Govinda Bhat, J.
1. This is a reference under section 27(1) of the Wealth-tax Act, 1957 (hereinafter called 'the Act'). The questions referred are :
'1. Whether, on the facts and circumstances of the case, the sum of Rs. 58,62,248 being the value of 3,1/2% war loan securities and foreign bank balances, was includible in the net wealth of the assessee for the assessment year 1957-58
2. Whether, on the facts and in the circumstances of the case, the sum of Rs. 4,81,181 or any portion thereof, representing the value of debentures and shares standing in the names of the assessee and her sons were includible in the wealth of the assessee for the assessment year 1957-58 ?'
2. Her Highness Rajkuverba Dowager Maharani Saheb of Gondal is the assessee and the assessment relates to 1957-58. The corresponding valuation date is December 31, 1956. His Highness Sri Bhojraji Maharaja Saheb of Gondal (hereinafter called the 'late Maharaja') died on July 31, 1952, leaving behind him the assessee and two sons, His Highness Vikramsinhji and Prince Shivarajasinhji. The late Maharaja had two personal accounts with the National Bank of India, London : one was a fixed deposit account and the other a current account. The said accounts were held in the joint names of the late Maharaja and the assessee. On the death of the late Maharaja, the bank transferred the said accounts to the sole name of the assessee. Interest accrued was credited to the current account of the assessee. The said bank held in safe custody, on behalf of the late Maharaja and the assessee 3,1/2% War Loan Certificates for $3,25,000 purchased by the bank in September, 1949, on instructions of the late Maharaja out of funds in the aforesaid joint current account and registered in the names of the National Bank of India Nominees Ltd. The interest on the said war loan was until the receipt by the bank of the advice of the death of the late Maharaja paid into the aforesaid joint current account. On receipt of advice of the death of the late Maharaja, the said safe custody account thereafter was credited to the aforesaid current account of the assessee.
3. His Highness Sri Vikramsinhji Maharaja Saheb of Gondal, hereinafter called the 'present Maharaja', succeeded the late Maharaja on the 27th day of March, 1954, and letters of administration to the estate of the late Maharaja were granted out of the principal probate registry of the High Court of Justice in England. The administrator on behalf of the present Maharaja claimed the aforesaid sums of money and securities lying with the National Ban of India, London, alleging that they formed part of the estate of the late Maharaja and that on his death the present Maharaja became solely and absolutely entitled thereto. Thereupon, National Bank of India Ltd. filed an application before the High Court of Justice, Queens Bench, On September 12, 1955. Referring to the rival claims made by the assessee and the administrator, it was submitted that the bank is ready to bring into court or to pay or dispose of the said amount of money and the said securities in such manner as the court may order or direct. In the said proceedings before the Queens Bench, the assessee and the administrator filed their respective statement of claim, each party claiming the sums of money and the securities as belonging to it absolutely.
4. Upon hearing the counsel for the applicant bank and for the claimants, the Master in chambers made the following order on November 11, 1955 :
'IT IS ORDERED that no action be brought by any of the above named claimants against the applicant to recover the securities and funds referred to in paragraphs 4 and 6 of the affidavit of Archibald Ross Steel sworn herein on the 12th September, 1955 or any part thereof or for any interest accrued in respect thereof since the date of the said affidavit and that the applicant's costs of this application be taxed or agreed with the claimants and that the applicant be at liberty to deduct the amount thereof from the said funds and interest and that within 14 days after such taxation or agreement the said securities be transferred into court and the balance of the said funds and interest be paid into court and that the said funds and interest be invested in 3.1/2% war stock and that the said claimants do proceed to the trial of an issue in the Chancery Division of the High Court to enquire whether the said securities, funds and interest are the property of the claimants His Highness Shri Vikramsinhji Maharaja Saheb of Gondal (hereinafter called the 'present Maharaja') against Her Highness Rajkuverba Dowager Maharani Saheb of Gondal (hereinafter called' the Dowager Maharani') or are the property of the claimant Robert Hampton Robertson Mogill as Administrator of the Estate of His Highness Shri Bhojrajji late Maharaja of Gondal - Dhoraji (hereinafter called 'the administrator') as against the Dowager Maharani in which issue the claimants the present Maharaja and the Administrator shall each be a plaintiff and the claimant the Dowager Maharani shall be the defendant and that a statement of claim by each of the said plaintiffs be delivered to the defendant and to one another within 6 weeks thereafter and that the said issue be tried by a judge of the said Chancery Division and that all questions of costs (save as aforesaid) and all further directions be given in the said division and that these proceedings be transferred to the said division and assigned to group 3 and that there be liberty to apply to the said division.'
