TMI Blog2002 (7) TMI 58X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Revenue, is as follows : "Whether, on the facts and in the circumstances of the case, the Tribunal was justified in directing the Assessing Officer to allow the sum of Rs. 50 lakhs received as advance sale consideration in terms of the agreement dated September 22, 1986, as debt owed in computing the net wealth under section 40(2) of the Finance Act, 1983?" The undisputed facts of this case are as follows: The assessee is a private limited company and is the owner of a property being 3, Alipore Road, Calcutta. On September 22, 1986, the said company entered into an agreement with one Satyam Properties and Finance Private Limited for sale of the said property, at Alipore, for a consideration of Rs. 3 crores. Out of the said amount of Rs. 3 crores, Rs. 50 lakhs was paid during the year ended on March 31, 1987. The intending purchaser, however, obtained possession of the land for the purpose of construction of a multi-storied building on the said land. The conveyance of the property had not been executed, however, the purchaser took steps for construction of the multi-storied building after obtaining possession. The assessment year involved in this reference is 1987-88 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Income-tax (Appeals) preferred yet another appeal to the Income-tax Appellate Tribunal. The learned Tribunal, however, accepted the contention of the assessee by allowing the said sum of Rs. 50 lakhs as deductions from the value of the said property as claimed by the assessee. The learned Tribunal in its order directed the Assessing Officer to deduct Rs. 50 lakhs in computing the net wealth of the assessee. Against the said order of the learned Tribunal dated March 9, 1992, the Revenue sought this reference on the above question of law under the provisions of section 27(1) of the Wealth-tax Act, 1957. Before dealing with the respective contentions and submissions both on behalf of the Revenue and on behalf of the assessee it is to be noted that companies were granted exemption from payment of wealth-tax. Under the Finance Act, 1983, the levy of wealth-tax was revived in the case of closely held companies which are those companies in which the public were not substantially interested. Such companies were brought under the cover of the wealth-tax in respect of net wealth of certain specified assets owned by such companies. All the assets owned by such companies were not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all practical purposes and the terms and conditions as contained in the said agreement for sale of the said property were quite specific and the said terms of the agreement in fact support the contention of the Revenue. Mr. Prasad, in this connection, also referred to a decision in his written submissions (though the said decision was not referred to at the time of hearing of the case). The said decision is reported in the case of CIT v. Podar Cement Pvt. Ltd. [1997] 226 ITR 625 (SC). In the said case, the Supreme Court was dealing with the assessment of income from property under the provisions of the Income-tax Act, 1961. It was held in that case that the liability of a person to be assessed on the income from property is on the person who actually receives or is entitled to receive such income. In that case the Supreme Court was primarily engaged with the interpretation of the word "owner" and held that though under the common law "owner" means a person who has got valid title legally conveyed to him after complying with the requirements of law such as the Transfer of Property Act, the Registration Act, etc., in the context of section 22 of the Income-tax Act, 1961, having re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion in mind to hold that the said decision has no application to the present case. Mr. Prasad also mentioned a Full Bench decision of the Patna High Court in his written notes. The said decision was rendered in the case of CIT v. Sheo Kumari Debi [1986] 157 ITR 13. Relying on the said decision Mr. Prasad contended that the learned Tribunal was not entitled in law to give a liberal meaning to the provisions of the relevant section or sections in the instant case. Instead it should have given a literal meaning to such section or rather the provisions of such sections. The said case involved a reopening of an assessment under the provision of the Income-tax Act, 1961. It was observed by the Full Bench in the said case that if the provisions of a statute have to prevent evasion of tax then the same need not be construed in favour of the assessee. Having considered the case in full I find it extremely difficult to appreciate as to how the principles of the said case would at all be applied to the facts and circumstances of the case in hand. I have no hesitation to hold that the principles of the said Full Bench decision of the Patna High Court have no manner of application to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in directing the Assessing Officer to deduct Rs. 50 lakhs in computing the net wealth of the assessee. Mr. R. N. Bajoria, learned senior counsel, on behalf of the assessee, sought to contend that the sum of Rs. 50 lakhs was secured on or had been incurred in relation to the said property and should be deducted from its value of Rs. 3 crores computed by the Assessing Officer. The only ground given for not allowing the deduction of the said amount was that it was part of the sale consideration and as such it was not allowable as a deduction. The other contention of the Revenue was that the sum of Rs. 50 lakhs as received was not to be included in the net wealth, since it was not one of the specified assets under sub-section (3) of section 40 of the Finance Act, 1983. Mr. Bajoria submitted that the assessee on the date of the valuation was the owner of the property in question. The conveyance of the property was not executed. The only question was whether the sum of Rs. 50 lakhs could be said to be a debt incurred in relation to or secured on the said property. The assessee had no right to appropriate the said sum as sale consideration till the sale was complete. The amount paid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssion had been given to the purchaser and as such the sale should be treated as complete for all practical purposes. It was submitted on behalf of the assessee that the provisions of section 55(6)(b) of the Transfer of Property Act were applicable irrespective of whether possession of the property had been delivered or not. In this connection, a judgment of the Bombay High Court reported in Dagadu Dhondu Patil v. Trakadu Motiram Patil, AIR 1957 Bom 79 was also referred to. It was next contended on behalf of the assessee that it could not be disputed in any event that the said sum of Rs. 50 lakhs was incurred in relation to the said property. The words "in relation to" are of very wide import and it could not be disputed that the said sum of Rs. 50 lakhs was received by the assessee in relation to the said property and the said property alone. It was argued on behalf of the assessee that the value of the said property on the date of the valuation could not be arrived at ignoring the fact that Rs. 50 lakhs had been received towards such value in advance. The tax could only be levied therefore, on the net value of the asset. According to Mr. Bajoria, the fact that the cash of Rs ..... X X X X Extracts X X X X X X X X Extracts X X X X
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