1968 (2) TMI 5 - HC - Wealth-tax

Whether in computing the market value of the share the assessee is entitled to the deduction of a sum by way of brokerage commission and s.s. 5(1)(viii) and 5(1)(xv) of the WT Act the assessee is entitled to the exclusion of the value of jewellery from the computation of his total wealth - Held no

Issues Involved:
1. Deduction of brokerage commission from the market value of shares.
2. Exclusion of the value of jewellery intended for personal use from the computation of wealth.
3. Inclusion of compensation payable under the Bihar Land Reforms Act in the total wealth of the assessee.

Detailed Analysis:

Issue 1: Deduction of Brokerage Commission from Market Value of Shares
The primary issue was whether the assessee could deduct a sum of Rs. 2,30,546 as brokerage commission from the market value of shares when computing wealth under the Wealth-tax Act, 1957. The assessee argued that the price quoted in the stock exchange includes brokerage, and thus, it should be deducted to reflect the net price receivable by the seller. However, the court held that under section 7(1) of the Act, the value of any assets should be estimated as the price it would fetch if sold in the open market on the valuation date, which implies the gross price without any deductions for brokerage or other expenses. The court referenced English legal principles, which support the interpretation that the gross price paid by the purchaser is the relevant value. Therefore, the brokerage commission cannot be deducted from the market value of the shares.

Issue 2: Exclusion of Jewellery Intended for Personal Use
The second issue was whether the value of jewellery intended for personal use could be excluded from the computation of wealth under sections 5(1)(viii) and 5(1)(xv) of the Wealth-tax Act. The assessee classified his jewellery into three groups and sought exemption for jewellery intended for personal use, relying on section 5(1)(viii). However, the wealth-tax authorities and the court interpreted that section 5(1)(xv), which specifically deals with jewellery and limits the exemption to Rs. 25,000, overrides the general provision in section 5(1)(viii). The court emphasized that the legislative intent, as evidenced by the history of the legislation, was to treat jewellery separately and limit its exemption. Thus, the assessee is not entitled to exclude the value of jewellery intended for personal use beyond the Rs. 25,000 limit.

Issue 3: Inclusion of Compensation Under Bihar Land Reforms Act
The third issue was whether the compensation amount of Rs. 36,87,419, fixed but not yet paid under the Bihar Land Reforms Act, should be included in the assessee's total wealth. The court referred to a precedent decision in Maharaj Kumar Kamal Singh v. Commissioner of Wealth-tax, which established that the compensation becomes part of the wealth as soon as the estate vests in the government, regardless of the payment date. Therefore, the compensation amount is liable for inclusion in the total wealth of the assessee.

Conclusion:
1. Question No. 1: The brokerage commission cannot be deducted from the market value of the shares.
2. Question No. 2: The assessee is not entitled to exclusion of the value of the jewellery intended for personal use, except for the exemption limit of Rs. 25,000.
3. Question No. 3: The compensation payable under the Bihar Land Reforms Act is liable for inclusion in the total wealth of the assessee.

The petitioner must pay costs of Rs. 200 to the opposite party.

← Previous Next →