MAHARAJ KUMAR KAMAL SINGH Vs. COMMISSIONER OF WEALTH TAX

JUDGEMENT

(1.) THESE three references under Section 27(1) of the Wealth-tax Act by the Income-tax Appellate Tribunal, Patna, are in relation to the assessment years 1959-60, 1960-61 and 1961-62, corresponding valuation dates of which were the 31st October, 1958, 31st October, 1959, and 31st October, 1960. The petitioner is an individual. His estate vested in the State of Bihar under the Bihar Land Reforms Act on and from 1st July, 1952, and he is entitled to receive compensation under the Act from the Government. Under section 3 of the Wealth-tax Act (hereinafter referred to as "the Act"), wealth-tax is payable by every individual, Hindu undivided family and company in respect of his or its "net wealth", as on the corresponding valuation date. Therefore, the question arose about the inclusion in the assessee's "net wealth" of the value of the estimated amount of compensation receivable by him from the Bihar Government under the Bihar Land Reforms Act. In the assessment year 1959-60 the Wealth-tax Officer estimated the value at Rs. 10,25,123 and included it in the net wealth of the assessee. For the assessment years 1960-61 and 1961-62 the assessee produced a letter from the District Collector, Arrah, to show that the assessee is entitled to compensation of Rs. 4,39,713 only. The Wealth-tax Officer estimated 75% thereof as the market value of the right of the assessee to receive the compensation. Accordingly, he included in the assessee's net wealth Rs. 3,29,784. On appeal, the Appellate Assistant Commissioner reduced the valuation for the first year to Rs. 3,29,784. For the next two years (1960-61 and 1961-62) the Appellate Assistant Commissioner held that it would be reasonable to estimate the market value of the compensation to be received by the assessee at 65% of the face value.

(2.) THE assessee preferred appeals before the Appellate Tribunal regarding assessments for the aforesaid three years and reiterated his contention that the right to receive compensation under the Land Reforms Act was not asset within the meaning of Section 2(m) of the Act and could not be included in the assessee's net wealth. THE Tribunal has held that the estimated amount of zamindari compensation payable to the assessee is an asset, and has to be included in the assessee's net wealth. However, it directed the Wealth-tax Officer to estimate the value and compensation to be received by the assessee at 65% even for the first year, i.e., 1959-60, as it was done by the Appellate Assistant Commissioner in regard to the second and third years (1960-61 and 1961-62).

(3.) BY the aforesaid order dated 12th July, 1967, R. L. Narasimham (the then Chief Justice) and K. B. N. Singh J. also observed that as the correctness of the decision in Maharajkumar Kamal Singh v. Commissioner of Wealth-tax was challenged, it would be necessary to place these references before a larger Bench. This is how they have come before us.