Income Tax Appellate Tribunal - Hyderabad
Smt. Veena Bhalla vs Wealth-Tax Officer on 25 November, 1999
ORDER
O.K. Narayanan, Accountant Member
1. These three appeals are filed by the assessee. The relevant assessment years are 1986-87, 1987-88 and 1991-92. These appeals arise out of regular assessments completed under section 16(3) of the Wealth-tax Act, 1957. These appeals are instituted against the common order passed by the Commissioner of Wealth-tax (Appeals)-4, Hyderabad, vide his order dated 28-11-1995.
2. Only one issue is involved in these appeals. The issue relates to the exclusion of a house property at Ramananthapur, Hyderabad, for the purposes of wealth-tax assessments, for the years under appeal. The grounds of appeal are common. They, as appearing in the appeal for assessment year 1986-87, are as follows -
"...
2. The learned Commissioner of Income-tax erred in not appreciating fact that the value of the property cannot be determined at an amount exceeding Rs. 8,00,000 in view of Agreement of Sale executed by appellant, on the facts and in the circumstances of the case.
3. The learned Commissioner of Income-tax erred in not appreciating fact that the valuation of the property which is subject to an Agreement of Sale cannot be done de-hors the Agreement of Sale, on the facts and in the circumstances of the case.
4. The learned Commissioner of Income-tax erred in not appreciating fact that even it is assumed that the decision of Supreme Court in the case of Nawab Sir Mir Osman Ali Khan v. CWT [1986] 162 ITR 888 is applicable, the market value of the property cannot at more than Rs. 8,00,000 in view of the Agreement of Sale entered into the appellant, on the facts and in the circumstances of the case.
5. The learned Commissioner of Income-tax erred in not appreciating fact that the Wealth-tax Officer was not correct determining the fair market value of property at Rs. 33,64,000, on the facts and in the circumstances of the case.
6. ....."
3. We heard both sides in detail. The assessee owned property bearing No. 4/117 to 118 situated at Ramananthapur, Hyderabad. The value of this property was declared at cost at Rs. 1,19,500. It was a self-occupied house property. Exemption was therefore, claimed under section 5(1)(iv). This was the position upto the Assessment year 1985-86. The assessee entered into an agreement to sell the property on 14-4-1985, i.e., during the previous year relevant to assessment year 1986-87. According to the assessee, the property was virtually sold, even though the sale deed was not registered with the Registrar's Office as per the provisions of Indian Registration Act. But for that registration, the property was virtually sold for all practical purposes; possession was handed over; and the entire consideration of Rs. 8 lakhs in terms of sale agreement was received by the assessee. Moreover, the assessee had executed an irrevocable power of attorney in favour of the buyer of the property, so that the conveyance deed could be registered as and when it is convenient for the buyer. On the basis of these facts, assessee claimed before the Assessing Officer that she was not legally in the possession and enjoyment of the house property at Ramananthapur, and for wealth-tax purposes she was not the owner thereof. Accordingly she did not include the value of the said house property in her returns of wealth for the assessment years 1986-87, 1987-88 and 1991-92.
4. But the Assessing Officer relying on the decision of the Hon'ble Supreme Court in the case of Nawab Sir Mir Osman Ali Khan v. CWT [1986] 162 ITR 888 (28 Taxman 641), held that as the property was not conveyed through a registered document as required by law, the assessee was still the legal owner of the property and the title of the property exclusively vested on the assessee. Therefore, he held that the assessee cannot run away from the ownership of the property, and she was bound by law to disclose the value of that property in her returns of wealth, and have the same assessed to tax under the Wealth-tax Act, 1957. Further, he held that since the house property was no longer used by the assessee for her residential purposes, assessee was not entitled to exemption under section 5(1)(iv) which was available only in respect of a self-occupied property. Therefore, the Assessing Officer held that the property has to be valued at fair market value for the purposes of wealth-tax assessment. He therefore, referred the matter to the Departmental Valuation Officer, who determined the fair market value of the property at Rs. 33.64 lakhs on the basis of land and building method. The Assessing Officer adopted the value as determined by the Departmental Valuation Officer, and included the same while computing the taxable wealth of the assessee for the three years under appeal.
