Income Tax Appellate Tribunal - Lucknow
Assistant Commissioner Of Wealth Tax vs Major S. Qureshi on 26 June, 2002
Equivalent citations: (2003)78TTJ(LUCK)474
ORDER
P.N. Parashar, J.M.
1. The Department has filed two wealth-tax appeals for the asst. yr. 1988-89 and 1989-90 for challenging the two orders of learned CWT(A) both dt. 23rd Aug., 1994, for the asst. yrs. 1988-89 and 1989-90. In these appeals, the Department has taken identical grounds to challenge the order of learned CWT(A).
2. The assessee has also filed cross-objections against the two orders of the learned CWT(A) for asst. yrs. 1988-89 and 1989-90.
3. The other cross-objections of the assessee, i.e., cross-objection Nos. 1 and 2 relate to asst. yrs. 1986-87 and 1987-88.
4. For the sake of convenience, the above mentioned Departmental appeals and cross- objections of the assessee are taken up together for hearing. Hence, these appeals and cross-objections are being decided by this order.
5. Shri Prasenjit Singh, learned Sr. Departmental Representative represented the Department whereas Shri D.B. Bhargava, advocate, appeared on behalf of the assessee in these appeals and cross-objections.
WTA No. 181/All/1994 :
6. The Department has taken following grounds in this appeal :
(1) "On the facts and in the circumstances of the case, the learned CIT(A) [CWT(A)] has erred in law in directing the AO to exclude the value of property at B.N. Road, Lucknow, from the wealth of the assessee. The learned CIT(A) [CWT(A)] has failed to appreciate that no agreement dt. 6th June, 1975, purported to have been made in discharge of the dower debt was filed before the AO and acceptance of this fresh evidence by him was in violation of r. 46A of the IT Rules, 1962."
(1) "On the facts and in the circumstances of the case, the learned CIT(A) [CWT(A)] has erred in law in directing the AO to exclude the value of structure on the plot of land at C-145, Nirala Nagar, Lucknow, and also the value of other assets of Hotel Tourist from the net wealth of the assessee. [The learned CIT(A)'s (CWT(A)'s) order dt. 25th Feb., 1994, in A.No. 11/Ward 1(2) Lko/1991-92 in the case of M/s Hotel Tourist referred to, has not been accepted by the Department and an appeal has been preferred before the Tribunal]."Ground No. 1
7. Ground No. 1 challenges the order of learned CWT(A) in excluding the value of property at B.N. Road, Lucknow, from the wealth of the assessee. The facts concerning to this issue are as under.
8. The assessee filed wealth-tax return on 30th Aug., 1988, declaring net wealth at Rs. 6,93,607. The WTO required the assessee to explain as to why the house property at 126/44, 9, B.N. Road, Lucknow, had not been disclosed by him in the return filed for the assessment year under consideration. It was submitted on behalf of the assessee that he made a verbal Hiba (gift) of the property in lieu of the dower debt to his wife, Smt. Arjumand Bano Begum. It was also stated that she had got the property mutated in her name in the records of Nagar Mahapalika. On this submission of the assessee, the WTO made following queries from the assessee:
(a) Whether the assesses has made any gift in lieu of Mehar (dower debt), if so, what was the amount of dower debt.
(b) Whether the conditions of making gift have been fulfilled.
(c) Whether Section 123 of Transfer of Property Act applies or not.
9. Since the assessee could not adduce evidence regarding the amount of Mehar (dower debt) that was determined at the time of the marriage of the assessee and about the acceptance of the gift and further since part of the property was found to be let out to Corporation Bank, Lucknow, by Major S. Qureshi in 1978 and thereafter there being no fresh agreement by Smt. Arjumand Bano Begum, the WTO held that in view of these conditions, the beneficiary of the property was the assessee. Thus, the theory of gift made by the assessee to his wife was rejected by the WTO and he held that since the assessee continued to enjoy the benefits from the property, it cannot be held that the property did not belong to him. The WTO also considered the issue from another angle i.e., that the acceptance of gift of immovable property was required to be registered under the Transfer of Property Act, failing which it cannot be relied upon and admitted as evidence. On the basis of these reasonings, the WTO held that the property belonged to the assessee and it was liable to be included in his net wealth, even if the same was gifted to his wife, by virtue of Section 4 of the WT Act; the value of this property was taken by the WTO at Rs. 13,00,400.
