Smt. Kartari vs Commissioner of Wealth-tax

S.S. Sodhi, J.—The matter here pertains to the assessment of wealth-tax for the years 1974-75 and 1975-76.

On May 15, 1975, a decree for declaration was passed against the assessee, Smt. Kartari whereby, her sons were held to be owners in possession of 4/5ths share of agricultural land and a house in Mohalla Dabianwala, Amritsar, with effect from April 14, 1952, by virtue of an oral gift made by her in their favour on that day. In the context of this decree, is the assessee, for purposes of computation of the wealth-tax payable by her, to be treated as having been divested of her title in this property with effect from the date of the oral gift or the date of the decree, that is, from April 14, 1952, or May 15, 1975 ? Herein lies the controversy raised.

The Wealth-tax Officer included the land and house covered by the civil court decree in the wealth of the assossee for the two assessment years in question, but, on account of this decree, excluded this property for the next assessment year, namely, 1976-77.

On appeal, the Appellate Assistant Commissioner agreed with the assessee and directed that only 1/5th share of the property covered by the decree be treated as her taxable wealth. This was, however, reversed in appeal by the Tribunal on the ground that immovable property could not be transferred without executing a registered document and further that the decree had been passed on the assessee consenting to the passing of it. This provides the factual background for the question raised, which reads as under :

" Whether, on the facts and in the circumstances of the case and on consideration of the court decree dated May 15, 1975, passed by the Sub-Judge, First Class, Phagwara, the Tribunal is right in law in holding that on the two valuation dates January 31, 1974, and March 31, 1975, the assessee was not divested of the ownership of the 4/5ths share of agricultural lands and of the house in Mohalla Dabianwala ?"

In seeking to support the view of the Tribunal, Mr. Ajay Mittal, counsel for the Revenue, canvassed the proposition that a gift of immovable property cannot be treated as complete unless registered in accordance with law. Support for this contention was sought from the judgment of the High Court of Gujarat in Darbar Shivrajkumar Vs. Commissioner of Gift-tax, Gujarat-IV, , where it was held that a transaction of a gift of immovable property would be complete only by executing a registered document subject to other conditions being fulfilled and further that, after registration, the title of the transferee does not relate back to the date of the execution of the gift deed.

Reference was next made to the judgment of the Supreme Court in Late Nawab Sir Mir Osman Ali Khan Vs. Commissioner of Wealth Tax, Hyderabad, , whore it was held that, before registration of the sale of immovable property, it must be treated to be that of the vendor ; even though the assessee-vendor has a mere " husk of title " and as against the vendee no " reality of title, as against the world he was still the legal owner and the real owner". These observations were made in dealing with a case where the entire consideration for the sale of immovable property had been received by the vendor and possession thereof had been delivered to the vendee, but the sale had not been registered.

Relying upon these two judicial precedents, counsel argued that, on a parity of reasoning, as, until registration, title in property cannot be said to pass from the vendor to the vendee, similarly, in the case here, the assessee must be held to be the owner of the land covered by the decree until the date of the passing of the decree and, therefore, the Tribunal rightly held the assessee to be the owner of this property during the two assessment years 1974-75 and 1975-76.

The analogy of receipt of consideration money to possession of immovable property agreed to be sold, before registration of the sale deed, clearly bears no resemblance to a case like the present pertaining to the passing of a declaratory decree which, in turn, holds the plaintiff to be the owner thereof on a prior date. Registration, undoubtedly, would not have the effect of relating back the title to the date of receipt of consideration and delivery of possession or even execution of the agreement for sale, but where a declaration is granted by a court holding a party to be the owner from a particular prior date, such party has necessarily to be held to he the owner as per such declaration from that date. None of the authorities relied upon by counsel for the Revenue can thus be treated as binding precedent here.

Great stress was, thus, rightly laid by Mr. S. P. Jain, counsel for the assessee, upon the terms of the civil court decree by virtue of which the declaration was granted to the sons of the assessee to the effect that they had become owners of the property in suit with effect from April 14, 1952. It was, therefore, argued that, in the face of this decree, the assessee could not but be held to have been divested of her title and ownership over this property since April, 1952.

As regards non-registration of the gift by the assessee to her sons, it needs to be borne in mind that such oral gifts of agricultural land were permissible in Punjab prior to April, 1955. Not only this, as held by the Division Bench in Gurdev Kaur and Another Vs. Mehar Singh and Others, ; a compromise decree regarding the immovable property which is the subject-matter of the dispute in the suit does not require registration even if the title is created in favour of the decree-holder for the first time under the decree, whether with or without consideration ". A similar view was expressed in Tej Singh v. Jagrup Singh [1989] PLJ 38 ; [1989] 1 PLR 136. Such thus being the settled position in law, there can be no escape from the conclusion that the assessee must be deemed to have stood divested of her title to the property covered by the decree with effect from April 14, 1952.

Confronted with this situation, counsel for the Revenue sought to contend that it was open to the Wealth-tax Officer to go behind the civil court decree and he, consequently, went on to argue that as some of the lands covered by the decree had been acquired under the Land Acquisition Act and compensation thereof had been given to the assessee, it must be held that she in fact had title therein, and, therefore, the Wealth-tax Officer rightly held that the sons of the assessee became owners from the date of the decree and not earlier. It will be seen that this is an entirely new point sought to be raised for the first time in reference here. On the face of it, it would involve adjudication on facts and also application of law thereon. This is clearly not an appropriate stage for such a matter to be raised and we, consequently, decline to go into it.

In the result, the reference is answered in the negative, in favour of the assessee and against the Revenue. There will be no order as to costs.