TMI Blog1973 (5) TMI 19X X X X Extracts X X X X X X X X Extracts X X X X ..... d it had been rightly included in the net wealth of the assessee - - - - - Dated:- 28-5-1973 - Judge(s) : SABYASACHI MUKHERJEE., S. HAZRA. JUDGMENT SABYASACHI MUKHARJI J. - In this reference under section 27(1) of the Wealth-tax Act, 1957, three questions have been referred to this court : (1) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that in computing the net assets of W.H. Harton Co. Ltd. for the purpose of determining the break-up value of its shares the sum of Rs. 61,800 being the amount of proposed dividend should be allowed as a deduction ? (2) Whether, on the facts and in the circumstances of the case, the Tribunal was legally justified in holding that the assessee was not the owner of 32,440 shares of Rohtas Industries Ltd.? (3) If the answer to the question No. 2 is in the negative, then whether the Tribunal was justified in holding that in respect of the shares of Rohtas Industries Ltd., only a sum of Rs. 1,63,200 should be included in the net wealth of the assessee in place of Rs. 4,69,894 ? " There is a slight mistake in question No. 2. The figure should be 22,440 shares of Rohtas Industries Ltd. and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee thereafter filed an appeal against the Presidency Magistrate's order before the High Court. We are told and it is undisputed that that was an incorrect statement. There was no appeal actually filed against the order of the Chief Presidency Magistrate referred to hereinbefore but a civil suit was instituted in the High Court claiming title to the said shares. Pending the disposal of the said suit the High Court appointed one Sri K. Khaitan as receiver in respect of the said shares. In the year 1955, right shares were issued by Rohtas Industries Ltd. and on the disputed 5,100 ordinary shares another bunch of 5,100 shares were receivable on payment of Rs. 51,000. The receiver asked the assessee to finance for the acquisition of these shares and the assessee deposited a sum of Rs. 51,000 with the receiver for the right shares. In the year 1958, the receiver also received 1,020 bonus shares on account of the original 5,100 shares. In the year 1960, right shares were again issued and the receiver received notice for 11,220 shares. Again the receiver, it appears, had asked the assessee to finance for the acquisition of these shares and the assessee had deposited a sum of Rs. 1,12 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 7(1) of the Act which provides bow the value of the assets is to be determined and provides that subject to any rules made in this behalf the value of any asset other than cash for the purpose of the Act shall be estimated to be the price which in the opinion of the Wealth-tax Officer it would fetch if sold in the open market on the valuation date. Therefore, the appropriate point to consider is whether these 22,440 shares of Rohtas Industries Ltd. could be said to be assets belonging to the assessee on the valuation date and, if so, what was the proper value of the assets that belonged to the assessee on the valuation date. The Act in question does not stipulate that in order to belong to an assessee, the assessee should be owner of the asset. The ownership, however, is an important ingredient of belonging but it must still fulfil the qualification of belonging. The question is that in the facts and circumstances narrated before, could it be said that 22,440 shares of the Rohtas Industries Ltd. belonged to the assessee on the valuation date in this case. From the facts as it appears from the statement of the case it appears that the shares were on blank transfers, that is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to a shareholder or stock-holder, and, in my opinion, until the requisite formalities are complied with, he continues the legal proprietor of the stock or share subject to that proprietorship being divested, which it may be at any moment, by a compliance with the requisite formalities.' The same position obtains in India, though the completion of the transaction by having the name entered in the register of members relates it back to the time when the transfer was first made. See Nagabushanam v. Ramachandra Rao. During the period that the transfer exists between the transferor and the transferee without emerging as a binding document upon the company, equities exist between them, but not between the transferee and the company. The transferee can call upon the transferor to attend the meeting, vote according to his directions, sign documents in relation to the issuance of fresh capital, call for emergent meetings, and, inter alia, also compel the transferor to pay such dividend as he may have recived. See E. D. Sasoon Co. Ltd. v. Patch approved in Mathalone v. Bombay Life Assurance Co. Ltd. But these rights though they, no doubt, clothe the transferee with an equitable owners ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hese shares were negotiable according to the law merchant custom and/or practice of the Calcutta Stock Exchange. Under the Sale of Goods Act, shares were goods but that did not preclude them from being negotiable according to the custom, practice or law merchant. There might arise cases also when the true owner might be estopped from asserting his title against a bona fide purchaser for value without notice of any defect in the title although from whom such bona fide purchaser acquired such title had no title to pass. The learned judge recognised this on the ground of mercantile convenience. It was further observed that whether a bona fide purchaser for value acquired a good title from one who had no title to the same and he only was estopped from denying such title depended on the facts of each particular case. So far as the true owner being estopped from asserting his title such an estoppel might arise by negligence, by conduct or by representation. To attract the principle of negligence, three conditions were to be satisfied : (a) duty on the part of the owner and breach of such duty (b) negligence in the act itself ; and lastly (c) negligence must be a proximate cause. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... these shares. The Tribunal or the revenue authority, however, had not considered whether that right of equitable ownership was capable of having any market value in terms of section 7(1) of the Wealth-tax Act, 1957. We need not, therefore, advert to this aspect of the matter. It may incidentally be mentioned that in the case of Smt. Chandra Jalan v. Commissioner of Wealth-tax (in Matter No. 378 of 1962) in respect of dividends declared in East Pakistan which the shareholder had the right to get was property within the meaning of the definition of asset in section 2(c) of the Act, it was held that in respect of such a property, in view of the restrictions in respect of such property, the Wealth-tax Officer was not justified in estimating the value on the face value thereof. We need not, however, as mentioned hereinbefore, examine this question in greater detail in the view we have taken in this reference. The assessee was not the legal owner of these shares and had only certain equitable rights over these shares and on the relevant valuation date the said scrips and the blank transfer deeds had been lost by theft. But, in the relevant year, all that happened was that the assessee w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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