10. In appeal, the issue was taken up before the learned CWT(A). He was of the view that since the wife of the assessee was in possession of the property in terms of agreement dt. 6th June, 1975, which related to gift of property made in discharge of the dower debt, the property shall be deemed to be 'belonging to' the wife of the assessee in view of Expln. 1 below Section 2(m) of the WT Act r/w Section 27(iia) of the IT Act introduced w.e.f. 1st April, 1988. According to him, therefore, the value of property is to be excluded from the net wealth of the assessee. Thus, after accepting the plea of the assessee, he directed the WTO to exclude the value of this property from the net wealth.
11. Before us, Shri Prasenjit Singh, learned Sr. Departmental Representative, submitted that in absence of any registered document, the transfer of property was not completed. The learned Sr. Departmental Representative placed reliance on the order of the WTO and submitted that the learned CWT(A) was not justified in admitting fresh evidence, i.e., agreement dt. 6th June, 1975, at the appellate stage and has violated the provisions contained under r. 46A of IT Rules, 1962.
12. The learned counsel for the assessee, Shri D.B. Bhargava, advocate, traced out the entire history relating to the property, i.e., property No. 126/44, 9, B.N. Road, Lucknow. According to him, Major S. Qureshi inherited the property in 1925 from his father. His marriage took place on 12th Dec., 1953, and at the time of marriage, Mehar (dower debt) was settled at Rs. 2,00,000. He further made reference to other documents filed in the paper book and explained that the property was transferred in lieu of dower debt to Smt. Arjumand Bano Begum who took possession of the property and also carried out liabilities relating to payment of taxes, etc.
13. The learned counsel for the assessee invited our attention to the affidavit dt. 26th Feb., 2002, of Dr. Noor Khan, daughter of the assessee, and documents annexed with this affidavit, which are available at pp. 63 to 201 of the paper book. According to him, the value of the property as assessed by the approved valuer in June, 1975, was Rs. 2,94,400 and after considering the dower debt of Rs. 2,00,000 settled as per Nikahnama dt. 12th Dec., 1953, the assessee made the verbal Heba (gift) of house No.C/126/44, Bisheshwar Nath Road, Lucknow, on 6th June, 1975, to his wife and thereby a taxable gift of Rs. 39,460 was worked out after excluding the value of the house and, accordingly, vide letter dt. 2nd July, 1986, the assessee intimated the ITO (Recovery) and deposited gift tax of Rs. 2,650 on 22nd March, 1986.
14. The learned counsel also made reference to the sequence of further events and pointed out that in relation to this house, the lady, Smt. Arjumand Bano Begum filed a suit in the Court of Small Causes Court, Lucknow, against Nagar Mahapalika and order dt. 15th March, 1990, was, passed in her favour. He also stated that on the demise of Smt. Arjumand Bano Begum, Dr. Noor Khan and her other successors, applied for mutation in respect of this property and mutation was effected and the decision of Nagar Mahapalika was conveyed vide letter of Mutation Cell Zone, available at p. 68 of the paper book. The learned counsel also made reference to the letter of Superintendent, Tax Zone dt. 2nd Feb., 1993, addressed to Shri Nadir Shah Khan, Smt. Noor Khan and Smt. Shahana Ahmad intimating them that in place of Smt. Arjumand Bano Begum, their names have been substituted and recorded. In order to further corroborate the factum of transfer of property from Major S. Qureshi, the assessee, in favour of Smt. Arjumand Bano Begum, he made reference to the tax assessment for 1992-93 (copy at p. 70 of the paper book), assessment for 1993-94 (copy at p. 72 of paper book) and assessment for subsequent years.
15. The learned counsel further made reference to the AD returns and computations relating to assessments under Section 16 of WT Act, of Major S. Qureshi for asst. yrs. 1983-84 to 1989-90 and income-tax assessments for these years. He also made reference to the AD of filing returns and computations relating to assessments under IT Act and WT Act pertaining to Smt. Arjumand Bano Begum for asst. yrs. 1986-87, 1987-88, 1988-89 and 1989-90. Copies of these papers have been filed by him in supplementary paper book and are available at pp. 202 to 235 of the paper book. On the basis of these documents, the learned counsel tried to demonstrate that the property at B.N. Road, Lucknow, was not included in the net wealth of the assessee in these assessment years and was duly shown by Smt. Arjumand Bano Begum in her returns. According to him, the lady was being assessed under IT Act for rental income from this property.
16. The learned counsel also made reference to the gift-tax return for the asst. yr. 1986-87 filed by Major S. Qureshi, a copy of which is available at p. 18 of the paper book, and other papers including photocopy of Nikahnama, letter dt. 20th Feb., 1986, written by Smt. Arjumand Bano Begum, copy of letter dt. 8th July, 1986, of Major S. Qureshi addressed to ITO Recovery (Vasuli), Lucknow, and other documents filed on the paper book.
