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C.S. Angre Vs. Commissioner of Wealth Tax - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtMadhya Pradesh High Court
Decided On
Case NumberMisc. Civil Case No. 140 of 1966
Judge
Reported inAIR1968MP168a; [1968]69ITR336(MP); 1968MPLJ135
ActsWealth Tax Act, 1957 - Sections 2, 7, 8(1), 8(2) and 17(1)
AppellantC.S. Angre
RespondentCommissioner of Wealth Tax
Appellant AdvocateK.A. Chitaley and ;V.S. Dabir, Advs.
Respondent AdvocateM. Adhikari and ;P.S. Khirwadkar, Advs.
Cases ReferredMaharajkumar Kamal Singh v. Commissioner of Wealth
Excerpt:
.....compensation for personal injury death of injured claimant subsequently for some other reasons held, claim for personal injury will abate on the death of claimant. claim will not survive to his legal representative except as regards claim for pecuniary loss to estate of claimant. - now, a 'debt' owed to an assessee on the valuation date is clearly his asset. both present and future debts are existing debts and can be attached and assigned and are, therefore, clearly assets. these principles are well settled (see syed tuffuzzool hossein khan v. as this asset of unpaid compensation instalments is a 'cash asset',the question of determining its market-value clearly does not arise......the compensation amount became payable to the assessee with interest at a certain rate from the date of resumption till the date of payment. section 15 of the jagirs act provided that the amount of compensation would be paid in maximum ten annual instalments.3. when the wealth-tax assessment for the assessment years in question were first made, the wealth tax officer did not include in the computation of the assessee's net wealth on the relevant valuation date of each assessment year, the amount of compensation instalments which had not become due on the valuation date. subsequently he noticed a decision of the allahabad bench of the appellate tribunal in the case of wealth-tax assessment of one dadu jagdish-singh, an ex-jagirdar of rewa, whose jagir had also been resumed under the.....
Judgment:

Dixit, C.J.

1. This consolidated reference under Section 27(1) of the Wealth-tax Act, 1957 (hereinafter referred to as the Act), at the instance of the assessee arises out of wealth-tax assessment for the assessment years 1957-58, 1958-59, 1959-60 and 1960-61. The questions which the Appellate Tribunal has propounded for decision are :--

1. 'Whether the proceedings for reassessment under Section 17(1)(b) were validly initiated?

2. Whether the market value as on the valuation date of the instalments due to be paid under the provisions of the MadhyaBharat Abolition of Jagirs Act after the valuation date is liable to be included in the total wealth of the assessee?'

2. The material facts are that the asses-see is an ex-jagirdar of the former Gwalior State. His jagir estate was abolished by the Madhya Bharat Abolition of Jagirs Act, 1951 (hereinafter referred to as the Jagirs Act). The jagir stood resumed as from 4th December 1952 on which date a notification under Section 3 of the Jagirs Act was published for the resumption of all jagir lands in the quondam State of Gwalior. On the resumption of his jagir the assessee became entitled to receive compensation under Section 8(1) of the Jagirs Act as determined in accordance with the principles laid down in the Schedule to that Act. The compensation amount became payable to the assessee with interest at a certain rate from the date of resumption till the date of payment. Section 15 of the Jagirs Act provided that the amount of compensation would be paid in maximum ten annual instalments.

3. When the wealth-tax assessment for the assessment years in question were first made, the Wealth Tax Officer did not include in the computation of the assessee's net wealth on the relevant valuation date of each assessment year, the amount of compensation instalments which had not become due on the valuation date. Subsequently he noticed a decision of the Allahabad Bench of the Appellate Tribunal in the case of wealth-tax assessment of one Dadu Jagdish-singh, an ex-jagirdar of Rewa, whose jagir had also been resumed under the Vindhya Pradesh Abolition of Jagirs and Land Reforms Act, 1952. The Allahabad Tribunal took the view that the entire compensation amount which became payable to the ex-jagirdar for resumption of his jagir was 'an asset in the hands of the assessee and not only the instalments already received but also to be received should be included in the net wealth.' The Wealth Tax Officer, therefore, issued to the present assessee a notice for reassessment under Section 17(1)(b) of the Act. In the reassessment proceedings the assessee objected to the validity of the notice under Section 17(1)(b) and also reiterated his contention that the compensation instalments which had not become due on the relevant valuation date could not be included in the compensation of net wealth. Both those objections were rejected by the Wealth Tax Officer who accordingly included in the computation of net wealth the amount of compensation instalments which did not become due and which had not been paid to the assessee before the valuation date. The decision of the Wealth Tax Officer was upheld in first appeal by the Appellate Assistant Commissioner and by the Appellate Tribunal in a second appeal which the assessee preferred.

