1. This Full Bench reference is made by the Division Bench by their orders dated June 16, 1988. The 'E' Bench at Bombay before whom this appeal arose for hearing on June 1, 1988, felt that for reasons recorded in their referring order it is a fit and proper case to be heard by a Special Bench and, therefore, they have formulated the following question and it had referred to a Full Bench. The question referred to the Full Bench is : "Whether, value of certain flats in a building should or should not be included in the net wealth of the assessee for the assessment year 1980-81 for which the relevant valuation date is March 31, 1980 ?" 20. In the order of reference it is stated that in the income-tax appeals for the assessment years 1978-79 and 1979-80 (Income-tax Appeals Nos. 5961 and 5962/(Bom) of 1983) which represent the appeals of the assessee's brother, Shri P.M. Mistry, by an order dated February 16, 1988, the Tribunal followed the Bombay High Court decisions in the case of Amarchand J. Agarwal v. Union of India [1983] 142 ITR 402 and CIT v. Zorostrian Building-society Ltd. [1976] 102 ITR 499 and held the issue against the assessee and in favour of the Revenue. Similarly, while disposing of the assessee's wealth tax appeals for the assessment years 1975-76 to 1979-80 in Wealth-tax Appeals Nos. 3284, 3593, 3665/(Bom) of 1983, 297/{Bom) of 1984 and 1489/ (Bom) of 1985, the earlier Tribunal by following the above case law had decided the issue in favour of the Department and against the assessee by their order dated March 1, 1988. In fact, the learned members of the Tribunal, while deciding the appeals for the abovesaid earlier years by following those two decisions of the Bombay High Court, held that the assessee should be considered to be the owner or remained owner of the property up to the date of the registration. The earlier Benches of the Tribunal held that since they are binding precedents they are bound to follow those two decisions in preference to the Gujarat High Court decision in Arundhati Balkrishna v. CIT [1982] 138 ITR 245 and the Calcutta High Court decision in CIT v. Ganga Properties Ltd. [1970] 77 ITR 637.
However, the referring Bench felt that the Bombay Tribunal in another case, namely, Smt. R.M. Batliboi (Income-tax Appeal No. 2972/(Bom) of 1981) considered the very issue followed in Arundhati Balkrishna v. CIT [1982] 138 ITR 245 (Guj) and CIT v. Ganga Properties Ltd. [1970] 77 ITR 637 (Cal) and also referred to the beneficial circular issued by the Commissioner of Income-tax, Bombay City No. 1, Bombay, dated January 21, 1974, bearing No. 53 of 1973, and found the very issue against the Revenue. Therefore, the referring Bench felt that neither the decision in the case of Amarchand J. Agarwal [1983] 142 ITR 402 (Bom) nor the case of Zorostrian Building Society Ltd. [1976] 102 ITR 499 (Bom) were applicable to the facts of the present case. They also strongly felt that neither the rule laid down in the case of the Gujarat High Court in Arundhati Balkrishna [1982] 138 ITR 245 nor by the Calcutta High Court in the case of Ganga Properties Ltd. [1970] 77 ITR 637 represent the correct law and it should not be applied to the case of the assessee. In view of the opinion which they held, the referring Bench also felt that the earlier orders of this Tribunal in the earlier years in the case of this assessee and his brother, Shri P.M. Mistry, requires reconsideration and hence made the reference.
3. Now, let us find out the brief history of the case up to the filing of the second appeal. The assessee, his brother, Shri P.M. Mistry, and three sisters of the assessee along with Shri K.M. Mistry are holding 1/3rd share each in the property known as "Bhaktawar Building" situated at Colaba, Bombay. For our purposes, it is enough to know that the assessee and his brother, Shri P.M. Mistry, held a one-third share each in this property. There are 40 flats constructed in the said premises.
Out of them five flats were jointly owned by the co-owners. 32 flats were occupied by the tenants and three flats continued to be in the possession of the court receiver. Out of 32 flats, 9 flats were sold in the accounting year relevant to the assessment year 1976-77. This transfer was accepted by the Income-tax Officer in the assessment year 1976-77.
4. We are now concerned with 12 out of 32 flats in this building.
According to the Revenue, the assessee is liable to pay wealth-tax on one-third value of these 12 flats. The assessee, however, had not been showing the value of these 12 flats on the ground that they were sold under the Apartment Owners' Act (which is hereinafter referred to as "the Act"). It is also the case of the assessee before the Wealth-tax Officer that under the said Act, it was not necessary to register the sale/transfer deed in order to pass on ownership to the transferee.
However, the Department was of the view that in the case of immovable property, the ownership will change hands only when the transfer document is registered and not till then. In view of this position having been held by the Revenue, the assessee's contention is not accepted and the value of the 12 flats was also considered as part of the net wealth of the assessee. Towards one-third value of these flats representing the assessee's share in them, a sum of Rs. 7,54,933 was added as part of the assessee's wealth for the assessment year 1980-81 whose valuation date was March 31, 1980.
5. Having been aggrieved against this addition, the assessee went in appeal before the Commissioner of Wealth-tax (Appeals). The learned Commissioner of Wealth-tax (Appeals), in his order dated June 20, 1987, found that right from the assessment year 1975-76 to the assessment year 1978-79, it has been held by the appellate authorities that the value of the flats sold under the Act should be excluded from the assessee's wealth and since this matter is covered by the assessee's own case, he should follow his predecessor's orders for earlier years, after accepting the assessee's contention in that regard. In view of accepting the main ground itself, he did not choose to take up the alternative ground that the amounts received from the respective flat owners, on transfer being effected in their names, should be allowed as a deduction in computing the net wealth of the assessee, as this was felt unnecessary, and, therefore, not taken up or answered.
6. Having been aggrieved against the impugned order dated June 20, 1987, the Revenue filed the present second appeal before this Tribunal and thus the matter stood up for consideration before the Division Bench or referring Bench which in its turn referred the matter to the Full Bench.
7. We have heard Shri D.K. Singh, learned Departmental Representative for the Department, and Shri P.J. Parchiwalla, learned advocate for the assessee. The assessee filed a paper book containing 28 pages whereas the learned Departmental Representative filed mostly photocopies of the decided cases on which he wants to rely. Admittedly, the assessee along with other co-owners had executed documents of conveyance with regard to the 12 flats under consideration. The documents of conveyance thus executed were not registered within the valuation date relevant for the assessment year 1980-81. It is the contention of the Revenue that unless the documents of conveyance were tendered for registration and the registration was actually completed under Section 61 of the Indian Registration Act, the sale or conveyance was not complete and till such registration takes place, the title to the flat could not be transferred in favour of the purchasers and till the registration is complete the assessee, along with his co-owners only, would be liable to pay wealth-tax on the value of the 12 flats also as part of their wealth.
