1983 (7) TMI 101 - AT - Wealth-tax

Summary

Issues Involved:

1. Whether the property in question is a transferred asset within the meaning of section 64 of the Income-tax Act.
2. Whether the income derived from the property can be considered in the hands of the assessee.
3. Whether the asset constitutes the wealth of the assessee under the Wealth-tax Act.

Issue-wise Detailed Analysis:

1. Whether the property in question is a transferred asset within the meaning of section 64 of the Income-tax Act:

The core issue in the income-tax appeal was to determine if the property, specifically the first floor of D. No. 6-2-953/A1, Khairatabad, was a transferred asset under section 64 of the Income-tax Act. The property was conveyed to the assessee by his mother through a settlement deed dated 29-3-1972. The first floor was constructed with a loan from Syndicate Bank and was later transferred to Miss Hema Mohan by a settlement deed executed on 5-11-1975. The settlement deed was presented for registration but was delayed due to the non-submission of an income-tax clearance certificate, and it was eventually registered on 5-6-1982.

The assessee argued that since the settlement deed was executed before his marriage to Miss Hema Mohan on 14-12-1976, the transfer was not governed by section 64(1)(iv). The Wealth-tax Officer (WTO) initially accepted this legal position but held that there was no valid registered document transferring the property before the marriage date, thus including the asset's value in the assessee's wealth.

2. Whether the income derived from the property can be considered in the hands of the assessee:

For the assessment year 1978-79, the assessee did not disclose any income from the property in his income-tax return, claiming it was settled on his wife before their marriage. The Income-tax Officer (ITO) included the income derived from the property in the assessee's hands, reasoning that the wife did not become the owner before the marriage. The Appellate Assistant Commissioner (AAC) allowed the appeal, stating that the registration of the document on 5-6-1982 takes effect from the date of execution (5-11-1975) under section 47 of the Indian Registration Act, 1908. Thus, the transfer was deemed to have occurred before the marriage, and section 64(1) did not apply.

3. Whether the asset constitutes the wealth of the assessee under the Wealth-tax Act:

The wealth-tax appeal for the assessment year 1976-77 involved determining if the property constituted the wealth of the assessee. The AAC held that the transfer of property was complete on 5-11-1975, falling within the assessment year 1976-77, and excluded the property's value from the assessee's wealth. The department contended that the Gujarat High Court decision in Darbar Shivrajkumar v. CGT, which held that a gift of immovable property is complete only upon registration, was applicable. However, the assessee argued that the latter Gujarat High Court decision in Arundhati Balkrishna v. CIT, which considered the transfer effective from the date of execution, should apply.

Conclusion:

The Tribunal concluded that the arguments advanced on behalf of the assessee should prevail. It was determined that the settlement deed executed on 5-11-1975 took effect from that date due to section 47 of the Registration Act. Since Miss Hema Mohan was not the wife of the assessee at the time of execution, section 64(1)(iv) did not apply. Consequently, the income derived from the property could not be taxed in the hands of the assessee, and the property's value could not be included in the assessee's wealth for the assessment year 1976-77. Both the income-tax and wealth-tax appeals brought by the revenue were dismissed.