9911796707
TMI Blog1980 (3) TMI 51X X X X Extracts X X X X X X X X Extracts X X X X ..... on the facts and in the circumstances of the case, the properties and assets standing in the name of Smt. Surajbai could be included in the net wealth of the assessee for the assessment years in question ? (3) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in not considering the contention relating to the sum of Rs. 4,83,438 being the share of the assessee in the credit balance in the partner's current account with the firm of Chirimiri Colliery Company as on the valuation date ? " Out of the aforesaid three questions, only the first two questions are pressed before us. The assessee is a HUF having share in a firm doing business in the name and style of Chirimiri Colliery Co. The assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l lease was to expire on the 23rd December, 1960. The assessee excluded from its net wealth the value of its interest in the company for the last five years of the lease-period on the ground that its interest in the company was not an asset within the definition of s. 2(e)(v) of the Act since the said interest was available to the assessee for a period not exceeding six years. The WTO, however, did not accept the assessee's claim because, according to him, it was the total period of the lease which should be taken into consideration for determining whether the exemption granted under the said s. 2(e)(v) applied. He further held that the said exemption was not available also because the lease was renewable for a further period of 30 years ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e are, therefore, two aspects of the question that fall for our consideration, viz., whether the interest in the lease should be valued with reference to the date of valuation or with reference to the total period of the lease, and, secondly, whether it can be said that the right to renewal of the lease was an interest in property, and, therefore, an asset within the meaning of the said Act. As regards the first question, the relevant s. 2(e)(v) as it stood prior to its amendment, was as follows: " 2(e) 'Assets' includes property of every description, movable or immovable, but does not include,- . . ......... (v) any interest in property where the interest is available to an assessee for a period not exceeding six years." It was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder transfer which is not revocable for a period exceeding six years or during the lifetime of the transferee, the assets are liable to be included in the net wealth of the transferor. It is implicit in sub-section (5) of section 4 that if an asset is held under a transfer which is revocable before the expiry of six years, the interest of the holder in the asset shall be included in the wealth of the transferor. If the transaction of lease in the present case was between a private individual and the respondent, evidently by virtue of section 4(5) the interest of the assessee under the lease would have been liable to be included in the net wealth of the transferor. We see no reason to hold that because the transferor is the Government, any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not sustainable. The unanimous view on this point is that mere right to renew does not create a contract between the parties, whether such right is burdened with conditions or not. It is only when the said right is exercised by the lessee that a contract is created between the parties resulting in an interest in the property. 'For this proposition, we may first refer to a decision of the Supreme Court in R. Kempraj v. Burton Son and Co. P. Ltd., AIR 1970 SC 1872. It is observed there as follows: " Where the lease for 10 years provided for an option to the lessee to renew the same for further similar periods as long as desired on the same terms and same rent, without any objection whatsoever from the lessor, clauses containing the opti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ional facts in our case have been stated only to point out that the statement of law made in the aforesaid Supreme Court case will apply to our case with all the more force. We may also further refer in this connection to an observation made in Weg Motors Ltd. v. Hales [1961] 3 All ER 181, 186 (CA) by Lord Evershed M. R., which is as follows: " But in the present case we are concerned not with a contract, that is a binding agreement, to grant and take a lease, but with an option which might never be exercised and cannot, until exercised, be in any event said, in our judgment, to create a term of years at all." The aforesaid observations, therefore, bring out the true nature of the right to renewal of the lease and make more than clear t ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