8. On the other hand, the contention of the assessee was that the documents of sale were all executed prior to the valuation date but only their registration had taken place subsequent to the relevant valuation date. However, by virtue of Section 47 of the Registration Act they operate from the date of their respective date of execution and so irrespective of the date of registration that 12 flats must be considered to have been conveyed to the transferee on the respective dates of execution of the deeds in their favour and since the titles were thus conveyed to the purchasers and since the purchasers themselves were in possession of the flats conveyed to them, the value of those 12 flats should no longer be excluded from the wealth of the purchasers or any portion of such value should be included as part of the wealth of the assessee or any co-owners of the flats.
9. The learned Departmental Representative relied upon the following authorities in support of his proposition :Hiralal Agrawal v. Rampadarath Singh, AIR 1969 SC 244 ; 3. Maharashtra Apartment Ownership Act, 1970 (which is referred to as "the Act" in this order) ; 4. Order of the Bench 'B' of the Bombay Tribunal dated February 16, 1988, passed in Income-tax Appeals Nos. 5669, 3670, 3672 and 3673/ (Bom) of 1983, 356/(Bom) of 1984 and 3148/(Bom) of 1984, relating to the assessment years 1976-77 to 1979-80 and 1980-81 in which the assessee's brother, Shri P.M. Mistry, was the appellant and also Income-tax Appeals Nos. 5961 and 5962/(Bom) of 1983, relating to the assessment years 1978-79 and 1979-80 in the case of this very assessee ; 5. The earlier order of this Tribunal 'B' Bench, dated March 1, 1988, passed in Wealth-tax Appeals Nos.
3284, 3593, 3665/(Bom) of 1983, 297/(Bom) of 1984 and 1489/(Bom) of 1985 relating to the assessment years 1975-76 to 1979-80 in the case of this very assessee ; 6. CIT v. Tamil Nadu Agro Industries Corporation Ltd. [1987] 163 ITR 61 (Mad) ; 7. Divvi Suryanarayana Murthy v. Competent Authority, IAC of I. T. [1979] 117 ITR 278 (AP) ; 8. Mahavir Metal Works P. Ltd. v. Union of India [1974] 95 ITR 197 (Delhi) ; and 9. CIT v. Ganga Properties Ltd. [1970] 77 ITR 637 (Cal).
10. Besides the above, the learned Departmental Representative wanted to distinguish the following cases relied upon by learned counsel for the assessee : 1. Arundhati Balkrishna v. CIT [1982] 138 ITR 245 (Guj) at pages 268-270 ; 2. CIT v. Zorostrian Building Society Ltd. [1976] 102 ITR 499 (Bom) ; 3. Nawab Sir Mir Osman Ali Khan (Late) v. CWT [1986] 162 ITR 888, at page 890 ; 4. Hiralal Agrawal v. Rampadarath Singh, AIR 1969 SC 244 ; 5. Nanda Ballabh Gururani v. Smt. Maqbool Begum [1980] 3 SCC 346 ; 6. Fort Properties Put Ltd. v. CIT [1994] 208 ITR 232 (Bom).
11. About the first two decisions strongly relied upon by the assessee which are noted above, it is said by the learned Departmental Representative that they have been rendered in the context of Section 45 of the Income-tax Act, He also sought to distinguish CIT v.Zorostrian Building Society Ltd. [1976] 102 ITR 499 (Bom) by contending that Section 47 of the Registration Act is not dealt with.
12. Learned counsel for the assessee, countering the arguments of the learned Departmental Representative, submitted that on March 11, 1975, most of the declarations were made by the flat owners under Section 2 of the Act as can be seen from page 12 of the paper book filed on behalf of the assessee. It is contended that once the registration of the sale deed is complete, it begins to operate from the date of execution of that document by virtue of Section 47 of the Indian Registration Act. Learned counsel for the assessee tried to distinguish the Bombay High Court decision in Amarchand J. Agarwal v. Union of India [1983] 142 ITR 402 by submitting that in that case the Bombay High Court is concerned with the application of Chapter XX-A of the Income-tax Act introduced with effect from November 15, 1972. In that case the sale deed was executed on November 7, 1972, before Chapter XX-A came into the Income-tax Act, 1961. The question in that case was whether compulsory acquisition under Section 269C is legal in view of the facts and circumstances of that case. What is the effective date of sale on which title of the transferor was made over to the transferee was not required for the purposes of the Bombay High Court in that case and hence Amarchand J. Agarwal v. Union of India [1983] 142 ITR 402 or the ratio of that decision cannot be of any help to the Department. In view of the latest Supreme Court decision in Nanda Ballabh Gururani v.Maqbool Begum [1980] 3 SCC 346 as well as the latest of the Bombay High Court in Fort Properties P. Ltd. v. CIT [1994] 208 ITR 232 in which the issue was similar to the issue which arose for the decision of this Tribunal, the ratio of those two decisions is to be followed and the case must be decided in favour of the assessee and the appeals of the Department must be dismissed.
13. We have heard the arguments of both the parties fully and completely. We have gone through the paper book filed on behalf of the assessee as well as the paper compilation filed on behalf of the Department. After hearing both the sides, we are of the view that though the point of law involved is quite intriguing, we feel that it should be decided in favour of the Department, since the bulk of the authorities, specially the Supreme Court decisions as well as the Bombay High Court decisions go to support the contention of the Department.
14. First, let us take the facts of the case. There was a building named "Bhaktawar" at Colaba, Bombay. It is a co-owned property in which the assessee holds one-third share. His brother, Shri P.M. Mistry, holds one-third interest and his brother and three sisters together hold another one-third interest in the said asset. There are 40 flats constructed. Out of them five flats were under the personal occupation of the co-owners, 32 flats were occupied by the tenants and three flats were in the possession of the court receiver.
