# SUDHIR CHANDRA NAWN v. WEALTH-TAX OH•'JCER, CALCUTTA & ORS

- **Citation:** [1969] 1 S.C.R. 108
- **Court:** Supreme Court of India
- **Decided:** 1968-04-23
- **Case number:** Writ Petitions Nos. 153 to 155 of 1967
- **Bench:** J. C. Shah, V. Ramaswami, V. Bhargaya, G. K. Mitter, C. A. Vaidialingam
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/sudhir-chandra-nawn-v-wealth-tax-oh-jcer-calcutta-ors-4371
- **Pages:** 7

## Headnote

Wea/1h Tax. Act, 1957, s. 3-Va/idiry and scope of-Co11stitution of
India, Art. 246 Cls. (I) & (3); 1th Schedule Entry 86 List I and Entry
49 List II-scope of-If Parliament competent to legislate to levy
wt.alth-tax 011 assets including land afJd bui/dingr.
The petitioner moved under Art. 32 for a writ to quash an order of
as.essmCJJt and penalty and notices of demand for recovery of tax for
tho years 1959-60, 1960-61 and 1961~2 under the Wealth Tax Act, 1957.
lt was contended, inter alia, on his behalf that (i) Wealth tax is charge.
able only on the accretion of wealth during the financial year; (ii) Parliament could not have iMended that the same assets should continue to be
charged to lax year after year; (iii) since the expression "net wealth" in
s. 3 mcludes
non-a~ricultural lands and buildings of an asscssee
and
power to levy tax on lands and buildings is reserved to the State Legislanrres by Entry 49 List II of the 7th Schedule to the Constitution, Parliament
was incompetent to Ic~i;late for the levy of wealth tax on the capital
value of a~scts which indude non-ai::ricultural lands and buildings; and
(iv) s. 7(1) of the Aot was ultra vires.
HELD : That (i) The charge imposed by s. 3 ·is clearly on the "net
wealth on the corresponding· valuation date" and not on the increase in
the wealth of the assessce, or accretion to the wealth of the assessee since
the last valuation date. [110 C-D)
(ii) There is no constitutional prohibition against Parliament levying
tax in respect of the same subject-matter or taxing event in successive
ass=mcnt periods. [110 DI
(iii) The tax· which is imposed by entry 86 List I is not directly a tax
on lands and buildings. It is a tax imposed on the capital value of the
assets of individuals and companies on the valuation date. Wealth-tax is
not imposed on the components of the assets of the
a~;essee but on the
total assets which he owns after taking hi• liabilities into account. On
the other hand, entry 49 List II of the Seventh Schedule contemplates the
levy of tax on lands and buildings or both as units.
It is normallv not
concerned with the division of interest or ownership in the units of lands
or buildings which arc brought to tax. [110 G-H; 111 C-D]
Tax on lands and buildings is directly imposed on lands and buildings, and bears a definite relation to ;i, while tax on the capital value of
assets bears no definable relation to lands and buildings which may form
a component of the total assets of the asscssee. [111 DJ
Ra/la Ram v. The Pr01•i11ce of East
Punjab, [1948) F.C.R. 207:
referred to.
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E
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Even assuming that there is some overlapping between the two entries.
H
the Parliament had power to legislate in respect of levy of wealth-tax
in respect of the lands. and buildings which may form part of the assets
of an assessee. [112 ~El
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S. C. NAWN V. WEALTH-TAX OFFICER (Shah, J.)
109
In re : The Central Provinces and Berar Act No. XIV of 1938. [1939]
F.C.R. 18, 49; referred to.
Exclusive power of the State Legislature under clause { 3) of Art.
246 has to be exercised subject to cl. ( 1) i.e., the exclusive power which
the Parliament has in respect of the matters enumerated in List I.
Assuming that there is a conflict between entry 96 List I and entry 49 List
II, which is not capable of reconciliation, the l)ower of Parliament to
lei:islate in respect of a matter which is exclusively entrusted to it must
supersede pro tanto the exercise of power of the State Legislature. [113 D--
EJ
Khan Bahadur Chowakkara11 Kaloth
Mammad Kevi v. Wealth-tax
Officer, Calicut, 44 I.T.R. 277; Vyzyaraju
Badri Narayanamurt/iy . v.
Commissioner of Wealth-tax, Bihar & Orissa, 56 I.T.R. 298;· and Sri
Krishna Rao L. Balckai v. Third Wealth-tax Officer, A.I.R.
1963 Mys.
111; referred to.
Observations of Jagdish Sahai, J. in Oudh Sugar Mills Ltd., Hargaon
v. State of U.P. and another, A.I.R. 1960 All. 136; disapproved.
