1993 (7) TMI 148 - AT - Benami Property

Summary

Issues:
Claim for excluding properties in the names of minor children from net wealth.

Analysis:
The judgment revolves around the claim of the assessee to exclude properties held in the names of his minor children from his net wealth. The initial assessment found that the funds for purchasing these properties came from the assessee, leading to the conclusion that he was the real owner, despite the properties being in the children's names. The Settlement Commission later accepted that the unexplained investment in these properties should be treated as the assessee's income spread over several years. The issue arose when the Wealth-tax Officer added the value of these properties to the assessee's net wealth for the assessment years 1986-87 and 1987-88. The assessee contended that these were benami properties and, post the Benami Transactions Act of 1988, they no longer belonged to him.

The contention before the Tribunal was whether the assessee's rights in these properties had been extinguished by law and if they could still be included in his net wealth. The revenue argued that the assessee could not recover the properties but there was no bar on the ostensible owner accepting the title as the real owner. Additionally, it was argued that the transfer of property to the minor children without adequate consideration made the assets includible under section 4(1)(a) of the Wealth-tax Act. The assessee maintained that there was no actual transfer, as the properties were held benami, and thus section 4(1)(a) did not apply.

The Tribunal analyzed the previous assessments and the provisions of the Benami Transactions Act, which prohibits benami transactions. It concluded that the assessee could not transfer or recover the properties due to the Act, extinguishing his right as the real owner. The Tribunal distinguished a previous Madras High Court decision, emphasizing the impact of the Benami Transactions Act on the rights of the real owner. It further clarified that the properties did not belong to the assessee as his possession was not coupled with a right to ownership. The Tribunal rejected the revenue's alternative ground, stating that the finding of a benami nature of the property contradicted a transfer to minor children without adequate consideration. Ultimately, the Tribunal directed the Wealth-tax Officer to exclude these properties and recalculate the net wealth, allowing the appeals.