15. Now, we are concerned with 12 out of 32 flats which were found to be occupied by the tenants. We have put a specific question to the learned Departmental Representative whether the Assessing Officer was able to identify the 12 flats which formed the assets relevant to the assessment year 1980-81. The learned Departmental Representative clearly stated before us that he cannot identify the 12 flats nor can he say as to with reference to which record the Income-tax Officer stated in his assessment order about these 12 flats. However, he submitted that there is no dispute with regard to the assets in question which admittedly comprised 12 flats and so the identity of those 12 flats cannot and need not be given any importance. The assessee's advocate also stated that with regard to the identity of these 12 flats there is no dispute between the assessee and the Department. Therefore, we hold that 12 flats out of 32 flats which were found to be in the possession of tenants form the assets with which we are concerned in this appeal and there is no dispute with regard to the subject-matter of the appeal before this Tribunal. So, we take it that 12 out of 32 flats in the occupation of tenants should be considered as the assets involved in the appeal before us.
16. For the assessment years 1975-76 to 1979-80 in the assessee's own case it was decided by this Tribunal, 'B' Bench, by its order dated March 1, 1986, that the assessee is liable to wealth-tax for his one-third interest in this asset. A copy of the order was furnished at pages 10 and 11 of the assessee's paper book. In those years, one-third share of the assessee in 32 flats was estimated at Rs. 12,14,495. The orders dated February 16, 1988, of the Tribunal, 'B' Bench, in the case of the assessee's brother, Shri P.M. Mistry, in his income-tax appeals relating to the assessment years 1976-77, 1977-78, 1978-79 and 1980-81 were provided at pages 1 to 9 of the paper book on behalf of the assessee. The income from the flat was directed to be considered in the hands of the assessee's brother in those assessment years. During those years also, the facts were that an agreement was entered into on March 12, 1975, between the co-owners of the property and the tenants of "Bhaktawar Building". Full sale consideration was paid by the tenants and declarations were made under the provisions of the Act. But the registration of the deeds of apartments was made beyond the accounting period relevant to those assessment years. The contention of the learned Departmental Representative in those appeals was that transfer of immovable property is complete only on the date of registration of the deed of conveyance and in the case of the assessee such registration was not effected during the accounting period relevant to the assessment years. The ownership, therefore, remained only with the assessee and the income is rightly assessed in his hands as he still continued to be the legal owner. The learned Tribunal at that time while passing that order had relied upon the following case-law : 2. CIT v. Sultan Brothers P. Ltd. [1983] 142 ITR 249 (Bom) ; 3. CIT v. Zorostrian Building Society Ltd. [1976] 102 ITR 499 (Bom) ; 4.
CIT v. Union Land and Building Society P. Ltd. [1972] 83 ITR 794 (Bom).
17. As is the case in the present assessment year the position considered by the Tribunal in the assessment years 1976-77 to 1980-81 was that the deeds were executed but they were not registered during those accounting years relevant to those assessments. In the case of the assessee's brother also it was contended on behalf of the assessee that once the registration is complete it operates from the date of execution of the deed and so the sale deeds must be deemed to have become effective even from the dates of the deeds and not from the dates of registration. This contention was rejected as untenable by the earlier Tribunal in the assessee's brother's case also in paragraphs 14, 15 and 16. The learned members discussed the contention and sifted it and those paragraphs are extracted hereunder : " 6. Even on the legal aspect, learned counsel submitted that the transfer was complete and final. According to him, an agreement was entered into on March 12, 1975, between the co-owners of the property and the tenants of the 'Bhaktawar' building. Full sale consideration was paid by the tenants. Declaration was made under the Maharashtra Apartment Ownership Act and such declaration was duly registered. Our attention was drawn to the following provisions of the Maharashtra Apartment Ownership Act : Section 2, Section 5, Section 11, Section 13(5), etc. Since the transfer made" by the assessee in this case is complete as per the provisions of the Maharashtra Apartment Ownership Act, the assessee cannot be treated as owner of these flats already transferred under the terms of the said Act.
7. It is further pointed out that the registration of the deeds of apartments was subsequently made, i.e., beyond the accounting period relevant for these assessment years. However, the date of registration, according to the learned counsel of the assessee, is not material as the effective date of operation reverted back to the date of original agreements/ deeds of conveyance of these flats to the transferee. For this proposition, reliance was placed on the following decisions : (i) Arundhati Balkrishna v. CIT [1982] 138 ITR 245 (Guj) ; (ii) CIT v. Ganga Properties Ltd. [1970] 77 ITR 637 (Cal).
8. Since the Inspecting Assistant Commissioner himself accepted the legal position in the case of the co-owners and the directions given in Section 144 of the Income-tax Act, it is submitted that these questions should be treated as concluded and the deed of transfer should be taken as on the date of the execution of the deed of conveyance." 18. On the facts before us also admittedly, the registration of documents with regard to these 12 flats was not complete in the accounting year in question, though as was the case in the earlier years, the documents of sale were executed in favour of the tenants of those 12 flats.
19. Now, the question is during the absence of any registered deeds in favour of the transferees for these 12 flats can they be considered as owners and whether they can be made liable to wealth-tax on the value of those 12 flats in the absence of any registered sale deed in their favour or in the alternative whether the assessee and his other co-owners are liable to pay wealth-tax on the value of these 12 flats for the assessment year 1980-81 is the only question to be decided in this case.
20. In support of the contention that the liability to pay wealth-tax for these 12 flats remained only with the assessee and his other co-owners, the learned Departmental Representative brought to our notice, firstly, the Supreme Court decision in Nawab Sir Mir Osman Ali Khan v. CWT [1986] 162 ITR 888. In that case also the assessee, the Nizam of Hyderabad, had received full consideration for certain immovable properties from the purchasers but he had not executed any registered sale deeds in favour of the vendees. The question is whether the property be included in the net wealth of the assessee for purposes of assessment to wealth-tax as they were assets "belonging" to him within the meaning of Section 2(m) of the Wealth-tax Act, 1957. The Supreme Court ultimately held that for all legal purposes, the properties had to be treated as belonging to the assessee. As per the headnote of the decision, the following is what is held : " The assessee, the Nizam of Hyderabad, had received full consideration for certain immovable properties from the purchasers.
But he had not executed any registered sale deeds in favour of the vendees : Held, that the value of the properties were to be included in the net wealth of the assessee for the purpose of assessment to wealth-tax as they were assets belonging to him within the meaning of Section 2(m) of the Wealth-tax Act, 1957. For all legal purposes, the properties had to be treated as belonging to the assessee.