5. When the matter was taken in first appeal, the learned Commissioner (Appeals) also concurred with the view of the Assessing Officer, relying on the decision of the Supreme Court in the case of Nawab Sir Mir Osman Ali Khan (supra). Hence, assessee preferred these appeals against the order of the Commissioner (Appeals), before this Tribunal.
6. We heard Shri M. Fakruddin, the learned Chartered Accountant for the assessee and Shri J. Albert, the learned Departmental Representative for the Revenue. The learned C.A. for the assessee submitted that even though technically the deed of conveyance was not registered on the valuation dates involved in these matters, full consideration was received by the assessee, and possession and enjoyment of the property was handed over, and therefore, the buyer has become the de facto owner of the property, and this fact has to be considered for wealth-tax assessment purposes also. If it is so considered, he submitted that the property has to be excluded from the computation of the net wealth of the assessee. Alternatively, he contended that the market value of this property in the hands of the assessee cannot go beyond Rs. 8 lakhs, as the property has been already handed over to the buyer on the basis of a valid document and consideration having already been received, and the assessee was bound to execute the conveyance deed. Even if the property has to be valued for the purposes of wealth-tax assessment, he submitted the property was fettered by the sale agreement and possession and enjoyment by the buyer in terms of the said agreement, and as such there can be no market value for the property beyond Rs. 8 lakhs, which was the actual consideration received by the assessee for passing away the immovable residential property. The learned C.A. submitted further that even if the value of the property at Rs. 8 lakhs is taken into consideration and treated as part of wealth of the assessee, correspondingly an amount of Rs. 8 lakhs received by the assessee from the buyer had to be given deduction as a liability, because on the valuation dates for the years under appeal, if the property is accounted in the hands of the assessee for want of registration, the receipt of consideration of Rs. 8 lakhs has to be considered as a corresponding liability. Therefore, according to the learned C.A., when the value of the property taken at Rs. 8 lakhs is taken as part of wealth, it has to be set off against the corresponding liability of Rs. 8 lakhs, and again, the result would be that of no value being assigned for the property in question for the years under appeal.
7. The learned Departmental Representative, Shri Albert on the other hand, contended that the ownership of the property in this case is squarely covered against the assessee by the decision of the Supreme Court in the case of Nawab Sir Mir Osman Ali Khan (supra), and the assessee cannot plead otherwise. Once the assessee is found to be the lawful owner of the property, there is no other go but to value the property according to fair market value. The Assessing Officer has arrived at the fair market value of the property on the basis of valuation report of the Departmental Valuation Officer. He, therefore, submitted that there is no infirmity in the impugned orders. Accordingly, he submitted that these appeals of the assessee are liable to be dismissed.
8. We considered all aspects of the matter in detail, in the light of the contentions of the parties. There are two issues to be considered in these appeals. The first issue is whether the assessee was the owner of the property and as such accountable to wealth-tax liability on the relevant valuation dates involved in these appeals with regard to the said property. The second issue is if she is held to be the owner accountable to wealth-tax, what should be the value for the property to be adopted for wealth-tax assessment. In first appeal, the learned Commissioner (Appeals) considered only the first issue and held that the property belonged to the assessee and she was answerable to the call of the Wealth-tax Act with regard to the property. For this conclusion, he relied on the decision of the Hon'ble Supreme Court in the case of Nawab Sir Mir Osman Ali Khan (supra). But, the Commissioner (Appeals) has not gone beyond and he has not considered the second issue. Therefore, to that extent, we have to interfere and disturb the order of the first appellate authority.
9. As the matter is covered by the decision of the Supreme Court in Nawab Sir Mir Osman Ali Khan's case (supra), we also hold that the legal owner of the property is the assessee herself, as on the valuation dates relevant for these appeals, and she is answerable to the wealth-tax assessments for these years, as far as the property in question is concerned.
