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Wealth-tax Officer Vs. Hemlata Shukla/Sarla Shukla - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Allahabad
Decided On
Judge
Reported in(1983)6ITD750(All.)
AppellantWealth-tax Officer
RespondentHemlata Shukla/Sarla Shukla
Excerpt:
1. since the above appeals involve common contentions and same arguments were advanced by the counsel in both the cases, they are disposed of by this consolidated order for the sake of convenience.2. the first common contention relates to the valuation of birhana road (kanpur) property. there is no dispute that in this property both the above assessees held equal shares. the wto valued it on rental method.he found that the assessees themselves had applied a multiple of 20 in the assessment years 1973-74 and subsequent years. he applied the same multiple to all the years under appeal. on this basis, he valued the share of each assessee in this property at rs. 1,08,600 for the assessment years 1970-71 to 1973-74. for the subsequent assessment years, he adopted the value of rs. 1,66,000 as.....
Judgment:
1. Since the above appeals involve common contentions and same arguments were advanced by the counsel in both the cases, they are disposed of by this consolidated order for the sake of convenience.

2. The first common contention relates to the valuation of Birhana Road (Kanpur) property. There is no dispute that in this property both the above assessees held equal shares. The WTO valued it on rental method.

He found that the assessees themselves had applied a multiple of 20 in the assessment years 1973-74 and subsequent years. He applied the same multiple to all the years under appeal. On this basis, he valued the share of each assessee in this property at Rs. 1,08,600 for the assessment years 1970-71 to 1973-74. For the subsequent assessment years, he adopted the value of Rs. 1,66,000 as declared by each of the assessee' s in their respective returns.

3. Both the assessees appealed to the AAC. The leading order was passed by the latter in the case of Smt. Hemlata Shukla, which was followed by him in the case of Smt. Sarla Shukla. He observed that the WTO had not given any reason, apart from taking the assessee's own declaration as the basis for applying a multiple of 20 to the net rental income.

According to him, therefore, the basis shown by the assessee of applying a multiple of 15 only was reasonable and should have been applied. He, accordingly, deleted the addition made by the WTO in the respective assessment years.

4. Being dissatisfied with the above finding of the AAC, the WTO has come up in appeals before us. The learned departmental representative submitted before us that there was no reason for not applying a multiple of 20 to the net rental income even up to the assessment years 1973-74 when both the assessees themselves had applied that multiple in the subsequent assessment years. The counsel, on the other hand, submitted that it was Rule 1BB of the Wealth-tax Rules, 1957 ('the Rules') which should be applied to the case as the property was mainly used for residential purposes.

5. After hearing the parties, we are in agreement with the submission of the learned counsel for the assessees. This issue had arisen before a Special Bench of the Tribunal in the case of Biju Patnaik v. WTO [WT Appeal Nos. 614 to 624 and 703 to 717 (Delhi) of 1979]. The Tribunal vide order dated 17-2-1982 [since reported in [1982] 3 SOT 623] had held that Rule 1BB, though introduced in the Wealth-tax Rules with effect from 1-4-1979 by the Wealth-tax (Amendment) Rules, 1979, was retrospective in operation, that it applied to all the assessments, which were pending either before the WTO or in appeal before the appellate authorities including the Tribunal. It was also held in this case that the rule was procedural and mandatory. It was further held in the above case that in such cases where the application of the rule was claimed before the appellate authorities, the valuation should be restored to the WTO for fresh consideration including the application of Sub-rule (5) of Rule 1BB to the case. Respectfully following the above decision of the Tribunal, we restore the matter of the valuation of Birhana Road property in respect of the assessment years 1970-71 to 1973-74 to the WTO for fresh consideration in the light of the above observations. There will, however, be no relief due to the assessees in respect of the assessment years 1974-75 to 1978-79 as in those years their declared values had been accepted by the WTO and there could not have been any dispute about such valuations before the AAC.6. We now deal with the dispute relating to a property situated at A-1/54, Safdarjung, New Delhi. Shri Prem Narain Shukla, father-in-law of the two assessees before us, was the owner of the Birhana Road, Kanpur, property. He intended to gift it to both the assessees. For this purpose, a gift deed was also prepared and was registered sometime in 1959 in Nagpur, where he was residing at the relevant time. It was subsequently noticed that the name of Smt. Sarla Shukla had been omitted from the deed. A suit No. 235 of 1972 was filed in the Court of First Civil Judge, Kanpur, by Shri Prem Narain Shukla and Smt. Sarla Shukla against Smt. Hemlata Shukla. It was pleaded in this case that the two ladies, now assessees, before us were the owners of the house in equal shares and were also in receipt of the income of the property equally. The Civil Judge passed an order on 18-11-1974 allowing the relief of declaration holding that both Smt. Hemlata Shukla and Smt.