The liability to pay wealth-tax arises because of the belonging of the asset and not otherwise. Mere possession, or joint possession, unaccompanied by the right to be in possession or ownership of property, would, therefore, not bring the property within the definition of 'net wealth' for it would not then be an asset 'belonging' to the assessee." 21. The next decision to which our attention was drawn was Amarchand J.Agarwal v. Union of India [1983] 142 ITR 402 (Bom). In that case the sale deed was executed on November 7, 1972, but it was registered on September 21, 1977. Section 269C of the Income-tax Act, 1961, was introduced with effect from November 15, 1972. The competent authority initiated proceedings for compulsory acquisition under Section 269C on June 26, 1978. The question was whether the proceedings of the competent authority were barred by time. The Bombay High Court held that they were not barred by time. In that case also the Bombay High Court posed a question before itself as to what is the date the property could be treated as transferred. In that case also, it was contended on the basis of Section 47 of the Registration Act that it is really irrelevant to consider the date when the document is registered, as the transfer operates from the date of execution itself. However, this argument was not accepted by the Bombay High Court. It held at page 407 ; "It is not possible to accept this line of reasoning. It is undoubtedly true that Section 47 of the Registration Act provides that the document shall operate from the time of its execution once it is duly registered by the registering authorities. But Section 47 does not say when a sale would be deemed to be completed and it only permits a document to operate from a certain date which may be earlier than the date when it was registered." The learned single judge went to the extent of holding that the transfer of a title would go along with the completion of sale and he held the following (at page 409) : " There is no distinction between the transfer of a title and the completion of the sale, and in view of the decision of the Supreme Court, the title passes only when the document is registered under the provisions of the Registration Act. The mere fact that such transfer operates from the date of execution is not sufficient to conclude that the title itself passes on the date of execution." 22. The single Bench decision was approved by the Division Bench of the same High Court in Amarchand Jainarain Agarwal v. Union of India [1983] 142 ITR 410 and the learned Division Bench held that the view of the Bombay High Court is also supported by the Delhi High Court in Mahavir Metal Works P. Ltd. v. Union of India [1974] 95 ITR 197 and the Andhra Pradesh High Court in Divve Suryanarayana Murthy v. Competent Authority [1979] 117 ITR 278.
23. The next instance to which our attention is invited is the decision of the Supreme Court in Ram Saran Lall v. Mst. Domini Kuer, AIR 1961 SC 1747. In that case Pandeys executed a deed of sale in favour of the respondent in respect of a house owned by them on January 31, 1946. The appellant claimed a right of pre-emption on account of this sale. The consideration mentioned in the sale deed was Rs. 2,000. On February 2, 1946, the appellants, on coming to hear about the execution of the deed of sale, claimed right of pre-emption. However, in fact, on February 9, 1946, the registration of the sale deed became complete as provided in Section 61 of the Registration Act. One of the requisites before the right of pre-emption can be exercised is that the preliminary demand must be made by the pre-emptor and that such demand must be made after the completion of the sale. In that case, the Attorney-General put forward a contention that the sale deed became operative from the date it was executed even though its registration might have taken place later. The contention of the Attorney-General was not accepted and majority of the learned judges of the Supreme Court held the following (at page 1749} : "We will assume that the learned Attorney-General's construction of the instrument of sale that the property was intended to pass under it on the date of the instrument is correct. Section 47 of the Registration Act does not, however, say when a sale would be deemed to be complete. It only permits a document, when registered, to operate from a certain date which may be earlier than the date when it was registered. The object of this section is to decide which of two or more registered instruments in respect of the same property is to have effect. The section applies to a document only after it has been registered. It has nothing to do with the completion of the registration and, therefore, nothing to do with the completion of a sale when the instrument is one of sale. A sale which is admittedly not completed until the registration of the instrument of sale is completed, cannot be said to have been completed earlier because by virtue of Section 47, the instrument by which it is effected after it has been registered, commences to operate from an earlier date.
Therefore, we do not think that the sale in this case can be said in view of Section 47, to have been completed on January 31, 1946. The view that we have taken of Section 47 of the Registration Act seems to have been taken in Tilakdhari Singh v. Gour Narain, AIR 1921 Patna 150. We believe that the same view was expressed in Naresh Chundra Dutta v. Girish Chandra Das, ILR 62 Cal 979 ; AIR 1936 Cal 17 and Gobardhan Bar v. Gana Dhar Bar, ILR 1940 2 Cal 270 ; AIR 1941 Cal 78. " 24. The next authority on which reliance is placed by the learned Departmental Representative was Hiralal Agrawal v. Rampadarath Singh, AIR 1969 SC 244. The facts of that case are that one Prembati Devi sold 2.62 acres of land on October 9, 1964, and executed a sale deed for Rs. 2,000. The sale deed was thereafter presented to the Sub-Registrar for registration. On October 14, 1964, the appellant applied for a certified copy of the sale deed and on its being furnished to him, he filed an application dated November 26, 1964, under Section 16(3) of the Bihar Land Reforms (Fixation of Ceiling Area and Acquisition of Surplus Land) Act, XII of 1962, before the Collector. He annexed to his application a copy of the sale deed and a copy of the challan evidencing his having deposited the sale price of Rs. 2,000 and an additional sum of ten per cent/thereof as required by the proviso to Section '16(3)(i) and Rule 19 of the Bihar Land Reforms (Fixation of Ceiling Area and Acquisition of Surplus Land) Rules, 1965. On November 30, 1964, the Registrar completed registration by endorsing the certification on the said sale deed under Section 60(1) of the Registration Act and copying out the endorsement and the certificate in the relevant register under Section 61(1) of the Registration Act, 1908. The appellant had in his application claimed to be entitled as a co-sharer to the right of reconveyance of the said land under Section 16(3) of the Bihar Act XII of 1962. In that case, it is not in dispute that registration was completed on November 30, 1964, four days after the appellant had handed over his application. The certified copy furnished by him was not that of the registered deed. However, it was a correct copy of the sale deed presented for registration. It was contended on behalf of the respondent that the application presented by the appellant on November 26, 1964, was premature as registration of the sale deed was not then completed and, therefore, there was not a complete transfer and, therefore, the Collector had no jurisdiction to entertain such an application. In that case, it was argued that under Section 16(2) and (3) of the Bihar Act XII of 1962, no transfer takes place unless the sale deed is registered. In that case, Mr. Desai argued that under Section 47 of the Registration Act once the registration is effected, the title under the sale deed related back to the date of execution and, therefore, though registration was completed on November 30, 1964, the transferee's title under the sale related back to the date of execution, i.e., October 9, 1964. Assuming, therefore, that the application was presented on November 26, 1964, the transferee's title having related back to the date of the execution of the sale deed, the transfer must he deemed to be completed on that date and, therefore, it was not correct that the right of reconveyance had not accrued to the appellant on November 26, 1964, or that the Collector had no jurisdiction on that date to accept the said application. Their Lordships of the Supreme Court rejected this contention and they held the following in that connection (at page 250) : " This contention, however, cannot be accepted in view of the decision in Ram Saran Lall v. Mst. Domini Kuer [1962] 2 SCR 474 ; AIR 1961 SC 1747, where this court rejected an identical contention.
