Mortgage by conditional sale depends on substance over form when deed terms show a debt-secured transfer and repayment right.

A deed will be treated as a mortgage by conditional sale, rather than a sale with an option to repurchase, where the surrounding terms show that the transferor needed money, remained in possession, paid monthly consideration, and the transferee's ownership depended on default. Here, the right to retransfer on repayment within three years, the existence of debt, and acceptance of part repayment supported the conclusion that the transaction was intended to secure a debt under section 58(c) of the Transfer of Property Act. Accordingly, only the mortgage debt of Rs. 10,000, and not the full property value, was includible in net wealth.

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Issues: Whether the transaction embodied in the registered deed dated 11-10-1971 was a mortgage by conditional sale or a sale with a condition to repurchase, and consequently whether the amount of Rs. 10,000 alone was includible in the assessee's net wealth.

Analysis: The deed showed that the transferor was in need of money and had received Rs. 10,000 against property previously purchased for Rs. 35,000, while remaining in possession and paying Rs. 150 per month. The document also provided for retransfer on repayment within three years and contemplated the transferee becoming absolute owner only on default. These features, together with the existence of debt and partial repayment accepted by the transferee, furnished intrinsic evidence that the real transaction was one intended to secure a debt. On that basis, the arrangement fell within the legal concept of a mortgage by conditional sale under section 58(c) of the Transfer of Property Act.

Conclusion: The transaction was held to be a mortgage by conditional sale, and only the mortgage debt of Rs. 10,000, not the full value of the property, was directed to be included in the assessee's net wealth. The decision is in favour of the assessee.

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