1. These appeals by the assessee, Manohar Lal, an individual of Lashkar, directed against the consolidated order of the AAC dated 25-8-1982 have been consolidated, heard together and are being disposed of by common order for the sake of convenience. The years of assessment involved are 1977-78 and 1978-79 for which the respective relevant valuation dates are 31-3-1977 and 31-3-1978. At one time Jagdish Prasad and Om Prakash, sons of Raghuraj Prasad Agarwal of Daulatpur, Lashkar, were the owners of a property at Topi Bazar, Lashkar. Vide sale deed dated 8-10-1971, the said persons sold the said property to one Manik Chand for a sum of Rs. 35,000. As the said purchaser was short of funds and needed money, he entered into a deed dated 11-10-1971 with the assessee individual. It is the exact nature of this document, which is the subject-matter of dispute in the present case. By this deed, which was duly registered, the said Manik Chand sold the aforesaid house to the assessee for a sum of Rs. 10,000. Manik Chand was to remain in possession of the house as before. He was to pay Rs. 150 per month by way of rent, Manik Chand had the right to repurchase the said property by paying Rs. 10,000 by 11-10-1974. In case Manik Chand failed to pay that amount, the assessee was to continue as the owner of the said property. According to the assessee, the said transaction was nothing but mortgage by conditional sale in terms of Section 58(c) of the Transfer of Property Act, 1982. The payment of Rs. 150 per month by Manik Chand was by way of interest. The intention of the partners was to treat the said transaction as mortgage by conditional sale and not as an out and out sale with a condition of retransfer, more so when Manik Chand has repaid Rs. 5,000 out of the aforesaid mortgage debt by paying Rs. 2,500 prior to 2-7-1983 and Rs. 2,500 on 2-7-1983. This stand of the assessee has, however, been rejected both by the WTO and the AAC. According to them, Manik Chand having not repaid the said sum of Rs. 10,000 by 11-10-1974, the assessee had become absolute owner of the property in question. Since the assessee was the owner of the said property, the WTO valued the said property at Rs. 58,000 for the first year and Rs. 63,000 for the second year against the mortgage debt of Rs. 10,000 shown by the assessee for each of the said years.
2. In the appeals before the Tribunal, the learned Counsel for the assessee took us through the above document dated 11-10-1971. He highlighted that the mortgagor had purchased the said property on 8-10-1971 for Rs. 35,000. The document itself expressly stated that he was in need of money and short of funds. According to the learned Counsel for the assessee, the said Manik Chand had to secure the debt of Rs. 10,000 taken by him from the assessee and so he had created nothing but a mortgage by conditional sale in favour of the assessee to secure the debt of Rs. 10,000 advanced by the assessee to him. Manik Chand continued to remain in possession of the mortgaged property by paying interest in the form of rent of Rs. 150 per month. The deed, thus, indicates the existence of debt, the continuance of Manik Chand as mortgagor-in-possession as before and that the price of Rs. 10,000, for which the said property was indicated to be sold, was far below the true value. These facts indicate that the transaction was one of mortgage. The above facts, according to the learned Counsel, provided sufficient intrinsic value that the transaction was nothing but a mortgage and not a sale with a condition to repurchase as held by the tax authorities. These arguments are controverted by the departmental representative, who has relied on the orders of the tax authorities.
3. We have given consideration to the above arguments. The short point for decision in these appeals is as to whether the above documents records a mortgage by conditional sale as urged by the learned Counsel for the assessee or a sale with a condition to repurchase as held by the tax authorities. According to Section 58(c), where the mortgagor ostensibly sells the mortgaged property on condition that on default of payment of the mortgage money on a certain date the sale shall become absolute on condition that on such payment being made the sale shall become void or on condition that on such payment made by the buyer shall transfer or the property to the seller, the transaction is called a mortgage by conditional sale and the mortgagee is a mortgagee by a conditional sale. On going through the above document executed between Manik Chand and the assessee, we find that the former had purchased this property for Rs. 35,000 on 8-10-1974. The document further records that Manik Chand was in need of money as he was short of funds. To secure those funds, he had entered into the above transaction.
According to the document, Manik Chand had sold the Topi Bazar property to the assessee for Rs. 10,000 on the condition that on such payment being made the assessee was to transfer the property to him (Manik Chand). The period for repayment was fixed at three years. It was also provided therein that if Manik Chand failed to pay that money to the assessee, the latter would become the absolute owner of the said property. It is also a fact, that Manik Chand was paying Rs. 150 per month to the assessee and that he had paid in all Rs. 5,000 out of the above amount of Rs. 10,000 to the assessee by 2-7-1983. Since the existence of the debt is there and continuance of Manik Chand in possession is also there and the price for which the property was sold by Manik Chand to the assessee, namely, Rs. 10,000 is far less than the sum of Rs. 35,000 for which he had purchased the said property at 8-10-1971, i.e., the three days before the execution and the registration of the present document. We are of the considered opinion that these facts provide intrinsic evidence more so when the assessee has not exercised his right of foreclosure and has accepted Rs. 5,000 out of Rs. 10,000 from Manik Chand, that the transaction recorded in the said deed is nothing but a mortgage with conditional sale as defined in Section 58(c). That being the position, the assessee is right when he urged before us that the mortgage debt in question and not the value of the said property of Topi Bazar in Lashkar should be included in the net wealth of the assessee for each of the year under consideration. We, therefore, direct the WTO to include Rs. 10,000 representing the mortgage debt in question in the net wealth of the assessee for each of the years under consideration.
4. and 5. [These paras are not reproduced here as they involve minor issues.]