LexCOMMISSIONER OF WEALTH TAX, BIHAR, PATNA versus MAHARAJA KUMAR KAMAL SINGH
Open in Lexace · Ask the AI about this caseJudgment (excerpt)
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COMMISSIONER OF WEALTH TAX, BIHAR, PATNA.
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MAHARAJA KUMAR KAMAL SINGH .
February 20, 1984
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[ V.D. TULZAPURKAR, R.S. PATHAK an dSAnYA~ACHI Muu1ARJI, JJ.] ..,,..
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· Wea/ih Tax Act, 1957, s.2'..m}-Net wc~lth~Ho~ to co1npute net wealth ,for
wedlth tax assessnient-First estimate ·value of a;!J':sets as per s.7(1) and then deduct
the debts owed by i1ssessee except debts':excluded by s.2(in).-Any factdi'
d~tt:act1n1
fro1n Value of aSSet which a willing purchaser , would pay for. buying that assci i11
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ope,JJ·market 1n11st be. taken into acconnt. POssibility of deducti'or/ofduesofassessqe
'for agricu!iura/inco111e·tax froinan1ount of con1pensation rmcfer s.4(c)ofBihar Land.
RejOnns Act, 1950 1"s Q factor to be taken b1to consideration in esti"1ati11g the. value of
· t~e righi to .CQlnpensalion which it would/etch ·if Juld in opeh · litarket. ·
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,Bi'har Land ~tforms Act, 1950--s. 4 (c) -interpretation of.
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While computing the net wealth of the respondent-""assessce for purposes·
-of \11ealth tax assessfl}eht unde'r the Wealth Tax Act, 1957, the wealth tax· officer ·
,. incllided certain atnOunt as the valuC of the·asscssee's right to compensation which
had accrued to hi1n on vesting of his estate in the Stci.te ~f B~har under the Bihai
Land Reforms Act, 1950 on the ba~is of market vaJUe on the vaiuatio~1 date.
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was ·contested by .. tl)-e assessee on the grouncj.'that after adjµsting his outstanding-
ag,ricultural jncon1e tax liability the compensation .Payable t6 him was nil.
Th~
. assessee also produCed Collector's letter to show that the amount of con1pensation
receivable by th~ assessee would be r{jJ. The Appeallate Assistant Con1missioner
.agreed ·~ith the yiew of the Wealth Tax Officer. In appeal-before the Tribunal the
asSe$see contended that the unpaid agricultural income-tax as a debt was deductible·
while CotnPuting his net wealth. The Jrib~nal accepting the ·Revenue's contention
held that the an1ouiits claimed by .the aSsessee were not deductible as a debt·-under
s.2(n1) as .the arrears of agricultural incoIDe-tax Were outstanding for inore than
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twelve -n1onths. On a reference being made, a Full Bench of the High. Court \vas
of the, opinion that the market value of the right of ihc assessee to receive ad-interim.
compen.sation. shotild be deterritlned in view of the provisions of· s.4(c) of the Bihar
. Land Reforms Act, 1950 and held that in the facts and· circumstances of the ca~e as·
nothing was receivable by the '~sSessee fro1n the State of .Bihar in vie'Y .of the
arrear$ of ag~icult~ral, inco1!1e-tax, the value· of ~e asset to the assessoe was nil,
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Hence this: 'appeal.
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Disn1issing· the appeal,
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frEL'ri: For con1pu.ti"ng net wealth Under' s.2(m) of the Wealth Tax Act, 1957 ·
t~cre are two different steps. Th'e fi1~st and essential step would be to estimate. the
value of the assets iil accordance v;:ith the provisions of· the Act arid the second step
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\vould be-to de~ilct thcrefro~ the debts O\Ved· by the assesSee -eXcept ·the debts ex-
cluded by that·se,ction. For·estimating the value of the a"sscts the material prov:isio1{
would be s.7(1) oft.he Act \vhich 'enjoins the Wealth Tax Officer to estimate the
price \vhich, in· !tis. opinion, an ai;;.5c( ot11cr than ca.sh \Vouk\.fetch if sold in the open
rharkct on the valuation 'ctate. The ·Wealth Tax Officer n1ust
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take into aCcoullt any
factor 'which detr~cts fron1 the valuC o(an asset which a willing purchasef v:rould ·
pay for buY.ing that asset in,ppen market.
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Section 4 of the Bihar land Reforins Act, 1950 deals with the cons_equences
of the vesting of.a)·i" estate or tCiiurc in-.the State and stipulates' different con~eQue1lces.
Clause .(c) of s.4 provideS_ th~t the arrea.rS of r~ve~~e arid cesses rcn1aining lawfully
due in reSp~ect of the estate.or tenure shall continue-to be recoverable it). .spite of'the
vesting Of the estate and sh.ill without prejudiCe to any o.the'r mode of .recovery, be
rocoverabie,' when so ordered by the Collector, by th6 deduction thereof from the
amou~t paYable.
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I11 the instant caSc; the possibility of deduction of the dues -of the nsscsSe~·for
ai?;ricultural 'incon1e tax und~r s.4(c) of the Bihai:· Lilnd Reforms Act from the con1-
peo.Sation n1oney .is aExcerpt shown. Read the full judgment & AI analysis in Lexace.