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Issues: (i) whether the assessee remained the owner of the house property for wealth-tax purposes despite an agreement to sell, delivery of possession and receipt of full consideration; (ii) if the assessee was still the owner, what value should be adopted for the property in the wealth-tax assessments.
Issue (i): whether the assessee remained the owner of the house property for wealth-tax purposes despite an agreement to sell, delivery of possession and receipt of full consideration.
Analysis: The property had not been conveyed by a registered instrument, so legal title continued to vest in the assessee. On that footing, the assessee remained accountable under the Wealth-tax Act in respect of the asset. The conclusion was consistent with the principle that absence of registration prevents transfer of legal ownership, even where possession has passed and consideration has been received.
Conclusion: The assessee was the legal owner for wealth-tax purposes on the relevant valuation dates.
Issue (ii): if the assessee was still the owner, what value should be adopted for the property in the wealth-tax assessments.
Analysis: Although legal title remained with the assessee, the property had been effectively transferred for practical purposes under a valid and enforceable agreement, with possession handed over and the entire consideration received. In those circumstances, the property could not be treated as having an open-market value exceeding the agreed consideration. At the same time, the receipt of the consideration created a corresponding liability in the hands of the assessee, because the amount was no longer beneficially owned by her. The property value and the matching liability therefore neutralised each other.
Conclusion: The property was to be taken at Rs. 8 lakhs, with an equal deduction for the corresponding liability, resulting in no net addition to wealth.
Final Conclusion: The additions made on account of the house property were deleted, and the assessments were to be modified accordingly in favour of the assessee.
Ratio Decidendi: For wealth-tax purposes, where legal title remains with the assessee but the property has been transferred in substance, with possession delivered and full consideration received, the asset cannot be valued above the agreed consideration and the corresponding amount received constitutes an offsetting liability.
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