1973 (4) TMI 4 - SC - Wealth-tax

Whether in computing the market value of the shares the assessee is entitled to the deduction by way of brokerage commission - Whether on a true construction of section 5(1)(viii) & 5(1)(xv) of the Wealth-tax Act the assessee is entitled to the exclusion of the value of jewellery from the computation of his total wealth - Whether any part of the amount fixed as compensation payable to the assessee under the Bihar Land Reforms Act is liable for inclusion in the total wealth

Issues Involved:
1. Deduction of brokerage commission in computing market value of shares.
2. Exclusion of the value of jewellery from the computation of total wealth under sections 5(1)(viii) and 5(1)(xv) of the Wealth-tax Act.
3. Inclusion of compensation payable under the Bihar Land Reforms Act in the total wealth of the assessee.

Issue-wise Detailed Analysis:

1. Deduction of Brokerage Commission:
The first issue pertains to whether the assessee is entitled to the deduction of a sum of Rs. 2,30,546 by way of brokerage commission in computing the market value of shares. The Wealth-tax Officer disallowed this claim, stating there was no provision for such a deduction. The High Court agreed, interpreting section 7(1) of the Wealth-tax Act to mean that the value of an asset should be the price it would fetch if sold in the open market on the valuation date, without deductions for brokerage or other sale expenses. The Supreme Court upheld this view, emphasizing that section 7(1) does not permit deductions for sale expenses, and any change to this rule would require legislative action. The relevant phrase is: "The value according to section 7(1) has to be the price which the asset would fetch if sold in the open market."

2. Exclusion of Jewellery Value:
The second issue concerns whether the value of jewellery amounting to Rs. 27,27,330 should be excluded from the total wealth computation under sections 5(1)(viii) and 5(1)(xv) of the Wealth-tax Act. The High Court held that jewellery fell under clause (xv) and not clause (viii). The Supreme Court disagreed, citing its decision in Commissioner of Wealth-tax v. Arundhati Balkrishna, which clarified that jewellery intended for personal use falls under section 5(1)(viii). The court noted that the assessee's claim that the jewellery was for personal use was not contested at any stage, thus it should be excluded from the total wealth. The relevant phrase is: "The value of jewellery of the assessee intended for personal use of the assessee would stand excluded under section 5(i)(viii) of the Act."

3. Inclusion of Compensation under Bihar Land Reforms Act:
The third issue addresses whether the compensation amount of Rs. 36,87,419, payable under the Bihar Land Reforms Act, should be included in the assessee's total wealth. The Wealth-tax Officer and subsequent appellate bodies included this amount, estimating its value at 65% of its face value. The Supreme Court upheld this inclusion, stating that the right to receive compensation is a valuable asset and falls within the definition of "assets" under section 2(e) of the Wealth-tax Act. The court rejected the argument that the compensation should be valued at 50% instead of 65%, noting that the Tribunal had consistently estimated such compensation at 65%. The relevant phrase is: "The right to receive compensation, even though the date of payment is deferred, is property and constitutes asset for the purpose of the Wealth-tax Act."

Conclusion:
The Supreme Court upheld the High Court's decisions on the first and third issues, denying the deduction of brokerage commission and including the compensation amount in the total wealth. However, it reversed the High Court's decision on the second issue, ruling that the jewellery intended for personal use should be excluded from the total wealth. The appeal was disposed of accordingly, with each party bearing its own costs.

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