Madras H.C : applying the decision of the Supreme Court in the case of F.S. Ghandhi [1990] 184 ITR 34 (SC) that as the assessee was not occupying the land as a lessee under any lease agreement, the property is not exigible to wealth-tax

High Court Of Madras

George Oakes Ltd. vs. Deputy Commissioner of Wealth-tax

Assessment Year : 1992-93

Section : 2(e)

Mrs. Chitra Venkatraman And M. Jaichandren, JJ.

Tax Case (Appeal) No. 159 Of 2005

July 13, 2011

JUDGMENT

Mrs. Chitra Venkataraman, J. – Following is the substantial question of law raised at the instance of the assessee :

“Whether, on the facts and circumstances of the case, the Tribunal should hold that applying the decision of the Supreme Court in the case of F.S. Ghandhi [1990] 184 ITR 34 (SC) that as the assessee was not occupying the land as a lessee under any lease agreement, the property is not exigible to wealth-tax ?”

2. The learned counsel appearing for the assessee as well as the standing counsel for the Revenue placed before this court the decision of this court reported in George Oakes Ltd. v. CWT [2004] 267 ITR 677/140 Taxman 51 (Mad.), in the case of the very same assessee for the assessment years 1984-85, 1985-86, 1987-88, 1988-89, 1990-91 and 1991-92. When the said question arose for consideration, this court held that since the suit as regards the leasehold right was pending and in the absence of any renewal and demand made by the lessor for possession it could not be held that the assessee had an interest in the property which had vested in it for a period exceeding six years.

3. Thus, following the decision of the Supreme Court reported in F.S. Ghandhi v. CWT [1990] 184 ITR 34/51 Taxman 15 (SC), this court held as follows (pages 681 and 682 of 267 ITR) :

“So far as the third question is concerned, the facts are that the assessee is a lessee of a property situated in Triplicane, Madras, in terms of a lease deed dated May 22, 1968, the period of the lease being 21 years. That lease expired on April 30, 1987. After the expiry of the lease, no fresh lease was entered into between the assessee and its lessor. On the other hand, the lessor asserted a right to retake possession and refused to recognise a right in the assessee to obtain renewal. That was followed by the lessor instituting a suit in C.S. No. 913 of 1989 on the original side of this court for recovery of possession of the property. Though the assessee in that suit took the plea that it is entitled to renewal, as to whether it is entitled to renewal and, if so, on what terms is a matter which will be determined only when the suit is ultimately decided. The position of the assessee as of now is a precarious position and it is not possible to predict with certainty as to what the outcome of the suit will be.

The Supreme Court, in the case of F.S. Ghandhi v. CWT [1990] 184 ITR 34 (SC), in a situation substantially similar to the one in which the assessee is placed, held that the continued possession of the property by the lessee after the expiry of the lease period, against the wishes of the lessor, was precarious and it could not be said that such a person had a vested interest in the land and would not fall within the scope of section 2(e)(2)(iii) of the Wealth-tax Act. The statutory provision applicable in this case also is section 2(e)(2)(iii) which refers to interest in property vesting in the assessee for a period exceeding six years. In the absence of any renewal and in the face of the demand by the lessor for possession-a claim which has been followed up by instituting a suit for eviction-it cannot be said that the assessee has an interest in the property which has vested in it for a period exceeding six years.

The third question, therefore, also is required to be and is answered against the Revenue and in favour of the assessee. We must, however, make it clear that in the event of the assessee subsequently securing renewal, whether under the orders of the court or otherwise, the assessee’s assessment to wealth-tax for the years subsequent to 1987 will be liable to be reopened so as to include the value of this asset as part of its wealth.”

4. In the light of the observation of this court and following the same, the present appeal relating to the assessment year 1992-1993 is answered against the Revenue and in favour of the assessee. No costs.

[Citation : 339 ITR 630]

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