ORDER
M.A.A. Khan, Judicial Member
1. This appeal by the assessee is directed against the order of the CWT (A) dated 3rd October, 1985, upholding the inclusion of Rs. 17,08,511 in the computation of net wealth of the assessee for the assessment year 1981-82.
2. As a result of draw held on August 16, 1980 at Chandigarh for the 129th draw of Kuber Bumper Draw of Punjab State Lotteries, the ticket bearing No. GK 546588, purchased and possessed by the assessee was declared winner of the first prize amounting to Rs. 25,50,000. Surrendering the said ticket in person on 1-9-1980 in the Directorate of Punjab State Lotteries department the assessee preferred his claim for payment of the prize money. Despite repeated visits to the Office of the Directorate and making several demands through his letters, including registered letter dated 22nd September, 1980 the assessee did not receive the amount. It was in response to the delivery of a legal notice dated 18th January, 1981 by the assessee, through his advocate Shri Ashwani Kumar Chopra, that the Deputy Director, Punjab State Lotteries, Chandigarh, vide his letter dated 28th January, 1981, informed the assessee that his claim was under consideration of the Directorate. He was further informed that one Shri K. Yuvraj had filed a suit in respect of the prize money in question in the Court of Senior Sub Judge, Chandigarh and since the said Court had not yet given stay orders the question of payment of the prize money to the assessee could be considered if he was able to give an undertaking to the effect that in case the decision was taken adverse to the department by the Court the assessee would refund the amount and further that he would give bank guarantee of the amount involved. On receipt of this letter from the Directorate of Punjab State Lotteries, Chandigarh, the assessee appears to have contacted the Managers of the Bank of Maharashtra at their branch offices at Relief Road, Ahmedabad as also in Sector 17, Chandigarh. The said bank agreed to issue a guarantee for and on behalf of the assessee on his executing an irrevocable agreement to indemnify the bank for any loss likely to be suffered by the bank in the transaction. The assessee executed the required agreement in the form of a guarantee on February 7, 1981 in favour of the Bank of Maharashtra, Relief Road, Ahmedabad branch as also in favour of the branch of the said bank at Chandigarh. Thereupon the branch office of the said bank at Chandigarh issued the bank guarantee on 7th February, 1981 in favour of the Director, Punjab State Lotteries, Sector 17, Amar Building, Chandigarh, guaranteeing, on behalf of its branch at Relief Road, Ahmedabad as also on behalf of the assessee, the payment of Rs. 17,08,500 to the Government of Punjab as and when the said amount was demanded by the said Government in accordance with the decision of the suit pending in the Court of Shri S.R. Bansal, Senior Sub Judge, First Class, Chandigarh. It appears that it was after executing the guarantee by the assessee in favour of Bank of Maharashtra and in turn the branch office of the said bank at Chandigarh issuing the bank guarantee to the Director, Punjab State Lotteries that the Lotteries Department of Punjab Government released the amount in favour of the assessee on 6-2-1981. It further appears that as per his agreement entered into by the assessee with the Bank of Maharashtra, out of the amount received by him from the Lotteries Department of Punjab Government an amount of Rs. 12,08,500 was kept in the savings bank account No. 722 of the Bank of Maharashtra and an amount of Rs. 5,00,000 was kept with the said bank against Fixed Deposit. The suit filed by said K. Yuvraj came to be dismissed on 4-8-1981 and it was only thereafter that the Lotteries Department of the Punjab Government released the bank of its guarantee vide letter dated 16th September, 1981. In its turn the bank released the assessee from the counter-bank guarantee vide its letter dated 22-9-1981.
3. It was in the above background that the assessee filed his return of wealth for the assessment year 1981-82. At the assessment proceedings the Wealth-tax Officer was of the opinion that the amount in question had been received by the assessee on 6-2-1981 and had been subjected to income-tax for the assessment year 1981-82. He was, therefore, of the opinion that since the date of the receipt of the amount in question being 6-2-1981, was a date before the valuation date, i.e., 31st March, 1981, the said amount constituted an asset of the assessee on the valuation date and was includible as such in the computation of his net wealth for the assessment year 1981-82. Being of that view the WTO included the amount in question in the computation of net wealth of the assessee and subjected the same to the levy of wealth-tax accordingly.
