# COMMISSIONER OF WEALTH TAX, MYSORE v. HER HIGHNESS VIJAYABA, DOWGER MAHARANI SAfIEB OF BHAVNAGAR PALACE, BHAVNAGAR & ORS

- **Citation:** [1979] 3 S.C.R. 545
- **Court:** Supreme Court of India
- **Decided:** 1979-03-09
- **Case number:** Civil APoeal Nos. 2170-2172 of 1972
- **Bench:** N. L. Untwalia, R. S. Pathak
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/commissioner-of-wealth-tax-mysore-v-her-highness-vijayaba-dowger-maharani-7647
- **Pages:** 6

## Headnote

Wealth Tax Act, 1957-S. 2(m)-By a family arrangcnu•nt assessce agreed
to pay certain szun to her younger son-The sum agreed to pay-If a debt owed
under s. 2(m)-Whether the undertaking to pay the sum an agreement without
const.leration.
Thi:: respondent's wealth was assessed to Wealth Tax under the Wealth Tax
Act, 1957 for three assessment years 1960·61, 1961-62 and 1962-63 the corresponding valuation dates being 31-12-1959, 31-12-1960 and 31-12-1961. On
14th May, 1953 the assessee wrote a letter to her younger son stating that his
late father expressed the wish that he (the second son)
should
be
paid
Rs. 50 lakhs out of the family properties and that to keep his promise and
elso to get peace of mind, if his elder brother did not pay the sum of Ro;;. 50
lakbs, she would pay such balance that remains unpaid. The elder brother
paU Rs. 20 lakhs.
The balance liability of Rs. 19 lakhs remained due and
continued to be due on all the three aforesaid valuation dates. It was finally
wiped off in February, 1962. On the question "whether, while assessing the
net weaHh of the respondent within section 2(m) of the Wealth Tax Act, the
sum of Rs. 19 lakhs was to be deducted" as debt owed by her, the Wealth
Tax Tribunal held in favour of the respondent.
The High Court held that the
sum of Rs. 19 lakhs constituted a debt owed by the assessee
and was
deductible under the Wealth Tax Act from the value of the total assets as on
31-12-1959.
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..
On appeal to this Court, the appellant argued (i) that the letter dated
14-5-1953 created no debt as the undertaking given by the respondent to her
son on his elder brother's failure to pay any portion ,Of
the sum was an
agreement without consideration and hence it was void and therefore it was
not cr.fvrceable at law on any of the valuation dates and could not be deducted; (ii) that the undertaking given by the
respondent in her letter dated
14-5-1953 was a contingent contract within the meaning of section 31 of the
Contrac: Act.
\
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Dismissing the appeal,
HELD : ( 1) Taking the totality of facts it was a case of family settlement or family arrangement which was binding on the parties. The respondent
a.greed to purchase peace for the family and to pay to her younger son the
amount which fell •hart of R•. 50 lakh• if her elder son did
not pay any
portion thereof. _It is well established that such a consideration is good considerafion which brings an enforceable agreement between the
parties and is
not hit by •ection 25. Even if it be held that the letter dated 14-5-1953 had
not the effect of bringing about the family arrangement or any binding arrange~
men bewteen the parties, their ~ubsequent conduct upto 12th September 1959
brought a concluded hmily arrangement. The respondent paid R•. 11 lakho
and reiterated her obligation to pay the balance in the shape of ornaments.
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546
SUPREME COURT REPORTS
(1979] 3 s.c.R.
A
That was net honoured by reason of which the younger son had a right tA>
enforce the family arrangement again~t his mother.
The
respondent would.
have been bound to pay the balance if a suit had been filed again.st her as
he bad refrained from going to the law court against his brother on
her
bringing about the family arrangement. [548 C--GJ
(2) Assuming that it was a contingent contract within the
mOO'lling of
B
s. 31 of the Contract act, such a contract under section 32 of the Contract Act,.
becomes enforceably by law when the future event contemplated in the continf
gent contract had happened.
The contingency in this case 'vas the liability of
't
the mother to pay a ceriain sum of n1oney on the failure by the elder son to
pay Rs. 50 lakhs or any part thereof. In that view, the liability of
the
~
mother became enforceable by law on the latter date, if not earlier.
[548 G-H, 549]
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Kesora1n Industries and Cotton Mills Ltd. v. Con1missioner of Wealth 1'ax
(Central), Calcutta, 59 J.T.R. 767; Standard Mills Co. Ltd. v. Commissioner
of Wealth Tax, Bombay, 63 J.T.R., 470; and Bo

## Text

•
545
COMMISSIONER OF WEALTH TAX, MYSORE
v.
