1974 (7) TMI 12 - HC - Wealth-tax

Summary

Issues Involved:

1. Whether the properties bequeathed to the assessee under a will are includible in the net wealth of the assessee under the Wealth-tax Act, 1957.
2. Whether the administration of the estate of the deceased affects the vesting of the legacy in the assessee.
3. Whether the interest acquired by the assessee in the separate properties of the testator could be considered an asset for wealth-tax purposes.

Issue-wise Detailed Analysis:

1. Inclusion of Bequeathed Properties in Net Wealth:

The primary issue was whether the properties bequeathed to the assessee under a will could be included in the net wealth of the assessee for wealth-tax purposes on the relevant valuation dates. The court examined the provisions of the Wealth-tax Act, 1957, particularly Section 3 (charging section) and Section 2(m) (definition of "net wealth"). The court noted that "net wealth" means the amount by which the aggregate value of all assets belonging to the assessee exceeds the aggregate value of all debts owed by the assessee on the valuation date. The court concluded that the interest which devolved upon the assessee under the will in the coparcenary properties and the separate properties of the testator was an asset belonging to the assessee on the relevant valuation dates. Therefore, it could be legitimately taken into account in computing his net wealth.

2. Administration of the Estate and Vesting of the Legacy:

The court considered whether the administration of the estate of the deceased affected the vesting of the legacy in the assessee. The will did not appoint any executor or administrator, and the father of the assessee was administering the estate. The court referred to the Indian Succession Act, 1925, noting that the right to receive the clear residue of the estate vested in the legatee immediately upon the death of the testator, even if the actual possession and distribution were deferred. The court held that the assessee's interest in the residue of the estate was vested in interest from the day of the testator's death and was transmissible to his representatives if he died before the distribution. Therefore, the administration of the estate did not prevent the vesting of the legacy in the assessee.

3. Interest in Separate Properties as an Asset:

The court examined whether the interest acquired by the assessee in the separate properties of the testator could be considered an asset for wealth-tax purposes. The court referred to the definition of "assets" in Section 2(e) of the Wealth-tax Act, which includes "property of every description." The court noted that the word "property" is of the widest import and includes every possible interest that a person can acquire, hold, and enjoy. The court concluded that the right to receive the clear residue of the estate, even if the actual receipt was deferred, was still property and constituted an asset for wealth-tax purposes. The court also referred to the Supreme Court decision in Pandit Lakshmi Kant Jha v. Commissioner of Wealth-tax, which supported the view that a vested right, even if payment is deferred, is an asset for wealth-tax purposes.

Conclusion:

The court held that the properties bequeathed to the assessee under the will executed by his grandfather were includible in the net wealth of the assessee under the Wealth-tax Act. The court answered the reframed question in the affirmative and ordered the assessee to pay the costs of the reference to the Commissioner and bear his own costs.