1980 (3) TMI 12 - HC - Wealth-tax

Summary

Issues Involved:
1. Whether the value of the building known as 'Darbargadh' was includible in the net wealth of the assessee for wealth-tax purposes.
2. If the answer to the first issue is negative, whether the assessee has any life interest in the said property, and as such, the value of such life interest was includible in the net wealth of the assessee.

Detailed Analysis:

Issue 1: Inclusion of Darbargadh in Net Wealth

The primary issue was whether the 'Darbargadh' building, an impartible and inalienable palace, should be included in the net wealth of the assessee for wealth-tax purposes. The assessee, the Maharaja of Morvi, contended that the Darbargadh should have a nominal value for wealth-tax purposes due to its non-saleable nature and its location in a small town. The Wealth Tax Officer (WTO) adopted a value of Rs. 5,50,000 based on prior assessments.

On appeal, the Appellate Assistant Commissioner (AAC) excluded the Darbargadh from the wealth-tax assessment, stating that the legal title vested with the dynasty of the Ruler, making the property inalienable and impartible. The AAC held that the Ruler had only the right to use the palace as an official residence, which had no market value.

The Tribunal upheld the AAC's decision, confirming that the title of Darbargadh vested in the dynasty and not in the individual Ruler, thus excluding it from the net wealth of the assessee. The revenue argued that the Ruler's right to occupy should be valued as a life interest, but the Tribunal rejected this, stating that the right was a personal one attached to the Ruler.

Issue 2: Life Interest in Darbargadh

The second issue arose only if the first issue was answered in the negative. The revenue contended that the Ruler's right to occupy the Darbargadh should be valued as a life interest. However, this contention was rejected by the Tribunal, which held that the right to occupy was a personal right attached to the Ruler and not to any individual.

Court's Analysis:

The court examined the nature of impartible property, referring to the Privy Council's decision in Shiba Prasad Singh v. Rani Prayag Kumari Debi, which explained that impartible property retains its character as joint family property despite certain incidents of joint family property being absent. The Supreme Court's decision in State of U.P. v. Raj Kumar Rukmini Raman Brahma was also cited, affirming that an impartible estate by custom cannot be considered the separate or exclusive property of the holder.

The court concluded that the Darbargadh, being an impartible property, could not be treated as the personal property of the Ruler before the amendment of Section 4(6) of the Wealth Tax Act, which deemed the holder of an impartible estate to be the individual owner of all properties in the estate. This amendment, effective from April 1, 1965, indicated that prior to this, the impartible property was considered joint family property.

Conclusion:

For the assessment years 1959-60 to 1964-65, the Darbargadh was not includible in the net wealth of the assessee, as it was joint family property. However, for the assessment year 1965-66, the Darbargadh was includible in the net wealth of the assessee due to the amendment in Section 4(6) of the Wealth Tax Act.

Judgment:

1. The value of the Darbargadh was not includible in the net wealth of the assessee for the assessment years 1959-60 to 1964-65.
2. The value of the Darbargadh was includible in the net wealth of the assessee for the assessment year 1965-66.
3. The question of life interest did not arise.

The court awarded costs to the assessee for this reference.