4. So far as the first question is concerned, this is concluded by the decision of the Supreme Court in Kamal Singh v. Commissioner of Income-tax, Bihar & Orissa, : [1959]35ITR1(SC) . In that case the Supreme Court construed 'informa-tion' for the purpose of Section 34(1)(b) of the Indian Income-tax Act, 1922, as not limited to factual information but as inclu-ding information leading to his belief as to the true and correct state of the law and thus covering information as to the relevant judicial decisions. The provisions of section 17(1)(b) of the Wealth-tax Act, 1957, are similar to Section 34 (1)(b) of the Income-tax Act, 1922. The word 'information' oc-curing in Section 17(1)(b) must, therefore, be construed in the same way as the Supreme Court did in regard to the use of the word in Section 34(1)(b) of the Income-tax Act, and it must be held that the Wealth-Tax Officer was justified in reopening the assessment when he learnt of the decision of the Appellate Tribunal, Allahabad Bench, in the case of Dadu Jagdishsingh of Rewa.

5. Coming to the second question placed before us, it is first necessary to refer to the relevant provisions of the Wealth-tax Act. Section 3 is the charging section. It is in the following terms :--

'3. Charge of wealth-tax -- Subject to the provisions contained in this Act, there shall be charges for every assessment year commencing on and from the first day of April, 1957, a tax (hereinafter referred to as wealth-tax) in respect of the net wealth on the corresponding valuation date of every individual, Hindu undivided family and company at the rate or rates specified in the Schedule.'

'Net wealth' has been defined in Section 2(m) thus :--

'(m) 'net wealth' means the amount by which the aggregate value computed in accordance with the provisions of this Act of all the assets, wherever located, belonging to the assessee on the valuation date, including assets required to be included in his net wealth as on that date under this Act, is in excess of the aggregate value of all the debts owed by the assessee on the valuation date other than, --

(i) debts which under Section 6 are not to be taken into account;

(ii) debts which are secured on, or which have been incurred in relation to any property in respect of which wealth-tax is not chargeable under this Act;

*****'

Section 2(e) defines 'assets'. That definition is as follows:--

'(e) 'assets' includes property of every description, moveable or immovable but does not include -

(i) agricultural land and growing crops, grass or standing trees on such land;

(ii) any building owned or occupied by a cultivator or receiver of rent or revenue out of agricultural land:

Provided that the building is on or in the immediate vicinity of the land and is a building which the cultivator or the receiver of rent or revenue by reason of his con-nection with the land requires as a dwelling-house or a store-house or an out-house; (iii) animals;(iv) a right to any annuity in any case where the terms and conditions relating thereto preclude the computation of any portion thereof into a lump sum grant;(v) any interest in property where the interest is available to an assessee for a period not exceeding six years from the date the interest vests in the assessee.''Valuation date', as defined in Section 2(q) means, in relation to any year for which an assessment is to be made under the Act, the last day of the previous year as defined in Section 3 of the Income-tax Act if an assessment were to be made under that Act for that year provided that --(i) Where in the case of an assessee there are different previous years under the Income-tax Act for different sources of income, the valuation date for the purposes of the Act shall be the last day of the last of the previous years aforesaid:(ii) in the case of a person who is not an assessee within the meaning of the Income-tax Act, the valuation date for the purposes of the Act shall be the 31st day of March immediately preceding the assessment year;(iii) where an assessment is made in pursuance of Section 19A, the valuation date shall be the same valuation date as would have been adopted in respect of the net wealth of the deceased if he were alive.

6. Reading together the aforesaid provisions of the Act it is clear that wealth-tax is charged on the aggregate value computed in accordance with the provisions of the Act of all the assets, wherever located belonging to the assessee on the valuation date. The words 'wherever located' occurring in the definition of 'net wealth' show that for including an asset in the net wealth of the assessee it is not necessary that the asset must be with him. It may be located anywhere, but it must belong to the assessee on the voluation date. The words 'belonging to' are used in contra-distinction to 'assets' which do not belong to the assessee but which belong to others and which are held by the assessee. The definition of 'assets' as given in Section 2(e) is wide enough. It includes property of every description, movable or immovable. Now, a 'debt' owed to an assessee on the valuation date is clearly his asset. A debt is an obligation to pay a liquidated or certain sum of money. If it is present, it is existent or now due and owing. If it is future, it is existent but accruing or payable in the future. Both present and future debts are existing debts and can be attached and assigned and are, therefore, clearly assets. A debt which is payable in future by reason of present obligation does not cease to be an asset belonging to the person to whom the debt is owed merely because that person has no immediate right to call for themoney. These principles are well settled (See Syed Tuffuzzool Hossein Khan v. Rughoonath Pershad, (1871) 14 Ind App 40, Banchharam Majum-dar v. Adyanath Bhattacharjea, (1909) ILR 36 Cal 936 and E. D. Sassoon & Co. Ltd. v. Commissioner of Income tax : [1954]26ITR27(SC) . In (1909) ILR 36 Cal 936 Mookerjee J. observed; that a debt was no less a debt because it had not yet matured, if it would certainly become payable in the future. In : [1954]26ITR27(SC) , Bhagwati J. observed in the course of his judgment:

'If the assessee acquires a right to receive the income, the income can be said to have accrued to him though it may be received later on its being ascertained. The basic conception is that he must have acquired a right to receive the income. There must be a debt owed to him by somebody. There must be as is otherwise expressed debitum in praesenti, solven dum in futuro; See W. S. Try Ltd. v. Johnson Inspector of Taxes, 1946 1 AU ER 532 and Webb v. Stenton, (1883) 11 QBD 518.'