Mr. Desai tried to distinguish that case on the ground that it was based on Mohamedan law which by custom applied to the parties there.
But the decision is based not on any principle of Mohamedan law but on the effect of Section 47 of the Registration Act. The majority decision clearly laid down that the sale there was completed only when registration of the sale deed was completed as contemplated by Section 61 of the Registration Act and, therefore, the talab-i-mowasibat made before the date of completion of registration was premature and a suit based on such a demand of the right of pre-emption was premature and must, therefore, fail. Similarly, in Radhakishan Laxminarayan Toshniwal v. Shridhar Ramchandra Alshi [1961] 1 SCR 248 ; AIR 1960 SC 1368, this court laid down that where a statute providing for the right of pre-emption lays down that it accrues only when transfer of the property takes place and such transfer is not complete except through a registered deed, a suit filed before the sale deed is executed is premature as the right of pre-emption under the statute did not accrue till the transfer became effective through a registered deed. In Bishan Singh v. Khazan Singh [1959] SCR 878 ; AIR 1958 SC 838, this court laid down that in a suit for pre-emption the plaintiff must show that the right had accrued to him at the time when he exercised it." 25. The next decision to which our attention was drawn by the learned Departmental Representative was the Madras High Court decision in CIT v. Tamil Nadu Agro Industries Corporation Ltd. [1987] 163 ITR 61. The facts in that case are the following : The assessee purchased a building from the Neyveli Lignite Corporation. The assessee paid the entire consideration in October, 1970, and was put in possession of the building in November, 1970.
In March, 1975, the deed of sale was executed in respect of the building by the Neyveli Lignite Corporation in favour of the assessee. The assessee claimed depreciation in respect of the building in the assessment year 1973-74 but the Income-tax Officer rejected the claim. The Tribunal, however, held that in view of Section 47 of the Registration Act, the assessee was entitled to the allowance. The Madras High Court held that the Tribunal's interpretation of Section 47 of the Registration Act was erroneous.
It held that the assessee was not the legal owner of the building in the assessment year 1973-74 and was not entitled to depreciation in respect of the building in that year. Their Lordships of the Madras High Court in that case held as follows (at page 65) : "We may observe that Section 47 of the Registration Act does not anywhere state that a document shall take effect according to its tenor irrespective of the time from which it would commence to operate as provided therein." 26. The next decision to which our attention is invited was Mahavir Metal Works P. Ltd. v. Union of India [1974] 95 ITR 197 (Delhi). The ratio of the decision is truly stated at pages 197 and 198 in the following headnotes : "For the purpose of Chapter XX-A a transfer of immovable property must be taken to be effected only when the instrument of transfer is registered. Any transfer, to attract the provisions of the Chapter, would have to be registered under the Indian Registration Act, 1908 : till then the provisions would not apply to it. The provisions of Chapter XX-A apply if the registration of the deed of transfer is effected after the Chapter came into force even though the deed might have been executed before the provisions of the Chapter came into force and under Section 47 of the Indian Registration Act, 1908, the title of the transferees dates back to the date of execution." 27. In that case, their Lordships held that the date on which the registration of the deed so effected would be the crucial date with reference to which the applicability or otherwise of Chapter XX-A of the Income-tax Act would be determined.
28. The next decision to which our attention is drawn by the learned Departmental Representative is the Calcutta High Court decision in CIT v. Ganga Properties Ltd. [1970] 77 ITR 637. In that case, there was an agreement of sale of a house property and delivery of possession of the said property was effected in 1957. However, the sale deed was executed in 1958. The question is whether the vendor under the sale deed is liable to be assessed as owner in respect of the bona fide annual value of the property for the assessment year 1957-58. The Income-tax Officer held that ownership was not transferred until the registration of the deed of conveyance took place. He held that during the accounting year in question the ownership remained vested in the assessee (vendor) and he included the bona fide annual value of the house in the vendor's total income. The Appellate Assistant Commissioner was of the same view as that of the Income-tax Officer. The Tribunal, however, was of the opinion that though the assessee remained the legal owner, the beneficial ownership of the house passed on to the purchaser on March 29, 1956, and under Section 9 of the Indian Income-tax Act, 1922, the income from the house property was assessable in the hands of the beneficial owner, i.e., the purchaser and not the assessee. The High Court held : (1) That in the case of a sale of immovable property, a registered document is necessary to give effect to the sale and the sale takes effect only from the date of registration of the document ; (2) In Indian law-beneficial ownership is unknown ; there is but one owner, namely, a legal owner, both in respect of vendor and purchaser and a trustee and cestui que trust ; and (3) The expression "income from property" used in Sections 6 and 9 of the Indian Income-tax Act, 1922, refers to the income of the legal owner of the property and he is the only person assessable to tax on the basis of a bona fide annual value thereof.