5. In obedience to the said order, the bank transferred the movies and the securities into court. The proceedings having been thus transferred to the Chancery Division of the High Court to enquire whether the funds, securities and interest are the property of the present Maharaja or of the assessee, the rival claimants submitted their statement of claim in the High Court of Justice, Chancery Division, each party contending that he or she was absolutely entitled to the monies and securities in question.
6. When the matter was thus pending adjudication, the present Maharaja and the assessee arrived at an amicable settlement were recorded in a letter of agreement dated July 9, 1956, which reads thus :
'We two have come to an amicable settlement and have agreed to the following points.
(1) His Highness the Maharaja Shri Vikramsinhji of Gondal to withdraw the case in England for joint holding which were standing in the names of His Highest the Maharaja Bhojrajji saheb of gondal and Her Highness the Maharani Shree Rajkuverba Saheb of gondal
(2) Her Highness the Dowager Maharani Shree Rajkuverba to give His Highs the Maharaja Shree Vikramsinhji Saheb of Gondal all foreign securities and accounts standing in the single name of Late His Highness the Maharaja Shree Bhojrajji Saheb of Gondal.
(3) Disputed jewellery to be divided in half and half.
(4) Jewie to be given Rs. 2,500 per month.
(5) Interest of Vidyalaya Securities to be given to Her Highness the Dowager Maharani Saheb of Gondal.
These terms are to be fulfilled within a week after hearing from London.
7. On July 9, 1957, the present Maharaja and the assessee wrote to the Lioyds Bank Ltd., London, to the effect that instructions had been issued to their respective solicitors in London for obtaining the release of the funds and securities deposited in the High Court and for the transfer of the same to the Lioyds Bank. The letter further directed the bank to keep certain amounts for meeting the tax liability of the late Maharaja and to hold the balance of the war stock and the funds for the account of the assessee solely and absolutely. The letter further stated that the authority given therein was irrevocable. The present Maharaja and the assessee addressed joint letters to their respective solicitors in London for obtaining the release of the funds and the securities from the High Court of Justice in accordance with the terms of the settlement. On January 24, 1958, Mr. Justice Danckwerts at Chambers, on both the parties by their solicitors consenting to the order, transferred the funds and securities to the Lioyds Bank Ltd.
8. The Wealth-tax Officer included the face value of the said securities in terms of Indian rupees at Rs. 61,39,253 and the bank balance of $ 851 which worked out to Rs. 11,346 in the wealth-tax assessment of the assessee for the years 1957-58 and 1958-59 on the ground that the assessee had become the absolute owner of the monies and securities by virtue of survivorship on the demise of the monies and securities by virtue of survivorship on the demise of the late Maharaja. The Appellate Assistant Commissioner upheld the inclusion of the value of the said assets but substituted the figure of Rs. 58,50,902 for Rs. 61,50,599. The Appellate Tribunal in the appeals preferred by the assessee upheld the inclusion of the value of these assets in the assessments for the year 1958-59 but directed the deletion of the same for the year 1957-58. In paragraph 25 of its order, the Tribunal has given its reasons for deletion of the value of the assets as on the valuation dated December 31, 1956, and it reads thus :
'In our opinion, the agreement dated July 9, 1956, did not confer on the assessee an absolute right over 3 1/2% war stock. This right was dependent upon Sri Vikramsinhji's withdrawing the suit under which he had claimed a right over the joint holding. therefore, as on December 31, 1958, there was nothing which would confer on the assessee an undisputed right over these assets. In the absence of any written consent on the part of Sri, virkramsinhji to withdraw the claim, the possibility of his prosecuting the claim in England cannot altogether be ruled out. Under the wealth-tax Act, the amount which could be included with that of the assessee is one over which the assessee has absolute ownership and the absolute right of user. But the assessee acquired such a right and title when the irrevocable letter of July 9, 1967, was issued. There was binding agreement and there was no more the contingency of Sri Vikramsinhji continuing the proceedings in England. We, therefore, consider that the inclusion of 3 1/2% war stock as on the valuation date, December 31, 1956, is not justified. We uphold its inclusion in the following year 1958-59.'
9. The second question referred relates to certain debentures and shares held jointly by the assessee and her sons. The assessee in her return for 1957-58 include the sum of Rs. 4,81,681 as value of the said debentures and shares on the valuation date. In the return for 1958-59 also she included the value of the said assets but in the returns for the subsequent years, the value of these was not included. The Wealth-tax Officer accepted the valuation returned by the assessee and included the same in the computation of her net wealth. In the appeals preferred before the Appellate Assistant Commissioner, the assessee raised a new ground on February 18, 1963. The said ground stated thus :
'That through oversight certain investments like Government securities, debentures and shares standing in the joint names of the appellant and her major sons was shown as the petitioner's assets in the return of wealth submitted. The same may kindly be deleted in full as the same should be assessed separately in the status of an individual as per sections 3 and 21(4) of the Wealth-tax Act.'