17. The contention of the learned counsel, on the basis of documents referred by him, was that property at B.N. Road, Lucknow, was gifted by the assessee in lieu of dower debt and, therefore, Smt. Arjumand Bano Begum became legal owner of the said property. It was, further, submitted by him that even if the technical objection of legal ownership is taken into account, then she can be treated as 'beneficial owner' of the property, because she held the property and derived benefit from the same. The learned counsel, further, elaborated his argument by submitting that in view of amendment made under s, 27 of IT Act and corresponding amendments made in Section 2(m) of WT Act, the beneficial owner is to be treated as real owner of the property and from that angle also the assessee did not remain the owner of the property after mutation which was effected on 18th March, 1986, and, therefore, after asst. yr. 1986-87 Major S. Qureshi did not.remain the owner of the property. The learned counsel also contended that amendment made in Section 27(iiia) of IT Act, which was made effective w.e.f. 1st April, 1988, is clarificatory in nature and shall apply retrospectively to all the pending matters. In support of his contention, he placed reliance on the decision of the Hon'ble Supreme Court of India in the case of Podar Cement (P) Ltd. (1997) 226 ITR 625 (SC). The learned counsel also placed reliance on the decision of Tribunal, Allahabad Bench, dt. 31st March, 1986, in the case of Sheik Mohd. Aiif v. ITO, a copy of which has been filed and is available on record.
18. We have carefully considered the facts and circumstances relating to this matter, the entire material on record to which our attention was invited and the rival submissions. The Nikahnama available at pp. 13 and 14 of the paper book shows that at the time of marriage, Mehar of Rs. 2,00,000 was settled. According to the assessee, property No. C-126/44, B.N. Road, Lucknow, was gifted on 6th June, 1975, by oral gift in lieu of dower debt. The transaction of oral gift has been mentioned in letter dt, 20th Feb., 1986, in response to which the Lucknow Nagar Mahapalika recorded name of Smt. Arjumand Bano Begum in place of Major S. Qureshi. Thus, oral gift was accepted by Smt. Arjumand Bano Begum and on the basis of this oral gift, she acted upon treating herself as owner of the property. The husband or other heirs did not object to this transaction of gift. Major S. Qureshi also excluded this property from his wealth tax returns and income from this property was not shown by him after 1986-87 as is evident from the returns available on paper book. On the other hand, Smt. Arjumand Bano Begum had shown income from this property in her computation for asst. yr. 1986-87 available at p. 214 of the paper book. In view of these facts, the position is clear that the assessee, after making gift of the property in the name of his wife in lieu of dower debt, did not treat himself as the owner of that property. In other words, after gift, the property belonged to Smt. Arjumand Bano Begum.
19. The AO while passing assessment order for asst. yr. 1986-87 considered the issue relating to the gift of property at B.N. Road, Lucknow, by the assessee, in favour of the wife and held that the assessee failed to show that in lieu of dower debt or Mehar the properties was validly transferred. He also made reference to Section 123 of Transfer of Property Act and observed that an agreement of immovable property is retired to be registered with the Registrar or Sub-Registrar under the Transfer of Property Act in Uttar Pradesh and since there was no registered gift deed or transfer deed, the property in question remained with the assessee and was liable to be included in his net wealth.
20. So far as asst. yrs. 1986-87 and 1988-89 are concerned, the learned CWT(A) although accepted the plea that the wife of the assessee was beneficial owner of the property being in her possession, but he observed that concept of beneficial ownership even if applicable in the context of Section 27 of IT Act, is not recognized under WT Act. He made reference to the decision in case of CWT v. Bishwanath Chatterji (1976) 103 ITR 536 (SC) and held that in view of this decision, the assets over which the assessee has legal dominion are includible in his net wealth, even if the asset is not in his physical possession. According to him, since the agreement of transfer for transferring the property by the assessee to his wife was not registered, the property is held to belong to the assessee and accordingly its value shall be includible in his net wealth.
