Chinar Exports (P.) Ltd. vs Inspecting Assistant ...
1990 Latest Caselaw 70 Del

ORDER

Per Shri M. A. Bakshi, J. M. - This appeal filed by the assessed is directed against the order of the CWT (A)-XI, New Delhi and the dispute relates to the assessment of the value of industrial plot of land purchased by the assessed from the D. D. A. in an open auction. The assessed is a private limited company on 27th October, 1982. The assessed acquired an industrial plot for a consideration of a sum of Rs. 23,16,509. The amount was paid by the assessed and the possession of the plot was also given prior to the valuation date. The valuation date of the assessed-company for the year under appeal is 30th April, 1983. Thought the possession of the plot was handed over to the assessed prior to the valuation date, the Conveyance Deed was executed on 1st December, 1983. The registration of the deed was effected on 24th of October, 1983. Since as on the valuation date the property had not been legally transferred to the assessed the assessed claimed exclusion of a sum of Rs. 23,16,509. The Assessing Officer assessed the value on the ground that in the lease deed it was mentioned that the property was transferred to the assessed-company on 13th of August, 1982. The CWT (A) confirmed the assessment on the ground that the sale deed clearly stipulates that the ownership in the premises vested in the assessed from 13th August, 1982. Accordingly, it was held that on the valuation date the plot of land belonged to the assessed and was accordingly includible in its net wealth.

2. The learned counsel for the assessed Shri P. N. Mehta contended that since the execution of the document as well as the registration had taken place after the expiry of the valuation date, the value of land could not be included in the assessable wealth of the appellant company. In this connection he relied upon the decision of the Hon'ble Supreme Court in the case of Nawab Sir Mir Osman Ali Khan v. CWT . The learned counsel further relied on the decision of the Andhra Pradesh High Court in the case of Divvi Suryanarayana Murthy v. Competent Authority . It was contended that under section 54 of the Transfer of Property Act, 1982 sale of immovable property for a consideration of Rs. 100 or more is completed only by the registration of the document and until the sale deed is registered no title in the property passes to the vendee. The mere fact that the assessed was in possession of a plot would not be enough to conclude that the land belonged to the assessed for the purpose of inclusion in the net wealth.

3. The learned Departmental Representative supported the orders of the lower authorities and it was argued that since the sale deed executed by the assessed with the Delhi Administration referred to the transfer of property with effect from 13th of August, 1982, the registration which was effected after the valuation period related back to that date and accordingly, the authorities below were justified in including the value of the land in the assessable wealth of the assessed.

4. We have given our careful consideration to the issue involved in this case. In the case of company, land belonging to it is includible in its assessable wealth. Now, the real question is as to whether the land belonged to the assessed-company as on the valuation date. It is not disputed that the auction of the plot was also handed over to the assessed-company before the valuation date and the company disclosed the value in its balance sheet. But the fact remains that neither the Conveyance Deed was executed nor registered in favor of the assessed as on the valuation date. As already stated, the conveyance deed was executed on 1st of December, 1983 which was also registered on 27th December, 1983. The contention of the learned DR that once the document is registered it relates back to its execution may not be helpful in resolving the controversy between the assessed and the revenue. Even if the decision of the Calcutta High Court in the case of CIT v. Ganga Properties Ltd. is taken into consideration, the document registered on 27th December, 1983 would relate to the date of execution, i. e., 1st December, 1983. The mere mention in the document that the plot belonged to the assessed from 13th August, 1982 would not be helpful as under the Registration Act, the title would relate back to the date of execution of the document.

5. Section 17(1) (b) of the Indian Registration Act, 1908 makes compulsorily registerable non-testamentary instruments which purport or operate to create, declare, assign, limit or extinguish, whether in the present or in the future, any right, title or interest, whether vested or contingent, of the value of Rs. 100 or upwards to immovable property. Section 47 of the Registration Act provides that a registered operate, if no registration thereof had been required or made, and not from the time of its registration.

6. Mulla on Indian Registration Act, 6th edn., at page 164 has stated as under :

"Section 47 of the Registration Act does not create a new title. It only affirms a title which has been created by the deed. The title is complete and the effect of registration is to make it unquestionable and absolute. But by virtue of section 47, one registration is effect, the title relates back to the date of execution."

7. In the case of Hall & Anderson (P.) Ltd. v. CIT the Hon'ble Calcutta High Court had the occasion to consider the effect of section 47 of the Registration Act, 1908. In that case, the assessed carried on the business as general drapers, out-fitters, furnishers and warehouse owners. It entered into an agreement on November 29, 1946 for the sale of its undertaking including all its immovable and movable properties to a public company with effect from December 1, 1946. The assessed undertook to execute a conveyance or any other document which might be necessary for the portions of the premises which did not pass by delivery of possession. The possession of all the properties was delivered on December 1, 1946. For the some reason or the other, Sale Deed for the immovable properties was not executed until 26th February, 1949. The Sale Deed recites that it was executed for the purpose of formally transferring the lands hereditaments and premises mentioned in the agreement for sale.

8. On these facts, the Hon'ble High Court held that the sale of immovable properties effected on February 26, 1949 and capital gains tax was not chargeable. Repelling the contention of the revenue in relation to section 47 of the Registration Act the Hon'ble High Court held as under :

"In my view, section 47 of the Registration Act does not help the revenue. In this case the registered document itself did not come into existence before February 26, 1949 and section 47 could operate only from that date."

9. It is evident that the facts of this case and the facts of Hall & Anderson (P.) Ltd.s case (supra) are identical.

10. Relying on the authority of the Calcutta High Court in Hall & Anderson (P.) Ltd.s case (supra), we are of the view that the land in question cannot be held to belong to the assessed-company within the meaning of section 2(m) of the Wealth-tax Act, 1957 prior to the execution of the Conveyance Deed.

11. Moreover, a different view is also available in the case of Divvi Suryanarayana Murthys case (supra) wherein the Andhra Pradesh High Court has held as under :

"A sale which is admittedly not completed until the registration of the instrument of sale is completed, cannot be said to have been completed earlier because by virtue of section 47 the instrument by which it is effected, after it has been registered, commences to operate from an earlier date. Therefore, we do not think that the sale in this case can be said, in view of section 47, to have been completed on January 31, 1946. The view that we have taken of section 47 of the Registration Act seems to have been taken in Tilakdhari Singh v. Gour Narain AIR 1921 Pat. 150. We believe that the same view was expressed in Naresh Chandra Dutta v. Girish Chandra Das 1936 2nd 62 Cal. 979; and Gobardhan Bar v. Gana Dhar Bar 1940 2nd 2 Cal. 270; ."

The same view was followed by the Supreme Court in Hiralal Agrawal v. Rampadarath Singh .

12. In the case of Nawab Sir Mir Osman Ali Khan (Supra) their Lordships of the Supreme Court have held that liability to wealth-tax arises because of the belonging of the asset and not otherwise. The mere possession or joint possession unaccompanied by the right to be in possession or ownership of the property would, therefore, not bring the property within the definition of net wealth for it would not then be an asset belonging to the assessed.

13. Considering the fact that the execution of the document as well as its registration took place after the valuation date the value of the land could not be included in assessing the net wealth of the assessed. We, therefore, delete the addition of Rs. 23,16,510 and allow the appeal of the assessed.

14. In the result, the appeal of the assessed is allowed.