F.S. GANDHI (DEAD) BY LRS. versus COMMISSIONER OF WEALTH TAX, ALLAHABAD

Citation: [1990] 2 S.C.R. 886 · Decided: 02-05-1990 · Supreme Court of India · Bench: KULDIP SINGH · Disposal: Appeal(s) allowed

Cited by 1 judgment(s) · cites 1 · see the full citation network in Lexace

Judgment (excerpt)

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F.S. GANDHI (DEAD) BY LRS. 
V. 
COMMISSIONER OF WEALTH TAX, ALLAHABAD 
MAY 2, 1990 
[KULDIP SINGH AND S.C. AGRAWAL, JJ.] 
Wealth Tax Act, 1957: Section 2(e) 2(iii)-Interest in respect of 
properties-Lease of lands on which 
properties were standing 
expired-Tenancy continued on month to month bas'is for unstated 
period-Whether liable to tax. 
Words and Phrases-'Js' and 'has been'-meaning of 
-i 
' -
The appellant-assessee owned certain properties on lease-hold 
lands. The leases in respect of these lands expired in 1958 and 1963 and 
the lessor-State Government issued notices to the assessee to hand 
over vacant possession of the leasehold lands. The properties were let 
out to the tenants and the assessee was receiving rental income from the 
same. 
In the Wealth Tax Returns for the assessment years 1971-72, 
1972-73, 1973-74 and 1974-75, the assessee valued the properties at ten 
times of the annual rental income. In the assessment order the Wealth 
Tax Officer valued the properties at fifteen times of the annual rental ') 
income. On appeal, the Appellate Assistant Commissioner of Wealth 
Tax valued the said properties at twelve and a half times of the annual 
rental income. 
On further appeal, the Income Tax Appellate Tribunal valued the 
properties at ten times of the annual rental income, but, at the request 
of the assessee, referred to the High Court for its opinion certain ques-
tions of law, including the questions whether the Tribunal was right in 
holding that the properties in respect of which the leases had expired in 
1958 and 1963 and notices h3d been issued to hand over the possession were 
assets within the meaning of Section 2(e)(v) of the Wealth Tax Act, 1957 
and its value was liable to be included in the net wealth of the assessee 
and that, on correct interpretation of Section 2(e)(v) of the Wealth Tax 
Act, and relevant provisions of the Transfer of Property Act, the in· 
terest of the appellant in respect of properties in dispute was for a 
period of over six years. 
886 
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F.S. GANDHI v. COMMR. OF WEALTH TAX 
887 
The High Court held that after the determination of the earlier 
leases, the assessee was lessee of properties under a new contract of 
tenancy, and it was a tenancy from month to month under Section ll6 
read with Section 106 of the Transfer of Property Act, and for an 
unstated period, and could not be said to be precarious in nature, that 
the said tenancy was an asset as defined in Section 2(e) of the Act and 
was not excluded under sub-clause (v) because the said interest had 
been available to the assessee for a period exceeding six years from the 
date the new contract of tenancy came into existence. It, however, 
granted certificate of fitness to appeal to the Supreme Court. 
Allowing the appeals, this Court, 
HELD: I. The properties in respect of which leases had expired in 
1958 and 1963 and notices had been received by the assessee to hand 
over the possession were not assets within the meaning of Section 
2(e)(2)(iii) of the Wealth Tax Act 1957 and the valuation of the same was 
not liable to be included in the net wealth of the assessee. The Tribunal 
was not right in holding that the interest of the assessee in respect of the 
properties in dispute was for a period over six years for the purpose of 
Section 2(e)(2)(iii) of the Act. [8981'-H. 
2.1 The word "available" in Section 2(e)(2)(iii) of the Act is pre-
ceded by the word "is" and is followed by the words "for a period not 
exceeding six years". The word 'is', although normally referring to the 
present, often has a future meaning. It may also have a past significa-
tion as in the sense of 'has been'. In view of the words "for a period not 
exceeding six years" which follow the \'ford "available", the word 'is' 
must be construed as referring to the present and the future. In that 
sense, it would mean that the interest is presently available and is to be 
available in future for a period not exceeding six years. [896C-D] 
The High Court has construed the word 'is' to mean 'has been'. 
As per the construction placed by the High Court in a case where an 
interest has been created for a period exceeding six years it would be 
included in the assets of the assessee under Section 2( e) of the Act only 
after the expiry of the period of six years even though the interest is 
available to the assessee for a period exceeding six years from the date 
the interest vests iu the assessee. The co

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