21. We have gone through the order of learned CWT(A) for the asst. yr. 1986-87 and for subsequent years. It is true that in view of the decision of Hon'ble Allahabad High Court in the case of Ghulam Abbas v. Resia Begum AIR 1951 All 86 and in view of the decision of Hon'ble Supreme Court of India in the case of CWT v. Bishwanath Chatterji (supra), the test of legal ownership is to be applied and for the application of test, it is to be seen as to whether a valid and legal title passed from the assessee to his wife in accordance with law, i.e., by a valid transfer deed registered in accordance with the relevant rules. If this test is applied, then we will come to the decision that the assessee had not transferred legal ownership of the property in favour of his wife because the so-called gift deed was not a registered document, rather it was simply an oral gift which was subsequently accepted by the wife of the assessee. Thus, there was no valid registered document for transferring the property in the name of Smt. Arjumand Bano Begum. It may also be pointed out that gift of immovable property in lieu of dower debt is treated as sale requiring registration of transfer deed. However, the aspect of deemed ownership cannot be overruled or ignored, because the property may not be legally owned by the person, but if he or she is enjoying possession of the property and also income from it, then being beneficial owner, he or she should also be charged with the tax liability. This issue came for consideration before the Hon'ble Supreme Court of India in the case of R.B. Jodha Mal Kuthiala v. CIT (1971) 82 ITR 570 (SC). In that case, the erstwhile owner of the property was required to pay income-tax on the house property under Section 9 even after the said property had been vested with the Custodian of Evacuee Property by virtue of Section 6(1) of the Pakistan (Administration of Evacuee Property) Ordinance, 1949. The contention of the Revenue was that notwithstanding vesting of the property in the Custodian, the legal ownership remained with the assessee and, therefore, Section 9(1) of the old Act was attracted. This contention of the Department was repelled by the Hon'ble Supreme Court of India in the following words :
"The question is who is the owner referred to in this section. Is it the person in whom the property vests or is it he who is entitled to some beneficial interest in the property? It must be remembered that Section 9 brings to tax the income from property and not the interest of a person in the property. A property cannot be owned by two persons, each one having independent and exclusive right over it. Hence, for the purpose of Section 9, the owner must be that person who can exercise the rights of the owner, not on behalf of the owner but in his own right."
22. The Hon'ble Mr. Justice Hegde, J. further observed as under :
"It is true that equitable considerations are irrelevant in interpreting tax laws. But, those laws, like all other laws, have to be interpreted reasonably and in consonance with justice. Again at p. 577, it was held that "for determining the person liable to pay tax, the test laid down by the Court was to find out the person entitled to that income". Again at p. 578 it was observed : "No one denies that an evacuee from Pakistan has a residual right in the property that he left in Pakistan. But the real question is, can that right be considered as ownership within the meaning of Section 9 of the Act. As mentioned earlier that section seeks to bring to tax income of the property in the hands of the owner. Hence, the focus of that section is on the receipt of the income...... ..The meaning that we give to the word 'owner' in Section 9 must not be such as to make that provision capable of being made an instrument of oppression. It must be in consonance with the principles underlying the Act."
23. In view of the ratio of that decision of Hon'ble Supreme Court of India, the liability of the person who receives or is entitled to receive the income from the property, in his right, has been fixed.
24. In the case of CIT v. Podar Cement (P) Ltd. (supra) the Hon'ble Supreme Court of India has further explained and applied the concept of beneficial ownership. This decision is after amendment inserted in Section 27 of IT Act through Finance Act, 1987, w.e.f. 1st April, 1988. The Hon'ble Supreme Court of India in the case of Podar Cement (P) Ltd. has also made reference to the memorandum explaining the provisions in the Finance Bill, 1987, concerning Section 27. The following portion of the memorandum, as has been extracted by the Hon'ble Supreme Court of India, is being reproduced below :
"SIMPLIFICATION AND RATIONALISATION OF PROVISIONS Enlarging the meaning of 'owner of house property'
27. Under the existing provisions of Section 22 of the IT Act, any income from house property is chargeable to tax only in the hands of the legal owner. As per Section 27 of the IT Act, certain persons who are not otherwise legal owners are deemed to be the owners for the purposes of these provisions.
Under the Transfer of Property Act, the transfer of ownership can be effected only by means of a registered instrument. However, in recent times various other devices are sought to be employed for transferring one's ownership in property. As a result, there are situations in which the actual owner, say, of an apartment in a multi-storied building, or a holder of a power of attorney is not the legal owner of a property. In some cases, pending resolution of disputes, the legal as well as the beneficial owners are assessed to tax in respect of the same income.
As measure of rationalization, the Bill seeks to enlarge further the meaning of the expression 'owner of the house property', given in Clause (iii) of Section 27 by providing that a person who comes to have control over the property by virtue of such transactions as are referred to in Clause (f) of Section 269UA will also be deemed to be the owner of the property. The amendment also seeks to enlarge the applicability of this clause to a member of a company or other AOP.
Corresponding amendments have also been proposed in regard to the definition of 'transfer' in Section 2(47) of the IT Act, Section 2(m) of the WT Act defining 'net wealth' and Section 2 (xii) of the GT Act defining 'gift'.
These amendments will take effect from 1st April, 1988, and will, accordingly, apply in relation to the asst. yr. 1988-89 and subsequent years."
