COMMISSIONER OF WEALTH-TAX ORISSA, BHUBANESHWAR. versus VYSYARAJU BADREENARAYANA MOORTHY RAJU, BERHAMPUR (GANJAM).

Citation: [1985] 3 S.C.R. 306 · Decided: 13-03-1985 · Supreme Court of India · Bench: R.S. PATHAK · Disposal: Appeal(s) allowed

Judgment (excerpt)

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D 
·COMMISStON!lR OF WEALTH-TAX ORISSA, 
BHUBANESHW AR. 
v. 
VYSYARAJU BADREENARAYANA MOOR THY RAJU 
. 
. 
BERHAMPUR (GANJAM). 
March 13, 1985 
(R;S. PATHAK, A.P. SEN AND E.S. VENKATARAMIAH, JJ.] 
Wealth Tax Act 1957, Sections 2(e), 2(m}, 2(q} and 7(2). 
'Net Wealth' -
'Valuation date' -
What are -Accrued interest -
Whether .an asset -
Distinction between cash and mercantile system of 
accounting -
Whether releva·n1 for wea Ith tax. 
The respondentMassessee was assessed to wealth tax for the assessment 
years 1965-66, 1966-67 and 1967-68, in the status of a Hindu Undivided 
~Family'. In each of the assessment years, the Wealth :'ax Officer included a 
.sum of Rs. 1.5 lakhs estimated as the accrued interest on the assessee's money 
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lending jnvestrµents. 
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The assessee appealed to the Appellate Assistant Commissioner, con· 
tending that as the books of account were maintained in accordance with the 
·cash system of accounting, the accrued interest on the money-lendini invest-
ment could not be included in the Wealth-Tax assessments, the Appellate 
:Assistant Commissioner following the decision of the Orissa High Court in 
Commissioner of Wealth-tax Bihar and Orissa v. Vysyaraju Badteenarayana 
Moorthy Raju (Orissa) {1971)79 ITR 330 deleted the additions representing 
accrued interest. 
The Wealth Tax Officer, appealed to the_ Appellate Tribunal and con-
tended that the accrued interest was liable to be included in the Wealth Tax 
assessment of the assessee, relying on the judgment of the Andhra Pradesh 
High Court in Vedrevu Venkappa Rao v. Commissioner of Wealth Tax A.P, 
(1968) 69 ITR 552. 
The Appellate Tribunal dismissed the appeal, as it was 
bound by the decision of the Orissa High Court. The Commissioner of Wealth 
Tax applied under Section 27(1) of the Wealth Tax Act, 1957 for a referenco 
to the Supreme Court in view of the conflict of opinions between the Orissa 
High Court and the Andhra Pradesh High Court and the question : "Whether 
the Wealth Tax Officer was justified in including in the net wealth of the 
~sessee, interest due on accrual basis (though not realised) on the outstandings 
+ 
... 
• 
6. w. t v. v.id.t. RAJU 
ot the 
as~essee's money-lending busine,s, · the ·accounts being. maintained· on 
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cash," was referred to this ~ourt. 
HELD : 1. 
Even though the accounts of the 
asse~sec .are maintained 
on cash basis irtterest due on accrual basis, though not realised, on the out-
standings of the money, lending business is liable to be included in the net 
wealth of the assessee. 
[JIOG) 
2. 
The value of a property 
re~ers to the Value of the rights in ihat 
property. 
What accrues as a right also falls t.o be included within the assets 
of an assessee under the Wealth Tax Act 1957. 
[310F] 
2.1. 
The system of accounting, mercantile or cash or hybrid, is ·of no 
relevance for the purpose of determining . the assets of the assessee. ~ ·rhat 
appears plainly from the definltion of "net wealth" which speaks of "the aggre 
gate value ......... of all the assets" belonging to the assessee on the valuation 
date. All the assets of the assessee, bar those expressly excepted by the- statute, 
are to be taken_ into account, and it is immaterial whether the assessee employs 
one system of accounting or another. .[3IOC·D) 
3. 
The assets are not confined to cash. 
Where the asset is an asset 
other than cash, its value is determined pursuant to sub-section (1) of se"ctioil.' 7 
as the estimated price, which, in the opinion of the Wealth Tax Officer, the 
asset would fetch if sold in the open market on- the valuation date. 
It would· 
be the estimated open market value of the rights in the property which consti-
tute the asset. 
[3 IOE-F] 
B 
Vedrevu Venkappa Rao v. Commissioner'of Wealth-tax A.P. (1968) 69 _ 
E 
ITR 552; CommiSsioner of Wealth-Tax. A.P-I. v. Pachigolla NarasimhQ Rao r• 
{1982) :134 ITR 646 and Dipta -Kumar. Basu v. Commissioner of Wealth Tax'. 
West Bengal, (1976) 450 JTR 450, approved. 
-Commissioner of Wealth-tax Bihar and Orissa v. Vysyaraju Badreenara-
yana Moorthy Raju (Orissa). (1971-) 79 JTR 330 and A.T. Mlrjf v. 
Commis-'.-11 
sioner of Wealth-Tax, Karnatka, (1980) 126 ITR 93, over-ruled. 
. _ 
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. 
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CIVIL APPELLATE JURISDICTION : Tax Reference Cas~s 'Nos. 3 
to 5 of 1975 
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Tax Reference under Section 257 of the Income-tax Act, 1961 ,; ' 
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made by the.Income-tax Appellate Tribunal, Cuttack Bench, Cuttack_i,, 
P.k Francis, Champat Rai and Miss A. Sub

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