1967 (6) TMI 11 - HC - Wealth-tax

WTO was justified in including in the total wealth of the assessee, the amount of representing the probable amount of compensation receivable by the assessee from the Govt

Summary

Issues:
1. Inclusion of probable compensation amount in wealth assessment.
2. Inclusion of accrued interest in wealth assessment.

Analysis:
The case involved two key issues. Firstly, whether the Wealth-tax Officer was justified in including a probable compensation amount of Rs. 80,000 in the total wealth of the assessee. The assessee contended that since the compensation amount was not ascertained and was payable in the future, it should not be considered as part of their wealth. However, the Appellate Assistant Commissioner and the Appellate Tribunal held that the legally enforceable right to the compensation amount on the valuation date constituted wealth. The Tribunal emphasized that the interim compensation paid to the assessee under the Abolition Act was of a capital nature and should be included in the total wealth assessment. The court referred to previous judgments under similar Acts, establishing that present liabilities to pay future sums constitute a debt in law and are considered as wealth for taxation purposes.

Secondly, the issue of including accrued interest in the wealth assessment was raised. The Wealth-tax Officer had added the interest accrued on loans made by the assessee to its constituents on an accrual basis. The Tribunal upheld this addition, stating that interest accruing on debts constitutes an asset and must be considered in calculating total wealth. The court cited previous judgments where interest amounts were deemed includible in the value of assets for wealth-tax purposes. Therefore, the court answered both questions in the affirmative, ruling against the assessee and upholding the inclusion of both the probable compensation amount and the accrued interest in the wealth assessment. The court also awarded costs and advocate's fee in favor of the respondent.