25. Thereafter, the Hon'ble Supreme Court of India has concluded as under :
"We are conscious of the settled position that 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, Registration Act, etc. But, in the context of Section 22 of the IT Act, having regard to the ground realities and further having regard to the object of the IT Act, namely, 'to tax the income', we are of the view, 'owner' is a person who is entitled to receive income from the property in his own right."
26. The Hon'ble Supreme Court of India has also considered the aspect relating to retrospectivity of the amended provision and held as under:
"From the circumstances narrated above and from the Memorandum explaining the Finance Bill, 1987 [see (1987) 165 ITR (St) 161], it is crystal clear that the ' amendment was intended to supply an obvious omission or to clear up doubts as to the meaning of the word "owner" in Section 22 of the Act. We do not think that in the light of the clear exposition of the position of a declaratory/clarificatory Act, it is necessary to multiply the authorities on this point. We have, therefore, no hesitation to hold that the amendment introduced by the Finance Bill, 1987, was declaratory/clarificatory in nature so far as it relates to Sections 27(iii), (iiia) and (iiib). Consequently, these provisions are retrospective in operation. If so, the view taken by the High Courts of Patna, Rajasthan, and Calcutta, as noticed above, gets added support and consequently the contrary view taken by the Delhi, Bombay and Andhra Pradesh High Courts is not good law."
27. So far as the WT Act is concerned, similar provision was introduced in Section 2 by Clause 75, which is as under :
75. Amendment of Section 2.--In Section 2 of the WT Act, 1957 (27 of 1957) (hereinafter referred to as the WT Act), in Clause (m), the following Explanation shall be inserted at the end, w.e.f. the 1st day of April, 1988, namely :
"Explanation : A building or part thereof referred to in Clause (iii), Clause (iiia) or Clause (iiib) of Section 27 of the IT Act shall be includible in the net wealth of the person who is deemed under the said clause to be the owner of that building or part thereof;"
28. It may be pointed out that the amendment made in Section 4(1)(a) and Section 2(m) of WT Act shall also operate retrospectively in view of the decision of Hon'ble Supreme Court of India in the case of CIT v. Podai Cement (P) Ltd.
29. Thus, in view of the above referred amendment, the property beneficially owned by a person or belonging to that person is to be included in his or her net wealth. Thus, in the context of the amended provisions which are to be applied retrospectively i.e., to asst. yr. 1986-87 onwards in the case of the assessee, the concept of beneficial ownership has to be taken into account, meaning thereby, even if the wife of the assessee was not legal owner for want of registered transfer deed, she can still be regarded as beneficial owner and the property belonging to her has to be included in her net wealth. After going through several documents placed before us by the assessee, there remains no doubt or dispute that the wife of the assessee was exercising the right of ownership and thus rights were being exercised by her not on behalf of her husband, namely, the present assessee, but in her own rights.
30. In view of the above position, the assessee cannot be treated to be beneficial owner of the property. The property did not belong to him, and therefore, it is to be excluded from his net wealth after the amendment as well as before the amendment for pending matters.
31. In the case of Shri Sheik Mohd. Arif v. ITO (supra), the Tribunal, Allahabad Bench, has considered the case of transfer of property by way of gift in lieu of dower debt. In that case also, Shri Sheik Mohd. Arif had made gift of immovable property in favour of Smt. Farzana Aiif who filed a photocopy before ITO stating that she had received the property and also possession thereof on 30th March, 1977. It was also shown that her name had been recorded in the municipal records and that she was also paying municipal tax. The ITO accepted the claim of the assessee namely, Shri Sheik Mohd. Arif that he was no longer the owner of the said property and it was in the ownership of his wife Smt. Farzana Aiif, but CIT did not agree with the ITO, as he was of the view that transfer of property by the assessee to his wife, as part payment of dower debt, was itself illegal and invalid. He, therefore, set aside the assessment made by the ITO and directed him to proceed to make reassessment from the stage of filing of the returns and to recompute the taxable income. The orders of the CIT passed under Section 263 of the IT Act for two assessment years weie challenged before the Tribunal.
32. So far as the question of ownership of the property transferred as part payment of Mehar is concerned, the Tribunal, after considering the principle laid down by the Hon'ble Allahabad High Court in the case of Gulam Abbas v. Razia Begum (1951/All/1986), held that since there was no registration, there was no legal transfer in favour of the wife. However, the Tribunal also considered the matter from another angle i.e., if there was no legal transfer of the property to the wife, could she still be assessed on account of her income from the property given to her under Section 22 of the Act. The Tribunal, after considering the circumstances and facts of the case, held that the assessee who was in occupation of the building as owner to all intents and purposes, except registry in her favour, was liable to tax under Section 22 of the IT Act. On the basis of the theory of real income also, the Tribunal held that the assessee, namely, Shri Sheik Mohd. Arif was not deriving any real income from the property and, therefore, the same cannot be assessed in his hands.