Sarla Shukla were the joint owners of Birhana Road, Kanpur, property.

This order, of course, was passed ex parte. However, nothing turns on that.

7. In the meantime both the ladies jointly purchased a plot of land in Safdarjung, New Delhi, on 9-8-1965 out of the rental income of Kanpur property and cash available with them. The plot was purchased for a sum of Rs. 34,500. A further sum of Rs. 1,723 was spent as registration charges. Construction was also started on this plot sometime in June 1966 and was completed in 1967-68. The construction was financed out of the following sources: Before we go further, we may also make some observations regarding the above sources. Till the judgment of the Civil Judge, Kanpur, delivered on 18-11-1974, the property was treated as belonging to Smt. Hemlata Shukla. Out of the rentals, a sum of Rs. 18,000 was deposited on 19-2-1962 in the name of Smt. Hemlata Shukla with Biharilal Munni Lal, Kanpur. This deposit was subsequently transferred to Biharilal Sri Krishna, Kanpur. Out of this, Rs. 30,000 were withdrawn and were invested in the construction of the property.

8. The Delhi property was subsequently let out, The rent received from this property was kept in a separate account. As and when required payment of house tax, water tax or repairs, etc., of the house were made by withdrawing the amount from this account. The question of assessing the income from this property arose in the income-tax proceedings. It was claimed there that the Delhi property belonged to an AOP consisting of Smt. Sarla Shukla and Smt. Hemlata Shukla. This claim of the assessee was not accepted by the ITO. He dealt with the question in the assessment year 1970. He observed in this order: From the investment point of view, it has now been clear that the investments have been made by the two ladies out of the gift received and also out of rental income of the Birhana Road, Kanpur property and they are also the joint owners of this property also.

As such the income shown should be assessed half in the hands of Smt. Sarla Shukla and half in the hands of Smt. Hemlata Shukla as the share of two ladies are more or less ascertainable. Since the assessee has filed return in the status of AOP the assessment in this case is made on protective basis on income of Rs. 8,640 as shown by the assessee.

Similar assessments were made by him for other years although in some of the orders he did not mention that the assessment was being made as a protective measure.

9. In the wealth-tax assessments although both the assessees showed the value of the Delhi property in part IV of the returns, but it was claimed that the property belonged to an AOP and further no share in the property was assessable in the hands of either of the above two assessees as their shares were indeterminate. The WTO following the findings in the corresponding income-tax assessment, held that since most of the investment had been made out of rental income from Birhana Road property, it could safely be presumed that the two ladies were also joint owners of the above property and, therefore, half of the value of the property could be assessed in the hands of each lady separately. In other words, he did not accept the claim of the assessee that the property in question belonged to an AOP or that no share from it was assessable in the hands of the assessees. He valued the property on rental basis at Rs. 1,88,000 and included half of the amount, i.e., Rs. 94,000 in the assessments of each of the two assessees in the assessment years 1970-71 to 1973-74. He revalued the property at Rs. 2,97,600 for the subsequent years and included half of that amount, i.e., Rs. 1,48,800 in those years.

