JUDGMENT
Prakash Krishna, J.
1. The Income Tax Appellate Tribunal Delhi has referred the following question of law under Section 27(3) of the Wealth Tax Act, 1957:-
Whether on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that the amount of Rs. 2,00,641/- on account of interest and compensation on account of the acquisition of land could not be included in the net wealth of the assessee ?
2. The facts of the case in brief are as follows :-
Present reference relates to Assessment Year 1973-74.
3. Assessee was the owner of a factory known as Bimal Glass Works which he sold on 26.5.1991 to M/s Sri Veer Industries Delhi for a sum of Rs. 10,50,000/-. As agreed upon, out of the total sale consideration a sum of Rs. four lacs was received in cash at the time of execution of the sale deed and balance of Rs. 6,87,000/- (including the interest thereon) was to be paid to the assessee in instalments subsequently.
4. The Collector, Agra, after aforesaid sale deed, proceeded to sell the assets/properties of M/s Shri Veer Industries on account of arrears of the sales tax due against it. The assessee instituted a suit claiming vendor’s lien on the sale of that property by the Collector, Agra. The suit was decreed and the Collector challenged the decree by filing an appeal in the High Court. The assessee also applied for the liquidation of vendee company in the Court of the Civil Judge, Delhi. The liability was disputed by the vendee company in the liquidation proceedings before the District Judge, Delhi. Thereafter the assessee instituted another suit in the Court at Agra for recovery of amount due from M/s Shri Veer Industries Ltd., Delhi. The suit was decreed but the decree was challenged in appeal by M/s Shri Veer Industries in the High Court at Allahabad. During pendency of the appeal, the parties entered into compromise and submitted a compromise petition before the High Court. The said compromise was however, disputed by Sri R.K. Jain, one of the Directors of M/s Shri Veer Industries. Terms of compromise stipulated delivery of possession to the assessee and consequently assessee got possession of the property. A part of the land of the factory was acquired at the instance of the Railways. The Collector awarded compensation along with the interest payable thereon which was received by the assessee. The said amount was deposited by the assessee in the fixed deposit under the orders of the Court. The Railways preferred an appeal against the award before the District Judge and the matter was still pending for final decision during the relevant assessment year.
5. The Wealth Tax Officer added a sum of Rs. 2,08,000/-(the sum received by the assessee towards interest and deposited in the Bank under the orders of the Court). The assessee challenged the addition of the aforesaid amount in his hands by filing appeal. The first appellate authority did not accept the contention of the assessee on the ground that for all practical purposes the said sum was an “asset” at the hands of the assessee within the meaning of Wealth Tax Act.
6. The Income Tax Appellate Tribunal however in second appeal accepted the contention of the assessee and deleted the addition of Rs. 2,08,000/- in the hands of the assessed on the ground that the assessee did not acquire any title on the ground that the amount was deposited in the fixed deposit subject to the acceptance of the compromise by the court and final determination of the proceedings in the land acquisition proceedings, which was still awaited.
7. Heard Sri Bharatji Agrawal, learned Senior Standing Counsel of the department in support of the reference. None appeared on behalf of the assessee in spite of the notice of the case.
8. Learned Counsel for the department strenuously contended that aforesaid sum is liable to be added in the net wealth of the assessee in question in view of the fact that under the terms of compromise the assessee got possession of the property in question and the Collector also made the award in favour of the assessee in land acquisition proceedings. According to the Department challenge of award (at the instance of the Railways; for whose benefit the land was acquired) is of little consequence in view of the judgment of the Supreme Court in the case of Commissioner of Wealth Tax v. U.C. Mehtab (1998) 231 ITR 501.
9. We have considered aforesaid submissions of the department.
10. It has come on record that although a compromise petition was filed before the Court which was not finally decided, out pending and no decree was passed by the Court in terms of compromise application. It is significant that authority to enter into a compromise was challenged by Sri R.K. Jain, (one of the Directors of M/s Shri Veer Industries Ltd.) on the ground that said compromise lacked bonafides. The Tribunal directed Wealth Tax Officer in the assessment years 1957-58 to make enquiries about the financial position of the vendee, its version about the assessee’s claim, the value of the property in question and about the fate of the orders passed in several litigations between the assessee and the vendee and the Collector of Agra. The Wealth Tax Officer, however, as noted in the order of the Tribunal in appeal failed to make proper enquiries in accordance with the directions of the Tribunal and failed to contact the vendee company in order to enquire about the position of the compromise and the objection of Sri R.K. Jain and also failed to point out final outcome of the dispute between the assessee visa vis, Collector, Agra and liability of the vendee company, if any, and the Wealth Tax Officer to whom the matter was referred thrice in past and in spite of opportunity granted did not make efforts in the matter
11. In our opinion the most crucial fact is that up to the valuation date compromise petition containing terms of compromise was not accepted by the court, there was no decree in terms of compromise and the order in terms of the compromise was not brought on record. It is not disputed by the learned Counsel for the department that during Assessment Year in question no decree in terms of the compromise was passed by the concerned court. From the above, it emerges that the assessee was the owner of the property in question who sold it to M/s Shri Veer Industries Ltd. for a sum of Rs. 10,50,000/- and in pursuance to the said sale agreement only a part of sale consideration was received by the assessee.
