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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 ..... o 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 both sides have, in fact, addressed their arguments on the basis of the question as re-framed above. The relevant facts, in brief, are that R. B. Nathuram Friends Colony Co-operative House Building Society Ltd., hereinafter referred to as "the society", agreed to allot plot No. 58, situated in Friends Colony, New Delhi, admeasuring 1,927 sq. yds. to one Smt. Gurdevi on March 14, 1962. Smt. Gurdevi entered into an agreement with the assessee, whereby the latter undertook to construct a house on the said plot on the condition that in case Smt. Gurdevi failed to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able. 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 erect a residential building on the land on the completion of which she was entitled to the grant of completion certificate from the society, that on her approaching the assessee the latter had undertaken to erect the building for and on her behalf, and that the assessee had deposited a sum of Rs. 1,11,766 with her as security for the due performance of the terms of the agreement between her and the society. In the operative part of the agreement, it was stated that on completion of the building, the assessee will obtain the necessary completion certificate and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 November 13, 1967 which has been annexed to the supplementary statement of the case, as annexure " D ", has certain recitals, more or less in the following words : (i) Smt. Gurdevi has received notice of the completion of substantially the whole of the house and that she has released and discharged the assessee from all liabilities under the agreement dated March 14, 1962, in respect of the completion of, the house and obtaining the completion certificate ; (ii) that she is not in a position to obtain transfer of the building in her favour on her paying the amounts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uyer 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 the Schedule to the Wealth-tax Act. Sub-section (6) of section 55 of the Transfer of Property Act reads as follows: "(6) The buyer is entitled-.... (b) Unless he has improperly declined to accept delivery of the property, to a charge on the property, as against the seller and all persons claiming under him to the extent of the seller's interest in the property, for the amount of any purchase-money properly paid by the buyer in anticipation of the delivery and for interest on such amount, an(, when he properly declines to accept the delivery, also for the earnest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the assessee, when Smt. Gurdevi declined to make the stipulated payment and to take over the property, the assessee had paid the sum styled as security and had been engaged in constructing the house and incurring expenses for this purpose, only because he, under the agreement, had the right to treat these payments and expenses as purchase money for the purchase of the property, which was the ultimate and principal object of the said agreement. This purchase money was being paid, thus, in anticipation of the delivery of property. The agreement between the parties was not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 between the two. Mr. Kohli relied on Shiv Prasad Singh v. Beni Madhab Chowdhury and U. P. Government v. L. Manmohan Das , to urge his contention that charge did not create any rights in the property. We, however, do not find in the said authorities any support for the proposition urged by Mr. Kohli. The distinction between charge and mortgage was held in both these cases to be very insignificant. In the case of Shiv Prasad Singh, the Patna High Court observed as follows : Now the broad distinction between a mortgage and a charge is this that whereas a charge only gives right t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p 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 property, it is to all intents and purposes a mortgage as if it is created by the parties. " Charge-holder in the case of a charge and the mortgagee in the case of a simple mortgage, thus, acquire the right to payment out of a particular property. It is to this extent that there occurs, in effect, a transfer of interest in specific immovable property in favour of the charge-holder or the mortgagee as the case may be. In the instant case, the assessee is in possession of the property " as of right " and cannot be dispossessed by Smt. Gurdevi or any one claiming under her. Even if the rel ..... X X X X Extracts X X X X X X X X Extracts X X X X
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