MAHARAJ KUMAR KAMAL SINGH Vs. COMMISSIONER OF WEALTH TAX

JUDGEMENT

(1.) These two references, under Section 27(1) of the Wealth Tax Act, by the appellate tribunal, Patna, are in relation to assessment years, 1957-58 and 1958-59, in respect of which the two corresponding valuation dates were 31-10-1958, and 31-10-1959 respectively. The assessee is an individual His estate vested in the State of Bihar under the Bihar Land Reforms Act on and from 1-7-1952. He was entitled to receive compensation in that respect from the Government. The manner in which the compensation will be computed as due to an ex-proprietor of an estate has been prescribed in the Act itself. The Wealth Tax Officer included Rs. 10,26,128 in the net wealth of the assessee for determining the wealth tax payable by him as, according to him, that was the amount of compensation due to the assessee from the Government. The basis of that calculation was what the Agricultural Income tax Officer, Arrah, had determined for the year 1359 Fasli to be the assessee's zamindari income (Rs. 3,42,041). The Wealth Tax Officer took three times of that as the minimum compensation which the assessee was likely to receive from the Government. Against that the assessee went in appeal before the appellate Assistant Commissioner of Wealth Tax Patna Branch, who, by a consolidated order in both the cases, held that the Wealth Tax Officer was right in including in the appellant's assessments for the two years the value of compensation estimated at 10 1/4 lakhs rupees on the two valuation dates. Against that, the assessee came in appeal before the appellate tribunal, which found that the right to receive compensation under the Bihar Land Reforms Act was an asset and its market value was to be estimated as provided under Section 7(1) of the Wealth Tax Act. Both the cases were remanded with a direction that the Wealth Tax Officer should get necessary information and clarification as to the amount of compensation payable to the assessee under Ss. 23 and 24 of the Bihar Land Reforms Act and should also afford every opportunity to the assessee to lead evidence about the probable amount of compensation due to him and thereafter estimate the market value thereof. On this, the assessee asked the tribunal to make a reference to this Court under Section 27(1) of the Wealth Tax Act, (which will be referred to hereafter as the Act) which was allowed and the following question was framed for reference:

(2.) The charging Section 3 of the Act provides that for every financial year, a tax in respect of the net wealth on the corresponding valuation date of every individual, Hindu undivided family and company at the rate or rates specified in the Schedule shall be charged. The net wealth has been defined in Clause (m) of Section 2 as meaning the amount by which the aggregate value of all the assets belonging to the assessee on the valuation date is in excess of the aggregate value of all the debts owed by him on that valuation date other than those specified in that clause. To find out what was the aggregate value of all the assets of an assesses it is necessary to determine what is to be taken as an asset for the purpose of this Act Clause (e) of that section stales that "assets" include property of every description movable or immovable but does not include-

(3.) Learned counsel appearing for the assessee contended that there is enormous uncertainty both in regard to the amount of compensation and the manner in which it will be payable until that is finally determined. The manner of computation has been prescribed in the Act and the assessee is entitled to interest on what will be determined finally as his due compensation. Even when interim compensation is paid under the provisions of that Act (Bihar Land Reforms Act), it is related to the approximate amount of compensation In the present case the assessee admittedly received an interim compensation of Rs 41,000 in March. 1956. from the State of Bihar That presupposes that the approximate amount of compensation payable to the assessee must have been arrived at according to Section 33 of that Act. Not necessarily the whole of the amount of compensation payable to the assessee will be the value of his right to receive that compensation. Even though that will be an asset, its value is to be determined in accordance with the provision under Section 7 of the Act which provides that 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. The tribunal has remanded the case with a direction to the Wealth Tax Officer to determine on evidence first of all, what will be the amount of compensation payable to the assessee and then to estimate what would be the market value with reference to the manner in which the (sic) payable is designed by the Government. This was a pertinent course to be adopted. The right to receive compensation under the Bihar Land Reforms Act constituted an asset to be included in the net wealth of which value was to be determined according to Section 7 of the Act both for the assessment years 1957-58 and 1958-59 so far as the assessee was concerned. This disposes of one of the two questions referred.