TMI Blog1994 (12) TMI 107X X X X Extracts X X X X X X X X Extracts X X X X ..... cisions in the cases of Amarchand J. Agarwal v. Union of India [1983] 142 ITR 402 and CIT v. Zorostrian Building Society Ltd. [1976] 102 ITR 499 and held the issue against the assessee and in favour of the revenue. Similarly, while disposing of the assessee's wealth-tax appeals for the assessment years 1975-76 to 1979-80 in WFA Nos. 3284, 3593, 3665/Bom./83, 297/Bom./84 and 1489/Bom,/85, the earlier Tribunal by following the above case-law had decided the issue in favour of the Department and against the assessee by their order dated 1-3-1988. In fact, the learned members of the Tribunal while deciding the appeals for abovesaid earlier years by following those two decisions of the Bombay High Court, held that the assessee should be considered to be the owner or remained owner of the property up to the date of registration. The earlier Benches of the Tribunal held that since they are binding precedents they are bound to follow those two decisions in preference to the Gujarat High Court in Arundhati Balkrishna v. CIT [1982] 138 ITR 245 and the Calcutta High Court decision reported in CIT v. Ganga Properties Ltd.[1970]77 ITR 637. However, the referring Bench felt that the Bombay Tribu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wever, the Department was of the view that in the case of immovable property, the ownership will change hands only when the transfer document is registered and not till then. In view of this position having been held by the revenue, the assessee's contention is not accepted and the value of the 12 flats was also considered as part of the net wealth of the assessee. Towards 1/3rd value of these flats representing the assessee's share in them, a sum of Rs. 7,54,933 was added as part of the assessee's wealth for the assessment year 1980-81 whose valuation date was 31-3-1980. 3. Having been aggrieved against this addition, the assessee went in appeal before the CWT (Appeals). The learned CWT (Appeals) in his order dated 20-6-1977 found that right from assessment year 1975-76 to assessment year 1978-79 it has been held by the appellate authorities that value of the flats sold under the Act should be excluded from the assessee's wealth and since this matter is covered by the assessee's own case, he should follow his predecessor's orders for earlier years, after accepting the assessee's contention in that regard. In view of accepting the main ground itself, he did not choose to take up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch value should be included as part of the wealth of the assessee or any co-owners of the flats. The learned D.R. relied upon the following authorities in support of his proposition: 1. Ram Saran Lall v. Domini Kuer AIR 1961 SC 1747. 2. Hiralal Agarwal v. Rampadarath Singh AIR 1969 SC 244. 3. Maharashtra Apartment Ownership Act, 1970 (which is referred to as the Act in this order). 4. Order of the Bench-B of the Bombay Tribunal dated 16-2-1988 passed in ITA Nos. 3669, 3670, 3672 3673/Bom./83. 356/Bom./84 and 3148/Bom./84 relating to assessment years 1976-77 to 1979-80 and 1980-81 in which the assessee's brother Shri P.M. Mistry was the appellant and also ITA Nos. 5961 and 5962/Bom./83 relating to assessment years 1978-79 and 1979-80 in case of this very assessee. 5. The earlier order of this Tribunal B-Bench dated 1-3-1988 passed in WTA Nos. 3284, 3593, 3665/Bom. /83, 297/Bom. /84 and 1489/Bom./85 relating to assessment years 1975-76 to 1979-80 in the case of this very assesses. 6. CIT v. Tamil Nadu Agro Industries Corporation Ltd. [1987] 163 ITR 61 (Mad.). 7. Divvi Suryanarayana Murthy v. Competent Authority [1979] 117 ITR 278 (AP). 8. Mahavir Metal Works (P.) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal, the ratio of those two decisions is to be followed and the case must be decided in favour of the assessee and the appeals of the Department must be dismissed. 7. We have heard the arguments of both the parties fully and completely. We have gone through the paper book filed on behalf of the assessee as well as the paper compilation filed on behalf of the Department. After hearing both the sides we are of the view that though the point of law involved in quite intriguing we feel that it should be decided in favour of the Department, since bulk of authorities, specially the Supreme Court decisions as well as the Bombay High Court decisions go to support the contention of the Department. 8. First, let us take the facts of the case. There was a building named "Bhaktawar" Colaba, Bombay. It is a co-owned property in which the assessee holds 1/3rd share. His brother Shri P.M. Mistry holds 1/3rd interest and his brother and three sisters together hold another 1/3rd interest in the said asset. There are 40 flats constructed out of them five flats were under the personal occupation of the co-owners, 32 flats were occupied by the tenants and three flats were in the possession o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e contention of the learned D.R. in those appeals was that transfer of immovable property is complete only on the date of registration of the deed of conveyance and in the case of the assessee such registration was not effected during the accounting period relevant to the assessment years. The ownership is, therefore, remained only with the assessee and the income is rightly assessed in his hands as he still continued to be the legal owner. The learned Tribunal at that time while passing that order had relied upon the following case law : 1. Amarchand J. Agarwal's case 2. CIT v. Sultan Brothers (P.) Ltd. [1983] 142 ITR 249 (Bom.) 3. Zorostrian Building Society Ltd.'s case 4. CIT v. Union Land Building Society (P.) Ltd. [1972] 83 ITR 794 (Bom.). 