A 634

COMMISSIONER OF WEALTH TAX, BIHAR, PATNA.

-..

MAHARAJA KUMAR KAMAL SINGH .

February 20, 1984

c [ V.D. TULZAPURKAR, R.S. PATHAK an dSAnYA~ACHI Muu1ARJI, JJ.] ..,,.. ' . -· .

 Wea/ih Tax Act, 1957, s.2'..m}-Net wclth~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' dtt:act1n1 fro1n Value of aSSet which a willing purchaser , would pay for. buying that assci i11 D ope, JJmarket 1n11st be. taken into acconnt. POssibility of deducti'or/ofduesofassessqe 'for agricu!iura/inco111etax 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 te righi to .CQlnpensalion which it would/etch if Juld in opeh litarket. ·

, .

, Bi'har Land tforms Act, 1950--s. 4 (c) -interpretation of. ... ,

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 theasscssee's right to compensation which

had accrued to hi1n on vesting of his estate in the Stci.te f Bhar under the Bihai Land Reforms Act, 1950 on the bais of market vaJUe on the vaiuatio~1 date. ~is , was contested by .. tl)-e assessee on the grouncj.'that after adjµsting his outstandingag, 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 Jribnal 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 . - _. " . ' 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 cae as

nothing was receivable by the 'sSessee fro1n the State of .Bihar in vie'Y .of the arrear$ of agicultral, inco1!1e-tax, the value of e asset to the assessoe was nil,

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635. ' Hence this: 'appeal.

Disn1issing the appeal,

' frEL'ri: For con1pu.ti"ng net wealth Under' s.2(m) of the Wealth Tax Act, 1957 ·

tcre are two different steps. Th'e fi1st 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

.· B \vould be-to deilct thcrefro~ the debts O\Ved by the assesSee -eXcept the debts excluded by thatse, ction. Forestimating 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

1 take into aCcoullt any factor 'which detrcts fron1 the valuC o(an asset which a willing purchasef v:rould ·

pay for buY.ing that asset in, ppen market.

[~43 ~-C] ·

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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 coneQue1lces.

Clause .(c) of s.4 provideS_ tht the arrea.rS of rve~e arid cesses rcn1aining lawfully due in reSpect 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

amout paYable. [~;1-3 -Gli] ' - •

I11 the instant caSc; the possibility of deduction of the dues -of the nsscsSefor ai?; ricultural 'incon1e tax undr s.4(c) of the Bihai:· Lilnd Reforms Act from the con1peo.Sation n1oney .is a factor tha_._t affects price or v.ilue of the co1npensatioi1 money' . receivable by ihe asseSsee under t~16 Bihar Land Reforms Act and until it has Peen

finally determined that no.- arrears of agriculturl inco1}1c tax }s payable at all, will remain a hindrance and the value of which rriust"be' quantified and deducted before

a P. oper csti,~C1.tc of the.value of_ the asset mone'y reCeiv!:J.blc bY the asess.ee-is prepa~ "._

red. _Exce'PtJn cases whee the 9uestion of arrears_?[ ag1icu1tural incon:ie tax is sttie~," this is a factor which goes to the dimination of the value of the asset. To._what extent ttiRt wbuld affect the Value of the _aSsct js a 1nattet of quantification.. The c-Ourt is not cOncerned wfrh the questiorl of_ actual quantificati_o~ .. , The 4

Court, is concerned with the question whether thai .f3.ctor , is a. matter which _has tope tak, en iii.fir, consideration in e<>timating the value of the asset i_n question.·

The court is of the opin_ion that i.t is a facto/ certainly to 'be talcn into cOside.ration in estimating wht. it w6u1d fetch in the <'ipen n1rke.t" (644 H; "645 AMC],

,- i .,

' The-coiitention that a debt \Vhkh _ls not deductible ·:becaus~ of _, povisions. 0 (.

~.2(m) should not 6e t'aen into considration in estimating the value of au asset

is not acceptable in the facts and circnn1stances of this se. (645 F] 1. , ' \

CtVIL APPEL~AT~}URismcT; ON : Civil Appeal_ Nos. 1238 to 1240

 H', 'of 1973. ·

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. From th~_Judgment and Order dated the 17th s"eptember, 1971 of the Patna High Court in T; ix Cases Nos, 2of1965 and 19 and 20

of 1966.