(iv) Section 7(1) of the Wealth-tax Act is not ultra vires. Section 7
only

## Text

SUDHIR CHANDRA NAWN
v.
WEALTH-TAX OH•'JCER, CALCUTTA & ORS.
April 23, 1968
[J. C. SHAH, V. RAMASWAMI, V. BHARGAYA, G. K. MITTER AND
C. A. VAIDIALINGAM, JJ.]
Wea/1h Tax. Act, 1957, s. 3-Va/idiry and scope of-Co11stitution of
India, Art. 246 Cls. (I) & (3); 1th Schedule Entry 86 List I and Entry
49 List II-scope of-If Parliament competent to legislate to levy
wt.alth-tax 011 assets including land afJd bui/dingr.
The petitioner moved under Art. 32 for a writ to quash an order of
as.essmCJJt and penalty and notices of demand for recovery of tax for
tho years 1959-60, 1960-61 and 1961~2 under the Wealth Tax Act, 1957.
lt was contended, inter alia, on his behalf that (i) Wealth tax is charge.
able only on the accretion of wealth during the financial year; (ii) Parliament could not have iMended that the same assets should continue to be
charged to lax year after year; (iii) since the expression "net wealth" in
s. 3 mcludes
non-a~ricultural lands and buildings of an asscssee
and
power to levy tax on lands and buildings is reserved to the State Legislanrres by Entry 49 List II of the 7th Schedule to the Constitution, Parliament
was incompetent to Ic~i;late for the levy of wealth tax on the capital
value of a~scts which indude non-ai::ricultural lands and buildings; and
(iv) s. 7(1) of the Aot was ultra vires.
HELD : That (i) The charge imposed by s. 3 ·is clearly on the "net
wealth on the corresponding· valuation date" and not on the increase in
the wealth of the assessce, or accretion to the wealth of the assessee since
the last valuation date. [110 C-D)
(ii) There is no constitutional prohibition against Parliament levying
tax in respect of the same subject-matter or taxing event in successive
ass=mcnt periods. [110 DI
(iii) The tax· which is imposed by entry 86 List I is not directly a tax
on lands and buildings. It is a tax imposed on the capital value of the
assets of individuals and companies on the valuation date. Wealth-tax is
not imposed on the components of the assets of the
a~;essee but on the
total assets which he owns after taking hi• liabilities into account. On
the other hand, entry 49 List II of the Seventh Schedule contemplates the
levy of tax on lands and buildings or both as units.
It is normallv not
concerned with the division of interest or ownership in the units of lands
or buildings which arc brought to tax. [110 G-H; 111 C-D]
Tax on lands and buildings is directly imposed on lands and buildings, and bears a definite relation to ;i, while tax on the capital value of
assets bears no definable relation to lands and buildings which may form
a component of the total assets of the asscssee. [111 DJ
Ra/la Ram v. The Pr01•i11ce of East
Punjab, [1948) F.C.R. 207:
referred to.
A
B
c
D
E
F
G
Even assuming that there is some overlapping between the two entries.
H
the Parliament had power to legislate in respect of levy of wealth-tax
in respect of the lands. and buildings which may form part of the assets
of an assessee. [112 ~El
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B
c
D
E
F
G
H
S. C. NAWN V. WEALTH-TAX OFFICER (Shah, J.)
109
In re : The Central Provinces and Berar Act No. XIV of 1938. [1939]
F.C.R. 18, 49; referred to.
Exclusive power of the State Legislature under clause { 3) of Art.
246 has to be exercised subject to cl. ( 1) i.e., the exclusive power which
the Parliament has in respect of the matters enumerated in List I.
Assuming that there is a conflict between entry 96 List I and entry 49 List
II, which is not capable of reconciliation, the l)ower of Parliament to
lei:islate in respect of a matter which is exclusively entrusted to it must
supersede pro tanto the exercise of power of the State Legislature. [113 D--
EJ
Khan Bahadur Chowakkara11 Kaloth
Mammad Kevi v. Wealth-tax
Officer, Calicut, 44 I.T.R. 277; Vyzyaraju
Badri Narayanamurt/iy . v.
Commissioner of Wealth-tax, Bihar & Orissa, 56 I.T.R. 298;· and Sri
Krishna Rao L. Balckai v. Third Wealth-tax Officer, A.I.R.
1963 Mys.
111; referred to.
Observations of Jagdish Sahai, J. in Oudh Sugar Mills Ltd., Hargaon
v. State of U.P. and another, A.I.R. 1960 All. 136; disapproved.