HER HIGHNESS VIJAYABA, DOWGER MAHARANI SAfIEB OF
BHAVNAGAR PALACE, BHAVNAGAR & ORS.
March 9, 1979
[N. L. UNTWALIA AND R. S. PATHAK, JJ.]
Wealth Tax Act, 1957-S. 2(m)-By a family arrangcnu•nt assessce agreed
to pay certain szun to her younger son-The sum agreed to pay-If a debt owed
under s. 2(m)-Whether the undertaking to pay the sum an agreement without
const.leration.
Thi:: respondent's wealth was assessed to Wealth Tax under the Wealth Tax
Act, 1957 for three assessment years 1960·61, 1961-62 and 1962-63 the corresponding valuation dates being 31-12-1959, 31-12-1960 and 31-12-1961. On
14th May, 1953 the assessee wrote a letter to her younger son stating that his
late father expressed the wish that he (the second son)
should
be
paid
Rs. 50 lakhs out of the family properties and that to keep his promise and
elso to get peace of mind, if his elder brother did not pay the sum of Ro;;. 50
lakbs, she would pay such balance that remains unpaid. The elder brother
paU Rs. 20 lakhs.
The balance liability of Rs. 19 lakhs remained due and
continued to be due on all the three aforesaid valuation dates. It was finally
wiped off in February, 1962. On the question "whether, while assessing the
net weaHh of the respondent within section 2(m) of the Wealth Tax Act, the
sum of Rs. 19 lakhs was to be deducted" as debt owed by her, the Wealth
Tax Tribunal held in favour of the respondent.
The High Court held that the
sum of Rs. 19 lakhs constituted a debt owed by the assessee
and was
deductible under the Wealth Tax Act from the value of the total assets as on
31-12-1959.
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On appeal to this Court, the appellant argued (i) that the letter dated
14-5-1953 created no debt as the undertaking given by the respondent to her
son on his elder brother's failure to pay any portion ,Of
the sum was an
agreement without consideration and hence it was void and therefore it was
not cr.fvrceable at law on any of the valuation dates and could not be deducted; (ii) that the undertaking given by the
respondent in her letter dated
14-5-1953 was a contingent contract within the meaning of section 31 of the
Contrac: Act.
\
•
•
Dismissing the appeal,
HELD : ( 1) Taking the totality of facts it was a case of family settlement or family arrangement which was binding on the parties. The respondent
a.greed to purchase peace for the family and to pay to her younger son the
amount which fell •hart of R•. 50 lakh• if her elder son did
not pay any
portion thereof. _It is well established that such a consideration is good considerafion which brings an enforceable agreement between the
parties and is
not hit by •ection 25. Even if it be held that the letter dated 14-5-1953 had
not the effect of bringing about the family arrangement or any binding arrange~
men bewteen the parties, their ~ubsequent conduct upto 12th September 1959
brought a concluded hmily arrangement. The respondent paid R•. 11 lakho
and reiterated her obligation to pay the balance in the shape of ornaments.
A
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D
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F
G
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546
SUPREME COURT REPORTS
(1979] 3 s.c.R.
A
That was net honoured by reason of which the younger son had a right tA>
enforce the family arrangement again~t his mother.
The
respondent would.
have been bound to pay the balance if a suit had been filed again.st her as
he bad refrained from going to the law court against his brother on
her
bringing about the family arrangement. [548 C--GJ
(2) Assuming that it was a contingent contract within the
mOO'lling of
B
s. 31 of the Contract act, such a contract under section 32 of the Contract Act,.
becomes enforceably by law when the future event contemplated in the continf
gent contract had happened.
The contingency in this case 'vas the liability of
't
the mother to pay a ceriain sum of n1oney on the failure by the elder son to
pay Rs. 50 lakhs or any part thereof. In that view, the liability of
the
~
mother became enforceable by law on the latter date, if not earlier.
[548 G-H, 549]
c
D
Kesora1n Industries and Cotton Mills Ltd. v. Con1missioner of Wealth 1'ax
(Central), Calcutta, 59 J.T.R. 767; Standard Mills Co. Ltd. v. Commissioner
of Wealth Tax, Bombay, 63 J.T.R., 470; and Bombay Dyeing and Manufacturing Co. Lt. v. Commissioner of Wealth Tax, Bombay City-I, 93 J.T.R., 603,
distinguished and held inapplicable.
CIVIL APPELLATE JURISDICTION : Civil APoeal Nos. 2170-2172
of 1972
Appeals by Special Leave from the Judgment and Order dated'
22-7-1971 of the Mysore High Court in T.R.C. Nos. 3, 4 and 5 of 1967.