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, B.JJ. Ahuja & Ms. A,. Subhashini, for the Appellant.

l>r.Y.S. Chita/e, and U.P. Singh, for Re•pondent .

. The Judgment of the Court was delivered by

•J .

SABYASAcHI MuKHARJJ, J. These appeals by certificates arise . . . against a decision of the Full Bench of tho Patna High Court. Several. questions were referred to the High.Court of Patna under Section 27 (1). of the Weahh Tax, Act, 1957, hereinafter re.ferred to as lhe Act. Two of these qu; ztions have been answered .against the assessee, one was held to be not entertainable and one misconceived. The question answered against the revenue in that reference before the High Court

wa• question No. (iii) meationec'. in the judgment of B.D. Singh. J . . and .th~ question ic. as follows:-

"Whether, 01, the facts and circumstances of the case, t)le Tri.bunal was right in . including in the assess's net wealth. a positive figure, on account of Zamindary compensation wito\Jt taking into consideration th.e arrears of agricultural . income tax instead of.taking the figure of compensation receivable from Government of Bihar at mil'.

Tn ordr to appreciate the question, it may. be ncessary to nofer to some facts. The question involved before the Full Bench was for the ssessment years I 959-60, 1960-61, and H6I-62, .rnrresponcl.'ng .. valuation .dates of which were the 3lst October, 1958, 3rd Octobr, '1959 and 31st October,.1960:lThe assessce is an individual. His estate vested in the State of Bihar under the Bihar Land Reforms Act, 1950

on and from' 1st July, 195_2, and he is entitled-to recieve compensation

" under the Act from the government, Under Section 3 of the. Act, the question arose about the inclusion in the, assessee's "net wealth" the value. of the estimated amourit of compensation receivable by him

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_ .. ,.

c.w.T. v. M.K. KA, MAL SINGH,:(Mukhaii J.) .

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. 637

~~ fro, m the Bihar Government under the Bihar Land Reforms Act,, J 950. , A In the assessment year 1959-60, the Wealth-tax Officer estimated the ' value at is. 10,25:123 and included it in the n•i wealth onhe assessee. For the assessment vears l 960-6r and 1961-62, the assessee produced a Jetter from the District Cllector; Arnih, to show that the. , assessee is entitled to compensation of Rs. 4,39,713 only .. The . ; wealth-tax 'officer estimated 75% the, eof as the market value of the B right of the assssee to receive the compensation. Accordingly he 'J included 1n the assessee's net wealth Rs. 3,29,784. On appeal, tlie ' Appeilate Assista.nt Commissioner 'reduced the valuati01i for the. Jst -< year to Rs. \29;?84.

For the riext two .years, namely 1960-61 and -. 1961-62, the Appellate Assistant Commissioner held that it would be reasonable to est1rnate the market. value of the compen<ation to

C be'received by the ssessee at.65°1, of the face valu~.

The assessee preferred appeals before the Appellate Tribunal regarding assessments for the aforesaid three years and reiterated his contention tliat the' right to receive compensation under'. the Land Reforms Act WdS not aq asset within the' meaninr: or' Section 2 ,(m)

., of the Act and. cou1d not be inclu{i.ed in the assessee's net wealth. The --Tribllnal held that the estiniatd amount of za1nind1ri colTjpensation ,..,. .. payable to th~ assessee 'was an as'set and had1to. be iuclu(l.ed in the assessee's net wealth, However, it directed the Wealth-tax Officer to . . ' , ,1 .. estimate !he value atid compensation t<? be reeiveci. by the assess_ee .at . L65% even for the rst year, i.e 1959-.60, as w!'ts <'.one by, the Appellate\ ·.Assistant Commissipner whh regard to .th.e scond and third yearn i.e.- 196Q-61 and 1961-62. l ''~