29. The relevant valuation date for the assessment year 1980-81 with which we are concerned in this appeal is March 31, 1980. Admittedly, the sale deeds were already executed with reference to these 12 flats within the valuation date. However, none of these sale deeds were registered under the Registration Act or under the Act. Sections 2, 4, 5 and 13 of the Act which came, into force with effect from February 19, 1971, as amended by the Maharashtra Act No. 6 of 1974 and 53 of 1974 (which is hereafter referred to as "the Act") are important to be noticed. Section 2 of the said Act is as follows : "2. This Act applies only to property, the sole owners or all the owners of which submit the same to the provisions of this Act by duly executing and registering a declaration as hereinafter provided : Provided that, no property shall be submitted to the provisions of this Act unless it is used or proposed to be used for residence, office, practice or any profession or for carrying on any occupation, trade or business for any other type of independent use : Provided further that the sole owner or all the owners of the land may submit such land to the provisions of this Act with a condition that he or they shall grant a lease of such land to the apartment owners, terms and conditions of the lease being disclosed in the declaration either by annexing a copy of the instrument of lease to be executed to the declaration or otherwise." "4. (Subject to the provisions of the second proviso to Section 2 of this Act, each apartment), together with its undivided interest in the common areas and facilities, appurtenant to such apartment, shall for all purposes constitute heritable and transferable immovable property within the meaning of any law for the time being in force in the State ; and accordingly, an apartment owner may transfer his apartment and the percentage of undivided interest in the common areas and facilities appurtenant to such apartment by way of sale, mortgage, lease, gift, exchange or in any other manner whatsoever in the same manner, subject to the same rights, privileges, obligations, liabilities, investigations, legal proceedings, remedies and to penalty, forfeiture and punishment as any other immovable property, or make a bequest of the same under the laws applicable to the transfer and succession of immovable property.
5. (1) Each apartment owner shall be entitled to the exclusive ownership and possession of his apartment in accordance with the declaration executed and registered as required by Section 2 of this Act.
(2) Each apartment owner (shall execute a deed of apartment) in relation to his apartment in the manner prescribed for the purpose." 31. Further, Section 13(1), (3) and (5) of the Act which are relevant for our purposes are as follows : " 13. (1) The declaration and all amendments thereto and the deed of apartment in respect of each apartment and the floor plans of the buildings referred to in Sub-section (2) shall all be registered under the Indian Registration Act, 1908. ....
(3) In all registration offices a book called 'register of declarations and deeds of apartments under the Maharashtra Apartment Ownership Act, 1970' and index relating thereto shall be kept. The book and the index shall be kept in such form and shall contain such particulars as the State Government may prescribe. ...
(5) The Sub-Registrar or, as the case may be, the Registrar shall register the declaration along with floor plans of the building and the deed of apartment in the register of declarations and deeds of apartments under the Maharashtra Apartment Ownership Act, 1970, and shall also enter particulars in the Index kept under Sub-section (3). Any person acquiring any apartment or any apartment owner shall be deemed to have notice of the declaration and of the deed of apartment as from the date of its registration under this section." 32. As can be seen from the above provisions, the flat owners either, one or many, should submit themselves to the provisions of this Act by executing and registering a declaration. Section 5 of the Act clearly shows that each apartment owner shall be entitled to the exclusive ownership and possession of his apartment and each apartment owner shall execute the deed of apartment in the manner prescribed for the purpose. Section 4 of the Act clearly gives power and authority to the apartment owner to transfer his apartment or percentage of his interest in the common area appurtenant to such apartment by way of sale, mortgage, lease, etc. The whole of the block and flats contained in "Bhaktawar Building" were admittedly joint properties of the assessee and his brother and sisters. After they became the co-owners of the flats, they sold the flats in favour of several other persons. Out of 40 flats co-owned by them, they sold 32 flats to others. Out of 32 flats thus sold we are concerned with 12 flats in this year under consideration. Therefore, in our opinion, the special provisions contained in Section 2 and Section 13 of the Act which applied to every flat owner to submit himself to the provisions of the Act by executing and registering a deed of declaration contemplated under the provisions of the said Act do not apply to the case before us. The provisions of the Act apply only to such persons who got constructed the flats for themselves for the first time and not to purchasers of the flats after they were once constructed. Inasmuch as the assessee, his brother and sisters who were the co-owners of all the flats should be deemed to be apartment owners under the provisions of the Act. Thus, the provisions of the Act are not at all relevant for consideration in this case. On behalf of the assessee at pages 12 to 21 a specimen deed of transfer in favour of the purchaser was furnished. In that deed at page 2, the following recital is present.: "and whereas pursuant to the provisions of Section 2 of the Maharashtra Apartment Ownership Act, 1970 (Maharashtra Act XV of 1971), the vendors have, prior to these presents, executed a declaration on the 11th day of March, 1975 (and lodged for registration with the Sub-Registrar of Assurances at Bombay under Section No. 645 of book No. 1 on the 14th day of March, 1975), submitting the said property to the provisions of the said Act." 34. The third parties were the purchasers, The above recital in the sale deed would clearly show that the vendors submitted themselves to the provisions of the Maharashtra Act 15 of 1971 (the Act), by executing a deed of declaration on March 11, 1975, and tendering it for registration on March 14, 1975. Thus, the vendors are perfectly entitled to sell their interest in the flats in Bhaktawar Building. The admitted fact is that during this assessment year up to March 31, 1980, though the co-owners executed the sale deeds in favour of third parties and sold away 12 flats, the registration of those deeds did not take place in the said assessment year under Sections 60 and 61 of the Registration Act. In the absence of any such registered deeds in favour of the third parties can it be said that the interest of the co-owners was already transferred in favour of the purchasers in the 12 flats, is the question for consideration. It is true that the purchasers were only put in possession of the 12 flats. It may also be true that substantial amount of consideration amounts were received from the purchasers towards consideration or sale price. The question is in the absence of the registered sale deed can it be said that the title passed to the purchasers. Learned counsel for the assessee strongly contended that subsequent to the close of the assessment year, the sale deeds were registered in favour of the purchasers. As per the list of sale deeds furnished at pages 22 to 27, the dates of registration were furnished against sale of each flat which disclosed that registration of deeds took place in August and October, 1981. If so the question is by virtue of operation of Section 47 of the Registration Act the effect of such subsequent registration will make the sale deed executed in favour of each of such purchasers effective from the date of execution of the document and by virtue of the provisions of Section 47, the transfer of title would take place in favour of the purchaser from the dates of the sale deeds themselves. In support of his contention, learned counsel for the assessee strongly relied upon the decision of the Gujarat High Court in Arundhati Balkrishna v. CIT [1982] 138 ITR 245. The question involved in that case was