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N.N. Subramania Iyer Vs. Union of India (Uoi) and anr. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtKerala High Court
Decided On
Case NumberO.P. No. 1126 of 1971
Judge
Reported in[1974]97ITR228(Ker)
ActsWealth Tax Act, 1957 - Sections 2 and 18(1); Finance Act, 1969 - Sections 24; Kerala Land Reforms Act, 1963 - Sections 72, 72A, 72F, 72H and 72I
AppellantN.N. Subramania Iyer
RespondentUnion of India (Uoi) and anr.
Appellant Advocate T.S. Venkiteswara Iyer and; P.K. Balasubramanyan, Advs.
Respondent Advocate P.A. Francis and; P.K. Ravindranatha Menon, Advs.
Excerpt:
- - it is an asset like any other debt;.....has raised a new objection in this court to the effect that the compensation payable for the said lands was agricultural property, that section 24 of the finance act, 1969, which amended section 2(e) of the wealth-tax act by including agricultural land in the definition of 'assets' was unconstitutional, and that the assessment of such an asset under the wealth-tax act was illegal and without jurisdiction. this objection can be summarily rejected, first, for the reason that the supreme court has held that the above amendment is valid and constitutional, and, secondly, for the reason that the contention that compensation payable for agricultural lands vested in the government continues to be an agricultural asset is totally unsustainable.3. it was also contended before me that the.....
Judgment:

Isaac, J.

1. The petitioner is an assessee under the Wealth-tax Act, 1957. For the assessment year 1970-71, he submitted a return of his net wealth before the second respondent, the Wealth-tax Officer, Palghat, The return related only to his non-agricultural assets. He did not include any agricultural assets in the return on the ground that all his agricultural lands were in the possession of tenants, and the said lands vested in the State Government on January 1, 1970, by virtue of Section 72 of the Kerala Land Reforms Act, 1963, which was before the valuation date. He claimed that the compensation payable by the Government for the said lands was not net wealth in respect of the year to which the assessment related. The second respondent rejected the claim, and made an assessment against the petitioner by his order, exhibit P-3, dated March 19, 1971, by including in his net wealth a sum of Rs. 1,68,000 on account of compensation obtainable by him from the Government. In arriving at the above figure, the second respondent stated that, if the tenants chose to pay the price of the holdings in lump under the Kerala Land Reforms Act, it was sufficient that they paid twelve times 50% of the annual rent, and that this amount could be safely fixed as the net value of the compensation on the valuation date. Pursuant to the above assessment, the second respondent issued to the petitioner a notice of demand, exhibit P-4, of even date. He also issued to the petitioner another notice, exhibit P-2, of the same date calling upon him to show cause why a penalty should not be imposed on him under Section 18(1) of the Act on the various grounds mentioned therein. Thereupon, the petitioner filed this writ petition to quash the above assessment and the two notices.

2. The assessment and the notice of demand are attacked only in so far as they relate to the inclusion of the compensation payable by the Government for the agricultural lands as part of his net wealth. In this respect, the petitioner has raised a new objection in this court to the effect that the compensation payable for the said lands was agricultural property, that Section 24 of the Finance Act, 1969, which amended Section 2(e) of the Wealth-tax Act by including agricultural land in the definition of 'assets' was unconstitutional, and that the assessment of such an asset under the Wealth-tax Act was illegal and without jurisdiction. This objection can be summarily rejected, first, for the reason that the Supreme Court has held that the above amendment is valid and constitutional, and, secondly, for the reason that the contention that compensation payable for agricultural lands vested in the Government continues to be an agricultural asset is totally unsustainable.

3. It was also contended before me that the compensation is payable by the Government in instalments in the future, and that such a thing wouldnot amount to an asset on the valuation date. This contention is also hardly sustainable. Under the Kerala Land Reforms Act, the compensation for the lands vested in the Government is a statutory debt payable by the Government in the manner provided in the Act. It is an asset like any other debt; and its value on the valuation date has to be fixed and included in the net wealth of the assessee.

4. The next contention is that the method that the second respondent has adopted to fix the value of the compensation is contrary to law and erroneous on the face of the order. This contention is entitled to succeed. An examination of the relevant provisions in the Kerala Land Reforms Act shows that the compensation payable by the Government for lands which vest in it under Section 72 of the Act, and the purchase price payable by the tenants for purchasing from the Government the right, title and interest of the land-owner in such lands are entirely different. The amount of compensation is fixed by Section 72-A of the Act. The procedure for fixing the compensation is contained in Section 72-F. Fifty, per cent. of the compensation amount should be paid as. provided in Section 72-H in eight equal annual instalments or in lump, if the tenant has paid the purchase price in lump. The balance compensation is payable in instalments in cash or by bond or in lump by the Government as provided in Section 72-I. The market value of this asset on the valuation date has to be determined having due regard to the aforesaid statutory provisions. The second respondent has not obviously noticed any of these provisions, He thought erroneously that the purchase price payable by the tenant to the Government is the compensation payable by the Government to the land owner, and that it is based upon the rent payable under the contract of tenancy. Both the compensation and purchase price are to be determined on the basis of fair rent, which in most cases is less than the contract rent. The order of assessment cannot, therefore, be sustained in so far as it relates to the valuation of the compensation amount due to the petitioner under Section 72-A of the Kerala Land Reforms Act.

5. The penalty notice, exhibit P-2, is illegal on the face of it. It is in a printed form, which comprehends all possible grounds on which a penalty can be imposed under Section 18(1) of the Wealth-tax Act. The notice has not struck off any one of those grounds; and there is no indication for what contravention the petitioner was called upon to show cause why a penalty should not be imposed. Even in the counter-affidavit filed by the second respondent, he has not stated for what specific violation he issued it. It is not that it would have saved his action. Apparently, exhibit P-2 is a whimsical notice issued to an assessee without intending anything.

6. In the result, I quash the penalty notice, exhibit P-2. I also quash the order of assessment and the notice of demand, exhibits P-3 and P-4, inso far as they relate to the valuation of the compensation payable by the Government to the petitioner for his agricultural lands vested in the Government under Section 72 of the Kerala Land Reforms Act, 1963. The second respondent may determine afresh the market value of the compensation on the valuation date in the light of the relevant legal provisions referred to herein and reassess the petitioner accordingly. The parties will bear their own costs.


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