The contention: of the asessee fUrther W?S that the unpaid agricu.i-

• -.F tural income-fax as a .debt was lieductihe while computing. his net

wealth. , , His claim was that this. debt was Rs.' 5,10,831 in the

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first year,> Rs. 4,76;46LOO in the second year an\i Rs. 4,75,706 in the 'third year. A sum of R < ' 24.430 being agricultural income-tax demand for 1363 fasli was allow.er. to be. ~.<'ducted by the Wealfh-dx: _Officer .for the second and third yCars" arrears of agric.111turft1 inCome~ G tax, ihe assessee had. pro<1.uced Government letter io show that the . . amount of compensation receivable by the assessce would be nil. Accor-·.

ding to the enquiries fron1 the re.venue depart1nellt. 11 also ppcarect that the final con; ipcnsation money.payable in respet of th• assessee's zamindari was less than the agricu'ltµral ii\com.,., tax dues outstanding H. aganist him,.andso.it was hot possible to effect r.ealisatiort of te dues

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1 "" • I of ai; ricu1tural income-tax only by adjustment from the final compensation muney. The Triqunal, therefore, held that except Rs. 2(430 which was agricultural income-tax demand for 1363 fasli and .which. was allowed to be deducted by the wea!th-.tax Officer, thi; other amounts as 'cla.i; ned by the assessee were not 'deductible as the arrears were outstanding for more than 12 months, in view of th<i provisi01; is contained under Section. 2 (m)of the Act and the Government Jetter was.· . . ' not f>t all h.elpful to the assess.ee. Then reference wasmade to the High

Court under Section 27(1).of the Act raising five questions out of which .. question No._ (iii) as set out hereinbefore is before us.

The questiOns before the High Court including' t\le question w, hich is before us were referred to a Foll Bench of the court and the reference was disposed of by .the 'Full Ben.ch o( Patna High Court on 17th September, 1~'71: anil the decision is reported in 84 LT.R. p. 240. ,

• • The Fu'H-Bench decided.the. question , in issue before us against the revenue and in favour of the assessce holding thereby that in the facts arid circumstances of the case as nothirg was receivable 1'y the assessee--in view of the arrears of agricultural inCcmc-taX, t.he value of

.. .'jj . ' -·- the asset to the assessee was nil. · . . .

Though at one point of time .there was certain controversy as ·•r.} . '

11. to whether the right t~ receive comp!nsati9n on the vesting of the • estate of the appellant m the" Government was an asset a11d as .such fts .value had to bi; taken in computing the net value of assets or not,. . There is t\o doubt that it is and it was not urged before us that it is not "!'. an; rsset. The only questioil, is:· how should it be va.lued.

H was cori-. tended before us that the Act pcohibit~ setting off of deductions of debts which are outstanding for more than .. 12 months .on account of the arrears of 'tax on income, agricultural or otherwise. - Therefore .it was urged that if the arrea; s of agricultural inc0111e-tax. due as in .this case are taken into account against the value of the. compensation \.: receivable by . the asse.ssee, then it would not •be in accordanc.e with the scheme of the .Act and it would permit defeating the intention of . "~ . ·, the legilature, namely, permitting deduction of arrears of .agricul\ural income-tax•outstanding for more than 12. months by indirect meihod which is prohibited c\irectly in terms .of Section 2 (m) (iii) of th.i; Act .. This.is the que.stion for our consideration in these app.eals. .. ·

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i c.w.T. v. _M.K. KAMAL SINGH.(Mukh11rji, J.)

we may at a glance examine. the proisiori," or"the llihar Land Reforths Act, under which compensation was pa'yable .t0 the asseisee and the 'value of which was under consideratio.n in this case. Before we do that, it is necessary to note the rlevant proisions ofthe Wealth Tax Act and to find out the scheme under ih~ W_ealth 'fax Act~. to how the assets have to be valed. Section 3 of the said Act is the charg- . ing section which imposes 1a tax for. every assessment year in respect of' _ • th!' net wealth on the corresponding valuation date. Section 4 make.•

'-, I, . some deeming inclusion of certain assets as assets ofthe assessee. It i•· not necessary to deaLwith these in c'.etail ii'iitit may be mentione<l that

certain assets which are not standing in the name .cif th~ asses see ire

 ·included .in the net wealth, for exa, mple,. assets •transferred to spouse : or minor child or partner of a firm etc. These deal with the assets wh1'ch

are not in the name or standing in the name.of assessee but .which .. really belong to the a.ssessec acc\mi.ing. to the scheme. of the legislation •.

