be said that the property legally belonged to the assessee in terms of section 2(m) of the Act on the facts and circumstances of the case, even though the statute must be read justly and equitably and with the object of the secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In Ahmed G. H. Ariff v. CWT [1970] 76 ITR 471 (SC), this court held that the word " annuity " in sub-clause (iv) of section 2(e) of the Act must be given the signification which it has assumed as a legal term owing to judicial interpretation and not its popular and dictionary meaning. In CWT v. Arundhati Balkrishna [1970] 77 ITR 505 (SC), there were two deeds of trust. The assessee's father had settled certain shares in trust for the benefit of the assessee and her two brothers. The trustees were to pay the residue of the income from the trusts in equal shares to the beneficiaries after deducting all costs and expenses. The assessee had a right after she had attained majority and after the birth of her first child to require the trustees to pay her shares out of the corpus of the trust fund absolutely up to one-half thereof. Under another trust created by her mother-in-law of certain sums of money and certain shares, the trustees were required to pay the income of the trust funds after deducting expenses to the assessee during her lifetime. It was held that the payments to the assessee under the trust deeds were not " annuities " within the meaning of section 2(e)(iv) of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mp sum ? Counsel for the Revenue contended that there must be an express provision which must preclude commutation. In this case, indeed, there is no express provision in the document itself. The question is : can, from the circumstances of the case, such an express provision precluding commutation be inferred on the facts and circumstances of this case ? The background of the facts and circumstances of the payment has to be kept in mind. The Nizam had certain income. He was being given three sums-one was the privy purse which was not commutable; the other was payment of Rs. 25 lakhs for the upkeep of palaces, etc., and the third of Rs. 25 lakhs in lieu of his previous income from the Sarf-e-khas. Income is normally meant for expenditure. The Nizam had to incur various expenditure. Commutation is often made when one is not certain as to whether the source from which that income comes will endure ; for example, when a man retires from service, he normally commutes in order to ensure for himself and after his death for his family a certain income which he can ensure by getting the commuted amount invested in his private bank or otherwise which he may not be sure because upon his de ..... X X X X Extracts X X X X X X X X Extracts X X X X
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