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Wealth-tax Officer Vs. R.K. Bhattacharjee - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Guwahati
Decided On
Judge
Reported in(1986)15ITD503(Gau.)
AppellantWealth-tax Officer
RespondentR.K. Bhattacharjee
Excerpt:
.....in the two suits, respectively. it appears that the appeals were filed against the judgment of decree passed by the sub-judge, silchar, in the aforesaid two suits and the judgment and decree passed by the trial court in each suit were set aside by the hon'ble gauhati high court. these facts were also noted by the wto in his assessment orders for the assessment years under consideration. the entire amount of pendente lite interest awarded under the two decrees of trial court amounting to rs. 1,07,148 was received by the assessee sometime in august 1973 and the same was spread over as follows : 4. the wto has further noted in the assessment orders that the assessee filed an appeal before the hon'ble supreme court against the judgment and decree passed by the hon'ble high court......
Judgment:
1. As all these appeals filed by the revenue arise out of the consolidated order dated 15-2-1983 passed by the AAC and give rise to a common issue, they were heard together and for the sake of convenience, are being disposed of by this single order.

2. The assessee applied for adjournment on the ground of his illness.

The prayer is not supported by a medical certificate or any other material. We, therefore, refuse the prayer for adjournment. Moreover, we do not find it necessary to adjourn the hearing of the appeals. At the time of hearing of the appeals none put in appearance on behalf of the assessee. The appeals were, therefore, heard ex parte and have to be disposed of on the basis of submissions made on behalf of the revenue and the materials available on record.

3. The assessee is an individual. The assessment years involved are 1968-69 to 1974-75. Shri B.B. Kundu, the learned departmental representative, stated before us that the assessee carries on bus iness as a contractor and that he constructed two bridges for the Government of Assam. The assessee filed two separate suits for recovery of compensation, being suit No. 33 of 1965 and No. 21 of 1966 in the Court of sub-Judge, Silchar. It further appears that both the suits were decreed by the sub-Judge on 15-9-1971 and the Court also awarded pendente lite interest of Rs. 49,845.98 and Rs. 57,302.24 in the two suits, respectively. It appears that the appeals were filed against the judgment of decree passed by the sub-Judge, Silchar, in the aforesaid two suits and the judgment and decree passed by the trial court in each suit were set aside by the Hon'ble Gauhati High Court. These facts were also noted by the WTO in his assessment orders for the assessment years under consideration. The entire amount of pendente lite interest awarded under the two decrees of trial court amounting to Rs. 1,07,148 was received by the assessee sometime in August 1973 and the same was spread over as follows : 4. The WTO has further noted in the assessment orders that the assessee filed an appeal before the Hon'ble Supreme Court against the judgment and decree passed by the Hon'ble High Court. According to the WTO, right to interest is taxable. He, accordingly, added the amounts of Rs. 32,050, Rs. 47,196, Rs. 62,342, Rs. 77,488, Rs. 92,634 and Rs. 97,148 in the net wealth of the assessee for the assessment years 1968-69 to 1973-74, respectively. For the assessment year 1973-74, the WTO allowed expenses of Rs. 10,000 out of the sum of Rs. 1,07,148 and, therefore, brought to wealth-tax the balance interest amount of Rs. 97,148.

5. For the assessment year 1974-75, the WTO took the view that the interest amount was not includible in the net wealth of the assessee.

6. The matter was carried in appeal before the AAC. The AAC was of the view that the question of ownership over the pendente lite interest is sub judice and that the assessee was not the rightful owner of the pendente lite interest. He, therefore, deleted the additions made by the WTO for the assessment years 1968-69 to 1973-74 on account of pendente lite interest. Aggrieved, the revenue has come up in appeal for all these assessment years.

7. At the outset, it may be mentioned that the appeal filed by the revenue for the assessment year 1974-75 is misconceived. In the grounds of appeal, it is stated that the AAC erred in deleting the addition for interest of Rs. 43,000. As has already been pointed out above, for the assessment year 1974-75, no addition on account of interest was made by the WTO in the assessment order. The appellate order of the AAC also shows that no appeal was filed for the assessment year 1974-75 so far as the addition of interest is concerned. Therefore, the appeal for the assessment year 1974-75 is incompetent and is liable to be dismissed on this ground as the ground taken does not arise out of the orders of the authorities below.

8. The learned departmental representative has submitted before us that the claim for pendente lite interest is an asset, value whereof has been quantified. It was further pointed out that though the Hon'ble Gauhati High Court has set aside the judgment and decree passed by the sub-Judge, Silchar, in the two suits, the assessee has gone up in appeal before the Supreme Court and has not given up his claim. It was further pointed out that the money received by the assessee as pendente lite interest under the decrees passed by the sub-Judge, Silchar, is still in his hands and, therefore, the WTO was fully justified in including the amount of pendente lite interest in the net wealth of the assessee for the assessment years 1968-69 to 1973-74. It was, thus, urged that the AAC was wholly in error in deleting the additions made by the WTO for the six assessment years.

