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C.W.T. v. R.S.D.Tandon - WEALTH TAX REFERENCE No. 31 of 1992  RD-AH 13168 (8 August 2006)
W.T.R. No.176 of 1989
Sri Ram Saran Das Tandon , 92-A, Ravindrapuri, Varanasi vs. Wealth Tax Commissioner/Central/Kanpur
W.T.R. No.206 of 1991
Sri Ram Saran Das Tandon , 92-A, Ravindrapuri, Varanasi vs. Wealth Tax Commissioner/Central/Kanpur
W.T.R. No.31 of 1992
Wealth Tax Commissioner/Central/Kanpur vs. Sri Ram Saran Das Tandon, 92A, Ravindrapuri, Varanasi.
Hon'ble R.K.Agrawal, J.
Hon'ble Vikram Nath, J.
(Delivered by R.K.Agrawal, J.)
In W.T.R. No.176 of 1989, which relates to Assessment Year 1981-82, the Income Tax Appellate Tribunal, Allahabad has referred the following two question of law under Section 27(3) of the Wealth Tax Act, 1957, hereinafter referred to as the Act:
"1. Whether Income-tax Appellate Tribunal under the facts and circumstances of case was justified in holding that house No.64, Lajpatnagar, Varanasi, belonged to assessee?
2. Whether, in absence of execution of document, and its registration by Cooperative Society, in favour of assessee, Income-tax Appellate Tribunal was justified in assessing the value of said assets in hand of assessee when his beneficial interest therein passed to his wife?"
whereas in W.T.R.No.206 of 1991 which relates to the Assessment Year 1980-81 the Tribunal has referred the following question under Section 27(1) of the Act:
"Whether on the facts and circumstances of the case, the Tribunal is legally justified in holding the applicant as the owner of the property, 64 Lajpat Nagar, Varanasi, in the year under consideration?"
and in W.T.R. No.31 of 1992, which relates to the Assessment Year 1982-83, the Tribunal has referred the following question under Section 27(1) of the Act:
"Whether on the facts and in the circumstances of the case, the Hon'ble Income-tax Appellate Tribunal was justified in holding that the value of the house property 64, Lajpat Nagar, Varanasi be deleted from the wealth of the assessee?"
for opinion to this Court.
As all the three references relate to the same assessee, they have been heard together and are being decided by a common order.
Briefly stated the facts giving rise to the present references are as follows:
Sri Ram Saran Das Tandon, the assessee became member of Lala Lajpat Rai Grih Nirman Sahakari Samiti, Varanasi, hereinafter referred to as "the Society". The object of the Society was to purchase and allot the land in favour of its members. As per bye-laws, after the allotment, the plots were transferred to the members of the Society. The applicant-asessee who had been allotted a plot No.64 in Lajpat Nagar by the Society constructed a house during the year 1957-58. The construction was made with the permission of the Society. In the year 1975 he moved an application before the Society for substituting the name of his wife Smt. Vimlawati Tandon in the record of the Society in his place. After observing the necessary formalities, the name of Smt. Vimlawati Tandon was substituted in place of the applicant. Thereafter, the applicant received a sum of Rs.60,000/- by cheque on 30th March, 1979 from Smt. Vimlawati Tandon towards the investment made and in getting the allotment of the land and the construction of the house by way of reimbursement/compensation. The Society has executed a registered sale deed in respect of the plot in question in favour of Smt. Vimlawati Tandon on 7.4.1983. In the return filed under the Act for the Assessment years 1980-81, 1981-82 and 1982-83 the applicant did not include the value of the house property No. 64, Lajpat Nagar, Varanasi. However, the Assessing Authority included the value of the said property by framing assessment under the Act. The order of the Wealth Tax Officer has been confirmed by the Commissioner of Wealth Tax(Appeals) as also the Tribunal except for the Assessment year 1882-83 on the ground that the applicant continued to remain the owner of the house property, 64, Lajpat Nagar, Varanasi inasmuch as the transfer has not been made by execution of a registered sale deed either by the applicant or by the Society in favour of Smt. Vimlawati Tandon. This was done for the Assessment year 1980-81 and 1981-82 whereas for the Assessment Year 1982-83 the Tribunal has deleted the addition.
We have heard Sri Krishna Agrawal, learned counsel appearing for the assessee and Sri R.K.Upadhyay, learned counsel appearing for the Revenue in both the references.
Learned counsel for the assessee submitted that it is not in dispute that the plot No.64, Lajpat Nagar, Varanasi was allotted to the assessee by the Society and he had made some constructions over it with the permission of the Society. However, in the year 1975, the assessee surrendered his membership in the Society and in his place his wife became member of the Society. The Society admitted his wife as a member in his place and thus for all practical purposes his wife Smt. Vimlawati Tandon became the owner of Plot No.64, Lajpat Nagar, Varanasi. She had also paid amount incurred by him for the construction of the house and other incidental expenses by cheque. According to him, in view of Section 4(7) of the Act, under law Smt. Vimlawati Tandon would be the owner of the plot and the house property, 64, Lajpat Nagar, Varanasi and the the value of it cannot be added in his hands. He has relied upon the following decisions in support of his submissions:
I.Commissioner of Income Tax v. Podar Cement Pvt. Ltd. and others, (1997)226 ITR 625(SC).
II.Nawab Mir Barkat Ali Khan v. Commissioner of Wealth-tax, (1997) 226 ITR 654 (Full Bench)(Andhra Pradesh).
