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TMI Blog1972 (5) TMI 11X X X X Extracts X X X X X X X X Extracts X X X X ..... rt for opinion, under section 27(1) of the Wealth-tax Act, 1957. In the consolidated statement relating to wealth-tax assessments for the years 1957-58, 1958-59, 1959-60, 1960-61 and 1961-62 (numbered in this court as Tax Cases Nos. 23 to 27 of 1966), sent at the instance of the Commissioner of Wealth-tax, a single question has been formulated for opinion as follows: "Whether, on the facts and in the circumstances of the case, the debts of Rs. 9,000 and Rs. 13,011 due to the assessee from Sri A. K. Hazra and Sri N. Sahay, respectively, on the basis of the usufructuary mortgage held by the assessee, constituted assets in its hands and comprise part of its wealth?" In the consolidated statement of cases relating to the same years (numbered in this court as Tax Cases Nos. 64 to 68 of 1967), sent at the instance of the assessee, the following questions have been referred for opinion: "(1) Whether, in the facts and circumstances of the case, compensation payable under the Bihar Land Reforms Act is in law an 'asset' which could be included in the assessee's net wealth as defined in section 2(m) of the Wealth-tax Act? (2) Whether, in the facts and circumstances of the case, the su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d followed up to the Tribunal. In each year the assessee had claimed certain deductions, including an amount of Rs. 32,266 due as agricultural income-tax. The latter sum has been consistently disallowed. While computing the net wealth, the Wealth-tax Officer had included the sums of Rs. 8,000 and Rs. 13,011 for the year 1957-58, due from Sri A. K. Hazra and Sri N. Sahay, respectively, on the basis of usufructuary mortgage in favour of the assessee, as its assets. On the last point the assessee obtained relief from the Appellate Tribunal for the year 1957-58 and for that reason these two sums of money were excluded from the net wealth of the assessee for the subsequent assessment years and that point has given rise to the reference in Tax Cases Nos. 23 to 27 of 1966. On the other questions raised by the assessee, reference in Tax Cases Nos. 64 to 68 of 1967 have arisen. After hearing the parties, some of the questions referred to this court by the statements of cases dated the 12th December, 1966, were reframed as follows: Question No. 2. "Whether, in the facts and circumstances of the case, the decrees obtained by the assessee against Shri A. H, Lai and Shri D, D. Tulsi for R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ealth-tax Act. It is noticed by the Tribunal that the order of the Calcutta High Court had been passed after the relevant dates of the first three assessment years and it held that even for the assessment years 1960-61 and 1961-62 the order of attachment could not indicate that the value of the decree was "nil", as was the assessee's case. Hence, the decree against Sri D. D. Tulsi was valued by the Wealth-tax Officer at Rs. 51,525. With respect to the decree against Sri A. H. Lal, it was noticed that the attachment order passed by the Calcutta High Court was on the 21st June, 1961, that is to say, even after the valuation date for the assessment year 1961-62. This decree was, therefore, valued by the Wealth-tax Officer at the figure of Rs. 1,11,747. The learned counsel for the assessee has contended that the two decrees have been erroneously valued and the principles for valuation laid down by section 7(1) of the Wealth-tax Act have not been followed. According to the learned counsel for the Wealth-tax Commissioner, the decrees have been correctly valued under section 7(2)(a) of the Act, inasmuch as the two decrees continued in the books of the assessee at their full value. It will ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onclusion that they would be valued at those sums without taking into consideration the hazards for realisation of the decrees. For instance, the decree obtained against Sri D. D. Tulsi was dated the 16th April, 1952, and that decree has not yet been executed. Similarly, the decree against Sri A. H. Lal is still in the process of execution and the Wealth-tax Officer was bound to take into consideration such matter in valuing the decrees under section 7(1) of the Act. The Wealth-tax Officer was bound to estimate the price that the decrees would have fetched, if sold in the open market on the valuation dates, in a manner as might reasonably be calculated to obtain for the vendor the best price of the property. The answer to this question is in the negative. For Question No.3 The amount of Rs. 32,266 could not be deducted as a debt owed by the assessee on any of the valuation dates under section 2(m) of the Act, as this was outstanding for a period of more than twelve months on the earliest valuation date, namely, the 20th September, 1956. The Wealth-tax Officer mentioned in his order for the assessment year 1957-58 that there was no evidence as to when the liability for the agric ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to him by the State Government. The intermediary's right to receive compensation as an asset, therefore, is subject to those disadvantages and restrictions and liable to fetch a lower price in open market than what it can fetch, had it been free from those disadvantages and restrictions. The dues of agricultural income-tax which the assessee was liable to pay to the State Government are certainly, therefore, to be taken into account in estimating the value of his compensation as an asset." In view of this decision, the answer to question No. 3 must be in the affirmative