# COMMISSIONER OF WEALTH-TAX, MADRAS v. SMT. MUTHUKRISHNA AMMAL

- **Citation:** [1969] 2 S.C.R. 1
- **Court:** Supreme Court of India
- **Decided:** 1968-09-06
- **Bench:** J. C. Shah, V. Ramaswami, A. N. Grover
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/commissioner-of-wealth-tax-madras-v-smt-muthukrishna-ammal-4484
- **Pages:** 6

## Headnote

Wealth-tax Act s. 2(e) (v)-"Asset"-Definition of-Unexpired period
of lease in excess of six years-Terminable in any year by notice from
either party-If an "asset" to be included in computation of wealth.
By two agreements of January 1, 1943
and January 1, 1945,
the
respondent obtained on lease from the
Government certain salt pans.
Each lease was to endure for 25 years but was liable to be determined by
notice on either side at the close of any salt manufacturing season. The
respondent sublet the rights under one lease for Rs. 15,000 per year and
under the other lease for Rs. 18,000 per year. In the course of the
respondent's assessment to wealth-tax for the assessment year 1959-60,
the Wealth-tax Officer calculated the value of the respondent's interest in
the salt pans for the unexpired period of the two leases and included it in
the computation of her net wealth. His order Was confirmed by
the
Appellate Assistant Commissioner but the Tribunal, in appeal, held that
the interest of the respondent in the salt pans was not an "asset", within
the meaning of s. 2(e)(v), and could not be included in the respondent's
net wealth. The High Court, upon a reference, confirmed the view taken
by the Tribunal.
On appeal to thls Court,
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HELD : Dismissing the appeal,
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Interest in property which ls available to the tax-payer for a period
not exceeding six years from the valuation date is not an asset within the
meaning df s. 2( e) and the value thereof cannot be included in the net
wealth of the assessee for the financial year relevant to the valuation date.
The interest of the lessee under each lease was precarious : it was liable
to be determined by notice by the Government
at the expiry of any
manufacturing season. The leasehold interest in the salt pans was therefore not available to the assessee for a period exceeding six years from
the valuation date. [4 C; 6 A]
There was no force in the contention that the expression "is available
to an assessee for
a period not exceeding the six years" in clause
s. 2(e) (v) means is and has been available to an assessee for the period
of six years before the date of valuation and that if interest in property
though revocable has remained unrevoked for more than six. years before
the valuation date, the interest would be an asset within the meaning
of s. 2(e). [4 E-F]
The terms of the clause ''from the date the interest vests in the
assessee" added after the expression "six. years" in clause 2(e) (v) by the
Wealth-tax (Amendment) Act, 1964 do not show that the amendment
was intended to be a parliamentary exposition of the meaning of the
original clause. [5 G]

