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TMI Blog1982 (10) TMI 56X X X X Extracts X X X X X X X X Extracts X X X X ..... h the assessees appealed to the AAC. The leading order was passed by the latter in the case of Smt. Hemlata Shukla, which was followed by him in the case of Smt. Sarla Shukla. He observed that the WTO had not given any reason, apart from taking the assessee's own declaration as the basis for applying a multiple of 20 to the net rental income. According to him, therefore, the basis shown by the assessee of applying a multiple of 15 only was reasonable and should have been applied. He, accordingly, deleted the addition made by the WTO in the respective assessment years. 4. Being dissatisfied with the above finding of the AAC, the WTO has come up in appeals before us. The learned departmental representative submitted before us that there was no reason for not applying a multiple of 20 to the net rental income even up to the assessment years 1973-74 when both the assessees themselves had applied that multiple in the subsequent assessment years. The counsel, on the other hand, submitted that it was rule 1BB of the Wealth-tax Rules, 1957 ('the Rules') which should be applied to the case as the property was mainly used for residential purposes. 5. After hearing the parties, we are in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... holding that both Smt. Hemlata Shukla and Smt. Sarla Shukla were the joint owners of Birhana Road, Kanpur, property. This order, of course, was passed ex parte. However, nothing turns on that. 7. In the meantime both the ladies jointly purchased a plot of land in Safdarjung, New Delhi, on 9-8-1965 out of the rental income of Kanpur property and cash available with them. The plot was purchased for a sum of Rs. 34,500. A further sum of Rs. 1,723 was spent as registration charges. Construction was also started on this plot sometime in June 1966 and was completed in 1967-68. The construction was financed out of the following sources : Rs. 1. Rental income from Birhana Road property from 1963-64 to 1969-70. 57,826 2. Withdrawal from Biharilal Sri Krishna, Kanpur being rental income of the said property 30,000 3. Gift received from Shri P.N. Shukla 10,000 4. Savings of the ladies 23,697 ----------------------- 1,21,283 ----------------------- Before we go further, we may also make some observations regarding the above sources. Till the judgment of the Civil Judge, Kanpur, delivered on 18-11-1974, the property was treated as belonging to Smt. Hemlata Shukla. Out of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rds, he did not accept the claim of the assessee that the property in question belonged to an AOP or that no share from it was assessable in the hands of the assessees. He valued the property on rental basis at Rs. 1,88,000 and included half of the amount, i.e., Rs. 94,000 in the assessments of each of the two assessees in the assessment years 1970-71 to 1973-74. He revalued the property at Rs. 2,97,600 for the subsequent years and included half of that amount, i.e., Rs. 1,48,800 in those years. 10. The assessees appealed to the AAC. It was submitted before him that the value of Delhi property was not assessable in the assessments of the assessees and, in any case, it had been improperly valued at an excessive amount. It was contended before him that the property belonged to an AOP consisting of Smt. Sarla Shukla and Smt. Hemlata Shukla and since their shares were indeterminate, no share thereof could be included in the assessments of the assessees. The AAC first took up the question as to whether Delhi property, in fact, belonged to any AOP. He found that even in the income-tax assessments, the ITO had not been able to correctly determine the shares of each lady in the income of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Delhi Administration. This deed nowhere specifies as to what extent they were owners in the said property. It only says that the lease had been given jointly to both the parties. Moreover, there is no deed of agreement for the Delhi property and the subsequent conduct in the distribution of income also goes to show that the share from the income of Delhi property was not specified or determinate. As already stated above, the real basis to be seen and as defined by the Supreme Court in Indra Balkrishna's case is whether there was an intention to come forward in a common purpose or common action and the object must be to produce income. This basis has been duty fulfilled in the above-mentioned case and, accordingly, I hold that there was a valid association of persons as contemplated under the I.T. Act. " He also agreed with the other contention of the assessees that no share from the AOP was assessable in the assessments of either of the above two assessees. 11. The department is aggrieved with the above findings of the AAC and has filed the present appeals. The learned departmental representative submitted before us that in the first place Delhi property could not be said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s that even if there was any difficulty in mathematically determining the amount of the capital invested by the assessees in the purchase of the property, that, by itself, was no ground to hold that their shares in association were either indeterminate or unascertainable. 12. The learned counsel for the assessee submitted before us that if the source of investment in the property was carefully examined, it would be clear that the ownership thereof was indeterminate at the time the investment was made in the construction of the property. In particular, he submitted that till 18-11-1974 when the Civil Judge, Kanpur, had delivered his judgment, the ownership of Kanpur property was in dispute and obviously, therefore, it was also in dispute as to who was the owner of the rental income derived from that property, which was the main source of investment in the purchase and construction of Delhi property. His second submission was that even if it could be said that the rental income of Birhana Road property belonged to two ladies in equal share, at least there was no clear idea about the ownership of Rs. 23,697, which represented the joint savings of the ladies. In the written submissio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ument was made to indicate that before the dispute was settled by the Civil Judge, Kanpur, not only the title of the property was in dispute but that the shares of the two ladies were also indeterminate in that property. 