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TMI Blog1982 (3) TMI 29X X X X Extracts X X X X X X X X Extracts X X X X ..... id not include arrears of rent in respect of a house property situated at Calcutta and which had been in the tenancy of Smt. Lakhpatia Devi. The monthly rent of that property was Rs. 600 and the arrears due in respect thereof as on the relevant valuation dates amounted to Rs. 28,000, 36,200 and Rs. 47,600. The WTO called upon the assessee to explain the reason for not disclosing the aforesaid assets in its total wealth. The reason given by the assessee was that since the aforesaid dues had become bad and it was doubtful that they would be realized, the assessee had not disclosed them. Apart from that, it was claimed that the assessee was maintaining its accounts on cash basis. The WTO did not accept this contention and on account of the fact that every year the assessee had been able to recover some of the arrears of rent, held that the arrears of rent had not become irrecoverable or bad debts. Accordingly, he added the aforesaid amounts in the assessments for these years, respectively. These three orders were passed on one and the same date, i.e., February 12, 1974. Aggrieved, the assessee preferred appeals before the AAC who disposed of the same by a common order. It was conten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e years. To that extent, therefore, relief was allowed to the assessee. Now, at the instance of the assessee the questions mentioned above have been referred to this court. It was submitted before us on behalf of the assessee by its learned counsel, Sri R. K. Gulati, that in view of the admitted fact that the assessee maintains its accounts on cash basis, the arrears of rent could not be included in its total wealth on the basis of accrual, it would not be necessary to enter into question No. 1 and reliance was placed on the decision of the Orissa High Courtin the case of Vysyaraju [1971] 79 ITR 330 and that of the Karnataka High Court in A. T. Mirji v. CWT [1980] 126 ITR 93. We do not agree because we have first to examine the nature of the arrears of rent and then to see as to whether they can be included in the total wealth of the assessee. It is, of course, not disputed that the assessee maintains its accounts on cash basis but, at the same time, as observed by the AAC, the assessee did not produce any balance-sheet before him nor any balance-sheet was available on the record. It is also not in dispute that the assessee had filed a suit for the ejectment of the tenant, recove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d " property " and excluded business from its connotation. It has, thus, been laid down that the word " property " in its normal and accepted meaning is a term of the widest import and unless there is any limitation or qualification placed contextually, it would signify every possible interest which a person can acquire, hold and enjoy. This proposition was reiterated by the court in Ahmed G. H. Ariff v. CWT [1970] 76 ITR 471 (SC) and at p. 476 of the report it has been further said : " the meaning of the word 'property' has come up for examination before this court in a number of cases ". It was observed in Commissioner, Hindu Religious Endowments v. Sri Lakshmindra Thirtha Swamiar of Sri Shirur Mull [1954] SCR 1005, that " there was no reason why that word should not be given a liberal and wide connotation and should not be extended to those well-recognised types of interests which had the insignia or characteristic of proprietary right ". The learned standing counsel has also invited our attention to another decision of the Supreme Court in Pandit Lakshmi Kant Jha v. CWT [1973] 90 ITR 97, where one of the questions for consideration was: whether any part of the amount of Rs. 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e was passed on December 1, 1967, and the assessee was to receive mesne profits at the rate of Rs. 600 per month from December 5, 1965. The relevant valuation dates for the years under consideration were September 29, 1968, October 18, 1969, and October 8, 1970, respectively. Therefore, by the relevant valuation dates the amount of mesne profits, to which the assessee was entitled, was clearly known and its calculation on the execution side on the payment of court fee was only a matter of clerical formality. The arrears, therefore, could not but be included amongst the assets of the assessee. There is yet another aspect from which the nature of these arrears can be determined. As laid down by the Supreme Court in Kesoram Industries and Cotton Mills Ltd. v. CWT (1966] 59 ITR 767, 780, " a debt is a sum of money which is now payable or will become payable in future by reason of present obligation, debitum in praesenti, solvendum in futuro ". In other words, if there is a debt, the fact that the amount is to be ascertained does not make it any the less a debt if the liability is ascertained and what remains is only the quantification of the amount. Apart from this, a debt due to an as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt year 1964-65. We fail to understand as to how this decision is of any help to the assessee. Therefore, so far as question No. 1 is concerned, in our opinion, the Tribunal was justified in holding that the arrears of rent relatable to the assessment years under consideration respectively were liable to be included in the assets of the assessee. As for reducing the market value thereof to 60 per cent., we do not wish to express ourselves since this aspect has not been challenged by the Department. Then we come to question No. 2. Section 7 of the Act provides for the mode to determine the value of assets. In so far as it is relevant for our purpose, it reads: " 7. Value of assets how to be determined.-(1) Subject to any rules made in this behalf, the value of any asset, other than cash, for the purposes of this Act, shall be estimated to 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. (2) Notwithstanding anything contained in sub-section (1) (a) where the assessee is carrying on a business for which accounts are maintained by him regularly, the Wealth-tax Officer may, instead of determining separat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lue of the assets, it is open to him to make such adjustments in regard to the value of the different assets shown in the balancesheet as he might consider necessary in the circumstances of the case." Similar view was taken by the Supreme Court In CWT v. Thungabhadra Industries Ltd. [1970] 75 ITR 196. It was laid down that (p. 199) " under sub-section (1) of section 7 of the Act the Wealth-tax Officer is authorised to estimate for the purpose of determining the value of any assets, the price which it would fetch, if sold in the open market on the valuation date. But this rule in the case of a running business may often be inconvenient and may not yield a true estimate of the net value of the total assets of the business. The Legislature has, therefore, provided in sub-section (2)(a) that where the assessee is carrying on a business for which accounts are maintained by him regularly, the Wealth-tax Officer may determine the net value of the assets of the business as a whole, having regard to the balance-sheet of such business as on the valuation date and make such adjustments therein as the circumstances of the case may require." We do not find any justification in the submissio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee maintained its accounts on cash basis but it has been found that it did not file any balance-sheet and apart from that it is not the question of determination of the net value of the asset of the business which is involved here. The decision of the Orissa High Court has been followed by the Karnataka High Court in A. T. Mirji[1980] 126 ITR 93. There, the assessee, an individual, was an income-tax practitioner and in his wealth-tax returns for certain years claimed that the bills receivable by him as on the relevant valuation date could not be included in his assets liable to tax. The court extended the scope of s. 7(2) to the case of a " profession " as well as the view that though there is a difference between a business and a profession, in so far as it relates to the requirements to accept the accounting system for taxation there is no difference between the two. Further, " profits and gains of business or profession " is treated as one head under item " D " of s. 14 of the I.T. Act, 1961. Therefore, whether the assessee is carrying on a business or profession, if he has maintained accounts regularly the system of accounting adopted should be normally accepted for c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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