10. Now, let us consider the second issue, as to what should be the value of the property for the purposes of wealth-tax assessment for the years under appeal. There are no disputes regarding the basic facts of the case. Assessee had de facto sold the property on 14-4-1985 for a consideration of Rs. 8 lakhs. Full consideration was received then and there. Possession and enjoyment of the property was handed over, and an irrevocable power of attorney was also executed by the assessee in favour of the buyer. These facts are not disputed. We have to examine the question of valuation, i.e., fair market value within these factual matrix. This property, by virtue of the fact that it has already been sold for all practical purposes, and possession and enjoyment has been passed on to the lawful buyer, and full consideration having been already received, and an irrevocable power of attorney having been executed, in our view, cannot really be offered for sale in the open market. Even though the assessee legally has title over the property, and the property was not properly conveyed through a deed registered under the Indian Registration Act, it is still doubtful, whether the assessee can still offer this property for sale to any other person, other than the person who already paid sale consideration and took possession and enjoyment of the property. It is equally doubtful whether the buyer can be evicted from the property, because he is enjoying the property lawfully, and he may take recourse to a court of law under the available provisions of Specific Reliefs Act, so that the contract of sale is made absolute by a decree of Civil Court. It is therefore, very clear from the facts of the case that the property in question had no market value as on the valuation dates relevant to these appeals. As far as the transaction between the assessee and the buyer of the property is concerned, the property has been transferred for Rs. 8 lakhs. That being so, the value of the property cannot go beyond that ostensible consideration of Rs. 8 lakhs. The Assessing Officer has not brought anything on record to point out that in fact, the assessee has received any consideration over and above the consideration declared in the document. Therefore, the consideration obviously cannot go beyond that. So, the market value of the property in question could be adopted for the purposes of assessment for the years under appeal at Rs. 8 lakhs.
11. The Hon'ble Supreme Court itself in its decision in the matter of Nawab Sir Mir Osman Ali Khan (supra) has endorsed this legal position in the following words -
"Under section 53A of the Transfer of Property Act, 1882, where possession has been handed over to the purchasers and the purchasers are in rightful possession of the same as against the assessee and in occupation of the property in question and, secondly, the entire consideration has been paid and, thirdly, the purchasers were entitled to resist eviction from the property by the assessee in whose favour the legal title vested because conveyance has not yet been executed by him and when the purchasers in possession had a right to call upon the assessee to execute the conveyance, it cannot (sic) be said that the property legally belonged to the assessee in terms of section 2(m) of the Act on the facts and circumstances of the case, even though the statute must be read justly and equitably and with the object of the section in view ...."
12. The Hon'ble Supreme Court was very much conscious of this position. But only because the legal title is important as far as the immovable property is concerned. Their Lordships have held that in order to pass the legal title properly, compliances have to be made under the Registration Act also. The above observations of the Hon'ble Supreme Court make it clear that the assessee in this case having been divested of the property physically for a lawful consideration, on the basis of a valid and enforceable agreement, had no locus standi to offer the property for sale in the open market to any other person. The fate of the house property is conclusively decided by the agreement and the transfer of possession of the property. Therefore, by no stretch of imagination, according to law, we can say that the property had enjoyed any market value, independent of the factum-ante that the property was handed over on the basis of a valid agreement. Therefore, we are of the view that maximum value that we can assign to the impugned property for the purposes of wealth-tax assessment is the ostensible consideration of Rs. 8 lakhs received by the assessee. So, we hold that the market value of the property as on the relevant valuation dates should be taken as Rs. 8 lakhs.
13. When we accept the legal hypothesis that the assessee was the owner of the property as on the relevant valuation dates, then we have to necessarily accept the fact that the consideration received by the assessee for the transfer of possession of that property has to be equally viewed as a corresponding liability tagged to the said property. If the assessee is the legal owner of the property, then assessee is not the legal owner of the said money of Rs. 8 lakhs. That can be treated only as an advance, in which case, the assessee stands in the shoes of a secured debtor. Therefore, the consideration received by the assessee partakes the character of an ascertained and secured liability. So when the property is deemed in the hands of the assessee for a value of Rs. 8 lakhs, concurrently the assessee should be given the deduction of equal amount of liability of Rs. 8 lakhs, because if the assessee is deemed as the owner, the consideration has to be deemed as a debt/liability. Therefore, we direct the Assessing Officer to deduct the same from the market value.
14. Virtually speaking, we are again back square to one. No value in fact, should be assigned to the property while making the assessments for the years under appeal, since the value of the property of Rs. 8 lakhs is off set by the corresponding liability of Rs. 8 lakhs. In this view of the matter, we hold that no addition on account of the house property in question is called for. We accordingly delete the additions made by the Assessing officer in this behalf in the impugned assessments and direct the Assessing Officer to modify the assessments accordingly.
15. In the result, all the three appeals of the assessee are allowed.