1965 (9) TMI 6 - HC - Wealth-tax

Whether the amount receivable by the assessee from the jagir administrator as compensation on the abolition of the jagir constitutes the wealth of the assessee and is assessable under the Wealth-tax Act -

Issues Involved:
1. Status of the assessee for assessment purposes.
2. Inclusion of compensation receivable from the jagir administrator in the assessee's wealth.

Issue-wise Detailed Analysis:

1. Status of the Assessee for Assessment Purposes:

The primary issue was whether the assessee should be assessed as an individual or as a Hindu Undivided Family (HUF). The assessee, a widow who succeeded her deceased husband as the holder of a jagir, argued that the assessment should be made in the status of an HUF. The Wealth-tax Officer, however, assessed her as an individual, stating that the jagir was personal property and the commutation amount was paid to her alone. The Appellate Assistant Commissioner upheld this view, noting that the jagir was a personal Crown grant and that the assessee held it in her personal right even after adopting a son.

The court examined the nature of jagir tenures and succession rights. It was established that the Nizam, the grantor, had absolute discretion in granting jagirs, which were inalienable and non-heritable without his explicit permission. The court referenced several firmans and legal precedents, including the Supreme Court's judgment in Sikandar Jehan Begum v. Andhra Pradesh State Government, which affirmed that jagirs were resumed and regranted upon the holder's death, and heirs did not automatically succeed.

The court also addressed the contention that the adopted son should be considered the karta of the joint family. However, it clarified that under Hindu law, a woman cannot be a coparcener or manager of a joint Hindu family. The Supreme Court's decision in Commissioner of Income-tax v. Seth Govindram Sugar Mills was cited, which held that coparcenership is a necessary qualification for the managership of a joint Hindu family, and a woman cannot fulfill this role.

In conclusion, the court found that the assessee was correctly assessed in the status of an individual, as the jagir was a personal grant and not a joint family property.

2. Inclusion of Compensation Receivable in Wealth:

The second issue was whether the compensation receivable by the assessee from the jagir administrator constituted wealth assessable under the Wealth-tax Act. The assessee argued that the future commutation amounts should not be included in her wealth, as they did not constitute wealth on the valuation date. The Wealth-tax Officer included the value of future instalments, which was upheld by the Appellate Assistant Commissioner and the Tribunal.

The court referenced its earlier judgment in Mir Imdad Ali Khan v. Commissioner of Wealth-tax, which held that commutation amounts sanctioned by the Government under the Hyderabad Jagirs Abolition Regulation and the Hyderabad Jagirs Commutation Regulation are "assets" within the meaning of section 2(e) of the Wealth-tax Act. It was established that wealth-tax is payable not only on the amounts actually paid before the valuation date but also on the total amount of compensation payable under the award.

Thus, the court affirmed that the compensation receivable by the assessee from the jagir administrator constitutes wealth and is assessable under the Wealth-tax Act.

Conclusion:

The court answered both questions in the affirmative and in favor of the department. The assessee was correctly assessed in the status of an individual, and the compensation receivable from the jagir administrator was rightfully included in her wealth for assessment purposes. The applicant was ordered to pay the costs of the department.

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