10. The assessees appealed to the AAC. It was submitted before him that the value of Delhi property was not assessable in the assessments of the assessees and, in any case, it had been improperly valued at an excessive amount. It was contended before him that the property belonged to an AOP consisting of Smt. Sarla Shukla and Smt. Hemlata Shukla and since their shares were indeterminate, no share thereof could be included in the assessments of the assessees. The AAC first took up the question as to whether Delhi property, in fact, belonged to any AOP. He found that even in the income-tax assessments, the ITO had not been able to correctly determine the shares of each lady in the income of the property. It was found by him that in the assessment year 1973-74, the shares of Smt. Hemlata Shukia and Smt. Sarla Shulda were determined in the ratio of 80: 20. In other years, they were treated as equal. He finally held as under: The words 'association of persons' as contemplated under the Income-tax Act is not used in any technical sense but must be construed in their plain ordinary meaning. A reference is hereby invited to the clarification and the meaning attributed to the word 'association of persons' as defined by the Supreme Court in CIT v. Indira Balkrishna [1960] 39 ITR 546. The Supreme Court has held that to constitute an association of persons they must join hands in a common purpose or common action and the object of the association must be to produce income. In respect of co-owners of property it had been held in the case of Sh. Abdul Rahman v. CIT [1944] 12 ITR 302 (Lahore) that they can be assessed as an association of persons if their shares are not definite and ascertainable. If co-ownership is coupled with other indices of joint enterprise, it would make the co-owners assessable, as association of persons. Thus, where persons join together to acquire hold and manage property jointly for the purpose of producing income, they fall to be charged as an association of persons. Looking into facts already brought on record it is clear, and as will be evident from the assessment order of the AOP for the assessment year 1971-72 where the ITO himself has presumed the investment in the New Delhi property out of the rental income from Birhana Road, Kanpur property. He has presumed that since the share of the ladies in the Birhana Road property was equal, it can safely be presumed that the share in the Delhi property was also equal and, hence, determinate. A perusal of the investment in Delhi property would go to show that the investment in the same was not totally related to the rental income from Birhana Road, Kanpur property. Moreover, at the time of the investment in the New Delhi property, the property at Kanpur stood in the name of Smt. Hemlata Shukla alone and it was only by a subsequent decree of the Civil Court that the claim of Smt. Sarla Shukia to the extent of 50 per cent was recognised. I have also gone through the indenture of lease made between Smt. Hemlata Shukia and Smt. Sarla Shukia as the owners of the Delhi property with the Delhi Administration. This deed nowhere specifies as to what extent they were owners in the said property. It only says that the lease had been given jointly to both the parties. Moreover, there is no deed of agreement for the Delhi property and the subsequent conduct in the distribution of income also goes to show that the share from the income of Delhi property was not specified or determinate. As already stated above, the real basis to be seen and as defined by the Supreme Court in Indra Balkrishna's case (supra) is whether there was an intention to come forward in a common purpose or common action and the object must be to produce income. This basis has been duly fulfilled in the above-mentioned case and, accordingly, I hold that there was a valid association of persons as contemplated under the I.T. Act.

He also agreed with the other contention of the assessees that no share from the AOP was assessable in the assessments of either of the above two assessees.