It is thus plain that it is not the time of| payment that determines whether the claim or demand is debt. A sum of money which is liquidated or certain and in all events payable is a debt irrespective of the fact whether it is payable now or at a future time. But a sum which may or may not become due or the payment of which depends upon contingencies which may or may not happen is not a debt.

7. Now, if the relevant provisions of the Jagirs Act are examined, it will be seen that the compensation amount payable to an ex-jagirdar in respect of resumption of his lagir is a certain sum of money pay-able to the jagirdar in the future by reason of a present obligation. The payment of compensation is in no way dependent upon the happening of any contingency. Coming to the material provisions of the Jagirs Act, Chapter II thereof dealt with the resumption of all jagir lands. Section 3 provided for the appointment of a date for the issue of a notification by the State for the resumption of all jagir lands. Section 4 laid down that as from the date of resumption and notwithstanding anything contained in any contract, grant or documet or in any other law, rule, regulation or order for the time being in force, but save as 'otherwise provided in the Act', the consequences stated in the various clauses of Section 4(1) shall ensue. Section 8 of that Act then made a provision for the assessment of compensation and the procedure for the determination of the amount of compensation. A jagirdar on the resumption of his jagir lands became entitled to receive compensation at seven times his net income determined in accordance with Schedule I to the Act. Section 8 ran thus:

'8. Duty to pay compensation (1) Subject to the other provisions of this Act, the Government shall be liable to pay to every jagirdar whose jagir lands has been resumed under Section 3, such compensation as shall be determined in accordance with the principles laid down in Schedule I.

(2) Compensation payable under this section shall be due as from the date of resumption and shall carry simple interest at the rate of 2 1/2 per cent per annum from that date up to the date of payment:

Provided that no interest shall be payable on any amount of compensation which remains unpaid for any default of the jagi-dar, his agent or his representative-in-interest.'

Section 15 (1) of the Jagirs Act said that 'after the amount of compensation payable to a jagirdar under Section 8 is determined under Clause (a) of Section 13 and the amount deducted from it under Section 14, the balance shall be payable in maximum ten annual instalments.' Sub-section (4) of Section 15 provided for the discharge of the Government's liability from payment of compensation in lieu of the resumed jagir thus:

'The payment of compensation money, under this Act, to a jagirdar, and to his zamindars and co-sharers and to persons entitled to a maintenance allowance, if any, shall be a full discharge of the Government from the liability to pay compensation in lieu of the resumption of his jagir lands by the Government, but shall not prejudice the rights to which any other person may be entitled by due process of law to enforce against the person to whom any amount has been so paid'.

8. It will be seen from these provisions that when the assessee's jagir was resumed, he became entitled to receive under Section 8 (1) of the Jagirs Act compensation laid down in Schedule I. This compensation amount became due to him under Sub-section (2) of Section 8 from the date of resumption. The compensation amount was, however, made payable not on the date of resumption of the jagir but in maximum ten annual instalments. There thus arose a right in favour of the assessee to receive compensation on the date of the resumption itself and as the compensation amount was not paid on the day, provision for payment of interest on the compensation sum from the date of resumption till the date of payment at a certain rate was made. There can, therefore, be no doubt that the amount of compensation instalments which had not been paid to the asses-see was debt owed to him by reason of a present obligation and was, therefore, an asset. That being so, the Wealth-tax Officer rightly included the amount of these instalments in the computation of the net wealth of the assessee. As this asset of unpaid compensation instalments is a 'cash asset',the question of determining its market-value clearly does not arise. Section 7 of the Act speaks of the determination of the market-value of any asset other than cash. Cash is money and its value can be no other than the value of that money in legal currency. We may add that the view that compensation amount payable in future in certain instalments by reason of a present obligation is an asset for the purpose of wealth-tax has also been taken by the Andhra Pradesh High Court in Mir Imdad Ali Khan v. Commissioner of Wealth-tax : [1963]50ITR216(AP) Rani Bhagya Laxmamma v. Commissioner of Wealth-tax : [1966]62ITR601(AP) and Chandramani Pat-tamaha Devi v. Commissioner of Wealth-tax : [1967]64ITR147(AP) , and by the Patna High Court in Maharajkumar Kamal Singh v. Commissioner of Wealth-tax 0065/1966 : [1967]65ITR460(Patna) .

9. For the foregoing reasons, our answer to the first question is in the affirmative. We answer the second question by saying that the amount of instalments payable to the assessee under the Jagirs Act after the valuation date has to be included in the computation of the total wealth of the assessee. The Department shall have costs of this reference. Counsel's fee is fixed at Rs. 200/-.


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