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TMI Blog1973 (8) TMI 8X X X X Extracts X X X X X X X X Extracts X X X X ..... dated November 13, 1967, was not a right on the relevant valuation date, within the meaning of sub-paragraph (c) of Paragraph A of Part I of the Schedule to the Wealth-tax Act, 1957 ? " The valuation date relevant for the assessment year 1968-69 is December 31, 1967. We are required to determine, in reality if the assessee had any right in the land and the building constructedt by him, whether under the release deed dated November 13, 1967, or otherwise, on the relevant date, within the meaning of sub-paragraph (c) of Paragraph A of Part I of the Schedule to the Wealth-tax Act, 1957. As the wording of the question is rather vague, and does not bring out the true scope of the reference, we have re-framed it as follows : " Whether, on the facts and in the circumstances of the case, the Tribunal was legally correct in holding that on the valuation date, the assessee had acquired no rights in the land or the building, within the meaning of sub-paragraph (c) of Paragraph A of Part I of the Schedule to the Wealth-tax Act, 1957 ? " This is neither a new nor a different question, but is well within the framework of the question as was originally referred to us. The learned counsel on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee, in the case of default on the part of Smt. Gurdevi, was said to be to proceed against her by instituting a suit for specific performance of the contract and/or for the execution of the sale deed in his favour in respect of the property. There was no question of the assessee having acquired any rights in the building and land either under the construction agreement dated March 14, 1962, or release deed dated November 13, 1967. Sub-paragraph (c) of Paragraph A of Part I to the Schedule to the Wealth-tax Act, was, therefore, held to be not applicable. In compliance with the directions of the High Court, asking for a supplementary statement of case, the Tribunal has forwarded copies of the agreement dated March 14, 1962, and the release deed dated November 13, 1967. The agreement of construction dated March 14, 1962, annexure " E " to the supplementary statement, recites in its preamble that Smt. Gurdevi had entered into an agreement of allotment dated January 7, 1952, with the society in respect of the land in question and had deposited with it a sum of Rs. 11,644-1-0, being the amount agreed to be paid as premium, that the said allottee (Smt. Gurdevi) was bound to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also covenanted to execute an irrevocable power of attorney in favour of Shri Premnath Sikand, son of L. Durga Dass, authorising him to sell, transfer and convey to and in favour of the assessee or his nominee, all the rights in the said land and the building constructed thereon, against the above-mentioned security money already received by her and to execute all such documents, deeds and papers including the final sale deed, as may be considered necessary and expedient by her said attorney. The said attorney was not to exercise the powers under the said power of attorney unless he received instruction from her in writing to so act. The aforesaid agreement, therefore, was not a mere agreement of construction, but was in effect an agreement of conveyance in favour of the assessee, subject to the condition that the assessee constructed the building and Smt. Gurdevi failed to pay the stipulated amount within the stipulated days. This document, thus, being a contract of sale of property did not require registration. In accordance with section 54 of the Transfer of Property Act, it did "not, of itself, create any interest in or charge on such property". The deed of release dated No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the assessee is no longer liable to furnish the completion certificate. This document can also be received in evidence of the fact that she was not in a position to make payment to the assessee and obtain the transfer of the building in her favour. The conditions, subject to which the assessee was to have the property conveyed to him, were thus fulfilled. Mr. B. N. Kirpal, the learned counsel for the revenue, submitted that although a registered deed conveying rights in the property in favour of the assessee has not been executed, yet the assessee being a buyer and having already paid the purchase money and being in possession is entitled to a charge on the property by virtue of sub-section (6)(b) of section 55 of the Transfer of Property Act. Mr. J. K. Kohli, the learned counsel for the assessee, on the other hand, submitted that the requirements of this sub-section of section 55 have not been met. No charge has, therefore, been created, and, in any case, creation of a charge is of no effect, because such a charge cannot be said to create any right in the property, which alone could be considered as an asset for the purposes of sub-paragraph (c) of Paragraph A of Part I of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in anticipation of completion of the contract, he was held to be entitled to a charge upon the property for the price paid by him. Even otherwise, we find that Mr. Kohli's contention is erroneous. His argument rests on that part of the agreement which deals with the construction the house only. But the several provisions in the, agreement dated March 14, 1962, are integral parts of the whole transaction and have to be viewed together. The amount that was paid by the assessee as security and the amount that was being spent by him on the construction of the house, which may appear to be mere advances, if the part of agreement dealing with construction is viewed in isolation, were in fact nothing but payments in anticipation of the delivery of the property to the assessee. The assessee made the payments and was incurring expenses of construction only because he was under the agreement entitled to get and to remain in possession of the property, which was to be ultimately purchased by him. Without the ultimate right to purchase, the assessee, as appears from the agreement, would not have agreed to undertake construction of the house. Even if the right to purchase arose in favour of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an existing or future debt, or the performance of an engagement which may give rise to a pecuniary liability." Simple mortgage has been defined in section 58(b) of the Transfer of Property Act, which reads as follows : " (b) Where, without delivering possession of the mortgaged property, the mortgagor binds himself personally to pay the mortgage money, and agrees, expressly or impliedly, that, in the event of his failing to pay according to his contract, the mortgagee shall have a right to cause the mortgaged property to be, sold and the proceeds of sale to be applied, so far as may be necessary, in payment of the mortgage money, the transaction is called a simple mortgage and the mortgagee a simple mortgagee." It will, thus, be seen that although there is a transfer of interest in immovable property in the case of a mortgage, that interest in the case of simple mortgage consists merely in the mortgagee's right to cause the mortgaged property to be sold and to apply the sale proceeds in payment of the mortgage money and nothing else. A charge-holder likewise has the right to have the property charged, sold for realisation of his dues. There is, thus, hardly much difference b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the creator of the charge in the property. A charge, therefore, is a transfer of an interest in property in the sense that an interest which had existed in the creator of the charge passes to the holder of the charge and creates an interest almost the same as an interest created by a simple mortgage. Iqbal Ahmad C.J. observed on page 346 that : " The right created by a charge is something more than a personal obligation, for it is a jus ad rem, i.e., a right to payment out of the property specified. There is very little difference between a charge and a simple mortgage. " Allsop J., in a separate judgment, observed that : " A simple mortgage of immovable property is a transfer of an interest in that property which must be specific and the mortgagee has a right to get the property put to sale by the court of law. A mortgage is created by act of parties. A charge, on the other hand, may not be on immovable property at all. It may not be, while it is floating, on any specific property and may be created not only by act of parties but by process of law. That seems to be the distinction between a simple mortgage and a charge. When a charge becomes fixed on specific immovable pro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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