11. The department is aggrieved with the above findings of the AAC and has filed the present appeals. The learned departmental representative submitted before us that in the first place Delhi property could not be said to be belonging to any AOP. In this connection, ha relied on the findings given in the income-tax assessments where, as stated above, it was held that the property did not belong to an AOP. He pointed out that the assessments made on AOP were as a protective measure and, therefore, there was no finality in the matter. He next contended that AOP was not an unit of assessment under Section 3 of the Wealth-tax Act, 1957 ('the Act') and invited our attention to Section 4(1)(b) of the Act. It is laid down in this section that in computing the net wealth of an individual, there shall be included, as belonging to that individual, where the assessee is a member of an AOP, the value of his interest in the association determined in the prescribed manner, The contention of the learned departmental representative, thus, was that even if it could be presumed that the property belonged to an AOP, still the value of the interest belonging to the two assessees in that association required to be included in their assessments and that such interest had to be determined in the prescribed manner. He then invited our attention to Rule 2(1) of the Rules, which is relevant for our purpose, and prescribes the method for ascertaining, among others, the interest of a person in an AOP. It reads as under: The value of the interest of a person in a firm of which he is a partner or an association of persons of which he is a member, shall be determined in the manner provided herein. The net wealth of the firm or the association on the valuation date shall first be determined. That portion of the net wealth of the firm or association as is equal to the amount of its capital shall be allocated among the partners or members in the proportion in which capital has been contributed by them. The residue of the net wealth of the firm or association shall be allocated among the partners or members in accordance with the agreement of partnership or association for the distribution of assets in the event of dissolution of the firm or association, or, in the absence of such agreement, in the proportion in which the partners or members are entitled to share profits. The sum total of the amounts so allocated to a partner or member shall be treated as the value of the interest of that partner or member in the firm or association.

Further, contention of the learned departmental representative was that even if there was any difficulty in mathematically determining the amount of the capital invested by the assessees in the purchase of the property, that, by itself, was no ground to hold that their shares in association were either indeterminate or unascertainable.

12. The learned Counsel for the assessee submitted before us that if the source of investment in the property was carefully examined, it would be clear that the ownership thereof was indeterminate at the time the investment was made in the construction of the property. In particular, he submitted that till 18-11-1974 when the Civil Judge, Kanpur, had delivered his judgment, the ownership of Kanpur property was in dispute and obviously, therefore, it was also in dispute as to who was the owner of the rental income derived from that property, which was the main source of investment in the purchase and construction of Delhi property. His second submission was that even if it could be said that the rental income of Birhana Road property belonged to two ladies in equal share, at least there was no clear idea about the ownership of Rs. 23,697, which represented the joint savings of the ladies. In the written submissions placed on record, it is pointed out that the only amount in which the shares of both the ladies could be determined or ascertained was a sum of Rs. 10,000 received as gift by them from Shri P.M. Shukla. To support his submission, he referred to an old decision of the Lahore High Court in Abdul Rahman v.CIT [1944] 12 ITR 302. It was held in this case that so long as the litigation between the parties was pending, it was impossible to hold that the shares of the parties were 'definite and ascertainable' within the meaning of Section 9(3) of the Indian Income-tax Act, 1922 ('the 1922 Act') and the parties were not entitled to have their shares of income separately assessed. His further submission was that the subsequent conduct of the ladies was also relevant. As stated above, he pointed out that a joint account had been opened for keeping the rental of Delhi property out of which not only taxes, etc., were paid, but repairs were also carried out. He also pointed out that even in the income-tax proceedings, the ITO had not been able to correctly determine the shares of the two ladies. We have already made a reference to this fact in earlier part of this order.

9. Shri Chaturvedi, the learned Counsel for the assessees, also referred to the following decisions--Arakal Joseph Gabriel v. Doning Inas [1911] 34 ILR 80 (Mad.), Navroji Maneckji Wadiav. Perozhai [1899] 23 ILR and Reazaddi Bepari v. Yakub Bepari AIR 1941 Cal. 416.

It was held in the first case that where there are no words in an instrument of gift of property to several persons indicating an intention to create tenancies-in-common, there is a presumption that the donees held the property as joint tenants and not as tenants-in-common. It was held in the second case that the tenancy of modern decisions undoubtedly was to give effect to any words indicating an intention to create a tenancy-in-common rather than a joint tenancy, but still there must be words indicative of such intention. In the third case it was held that Section 45 of the Transfer of Property Act, 1882, could not be limited to voluntary transfers but that it also applied to involuntary transfers. The above authorities were quoted by the learned Counsel in connection with the joint gift of Birhana Road property to the assessees to show that there was no presumption in law that that property had been gifted in equal shares. This argument was made to indicate that before the dispute was settled by the Civil Judge, Kanpur, not only the title of the property was in dispute but that the shares of the two ladies were also indeterminate in that property.

