1972 (7) TMI 18 - HC - Wealth-tax

Whether on the facts and the circumstances of the case the value of the properties transferred by the assessees to their wives is includible in the total wealth of the assessee under section 4(1)(a) of the Wealth-tax Act

Issues Involved:
1. Whether the value of the properties transferred by the assessees to their wives is includible in the total wealth of the assessee under section 4(1)(a) of the Wealth-tax Act.
2. The nature of dower (mehr) under Mohammadan law and its classification as a debt.
3. Definition and scope of "adequate consideration" under section 4(1)(a) of the Wealth-tax Act.
4. Applicability of section 4(1)(a) to the facts of the case.
5. Interpretation of "debts owed" within the meaning of section 2(m) of the Wealth-tax Act.

Detailed Analysis:

1. Whether the value of the properties transferred by the assessees to their wives is includible in the total wealth of the assessee under section 4(1)(a) of the Wealth-tax Act:

The court examined whether the properties transferred by the assessees to their wives should be included in their total wealth under section 4(1)(a) of the Wealth-tax Act. The assessees argued that the transfer was in partial discharge of a dower debt, which they claimed was a legitimate debt under Mohammadan law. The Wealth-tax Officer, however, did not accept this argument, stating that the enhancement of the dower was voluntary and did not create a legal liability or consideration under section 4 of the Act. The Tribunal later held that the transfer of property in settlement of the dower debt was for adequate consideration and should not be included in the assessees' net wealth. The High Court, however, disagreed with the Tribunal's decision, concluding that the transfers were not for adequate consideration and thus should be included in the assessees' total wealth.

2. The nature of dower (mehr) under Mohammadan law and its classification as a debt:

The court discussed the nature of dower (mehr) under Mohammadan law, distinguishing between prompt and deferred dower. Prompt dower is payable on demand, while deferred dower is payable upon the dissolution of marriage by death or divorce. The court noted that deferred dower is not a debt in praesenti and cannot be demanded or paid until the dissolution of the marriage. The court emphasized that the deferred dower does not become a debt owed by the husband during the subsistence of the marriage.

3. Definition and scope of "adequate consideration" under section 4(1)(a) of the Wealth-tax Act:

The court examined the meaning of "adequate consideration" as used in section 4(1)(a) of the Wealth-tax Act, noting that the term is not defined in the Act. The court referred to the definition of "consideration" in section 2(d) of the Indian Contract Act, which involves an act, abstinence, or promise made at the desire of the promisor. The court concluded that "adequate consideration" means valuable consideration measurable in terms of money or money's worth, and not merely good consideration such as natural love and affection. The court emphasized that adequate consideration must be something more than good or valid consideration and must be capable of being compared and measured with money.

4. Applicability of section 4(1)(a) to the facts of the case:

The court analyzed the applicability of section 4(1)(a) to the facts of the case, noting that the transfers of assets were made while the relationship of husband and wife was subsisting and were not made in connection with an agreement to live separately. The court concluded that the transfers must be found to be without adequate consideration to attract the provisions of section 4(1)(a). The court held that the transfers in question were not for adequate consideration as they were made in partial discharge of a deferred dower, which is not a debt in praesenti and cannot be demanded or paid during the subsistence of the marriage.

5. Interpretation of "debts owed" within the meaning of section 2(m) of the Wealth-tax Act:

The court discussed the meaning of "debts owed" within the context of section 2(m) of the Wealth-tax Act, referring to various legal precedents. The court concluded that a debt must be a liability to pay an ascertainable sum of money in praesenti or in futuro. The court held that the deferred dower in this case was not a debt owed on the relevant valuation dates as it was contingent on the dissolution of the marriage. The court emphasized that the liability to pay the dower was contingent on a future event and thus did not qualify as a debt owed under section 2(m).

Conclusion:

The court answered the question in the affirmative, holding that the value of the properties transferred by the assessees to their wives should be included in their total wealth under section 4(1)(a) of the Wealth-tax Act. The court emphasized that the transfers were not for adequate consideration and that the deferred dower did not constitute a debt owed during the subsistence of the marriage. The assessees were ordered to pay the costs of the reference.

← Previous Next →