# LAKSHMI KANT IHA v. COMMISSIONER OF WEALTII TAX BIHAR AND ORISSA

- **Citation:** [1973] 3 S.C.R. 973
- **Court:** Supreme Court of India
- **Decided:** 1973-04-16
- **Case number:** Civil Appeal No. 296 of 1970
- **Bench:** K. S. Hegdb, H. R. Khanna
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/lakshmi-kant-iha-v-commissioner-of-wealtii-tax-bihar-and-orissa-6596
- **Pages:** 14

## Headnote

We<1/tlr Tax Act 1951, s. 5(1) VIII and 5(l)XV-ls jewellery for personal use exempted-Whefher brokerage charges to be excluded and right
to compensation included in the net wealth of the assessee.
The assessee, former Maharaja of Darbhanga filed a return for the
assessment year 1957-58 declaring his net wealth of more than two and
half crores. A revised return was filed subsequently showing a lesser
amount. The wealth-tax officer determined the net wealth of the assessee
to be more than four and half crores.
The assessee held shares and stocks
in
various
companies. The
assessee gave correct valuation of those shares but claimed a deduction
of more than 2 lakhs by way of brokerage which he would have to pay lf
those shar .. were sold in the open market. Further, the assessee claimed
deduction from the net wealth of the value of jewellery intended for personal use.
Thirdly, the assessee claimed deduction of more than 36
Iakhs. payable to him as compensation by the Government for acquiring
his Zamindari l'State, on the ground that it was not known as to when and
in what manner the amount would be paid.
-
The wealth-tax officer rejected all his claims and after estimating the
value of compensation to be 75 per cent of its face value, Rs. 27,65,564
was added to the total wealth of the assessee.
·
On appeal, the Appellate Assistant Commissioner affirmed the decision
of the wealth-tax. officer.
The Tribunal
also rejected the claims of the
assessee so far as the brokerage commission and the jewellery was concerned. It further held that the valuation of the bonds should be deter·
mined to be-65 per cent of the face value. On a reference to the High
Court, alt three questions were answered against the assessee. On appeal
before this C-0urt. all those three points were raised.
Partly allowing the appeal,
HELD: (i) As regards the question relating to the jewellery, it was
decided in Commissioner of"Wealth Tax, Gujarat v. Arundhati Balkrishna,
[1970) 77, J.T.R. 505, that section 5(1)(XV) dealt with
jewellery in
general whether intended for personal us0 of the assessee or not while
jewellery intended for personal use of the assessee came within the scope
of section 6(l)(viii) of the Act. It was accordingly held that the value
of jewellery of the assessee intended for ~rsonal use of the assessee
would stand excluded under section 5(1)(vili) of the Act in computation
df the net wealth of the assessee. In the present case, in absence of any
plea that the jewellery was not intended for the assessee's personal use
and in absence of any retrospective operation of the F"mance Act of 197i
excluding jewellery from the purview of cl. VIII of Sec. 5 (I) of the
Act, the value of the jewellery for his personal use will not be included
in the net wealth of the assessee.
[9770)
(ii) Regarding brokeragero~sion section 7(1) df the Act provides
that subject to any rule made in this behalf, the value of any asset shall be
973
1174
SUPREME COURT REPORTS
[1973) 3 S.C.R.
estimated to be the price which in the opinion of the wealth-tax officer
would fetch if sold in the open market.
There is nothing in the
language of Sec. 7(1) of the Act which permits any deduction on ·account
of the expenses of sale which may be borne by the assessee. The val~e
aecording to Sec. 7 (I) has to be the price which the asset would fetch 1f
sold- in the open market.
Therefore, so far as the construction of Sec.
7(1) of the Act is concerned, in view of its plain language, there is no
scope of excluding the expenses of sale of the asset from the price which
the asset would fetch if sold in the open market. (980C, DJ
Duke of Buccleuc/1 v. Indian Revenue Commissioner, H967] A.C. 506,
referred to.
(iii) As regards inclusion
of the compensation
receivable
by the
assessee from the Government, sec. 32(2) of the Bihar Land Reforms
Act, 1950 provides that the amount of compensation payable in terms of
a Compensation
Assessment-roll shall be paid in cash or in bonds or
partly in cash and partl

## Text

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LAKSHMI KANT IHA
v.
COMMISSIONER OF WEALTII TAX BIHAR AND ORISSA
April 16, 1973
[K. S. HEGDB AND H. R. KHANNA, JJ.]
We<1/tlr Tax Act 1951, s. 5(1) VIII and 5(l)XV-ls jewellery for personal use exempted-Whefher brokerage charges to be excluded and right
to compensation included in the net wealth of the assessee.