(iv) Section 7(1) of the Wealth-tax Act is not ultra vires. Section 7
only directs that the valuation of any asset other than cash has to be
made subject to the rules.
Jit does not contemplate that there shall be
rules before an asset can be valued. Failure to make rules for valuation ·
of a type of asset cannot therefore affect the vires of s. 7. [114 F-G]
ORIGINAL JURISDICTION : Writ Petitions Nos. 153 to 155 of
1967.
Petition under Art. 32 of the Constitution of India for the enforcement of fundamental rights.
Nirmal Mukherjee and P. K. Mukherjee, for the petitioner.
C. K. Daphtary, Attorney-General, T. A. Ramachandran and
R. N. Sachthey, for respondents Nos. 1 to 3.
Naunit Lal, for intervener No. 1.
M. R. K. Pillai, for intervener No. 2.
C. B. Agarwala and 0. P. Rana, for intervener No. 3.
The Judgment of the Court was delivered by
Shah, J. For the years 1959-60, 1960-61 and 1961-62 the
petitioner was assessed to tax under the Wealth-tax Act, 1957, by
the. ytealth-t:ix Officer, C-Ward, District II (1), Calcutta. The
petitioner failed to pay the tax and proceedings for recovery of
tax and penalty were taken against him.
The petitioner then
moved this Court for a writ quashing the order of assessment and
penalty and notices of demand for recovery of tax. The petition
was sought to be supported on numerous grounds, none of which
has, in our judgment, any substance.
The plea that wealth-tax
is chargeable only on the accretion of wealth during the financial
year is contrary to the plain words of the charging section. Section 3 of the Wealth-tax Act, as it stood• in the relevant years,
declared that there shall be charged for every financial year a
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St:PREME COURT REPORTS
[I 969] I s.c.R.
ta-.; 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.
The expression
"net wealth" is defined in s. 2(m) as meaning "the amount by
which the aggregate value computed in accordance with the provisions of the Act of all the assets, wherever located, belonging
to the assessec on the valuation date, including assets required
to be included in this net wealth as on the date under the Act.
is in excess of the aggregate value of all the debts owed by the
assessee on the valuation date, other than
. . . . . . ". TI1e
expression "assets" is defined in s. 2(c) as inclusive of property
of every description, movable or immovable, but not inclucling
agricultural land and growing crops, grass or standing trees on
such land. By s. 3 charge is imposed upon the net wealth of an
assesscc on the corresponding valuation date. The charge thereby
imposed is on the "net wealth on the corresponding valuation date'"
and not on the increase in the wealth of the assessce. or accretion to the wealth of the assessee since the last valuation date.
It was urged that the Parliament could not have intended
that the same assets should continue to be charged to tax year
after year.
But there is no constitutional prohibition against the
Parliament levying tax in respect of the same subject-matter or
taxing event in successive assessment periods.
The Parliament enacted the Wealth-tax Act in exercise of the
power under List I of the Seventh Schedule entry 86-"Taxes on
the capital value of assets, exclusive of agricultural lands, or individuals and companies: taxes on the capital of companies". That
was so assumed in the decision of this Court in Banarsi Dass v.
Wealth-tax Officer, Special Circle, Meemt(1), and counsel
for
the petitioner accepts that the subject of Wealth-tax Act falls
within the terms of entry 86 List T of the Seventh Schedule. He
says, however. that since the expression "net wealth" includes
non-agricultural lands and buildings of an asses.see, and power to
levy tax on lands and buildings is reserved to the State Legislatures
by entry 49 List II of the Seventh Schedule. the Parliament is
incompetent to legislate for the levy of wealth-tax on the capital
value of assets which include non-agricultural lands and buildings.
The argument advanced by counsel for the petitioner is wholly misconceived. The tax which is imposed by entry 86 List I of the
Seventh Schedule is not directly a tax on lands and buildings. It
is a tax imposed on the capita! value of the assets. of ind.ividuals
and companies, on the valual!on date.
The tax. 1~ n.ot imposed
on the components of the assets of the assessee.: 1t 1s 1111p~scd on
the total assets which the assessee owns, and m determmmg the
net wealth not only th~ encumbrances specifically charged against
(I) 56 l.T.R. 2:?4.
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S, c. NAWN v. WEALTH-TAX OFFICER (Shah, J.)
111
any item of asset, but the general liability of the assessee to pay
his debts and to discharge his lawful obligations have to be taken
into account. In certain exceptional cases, where a person owes
no debts and is under no enforceable obligation to discharge
any liability out of his assets, it may be possible to break up
the tax which is levia ble on the total assets into components and
attribute a component to lands and buildings owned by an assessee.