10. The learned Counsel further submitted that no doubt Section 4(1)(b) did permit the WTO to include the value of the interest of the assessees in the association, which was to bs determined in the prescribed manner. He, however, submitted that such determination could not be made under Rule 2(1). He contended that on the basis of his earlier arguments, it was not possible to ascertain the proportion of the capital invested in Delhi property by the two ladies and if this could not be determined, the rule had no application to the present case. He further submitted that there was also no agreement for the distribution of assets in the event of the dissolution of the association, nor there was anything to indicate in what proportion the ladies were entitled to share profits of the association. According to him in view of these difficulties, Rule 2(1) could not be applied to the case of the above assessees and, therefore, no share of the association could be brought to the assessment in their respective assessments.

11. The counsel made another pertinent argument that it was with a view to obviate the above difficulty that Section 21AA of the Act had been introduced in the Act from 1-4-1981 by the Finance Act, 1981. The relevant portion of the section reads as under: (1) Where assets chargeable to tax under this Act are held by an association of persons, other than a company or co-operative society, and the individual shares of the members of the said association in the income or assets or both of the said association on the date of its formation or at any time thereafter are indeterminate or unknown, wealth-tax shall be levied upon and recovered from such association in the like manner and to the same extent as it would be leviable upon and recoverable from an individual who is a citizen of India and resident in India for the purposes of this Act and-- The counsel also referred to the speech of the Finance Minister introducing the Budget for 1981-82 in the Parliament. The relevant portion of the speech is as under: Another device being used for avoiding proper tax liability is the creation of associations of persons without defining the shares of members. This enables the creation of a large number of taxable entites which, under the existing law, will be chargeable to income-tax separately. I now propose that such associations of persons be charged to income-tax at the maximum marginal rate and to wealth-tax at the fiat rate of 3 per cent or at the appropriate rate applicable in the case of an individual, whichever is higher. This proposal will also take effect from the assessment year 1981-82.

12. He also referred to circular No. 308 dated 29-6-1981 issued by the CBDT giving explanatory note on provisions relating to direct taxes in the Finance Act, 1981. In this circular also, the Board have emphasised the underlying idea for introducing Section 21AA in the Act as pointed out by the Finance Minister in his Budget speech. The counsel relying on the decision of the Supreme Court in K.P. Varghese v. ITO [1981] 131 ITR 597 submitted that the speech made by the mover of the Bill explaining the reasons for its introduction could be referred to for the purpose of ascertaining the mischief sought to be remedied by the legislation and the object and purpose for which the legislation was enacted. The judgment laid down that this was in accord with the recent trend in juristic thought not only in western countries but also in India that the interpretation of a statute being an exercise in the ascertainment of meaning, everything which is logically relevant should be admissible. It was also held in this case that the circulars of the Board explaining the scope and object of a section were binding on the department in the administration of the Act.

13. Finally, the counsel for the assessees submitted that even before the enactment of Section 21AA in the Act, it was possible to say that even an AOP was assessable as an individual which is an assessable entity under the charging Section 3. In this connection, he referred to a decision of the Supreme Court in WTO v. C.K. Mammed Kayi [1981] 129 ITR 307. Another decision cited by him was that of the Bombay High Court in Trustees of Gordhandas Govindram Family Charity Trust v. CIT [1968] 70 ITR 600. It was held in this case that the joint trustees of a charitable trust could be assessed as 'individual' for the purpose of wealth-tax in respect of the value of the properties held by them as trustees, and that they could not be treated as an AOP and exempted from wealth-tax on the ground that an AOP was not an entity mentioned in the charging section of the Act.

14. We have carefully considered the submissions placed before us on behalf of the rival parties. There are two issues for our consideration. The first is whether Delhi property was held by an AOP consisting of Smt. Sarla Shukla and Smt. Hemlata Shukla. The second issue is whether their shares were also determinate so as to apply Section 4(1)(b) and Rule 2(1).