B. B. Ahuja and Miss A. Subhashini for the Appellant.
E
s. T. Desai, I. N. Shroff and H. S. Parihar for the Respondenl~.
F
G
The Judgment of the Court was delivered by
UNTWALIA J.-These are three appeals by special leave filed by the
Commissioner of Wealth Tax, Mysore from the Judgment of the, Mysore
(now Karnataka) High Court.
The assessee is the Dowger Malmrani
of Gondal.
Her husband, His Highness Bhojjrajji Maharaja Saheb of
Gonda!, died intestate on 31. 7 .1952 leaving considerable moveable and
immoveable properties.
Certain disputes and differences arose after
his death between his two ~ons namely Maharaja Vikramsinghji and
his youn~er brother Shivaraj Singhji in· respect of the assets left by the
late Maharaja Saheb.
The younger brother was contemplating legal
proceedings against his elder brother. Their mother intervened. The
idea of litigation, thereupon, was dropped because the assessee gave
a letter dated 14.5.1953 to Shivaraj Singhji stating therein :-
"Your father had exprelised in the presence of many people
that he will give you rupees fifty lakbs.
To keep up his
H
words and promise and also that I should get peace of mind I
am writing to you that. if your brother Vikramsinghji Maharaj a of Gondal does not give you the full amount, then you
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c. w. T. v. VIJAYABA (Untwalia, I.)
547
must get the balance of amount from me.
That is my sincere
desire.
I will also press Vikram that he should give you
the amount of Rs. fifty lakhs.
Vikram Singhji paid only Rs. 20,00,000/- to Shivaraj Singhji. The
latter, therefore, claimed the balance amount of Rs. 30,00,000/- from
the assessee on the basis of her Jetter dated 14.5.1953.
On or about
12.9.1959, pnrsnant to her commitment made in the letter aforesaid,
the assessee transferred War Stock valued at Rs. 11,00,000/- to Shivaraj Singhji and also agreed to hand over certain ornaments in full settlement of his claim.
The ornaments were however not given.
That
led to disputes between the mother and the son but eventually
they
were also settled on 22.2.1962 which settlement was evidenced by a
document setting out all the relevant facts of the history of the dispute.
By virtue of this settlement a sum of Rs. 10,00,000/- was paid by the
a·ssessee to Shivaraj Singhji.
The assessee's wealth was assessed to wealth-tax under the WealthTax Act, 1957 for the three assessment years in question viz. 1960-61,
1961-62 and 1962-63.
The corresponding valuation dates of the 'said
assessment years are 31.12.1959, 31.12.1960 and 31.12.1961.
It
would be noticed that the assessee, under the arrangement arrived at
between the parties, became liable to pay the balance of the amount of
Rs. 30,00,000/- to Shivaraj Singhji as Vikramsinghji, out of the sum of
Rs. 50,00.,000/- mentioned in the letter dated 14.5.1953, paid only
Rs. 20,00,000f-.
The assessee succeeded in wiping off her liability
to the extent of. Rs. 11,00,000/- on 12.9.1959 by transfer of War
Stock.
The balance of the liability, i.e., Rs. 19,00,000/- remained due
and continued to be due on all the three valuation dates aforesaid. It
--( / could be wiped off by a further settlement only in February, 1962. In
,
respect of the three assessment years in question, however, a question
arose as to whether while a~sessing the net wealth of the assessee within
the meaning of clause {m) of section 2 of the Wealth-Tax Act the said
sum of Rs. 19,00,000/- was to be deducted.
The Wealth-Tax Tri-
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bunal held in favour of the assessee.
At the instance of the Revenue
for all the three years a common question of law was referred to the
High Court for its opinion.
The questions being in identical terms it
would suffice to quote the question with respect to the assessment
year 1960-61.
It reads as follows :-
"Whether on the facts and circumstances of the case, the
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sum of Rs. 19 lakhs could constitute a debt owed by the assesB
see and deductible under the Wealth-Tax Act from the value
of the total assets as on 31.12.1959 ?"
548
SUPREME COURT REPORTS
[1979] 3 s.c.R.
t:I
A
The High Court has answered the question in the affirmative, in
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favour of the assessee and against the department.
Hence this appeal.
Mr. Ahuja appearing in support of the appeal contended that
by
the letter dated 14.5.1953 no debt was created as the undertaking given
by the assessee to her son agreeing to pay the deficit in respect of
Rs. 50,00,000/- on his elder brother's failure to pay any portion of the
sum was an agreement without consideration and hence under section
25 of the Contract Act it was void and was not saved by any of the exceptions mentioned therein. He, therefore, contended that it was not an
enforceable liability on any of the valuation dates and could not be deducted from the valuation of the assessee's wealth.
