1984 (12) TMI 59 - HC - Wealth-tax

Summary

Issues Involved:
1. Validity of reassessment proceedings under section 17(1)(a) of the Wealth-tax Act, 1957.
2. Characterization of lands as agricultural or non-agricultural.
3. Inclusion of the right to compensation as an asset before final determination under the Land Acquisition Act.
4. Impact of cash basis accounting on the inclusion of the right to compensation in net wealth.
5. Valuation of the right to compensation at 40% of the amount finally determined by the High Court.
6. Transfer of land and its implications under section 4(1)(iv)(a) of the Wealth-tax Act.

Detailed Analysis:

1. Validity of Reassessment Proceedings:
The court upheld the validity of the reassessment proceedings initiated under section 17(1)(a) of the Wealth-tax Act for the assessment years 1965-66 to 1968-69. The assessee failed to disclose fully and truly all material facts necessary for assessment, including the value of lands held and compensation receivable. The court affirmed that the reassessments were not barred by limitation.

2. Characterization of Lands as Agricultural or Non-Agricultural:
The court concluded that the lands within the Visakhapatnam municipal limits were non-agricultural in character. Despite initial presumptions based on ryotwari pattas and land revenue payments, the Revenue successfully rebutted the presumption by demonstrating through evidence that the lands were not used for agricultural purposes either before or after the purchase by the assessee. The court applied the tests laid down by the Supreme Court in CWT v. Officer-in-Charge (Court of Wards) and found that the Tribunal correctly concluded that the lands were not agricultural.

3. Inclusion of the Right to Compensation as an Asset:
The court rejected the assessee's contention that the right to compensation was a mere inchoate right until the final determination of proceedings under sections 30 and 18 of the Land Acquisition Act. The Tribunal's decision to include the right to compensation in the net wealth was upheld, as the disputes were relevant only for valuation purposes and not for determining whether the asset should be considered for wealth-tax purposes.

4. Impact of Cash Basis Accounting on Inclusion of Right to Compensation:
The court dismissed the argument that the right to compensation should not be included in the net wealth due to the assessee's cash basis accounting. The system of accounting is irrelevant for wealth-tax assessments. The right to receive compensation is an asset under section 2(e) of the Act and must be included in the net wealth regardless of whether it was realized in cash.

5. Valuation of Right to Compensation at 40%:
The court upheld the Tribunal's valuation of the right to compensation at 40% of the amount finally determined by the High Court, considering the pending disputes and the risks involved. This valuation was found to be appropriate and supported by the principles laid down in relevant case law, including Mrs. Khorshed Shapoor Chenai v. Asst. CED.

6. Transfer of Land and Section 4(1)(iv)(a) Implications:
The court found that the lands covered by the agreement dated July 15, 1968, continued to belong to the assessee as there was no registered sale deed. The Tribunal's finding that the agreement was genuine was accepted, but the court rejected the argument that section 4(1)(a)(iv) applied, as the lands were included in the net wealth under section 3 of the Act. The court also dismissed the relevance of section 53A of the Transfer of Property Act, as there was no evidence that the agreement-holders were in possession of the lands.

Conclusion:
Questions Nos. 1 to 7 were answered in the affirmative, favoring the Revenue. Question No. 8 was answered in the negative, favoring the assessee. Question No. 9 was answered in the negative, favoring the Revenue. The court directed the Tribunal to consider the question of valuation if it was raised and pressed in the grounds of appeal. The assessee was ordered to pay the Revenue's costs.