Case: Bennett Coleman & Company Limited Times of India Bldg Vs. The Assistant Commissioner of Wealth Tax

F.I. Rebello, J.1. Heard learned counsel for the parties.2. Admit.3. The appellant has pressed this appeal on the following question."Whether a flat in a tenant co-operative housing society which is transferred to the name of an assessee on 17th April, 1993 and which comes to the legal ownership of the assessee only on that date, can be said to be "belonging" to the assessee as on the valuation date of 31st March, 1993 so as to be liable to wealth tax for the assessment year 1993-944. A few jurisdictional facts. There is no dispute that the society had granted no objection to the previous member to sell the property before 1.4.1993. There is also no dispute that there was an agreement to sell between the appellant and the previous owner and full consideration had been paid before 1.4.1993. There is also no dispute that the resolution was passed by the society admitting the appellant as a member before 1.4.1993. There is a further finding that the appellant themselves included the said property as their assets in their books for the Annual year 1992-93.5. For considering the question of law what is relevant is Section 4(7) of the Wealth Tax Act,1957. The section as reproduced is as of 1.4.1997."Where the assessee is a member of a co-operative society, company or other association of persons and a building or part thereof is allotted or leased to him under a house building scheme of the society, company or association, as the case may be, the assessee shall, notwithstanding anything contained in this Act or any other law for the time being in force, be deemed to be the owner of such building or part and the value of such building or part shall be included in computing the net wealth of the assessee; and, in determining the value of such building or part, the value of any outstanding installments of the amount payable under such scheme by the assessee to the society, company or association towards the cost of such building or part and the land appurtenant thereto shall, whether the amount so payable is described as such or in any other manner is such scheme, be deducted as a debt owed by him in relation to such building or part".A reading of the said sub section would indicate, that the requirements are that the assessee must be a member and further that building or part thereof is allotted or leased to them. If these two conditions are satisfied then notwithstanding anything contained in the Act or any other law for the time being in force, such assessee would be deemed to be the owner of such building or part thereof and the valuation of such or part shall be included in computing the net wealth of the assessee.6. The learned counsel for the appellant seeks to rely on the rules framed under the Maharashtra Co. operative Societies Rules, 1961 and placed emphasis on Rule 24 which reads as under.24. Procedure for transfer of shares :-(1) No transfer of shares shall be effective unless:-(a) It is made in accordance with the provisions of the bye-laws;(b) A clear fifteen days notice in writing is given to the society indicating therein the name of the proposed transferee, his consent, his application for membership, where necessary and the value proposed to be paid by the transferee;(c) All liabilities of the transferor due to the society are discharged and(d) The transfer is registered in the books of the society.(2) Any charge in favour of the society on the share so transferred will continue unless discharged otherwise."We may also refer to the definition of a member under Maharashtra Co-operative Societies Act, which reads as under."Member" means a person joining in an application for the registration of a co-operative society which is subsequently registered, or a person duly admitted to membership of a society after registration and includes a nominal, associate or sympathizer member".Thus, it is clear that so far as the assessee is concerned the assessee was admitted as member before 1.4.1993.7. The argument canvassed by the assessee is that no transfer of shares shall be affected unless the transfer is registered in the books of the society. In short, the learned counsel is seeking to place reliance on the aforesaid proviso which is introduced under the provisions of the State Act namely Maharashtra Co-operative Act, 1960. As we have already noted the Wealth Tax Act for considering the "assets" as that of the assesses does not require transfer of shares. All that it requires is admission to membership and allotment of a building or part of a building. Allotment to that extent does not require transfer of shares of the society. Section 4(7) of the Wealth Tax Act which is a central legislation has not incorporated by reference or otherwise the definition of the State Act, or the rules made thereunder for the purpose of reading the provisions of the Wealth Tax Act. That would not be possible considering that each State will have its own laws. What therefore, must be considered are the provisions and the requirements as contained in the Wealth Tax Act. The Act requires only two requirements firstly that the assessee must be a member and secondly the assessee shall be allotted a building or part of the building. In the instant case, as noticed by us, both the requirements are satisfied. Allotment being by purchaser from the previous member and the society giving its no objection to the sale and the assessee being put in possession before the relevant date by the previous member.8. On behalf of the appellant the learned counsel sought to place reliance on the judgment of the Supreme Court in the case of Late Nawab Sir Mir Osman Ali Khan Vs. Commissioner of Wealth Tax, Hyderabad (162 ITR 888) . In that case what the Supreme Court was concerned was the expression "belonging to" an assessee. On the facts there the Apex court noticed that there was no transfer of ownership of the property in the name of the vendee and the assessee continued to be the owner though in part performance of the contract the vendee had been put in possession. Admittedly the said sale deed entered into had not been registered.

Decision reasoning: 0[ds]A reading of the said sub section would indicate, that the requirements are that the assessee must be a member and further that building or part thereof is allotted or leased to them. If these two conditions are satisfied then notwithstanding anything contained in the Act or any other law for the time being in force, such assessee would be deemed to be the owner of such building or part thereof and the valuation of such or part shall be included in computing the net wealth of thewe have already noted the Wealth Tax Act for considering the "assets" as that of the assesses does not require transfer of shares. All that it requires is admission to membership and allotment of a building or part of a building. Allotment to that extent does not require transfer of shares of the society. Section 4(7) of the Wealth Tax Act which is a central legislation has not incorporated by reference or otherwise the definition of the State Act, or the rules made thereunder for the purpose of reading the provisions of the Wealth Tax Act. That would not be possible considering that each State will have its own laws. What therefore, must be considered are the provisions and the requirements as contained in the Wealth Tax Act. The Act requires only two requirements firstly that the assessee must be a member and secondly the assessee shall be allotted a building or part of the building. In the instant case, as noticed by us, both the requirements are satisfied. Allotment being by purchaser from the previous member and the society giving its no objection to the sale and the assessee being put in possession before the relevant date by the previous member.8. On behalf of the appellant the learned counsel sought to place reliance on the judgment of the Supreme Court in the case of Late Nawab Sir Mir Osman Ali Khan Vs. Commissioner of Wealth Tax, Hyderabad (162 ITR 888) . In that case what the Supreme Court was concerned was the expression "belonging to" an assessee. On the facts there the Apex court noticed that there was no transfer of ownership of the property in the name of the vendee and the assessee continued to be the owner though in part performance of the contract the vendee had been put in possession. Admittedly the said sale deed entered into had not been registered.