The assessee, former Maharaja of Darbhanga filed a return for the
assessment year 1957-58 declaring his net wealth of more than two and
half crores. A revised return was filed subsequently showing a lesser
amount. The wealth-tax officer determined the net wealth of the assessee
to be more than four and half crores.
The assessee held shares and stocks
in
various
companies. The
assessee gave correct valuation of those shares but claimed a deduction
of more than 2 lakhs by way of brokerage which he would have to pay lf
those shar .. were sold in the open market. Further, the assessee claimed
deduction from the net wealth of the value of jewellery intended for personal use.
Thirdly, the assessee claimed deduction of more than 36
Iakhs. payable to him as compensation by the Government for acquiring
his Zamindari l'State, on the ground that it was not known as to when and
in what manner the amount would be paid.
-
The wealth-tax officer rejected all his claims and after estimating the
value of compensation to be 75 per cent of its face value, Rs. 27,65,564
was added to the total wealth of the assessee.
·
On appeal, the Appellate Assistant Commissioner affirmed the decision
of the wealth-tax. officer.
The Tribunal
also rejected the claims of the
assessee so far as the brokerage commission and the jewellery was concerned. It further held that the valuation of the bonds should be deter·
mined to be-65 per cent of the face value. On a reference to the High
Court, alt three questions were answered against the assessee. On appeal
before this C-0urt. all those three points were raised.
Partly allowing the appeal,
HELD: (i) As regards the question relating to the jewellery, it was
decided in Commissioner of"Wealth Tax, Gujarat v. Arundhati Balkrishna,
[1970) 77, J.T.R. 505, that section 5(1)(XV) dealt with
jewellery in
general whether intended for personal us0 of the assessee or not while
jewellery intended for personal use of the assessee came within the scope
of section 6(l)(viii) of the Act. It was accordingly held that the value
of jewellery of the assessee intended for ~rsonal use of the assessee
would stand excluded under section 5(1)(vili) of the Act in computation
df the net wealth of the assessee. In the present case, in absence of any
plea that the jewellery was not intended for the assessee's personal use
and in absence of any retrospective operation of the F"mance Act of 197i
excluding jewellery from the purview of cl. VIII of Sec. 5 (I) of the
Act, the value of the jewellery for his personal use will not be included
in the net wealth of the assessee.
[9770)
(ii) Regarding brokeragero~sion section 7(1) df the Act provides
that subject to any rule made in this behalf, the value of any asset shall be
973
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SUPREME COURT REPORTS
[1973) 3 S.C.R.
estimated to be the price which in the opinion of the wealth-tax officer
would fetch if sold in the open market.
There is nothing in the
language of Sec. 7(1) of the Act which permits any deduction on ·account
of the expenses of sale which may be borne by the assessee. The val~e
aecording to Sec. 7 (I) has to be the price which the asset would fetch 1f
sold- in the open market.
Therefore, so far as the construction of Sec.
7(1) of the Act is concerned, in view of its plain language, there is no
scope of excluding the expenses of sale of the asset from the price which
the asset would fetch if sold in the open market. (980C, DJ
Duke of Buccleuc/1 v. Indian Revenue Commissioner, H967] A.C. 506,
referred to.
(iii) As regards inclusion
of the compensation
receivable
by the
assessee from the Government, sec. 32(2) of the Bihar Land Reforms
Act, 1950 provides that the amount of compensation payable in terms of
a Compensation
Assessment-roll shall be paid in cash or in bonds or
partly in cash and partly in bonds. Therefore, as soon as the estate vests
in the State, the proprietor or a tenure-holder has the right to get com·
pensation and this right to get compensation comes under the definition
"assets" as given in sect\on 2(e) of the Wealth Tax
Act.
[982D-E,
983 DJ
Maharajkumar Kamal Sin'gh v. Commissioner of Wealth Tax, [1967]
65 J.T.R. 460, referred to.
(iv) As would appear from the order of tl!e Tribunal,
the value or
compensation payable under the Bihar Land Reforms Act has been estimated for the purpose of wealth-tax to be 65 per cent of the amount of
compensation determined.. There is no .cogent ground to interfere in this
regard.
[986A]
·
Commissioner of Wealth Tax v. U. C. Mahatab," H970] 78 J .. T.R. 214,
discussed and distinillished.
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 296 of
1970.
Appeal by certificate from the judgment and order dated
February 28, 1968 of the Patna High Court in Tax Case No. 8
of 1966.
.....
R. J. Ko/ah and I. N. Shroff, for the appellant.
F. S. Nariman, Addl. Solicitor-General of India, T. A. Ramachandran, S. P. Nayar and R. N. Sachthey, for the respondents.
