Madras High Court
Late P. Appavoo Pillai (By A. Vimalan) vs Commissioner Of Wealth-Tax on 6 December, 1972
Author: V. Ramaswami
Bench: V. Ramaswami
JUDGMENT Ramanujam, J.
1. One Appavoo Pillai, the asses see, was the proprietor of a bus service and a partner in the firm of M/s. Ratna Studio at Dharmapuri. He filed a return of net wealth on the valuation date, March 31, 1957, showing his total wealth at Rs. 2,42,692. He did not include in that return the properties standing in the name of his wife, Lakshmikanthammal. The said Lakshmikanthammal, in her turn, submitted a separate return of net wealth in respect of the properties standing in her name as on March 31, 1957. The Wealth-tax Officer, however, found that the said Appavoo Pillai had been in the habit of investing monies sometimes in his name and sometimes in the name of his wife, that the various advances and investments had been entered in the money-lending accounts maintained by the assessee, that no distinction had been made between the investments in his own name and in the name of his wife, that there was not even a transfer of funds from the assessee's folio to the folio of the wife and that in fact there was no folio in the name of the assessee's wife in the money-lending books prior to March 31, 1956. From these facts the Wealth-tax Officer concluded that all the advances and investments in the name of the wife had been made only by the assessee, that the income from these investments had been ultilised by the assessee himself, that the assessee never treated the amounts invested in the name of his wife as gifts and that, therefore, the value of the movable assets in the name of his wife should be added to the net wealth returned by the assessee. He also felt that the immovable properties in the name of the assessee's wife had been purchased with the funds provided by the assessee and, therefore, those properties should also be included in the net wealth of the assessee.
2. The order, of the Wealth-tax Officer clubbing the properties standing in the name of the assessee's wife with those belonging to him was challenged by the assessee before the Appellate Assistant Commissioner, who, however, upheld the clubbing observing that the assessee had not, in fact, transferred the funds representing the value of the movable and the immovable properties in the name of his wife and that no gift has been established in respect of any of those properties.
3. On appeal to the Tribunal, it held that so far as movable properties, i.e,, advances and investments standing in the name of the assessee's wife are concerned, there is no evidence to show that the investments had-been made out of the wife's own funds, that the assessee intended to make a provision for his wife in making the investments in her name, that all the funds invested in the name of his wife in fact had their origin in the assessee, and that, therefore, the inclusion of the value of the movables standing in the name of the wife in the net wealth of the assessee was justified. But as regards the immovable properties standing in the name of the assessee's wife the Tribunal held that the transfers had been effected in the name of the wife prior to April 1, 1956, and that, therefore, it could not be included in the net wealth of the assessee in view, of Section 4(4) of the Wealth-tax Act. At the instance of the assessee the following questions have been referred to this court for decision :
" 1. Whether, on the facts and in the circumstances of the case, the inclusion of the movable assets belonging to Lakshmikanthammal, the wife of the assessee, P. Appavoo Pillai, in the taxable wealth of the assessee is lawful ?
2. Whether, on the facts and in the circumstances of the case, the movable assets of Lakshmikanthammal, are liable to be included in the taxable wealth of the assessee in view of or having regard to Section 4(4) of the Wealth-tax Act?"
4. Mr. Swaminathan, learned counsel for the assessee, contends before us in the forefront that the Tribunal had failed to consider the applicability of Section 4(4) of the Wealth-tax Act with reference to movable properties standing in the name of the assessee's wife, while it applied that section in respect of immovable properties and granted relief to the assessee in relation thereto. Secondly, it is contended that the Tribunal has overlooked an important piece of evidence, a statement of wealth given by the assessee even before the Wealth-tax Act came into force, wherein he has treated both the movable and immovable properties standing in the name of his wife as exclusively belonging to her. It is also contended by the learned counsel that in any event the materials on record will clearly establish the title of the assessee's wife to the movable properties in question.
5. As the assessee had got relief before the Tribunal in respect of the immovable properties standing in the name of his wife, we have to consider whether the assessee is entitled to the relief in respect of the movable properties standing in the name of the assessee's wife. The movable properties have been valued at Rs. 1,75,594 and they comprise advances, deposits and investments as under:
Rs.
1.
27-9-1949 : Loan on promissory note executed by one C. P. Ramaswamy Naidu in favour of the assessee's wife ...
12,000
2. 31-5-1950: On a mortgage executed by one Rama-linga Mudaliar ...
12,500
3. 6-11-1950 : On a mortgage executed by Ratna Studio in favour of the assessee's wife ...
1,15,000
4. 20-12-1953 : On mortgage executed by one Narayana Rao ...
1,500
5. 14-10-1954 : On mortgage executed by Hanumantha Rao ...
3,000
6. Jan., 1957 : Deposit with Salem Dharmapuri Union Motor Service Ltd. in the name of the wife ...
21,594
7. Shares in the above company in the name of the wife ...
2,000
8. Cash ...
8,000 Total ...