15. We will take the second issue first. As stated above, the construction of the property including the purchase of the plot at Delhi was financed mainly out of the rental income of Kanpur property, gifts received by the ladies from their father-in-law and their own personal savings. It was contended before us that their shares in Kanpur property were indeterminate at the time the above activities were carried on and, therefore, they remained indeterminate in the Delhi property also irrespective of the fact that subsequently their shares were determined by the Civil Court in Kanpur property in 1974.

In our opinion, that is not a correct approach.

No doubt there was dispute about the title of the Kanpur property.

However, it was settled by the Civil Court on 18-11-1974 when the ladies were declared as joint owners with equal shares, as was admitted before us. The judgment related back to 1959 when the property was gifted to them by Shri P.N. Shukla. That means their shares in Kanpur property became determinate from the date it was gifted to them. Even otherwise, where the interest of the donee in the deed of gift are not specified, they take the property in equal shares. We, however, do not intend to elaborate this point any further or to deal with the various authorities relied on by the learned Counsel for the assessees as, in our opinion, his case is supportable from another angle. Even if the shares of the ladies in Kanpur property could be held to be determinate, it could not be said that their shares in Delhi property were also determinate. There is no presumption in law that if the shares of the owners are determinate in the property, their shares are also determinate in another property acquired out of the rental of the first property. It is open to them to have different shares in their subsequent acquisition. Section 45 of the Transfer of Properly Act no doubt lays down that in the absence of evidence as to the interests in the fund to which the parties were respectively entitled or as to the shares where they respectively advanced, such persons shall be presumed to be equally interested in the property. It is well settled that this section applies only to transfers for consideration. It that respect, the section will have application only to the acquiring of the plot in Delhi and not to the structure which was constructed by the ladies themselves and was not acquired for consideration. It is also by now well settled that, unlike the English law, the law in India recognises dual ownership, the land belonging t o one person and the structure upon it belonging to another--Sakarchand Chhaganlalv. CED [1969] 73 ITR 555 (Guj.) This was also the view taken by the Madras High Court in the case of CIT v. The Madras Cricket Club [1934] 2 ITR 209. It was held in this case that in order that a person may be assessed as the owner of a building under Section 9 of the Indian Income-tax Act, 1922, it was not necessary that he should also be the owner of the land on which the building stands. The fact that the shares of the ladies could be held to be determinate in the land will, therefore, not be an impediment in our finding that their shares were indeterminate in the structure.

Besides, as found by us. Rs. 33,697 had been invested by the ladies in the construction out of their own savings. The extent of the saving of each lady is not at all known in this amount. On these facts, we hold that the shares of both the ladies in Delhi property remained indeterminate.

16. After having come to the above finding, we have next to see whether the ownership of the building vested in an AOP consisting of the above two ladies. Section 26 of the Income-tax Act, 1961 lays down that where property consisting of building or buildings and lands appurtenant thereto is owned by two or more persons and their respective shares are definite and ascertainable, such persons shall not in respect of such property be assessed as an AOP, but the share of each such person in the income from the property shall be included in his total income.

This section, by application, states that if the shares of the persons in a property are not definite and ascertainable, then in respect of such property they will have to be assessed as an AOP. The idea of the property being owned by an AOP is, therefore, inherent in Section 26 itself. Similar circumstances exist in the present case. The shares of the ladies are not definite and ascertainable in Delhi property The conclusion, therefore, is that they have to be assessed as an AOP in respect of that property. This was also the view taken by the Tribunal in, the case of S.K. Gupta [IT Appeal Nos. 760 to 762 (All.) of 1978-79, dated 24-1-1981] a copy of which was placed before us. The Supreme Court in the case of CIT v. Indira Balkrishna, [1960] 39 ITR 546 had held that the word 'associate' means 'to join in common purpose or to join in an action'. Therefore, 'AOP' as used in the Income-tax' Act, means an association in which two or more persons join in a common purpose or common action. These observations squarely fit in with the present case. The two ladies had joined in a common purpose or common action in acquiring Delhi property and, therefore, they formed an AOP in respect of that property. The case of Sh. Abdul Rahman (supra) decided by the Hon'ble Lahore High Court also supports the stand of the assessee. It was held in this case that if the shares of the parties were not definite and ascertainable within the meaning of Section 9(3) of the 1922 Act, corresponding to Section 26 of the 1961 Act, then they were not entitled to have their shares of income separately assessed.

