COMMISSIONER OF WEALTH TAX Vs. ABDUL HUSSAIN MULLA MOHAMMAD ALI

JUDGEMENT

(1.) IN this reference under Section 27(1) of the Wealth-tax Act, 1957, the INcome-tax Appellate Tribunal has sought our opinion on the following two questions :

(2.) THE present reference, which governed four different cases before the Income-tax Appellate Tribunal, relates to the assessment years 1957-58, 1958-59 and 1960-61. THE case is to the effect that the respondent, Abdul Hussain, orally gave an amount of Rs. 4,00;000 to one Faizullabhai some time before the year 1950. THEre was no written document in that behalf nor was it entered in the account books. THEre was no recovery made from Faizullabhai during the four assessment years. However, on July 24, 1961, Faizullabhai repaid Rs. 1,21,800 to the respondent, Abdul Hussain, voluntarily. In the original return filed by the respondent for the assessment year 1957-58, he had included this amount, but in a revised return he claimed exemption in respect of the amount of Rs. 4,00,000 on the ground that the amount was neither a loan nor an obligation. This contention was not accepted by the Wealth-tax Officer, as also by the Appellate Assistant Commissioner of Wealth-tax, who included the amount of Rs. 4,00,000 in the total wealth of the respondent. On appeal to the Income-tax Appellate Tribunal the learned members were of the opinion that " Quaraza-e-Hasana", as known in Quaranic law, is a loan given in good faith and goodwill. THE creditor does not exercise his legal rights and there is no obligation on the debtor to pay. However, if the debtor voluntarily pays the amount, the creditor accepts it; otherwise he does not even make a demand for the payment.

(3.) IN the present case the valuation date for the first assessment year was March 31, 1957, while for the subsequent years it was March 31, 1958, March 31, 1959, and March 31, 1960, respectively. The word "debt" mentioned in Section 2(m) of the Act defining the words " net wealth " would mean debt due to the assessee which is legally due and legally recoverable. A debt which has become barred by time and regarding which the assessee has no right of recovery, the same would not be includible in the net wealth. IN this connection we might advert to a Full Bench decision of the Calcutta High Court in Banchharam Majumdar v. Adyanath Bhattacharjee, 1909 36 ILR(CAL) 936 wherein the question was whether the heirs of the deceased were required to obtain a succession certificate in respect of debt due to the deceased which was not payable during his lifetime, but which was payable after his death only. The learned judges constituting the Full Bench held that the heirs could not recover the debt after the death of the deceased without obtaining a succession certificate. Jenkins C.J. and Mookerjee J., who delivered separate concurring judgments, held that in order that a debt owed to the deceased may require succession certificate, it is necessary that the debt should be payable and that it must be recoverable. The clear implication was that it must not be by any provision of the statute.