The Judgment of the Court was delivered by
KHANNA, J. This appeal on certificate is directed against the
judgment of Patna High Coun whereby that court answered the
following three questions referred to it under section 27 of the
Wealth Tax Act, 1957 (Act No. 27 of 1957) (hereinafter referred
to as the Act) against tithe assessee :
"(1 ) Whether in comuting the market value of the
shares the assessee is entitled to the deduction of a sum
of Rs. 2,30,546 by way of brokerage commission;
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L. K. JHA v. C.W.T. (Khanna,/.)
( 2) Whether on a true. construction of section
:S(l)(viii) and S(l)(xv) of the Wealth Tax Act, the
assessee is entitled to the exclusion of the value of
jewellery arnoilnting to Rs. 27,27,330 from the computation ot his total wealth?
( 3) Whether
any
part
of.
the
amount
of
Rs. 36,87,419 fixed as compensation payable to the
assessee under the Bihar Land Refonns Act is liable for
inclusidn in the total wealth of the assessee?"
975
The assesse was former Maharajadhiraja of Darbhanga. The
matter relates to the assessment year 1957-58, the relevant valua·
tion date for which was March 31, 1957. The assessee filed a
return on April.22, 1958 declaring a net wealth of Rs. 2,77,46,489.
A revised ·return was filed subsequently showing !he total weal!h
to be Rs. 2,69,58,130. The Wealth Tax Officer determined the
net wealth of the assessee to be Rs. 4,57,85,996.
The as5essee~ileld shares and
stocks in various limited
D
companies. In · tbe return filed by him the assessee gave correct
valuation of those shares and stocks as given in the stock exchange
quotations and. the quotations furnished by well-known brokers,
but he claimed a deduCl!ion of a sUlll of Rs. 2,30,546 by way of
brokerage. It was contended on behalf o~ the assessee that in
effecting the sales of the shares and stocks, bl'okerage would have
E to be paid. The Wealth Tax Officer disallowed the claim in this
respect on the ground that there was no provision for deducting
the broker&,Ke cotnmisslon.
In Part IV of the return filed by the assessee, he mentioned
'the value of. jewellery intended for personal use to be Rs. 27,27,330.
It was claimed that as the said jewellery was intended for personal
r
uso, it should not be taken into account for com.puting the total
wealth of. the assessee. The assessee sought to bring his case under
section 5(1)(viii) of the Act. The Wealth Tax Officer rejected
this claim of the assessee on the ground that the aforesaid clause
did not cover jewellery.
The assessee had held zamindari estate which was acquired
G by the Government under the Bihar Land Refonns Act.
The
as5essee was to receive a sum of Rs. 36,87,419 from tbe Government of. Bihar as compensation in that connection. The assessee
claimed that the compensation payable to him could not be
· include~ irt his total wealth because it was not known as to when
and in what manner the amount would be paid. The Wealth Tax
'II
Officer held that the right to receive compensation represented a
valuable asset which had to be included in the total wealth of the
assessee.
As the whole of the compensation had not yet been
paid up to the date of the valuation, the .Wealth Tax Officer esti-
, - .
976
SUPREME COURT REPORTS
[1973] 3 s.c.R.
. mated the value of the compensation to be 75 per cent of its
face value. Rs. 27,65,564 were accordingly included on that
account in the total wealth of the assessee.
On appeal the Appellate Assistant Commissioner affirmed the
decision of the Wealth Tax Officer on the three questions mentioned above. The Appellate Assistant Commissioner also held that
the items of jewellery could be considered only
under section
5 ( 1 )(xv) oi the Act and not under any other provision.
On
further appeal to the Income Tax Appellate Tribunal, the Tribunal
rejected the claim of the assessee for deduction on account of
brokerage commission.
So far as the jewellery was concerned,
the Tribunal dealt with the submission made on behalf of the
assessee that clause (xv) of section 5 ( 1 ) of the Act had been
deleted by the Finance Act of 1963 and o~rved that as long as
that clause was in the statute book, that clause · governed the
exemptions granted by section 5 in preference to clause (viii).
The Tribunal consequently rejected the claim of the assessee in
respect of the jewellery.
As regards the compensa1tion payable
under the Bihar Land Reforms Act to the assessee, contention was
raised on behalf of the assessee that the market value of the
compensation bonds was about 50 per cent of its face value. The
Tribunal observed in this connection that the value was generally
estimated at 65 per cent oi the amount of compensation determined
by the Compensation Officer. It was accordingly held that the
valuation of the bonds should be determined to be 65 per cent of
the face value.
The questions reproduced above were thereafter
referred to the High Court at the instance of the assessee.