In our opinion
the argument is not sound.
Taking the totality of the facts as found
by the Tribunal and mentioned in the impugned judgment of the High
Court it was a case of family settlement or family arrangement which
iS binding on the parties concerned.
The asse6see agreed to purchase·
peace for the family, and to pay to her son the amount which fell short
of Rs. 50,00,000/- if her elder son did not pay any portion the:reof. It
is well established that such a consideration is a good consideration
which brings, about an enforceable agreement between the
parties.
Section 25 of the Contract Act does not hit this.
It may be further pointed out that even if it be held that the letter
dated 14.5.1953 had not the effect of
bringing about the
family
arrangement and any binding agreement between the parties, their subsequent conduct upto 12.9.1959 brought about a concluded family
arrangement.
Vikramsinghji paid Rs. 20,00,000/-.
Out of
the
balance of Rs. 30,00,000/- the assessee. discharged her liabilities to the
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extent of Rs. 11,00,000/- and reiterated her obligation to pay foe bala- '-,.._
nee of Rs. 19,00,000/- in the shape of ornaments.
That was not honT
oured.
Shivaraj Singhji had a right to enforce the family arrangement
'
against his mother, as arrived at partly in writing and partly orally as
evidenced by the conduct of the parties.
The assessee would have been
bound to pay Rs. 19,00,000/- if a suit had been filed against her by
Sivaraj Singhji as he had refrained going to the law court from against
his brother on her bringing about the family arrangement.
Mr. Ahuja then submitted that at best the undertaking given by the·
assessee in her letter dated 14.5.1953 was a contingent contract within
the meaning of section 31 of the Contract Act
Even so, under section.
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32 such a contract becomes enforceable by law when future even'
contemplated in the contingent contract has happened. In this case the
cotingency was the liability of the mother to pay a certain sum of money
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c. w. T. v. VIJAYABA (Untwalia, J.)
on the failure by her elder son to pay Rs. 50,00,000/- or any part thereof.
This did happen sometime between 14.5.1953 and 12.9.1959.
In that view of the matter, if not earlier the liability of the mother became enforceable by law on the latter date.
Learned counsel for the appellant citod three decisions of this Court
to support his argument viz.-Kesaram Industries and Cotton Mills
Ltd. v. Commissioner of Wealth-Tax (Central)
Calcutta;(')
Standard Mills Co. Ltd. v. Commissioner of Wealth-Tax, Bombay(') and
Bombay Dyeing and Manufacturing Co.
Lt~ v. Commissioner of
Wealth-Tax, Bombay City-I('). None of them is quite apposite on
the point at issue before us.
In the case of Kesoram Industries it was
held that "debt owed" within the• meaning of section 2(m) of the Wealthtax Act, 1957 could be defined as the liability to pay in praesenti or In
futuro an ascertainable sum of money. It was held that a liability to
pay income-tax was a present liability though the tax became payable
after it was quantified in accordance with ascertainable data.
Subba
Rao J .; a·s he then was, delivering the majority opinion said at page
780 :-
"The said decisions also accept the legal position that a
liability depending upon a contingency is not a debt in praesenti or in futuro till the contingency happened. But if there
is a debt the fact that the amount is to be a-scertained does
not make it any the less a debt if the liability is certain and
what remains is only the quantification of the amount.
In
short, a debt owed within the meaning of section 2(~) of
the Wealth-tax Act can be defined as a liability to pay in
praesenti or in futuro an ascertainable sum of money.
The other two decisions of this Court were concemod with
th~
question as to whether the liability of the assessee to pay gratuity to itil
employees on determination of employment was a mere contingent liability which arose only when the employment of the employee was determined by death, incapacity, retirement or resignation and whether it
could be deducted :IB a debt in computing the net wealth of the asscssee.
The answer given was against the assesse'e.
In the present case we
have held that the liability of the assessee was created
by the family
arrangement arrived at between the parties and even if it was a contingent liability the contingency did bawen and the asse~see became liable
(1) S9 I.T.R. 767
(2) 63 I.T.R. 470
(3) 93 I.T.R. 603
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550
SUPREME COURT REPORTS
[1979] 3 s.c.R.
A
to pay the amount a·s a debt before 12.9.1959, which is anterior to the
relevant valuation dates.
The sum of Rs. 19,00,000/- was a subsisting debt on the said valuation dates.
B
For the reasons stated above, we hold that there is no merit in this
appeal.
It is accordingly dismissed with costs.
N.K.A.
Appeal dismissed .
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