4. On appeal, the learned CWT(A) agreed with the views of the WTO and held that the assessee was in possession of the amount in question as of right and, therefore, the amount of Rs. 17,08,500 was his property on the relevant valuation date. The learned CWT(A) was of the opinion that the principle laid down in the case of CWT v. Bishwanath Chatterjee [1976] 103 ITR 536 (SC), relied upon by the assessee for his benefit, made the assessee the owner of Rs. 17,08,500 on the valuation date and, therefore, the WTO was justified in including the said amount in the net wealth of the assessee. Holding thus the CWT(A) dismissed assessee’s appeal. Hence this appeal before us.
5. Before us Mr. K.C. Patel, the learned counsel for the assessee, has vehemently urged that the approach of the authorities below in the present case was not at all justified in law. Mr. Patel submitted that taxable event in the wealth-tax was “belonging” of the asset to an assessee with valuation date and since in the facts and circumstances of the present case the amount of Rs. 17,08,500 cannot be said to be “belonging” to the assessee until and unless it was released from guarantee which took place only on 16th September, 1981 the same was not his wealth on valuation date. Mr. Patel further submitted that the taxability of the amount in question in income-tax proceedings for the assessment year 1980-81 did not affect the case of the assessee in wealth-tax assessment proceedings for the obvious reason that the charge of tax in the two enactments was altogether different. Mr. Patel explained that under IT Act the charge of tax was on the “accrual of income” whereas the charge of tax under wealth-tax was on the asset “belonging” to the assessee on the relevant valuation date. Mr. Patel further submitted that even if by any stretch of imagination it be assumed that the amount in question had come to belong to the assessee on 6-2-1981 even then it was not includible in the computation of the net wealth of the assessee for the reason that the said asset carried with it the liability of paying the same amount to the Government of Punjab. In that sense of the matter the value of the said asset would be ‘nil’.
6. As against the above arguments, Mr. Vyas, the learned Departmental Representative, vehemently supported the orders of the authorities below and mainly contended that when income had arisen to the assessee in assessment year 1981-82 how could it be said that it did not belong to the assessee in that assessment year. Mr. Vyas further submitted that the subsequent event of the release of the amount in favour of the assessee by the Punjab Government should be taken into account and it could be clearly seen that the amount in question formed the assessee’s asset for inclusion in the computation of his net wealth for the assessment year 1981-82. For the alternate arguments as advanced by Mr. K.C. Patel, the learned Departmental Representative submitted that the liability of repaying the amount in the event of the decision of the Civil Court going against the Punjab Government was a contingent liability and such liability would not neutralise the value of the asset belonging to the assessee on the valuation date.
7. In the light of the arguments advanced before us the question that arises for our consideration is whether in the facts and circumstances of the present case it can be said that the amount of Rs. 17,08,500 being an asset belonged to the assessee as on the relevant valuation date so as to be includible in the computation of his net wealth for assessment year 1981-82. This question which has been raised through various grounds of appeal necessarily requires us to consider the meaning and scope of the expression “belonging to the assessee” as occurring in the definition of ‘net wealth’ under Section 2(m) of the Wealth-tax Act, 1957 (‘the Act’).
8. The expression “belonging to” appears to have been the subject-matter of serious consideration of the Supreme Court on several occasions. It appears that in the case of Raja Mohammad Amir Ahmad Khan v. Municipal Board of Sitapur AIR 1965 SC 1923 the meaning of the phrase ‘belonging to’ was considered and it was observed by the Supreme Court that “though the expression ‘belonging to’ was capable of denoting an absolute title, it was nevertheless not confined to connoting that sense. Full possession of an interest less than that of full ownership could also be signified by that expression”. The said expression ‘belonging to’ again fell for consideration of the Supreme Court in the case of Bishwanath Chatterjee (supra) wherein, after having considered the meaning of the said expression as given in Oxford English Dictionary, their Lordships held that:
So it is the property of a person, or that which is in his possession as of right, which is liable to wealth-tax. In other words, the liability to wealth-tax arises out of ownership of the asset and not otherwise. Mere possession, or joint possession, unaccompanied by the right to, 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.
