9911796707
TMI Blog1982 (7) TMI 50X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee owned a cinema house which was leased out to one Shyama Charan for a period of ten years beginning from 22nd May, 1950, and ending on 21st May, 1960, at a rent of Rs. 1,600 per month. As the lessee did not hand over possession after the expiry of the, lease, a suit was instituted by the assessee for recovery of vacant possession, arrears of rent and mesne profits. The suit was first decreed on 3rd November, 1962, regarding the claim for possession by the district judge leaving the question of arrears of rent and mesne profits to be settled thereafter. The decree for possession was affirmed by the High Court and the Supreme Court. The possession was delivered to the assessee on 4th October, 1964. The district judge thereafter tried ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 31st December, 1965, for 1966-67 and 31st December, 1966, for 1967-68. The WTO added the amount of Rs. 1,72,000 which is the amount of mesne profits payable for the period up to 3 lst December, 1963, as an asset for the assessment year 1964-65 and for the subsequent years, the amount of Rs. 2,08,000. The AAC confirmed the order of the WTO. The Tribunal held that the right to receive the asset in the shape of mesne profits arose to the assessee only on 2nd January, 1967, when the district judge passed the decree and this did not relate back to any earlier period and, therefore, the Tribunal deleted the addition made by the WTO. On an application made by the Revenue, the Tribunal referred the aforesaid question of law. The charge of wealt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the Supreme Court in Pandit Lakshmi Kant Jha v. CWT [1973] 90 ITR 97 at 106-107. The question then is whether the assessee's right to recover mesne profits for which he had filed a suit and which was pending on all the relevant valuation dates could be called property belonging to the assessee even before the passing of the decree relating to mesne profits. It is true that the right to recover or sue for mesne profits is a claim for unliquidated damages. It is not a debt. It is not an actionable claim as defined in s. 3 of the Transfer of Property Act, 1882. Speaking generally it is also not transferable except along with the property in respect of which it is claimed (Gangaraju v. Gopala Krishnamurthi, AIR 1957 AP 190) or when the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sold in the open market on the valuation date and as the right to recover mesne profits cannot be sold, its valuation cannot be determined which shows that it is not property falling within the definition of assets contained in the Act. This argument cannot be accepted. It was held in Ariff's case [1970] 76 ITR 471 (SC), that the words "if sold in the open market " occurring in s. 7 do not contemplate actual sale or the actual state of the market but only enjoin that it should be, assumed that there is an open market and the property can be sold in such a market. As further pointed out in that case, these words contemplate a hypothetical case and the WTO must assume that there is an open market in which the asset can be sold. The same view ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the heirs before its adjudication and quantification. Before parting with the case, we would like to make it clear that the valuation of the right to recover mesne profits on the valuation date will not be necessarily the amount of mesne profits which the court later adjudicates. Normally, it would be much less having regard to the unpredictable course that a litigation may take in future. The Tribunal has not dealt with the question of valuation as it came to the conclusion that the right is not an asset. It will have to go into that question now. For the reasons given above, we answer the question as follows: " The right to receive or recover mesne profits existed as an asset belonging to the assessee on the relevant valuation da ..... X X X X Extracts X X X X X X X X Extracts X X X X
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