The High Court while dealing with the first qeustion, observed
that in estimating the value of an asset regards must be had to
the value it would fetch. The word "fetch", in the opinion of the
High Court, must mean the quoted price only and brokerage and
other inevitable expenses would have to be ignored. On question
No. (2), the High Court expressed the opinion that the jewellery
was outside the scope of clause (viii) of section 5(1) of the Act
and could be dealt with only under clause (xv).
As
regards
question No. (3), the High Court relied upon its earlier decision
in the case of Maharajkumar Kamal Singh v. Commissioner of
Wealth Tax.(') It was observed that merely because the amount
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of compensation payable to the assessee had not yet been paid and
there was likely to be much delay in paying the same, the said
amount could not be deducted from the assets for the purpose of
the Act. Questions ( 1 ) and ( 2) were accordingly answered in the · ll
negath·e while question No. (3) was answered iii the affinuative.
(1) (1967] 65 I. T. R. 460.
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L. K. JHA v. c.w.T. (Khanna,/.)
977
In appeal before us Mr. Kolah on behalf of tl;te appellant has
assailed the correctness of the answers given by the High Court on
all the three questions. As against that, the learned Additional
Solicitor General has canvassed for the correctness of the judgment
of the High Court so far as the answers to questions ( 1 ) and ( 3}
are concerned.
As regards question No. (2), the Additional
Solicitor General has made certain submissions to which reference
would be made hereafter.
We may at the .outset deal with question No. (2) relating to
the jewellery. As mentioned earlier, the High Court took the view
that as jewellery was dealt with specLfically under clause (xv)
of section 5 (I) of the Act, the jewellery would be outside the
scope of clause (viii) altogether. This view of the High Court
cannot be sustained because of the decision of this Court in the·
case of Commissioner of Wealth Tax, Gujarat v. Arundhati Ba/-
Krishna.(') It was observed in that case by this Court that section
5 (I )(xv)
dealt with jewellery in general whether intended for
personal use of the assessee or not, while jewellary intended for
personal use of the assessee came within the scope of section
5 (1 )(viii) of the Act. It was accordingly held that the value of
jewellery of the assessee intended for personal use of the assessee
would stand excluded under section 5 (1) (viii) of the Act in· the
computation of the net wealth.
The learned Additional Solicitor
General has frankly conceded that in view of the aforesaid deci~ion
of this Court, he cannot support the view taken by the High Court
in the respect. It has, however, been sutlmitted by him that we
should remand the case with a view to ascertain as to how much
' of the jewellery in question was intended for the personal use of
the assessee.
We find it difficult to accede to tltls contention.
The matter is rather old as it relates to the assessment
year
1957-58. The case of the assessee before the Wealth T-ax Officer
was that the entire jewellery worth Rs. 27,27,330 was intended
for his personal use and should not be included in the total wealth.
The Wealth Tax Officer disallowed the claim of the assessee irr
this respect on the ground that the items of jewellery were covered
by caluse (xv) and not by clause (viii) of section 5(1) of the
Act. The claim of the assessee that the jewellery in question was
intended for the personal use of the assessee was not rejected. No
plea was also raised in appeal before the Appellate Assistant
Commissioner or the Tribunal that the jewellery was not intended
for the personal use of the assessee. It, therefore, cannot be said
on the 11eord that the claim of the assessee that the jewellery in
question was intended for his personal use has been controverted.
In the circumstances, we must proceed on the assumption for the
purpose of the assessment during the- relevant year. that
the
jewellery was intende.~. for the personal use of the assessee.
(!) [19701 77 I. T. R. 505.
978
SUPREME COURT REPORTS
[1973] 3 s.c.R.
It may be mentioned that jewellery has been excluded by section
32 ol the Finance (No. 2)Act of 1971 (Act 32 of 1971) from
the purview of clause (viii) of section 5(1) of the Act with effect
from April 1, 1963. This amendment made in clause (viii) would
not make any material difference because the said amendment is
to operate with effect from April 1, 1963, while. we are dealing
with the assessment year 1957-58. As such, the said amendment
.can oblviously not apply to the assessment in question.
Question No. (1), as would appear from the above, relates to
1he claim of the assessee for deduction on account of brokerage
.commission from the value of shares and stocks held by hini. The
·stand which has been taken on behalf of the assessee is that as
:and when he sells the shares and stocks in question, he would have
'to pay brokerage commission.
As such, it is urged
that in
,computing the value of this asset, the price which it would fetch
1n the market should be reduced by the brokerage which would
'have to be paid on account of the transaction of the sale. We find
jt diffioult to accede to this contention. Section 7 ( 1) of the Act
I.eads as under :
H$ubject to any rules made in this behalf, the value
of any asset, other than cash, for the purposes of this
Act, shall ble estimated to be the price which in the
opinion of the Wealth-tax Qfficer it would fetch if sold
in the open market on the valuation date."