In such a case, the .component out of the total tax attributable
to lands and _buildings may in the matter of computation bear
similarity to a tax on lands and buildings levied on the capital or
annual value under entry 49 List II. But the legislative authority
of Parliament is not determined by visualizing the possibility of
exceptional cases of taxes under two different heads operating
similarly on tax-payers.
Again entry 49 List II of the Seventh
Schedule contemplates the levy of tax on lands and buildings or
both as units. It is normally not concerned with the division of
interest or ownership in the units of lands or buildings which are
brought to tax. Tax on lands and buildings is din~ctly imposed
on lands and buildings, and bears a definite relation to it. Tax
on the capital value of assets bears no definable relation to lands
and buildings which may form a component of the total assets
of the assessee. By legislation in exercise of power under entry 86
List I tax is contemplated to be levied on the value of the assets.
For the purpose of levying tax under entry 49 List II the State
Legislature may adopt for detern1ining the incidence of tax the
annual or the capital value of the lands and buildings. But the
adoption of the annual or capital value of lands and buildings
for determining tax liability will not, in our judgment, make the
fields of legislation under the two entries overlapping.
In Ral/a Ram v. The Province of East Punjab(1 ) the Federal
Court held that the tax levied by s. 3 of the Punjab Urban lnlmoveable Property Tax Act, 17 of 1940, on buildings and lands
situated in a specified area at such rate not exceeding twenty per
centum of the annual value of such buildings and lands, as the
Provincial Government may by notification in the Official Gazette
direct in respect of each such rating area was not a tax on income,
but was a tax on lands and buildings within the meaning of item
No. 42 of List II of the Seventh Schedule of the Government of
India Act, 1935. In that case it was contended that under the
. provisions of the Punjab Act the basis of the tax was the annual
value of the buildings and since the same basis was used in the
Income-tax Act for determining the income from property and
generally speaking the a_nnual value is the fairest standards for measuring income and, in many cases, is indistinguishable from it,
the tax levied by the impugned Act was in substance a tax on
income. The Court pointed out that the arufual value is not neees-
(!) (1948] F.C.R. 207.
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SUPREME COURT REPORTS
[ 1969] I S.C.R.
sarily actual income, but is only a standard by which income may
be measured, and merely because the Income-tax Act had adopted the annual value as the standard for determining the income.
i.t did not follow that, if the same standard is employed as a measure for any other tax, that latter tax becomes also a tax on
income.
In the case of a tax on lands and buildings, the value, capital
or annual, would be determined by taking the land or building
or both as a unit and subjecting the value to a percentage of tax.
, In the case of wealth-tax the charge is on the valuation of the
total assets (inclusive of lands and buildings) less the value of
debts and other obligations which the assessce has to discharge.
Merely because in determining the taxable quantum under taxing
statutes made in exercise of power under entries 86 List I and 49
List II, the basis of valuation of assets is adopted, trespass on the
field of one legislative power over another may not be assumed.
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Assuming that there is some overlapping between the two
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entries, it cannot, on that account be said that the Parliament
had no power to legislate in respect of levy of wealth-tax in respect
of the lands and buildings which may form part of the assets of
the assessee.
As observed by Gwycr, C.J .• in In re: The Central
Provi11ces and Berar A ct No. XIV of 1938 ( 1) :
". . . . that a general power ought not to be so construed as to make a nullity of a particular power conferred by the same Act and operating in the same field,
when by reading the former in a more restricted sense
effect can be given to the latter in its ordinary and natural meaning."
Apparently an entry "taxes on lands and buildings" is a more
general entry than the entry in respect of a tax on the annual
value of assets of an individual or a company, and by conferring
upon Parliament the power to legislate on capital value of the
a~scts including lands and buildings, the power of the State Legislature was pro tanto excluded.
The scheme of Art. 246 of the Constitution which distributes
legislative powers upon the Parliament and State Legislature must
be remembered. Article 246 provides :
.
"( 1) Notwithstanding anything in clauses (2) and 3
Parliament has exclusive power to make laws with res- .
pect to any of the matters enumerated in List I in the
Seventh Schedule.
{I) (1939] F.C.R.18,49 . •
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S. C. NAWN V. WEALTH-TAX OFFICER (Shah, J.)
113
· (2) Notwithstanding anything in clause (3), Parliament, and, subject to clause (1), the Legislature of any
State also, have power to make laws with respect ·to
any of the matters enumerated in List III in the Seventh
Schedule.
(3) Subject to clauses (1) and (2), the Legislature of
any State has exclusive power to make laws for sueh
State or any part thereof with respect to any of the matters enumerated in List II in the Seventh Schedule."