## Text

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COMMISSIONER OF WEALTH-TAX, MADRAS
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v.
SMT. MUTHUKRISHNA AMMAL
September 6, 1968
[J. C. SHAH, V. RAMASWAMI AND A. N. GROVER, JJ.]
Wealth-tax Act s. 2(e) (v)-"Asset"-Definition of-Unexpired period
of lease in excess of six years-Terminable in any year by notice from
either party-If an "asset" to be included in computation of wealth.
By two agreements of January 1, 1943
and January 1, 1945,
the
respondent obtained on lease from the
Government certain salt pans.
Each lease was to endure for 25 years but was liable to be determined by
notice on either side at the close of any salt manufacturing season. The
respondent sublet the rights under one lease for Rs. 15,000 per year and
under the other lease for Rs. 18,000 per year. In the course of the
respondent's assessment to wealth-tax for the assessment year 1959-60,
the Wealth-tax Officer calculated the value of the respondent's interest in
the salt pans for the unexpired period of the two leases and included it in
the computation of her net wealth. His order Was confirmed by
the
Appellate Assistant Commissioner but the Tribunal, in appeal, held that
the interest of the respondent in the salt pans was not an "asset", within
the meaning of s. 2(e)(v), and could not be included in the respondent's
net wealth. The High Court, upon a reference, confirmed the view taken
by the Tribunal.
On appeal to thls Court,
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HELD : Dismissing the appeal,
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G
H
Interest in property which ls available to the tax-payer for a period
not exceeding six years from the valuation date is not an asset within the
meaning df s. 2( e) and the value thereof cannot be included in the net
wealth of the assessee for the financial year relevant to the valuation date.
The interest of the lessee under each lease was precarious : it was liable
to be determined by notice by the Government
at the expiry of any
manufacturing season. The leasehold interest in the salt pans was therefore not available to the assessee for a period exceeding six years from
the valuation date. [4 C; 6 A]
There was no force in the contention that the expression "is available
to an assessee for
a period not exceeding the six years" in clause
s. 2(e) (v) means is and has been available to an assessee for the period
of six years before the date of valuation and that if interest in property
though revocable has remained unrevoked for more than six. years before
the valuation date, the interest would be an asset within the meaning
of s. 2(e). [4 E-F]
The terms of the clause ''from the date the interest vests in the
assessee" added after the expression "six. years" in clause 2(e) (v) by the
Wealth-tax (Amendment) Act, 1964 do not show that the amendment
was intended to be a parliamentary exposition of the meaning of the
original clause. [5 G]
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1922 of
1967.
2
SUPREME COURT REPORTS
[1969] 2 S.C.R.
Appeal from the judgment and order dated September 4, 1964
of the Madras High Court in T. C. No. 237 of 1962 (Reference
No. 132 of 1962).
B. Sen, R. N. Sachthey and B. D. Sharma, for the appe!laint.
T. A. Ramachandran, for the respondent.
The Judgment of the Court was delivered by
Shah, J.
By two agreements dated respectively January 1,
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1943 and January 1, 1945, the respondent Muthukrishna Ammal
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obtained from the Government of India on lease certain salt pans.
Each lease was to endure for twenty-five years unless otherwise
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determined under the covenants of the indenture.
The right c
under the first lease was sublet by the respondent to one K. Nadar
in consideration of an annual payment of Rs. 15,000 and the right
under the second lease was sublet to Mettur Chemicals Ltd. in
consideration of an annual payment of Rs. 18,000.
The respondent made a return for the assessment year 1959-60
under the Wealth-tax Act of net wealth of Rs. 3,000 in India and
Rs. 2,64,500 in foreign countries.
The Wealth-tax Officer held
that the value of the interest of the respondent in the salt pans for
the unexpired periods of the two leases was liable to be included
in the computation of her net wealth.
V alning the leasehold
interest in the salt pans at the average rate of income received from
the last three years, for the unexpired terms, the Wealth-tax Officer
brought to tax in addition to the net wealth returned by the respondent an aggregate amount of Rs. 1,89,330. The order was
confirmed by the Appellate Assistant Commissioner.
But the
Income-tax Appellate Tribunal held that the interest of the respondent in the salt pans was not an "asset" within the meaning of
s. 2 ( e) ( v), for the interest of the respondent in the land was not
available to her for a period exceeding six years. The Tribunal
accordingly directed that the value of the leasehold interest in the
salt pans be deleted in the computation of the net wealth of the
respondent.
The Tribunal referred the following question to the High
Court of Madras for determination :
"Whether the leasehold interest of the assessee in the
salt pans is an "asset" within the meaning of s. 2(e) (v)
of the Wealth Tax Act, 1957, and its value is includible
in the net wealth of the assessee ?"
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The High Court of Madras held that the leasehold interest of the
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respondent in the salt pans was not an "asset" within the meaning
of s. 2 ( e )( v) of the Act and its value was accordingly not liable
to be included in the net wealth of the respondent.
The CommisJ
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C.W.T. V. MUTHUKR!SHNA (Shah, J.)
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sioner of Wealth-tax has aj)pealed to this Court with certificate
granted by the High Court.
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The provisions of the Wealth-tax Act, 1957, in force at the
relevant time may first be noticed.
Section 3 provides :
"Subject to the other provisions contained in this
Act, there shail
be charged for every financial year
commencing on and from the first day of April, 1957,
a tax (hereinafter referred to as wealth-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."
"Net wealth" is defined in s. 2 (m) as meaning "the amount by
which the aggregate value computed in accordance with the provisions of this Act of all the assets, wherever located, belonging
to the assessee on the valuation date, including assets required
to be included in this net wealth as on that date under this Act,
is in excess of the aggregate value of all the debts, owed by the
assessee on the valuation date, other than, . . . . . " The
expression "assets" occurring in the definition of "net wealth" is
defined in cl. ( e) of s. 2. It "includes property of every description, movable or immovable, but does not include- . . . . (v)
any interest in property where the interest is available to an
assessee for a period not exceeding six years".
The covenants of the two leases are in terms identical. The
following clauses in the leases are relevant in considering whether
