TMI Blog1987 (7) TMI 26X X X X Extracts X X X X X X X X Extracts X X X X ..... ntiff, H. H. Maharaja Fatehsinh Gaikwar. By the two trust deeds executed on March 14, 1959, the settlor created the trusts in respect of two properties situated at Bombay, known as " Chateau Windsor " and " Chateau Marine ". He appointed himself and the plaintiff as trustees, The settlor reserved to himself the right to enjoy the properties during his lifetime. After his demise, the properties were to be enjoyed by the plaintiff's wife, Padmavati, if she survived him. The settlor died on July 19, 1968. On March 27, 1957, the Income-tax Officer sent a certificate under section 46(2) of the Indian Income-tax Act, 1922 (hereinafter referred to as " the old Act "), to the Additional Collector of Bombay for recovery of arrears of income-tax dues from the settlor. This order, admittedly, was passed under the old Act. On March 30, 1957, the Additional Collector wrote a letter to the settlor requiring him to pay the dues within three days or show cause why they should not be recovered from him. Admittedly, it was served on him on April 4, 1957. On March 14, 1959, as already indicated, he executed the two trust deeds in respect of the two properties. On May 12, 1959, the trust deeds w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the repealed section 34 of the Wealth-tax Act, 1957, did not help the plaintiff to any extent, inasmuch as it was not valid. At any rate, it could not take the place of the certificate under section 230A of the present Act, which requires certification in respect of the liabilities arising not only under the Wealthtax Act but quite a few other Acts, also, including the old and the present Acts. (iii) The attachment levied by the 1st defendant in July, 1970, related back to April 4, 1957, on which date the certificate under section 46(2) of the old Act was served by the Additional Collector, Bombay, on the settlor. For this finding, the 1st defendant relied on the provisions of rule 51 of the Second Schedule to the present Act. (iv) Since, on the dates of the attachments, that is to say, in July, 1970, the trusts were not registered, the property still continued to vest in the settlor and were liable to attachment, and (v) The trusts were void under section 281 of the present Act, as they were created with a motive to defraud the Revenue. The plaintiff challenges the validity of this order by this suit. The defendants naturally support it. When the case came up for he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y property valued at more than fifty thousand rupees, no registering officer appointed under that Act shall register any such document, unless the Income-tax Officer certifies that (a) such person has either paid or made satisfactory provision for payment of all existing liabilities under this Act, the Excess Profits Tax Act, 1940 (15 of 1940), the Business Profits Tax Act, 1947 (21 of 1947), the Indian Income-tax Act, 1922 (11 of 1922), the Wealth-tax Act, 1957 (27 of 1957), the Expenditure-tax Act, 1957 (29 of 1957), the Gift-tax Act, 1958 (18 of 1958), the Super Profits Tax Act, 1963 (14 of 1963), and the Companies (Profits) Surtax Act, 1964 (7 of 1964) ; or (b) the registration of the document will not prejudicially affect the recovery of any existing liability under any of the aforesaid Acts ........ It is fairly conceded by Shri Chinoy for the plaintiff that no certificate in terms of section 230A was filed before the Registering Officer. He, however, faintly suggests that the filing of the certificate dated January 8, 1971, under section 34 of the Wealth-tax Act, 1957, was enough. cannot accept this submission for several reasons. In the first place, it should be noted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the registration had been held to be effective in the eye of the law. When the registration of the two deeds was compulsory under section 17 of the Indian Registration Act, mere execution of the documents in March, 1959, will not create any rights or obligations. It follows that the two properties continued to vest in the deceased settlor till his death. After his death, they vested in his legal representatives. In July, 1970, when the attachments came to be effected, the two properties were thus squarely liable for attachment. I return a finding to this effect on issue No. 2(b). Resultantly, the suit will have to be dismissed. However, I would like to record findings on other issues also with sketchy reasons therefor. Issue No. 1 : The circumstance that the attachment of the properties was subsisting at the time of registration of the deeds would have been innocuous, had the registration been held to be valid. In that case, under section 47 of the Indian Registration Act, 1908, the deeds would have become effective from the date of their execution (March 14, 1959). However, now, the question does not survive. Shri Mehta, for the defendants, however, has advanced one more su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or other moneys contrary to such attachment, shall be void as against all claims enforceable under the attachment." " 51. Where any immovable property is attached under this Schedule, the attachment shall relate back to, and take effect from, the date on which the notice to pay the arrears, issued Under this Schedule, was served upon the defaulter." Shri Mehta argues that reading rules 2, 16(1) and (2) and 51 of the Second Schedule to the present Act together, the court should hold that the demand notice dated March 30, 1957, by the Additional Collector, Bombay, served on the settlor on April 4, 1957, should be treated as notice contemplated by rule 2 and by pressing in aid rule 16(1), it should be further held that the two trust deeds of March, 1959, came into being while the two attachments were in force. Thus, the benefit enuring to the beneficiaries under the deeds would become void under rule 16(2) as against the claim under the attachments. Shri Chinoy countered these submissions by contending that the constraints under the Second Schedule would materialise only if the initial notice of demand was served or issued under rule 2. He drew my attention to the portions of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and revenue could be recovered by serving written notice of demand on the defaulter under section 152. There was, however, no further provision in the Code analogous to rule 51 of the Second Schedule to the present Act. Indeed, a study of Chapter XI of the Code which deals with the topic " Realisation of the Land Revenue and other Revenue Demands " will show that where dues were to be recovered by sale of immovable property, attachment of such property was not at all contemplated. Attachment was necessary only in the case of movable property. For immovable property, the Collector straightaway used to issue proclamation of sale under section 55 read with sections 165 and 166 of the Code. The finding is thus inescapable that in our case the attachment in express terms came to be effected only in July, 1970, that is, long after the advent of the present Act. For all these reasons, I hold that the provisions of rules 2 and 16(1) and (2) or 51 of the Second Schedule to the present Act are not applicable to the facts of the present case. Had the provisions of section 230A of the present Act stood duly complied with, I would have upheld the operative validity of the two trust deeds as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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