1969 (8) TMI 4 - SC - Wealth-tax

Asset - allowable expenditure - right to receive a share of the income was a mere right to any annuity where the terms and conditions relating thereto precluded the commutation of any portion into a lump sum grant. The word 'annuity' should be given its popular and dictionary meaning and not the signification which it has assumed as a legal term owing to judicial interpretation - Assessee's appeal is dismissed

Issues Involved:
1. Assessability of the right to receive a specified share of net income from a wakf-alal-aulad estate under wealth-tax.
2. Classification of the right as an asset or an annuity under the Wealth-tax Act.
3. Valuation of the right to receive income for wealth-tax purposes.
4. Applicability of exemptions under the Wealth-tax Act.
5. Legal interpretation of "property" and "assets" in the context of the Wealth-tax Act.

Detailed Analysis:

1. Assessability of the Right to Receive a Specified Share of Net Income from a Wakf-alal-aulad Estate Under Wealth-tax:
The primary issue was whether the right of an assessee to receive a specified share of the net income from an estate, where a wakf-alal-aulad has been created, is an asset assessable to wealth-tax. The court examined the deed dated November 19, 1928, and the modified deed dated July 5, 1930, which created a wakf for the benefit of the settlor's wife, children, and their descendants. The appellants, who were beneficiaries under the deed, were assessed to wealth-tax on the basis that they had a share in the wakf estate. The court upheld that the right to receive a share of the rents and profits of the wakf property was indeed property or an interest in property and fell within the definition of "assets" as per section 2(e) of the Wealth-tax Act.

2. Classification of the Right as an Asset or an Annuity Under the Wealth-tax Act:
The appellants contended that their right under the deed of wakf was a mere right to an annuity as mentioned in section 2(e)(iv) and was therefore not an asset assessable to wealth-tax. This contention was rejected by the Tribunal and subsequently by the High Court, which held that the right to receive a definite share of the net income from wakf property did not fall within the meaning of "annuity" but was an aliquot share of the income. The court emphasized that even if the asset was non-transferable and could not be sold in the open market, it still had value for wealth-tax purposes.

3. Valuation of the Right to Receive Income for Wealth-tax Purposes:
The appellants argued that the right to a share in the income was not capable of any valuation, and the price it would fetch if sold in the open market could not be ascertained. The court referred to the provisions of English statutes and decisions by English courts, including the House of Lords in Commissioners of Inland Revenue v. Crossman, to conclude that the statute contemplates a hypothetical market. The value of the asset must be found out assuming there is an open market, and the tax officer must estimate the price it would fetch if sold in such a market.

4. Applicability of Exemptions Under the Wealth-tax Act:
The appellants also contended that the allowances under assessment were payable to the beneficiaries by way of maintenance and were not transferable under section 6(dd) of the Transfer of Property Act, and therefore had no market value for inclusion in the net wealth. This argument was refuted, as the right to maintenance was not one of the assets mentioned in section 5 of the Wealth-tax Act, which alone entitled an assessee to claim exemption. The court held that the right to receive an aliquot share of the income was an asset within the meaning of section 2(e) and liable to be included in the net wealth of the assessee.

5. Legal Interpretation of "Property" and "Assets" in the Context of the Wealth-tax Act:
The court examined the definition of "assets" in section 2(e) of the Wealth-tax Act, which includes property of every description, movable or immovable. The court emphasized that "property" is a term of the widest import and signifies every possible interest which a person can hold or enjoy. The court referred to previous judgments, including Commissioner, Hindu Religious Endowments v. Shri Lakshmindra Thirtha Swamiar of Sri Shirur Mutt, to support the view that the word "property" should be given a liberal and wide connotation. The court concluded that the right to receive a share of the income from the wakf estate was indeed an asset and assessable to wealth-tax.

Conclusion:
The appeals were dismissed, and the court affirmed that the right to receive a specified share of the net income from a wakf-alal-aulad estate is an asset assessable to wealth-tax. The court held that such a right is not an annuity and must be valued for wealth-tax purposes, even if it is non-transferable and lacks a marketable value. The decision underscores the broad interpretation of "property" and "assets" under the Wealth-tax Act.

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