Case: Commissioner Of Wealth-Tax, Madras Vs. Smt. Muthukrishna Ammal

lessee shall continue to enjoy the leased land undisturbed for a said term of twenty-five years. In case, however, there is any breach of any of the above conditions or the lessee delays payment of any sum due to the lessor for over two months from the date of its falling due or in case the licence granted under clause 9 above is cancelled or forfeited for breach of any condition of such licence the lessor may determine the lease forthwith. Each lease was liable to be determined by notice on either side at the close of any manufacturing season. The interest of the lessee under each lease was precarious; it was liable to be determined by notice by the Government at the expiry of any manufacturing season. The leasehold interest in the salt pans was therefore not available to the assessee for a period exceeding six years from the valuation dateA lesses interest in land is undoubtedly an interest in immovable property and would normally be an asset unless within the meaning of Section 2 (e) (v) of the Act, the interest in the property is available to the assessee for a period not exceeding six years. 6. It was urged by counsel, for the Revenue that since the respondent had enjoyed the rights under one lease for 16 years and in the other lease for 14 years, and on the valuation date both the leases were outstanding, the rights were assets within the meaning of the Wealth-tax Act.Counsel submitted that the expression is available to an assessee for a period not exceeding six years in clause (v) of Section 2 (e) means is and has been available to an assessee for the period of six years before the date of valuation.Counsel says that if interest in property though revocable has remained unrevoked for more than six years before the valuation date the interest would be an asset within the meaning of Section 2 (e). We are unable to agree with that contention. The expression used by the Parliament is is available to an assessee for a period not exceeding six years, andit must mean that thought the assessee has interest in property at the valuation ate the interest will remain available for a period not exceeding six years, or for a shorter period the interest will fall within the exception; if it is to remain available for a period exceeding six years it will fall within the definition of assets and its value will be liable to be included in the net wealth of the assessee. 7. The terms of Section 4 of the Wealth-tax Act also throw some light on the problem. That section prescribes certain classes of assets which are liable to be included in the net wealth of an assessee. The section, before it was amended by the Wealth-tax (Amendment) Act, 1954, provided: (1) In computing the net wealth of an individual there shall be included, as belonging to him- * * * * * (5) The value of any assets transferred under an irrevocable transfer shall be liable to be included in computing the net wealth of the transferor as and when the power to revoke arises to him. Explanation-For the purposes of this section the expression transfer includes any disposition, trust, covenant, agreement of arrangement and an irrevocable transfer includes a transfer of assets which, by the terms of the instrument effecting it , is not revocable for a period exceeding six years or during the lifetime of the transferee. If any assets are held under an irrevocable transfer, i.e., under a transfer which is not revocable for a period exceeding six years or during the lifetime of the transferee, the assets are liable to be included in the net wealth of the transferor.It is implicit in sub-section (5) of Section 4 that if an asset is held under a transfer which is revocable before the expiry of six years, the interest of the holder in the asset shall (sic (not?)) be included in the wealth of the transferor. If the transaction of lease in the present case was between a private individual and the respondent evidently by virtue of Section 4 (5) the interest of the assessee under the lease would have been liable to the included in the net wealth of the transferor. We see no reason to hold that because the transferor is the Government any different rule will apply. 8. Counsel for the Revenue invited our attention to the amendment made in the Act by the Wealth Tax (Amendment) Act 1964, in the definition of the word assets in Section 2 (e) of the Act. Relying upon the clause added by the Amending Act from the date the interest vests in the assessee after the expression six years in Clause 2 (e) (v), counsel, contended that this was intended to be a parliamentary exposition of the meaning of the original clause. We do not think that any such intention appears from the terms of that clause. Assuming that the exception in respect of interest in property which is available to an assessee for a period not exceeding six years from the date the interest vests in the assessee is only to apply after the date of the amendment by the Wealth Tax (Amendment) Act 1964, that clause has no application and the terms of the section must be interpreted as they stood at the valuation date which crystallized the charge of Wealth-tax for the appropriate assessment year. It is unnecessary to refer to the amendment made by the same Amending Act in the Explanation to Section 4 of the Act.We are of the view that interest in property which is available to the tax-payer for a period not exceeding six years from the valuation date is not an asset within the meaning of Section 2 (e) and the lalue thereof cannot be included in the net wealth of the assessee for the financial year relevant to the valuation date.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]We are unable to agree with that contention. The expression used by the Parliament is is available to an assessee for a period not exceeding six years, andit must mean that thought the assessee has interest in property at the valuation ate the interest will remain available for a period not exceeding six years, or for a shorter period the interest will fall within the exception; if it is to remain available for a period exceeding six years it will fall within the definition of assets and its value will be liable to be included in the net wealth of the assesseeIf any assets are held under an irrevocable transfer, i.e., under a transfer which is not revocable for a period exceeding six years or during the lifetime of the transferee, the assets are liable to be included in the net wealth of the transferor.It is implicit in sub-section (5) of Section 4 that if an asset is held under a transfer which is revocable before the expiry of six years, the interest of the holder in the asset shall (sic (not?)) be included in the wealth of the transferor. If the transaction of lease in the present case was between a private individual and the respondent evidently by virtue of Section 4 (5) the interest of the assessee under the lease would have been liable to the included in the net wealth of the transferor. We see no reason to hold that because the transferor is the Government any different rule will applyWe do not think that any such intention appears from the terms of that clause. Assuming that the exception in respect of interest in property which is available to an assessee for a period not exceeding six years from the date the interest vests in the assessee is only to apply after the date of the amendment by the Wealth Tax (Amendment) Act 1964, that clause has no application and the terms of the section must be interpreted as they stood at the valuation date which crystallized the charge of Wealth-tax for the appropriate assessment year. It is unnecessary to refer to the amendment made by the same Amending Act in the Explanation to Section 4 of the Act.We are of the view that interest in property which is available to the tax-payer for a period not exceeding six years from the valuation date is not an asset within the meaning of Section 2 (e) and the lalue thereof cannot be included in the net wealth of the assessee for the financial year relevant to the valuation date.