Meaning of the above term ‘belonging’ was again considered in the case of Nawab Sir Mir Osman Ali Khan v. CWT [1986] 162 ITR 888 (SC) wherein the views expressed by the Court in both the above cases were considered and affirmed. In that case the concept of ownership as given by Salmond and the meaning of the expression “belonging to” as also the distinction between “belonging to” and “ownership” were considered at length. Their Lordships finally held that the liability to wealth-tax arises because of the belonging of the asset and not otherwise, as was held in Bishwanath Chatterjee’s case (supra).
9. It is thus clear from the law laid down by the Supreme Court on the subject that when we speak of certain physical objects as belonging to a person without any qualifying expression, primarily the natural meaning is that they are his own absolute property. The element of ownership is, therefore, there in the meaning of ‘belonging’. That element of ownership carries with it the necessary incidents of using or utilising the said property without any restriction or restraint on his right as owner thereof, by the person to whom such property belongs. But when a person by virtue of some contractual obligation simply takes up the control or custody of the property as per the directions of the giver, such person cannot be said to own the property absolutely and, therefore, such property, in our opinion, would not fall within the purview of the expression “belonging to” for the purposes of inclusion in the computation of his net wealth,
10. Now coming to the merits of the present case it is obvious that though the amount in question was received by the assessee on 6-2-1981, that could be so received by him after filing the undertaking which was to the effect that the said amount would be refunded to the Punjab Government as and when required by them, depending upon the result of the suit filed by K. Yuvraj in the Court of Senior Sub Judge, Chandigarh. That apart, the receipt of the said amount by the assessee on 6-2-1981 further carried an obligation of filing the bank guarantee which the assessee did. It is further gathered that the bank had issued the guarantee against the amount in question being deposited with it. It is not too difficult to infer from these facts that no doubt that the assessee can be said to be possessing the amount in question but for all practical purposes, by virtue of such possession he was simply a custodian of the property up to the time it was finally released in his favour by the Punjab Government. He could not have used the said property according to his own liking and will. Therefore, the very element of ownership which is there in the meaning of “belonging”, despite the distinction pointed out by their Lordships in the cases referred to above, was missing in the possession of the assessee of the amount in question. The restraint that was there on his right to utilise, use and invest the amount in question according to his will was removed only on 22nd September, 1981 when he was discharged of his obligation under the guarantee given by him to the bank and by the bank to the Punjab Government on his behalf. We are, therefore, clearly of the opinion that the amount of Rs. 17,08,500 was not the asset of the assessee on the valuation date as it did not belong to him for the purposes of computation of his net wealth as on the valuation date.
11. In our opinion the treatment given to the amount in question by the tax authorities in the income-tax assessment for the year 1981-82 does not at all affect the contention of the assessee as raised before us. In this behalf we agree with Mr. Patel that the charge of tax under the two Acts was totally different and simply because an amount was subjected to the charge of income-tax, the said amount is not necessarily liable to the levy of wealth-tax on that very ground. In our discussion we have clearly found that the amount in question did not belong to the assessee as his asset on the relevant valuation date. That being so, we see no reason to allow the levy of wealth-tax on this amount simply on the ground that it was subjected to tax under the provisions of the IT Act. The objection of the learned departmental representative in this behalf is overruled.
12. Since we are clearly of the opinion that the amount in question did not belong to the assessee on the relevant valuation date and, therefore, was not includible in the computation of his net wealth as defined under Section 2(m) of the Act, we do not propose to decide the controversy whether the said amount, in the facts and circumstances of the present case, carried an equal liability for repayment thereof and if so whether the said liability was contingent or not.
13. In the result the order under appeal is set aside and the appeal of the assessee is allowed. The amount of Rs. 17,08,500 shall not be included in the computation of assessee’s net wealth for the assessment year 1981-82.