10. As is the case in the present assessment year the position considered by the Tribunal in assessment years 1976-77 to 1980-81 was that the deeds were executed but they were not registered during those accounting years relevant to those assessments. In the case of the assessee's brother also it was contended on behalf of the assessee that once the registration is complete it operates from the date of execution of the deed and s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erees for these 12 flats can they be considered as owners and whether they can be made liable to wealth-tax on the value of those 12 flats in the absence of any registered sale deed in their favour or in the alternative whether the assessee and his other co-owners are liable to pay wealth-tax on the value of these 12 flats for assessment year 1980-81 is the only question to be decided in this case. 11. In support of the contention that the liability to pay wealth-tax for these 12 flats remained only with the assessee and his other co-owners, the learned D. R. brought to our notice, firstly the Supreme Court decision in Nawab Sir Mir Osman Ali Khan's case. In that case also the assessee, the Nizam of Hyderabad had received full consideration for certain immovable properties from the purchasers but he had not executed any registered sale deeds in favour of the vendees. The question is whether the property be included in the net wealth of the assessee for purposes of assessment to wealth-tax as they were assets 'belonging' to him within the meaning of section 2(m) of the Wealth-tax Act, 1957. The Hon'ble Supreme Court ultimately held that for all legal purposes the properties had to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he learned Single Judge went to the extent of holding that the transfer of a title would go along with the completion of sale and he held the following at page 409 : "There is no distinction between the transfer of a title and the completion of the sale and in view of the decision of the Supreme Court, the title passes only when the document is registered under the provisions of the Registration Act. The mere fact that such transfer operates from the date of execution is not sufficient to conclude that the title itself passes on the date of execution. The Single Bench decision was approved by Division Bench of the same High Court [1983] 142 ITR 410 and the learned Division Bench held that the view of the Bombay High Court is also supported by the Delhi High Court [1974] 95 ITR 197, Mahavir Metal Works Pvt. Ltd. v. Union of India and the Andhra Pradesh High Court Divvi Surya Narayana Murthy v. Competent Authority." 13. The next instance to which our attention is invited is the decision of the Hon'ble Supreme Court in Ram Saran Lal's case. In that case Pandey's executed a deed of sale in favour of the respondent in respect of a house owned by them on 31-1-1946. The appellant clai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14. The next authority on which reliance is placed by the learned D. R. was Hirlal Agarwal's case. The facts of that case are that one Premwati Devi sold 2.69 acres of land on 9-10-1964 and executed a sale deed for Rs. 2,000. The sale deed was thereafter presented to the Sub-registrar for registration. On 14-10-1964, the appellant applied for a certified copy of the sale deed and on its being furnished to him, he filed an application dated 26-11-1964 under section 16(3) of the Bihar Land Reforms (Acquisition of Ceiling Area and Acquisition of Surplus Land) Act XII of 1962 before the Collector. He annexed to his application a copy of the sale deed and a copy of the challan evidencing his having deposited the sale price of Rs. 2,000 and an additional sum of 10% thereof as required by the proviso to section 16(3)(i) and rule 19 of the Bihar Land Reforms (Fixation of Ceiling Area and Acquisition of Surplus Land) Rules, 1963. On 30-11-1964, the Registrar completed registration by endorsing the certification on the said sale deed under section 60(1) of the Registration Act and copying out the endorsement and the certificate In the relevant register under section 16(1) of the Registration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion Act and, therefore, the talab-in-mowasibat made before the date of completion of registration was premature and a suit based on such a demand of the right of pre-emption was premature and must, therefore, fail. Similarly, in Radhkishan L. Toshniwala v. Shridhar 1961 - 1 SCR 248 (AIR 1960 SC 1368) this Court laid down that where a statute providing for the right of pre-emption lays down that it accrues only when transfer of the property takes place and such transfer is not complete except through a registered deed, a suit filed before the sale deed is executed is premature as the right of pre-emption under the