Case: Commissioner of Wealth Tax, Patna Vs. Raghubar Narain Singh

These appeals from the judgment of the High Court of Patna have-come to this Court by certificates granted under Section 29 of the Wealth Tax Act, 1957. The questions upon which the certificates of fitness of appeal to this Court have been granted are question Nos. (2), (3) and (4) in Tax Cases Nos. 64 to 68 of 1467. The questions are asNo. 2. Whether, in the facts and circumstances of the case, the decrees obtained by the assessee against Shri A.H. Lal and Shri D.D. Tulsi for Rs. 1, 11, 747 and Rs. 51, 525 respectively, have been valued under the Wealth Tax Act, 1957, by correctly applying the provisions of section 9 of the Act for the purpose of including their values in the net wealth of the assessee?Question No. 3-Whether, the sum of Rs. 32, 266, the amount of Agricultural income-tax due from the asessee, falls for deduction in hands of the assessee in arriving at his total wealth for the years 1957-58, 1958 59, 1959-60 andNo. 4-Whether, the sums of Rs. 597909 due from Tikait Girja Prasad Singh, Rs. 40001 due from Sri Gangeshwar Prasad Singh, Rs. 64000 due from Mahanth Mahabir Das, Rs. 37773 due from Sri Lakshmi Narain Singh, Rs. 2600 due from Sri Jamuna Prasad Missir, Rs. 1250 due from Sri Sarjug Kumar, Rs. 1 5344 due from Sri Nandkishore Singh, and Rs. 388760 due from Raja Prithivichand Lal Chaughury under claim decrees obtained against them by the assessee under the Bihar Land Reforms Act are assets of the assessee within the meaning of Wealth Tax Act, 1957, and have been valued under the said Act by correctly applying, the provisions of section 7 of the Act for the purpose of including their values in the net wealth of the assessee ?Regarding Question No. 3 which is the question whether, the A amount of agricultural income-tax dues from the assessee is a factor which has to be taken into account for valuing the compensation payable to the assessee, we ha ve held that agricultural income-tax dues from the assessee which are deductible from the compensation under Section 4 (c) of the Bihar Land Reforms Act, 1950, if the same has not been deducted before the issue of the compensation bond, then the possibility and the hazard of its being deducted from the compensation involved is a factor which has to be taken into account in estimating the value of the right of compensation for the purpose of estimating the net wealth of the assessee on the valuation date under the Wealth Tax Act. The arrears of agricultural income-tax is not to be deducted from the net wealth as such but is a factor which a willing C purchaser will take into consideration in estimating the value of these assets and that is a factor which should be taken into consideration. The point has been discussed by this Court in the case of Commissioner of Wealth Tax, Bihar, patna v. Maharaja Kumar Kamal Singh (Civil Appeal Nos. 1238 to 1240 (NT) of 1973). The question, is, therefore answered as the answerer given in the said appeals and the Tribunal will estimate the value by taking into consideration the possibility for deduction on account of the liability of the assessee on account of agricultural income-tax if it had not been already deducted in accordance with the provisions of the Act and determine the net value of the assets of the assessee, accordingly.

Reasoning: In respect of sums due from Tikait Girja Prasad Singh, the High Court has observed that assessee was entitled in respect of the zamindari compensation of Tikait Girja Prasad Singh which had. vested in the Government and the value of the compensation had been estimated at 75 per cent of certain figure. The High Court directed that when assessee had a claim decree against its debtor, the Wealth Tax officer should ascertain the price that a reasonable person would have paid for it on the relevant date, valuation in open market considering that this claim decree can only be satisfied wholly or partly from the compensation which the debtor would receive under the Bihar Land Reforms Act, 1950. The claim decree was an asset, the High Court held, but it was wrongly valued by the authorities and directed to be valued by estimating that it would fetch in the open market on the valuation date taking into consideration all thethe same principle, the other decrees mentioned in the questions have been disposed of by the High Court. We are of the opinion that in view of the principles discussed by this Court in the case of Commissioner of Wealth Tax Bihar, Patna v. Maharaja Kumar Kamal Singh the High Court was right in its conclusion. Indeed this question was not seriously pressed before us separately.We may reiterate that learned counsel for the revenue urged b before us certain propositions,For the purposes of computation of net- wealth of an assessee each asset belonging to him and each debt owed by him has to be valued separately.(2) The difference. between the aggregate value of the assets and the aggregate value of the debts represents his net-wealth.(3) In determining the market value of an asset (or the residue of the asset diminished by an over- riding title on the asset itself), any liability or debt incurred in relation to it has to be ignored as the debt or liability has to be separately evaluated:(4) What is the market value of a certain asset (or the residue asset as referred to above, is a question of f act, to be deter mined finally by the Income-tax Appellate Tribunal taking into account the relevant evidence and considerations put foreward by both the sides anthem High Court cannot interfere with such a finding of fact unless it is found to be based on irrelevant consideration or is arrived at by ignoring relevant evidence,(5) When the debt is represented as an asset, its market value has to be determined in. the same manner as the market value of any other asset irrespective of the fact whether such an asset- debt is encumbered by another debt owed from the assessee, because the later- mentioned debt can qualify for deduction at its market valueproposition No. (I) and (2) above, there cannot be any dispute. But as regards Proposition No. (3), as this Court has discussed in Commissioner of Wealth Tax, Bihar Patna v. Maharaja Kumar Kamal singh, if there is an asset which is subject to certain hazards -. including the liability of certain debts to be deducted from the said asset, then that factor would be relevant factor diminishing the market value of the asset in open market and has to be estimated taking into consideration that factor. Regarding Proposition No. (4), it may be stated that while it is a question of fact but if the Tribunal has arrive d at the conclusion by taking wrong principles into consideration, then such a finding would not bind the High Court. Regarding Proposition No. (5), it may be stated that (debts may be deducted from the value  of assets but the valuation of an as set has to be done in terms of Section 7 (l) talking into considerations all the hazards including the possibility of an amount on account of debt being deducted from the value of the asset is a factor which will influence a prospective buyer in the open market, depending upon the facts and circumstances of each case.