33. The concept of real wealth and actual wealth, if applied in the present case, will make it clear that the property did not actually and really remain in the name of the assessee, rather it belonged to Smt. Arjumand Bano Begum. The only difference which may be pointed out is that in WT Act, different terms have been adopted, however, since the assessee was no more a legal beneficiary of the property, he did not retain the wealth in the property. As a legal beneficiary of the property, he did not retain the wealth in the property for any purpose, much less for the purpose of tax liability and WT Act. From this angle also, the property given by him to his wife in lieu of dower debt and actually and factually occupied by his wife by acquiring interest in the property, no more remained with him.
34. Coming to the facts of the present case, the main objection of the WTO was that the transaction of gift was not evidenced by a registered document. A gift, under Mohmadan Law, may be made even orally, Section 129 of Transfer of Property Act, which is a saving clause and which provides that nothing in this chapter (Chapter 7 of gifts) shall be deemed to effect the rule of Mohmadaa Law. Under Mohmadan Law, the essential of gifts are that :
(1) A declaration of gift by the donor.
(2) Its acceptance, expressed or implied by donee.
(3) Delivery of possession.
35. In the present case, these ingredients are satisfied. Otherwise also, since the lady Smt. Arjumand Bano Begum was exercising the rights of ownership on the basis of the gift, she can be treated as a beneficial owner of the property and this property is to be treated as belonging to her for wealth-tax purposes also.
36. The Department has also challenged the order of learned CWT(A) on the ground that he admitted fresh facts in violation of Rule 46A of IT Rules. An examination of order of learned CWT(A) shows that he has considered the matter in detail in asst. yr. 1986-87 which is the main order, which has been followed in the subsequent assessment years. On perusal of the order of learned CWT(A), it is not found that new or fresh evidence was admitted by him and in case any document was considered by the learned CWT(A) without confronting the WTO, the objection should have been taken at that level itself. Otherwise also, during arguments before us, the learned Sr. Departmental Representative could not effectively substantiate this ground. Hence, this objection of the Department also fails.
37. In view of the above, we uphold the order of the learned CWT(A) and reject the ground taken by the Department.
Ground No. 238. This ground challenges the direction of learned CWT(A) to exclude the value of structure on the plot of land at C-145, Nirala Nagar, Lucknow, and also the value of other assets of Hotel Tourist from the net wealth of the assessee.
39. After considering the partnership of Hotel Tourist in p. 17 of the order, the learned CWT(A) has held as under:
"It is recalled that the partnership styled Hotel Tourist has been held to be a genuine partnership by the undersigned vide order in appeal No. 11/W-(2)/Lko./1991-92, dt. 25th Feb., 1994, in the case of Hotel Tourist. It has also been held therein that the property on the plot of land at C-145, Niralanagar, Lucknow, was constructed by the partnership out of its fund. It would, therefore, follow that the super structure on the plot of land is not owned by the appellant but buy the partnership. The appellant only owns the plot of land on which the super structure stands. The value of the plot of land alone is, therefore, held to be includible in the appellant's net wealth."
40. While deciding WTA No. 179/All/1994 in the case of Asst. CWT v. Major S. Qureshi, we have upheld the findings of learned CWT(A) by observing as under:
"We have carefully considered the facts and circumstances relating to this matter and the material to which our attention was invited and the rival submissions. On examination of the lease deed dt. 18th Dec., 1980, the learned CIT(A) found that the partnership firm constructed on the property of the land at Nirala Nagar plot with its firm and rented out to the firm M/s Aristo Pharmaceuticals. The rent was realized in the bank account of the partnership firm and profit was distributed amongst the partners. In view of the above fact, in our opinion, the learned CIT(A) was justified in holding that the value of the building constructed by the partnership out of its funds cannot be included in the net wealth of the assessee. It may be pointed out that vide our order dt. 24th Jan., 2002, rendered in ITA No. 618 to 621/A/94, we have upheld the view taken by the learned CIT(A) that M/s hotel Tourist was a genuine firm and was accordingly entitled for registration. In view of these findings, the value of the building constructed by the firm, namely, M/s Hotel Tourist is to be included in the net wealth of the firm and not in the net wealth of the assessee. In view of the above, we uphold the findings of the learned CIT(A) and reject the ground taken by the assessee."