statute did not accrue till the transfer became effective through a registered deed. In Bishan Singh v. Khazan Singh 1959 SCR 878 - (AIR 1958 SC 838) this Court laid down that in a suit for pre-emption the plaintiff must show that the right had accrued to him at the time when he exercised it." 15. The next decision to which our attention was drawn by the learned D.R. was the Madras High Court decision reported in Tamil Nadu Agro Industries Corpn. Ltd.'s case. The facts in that case are the following: The assessee purchased a building from the Neyveli Lignite Corporation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y and delivery of possession of the said property was effected in 1957. However, the sale deed was executed in 1958. The question is whether the vendor under the sale deed is liable to be assessed as owner in respect of bona fide annual value of the property for the assessment year 1957-58. The ITO held that ownership was not transferred until the registration of the deed of conveyance took place. He held that during the accounting year in question the ownership remained vested in the assessee (vendor) and he included the bona fide annual value of the house in the vendor's total Income. The AAC was of the same view as that of the ITO. The Tribunal however, was of the opinion that though the assessee remained the legal owner, the beneficial ownership of the house passed on to the purchaser on 29-3-1956 and under section 9 of the Income-tax Act, 1922, the income from the house property was assessable In the hands of the beneficial owner i.e., the purchaser and not the assessee. The High Court held : (1) That in the case of sale of immovable property, a registered document is necessary to give effect to the same and the sales take effect only from the date of registration of the doc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n areas and facilities appurtenant to such apartment by way of sale, mortgage, lease. gift, exchange or in any other manner whatsoever in the same manner, to the same rights, privileges, obligations, liabilities, investigations, legal proceedings, remedies and to penalty, forfeiture and punishment as any other immovable property, or make a request of the same under the laws applicable to the transfer and succession of immovable property. 5.(1) Each apartment owner shall be entitled to the exclusive ownership and possession of his apartment in accordance with the Declaration executed and registered as required by section 2 of this Act. (2) Each apartment owner (shall execute a Deed of Apartment) in relation to his apartment in the manner prescribed for the purpose." Further, sections 13(1), (3) and (5) of the Act which are relevant for our purposes are as follows: "13(1) The Declaration and all amendments thereto and the Deed of Apartment in respect of each apartment and the floor plans of the buildings referred to In sub-section (2) shall all be registered under the Indian Registration Act, 1908. (3) In all registration offices a book called 'Register of Declarations and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of all the flats should be deemed to be apartment owners under the provisions of the Act. Thus, the provisions of the Act are not at all relevant for consideration in this case. On behalf of the assessee at pages 12 to 21 specimen deed of transfer in favour of purchaser was furnished. In that deed at page 2 the following recital is present: "and whereas pursuant to the provisions of section 2 of the Maharashtra Apartment Ownership Act, 1970 (Maharashtra Act XV of 1971) the vendors have prior to these presents, executed a Declaration on the 11th day of March, 1975 (and lodged for registration with the Sub registrar of Assurances at Bombay under S. No. 645 of Book No. 1 on the 14th day of March, 1975) submitting the said property to the provisions of the said Act." The co-owners were the vendors under the said deed. Third parties were the purchasers. The above recital in the sale deed would clearly show that the vendors submitted themselves to the provisions of Maharashtra Act 15 of 1971 (the Act) by executing a deed of declaration on 11-3-1975 and tendering it for registration on 14-3-1975. Thus, the vendors are perfectly entitled to sell their interest in the fiats in Bhaktaw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd section 45 of the Income-tax Act. In that case Justice Thakkar (as he then was) of the Gujarat High Court commenting upon the Supreme Court decision in the case of Ram Sharan Lal observed the following: "What needs to be clearly comprehended is that in one of these cases the Supreme Court was concerned with the vital question as regards the inter se rights of the vendor vis-a-vis the vendee in relation to the property sold by the vendor to the vendee. In other words, the question as to when the transaction of sale became complete as between the vendor and the vendee In the sense of extinguishment of the right of the vendor and the creation of the right of the vendee was never in issue. When did the vendor cease to be the owner and when did the vendee become the owner of the property ? On the date of the execution of the sale deed which was subsequently registered ? Or at some later date when it was presented for registration or was copied out in the