'Bare readinR of the section makes it plain that subject to any
rules which may be made in this behalf, the value ol the assets,
·other than cash, has to be the price which the assets,
in the
:opinion ol the Wealthtax Officer, woqld fetch in the open market
.on the valuation date. It would,
therefore.
follow
that
in the absence of any rule prescribing a different criterion, the
·value of an asset, other than cash, should be taken to be the price
which it would fetch if sold in the open market on the valuation
date.
No rules prescribing a different criterion in respect of the
·value of quoted stocks and shares have been brought to our notice.
Rule 1-C of the Wealth-tax Rules relates 'to the market value of
unquoted preference Shares, while rule 1-D of the said rules
-relates to market value of unquoted equity shares of companies
-other than investment companies and managing agency• companies.
The value of the stocks and shares in question, in the cireum.
stances, would have to be estimated to be the price which they
would fetch if sold in the
open market on the
valuation
.date. The authorities concerned under the Aot for this purpose
·accepted the valuation as given in stock exchange quotations and
·the quotations furnished by "1\'ell-known brokers. No objection. can
be taken to this mode of valuation. Indeed, this was the mode
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L. K. JHA v. C.W.T. (Khanna,/.)
979
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which had been adopted by the assessee himself in the retut11
filed by him.
There is nothing in the language of section 7 ( 1) of the Ac\
which permits any deduction on account of the exp11nses of sale
8
which may be borne by the assessee if he were to sell the asset
in question in l)ie open market. The value according to section
7 ( 1 ) has to be the price which the asset would fetch ii sold in
the open market. In a good many cases, the amount which the
vendor would
receive would be less than the price fetched
by the asset. The vendor may, for example, have to pay for the
brokerage ·commission or may have to incur other expenses for
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effectuating the sale. It is not, however, the amount which
the vendor would receive after deduction of those expenses but
the price which the asset would fetch when sold in the open
market as would constitute the value of the asset for the purpose
of section 7 (1 ) of the Act. To accede to the contention
advanced on behalf of the appellant would be reading in section
D 7 (1 ) the words "to the asses see' after the words "it would fetch",
although the legislature has not inserted those words in the statute.
Sm:h a course would not be permissible unless there is anything in
the relevant provisions which may show that the intention of
the legislature was that the value of an asset would be the price
fetched after ded11cting the sale expenses.
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It, no doubt, appears to be somewhat harsh that in computing the value of an asset only the ·price it. would fetch if sold
m the open market bas to be taken into account and the expenses
which would have to be l:llOrne in making the ~ale have to be
excluded from consideration, This, however, is a matter essentially for the legislature. No resort can be made to an equitable
principle for there is no equity about a tax.
So far as the
construction of section 7 ( 1) of the Act is concerned, in view
of its plain language, there i~ no escape from the conclusion that
the expenses in effecting the sale of the asset in the open market
cannot be deducted.
The material part of the language of section 7 ( 1) of the
Wealth-tax Act, 1957 is similar to that of sub-section (1) of
section 3 6 of the Estate Duty Act which was J:>rougbt on the
statute book elidier in 1953. Sub-section. (1) of section 36
of the Estate Duty Act reads !IS under :
" ( 1) Tl1e principal value of any property shall be
estimated to be the price which, in the opinion of
the Controller, it would fetch if sold in the open inarket
at the time of the deceased's death."
980
SUPREME COURT REPORTS
(1973] 3 S.C.R.
Section 48 of the Estate Duty Act was as under :
"Where the Controller is satisfied, that any additional expe~se in administering or in realising property
has. been incurred by reason of the property Ueing
situate out of India, he may make an allowance from
the value of the property on account of such expense
not exceeding in any case five per cent on the value
of the property."
On account of the similarly in language of the material parts
of section 7 (1) of the Wealth Tax Act and section 36( 1) of the
Estate Duty Act, the value cf on asset, other than cash, for the
purpose of. section 7 (1) of the Wealth Tax Act should tie the
same as its value for the purpose of section 36(1). of the Estate
Duty Act. Section 48 of the Estate Duty Act reproduced above
allows a deduction up to 5 per cent on account of expenses for
administring or realising property situated out of India in computing the value of that property. It would follow from
the
above that where the legislature intended that
allowance
or
deduction should be made from the value of property, it made
an express provision to that effect.
The fact that no provision
was made in respect of expenses which may have to be borne by
the assessee in effecting the sale of an asset shows that in computing the value of an asset, such expenses cannot be deducted from
the price which the asset would fetch if. sold in the open market.