for the years in question. For answering question No. 4, a little of the previous history of the hearing of the cases has to be narrated. We had heard learned counsel for the parties earlier and by order dated the 14th April, 1971, we had called for a supplementary statement of the case from the Tribunal by stating thus: In question No. 4, five sums of money have been mentioned, namely, Rs. 1,45,375, Rs. 20,001, Rs. 32,000, Rs. 58,967 and Rs. 92,500. But, in giving the names of the debtors more than five names have been mentioned. The Appellate Tribunal should, therefore, be more precise and state what sums a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 00 (ii) Sarjug Kumar 625 (iii) Nand Kishore Singh 7,672 (iv) Lakshmi Narain Singh 19,887 ---------------- 29,484 4. Further, the High Court has asked the origin and nature of the loans and the treatment thereof by the Wealth-tax Officer, the Appellate Assistant Commissioner and the Tribunal. For this, the matter is incorporated in annexure 'A' which is made a part of the statement of the case." After receipt of the supplementary statement of the case this question was reframed and I shall now deal with each of the items covered by this question separately. The history of the sum due from Tikait Girja Prasad Singh has been mentioned in annexure "A" to the supplementary statement of the case as follows: "In 1947, a loan of Rs. 5,68,000 was taken by the court of wards of estate of Tikait Girja Pd. Singh through the manager of the estate under a simple mortgage of the entire Gawan Estate T. No. 11, consisting of 226 villages. Before the loan was repaid, the estate vested in the State under the Bihar Land Reforms Act on May 28, 1952. The assessee's claim was allowed under section 14 of the Bihar Land Reforms Act by the Sub-judge, Claims Officer, Chotanagpur Division ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties who have considered this item have approached this part of the case on wrong principles. The claim decree is no doubt an asset of the assessee, but it has been valued wrongly, without correctly applying the provisions of section 7(1) of the Wealth-tax Act. In annexure "A" to the supplementary statement of the case Rs. 40,000 due from Sri Gangeshwar Prasad Singh has been dealt with as follows: "On December 16, 1929, a loan of Rs. 74,500 was given to the executors of the Estate of Tejeridra Narain Singh by executing a simple mortgage bond. Before the loan was repaid, the estate vested in the State under the Bihar Land Reforms Act and the claim was assessed at Rs. 40,001 in terms of compromise decree in Misc. judicial Case No. 68/3 of 54/55 in the court of Sub-judge, Bhagalpur, under the Bihar Land Reforms Act." The Wealth-tax Officer had valued this claim decree at 75 per cent. of its face value and the Appellate Assistant Commissioner reduced this to 50 per cent. of the face value of the decree and this was affirmed by the Tribunal. For the same reason that we have given while dealing with the claim decree against Tikait Girja Prasad Singh, it must be held that the method ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s made erroneously and how the Wealth-tax Officer should have proceeded in the matter has been indicated earlier, on the footing, of course, that all the claims decrees were assets of the assessee. The last item under this question was the dues against Raja Prithvichand Lal Chaudhary. This matter has been mentioned in annexure "A" as follows: 'P. C. Lal took a loan against a sudbharna deed, dated July 31, 1934, mortgaging Milkiat interest. After the Milkiat vested in the State under the Bihar Land Reforms Act, vide Case No. 5/52 before the Claims Officer, Bhagalpur Division, Bhagalpur, a decree was passed for Rs. 3,88,760 (sic) the claim payable to Raja P. C. Lal was determined at Rs. 1,85,000." In this case also the Wealth-tax Officer calculated 75 per cent. of Rs. 1,85,000 to be the value of this decree and this was reduced to 50 per cent. by the Appellate Assistant Commissioner. This was affirmed by the Tribunal. Here also the decree has been valued erroneously, as indicated above, although this was also an asset of the assessee. Therefore, in all the decrees covered by question No. 4, the Wealth-tax Officer should have applied the same test that we have laid down while de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... objection to it. Under the provisions of Order 34, rule 4, he cannot deprive the mortgagor of his right to redeem excepting by proceeding on his mortgage. Although we express no final opinion on this point it may be that a mortgagee who secures a decree for payment of arrears of rent cannot put the property to sale for realisation of the amount decreed but there can be no objection to his suing for possession if the rent note entitles him to do so. So long as the mortgagor had a right to redeem the mortgage he can always pay off the mortgagee and get back possession. This position would continue so long as the property is not sold under a final decree for sale under the provisions of Order 34, Civil Procedure Code." Therefore, the Appellate Tribunal was in error in excluding the two sums of money due from A. K. Hazra and N. Sahai altogether from the assessee's net wealth. These two dues must, however, be valued under section 7 of the Wealth-tax Act and in valuing these dues it must be considered whether the assessee could obtain decrees on his rent notes and sue for possession based on them. No facts were considered by the Tribunal in excluding these two dues from the net wea ..... X X X X Extracts X X X X X X X X Extracts X X X X
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