17. After having held that the Delhi property belonged to the AOP consisting of Smt. Sarla Shukla and Smt. Hemlata Shukla, we have further to see how far the provisions of Section 4(1)(b) of the Act were applicable to the case. An AOP is not an assessable entity under the charging Section 3 of the Act. In this connection, we do not agree with the submissions of the learned Counsel for the assessees based on the principles laid down in the cases reported in C.K. Mammed Kayi (supra) and Trustees of Gordhandas Govindram Family Charity Trust (supra). These cases are distinguishable. Suffice it to say that an AOP is not assessable to wealth-tax. To some extent this omission is remedied by Section 4(1)(b). It lays down that in computing the net wealth of an individual, there shall be included as belonging to that individual, where the assessee is a member of an AOP, the value of his interest in the association determined in the prescribed manner. This provision is no doubt attracted to the present case also. Ordinarily, therefore, each of the two assessees are liable to be assessed on her interest in the association, which has to be determined in the prescribed manner. The manner of such determination has been prescribed in Rule 2. We have quoted the relevant portion of the rule in our this order. The rule prescribed that the net wealth of the association on the valuation date shall first be determined. Then that portion of the net wealth of the association as is equal to the amount of its capital shall be allocated amongst the members in the proportion in which capital has been contributed by them. We have already seen above that it is not possible for us to say in what proportion each lady had contributed her capital in acquiring Delhi property. This provision of the rule is, therefore, inapplicable to this case. The rule further provides that the residue of the net wealth of the association shall be allocated among the members in accordance with the agreement of association for the distribution of assets in the event of dissolution of the association. There is no such agreement in this case. This portion of the rule can also not be applied. The rule further says that in the absence of such agreement, the allocation has to be made in the proportion in which the members are entitled to share profits. We are also unaware in what proportion the ladies are entitled to share the income of Delhi property. In this connection, it will be relevant to state that they had opened a joint account in which the rents of the above property were banked and out of which the expenses were incurred.

The rule further says that the sum total of the amount so allocated to a member shall be treated as the value of his interest in the association. In the circumstances stated above, it is not possible for us to find out the sum total of the amount treated as the value of the interest of any lady. Rule 2 is, therefore, inapplicable to the present case in its entirety. There is not other provision in the Act to bring to tax a share of a member in an AOP. We, therefore, hold that no portion of Delhi property can be assessed in the assessments of either of the above two ladies.

18. In expressing our above view, we find agreement with the submissions of the counsel relating to the introduction of Section 21AA in the Act. It was precisely to meet such situations that this section has been introduced in the Act. It lays down that where assets chargeable to tax are held by an AOP and the individual shares of the members in the income or assets or both of the said associations are indeterminate or unknown, the wealth-tax shall be levied and recovered from such association in the manner laid down in that section. The contention of the learned Counsel for the assessee that Section 21AA was meant to plug the lacuna in the Act is supported by the circular of the CBDT and the speech of the Finance Minister delivered in the Lok Sabha while moving the Finance Bill and that they arc relevant to find out the object and purpose for which the legislation is enacted in the light of the principle laid down by the Supreme Court in the case of K.P. Varghese (supra). The view we have taken has also the view of the Tribunal in the case of J.K. Srivastava (supra). A copy of this order was also made available to us by the counsel for the assessees. We, therefore, uphold the order of the AAC excluding the value of Delhi property from the assessments of the two ladies for all the years under appeal.


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