41. In view of our finding in ITA No. 618 to 621/A/94 and our finding recorded in WTA No. 179 and 180/A/94, we have treated the partnership firm to be valid. Hence, the value of the building constructed by the firm, namely, M/s Hotel Tourist is to be included in the net wealth of the firm and not in the net wealth of the assessee.
42. In view of the above, we uphold the findings of learned CWT(A) in excluding the value of structure of plot on the land at C-145, Nirala Nagar, Lucknow, and value of assets of M/s Hotel Tourist from the wealth of the assessee.
43. This ground is also rejected.
44. In the result, the appeal stands dismissed.
C.O. No. 3/All/199545. The assessee has taken following effective ground in this cross-objection :
"(1) That in the facts and circumstances of the case, the CWT(A), Lucknow, was wrong in assessing the value of the land at Rs. 1,55,000, when he should have accepted the value of land at Rs. 12,000, as valued by the approved valuer on the basis of lease rent. Alternatively, the value assessed is too excessive."
46. Before us, the learned counsel for the assessee, Shri D.B. Bhargava, submitted that the learned CWT(A) was not justified in valuing the plot at Rs. 1,70,000 because the value of the plot should have been taken on the basis of lease rent.
47. The learned Senior Departmental Representative, on the other hand, supported the order of learned CWT(A) on this issue. The learned CWT(A) has considered the issue in para 5 of his order, which is as follows :
"For the reasons discussed in the appellant's appeal for asst. yr. 1986-87 in appeal No. 54/Dhankar/Lko./1991-92 of even date, it is held that the value of plot of land 'alone is includible in the appellant's net wealth. The plot of land was valued at Rs. 1,28,000 for the asst. yr. 1986-87. Considering annual increase of approximately 10 per cent in real estate, the plot is valued at Rs. 1,70,000 for the year under consideration. The addition of Rs. 8,24,700 is, therefore, reduced to Rs. 1,70,000."
48. In support of his contention, the learned counsel for the assessee, Shri D.B. Bhargava made reference to the circle rates fixed by the District Magistrate, Lucknow, by his order dt. 30th March, 1991, according to which the circle rates for the residential plots at Nirala Nagar were fixed at Rs. 10 to Rs. 15 per sq. ft. He, further, pointed out that the rates of Bisheshwar Nath Road were at Rs. 30 to Rs. 35 per sq. ft. and, therefore, considering these rates, the valuation as adopted by the learned CWT(A) is not at all justified.
49. On going through the order of learned CWT(A), it is not made out as to what method of valuation has been applied. The rules of determination of value of assets have been laid down in Schedule III. Part III of this Schedule relates to immovable property. In view of Rules 4, 5, 6 and 7, the value is to be determined on the basis of net maintainable rent i.e. by adopting rate capitalization method and in case this method is not found applicable, then resort may be taken to r. 8 by taking recurrence course and procedure laid down in that rule. Rule 20 which is contained in part H of Schedule m covers the cases where it is not possible to apply Rules 3 to 19 of Schedule III. In the present case, neither rent capitalization method has been applied nor recourse has been taken to provisions contained in r. 8 nor valuation was done through Valuation Officer as provided under r. 20. The details and the method on the basis of which the valuation was arrived at by the learned CWT(A) has not been clearly stated.
50. In paras 18 and 19 of his order dt. 23rd Aug., 1994, for asst. yr. 1986-87, the learned CWT(A) has rejected the valuation made by the assessee on the basis of approved value's estimate at Rs. 12,000 which appears to be on the basis of lease rent of Rs. 100 per month. The learned CWT(A) has then proceeded to consider the rates notified by the District Magistrate for the payment of stamp duty, however, he has quoted the rates of land at B.N. Road area, which may be fixed at Rs. 44 per sq. ft. in 1986. On that basis, the learned CWT(A) applied the rate of Rs. 40 per sq. ft. and valued the plot of the land at Nirala Nagar, measuring 3,200 sq. ft. at Rs. 1,28,000. It is clear that the learned CWT(A) has not taken into account the circle rates for Nirala Nagar and has not justified his action by citing any example or comparable case. Thus, after going through the order of learned CWT(A), we are unable to sustain his approach and findings.
51. We, therefore, set aside his findings on this issue and restore the same to WTO for deciding the issue afresh in accordance with relevant rules. For doing so, the assessee shall be provided full opportunity of being heard.
52. The cross-objection is, therefore, allowed for statistical purposes.
WTA No. 182/All/199453. The Department has taken identical grounds in this appeal for challenging the order of learned CWT(A). Since the facts and circumstances relating to this assessment year are just identical to the facts and circumstances relating to the asst. yr. 1988-89, following the same approach and applying the same reasons as have been applied by us for rejecting the grounds taken by the Department in that appeal, we reject the grounds of Revenue in this appeal also.
