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TMI Blog1996 (12) TMI 25X X X X Extracts X X X X X X X X Extracts X X X X ..... also a co-mortgagor ? (iv) the value of the right to equity of redemption in so far as the assessee is concerned is nil and nothing is includible ? (v) such right did not have any value as the sale proceeds of the mortgaged property fell short of the loan amount and are not the above findings and approach wrong, against law, uncalled for and unwarranted ? 2. Whether, on the facts and in the circumstances of the case and also in view of the fact that the property was mortgaged by the assessee not for her needs and liability but for a third party company, the Tribunal is right in law in holding that 'the only right that the assessee had over the property was the right to equity of redemption' and is not the above finding and proposition against fundamentals, law and all canons of property laws ? 3. Whether, on the facts and in the circumstances of the case, the Tribunal is right in law and fact--- (i) in deleting the value included in respect of the mortgaged property from the assessment ? (ii) in finding the value at nil ? " In I. T. R. Nos. 12 to 16 relating to the assessment years 1982-83 to 1986-87, the following common questions are referred at the instance of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unsecured creditors to consider the compromise or arrangement. Meetings were held on February 27, 1968, and the compromise or arrangement was approved with certain modifications and by order dated April 2, 1968, this court sanctioned the scheme subject to the terms and conditions in the said order. This court also granted sanction by order dated March 13, 1969, for execution of the mortgage. The assessee was one of the parties to the compromise or arrangement. The company thereupon applied for a loan of Rs. 20 lakhs for its reconstruction. The loan was sanctioned by the Kerala Financial Corporation against the mortgage of the properties belonging to the company and properties belonging to the guarantors, namely, the assessee and some other shareholders. The mortgage is evidenced by an indenture dated September 22, 1969, between the company, Sri P. C. Abraham, the assessee along with some other shareholders and the Kerala Financial Corporation. In connection with the wealth-tax proceedings of the assessee for the years 1976-77 to 1986-87, the question about the valuation of the Palarivattom property extending to 1.74 acres mortgaged to the Kerala Financial Corporation arose. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ings at the instance of the Revenue. It was contended by learned standing counsel for the Revenue that the document dated September 22, 1969, cannot take the character of a mortgage. It can only be taken as a document creating a charge on the property of the assessee. This contention is based on the provision in the instrument that the company was unable to pay off the debt in instalments spread over a period of 8 1/2 years. According to learned counsel, liability is not created for a definite period and, therefore, the burden on the property is only in the nature of a charge. In support of the above contention, he relied on a decision of the Allahabad High Court in Matlub Hasan v. Mt. Kalawati, AIR 1933 All 934. On the other hand, learned counsel for the assessee would submit that all the three authorities have understood the document dated September 22, 1969, as a deed of mortgage and there is no reason to give it a different interpretation as contended by the Revenue. It was also pointed out that the very same document came up for consideration before this court in I. T. R. No. 87 of 1992, CIT v. Thressiamma Abraham (No. 1) [1997] 227 ITR 802, in the matter of assessment under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s nobody's case that a liability is created in perpetuity not capable of redemption. Merely because the time for repayment is spread over a period of 8 1/2 years, it cannot be contended that the liability is created for perpetuity. As a matter of fact also in this case, the property of the assessee was brought to sale at the instance of the mortgagee-Kerala Financial Corporation. We, therefore, reject the contention taken by the Revenue that the status of the assessee is not that of a mortgagor in the light of the terms of the document dated September 22, 1969. If that be so, the Tribunal was justified in holding that for the assessment years 1976-77 to 1981-82, the only right the assessee had in the property mortgaged to the Kerala Financial Corporation was the right of equity of redemption. Even though an attempt was made to contend that the assessee had a right of reimbursement of the money paid to the Kerala Financial Corporation by sale of her property from other mortgagors in the absence of any such specific provision in the document and also in view of the fact that the assessee was made personally liable to the Corporation for the debts of the company as a guarantor, this c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uestion in the light of the above rule and has come to a factual finding that the value of the book debt created by the company in favour of the assessee would be nil. We find merit in the contention raised on behalf of the assessee. What has been elaborately considered by the Tribunal in paragraph 15 of its common order is about the value that the book debt may fetch in the open market. The Tribunal found that out of the outstanding loan liability of Rs. 20,00,000 with interest thereon, only an amount of Rs. 11,84,000 had been paid by the sale of the assessee's mortgaged property. The balance was still outstanding. The land, buildings, plant and machinery of the company are all still under mortgage to the Kerala Financial Corporation. Therefore, the company's right over its assets was restricted to its right to equity of redemption. That apart, the company has got, as on December 31, 1983, a liability for hundi acceptance in a sum of Rs. 11,22,000 and the same figure continued for the accounting year December 31, 1984 also. It had not paid interest accrued on its own loans in an amount of Rs. 2,53,922 as at December 31, 1984. Further, there are preferential payments remaining un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee in the land for the purpose of assessment to wealth-tax, the price which the leasehold interest would fetch in the open market were it not encumbered or affected by the burden or restriction contained in one of the conditions of the lease deed would have to be reduced by 50 per cent. of the unearned increase in the value of the land on the basis of the hypothetical sale on the valuation date. The relevant covenant in the document was a covenant running with the land and it would bind whosoever was the holder of the leasehold interest for the time being. Therefore, it had the effect of depressing the value which the leasehold interest would fetch if it were free from the burden or disadvantage. We do not see how this decision would be of any help to the contention raised by the Revenue before us. Then the only other question to be considered is whether it is correct to hold that unless the value is realised the book debt in a sum of Rs. 10,80,000 cannot be included in the net wealth of the assessee. Even though there is a sentence in para 15 of the common order of the Tribunal that the book debt would not represent any value to the assessee until it is realised, from a re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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