whether the sale of agricultural land resulted in capital gains under Section 45 of the Income-tax Act. The assessee in that case had 4,289 sq. yards of site towards her one-third share within the limits of the Municipal Corporation of Ahmedabad. The sale deeds were executed in respect of the land in question prior to March, 1970. The documents were presented for registration on March 1, 1970, and registration was effected after April 1, 1970. The question is whether the land is a capital asset within the meaning of Section 2(14) of the Income-tax Act, read with Section 47(iii) and Section 45 of the Income-tax Act, In that case, Justice Thakkar (as he then was) of the Gujarat High Court commenting upon the Supreme Court decision in the case of Ram Saran Lall v. Domini Kuer, AIR 1961 SC 1747, observed the following (at page 268 of 138 ITR) : " What needs to be clearly comprehended is that in none of these cases the Supreme Court was concerned with the vital question as regards the inter se rights of the vendor vis-a-vis the vendee in relation to the property sold by the vendor to the vendee. In other words, the question as to when the transaction of sale became complete as between the vendor and the vendee in the sense of extinguishment of the right of the vendor and the creation of the right of the vendee was never in issue. When did the vendor cease to be the owner and when did the vendee become the owner of the property On the date of the execution of the sale deed which was subsequently registered Or at some later date when it was presented for registration or was copied out in the registration book by the official concerned That, however, is the vital question from the standpoint of the Income-tax Act and Wealth-tax Act, because the date of transmission of title from the vendor to the vendee is extremely relevant for determining who is liable to bear the tax burden." 35. The Gujarat High Court had posed the real issue before them as follows (at page 270 of 138 ITR) ; "Therefore, in relation to every transaction of transfer of a capital asset, the question will have to be decided in which previous year the transaction was 'effected'. In other words, the expression 'effected' in the context in which it is used would mean the previous year in which the transfer of a capital asset became complete or operative in the sense of the title of the transferor being extinguished and the title of the transferee being created. It must be realised that an anomalous situation would arise in the context of the Wealth-tax Act, if a capital asset were to be treated as being of the ownership of the transferor at one point of time in one year whereas it is treated as the property of a transferee in a different year. The date on which the transaction is effected would be extremely relevant and would have critical significance for a very good reason. The same property cannot belong exclusively to 'A' as also exclusively to 'B' at any one point of time. Either 'A' owns it exclusively or 'B' owns it exclusively at any given point of time. But not both." 36. Therefore, even for determination of the question of wealth-tax liability in our humble opinion one has to determine to whom the assets belong with reference to a particular valuation date. The liability to wealth- tax is on that person who remains the owner of the asset on a particular valuation date. Learned counsel for the assessee strongly relied upon the latest Bombay High Court decision in Fort Properties Pvt Ltd. v. CIT [1994] 208 ITR 232. In that case a building was transferred first by holding company in favour of its subsidiary.
Later, the subsidiary company which is the assessee before the Bombay High Court sold it to Bank of Maharashtra. An agreement of sale was entered into on April 18, 1967, in pursuance whereof a sale deed was executed on October 11, 1967. The question is whether in the assessment year 1969-70 for which the previous year ended by August 31, 1968, whether the assessee is liable for capital gains. For the first time, a contention was raised in the reference before the High Court that assuming that the assessee is liable to be taxed on capital gains, it will be assessable neither in the assessment year 1968-69 nor in the assessment year 1969-70, but only in the assessment year relevant to the previous year in which registration was completed. The sale deed was executed in that case on October 11, 1967, and presented for registration on that very date, the sale must be deemed to have been completed on April 29, 1970, on which date the documents were entered in the records of the register and all other formalities were completed by the Registrar. This argument appeared to have been rejected by the Bombay High Court. No doubt, the Bombay High Court, in a later part of the judgment, found that the registration was deemed to be complete under Section 61(2) of the Registration Act on April 29, 1970. It also observed that there is no dispute with regard to these dates. The learned judge posed the real question before it as follows (at page 254) : "The question is from which date the sale deed shall operate -- whether from the date of execution of the sale deed or the date on which the registration is deemed to be complete within the meaning of Section 61(2) of the Registration Act." .
37. Subsequently, after observing the terminology of Section 47 of the Registration Act at page 255 of the reported judgment, it held the following : "This section clearly provides that a registered document operates from the time it would have commenced to operate if, no registration thereof is required or made and not from the time of its registration. Section 47 is clear. The sale deed in the instant case was executed on October 11, 1967. It would have commenced to operate from that date if no registration thereof was required. However, as it was required to be registered, it was registered. The registration is deemed to be complete within the meaning of Section 61(2) of the Registration Act on April 29, 1970. In other words, the sale deed became a registered document on that date. The question is when it shall operate. Section 47 of the Registration Act is a complete answer to this section - it shall operate from the date of its execution, i.e., October 11, 1967." 38. Later it found the respective fields of operation of Section 47 and Section 61 of the Registration Act as follows (at page 256) : "The date of registration will be determined with reference to Section 61 but the time from which such document operates shall have to be determined with reference to Section 47 of the Registration Act. Sections 61 and 47 deal with two different situations -- the former with the date of registration or the date of completion of sale and the latter with the time from which a registered document or completed sale commences to operate. This conclusion of ours gets full support from the decision of the Punjab and Haryana High Court in Milkha Singh v. Tara Singh, AIR 1973 P & H 445, and the decision of the Patna High Court in Shankar Prasad v. Muneshwari (Mt.), AIR 1969 Patna 304.
We, therefore, hold that the previous year in respect of the income from the property in question was the accounting year of the assessee and that being so the relevant assessment year was the assessment year 1969-70. In that view of the matter, we answer the second question in favour of the Revenue and against the assessee." 39. There is no doubt that the view taken by the Bombay High Court in the above case appears to be supporting the stand of the assessee in this appeal. However, we may immediately state that this decision of the Bombay High Court is quite opposed to the decision of the Supreme Court in Nawab Sir Mir Osman Ali Khan v. CWT [1986] 162 ITR 888, the facts as well as the ratio of which have already been discussed above.
In the case before the Supreme Court also the purchasers fully paid the sale consideration. They were in possession of the property and they have been in full enjoyment of the property. The only deficiency in that case was that the sale deeds were not executed and also not registered in favour of the purchasers. The question in those circumstances is to whom do the assets belong. We may remind ourselves that the case before the Supreme Court was also a wealth-tax case similar to the one before us now. The facts as well as the ratio of the case in Nawab Sir Mir Osman Ali Khan v. CWT [1986] 162 ITR 888 decided by the Supreme Court were already extracted in prior paragraphs of our order.