10. At the stage of the arguments before the Appellate Assistant Commissioner, an alternate contention was put forward on behalf of the assessee that the Wealth-tax Officer should have assessed only 50 per cent. of the value of the joint holdings as belonging to the assessee. The Appellate Assistant Commissioner rejected the additional ground as also the alternate contention. The following facts were admitted by the assessee before the Appellate Assistant Commissioner :
1. The debentures and shares were acquired from the funds of the assessee prior to 1-4-1956;
2. They were in the possession of the assessee;
3. The dividends were collected by the assessee; and
4. The assessee had admitted the whole of the dividends as her income in her returns of income for income-tax up to the assessment year 1959-60.
11. The Appellate Assistant Commissioner sustained the inclusion of the value of the joint holdings in the assessee's total wealth.
12. The Appellate Tribunal allowed the assessee's appeal holding as under :
'For purposes of inclusion of any assets under the Act, there should be ownership and the absolute right of user. One of the characteristics of ownership is the power of disposal over the property. It is an admitted fact that with reference to shares and debentures the power of disposal is restricted and can be effected of unpaid calls on shares both the parties. It would appear that in respect of unpaid calls on shares both the parties are jointly and severally liable. We, therefore, consider that in respect of these shares and debentures the assessee could not be said to be the absolute owner. The mere fact that the dividend warrants are issued and cashed by the assessee cannot conclude the issue. The dividend warrant is issued because the assessee's name is the first name, but absolute ownership is not derived therefrom. We do not find any material on which the department could say that the other persons along with whose name the shares and debentures stand is a benamidar. We direct the exclusion of the value of the joint holdings in respect of the shares and debentures in the assessment years 1957-58 to 1962-63'.
13. Section 3 of the Act which is the charging section levies wealth-tax in respect of the net wealth of the assessee as it existed on the valuation date. 'Net wealth' which forms the tax base has been defined in section 2(m) to mean the aggregate value computed in accordance with the provisions of the Act of all the assets, wherever located, belonging to the assessee on the valuation date, subject to certain exceptions which are not relevant for the purpose of the decision of this case. One of the main conditions for inclusion of the assets in the net wealth is that the assets should belong to the assessee on the valuation date. If, on the said date, the assets did not belong to the assessee, they cannot be included in the computation of his net wealth. The word 'assets' has been defined in section 2(e) as inclusive of property of every description, movable or immovable. The word 'property' is a term of the widest import and and is sufficiently comprehensive to include every species of an estate, real and personal and everything which one person can own and transfer to another. In extends to every species of right and interest capable of being enjoyed as such upon which it is practicable to place a money value. The term 'property' includes not merely tangible property but also intangible rights. In English law, personal property is either, (1) a chose in possession, i.e., a thing which can be possessed and enjoyed and capable of being transferred by manual delivery known as movable property under Indian law, or (2) a chose in action, i.e., a thing that is realisable in action in a court of law known as 'actionable claim' in Indian law. The right of a partnership to sue for accounts of a dissolved partnership is an instance of an 'actionable claim'.
14. In the instant case, on the death of the late Maharaja when the administrator of his estate laid claim to the 3 1/2% war loan securities and bank balances with the National Bank of India, London, an interpleader action was commenced by the said bank in the High Court of Justice, Queens Bench Division. The court by its order deed November 11, 1955, ordered the said bank to transfer the funds and securities into the court and directed the rival claimants to proceed to the trial of the issue in the Chancery Division of the High Court of Justice whether the said securities, funds and interest are the property of the present Maharaja or that of the assessee and pending such adjudication, it was ordered that no action be brought by any of the said claimants against the said bank to recover the securities and funds. Pursuant to the said order, the bank paid into court the funds and securities and interest. The proceedings were pending in the Chancery Division of the High Court of Justice on the valuation date. The said proceedings terminated only on January 24, 1958, when it was ordered that funds and securities be transferred to the Lioyds Band Ltd., who were authorised to hold the same for the account of the assessee solely and absolutely. The funds and securities did not become the property of the assessee until January 24 1958, notwithstanding the letter of agreement dated July 9, 1956, under which the present Maharaja agreed to withdraw his claim in favour of the assessee. It is only after the claim was withdrawn, pursuant o the agreement and the court passed an order that the assessee became the owner of the assets. On the date of valuation, i.e., December 31, 1956, the assessee's right was only an actionable claim. Her right was not reduced into possession but was recoverable by a suit at law.