12. The Apex Court in Vidyadhar v. Manikikrao AIR 1999 SC 1441 has held that the payment of whole of price at the time of execution of sale deed is not sine-qua-non to completion of sale deed. The title in the property is passed as soon as the sale deed is registered even if the balance amount of sale price was not paid. The sale would not be invalid on account of balance of the sale price. In view of this principle the title in the property passed from the assessee to the vendee company as soon as the sale deed was executed on 26/5/1991. Resultantly the assessee ceased to have any right title or interest in the property sold, except the lien for unpaid amount, which is also disputed.
13. The AAC as well as the learned Senior Counsel laid much emphasis on the fact that the Collector awarded the compensation in the land acquisition proceeding in the name of the assessee and as such for all practical purposes the assessee became the owner of the property and as such the interest accrued on the compensation mount is liable to be included in the net assets of the assessee. The said argument, in our opinion is untenable in law. The subsequent delivery of possession in the absence of transfer of ‘title’ by the vendee company to the assessee pending acceptance of the compromise by the Court is of little consequence and will not make the assessee owner of the property as ownership of immovable property can be transferred by means of registered sale deed or a person can claim title under a decree by no other means. It is not the case of the department that the assesses acquired any title to the property pending the acceptance of the compromise application. The Wealth Tax Officer, in spite of the repeated opportunities granted by the Tribunal failed to establish that on ‘valuation date’ the assessee had in law any propriety/substantial interest in the property.
14. The Tribunal has pointed out that there were many litigations in between the assessee and the vendee company and the Collector. The assessee who was erstwhile owner had transferred the property in question by means of sale deed in favour of M/s Shri Veer Industries. The possession of the assessee of the disputed property in the absence of any valid title can at the most be described as permissive possession with the leave and licence of the vendee company. The Supreme Court in some what similar circumstances in F.S. Gandhi v. Commissioner of Wealth Tax AIR 1991 SC 1866 has held that when assessee is in occupation of lease property leased out by the Government of Uttar Pradesh and lease has already expired and the Government of U.P. has issued notices to the assessee to hand over the vacant possession of the lease hold lands, the leases which were expired were not assets within the meaning of Section 2(e) 2(iii) of the Wealth Tax Act and the valuation of the same was not liable to be included in the net wealth of the assessee. The Apex Court has held that the continuance of the assessee was precarious in nature because, it could be terminated by the lessor.
15. On the same analogy, we are of the view that on the facts of the present case the right of the assessee to receive the compensation amount was very much sub judice and not free from doubt before the Court. The entitlement or authority to receive the compensation amount was the subject matter of litigation and at that point on time the assessee had no clear legal title to receive the compensation amount inasmuch as the compromise petition was not accepted by the Court. More so, it has come on record that in spite of various opportunities granted by the Tribunal there is no iota of evidence to show that the compromise application was ultimately accepted by the court, authorizing the assessee to receive the compensation amount. The assessee although as a matter of fact received the amount tendered by the Collector and had to deposit the same in pursuance of the order passed by the Court. The position of the assessee was as that of a depositor. The assessee received the interest amount accrued on the FDR in the capacity of depositor for the ultimate benefit of the true owner as would be ultimately found by the Court.
16. The law, as laid down by Apex Court in the case of CWT v. UC Mehtab, (supra) upon which learned Counsel of the Department strenuously relies is distinguishable on facts and it has hardly any application to the facts of the case in hand. The Apex Court in the aforesaid case proceeded to lay down the law on the finding that the moment assessee’s land is acquired or otherwise vested in the State he becomes entitled to the compensation and merely because the amount of compensation is not determined immediately it can not be said that there is no right to compensation for the erstwhile owner. The crux of the matter is that right to receive compromise is not in dispute. What is in dispute the quantum of compensation. There are two things (1) the quantum of compensation (2) the authority to receive the compensation. In the case before the Apex Court, the only dispute was with regard to the determination of the quantum of compensation to be received by the erstwhile owner. In that context the Supreme Court has said that determination of compensation takes time, therefore, the right to receive the compensation is asset and is includable in the net asset value of the assessee. It has been further clarified that the said right can not be equal to the amount of compensation payable under the Acquisition Act. The afore stated principle in our opinion, will not applicable in a case where the very authority, entitlement basis of foundation to receive the compensation is in dispute and is sub judice before the court of law. The pronouncement of law made by the Supreme Court will not be extended to such cases which fall in the second category mentioned above.
17. In view of the above discussion, we find that the sum of Rs. 2,08000/-, representing the interest on the compensation amount was rightly not included in the net asset of the assessee by the Tribunal.
18. In the result we answer the question referred to above in the affirmative i.e. in favour of the assessee and against the Revenue. No order as to costs.