40. However, it was argued that the Supreme Court decision is distinguishable on facts. It is stated that the Supreme Court in its decision observed that the sale deed was never executed and also not registered whereas in the present facts of the case, it is admitted that during the assessment year in question the sale deeds were executed in relation to the 12 flats in question though the sale deeds were not registered during that assessment year. In our opinion, the distinction drawn between the Supreme Court case and the present case is a distinction without difference.
41. Unless the legal presumption available under Section 47 is invoked there is no possibility of holding, in the facts of the present case that the sale deeds executed with reference to these is flats would come to operate from the respective dates of their execution, but there is no possibility to argue that there were complete registered documents in operation for the assessment year in question. Admittedly, the registration did not take place in the assessment year in question and it had taken place only subsequent to the close of the assessment year. Unless there is a registered document which completes the sale, the presumption under Section 47 would not be available. Whether there is registration of the sale deed or not and what is the date of completion of the sale are questions of fact. Thus, the question of fact did not occur in the assessment year 1980-81. The facts which occur subsequently or the subsequent events cannot be incorporated into facts available for the assessment year 1980-81 for the purposes of invoking the presumption under Section 47 of the Registration Act and in our humble opinion, therefore, the presumption under Section 47 cannot be raised for the assessment year 1980-81. Section 47 comes into play only when there is a registration and not until then. When the registered document is not in existence for the assessment year 1980-81 to any of these 12 flats, the resultant situation would be equal to the situation where there is no sale deed at all. Thus, the Supreme Court decision in Nawab Sir Mir Osman Ali Khan v. CWT [1986] 162 ITR 888 is quite analogous to the facts of the present case. We are bound to follow the Supreme Court decision in preference to the Bombay High Court in Fort Properties Pvt. Ltd v. CIT [1994] 208 ITR 232 purporting to have followed the Supreme Court decision in Nanda Ballabh Gururarii v. Maqbool Begum [1980] 3 SCC 346. We have fully gone through the decision. At paragraph 6, the facts of the case before them were extracted which are as follows : "6. The court was shown the original registered sale deed. It was also shown to Mr. S.S. Khanduia, learned counsel for the appellant.
It clearly shows that the sale deed was executed on July 27, 1974, and it was offered for registration and admitted for registration on July 28, 1974. This becomes evident from the endorsement of the Sub-Registrar on the sale deed itself. The confusion that the deed was registered on November 11, 1974, stems from the fact that the book in which all documents registered by the Sub-Registrar are transpires as permanent record showed that the present sale deed was transcribed into the book on November 11, 1974. However, in view of the provision contained in Section 47 of the Indian Registration Act, it clearly transcribes that once the deed is registered, it would operate from the time from which it would have commenced to operate if no registration thereof had been required or made and not from the time of its registration. There is no suggestion that the sale deed was deliberately ante-dated. Therefore, on registration the sale deed operated from July 27, 1974, the date of its execution, The relevant provision prohibits the court from entertaining a petition for release of accommodation within three years from the date of purchase and not from the date of registration of sale deed. Once it is established that the house from which appellant was sought to be evicted was purchased by the landlady on July 27, 1974, and the application for release of accommodation was made by the landlady on September 10, 1977, it was certainly, made after a lapse of three years from the date of the purchase and the proviso would not be attracted. This was the only point on which leave was granted by this court and as there is no merit in it, the appeal fails and it is dismissed but in the circumstances of the case with no order as to costs.
42. As can be seen from the above, the Supreme Court construed that registration of the sale deed took place on July 28, 1974. However, there was a confusion in the mind of the lower courts when they stated that the registration of the document took place on November 11, 1974.
So when once the registration took place on July 28, 1974, by virtue of Section 47 of the Registration Act, it operates from the date of execution, namely, July 28, 1974. The landlady filed a petition for release of accommodation on September 10, 1977, which is quite beyond three years from the date of the sale deed, i.e., July 27, 1974. Her petition dated September 10, 1977, is also beyond three years even after the completion of the sale deed on its being registered on July 28, 1974. Therefore, the decision in Nanda Ballabh Gururani v. Maqbool Begum [1980] 3 SCC 346 cannot be of any help to the assessee and we are not persuaded by the arguments of learned counsel for the assessee that in Nanda Ballabh Gururani, v. Maqbool Begum [1980] 3 SCC 346, the Supreme Court struck a different note about the operation of Section 47 from what has been decided by it in Ram Saran Lall v. Mst. Domini Kuer, AIR 43. Therefore, we are of the view that the previous decisions rendered by the Tribunal both in the case of the assessee, as well as in the case of his brother, for the assessment years 1978-79 and 1979-80 and 1976-77 to 1979-80, respectively, are correctly decided and we answer the question referred to us in favour of the Revenue and against the assessee. We hold that the one-third share of the assessee in the value of the 12 flats which constitute the assets in question, in this case, should be held to be the wealth of the assessee for the assessment year 1980-81 for which the relevant valuation date was March 31, 1980. The appeal of the Department is, therefore, allowed and the order of the first appellate authority is set aside. At this stage an alternative argument was advanced by learned counsel for the assessee saying that in case this Tribunal for any reason treats the one-third value of the 12 flats as the wealth of the assessee for the assessment year 1980-81, the sale consideration received from the purchasers of those flats should be allowed as a debt due from the assessee and hence it should be allowed as deduction, while computing the net wealth of the assessee under Section 2(m) of the Wealth-tax Act, otherwise it would amount to taxing the same twice over which is not permitted under the law. The learned Departmental Representative offers no objection in theory to this submission but he submitted that first it should be ascertained how much sale consideration was received on each of the flats.
Secondly, it should also be shown that the said sale consideration was shown as part of the wealth of the co-owners and one-third of the total sale consideration was shown as a part of the wealth of the assessee either in the present assessment year or in the past assessment years.
After fulfilling these two conditions only the sale consideration received by the assessee can be considered as debt owed by the assessee. We accept the alternative contention and hold that the assessee on fulfilling these two conditions is entitled to deduct the sale consideration received by him from his wealth. Nobody did this verification. Therefore, we remand the matter to the Assessing Officer to record necessary facts into the assessment record and after giving reasonable opportunity to the assessee to determine the quantum of deduction to which the assessee is entitled while determining his net wealth for the assessment year 1980-81. Thus, the referred question is answered against the assessee and in favour of the Revenue.
44. The appeal of the Revenue is allowed. The matter is remanded to the Assessing Officer for determining the question of deduction.