Section 36 ( 1) of the Estate Duty Act was based upon section
7 ( 5) of the U.K. Finance Act, 1894 and section 60(2) of the
U.K. Finance Act, 1910, while section 48 of the Estate Duty
Act was based upon section 7(3) of the U.K. Finance Act, 1894.
According to section 7(5) of the U.K. Finance Act, 1894, "the
· principal value of any property shall be estimated to be the price
which, in the opinion of the commissioners, such property would
fetch if sold in the open market at .the time of the death of the
deceased". Section 60(2) of the U.K. Finance Act, J910 provides that "in estimating the principal value of any property
under section 7 ( 5) of the principal Act. . . -the commissioners
shall fix the price of the property according to the market price
at the time of the death of the deceased, and shall not make any
reduction in the estimate on account of the estimate being made
on the assumption that the whole property is to ~ placed on the
market at one and the san1e time". In the context of the above
provisions, it has been observed on page 393 of Green's Death
Duties, Sixth Edition :
"The price which property 'fetches' is the gross price
paid by the purchaser, without deduction for the vendor"s
costs and expenses. This is so, even where the property
is subject to a trust for sale. But if the property to be
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valued is merely a share in an unadministered estate, or
in the proceeds of sale of trust property which must be
realised for the purpose of distribution, the expenses of
the executors or trustees under the old title should be
taken into account."
98 I
The matter has been dealt with in Dymond's Death Duties,
Forteenth Edition,page 569 in the following words :
"The price which the property fetches js the gross
sale price, without deduction for the costs of sale, except
that, if the property is part of an unadministered estate
or a share of property subject to a trust already in
operation which involve~ conversion, or if the property
consists of certified chattels of national, etc., interest
(see P. 868), allowance for costs may be made."
The House of Lords had to deal with this aspect of the matter
in the case of Duke of Buca/euch v. Inland Revenue Commissioners.(')
After referring to section 7(5) of the U.K. Finance
Act, 1894 Lord Reid observed:
"I am confirmed in' my opinion by the fact that the
Act permits no deduction from the price fetched of the
expenses involved in the sale (except in the case of
property abroad under sub-section (3))."
E
Lord Morris in this context observed:
"The value of a property is to be estimated to be the
price which it would 'fetch' if sold in the open market at
, the time of the death of the deceased. This points to the
price which a purchaser would pay. The net amount that
a vendor would receive would be less. There would be
F
costs of and incidental to a sale. It would seem to be
harsh or even unjust that allowances cannot ~ made in
respect of them. But the words of the statute must be
followed."
Similar observations were made by Lord Hodson and Lord Guest.
G
We are, therefore, of the view that the High Court rightly
answered question No. (I) relating to the claim for deduction on
account of brokerage commission against the assessee.
Question No. (3) pertains to the compensation payable to the
assessee under the Bihar Land Reforms Act.
Two contentions
have been advanced on hehalf of the appellant in this Court wfth
H
regard to the above question. fo is argued in the first instance that
compensation payable to the assessee under the
Bihar Land
(I) [1967] A. C. 506,
982
SUPREME COURT REPORTS
(1973] 3 s.c.R.
Reforms A~t does not constitute an asset as can be taken into
account in computing the total wealth cl the assessee.. In the
alternative, it is urged that in computing the value of compensation
the Tribunal should have taken the value to be 5 0 per cent and
and not 65 per cent of the amount of compensation.
None of
these contentions, in our opinion, is well founded.
The Bihar
Land Refonns Act, 1950, (Bihar Act 3 of 1950) provides for the
transference to the State of the interests ol proprietors and tenure.
holders in Ian.ct and of other interests in land. According to section 3(1) of the Act, the State Government may, from time to
time, by notification declare that the estates or tenures of a proprietor or tenure holder, specified in the notification, have passed
to and become vested in the State. Section 4 enumerates the consequences of the vesting of an estate or tenure in the State. One
of those consequences is that the estate or tenure, including the
interest of the proprietor or tenure-holder in such an estate or
tenure shall, with effect from the date of vesting, vest absolutely
in the State free from all incumbrences and such proprietor or
tenure-holder shall cease to have any interests in such estate or
tenure, other than the interests expressly saved by or under the
provisions of the Act. Section 19 makes provision for the appointment of Compensation Officer who shall in the case of an estate
or tenure which has vested in the State, prepare in tl!e prescribed
form and manner a Compensation Assessment-roll containing the
gr08S asset and the net income of each proprietor and tenure-holder
of estates and tenure~ and the compensation to be paid in accordance with the provisions of the Act to such proprietor or tenureholder and all other persons whose interests are transferred to the
State. Section 23 prescribed the mode of computation of net income, while section 24 gives the rate of compensation and the
mode of its determination. According to section 26 there should
be a preliminary publication of Compensation Assessment-roll.
