Commissioner of Wealth Tax vs Shakti Sikand

The petitioner seeks reference of the following question to this court :

"Whether the Income Tax Appellate Tribunal misdirected itself in law in holding that the assessed''s one-third share in the advance rent received from foreign embassy, for the property at No. 1, Kautilya Marg, New Delhi, is a debt within the meaning of section 2(m) of the Wealth-tax Act, ignoring the fact that, in the order for the earlier year in the assessed''s own case, the matter has been referred to the Appellate Assistant Commissioner for proper ascertainment of facts ?"

The assessed was one of the co-owners of a house having one-third share therein and had received advance rent to be adjusted every year. A question arose as to whether this advance rent could be regarded as a debt due to the tenant or not.

The Tribunal, in respect of the assessment year 1979-80, has found as a fact that "nor was it in dispute before us, that the assessed was holding this amount on behalf of the tenants and that the amount is to be adjusted against the rent payable by the tenants over a period of four years and the outstanding amount was returnable by the assessed in case the tenancy is determined."

The aforesaid observations of the tribunal are findings of fact and they clearly show that the outstanding amount was being held by the assessed for and on behalf of the tenants. It was, in other words, a debt due to the tenants because the Tribunal has found that if the tenancy was determined, then the amount had to be returned and could not be retained by the assessed.

In view of these findings of fact, the answer to the question proposed is self-evident.

It was then contended by Mr. Rajindra that the entire amount of advance rent could not be regarded as debt being due to the tenants. We, however, find that, in the order dismissing the application u/s 27(1) of the Wealth-tax Act, 1957, it has been observed by the Tribunal that it is only the unadjusted amount which will remain as a liability which can be allowed as a deduction under the Act. Even in the order of the Tribunal, the reference is to the outstanding amount which could be regarded as a debt due.

In our opinion, no reference is called for. We, Therefore, dismiss the petition.