9. We have considered the contentions raised on behalf of the revenue and have gone through the record of the case. As has been stated before us on behalf of the revenue, the assessee filed two separate suits in the Court of sub-Judge, Silchar, for recovery of compensation. We feel handicapped by the fact that the copies of the plaints of those suits as also the copies of the judgment and decree passed by the trial court in each suit have not been made available to us. On the basis of what has been submitted before us on behalf of the revenue, we can safely conclude that the assessee's right to recover compensation or damages by way of interest for breach of a contract is a mere right to sue and is not an actionable claim and is, therefore, not transferable in view of the clear provisions of Section 6(e) of the Transfer of Property Act, 1882. Section 6 says that property of any kind may be transferred except as otherwise provided by this Act or any other law for the time being in force. This goes to show that a mere right to sue cannot be regarded as a property. Now, under Section 3 of the Wealth-tax Act, 1957 ('the Act'), wealth-tax is chargeable in respect of net wealth of the assessee. 'Net wealth' is defined in Section 2(m) of the Act and it means the amount by which the aggregate value of all the assets belonging to the assessee on the valuation date is in excess of aggregate value of all the debts owed by the assessee on the valuation date. The definition of the word 'asset' as given in Section 2(e) is not exhaustive but is inclusive. 'Asset' includes property of every description, movable or immovable, with certain exceptions as given in Section 2(e). So, in the instant case, it is to be seen whether pendente lite interest awarded under the decree passed by the sub-Judge, Silchar, is an asset belonging to the assessee.

10. Section 34 of the Code of Civil Procedure, 1908, vests a civil court with a discretion to award pendente lite interest at such rate as the Court deemed it reasonable to be paid on the principal sum adjudged, from the date of the suit to the date of the decree. So, the matter relating to the award of pendente lite interest is in the sole discretion of the Court, though this discretion is to be exercised judicially and not arbitrarily or in a capricious manner. A litigant bringing a suit for recovery of money in a civil court cannot, as of right, claim pendente lite interest. The amount awarded as pendente lite interest does not amount to a debt before the Court passes a decree awarding pendente lite interest. Before passing of the decree no claim subsists in favour of the person bringing a suit for recovery of money regarding pendente lite interest. The right to receive pendente lite interest accrues or arises for the first time when the Court awards pendente lite interest under Section 34. Before passing of the decree such a person can have no interest in or claim over pendente lite interest. His right to receive pendente lite interest arises only under the decree and such right is extinguished as soon as the decree awarding the pendente lite interest is set aside by a higher Court. So, as right to receive pendente lite interest is neither an actionable claim nor even a mere right to sue. Such a right which does not exist before passing of a decree by a competent Court, cannot be treated as a property.

11. Now, coming to the facts of the case in hands, it will be seen that the sub-Judge, Silchar, passed two separate decrees in favour of the assessee and against the State of Assam awarding pendente lite interest aggregating to Rs. 1,07,148. This amount was received by the assessee some time in August 1973. It, however, appears that subsequently the judgments and decrees passed by the sub-Judge, Silchar, were set aside by the Hon'ble Gauhati High Court and the suits brought by the assessee were dismissed. The moment the decrees passed by the trial court were set aside by the Hon'ble High Court, the assessee's right to receive pendente lite interest under the original decrees of the trial court became extinct and no longer survived. The assessee has, no doubt, filed an appeal before the Supreme Court challenging the decision of the Hon'ble High Court, but this fact cannot have the effect of reviving the decrees of the trial court unless his claim is again decreed by the Hon'ble Supreme Court and he is again awarded pendente lite interest. The fact that he has not given up his claim is of no consequence. No, doubt, according to the material available on record, the assessee still holds the money received by him under the original decrees passed by the sub-Judge, Silchar, as pendente lite interest.

But by virtue of the judgment and decree passed by the Hon'ble High Court, he lost the right to retain that amount as pendente lite interest and it is bound to be refunded to the State Government. Thus, even though the assessee is holding the money, the property in the money does not belong to him. It amounts to a debt or a liability in his hands which he owes to the State Government as under the decree of the High Court the amount received by him is refundable to the State Government. Liability to wealth-tax arises out of the ownership of the asset and not otherwise. Mere possession unaccompanied by the right of ownership of property would not bring the property within the definition of 'net wealth' for it would not be an asset belonging to the assessee. In view of this clear position, we have no doubt in our minds that the property in the amount in question does not vest in the assessee and, therefore, the money received by him cannot be held to be an asset belonging to him. In this view of the matter, the amount in question cannot be included in his net wealth and cannot be brought to tax.

12. In view of what has been said above, we maintain the consolidated order of the AAC on the point.

13. In the result, all the departmental appeals fail and are hereby dismissed.


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