54. Hence, this appeal is also dismissed.
C.O. No. 4/All/199555. The ground taken in this cross objection by the Department is identical to ground No. 1 taken in cross-objection No. 3.
56. While deciding C.O. No. 3, we have set aside the order of learned CWT(A) and have restored the same to the WTO for deciding the issue relating to valuation of land at Nirala Nagar plot owned by the assessee as per relevant rules referred by us in that order. Hence, adopting the same approach, we decide the ground taken in this C.O. by the Department and restore the matter to WTO for deciding the same afresh as per relevant rules for this assessment year also, by providing full opportunity of being heard, to the assessee.
57. Thus C.O. is decided accordingly.
Cross Objection No. 158. In this cross-objections, the assessee has taken as many as 6 grounds.
Ground Nos. 1 & 259. These grounds are directed against the findings of learned CWT(A) in holding that the immovable property situated at 126/44, 9, B.N. Road, Lucknow, was assessable in the hands of the assessee (respondent).
60. The contention of the learned counsel for the assessee, Shri D.B. Bhargava, in support of this ground of C.O. was that property situated at 126/44, 9, B.N. Road, Lucknow, was gifted by Major S. Qureshi to his wife in lieu of dower debt and, therefore, the property is no more the wealth of the assessee to be included in his wealth. The learned CWT(A) has rejected the contention of the assessee and held that even if the property was not in his physical possession, the assessee had legal domain over the property and the same was includible in his net wealth. It may be pointed out that in asst. yrs. 1986-87 and 1987-88, the learned CWT(A) has included the property in the net wealth of the assessee whereas in subsequent two years, i.e., asst. yrs. 1988-89 and 1989-90, he has excluded the same from his net wealth. He has done so by taking into account Expln. 1 below Section 2(m) of WT Act r/w Section 27(iia) of IT Act introduced w.e.f. 1st April, 1988, i.e., from asst. yr. 1988-89
61. It may be pointed out that the above amendment is clarificatory in nature as held in the case of CIT v. Podar Cement (P) Ltd. (supra). This amendment shall be applicable retrospectively i.e., it shall apply to the pending appeals of 1986-87 and 1987-88 also.
62. So far as the factual position is concerned, in view of our findings recorded while deciding appeal for asst. yr. 1988-89, we have held that Smt. Arjumand Bano Begum became the legal beneficiary of the property gifted to her in lieu of dower debt from asst. yr 1986-87. Thus, factual position is not dissimilar in asst. yrs. 1986-87 and 1987-88. Therefore, in view of our findings recorded while deciding WTA No. 181/All/1994, we hold that in asst. yrs. 1986-87 and 1987-88 also the assessee was not really the owner of the property or beneficial owner thereof and the property did not belong to him, rather it belonged to Smt. Arjumand Bano Begum.
63. In view of the above-mentioned facts and circumstances, we are of the view that the learned CWT(A) was not justified in not excluding the property at B.N. Road, Lucknow, from the net wealth of the assessee in asst. yr. 1986-87.
64. Hence, ground Nos. 1 and 2 taken by the assessee in C.O. Mo. 1 stand allowed.
Ground No. 365. This ground was not pressed by the assessee at the time of hearing of appeal. Hence, it is rejected, as not pressed.
Ground No. 466. This ground challenges the value of land of Nirala Nagar plot determined by the learned CWT(A) at Rs. 1,28,000. While deciding C.O. Nos. 3 and 4 relating to this issue in asst. yrs. 1988-89 and 1989-90, we have set aside the finding of learned CWT(A) and restored the matter to the WTO for deciding the same afresh as per the relevant rules and after giving full opportunity to the assessee for being heard.
67. Our findings and directions on this issue given in C.O. Nos. 3 and 4 shall also apply to ground No. 4 in C.O. No. 1 and the value of the property shall be redetermined by the WTO for this assessment year also as per our directions given in asst. yr. 1988-89.
Ground Nos. 5 & 668. These grounds are of general nature which does not require any specific adjudication. Hence, these grounds are rejected.
Cross Objection No. 2This cross-objection is, therefore, allowed in part for statistical purposes and accordingly disposed of.
Ground Nos. 1 & 269. These grounds are identical to ground Nos. 1 and 2 taken in C.O. No. 1. Hence, our order on these grounds in that C.Os shall also apply in asst. yr. 1987-88.
Ground Nos. 3 to 670. These grounds were not pressed by the assessee at the time of hearing of appeal. Hence, these grounds are rejected, as not pressed.
This cross-objection is, therefore, partly allowed for statistical purposes and is disposed of accordingly.