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TMI Blog1968 (2) TMI 19X X X X Extracts X X X X X X X X Extracts X X X X ..... ising the imposition of the tax is Entry 86 of the Union List, "Taxes on the capital value of the assets, exclusive of agricultural land, of individuals and companies; taxes on the capital of companies." And the law that actually imposes the tax is the charging section of the Act, namely, section 3, which says that a tax called wealth-tax shall be charged in accordance with the provisions of the Act in respect of the net wealth of every individual, Hindu undivided family, and company at the rates specified in the Schedule to the Act. Net wealth, according to section 2(m) of the Act, is the amount by which the aggregate value of the assets of a person exceeds the aggregate value of his debts, and, by section 2(e), agricultural land and certain other assets are excluded from the scope of the word " assets ". Section 7 says that, subject to any rules made in that behalf, the value of any asset, other than cash, shall, for the purposes of the Act, be the price which, in the opinion of the Wealth-tax Officer, it would fetch if sold in the open market on the valuation date. Clauses (a) and (b) of Paragraph A of Part I of the Schedule provide for the rates of assessment (with progressivel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as the petitioner has shown by way of illustration, while properties of the value of, say, Rs. 10 lakhs would suffer no additional wealth-tax if situate in a rural area, they would suffer a tax of Rs. 7,000 if situate in an area in category D, but only Rs. 5,000 if situate in an area in category C, Rs. 4,000 if situate in an area in category B, and Rs. 3,000 if situate in an area in category A. According to the petitioner, this difference is clearly discriminatory and can have no rational hearing on the objects of the statute. Even if there were any acceptable reason, which there is none, to justify a difference merely on the basis of population, then if that reason justifies the total exemption of rural areas, it should operate to enhance, not to diminish the tax as one proceeds from a less populated to a more populated urban area. Among urban areas the tax should be lightest, not the heaviest, in an area like Cochin falling in category D, and it should be the heaviest, not the lightest, in an area like, say, Bombay or Calcutta, falling in category A. So runs the petitioner's argument. The revenue seeks to justify the seeming differences on the ground that, owing to pressure of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wever, that the purpose of this levy is as much to raise revenue as also to achieve wider social purposes. It may be that, as a result of this measure, property owners may transfer properties to corporate bodies which are not now liable to the wealth-tax or property-owning companies may come up. If this tendency develops, Government will deal with it at the appropriate time." All this might explain why property in what we have called rural areas should be exempt from the additional tax. But it can scarcely explain the seemingly contrary trend of a higher tax in respect of property in a smaller urban area than in respect of property of the same market value in a bigger urban area. The evil sought to be mitigated, one should have thought, would progressively increase with an increase of population. The real explanation for the seeming discrimination is, we think, to be found elsewhere. Perhaps there is a hint of it in this rather cryptic passage in the Finance Minister's speech. " In view of differences in urban property values in towns of different sizes, I have decided to provide for different exemption limits according as the population of the town is between I lakh and 4 lakhs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in support of her assertion--but we cannot take note of that. The Act imposes wealth-tax at the same rates on all assets irrespective of where the assets are held. It is only in respect of the additional wealth-tax, imposed only in respect of lands and buildings, that it makes a difference between one area and another. Now, it is notorious that immovable property of the same market value fetches a higher income in all urban than in a rural area. Therefore, in relation to its market value, the capital value of an asset situate in an urban area is higher than the capital value of all asset situate in a rural area. And, since the tax is really on the capital value, although it is the market value that the Act adopts for arriving at the capital value, this provides ample justification for the total exemption in respect of immovable property in a rural area. But, as we progress from a smaller to a bigger urban area, owing to several factors, property hunger and sentiment not the least, generally speaking, the market value of an asset increases out of proportion to its productivity, in other words, out of proportion to its capital value. Thus, generally speaking, it would be correct to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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