registration book by the official concerned ? That, however, is the vital question from the standpoint of the Income-tax Act and W.T. Act because the date of transmission of title from the vendor to the vendee is extremely relevant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t year relevant to the previous year in which registration was completed. The sale deed was executed in that case on 11-10-1967 and presented for registration on that very date, the sale must be deemed to have been completed on 29-4-1970 on which date the documents were entered into the records of the register and all other formalities were completed by the Registrar. This argument appeared to have been rejected by the Bombay High Court. No doubt, the Bombay High Court in later part of the judgment found that the registration was deemed to be complete under section 61(2) of the Registration Act on 29-4-1970. It also observed that there is no dispute with regard to these dates. The learned Judge posed the real question before it as follows: "The question is from which date the sale deed shall operate - whether from the date of execution of the sale deed or from the date on which the registration is deemed to be complete within the meaning of section 61(2) of the Registration Act." Subsequently, after observing the terminology of section 47 of the Registration Act at page 255 of the reported judgment it held the following: "This section clearly provides that a registered docum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on. They were in possession of the property and they have been in full enjoyment of the property. The only deficiency in that case was that the sale deeds were not executed and also not registered in favour of the purchasers. The question In those circumstances is to whom does the assets belong to. We may remind that the case before the Hon'ble Supreme Court was also a wealth-tax case similar to the one before us now. The facts as well as the ratio of the case decided by the Hon'ble Supreme Court were already extracted in prior paras of our order. However, it was argued that Supreme Court decision is distinguishable on facts. It is stated that the Supreme Court in its decision observed that the sale deed was never executed and also not registered whereas in the present facts of the case, it is admitted that during the assessment year in question the sale deeds were executed in relation to the 12 flats in question though the sale deeds were not registered during that assessment year. In our opinion, the distinction drawn between the Supreme Court case and the present case is a distinction without difference. 19. Unless the legal presumption available under section 47 is invoked t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the Sub-registrar are transcribed as permanent record showed that the present sale deed was transcribed into the book on November 11, 1974. However, in view of the provision contained in section 47 of the Indian Registration Act, it clearly transpires that once the deed is registered, it would operate from the time from which it would have commenced to operate if no registration thereof had been required or made and not from the time of its registration. There is no suggestion that the sale deed was deliberately ante-dated. Therefore, on registration the sale deed operated from July 27, 1974, the date of its execution. The relevant provision prohibits court from entertaining a petition for release of accommodation within three years from the date of purchase and not from the date of registration of sale deed. Once it is established that the house from which appellant was sought to be evicted was purchased by the landlady on July 27, 1974, and the application for release of accommodation was made by the landlady on September 10, 1977, it was certainly made after a lapse of three years from the date of the purchase and the proviso would not be attracted. This was the only point ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 2(m) of the Wealth-tax Act, otherwise it would amount to taxing the same twice over which is not permitted under the law. The learned D.R. offers no objection in theory for this submission but he submitted that first, it should be ascertained how much sale consideration was received on each of the flats. Secondly, it should also be shown that the said sale consideration was shown as part of the wealth of the co-owners and 1/3rd of the total sale consideration was shown as a part of the wealth of the assessee either in the present assessment year or in the past assessment years. After fulfilling these two conditions only the sale consideration received by the assessee can be considered as debt owed by the assessee. We accept the alternative contention and hold that the assessee on fulfilling these two conditions is entitled to deduct the sale consideration received by him from his wealth. No body did this verification. Therefore, we remand the matter to the Assessing Officer to record necessary facts into the assessment record and after giving reasonable opportunity to the assessee to determine the quantum of deduction to which the assessee is entitled to while determining his net ..... X X X X Extracts X X X X X X X X Extracts X X X X
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