Sri R.K.Upadhyay on the other hand submitted that under Section 2(m) of the Act, the assessee, namely, Sri Ram Saran Das Tandon would be treated as to be the owner of the house property, 64, Lajpat Nagar, Varanasi till such time it is transferred by way of registered sale deed and the said property would continue to belong to him irrespective of the fact that in the list of members of the Society his name has been deleted and in his place the name of his wife has been entered. He placed reliance on a decision of the Apex Court in the case of Nawab Sir Mir Osman Ali Khan(Late) v. CWT, (1986) 162 ITR 888. He further submitted that in respect of the Assessment Year 1982-83, the Tribunal has committed error in deleting the addition in respect of the value of house property, 64, Lajpat Nagar, Varanasi in the hands of the assessee.
Having given our anxious consideration to the various pleas raised by the learned counsel for the parties, we find that the facts are not in dispute. The question is as to whether the house property, 64, Lajpat Nagar, Varanasi can be treated to belong to the assessee Sri Ram Saran Das Tandon or to Smt. Vimlawati Tandon after 1975 when the name of Smt. Vimlawati Tandon was entered in the Members' Register of the Society in place of her husband. The question need not detain us any longer as we find that under sub-section (7) of Section 4 of the Act, which reads as under:
"(7) Where the assessee is a member of an association of persons, being a co-operative housing society, and a building or a part thereof is allotted or leased to him under a house building scheme of the society, the assessee shall, notwithstanding anything contained in this Act or any other law for the time being in force, be deemed to be owner of such building or part and the value of such building or part shall be included in computing the net wealth of the assessee; and, in determining the value of such building or part, the value of any outstanding instalments of the amount payable under such scheme by the assessee to the society towards the cost of such building or part and th eland appurtenant thereto shall, whether the amount so payable is described as such or in any other manner in such scheme, be deducted as a debt owned by him in relation to such building or part."
it has been specifically provided that where the assessee is a member of a Cooperative Housing Society and a building or a part thereof is allotted or leased to him under a house building scheme of the society, then he shall be deemed to be the owner of the said building or part and the value of such building or part shall be included in computing the net wealth of the assessee. Admittedly in the present case, we find that Sri Ram Saran Das Tandon ceased to be the member of the Society in the year 1975 and as the assessment relates to the period subsequent to 1975 when he was not the member of the Society, he cannot be treated to be the owner of the house property, 64, Lajpat Nagar, Varanasi.
We further find that in the case of Podar Cement Pvt. Ltd.(supra) the Apex Court has held as under:
"....... 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 regard to the ground realities and further having regard to the object of the Income-tax Act, namely, to tax the income, "owner" is a person who is entitled to receive income from the property in his own right. The requirement of registration of the sale deed in the context of section 22 is not warranted."
The Full Bench of the Andhra Pradesh High Court in the case of Nawab Mir Barkat ali Khan(supra) has held as follows:
"A close reading of section4, the Explanation thereto and section2(m) of the Act makes the intention of Parliament evident as to what should be treated as belonging to the individual for the purposes of computing the net wealth. It appears to us that a property which has been transferred by the individual in favour of another under any disposition, settlement, trust, covenant, even an agreement or arrangement will cease to belong to him and cannot be brought within the fold of "belonging to" under section 2(m) of the Act and it is for that purpose that section 4 of the Act specifically provides that the properties held by persons enumerated in clause (a) of sub-section (1) under such inchoate transfer shall be included as belonging to that individual. Therefore, it follows that in the case of a transfer as defined in the Explanation to section 4 by the individual, the property cannot be said to belong to the individual unless it is within the clutches of section 4 of the Act, notwithstanding the fact that the transfer had not been effect as contemplated under section 54 of the Transfer of Property Act or under the Registration Act."
It has also considered the decision of the Apex Court in the case of Nawab Sir Mir Osman Ali Khan(supra) and has held as follows:
"It is worth noticing here that the provisions of section 4 of the Act were not brought to the notice of the Supreme Court and were not considered in Nawab Sir Mir Osman Ali Khan v. CWT 162 ITR 88(SC).There as, however, no occasion for consideration of those provisions in the other cases referred to above. For the purpose of construing the expression "belonging to" in section 2(m) of the Act in view of the judgment of the Supreme Court in Nawab Sir Mir Osman Ali Khan's case  162 ITR 888, the judgments of our High in CIT v. Nawab Mir Barkat Ali Khan  Tax LR 90, Nawab Mir Barkath Ali Khan v. CIT 171 ITR 541 and CIT v.Sahney Steel and Press Works (P.) Ltd. 168 ITR 811, will not be of much assistance much less will they be binding authorities on the interpretation of the expression "belonging to" in section 2(m) of the Act for the term considered in those income-tax case was "owner" within the meaning of section 9 of the 1922 Indian Income-tax Act (section 22 of the 1961 Income-tax Act).
For the aforementioned reasons, in our considered view, the expression 'belonging to' in section 2(m) of the Act will have to be understood as interpreted above in answering the first question."
Applying the principles laid down by the Apex Court and the Andhra Pradesh High Court to the facts of the present case, we are of the considered opinion that as the assessee ceased to be the member of the Society in the year 1975 and in his place Smt. Vimlawati Tandon became member of the Society, thus, the house property, 64, Lajpat Nagar, Varanasi belongs to Smt. Vimlawati Tandon and not to the assessee.
We, therefore, answer the two questions referred to us in W.T.R. No.176 of 1989 in the negative i.e. in favour of the assessee and against the Revenue, the question referred to us in W.T.R. No.206 of 1991 in the negative i.e. in in favour of the assessee and against the Revenue and the question referred to us in W.T.R. No.31 of 1992 in the affirmative i.e. in favour of the assessee and against the Revenue.
The parties shall bear their own costs.
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