10. The learned counsel further submitted that no doubt section 4(1)(b) did permit the WTO to include the value of the interest of the assessees in the association, which was to be determined in the prescribed manner. He, however, submitted that such determination could not be made under rule 2(1). He contended that on the basis of his earlier arguments, it was not possible to ascertain the proportion of the capital invested in Delhi property by the two ladies and if this could not be determined, the rule had no application to the present case. He further submitted that there was also no agreement for the distribution of assets in the event of the dissolution of the association, nor there was anything to indicate in what proportion the ladies were entitled to share profits of the association. According to him in view of these difficulties, rule 2(1) could not be applied to the case of the above assessees and, therefore, no share of the association could be brough ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the purpose of ascertaining the mischief sought to be remedied by the legislation and the object and purpose for which the legislation was enacted. The judgment laid down that this was in accord with the recent trend in juristic thought not only in western countries but also in India that the interpretation of a statute being an exercise in the ascertainment of meaning, everything which is logically relevant should be admissible. It was also held in this case that the circulars of the Board explaining the scope and object of a section were binding on the department in the administration of the Act. 13. Finally, the counsel for the assessees submitted that even before the enactment of section 21AA in the Act, it was possible to say that even an AOP was assessable as an individual which is an assessable entity under the charging section 3. In this connection, he referred to a decision of the Supreme Court in WTO v. C.K. Mammed Kayi [1981] 129 ITR 307. Another decision cited by him was that of the Bombay High Court in Trustees of Gordhandas Govindram Family Charity Trust v. CIT [1968] 70 ITR 600. It was held in this case that the joint trustees of a charitable trust could be assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the first property. It is open to them to have different shares in their subsequent acquisition. Section 45 of the Transfer of Property Act no doubt lays down that in the absence of evidence as to the interests in the fund to which the parties were respectively entitled or as to the shares where they respectively advanced, such persons shall be presumed to be equally interested in the property. It is well settled that this section applies only to transfers for consideration. It that respect, the section will have application only to the acquiring of the plot in Delhi and not to the structure which was constructed by the ladies themselves and was not acquired for consideration. It is also by now well settled that, unlike the English law, the law in India recognises dual ownership, the land belonging to one person and the structure upon it belonging to another--Sakarchand Chhaganlal v. CED [1969] 73 ITR 555 (Guj.) This was also the view taken by the Madras High Court in the case of CIT v. The Madras Cricket Club [1934] 2 ITR 209. It was held in this case that in order that a person may be assessed as the owner of a building under section 9 of the Indian Income-tax Act, 1922, it was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re High Court also supports the stand of the assessee. It was held in this case that if the shares of the parties were not definite and ascertainable within the meaning of section 9(3) of the 1922 Act, corresponding to section 26 of the 1961 Act, then they were not entitled to have their shares of income separately assessed. 17. After having held that the Delhi property belonged to the AOP consisting of Smt. Sarla Shukla and Smt. Hemlata Shukla, we have further to see how far the provisions of section 4(1)(b) of the Act were applicable to the case. An AOP is not an assessable entity under the charging section 3 of the Act. In this connection. we do not agree with the submissions of the learned counsel for the assessees based on the principles laid down in the cases reported in C.K. Mammed Kayi and Trustees of Gordhandas Govindram Family Charity Trust. These cases are distinguishable. Suffice it to say that an AOP is not assessable to wealth-tax. To some extent this omission is remedied by section 4(1)(b). It lays down that in computing the net wealth of an individual, there shall be included as belonging to that individual, where the assessee is a member of an AOP, the value of h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unsel relating to the introduction of section 21AA in the Act. It was precisely to meet such situations that this section has been introduced in the Act. It lays down that where assets chargeable to tax are held by an AOP and the individual shares of the members in the income or assets or both of the said associations are indeterminate or unknown, the wealth-tax shall be levied and recovered, from such association in the manner laid down in that section. The contention of the learned counsel for the assessee that section 21AA was meant to plug the lacuna in the Act is supported by the circular of the CBDT and the speech of the Finance Minister delivered in the Lok Sabha while moving the Finance Bill and that they are relevant to find out the object and purpose for which the legislation is enacted in the light of the principle laid down by the Supreme Court in the case of K.P. Varghese. The view we have taken has also the view of the Tribunal in the case of J.K. Srivastava. A copy of this order was also made available to us by the counsel for the assessees. We, therefore, uphold the order of the AAC excluding the value of Delhi property from the assessments of the two ladies for all ..... X X X X Extracts X X X X X X X X Extracts X X X X
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