1967 (11) TMI 15 - HC - Wealth-tax

Market value as on the valuation date of the instalments due to be paid under the provisions of the Madhya Bharat Abolition of Jagirs Act after the valuation date is liable to be included in the total wealth of the assessee

Issues Involved:

1. Validity of reassessment proceedings under section 17(b) of the Wealth-tax Act, 1957.
2. Inclusion of the market value of compensation installments due under the Madhya Bharat Abolition of Jagirs Act in the total wealth of the assessee.

Issue-wise Detailed Analysis:

1. Validity of Reassessment Proceedings under Section 17(b):

The first issue addresses whether the proceedings for reassessment under section 17(b) of the Wealth-tax Act, 1957, were validly initiated. The court referenced the Supreme Court's decision in Maharaj Kumar Kamal Singh v. Commissioner of Income-tax, which interpreted "information" in section 34(1)(b) of the Indian Income-tax Act, 1922, as including not only factual information but also information leading to a belief about the correct state of the law, including judicial decisions. Given the similarity between section 17(1)(b) of the Wealth-tax Act and section 34(1)(b) of the Income-tax Act, the court held that the Wealth-tax Officer was justified in reopening the assessment upon learning of the Appellate Tribunal's decision in the case of Dadu Jagdishsingh of Rewa. Thus, the reassessment proceedings were validly initiated.

2. Inclusion of Compensation Installments in Total Wealth:

The second issue concerns whether the market value of the installments due under the Madhya Bharat Abolition of Jagirs Act should be included in the assessee's total wealth. The court first referred to the relevant provisions of the Wealth-tax Act, including the definitions of "net wealth," "assets," and "valuation date." The court emphasized that wealth-tax is charged on the aggregate value of all assets belonging to the assessee on the valuation date, irrespective of their location.

The court noted that a debt owed to an assessee on the valuation date is considered an asset, whether it is a present or future debt. This principle is supported by established legal precedents, including Syud Tuffuzzool Hossein Khan v. Rughoonath Pershad and E. D. Sassoon & Co. Ltd. v. Commissioner of Income-tax. A debt payable in the future by reason of a present obligation is still an asset, even if the payment is deferred.

Examining the relevant provisions of the Madhya Bharat Abolition of Jagirs Act, the court found that the compensation amount payable to an ex-jagirdar for the resumption of his jagir is a certain sum of money payable in the future due to a present obligation. The compensation amount became due from the date of resumption, although it was payable in up to ten annual installments. Thus, the unpaid compensation installments were considered a debt owed to the assessee and, therefore, an asset.

The court concluded that the Wealth-tax Officer correctly included the amount of these installments in the computation of the assessee's net wealth. As these unpaid compensation installments are "cash assets," their market value does not need to be determined separately, as cash is valued at its face value in legal currency.

The court supported its conclusion by referencing similar judgments from the Andhra Pradesh High Court and the Patna High Court, which also held that compensation amounts payable in future installments due to a present obligation are assets for wealth-tax purposes.

Conclusion:

The court answered the first question affirmatively, confirming the validity of the reassessment proceedings. For the second question, the court held that the amount of installments payable to the assessee under the Jagirs Act after the valuation date must be included in the computation of the total wealth of the assessee. The department was awarded costs for the reference, with counsel's fee fixed at Rs. 200.

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