Section 27 gives a right of appeal from an order passed by a Compensation Officer to a Judge of the High Court.· After all objections and appeals have been disposed of, there has to be a final
publication of the Compensation Assessment-roll in accordance with
section 28 of the Act. Section 32 provides for the manner of pay,
me111 of compensation. Sub-section (2) of that section reads.
A
B
c
D
f,
F
G
"The amount of compensation so payab\e in terms
of a Compensation Assessment-roll as finally published
shall be paid in cash or in bonds or partly in cash and
partly in bonds.
The bonds shall. be either negotiable or non-negotiable and non-transferable
and be
H
payable in forty equal instalments to the person named
therein and shall carry interest at two and a hall' per
centum per annum ,..ith effect from the date of issue."
A
B
L. K • .JHA y, C.W.T. (Khanna,/;)
983
. Section 33 makes provisio~ for ad interim paymept to the propnetors after the date of vesting and before the day of payment
of compensation under su~section (2) of section 32 of the Act,
Perusal of the different provisions of Bihar Land Refonns Act
shows that as soon as the estate or tenure of a proprietor or a
ten~holder vests in the State, he becomes entitled to receive
compensation. The fact that the payment of compensation in tenns
of the provisions of the Act may be deferred and be spread over
a number of years does ilot affect the right of th~ proprietor oi
tenure-holder to the compensation.
The assessee, in our opinion,
was vested with a right to get compensation immediately his land
was vested in the State. Section 2 ( e) of the Act defines "assets"
C
to include property of every description, movable or immovable,
but does not include certain catgories of property with which we
are not concerned.
The word "property", as mentioned tiy this
Court in the case. of Ahemed G. H. Arifj and Others v. Commissioner' of JV ca/th tax(') is a term of the widest import and subject to any limitation which the context may require, it signifies
every-possible interest which a person can clearly hold and enjoy.
The definition of the "assets" as given in section 2(e) of the Act,
D
E
F
G
H
though not exhaustive shows its wide anlplitude and we see no
reason as to why the right to receive compensation
cannot be·
included amongst the assets of an assesee,
According to Mr. Kolah, the amount of compensation had not
been determined by the valuation date and as such it could not
be included in the assets o~ the assessee. There is, however, no
material on the record to -show that the amount of compensation
had not been detennined by the valuation date.
The fact that
the assessee had originally shown the amount. of compensation
payable to be Rs. 92,27,422 in his return and it was only in the
revised return . that he stated that t]).e amount of compensation
payable to· him had been determined by the Compensation Officer
to be Rs. 36, 87, 419 would not necessarily show that the amount of
compensation had not been determined tw the valuation date.
According to the order of the Wealth Tax Officer the contention
which was raised on behalf of tho assessee was that the compensation money should not be included in the total wealth because·
it was not known as to when and in what manner the amount
would be received. The Appellate Income Tax Tribunal in this;
context observed :
"The value of the zamindary compensation payable
to the assessee had been determined by the Componsa-
-
tion Officer at Rs. '3.6,87,419.
For the purpose
of
assessment the Wealth Tax Officer had determined the
(I) [1970] 76 I. T. K: 471.
984
SUPREME COURT REPORTS
(1973] 3 S.C.R.
value at 7 5 % of the compensation determined.
This·
has been sustained on appeal by the App. Asst. Com,
missioner who has found that a part of the compensatio1f
had been adjusted against Government dues outstanding
from the assessee. So, the assessee is deemed to have
received full value for that part of the compensation.
It is subbnitlted on behalf of the assessee that the market
value of the Bihar Zamindary Compensation bonds is
about 50% of the amount of the bonds.
The Tribunal
has taken all these facts into consideration in determin·
ing the value of compensation payable under the Bihar
Land Reforms Act in the case of several-assessees and
the Tribunal has generally estimated such 'l?lllue for
Wealth Tax purposes at 65% of the amount of the
compensation determined. In this case also we would
direct that the valuation be taken at 65% of the amount
compensation determined by the Compensation Officer."
A
B
c
The above observations as well as the form of question No. (3)
show that no controversy was raised by the assessee on
the
D
score that the amount of compensation had not been determined.
by the valuation date.
Assuming for the sake of argument that the
amount
of
.compensation paya[lle to the assessee had not been determined
by the Compensation Officer by the valuation date, tllat fact
would not justify the exclusion Of the compensation payable
E
from the assets of the assessee.