Exclusive power to legislate conferred upon Parliament is exercisable, notwithstanding anything contained in els. (2) & (3), that
is made more emphatic by providing in cl. (3) that the Legislature of any State has exclusive power to make laws for such
State or any part thereof with respect to any of the matters
enumerated in List II in the Seventh Schedule, but subject to
els. (1) and (2). Exclusive power of the State Legislature has
therefore to be exercised subject to cl. ( 1) i.e. the exclusive power
which the Parliament has in respect of the matters enumerated in
List I. Assuming that there is a conflict between entry 86 List I
and entry 49 List II, which is not capable of reconciliation, the
power of Parliament to legislate in respect of a matter which is
exclusively entrusted to it must supersede pro tanto the exercise
of power of the State Legislature. The problem reviewed from
any angle is incapable of a decision in favour of the assessee.
The High Courts have consistently taken the view in cases in
which the question under discussion expressly fell to be determined, that the power to levy tax on lands and buildings under
entry 49 List II does not trench upon the power conferred upon
the Parliament by entry 86 List I, and therefore the enactment of
the Wealth-tax Act by the Parliament is not ultra vires. In Khan
Bahadur Chowakkaran Kaloth Mammad Kevi v. Wealth-tax Officer, Calicut(1 ), the High Court of Kerala held that wealth-tax is
~ifically and in substance covered by entry 86 of the Union
List of the Seventh Schedule to the Constitution of India and
~~ is really no ~ct and no overlapping between the 'jurisdiction of the Parhament under entry 86 of the Union List to
enact a la:w levying a tax on the capital value of assets, and of the
~
Legislature under entry 49 of the State List, to enact a law
Jevymg a tax _on la~ds and bu!ldings. A similar view was expressed by the .o!'lssa High Court m V.vs:yaraju Badri Narayanamurthy
v. Commzsswner of Wealth-tax, Bihar & Orissa( 2 ); and also in
Sri Krishna Rao L. Balckai v. Third Wealth-tax Officer(•).
Reliani:e was, ho~ever, placed by counsel for the petitioner
upon certain observations made by J agdi~h Sahai, J. in Oudh
(I) 44 l.T.R. 277.
'3) A.LR. 1963 Mys. 111. •
(2) 56 r.'f.R.. 298.
114
SUPREME COURT REPORTS
[1969) 1 s.c.R.
Sugar Mills Ltd. Hargaon v. S/llte of U.P. and another('). In
that ca-;c the validity of the U.P. Large Land Holdings Act 31
of 1957 was challenged on the ground that the power to tax
covered by the Act was not conferred upon the State Legislature
by List ll entry 49. The Court in that case held that the tax
under the Act was a tax on the holding and not on the annual
value or the capitalised value of the land and the annual value
was only the mc,Lsure of the tax.
Jagdish Sahai, J., proceeded,
however, to observe that the meaning of the word "assets" in entry
86 of List I should exclude land, both agricultural as well as
non-agricultural, from its ambit in order to give full scope to the
expression "Taxes on land." occurring in entry 49 of List JI.
But it was not necessary for deciding the question falling to be
determined in that case to enter upon the question whether a tax
on the capitalised value of non-agricultural lands forming part
of the assets of an assessee is covered by entry 86 List I or
entry 49 List II. That is so expressly stated by the Jcarncd Judge.
The Court was concerned only to deal with the q11estion whether
the U.P. Large Land Holdings Act fell within entry 49 of List II.
The observations made by the learned Judge were plainly obiter,
and, in our judgment, do not correctly
interpret entry 86
List I.
The pica that s. 7 ( 1) of the Wealth-tax Act is ultra vires the
Parliament is also wholly without substance. That clause provides:
"Subject to any rules made in this behalf, 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 Wealtli-tax Officer it would fetch if sold in
the open market on the valuation date."
It was urged that no rules were framed in respect of the valuation
of lands and buildings.
But s. 7 only directs that the valuation
of any asset other than cash has to be made subject to the rule.;.
It does not contemplate that there shall be rules before an asset
can be valued.
Failure to make rules for valuation of a type of
asset cannot therefore affect the vire.1· of s. 7. It was also said
that s. 7(1) which requires that the asset shall be valued at the
price which it would fetch i~ sold in th~ open .market on ~
valuation date. was expropnatory. Thts contention was not raised in the petition, and no ground is made out for holding that
the rate at which wealth-tax is levied is expropriatory.
The petitions fail and arc dismissed with costs.
One hearing
fee
R.K.P.S.
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Petition• dimissed .
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