2025 (3) TMI 560 - HC - VAT / Sales Tax

Nominee holds property in trust for legal heirs, not exclusive owner under succession laws

Hemlata Madhusudan Panchal Versus Sales Tax Officer, MUM-VAT-C-739, Mumbai, State of Maharashtra.

Bombay HC dismissed petition challenging attachment order for non-payment of tax dues under Maharashtra VAT Act, 2002. Court held that mere nomination ... Challenge to attachment order - attachment of flat for non payment of tax dues - Section 34 of the Maharashtra Value Added Tax Act, 2002 - HELD THAT:- Section 34 (1) (v) of the said Act empowers the Respondent No. 1 to perform duties of Tahsildar under the Code, for the purpose of effecting recovery of amount of tax and its dues as arrears of land revenue. Perusal of Form No.15 submitted by the Petitioner to the Cooperative Housing Society, affidavit by the Petitioner and her three sons including Mr. Jayesh dated 30/06/2017 and indemnity bond executed by the Petitioner dated 01/07/2017 shows that it is clearly stated in all these three documents, that the Petitioner is claiming to be a nominee after the death of late Madhusudan and the Petitioner is one of his legal heirs and there are three other legal heirs i.e. her sons. It is settled law that mere nomination in favour of one of the legal heirs does not make that nominee the exclusive owner holding full title to the property and the nominee holds it in trust of all the legal heirs as per applicable succession rules. As per the averments in petition itself (paragraph no. 3.3) late Madhusudan has passed away ‘intestate’. Therefore, the laws of succession would squarely apply. The affidavit in reply filed by the Respondent State is not countered by filing any rejoinder. From the said affidavit, it is clear that the arrears under the said Act are in respect of period FY 2008-09 and FY 2012-13. If this period is considered along with dates of earlier notices issued, it is evident that the alleged transfer in favour of the Petitioner by her sons is subsequent in point of time, being effected in June 2017 and therefore, undivided share of Mr. Jayesh in the title therein is hit by Section 38 of the said Act. Whether the said transfer was with ‘an intent to defraud revenue’ is a disputed question of fact, that will have to be considered in accordance with law, including enquiry under Section 38 of the said Act. The affidavit in reply filed by the Respondent State is not countered by filing any rejoinder. From the said affidavit, it is clear that the arrears under the said Act are in respect of period FY 2008-09 and FY 2012-13. If this period is considered along with dates of earlier notices issued, it is evident that the alleged transfer in favour of the Petitioner by her sons is subsequent in point of time, being effected in June 2017 and therefore, undivided share of Mr. Jayesh in the title therein is hit by Section 38 of the said Act. Conclusion - It is settled law that mere nomination in favour of one of the legal heirs does not make that nominee the exclusive owner holding full title to the property and the nominee holds it in trust of all the legal heirs as per applicable succession rules. Petition dismissed. 1. ISSUES PRESENTED and CONSIDEREDThe core legal issues considered in this judgment include:Whether the attachment order on the flat, based on tax dues of Mr. Jayesh, was legally valid given the Petitioner's claim of exclusive ownership.Whether the attachment was contrary to Section 34 of the Maharashtra Value Added Tax Act, 2002, and relevant provisions of the Maharashtra Land Revenue Code, 1966.Whether the transfer of membership and share certificate to the Petitioner nullified Mr. Jayesh's interest in the said flat.Whether the attachment order required an inquiry under Section 38 of the Maharashtra Value Added Tax Act, 2002.Whether the transfer of the flat was with an intent to defraud the revenue under Section 38 of the said Act.2. ISSUE-WISE DETAILED ANALYSISOwnership and Attachment Validity:Legal Framework: The Maharashtra Value Added Tax Act, 2002, and the Maharashtra Land Revenue Code, 1966, were central to determining the legality of the attachment. Section 34 of the VAT Act and Sections 176, 181, and 182 of the Code were particularly relevant.Court's Interpretation: The Court noted that mere nomination does not confer exclusive ownership; the nominee holds the property in trust for all legal heirs. The Petitioner, as a nominee, did not have exclusive ownership over the flat.Key Evidence and Findings: The affidavit signed by the Petitioner and her sons indicated a transfer of membership rights but not exclusive ownership. The share certificate in the Petitioner's name did not equate to sole ownership due to the lack of a registered transfer document.Application of Law to Facts: The Court applied the principles of succession, noting the flat's title devolved upon all legal heirs, including Mr. Jayesh, making his share attachable.Treatment of Competing Arguments: The Petitioner's argument of exclusive ownership was countered by the State's position that Mr. Jayesh's share could be attached. The Court sided with the State, emphasizing the lack of a registered transfer document.Conclusions: The attachment was valid concerning Mr. Jayesh's share, as the Petitioner did not hold exclusive ownership.Inquiry Requirement under Section 38:Legal Framework: Section 38 of the Maharashtra Value Added Tax Act, 2002, requires an inquiry when a transfer is suspected to defraud revenue.Court's Interpretation: The Court recognized the potential need for an inquiry but noted the State's concession that the attachment was limited to Mr. Jayesh's proportional share.Key Evidence and Findings: The State's affidavit indicated arrears and previous notices, suggesting the transfer might have been intended to defraud revenue.Application of Law to Facts: The Court did not express an opinion on the intent to defraud, leaving the question open for determination through proper inquiry.Treatment of Competing Arguments: The Petitioner's lack of awareness of her son's tax issues was insufficient to negate the possibility of fraudulent intent.Conclusions: The necessity of an inquiry under Section 38 was acknowledged but not resolved, with contentions left open.3. SIGNIFICANT HOLDINGSPreserve verbatim quotes of crucial legal reasoning: 'It is settled law that mere nomination in favour of one of the legal heirs does not make that nominee the exclusive owner holding full title to the property and the nominee holds it in trust of all the legal heirs as per applicable succession rules.'Core principles established: Nomination does not equate to exclusive ownership; legal heirs hold the property as per succession laws. Attachment can apply to a proportional share of a defaulter in a property.Final determinations on each issue: The petition was dismissed, with the attachment order applicable only to Mr. Jayesh's share in the flat. The Court left open questions regarding the intent to defraud revenue and the necessity of an inquiry under Section 38.