15. Sri S. R. Rajasekara Murty, learned counsel for the revenue, conceded, in our opinion rightly, that the funds and securities which are the subject-matter of legal proceedings before the Chancery Division in the High Court of Justice in England cannot be treated as a tangible asset of the assessee on the valuation date, and therefore, was not includible in the net wealth of the assessee for 1957-58. The intangible right of the assessee as an actionable claim is also an asset but that is not the same or identical as the tangible claim is also an asset but that is not the same or identical as the tangible asset. The Wealth-tax Officer was, therefore, in error in including the sum of Rs. 58,62,248 in the net wealth of the assessee for 1957-58. But, we must add that the value of the assessee was includible in her net wealth for 1957-58. The basis of the said valuation would be entirely different from the value of the tangible assets. The price, in the opinion of the Wealth-tax Officer, which the right of the assessee would fetch if sold in the open market on the valuation date would be the value of that asset. The Wealth-tax Officer has to take into consideration all the facts and circumstances of the case including the letter of agreement dated July 9, 1956.
16. On the second question referred to, Sri. S. P. Bhat, learned counsel for the assessee, conceded that the additional ground taken on February 8, 1964, before the Appellate Assistant Commissioner is untenable and that the Tribunal was not right in deleting the entire sum of Rs. 4,81,681. He submitted that 50 per cent. of the value of the debentures and shares alone was includible in the net wealth of the assessee.
17. Sri Rajashekara Murthy, learned counsel for the revenue, urged that on the admitted facts the assessee has to be held to be the full owner of the debentures and assets and, therefore, their entire value was includible in the net wealth.
18. The learned counsel for the assessee urged that the facts relied on by the Appellate Assistant Commissioner, viz., that the dividends were received by the assessee and that the share certificates were in her possession, are not sufficient to hold that the assessee was the full owner. He argued that the dividends could not be paid to both the joint owners mentioned in the share certificates but could be paid to one of them only and since the first name in the share certificates is that of the assessee, the dividend warrants were issued in her name. He further urged that for unpaid call money both the shareholders would be liable when the calls were made and in these circumstances the only proper conclusion that can be reached is that the assessee was a co-owner owning 50 per cent. interest in the shares.
19. The Tribunal excluded the value of the debentures and shares on the ground that the assessee could not be said to be the absolute owner and that there is no material on which the department could say that the assessee's sons are benamidars. This conclusion of the Appellate Tribunal, in our opinion, is wholly erroneous. As stated earlier, the debentures and shares were acquired with the funds of the assessee; they were in her possession; the dividends were collected by her and she had admitted them in her return of income of income-tax up to the year 1959-60. The Appellate Assistant Commissioner has also observed that no evidence has been let in to show that the assessee's sons had admitted their share in the returns of wealth filed by them.
20. It is settled law that a company for its purposes does not recognise any trust or equitable ownership in shares. It merely recognises the registered shareholder as the owner and pays the dividend to that shareholder. But, the shares may, because of a trust or fiduciary relationship belong to a person other than the registered shareholder and dividend distributed by the company would for the purpose of income-tax be deemed to accrued or arise to the real owner of the shares. If the shares stand registered in the name of 'B' but 'B' is the real owner of the said shares, the dividends distributed by the company and received by 'A' would be deemed to be the income of 'B' and 'B' is liable to be assessed to income-tax : vide Kishenchand Lunidasingh Bajaj v. Commissioner of Income-tax. From the fact that the assessee, in her return for income-tax up to the assessment year 1959-60, had admitted the entire dividends collected by her as her income, the only conclusion that can be reached is that she was real owner of the shares and that her sons were benamidars. It is not the case of the assessee that, on the valuation date, there was any dispute between her sons or that her sons had laid any claim to the shares. the assessee being the real owner of the shares, the value of the said assets were includible in her net wealth for the assessment year 1957-58. The Tribunal was in error in excluding the same from the net wealth of the assessee.
21. Our answer to the questions of law referred are :
(1) that, on the facts and circumstances of the case, the sum of Rs. 58,62,248 being the value of 3.1/2 per cent. war loan securities and foreign bank balances was not includible in the net wealth of the assessee for the assessment year 1957-58, but the value of the intangible right of the assessee's claim to the said assets was includible in her net wealth.
(2) On the facts and the circumstances of the case, the sum of Rs. 4,81,681 being the value of debentures and shares standing in the names of the assessee and her sons was includible in the net wealth of the assessee for the assessment year 1957-58.
22. In the circumstances the parties are directed to bear their own costs.