the interest of the respondent is an "asset" within the meaning of
the Wealth Tax Act :
"I. The lease shall be for a period of twenty-five
years commencing from the 1st of January one thousand
nine hundred and forty-three provided that the lessor
or lessee shall be at liberty to determine the lease on
giving to
the other of them notice in writing at the
close of the salt ma1I1ufacturing season . . . . . .
2. On the expiry of the lease or its sooner determination as provided in clause 1 supra or clause 23 infra
the lessee shall leave the demised premises such in
order as it is consistent with the due performance of
this lease . . . . .
23. The lessee shall abide by the decision of the
Collector in case of any dispute arising between the
lessor and the lessee or of any difference of opinion as
to the interpretation of the terms of this lease of the
obligations thereunder and such decision shall be final
and binding on the lessee.
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SUPREME COURT REPORTS
[1969] 2 S.C.R •
24. Subject to the foregoing conditions the Jessee
shall continue to enjoy the leased land undisturbed for
a said term of twenty-five years.
In case, however,
there is any breach of any of the above conditions or
the lessee delays payment of any sum due to the lessor
for over two months from the date of its falling due or
in case the licence granted under clause 9 above is cancelled or forfeited for breach of any condition of such
licence the lessor may determine the lease forthwith."
Each lease was liable to be determined by notice on either side
.at the close of any manufacturing season.
The interest of the
lessee under each lease was precarious : it was liable to be deter-
.mined by notice by the Government at the expiry of any manufacturing season. The leasehold interest in the salt
pans was
therefore not available to the assessee for a period exceeding six
years from the v~luation date.
A Jessee's interest in land is undoubtedly an interest in immovable property and would normally
be au asset, unless within the meaning of s. 2 ( e) ( v) of the Act,
the interest in the property is available to the assessee for a period
not exceeding six years.
It was urged by counsel for the Revenue that since the respondent had enjoyed the rights under one lease for 16 years and in
the other lease for 14 years and on the valuation date both the
leases were outstanding, the rights were "assets" within the meaning
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of the Wealth:tax Act.
Counsel submitted that the expression
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"is available to an assessee for a period not exceeding six years"
in cl. ( v) of s. 2 ( e) means is and has been available to an assessee
for the period of six years before the date of valuation.
Counsel
says that if interest in property though revocable has remained
unrevoked for more than six years before the valuation date, the
interest would be an asset within the meaning of s. 2 ( e). We · F
are unable to agree with that contention. · The expression used
by the Parliament is "is available to an assessee for a period not
exceeding six years", and it must mean that the assessee though
'he has interest in property at the valuation date the interest will
remain available for a period not exceeding six years. If it is to
Temain available for six years or for a shorter period the interest
will fall within the exception : if it is to remain available for a
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period exceedin,g six years it will fall within the definition of
"assets" and its value will be liable to be included in the net
wealth of the assessee.
The terms of s. 4 of the Wealth-tax Act also throw some light
·on the problem.
That section prescribes certain classes of assets
which are liable to be included in the net wealth of an assessee.
The section, before it was amended by the Wealth Tax (Amendment) Act, 1964, provided:
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C.W.T. V. MUTHUKRISHNA (Shah, J.)
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" ( 1) In computing the net wealth of an individual,
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there shall be included, as belonging to him-
(5) The value of any assets transferred under an
irrevocable transfer shall be liable to be included in
computing the net wealth of the transferor as and when
the power to revoke arises to him.
Explanation.-For the purposes of this section the
expression "transfer'' includes any disposition,
trust,
covenant, agreement or arrangement, and "an irrevocable transfer" includes a transfer of assets which, by
the terms of the instrument effecting it, is not revocable
for a period exceeding six years or during the life-time
of the transferee."
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If any assets are held under an irrevocable transfer, i.e., under a
transfer which is not revocable for a period exceeding six years
or during the life-time of the transferee, the assets are liable to
be included in the net wealth of the transferor. It is implicit in
sub-s. (5) of s. 4 that if an asset is held under a transfer which
is revocable before the expiry of six years, the interest Of the
holder in the asset shall be included in the wealth of the transferor. If the transaction of lease in the present case was
between a private individual and the respondent, evidently by
virtue of s. 4 ( 5) the interest under the lease would have been
liable to be included in the net wealth of the transferor. We see
no reason to hold that because the transferor is the Government,
any different rule will apply in the case of inclusion of lands held
under a revocable transfer by the respondent from the Government.
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Counsel for the Revenue invited our attention to the amendment made in the Act by the Wealth Tax (Amendment) Act,
1964, in the definition of the word "assets" ins. 2(e) of the Act.
Relying upon the clause added by the Amending Act "from the
date the interest vests in the assessee" after the expression "six
years" in cl. 2(e) (v), counsel contended that this was intended
to be a parliamentary eXposition of the meaning of the original
clause.
We do not think that any such intention appears from
the terms of that clause.
Assuming that the exception in respect
of interest in property which is available to an assessee for a period
not exceeding six years from the date the interest vests in the
assessee is only to apply after the date of the amendment by the
Wealth Tax (Amendment) Act, 1964, that clause has no application and the terms of the section must be interpreted as they stood
at the appropriate valuation date which crystallized the charge of
wealth-tax for the appropriate assessment year. It is unnecessary
to refer to the amendment made by the same Amending Act in
SUPREME COURT REPORTS
[1969] 2 S.C.R.
the Explanation to s. 4 of the Act.
We are of the view that inteA
rest in property which is available to the tax-payer for a period
not exceeding six years from the valuation date is not an asset
within the meaning of s. 2 ( e) and the value thereof cannot be included in the net wealth of the assessee for the financial year
relevant to the valuation date.
The appeal therefore fails and is dismissed with costs.
.R.K.P.S.
Appeal dismissed .
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