COMMISSIONER OF WEALTH TAX Vs. BHALCHAMORA D JOKHAKAR

JUDGEMENT

(1.) THE question that has been referred to us for our determination in this reference under S. 27(1) of the WT Act, 1957, runs as under :

(2.) THE question relates to wealth tax assessment for asst. yrs. 1962 63 and 1963 64, the relevant valuation dates being 31st March, 1962,and 31st March, 1963, respectively. Original assessee, Manu Subedar, since deceased (his executors have been brought on record), was a well known economist and financial adviser. Under an agreement of lease dt. 1st Nov., 1943, made between the original assessee and the Government of India a plot of land situate in Marine Lines locality was obtained on lease by the original assessee for a period of 999 years on an annual rent of Re.1 and for consideration of approximately Rs. 3,60,000. It appears that this plot of land was obtained by the original assessee for the purpose of constructing a cinema theatre thereon, which he could not do. On 6th Jan., 1947, the original assessee entered into an agreement with one Habib Hussein under which Habib Hussein was granted a licence to enter upon the land and erect thereon a cinema theatre and other buildings, etc., and in consideration for the licence so granted Habib Hussein agreed to pay compensation to the original assessee at the rate of Rs. 4, 200 per month. The original assessee had agreed to grant a sub lease of the plot for a term of 999 years as and when he got a regular lease from the Government of India. In October, 1949, after getting a regular lease from the Government of India the original assessee granted a sub lease to Habib Hussein. It further appears that for the purpose of erection of a theatre and starting the business of running a cinema house Habib Hussein requested the original assessee to render him all the matter of getting necessary plans prepared as also procuring necessary finance. The original assessee was also requested to render various other servises in connection with the construction of the theatre. On 4th June, 1948, the original assessee entered into an agreement with Habib Hussein under which the original assessee became entitled to receive for a period of 20 years, 2 per cent of the gross annual income earned by Habib Hussein in the cinema business. The construction of the theatre and the buildings appurtenant thereto was completed on 1st April, 1949, and the cinema business was started by Habib Hussein on and from that date. It appears that some time later Habib Hussein desired certain variation in the agreement dt. 4th June, 1948, and the original assessee by his latter dt. 17th March, 1950, informed Habib Hussein that he would be agreeable to variations proposed provided Habib Hussein would buy out for a capital sum the annual payment covered by agreement dt. 4th June, 1948. The capital payment was arrived at by mutual ageement as at Rs. 3,30,000. Thereafter, a fresh agreement dt. 10th July, 1950, was entered into by and between the parties, which fresh agreement was really in the nature of mortgage of the building for the purpose of securing the payment of Rs. 3,30,000. It appears that the capital of Rs. 3,30,000 was payable within a period of 5 years by quarterly instalment of Rs. 16,500 each. Admittedly, up to May, 1958, a sum of Rs. 1,90,000 had been paid, leaving a balance sum of Rs. 1,40,000. On 20th May, 1958, a fresh agreement (being Annexure "C" referred to in the question) was entered into between the original assessee and Habib Hussein with reference to the payment of balance amount of Rs. 1,40,000. Under this document Habib Hussein undertook to pay a sum of Rs. 1,000 per month to the original assessee for his lifetime, the payment commencing from 1st April, 1958. It was also agreed that if a default was made in payment of any two instalments for any two months, then, the original assessee would be entitled to recover from Habib Hussein payment at enhanced rate of Rs. 1,500 per month with interest at 9 per cent per annum in respect of each month of default. It is this last agreement dt. 20th May,1958, which has a material bearing on the question referred to us for our determination.

(3.) AFTER having heard Mr. Joshi, counsel for the Revenue, we are of the view that the question referred to us will have to be decided having regard to the relevant provisions of the WT Act and the terms and conditions of the contract dt. 20th May, 1958, and it is really unnecessary for us to go into any general principle said to have been enunciated by the Gujarat High Court in CWT vs. Dr. E.D. Anklesaria (supra).