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TMI Blog1991 (4) TMI 37X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee for each of the assessment years 1963-64 and 1964-65?" Counsel are agreed that, in view of the Supreme Court decision in the case of Ahmed Ibrahim Sahigra Dhoraji v. CWT [1981] 129 ITR 314, the question requires to be answered in the affirmative and in favour of the assessee. The question is so answered. In the references at the instance of the Department, questions of law referred to this court by the Tribunal are : For the assessment years 1963-64 to 1966-67 (W. T. R. No. 12 of 1977): Whether, on the facts and in the circumstances of the case and having regard to the consent decree dated June 11, 1969, the Appellate Tribunal was right in holding that the right of the assessee to receive compensation from the Central Government and the interest thereon will not amount to the assessee having acquired any right in the immovable property so as to be treated as wealth and, consequently, directing the Wealth-tax Officer to delete the amounts of Rs. 62,963, Rs. 78,083, Rs. 93,203, Rs. 1,08,323 for the assessment years 1963-64, 1964-65, 1965-66 and 1966-67 respectively from the net wealth of the assessee ? " For the assessment years 1967-68 to 1969-70 (W. T. R. No. 5 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties, no subsisting contract had come into existence. The appeal was, however, dismissed by the Division Bench by judgment dated July 16, 1965. On June 29, 1968, the Commissioner appointed for determining the amount of compensation, if any, submitted a report in terms of which the amount of compensation/damages was determined at Rs. 10,92,000. The assessee filed objections to the report on July 16, 1968. The Union of India also filed objections on July 19, 1968. Eventually, however, there was a compromise between the parties and, by a consent decree, the amount of damages was determined at Rs. 2,52,000. The Union of India was directed to pay to the assessee Rs. 2,52,000 plus Rs. 1,56,030 being interest thereon at the rate of 6% per annum from January 30, 1959, up to the date of the consent decree and to pay interest at the rate of 4% per annum from the date of the consent decree till payment. The assessee did not disclose any part of the amount received as damages and interest thereon in his wealth-tax returns for the assessment years 1963-64 to 1969-70. However, the Wealth-tax Officer took the view that the amount received as damages as well as interest accruing thereon repres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as that mesne profits should be paid at the rate of Rs. 4,000 per month. The District judge decreed the suit awarding mesne profits at the rate of Rs. 4,000 per month. The matter went up to the Supreme Court. The Supreme Court stayed the decree and yet the Madhya Pradesh High Court held that the right to receive or recover mesne profits existed as an asset belonging to the assessee on the relevant valuation dates even before the passing of the decree by the District judge quantifying the amount of mesne profits. The contention of Shri Jetley, thus, was that, in the present case, when the learned single judge of our court decreed the suit on September 20, 1961, directing the Commissioner to take accounts for fixing the amount of damages, there accrued an asset belonging to the assessee in the form of a right to receive damages and the time when the amount of damages was actually quantified was irrelevant. On the relevant valuation dates, such a right, i.e., the "asset" is required to be evaluated and included in the wealth of the assessee. Shri Dastur, learned counsel for the assessee, strongly relied on the Supreme Court decision in the case of CIT v. Hindustan Housing and Land D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t decision in the case of U. S. Nayak v. CWT [1968] 68 ITR 171. In that case, despite serious disputes about the validity of sale and the fact that even the possession of the property was not given to the assessee, it was held that, as, on the relevant valuation date, the assessee owned the property, the property was required to be valued as a "property" at its fair market value. The assessee's claim that, in such a case, only the amount paid by it as sale price of the property be treated as an asset being advance paid towards the purchase of the property was rejected. Referring again to the Andhra Pradesh High Court decision in CWT v. Pachigolla Narasimha Rao [1982] 134 ITR 640, Shri Jetley pointed out that the analogy of the Income-tax Act cannot be extended to the Wealth-tax Act because, by means of section 2(m) read with section 2(e), the Wealth-tax Act defines what constitutes "net wealth" and "an asset". Shri Jetley made an attempt to distinguish the Supreme Court decision in CIT v. Hindustan Housing and Land Development Trust Ltd. [1986] 161 ITR 524, strongly relied upon by Shri Dastur by referring to the fact that, in that case, the assessee was permitted to withdraw the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee was maintaining accounts on the cash basis, an "asset" that accrued but was yet to be received could be treated as an asset for wealth-tax purposes. In that case which was subsequently confirmed by the Supreme Court in CWT v. Vysyaraju Badreenarayana Moorthy Raju [1985] 152 ITR 454, it was held that so far as the Wealth-tax Act is concerned, the method of accounting was not a relevant consideration. What is relevant was whether an asset belonged to the assessee in terms of section 2(e) of the Act on the relevant valuation date. The facts in the Andhra Pradesh High Court decision in CWT v. Pachigolla Narasimha Rao [1982] 134 ITR 640, are not much different. There again, the dispute was not about the accrual of interest. The dispute was only that because the assessee was maintaining his accounts on cash basis, the mere fact that the interest had accrued whether it could not be included in his wealth. No doubt the Madhya Pradesh High Court decision in CWT v. Shivjibhai Jairam (HUF) [1983] 143 ITR 759, is a case which apparently supports the Department. However, in that case also, the question involved was about the right to recover mesne profits. No doubt the court held t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner by its decree to take accounts for the purpose of determining damages, if any, payable to the assessee for breach of the contract. As the decree stands, it is not possible to say that any right to receive damages as such in reality accrued to the assessee as a result of the decree. Besides, the judgment of the learned single judge was not accepted by the Union of India. An appeal was filed, inter alia, on the grounds already mentioned earlier. It is evident from the grounds taken that the very existence of the contract was disputed in appeal. It is true that the Division Bench, by its judgment dated July 16, 1965, dismissed the appeal filed by the Union of India. The effect of the dismissal of the appeal merely brought back the situation as it was on the date when the decree was passed by the learned single judge. The dismissal of the appeal, thus, did not improve upon the assessee's right to receive damages as such. Coming then to the judgment and report of the Commissioner dated June 29, 1968, by which he recommended awarding of damages of Rs. 10,92,000, here again, it is seen that both the assessee and the Union of India filed objections. If the matter had not been ..... X X X X Extracts X X X X X X X X Extracts X X X X
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