The right to receive compensatioJ!
because vested in the assessee the moment he was divested of
his estate and the same got vested in the State in ·pursuance of
the provision of Bihar Reforms Act. As the estate of the assessee .
which vested in the State was known and as the formula fixing
the amount of compensation was prescribed by the statute, the F
amount of compensation was to all intents and purposes a matter
of calculation.
The fact that the necessary calculation had. not
been made and the amount of. compensation had consequently
not Wen quantified by the valuation date would not take com•
pensation payable to the assessee out of the definition of assets
or make it
cease to be
property.
The
right
to
receive
G
·compensation from the State is a valuable right. more so when
it is based upon statute and the liability to pay is not denied by
the State. It is no doubt true that the
compensation is not
payable immediately and its payment might be spread over a
μeriod of 40 years. but that £act would be relevant only for the
μurpose of evaluating the right to compensation.
It would not
·detract from the proposition that the right to. receive compensation,
H
even though the date of payment is deferred is propertv and
.constitutes asset for the purpose of Wealth Tax Act.
·
11 •
B
c
D
E
F
G
i;.. K. JHA v. c.w.T. (Khanna, J.)
985
The Patna High Court in the case of Maharajkumar Kamal
Singh v. Commissioner of Wealth Tax (supra) held that the right
to receive compensation under the Bihar Land
Reforms
Act
constituted "asset" for the purpose of Wealth Tax Act. The view
taken in that case was approved by a Full Bench of Patna High
Court in the case of Maharaj Kumar Kamal Singh v. Commissioner
of Wealth Tax( 1).
We see no cogent ground to take a different
view.
It may also be observed that the Andhra Pradesh Hig11
Court in five cases, namely, Mir lmdad Ali Khan v. Commissioner
of Wealth Tax('), Rani Bhagya Laxmamma v. Commissioner of
Wealth Tax("), V. Chandramani Pattamaba Devi v. Commissioner
of Wealth Tax('), Vandrevu Venkappa Rao v. Commissioner of
Wealth Tax(') and P. V. G. Raju v. Commissioner of Wealth
Ta.~(') has held that the compensation payable on the abolition
of estates can be taken into account for the purpose of Wealth
Tax Act. Similar view has been taken biy the Madhya Pradesh
High Court in Sardar C. S. Angre v. Commissioner of Wealth
Tax(') and Allahabad High
Court in
Maharaja
Pateshwari
Pd. Singh v. Commissioner of Wealth Tax(').
Mr. Kolah has invited our attention to a decision of
the
Calcutta High Court in the case of Commissioner o~ Wealth Tax
v. U. C. Mahatab (') wherein that court held that till the final
publication of the Compensation Assessment-roll under the
West Bengal Estates Acquisition Act, the assessee had no legal
right to compensation and the same could not be included in the
definition of "assets" in the Wealth Tax Act. It is, in our opinion.
not necessary to express any view with regard to •the correctness of
that decision. Suffice it to say that the decision in that case proceeded upon the assumption that the provisions of the West Bengal
Estates Acquisition Act, 1953 were materially
different
from
those of the Bihar Land Reforms Act.
It was, in fact. on that
ground that the learned Judges of the Calcutta High Court distinguished the case of Maharaj Kumar Kamal Singh v. Co111missioner
of Wealth Tax (supra) as well as the decision of the Patna High
Court which is now the subject matter of the present appeal.
We are also nO'I: impressed by the contention
advanced on
behalf of the appellant that the value of the compensation should
have been determined for the purpose of Wealth Tax Act to be
50 ,per cent of the amount o.f compensation and not 65 per cent.
!1) [1972) 84 I. T. R. 240.
ff
131 [1966] 62 l. T. R. 60
(2) [1961) 50 I. T. R. 2t6.
(4) [1967) 64 I. T. R. 147.
(6) [1970] 78 !. T. R. 60
(5) [1968] 69 l. T. R. 552.
(7) [t968] 69 I. T. R. 336.
(9) [t970] 78 I. T. R. 2t4.
15-797Sup. Cl/73
(8) [1970) 78 I. T. R. 581
986
SUPREME COURT REPORTS
[1973] 3 S.C.R.
As would appear from the order of the Tribunal, the value of
A
compensation payable under the Bihar Land Reforms Act has
been generally estimated for the purposo of Wealth Tax Act to be
6S per cent of the amount of compensation deterinined. We see
no cogent ground to interfere in this respect.
As a result of the above, we .uphold the answers given by the
Hiib Court in respect of the first and third questions. So far as
question No. (2) is concerned, we vacate the answer given by the
Hiib Court and answer that question in the affirmative in favour
of the assessee.
The appeal is disposed of accordingly, In the
circumstances, the parties are left to bear their own costs of this
Court as well as in the High Court.
s. c.
B