1,75,594
6. Items 1, 3, 6, 7 and 8 are shown to have been in the name of the assessee's wife. There are no details available as regards the other items. As already stated, the assessee's wife had also filed a wealth statement as on March 31, 1956, in which all the above items of movable properties as well as immovable properties standing in her name had been shown. A copy of the assessee's letter dated December 13, 1956, to the Income-tax Act Officer, Salem, shows that he has enclosed his statement of wealth as also the statement of wealth of his wife along with that letter. The learned counsel points out that as per the wealth statement given by both the assessee and his wife as on March 31, 1956, both movable and immovable properties standing in the name of the wife are her independent and exclusive properties and that even if the original consideration in respect of some of the transactions, both movable and immovable properties, had proceeded from the assessee, once he had declared the properties as that of his wife, they cannot be treated as properties of the assessee on the valuation date. It is not as if the Tribunal was not aware of the wealth statements filed by the assessee and his wife as on March 31, 1956, earlier to the coming into force of the Wealth-tax Act. But what the Tribunal says is that notwithstanding those wealth statements the treatment of the movable properties in the accounts of the assessee showed that the assessee is still the beneficial owner of those items and that, therefore, they should all be taken to be benami investments by the assessee in the name of his wife. If the investments are benami for the benefit of the assessee, then the inclusion of the same in the assessee's wealth could not be taken exception to. But what the learned counsel says is that there is no material for the Tribunal to come to the conclusion that the investments have been made by the assessee for his own benefit in the name of his wife. But we are of the view that the materials referred to by the Tribunal do clearly lead to the inference that the investments were made only for the benefit of the assessee. The facts referred to by the Tribunal are these : Though the investments are in the name of the assessee's wife they find a place in the money-lending books of the assessee. No distinction had been made by the assessee between his own investments and those in the name of his wife. There was in fact no credit for any amount in the name of his wife. It has also been conceded by the assessee before the Tribunal that there is no evidence to show that the advances and investments had been made out of the wife's own funds. The assessee's explanation that he intended to make provision for his wife and, therefore, made the advances and investments in the name of his wife had not been established. The assessee executed a will on March 18, 1957. There was no reference to any provision having been made for his wife in the will though there was a reference therein to the provisions made in favour of his children. To prove such an intention there is not even the transfer of funds from the assessee's folio to the folio of his wife. In fact it is found that there is no folio in the name of the assessee's wife. On these materials the Tribunal came to the conclusion that the advances and investments made in the name of his wife are only benami for the benefit of the husband. We are not inclined to hold that the finding reached by the Tribunal that the investments have been made by the assessee benami in the name of his wife does not follow from the material set out above. Notwithstanding the wealth statement given by the assessee and his wife as on March 31, 1956, showing the advances and investments' in the name of the wife as her wealth, the treatment of the advances and investments in the books of the assessee clearly shows that the beneficial owner of the said advances and investments was the assessee himself. We are not also inclined to accept the contention of the learned counsel that we must go only by the wealth statement given by the assessee prior to the coming into force of the Wealth-tax Act and overlook the treatment of the said advances and investments as not conclusive. We ate inclined to agree with the conclusion reached by the Tribunal on the materials on record that the advances and investments were only made by the assessee in the name, of his wife without any intention to benefit her.
7. Even otherwise, the question whether advances and investments made by the assessee in the name of his wife are benami for his benefit is one of fact and, as already pointed out, the Tribunal had some material to base that finding. It is well established that the question of benami is one of fact. In Sree Meenakshi Mills Ltd. v. Commissioner of Income-tax, [1957] 31 I.T.R. 28, [1936] S.C.R. 691 (S.C.) their Lordships of the Supreme Court have held that a finding on a question of fact could be attacked under Section 66(1) as erroneous in law only when there is no evidence to support it or when it is perverse. In this case the finding of benami has been given by the Tribunal on an inference from the basic facts set out above and, therefore, it is purely one of fact. This court in a recent decision in Commissioner of Income-tax v. U. G. Krishnaswami Naidu, [1972] 86 I.T.R. 239 (Mad.) has held that the inference drawn by the Tribunal from proved facts that a transaction was benami does not involve the application of any principle of law, and, therefore, such a finding which is purely one of fact cannot be attacked in a reference under Section 66 of the Income-tax Act.
8. The learned counsel for the assessee also contends that the Tribunal has not considered the applicability of Section 4(4) of the Wealth-tax Act to movable properties standing in the name of the assessee's wife, though that section was applied and relief granted in respect of immovable properties. But on the finding given by the Tribunal that the movable properties consisting of advances and investments are benami and that the assessee continued to be the beneficial owner of the same, there is no question of applying Section 4(4) as there was in fact no transfer before the coming into force of the Act in relation to movable properties and the Tribunal is justified in not applying Section 4(4) so far as the movable properties are concerned.
9. The result is that the reference is answered in the affirmative and against the assessee. The revenue will have its costs from the assessee. Counsel's fee Rs. 250.