Author: Sharanya Chakraborty, 1st year student at S.N Law College, Calcutta University.
Citation(s): 1988-LL-0509, 172 ITR 614, 70 CTR 82
Date of Decision: 9th May, 1988
Bench: Justice M.N Venkatachalliah
Original Copy: View
Issue in question:
- Whether the tribunal was justified in holding that this amount of 4 lakhs cannot be cannot be considered or included in the total assets of assessee according to the facts and circumstances of the case?
- Whether the act of the tribunal was justified that the amount of 4 lakhs was taken into the nature of “Quaraza-e- Hasana” according to the facts of the case when Rs 1,21,800 has been repaid out of the amount of Rs 4 lakhs?
Background of the case:
- Abdul Hussain and Faizullahbhai were partners of Rising Sun Flour firm and oil mills at Ujan. Abdul advanced an amount of Rs 4 lakhs as a loan to Faizullah, Mandlawala in Sidhpur.
- In the original years in 1957, the assessee filed a return of Rs 8,57,910 which included Rs 4 lakhs as principal amount which was advanced by the assessee.
- The borrower employed that amount as a capital amount in his firm and wealth tax as it was termed meant the tax on the wealth of the person. In muslim the loan was said to be Quazara E Hasana meaning a debt of good will.
- The tax payer said that the parties to the contract had no legal relations to this agreement and thus no legal obligations was there to pay the debt back or to enforce it. The appellate tribunal then justified saying that the transaction was of good faith and there was a legal intention. The high court upheld this view.
Judgement of the court:
- Under Section 27(1), Commissioner of Wealth-tax, Bhopal arose out of the opinion of the Wealth Tax act, 1957. “Quazar E Hasana” was said to be a personal law of Muslim.
- Reliance was placed at some points from the Quran which relates this transaction.
- Tribunal and high court were into a dilemma of serious errors of hypothetical incidents of muslim personal law institutions.
- Learned counsel defined that it is antithetical as the concept of Quazara E Hasana and it’s related incidents are not at all established. The debt was there but there was no obligation to repay.
- There was no circumstance saying that the loan was advanced prior to 1950 and there was no repayment during the accounting years.
- Referring to this reliance by the High Court, listing some incidents of ‘Hiba-ba-shart-ul-evaz’ it was submitted that the reasoning was based on form of a mussalman gift which was as much as destructive of the assessee’s case in asmuch as the kind of gift envisaged by ‘Hiba-ba-Shart-Ul Evaz’.
- Ne legal bar nor remedy is pleaded. The issues which came up are properly answered in the revenue’s favor providing an implication that the loan becomes includible in the wealth of assessee and that would continue for other relevant years.
- In this circumstance of case, no order as to costs was declared.
- Hiba bil Iwaz was distinguished from Hiba-ba-shart-ul-Iwaz and references were taken from the Mohammedan Law.
- Judgement including case references from “Rose and Frank Co. Vs JR Crompton and Bross Ltd”.
- The infirmity of the claim “Quazara E Hasana” is considered a resourceful argument in the High court’s judgement.
- Before the high court, no authoritative text or principles were cited which was in favour of Muslim law.
- As in this case, we had a concept of Quazara E Hasana, if Qard Hasan was considered the same as the above, then the debtor of the loan who would repay or the creditor for the repayment of the money would be excluded.
- Even the tax implications of the economic or financial obligations were on the verge of end to the burden which established that the transaction incidents were excluded from the contemplation.
- At last, there was no legal bar of remedy and what was set up was the non existence of that particular remedy itself.