-~ _ we may note }iere as-it.w~:.S conVaS-scrl. before us.that under sub-sectjon

(3) of Sectio~ 4 of the Act which provides that w.here the value ohny asset is to, be ihcluded. in the net' wealth of a~ assessee ii~ accordance

- with cbuse (a)' of sub, setion (l) or sub-sMion (JA).11\ere shall be

ded'uced from such valuQ>any debts owing on the valuation <late by the tfansferree mentioned i~ that clause in so fr as such debts are ' . . ' .. . ' . --. . . referable to' such assets; .and the provisions of Section 5 shall apply

.. ._ inrehitiOn to scli.ssets as Ir sucJi a}sE:ts'.were assets -beJoJ1ging o th.~ assessee. Sction 5 deals with the exemption of certain assets.

I Section 6 excludes .. ce.rtain -l,; sets an_d debts ?utside India_: . Section '-<l.-1 1s import.ant which provides~ the metho0 .. how the .1• . to be assessed. n -provides th.at it shall be esti'matec\ to be the price

which in the. opi, Jlion of the Wealt!Hax Officer ii wol)ld fetch if sold in the open market on the valuation .date.' Section 2 (m) clea1' -..ith ,,.

-, '_'nt wealth" _upon wliich tax is levied and read• as follows :

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. "2 (m)-"nei wealth" mens the mount by which. the i aggregate value coputed. in accordance . with the. provision• of

this .Act of all tlfe assets,· wherever located, belonging, to tho , assessee on the Valuation date, including assets required to b6

induded in his net wealth as on that date under thi• Act, ii i11. excess.of the. aggregate value pf all the debts m;, ed by the aoie .. ec

on the valuation c.,; te other than-. . . •

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(i) .debts which under section 6are not t• bO tak•a isl@ H account; ,

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SUPREfE COURT REPORTS [1984] 2 s.c.R.

(ii) debtnhich are secured on or which !)ave been incurred in . relation to, any property in respect of which wealth-tax is not chargeable under this Act;, and •

. (iii) the amount of the tax, penalty or interest apayable inconsequcnce of any order passed under or in pursuance of this.· Act or any law relating to taxation of income or profits,

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- or the Estate :buty Act, 1953 (34 of !953j, the Expe.rlditure -'<' Tax Act, 1957 (29 ofl957),.j)r the Gift-tax Act, 1958 (18 of •. 1958),- . . . - -~

, (a) which is outstanding on the valuation date andis claimed by the assessee in appeal, revision or other proceed-

.J .

ing as not being payable by liim; or ~

(b) which, although not claimed by the assessee as not

being payable by 'him, is rit!Vertheless, outnding for a period of more than twelve months on the valuation

I , date".

The main contention of the revenue is •that the amount of tax, penalty 01; interest payable in consequence o'f any order passer. unc'.er or in pursuance of the ACt. or any lawrelating to taxation of income___}- - or profits, or the Estate Duty Act which is outstanding on the valuation date and is claimed by the assessee in appeal, revision or other proccedillgs as not being payable by him and which, although not claimed by the assessee as not .being payable by him, is ll!'vertheless_ outstanding for more than twelve months on the valuation date should not be f'

considere~. to be debt entitled to be deducted from net wealth. 'Net wealth' as we have noticed mearis the amount by which the aggregate ..;, value computed in accordance with the P!ovisions of the, Act, of all

the_ assets wherever.located, belonging to theassessee 'is in excess of the aggregate value of all debts exclml.ing the debts mentioned in Section 2 (m) of the Act. Therefore the scheme ofimposition of wealth tax in , case of an assessee which is not a company and the present assessee

is not a company ahd the c0mputation f the wealth tax of an asses see

which is a company might be done under s.ub-sectlon (2) of Section 7 of the Act,. must be done by firt estimating the value of the assets in in acc_ordance with the provisions of .'the Act. That is the first 'step. Therefore the estimation of the value of the assets is first necessary '

 c:w.T, v. M.K. KAMAL SINGH (lefukharji, J.)' 64\

\ . ' ' ' _ _,,_ in accordance with the provisions of the-Act: The material provision of the Act forthb-1:mrpcise in the' said Act would be Section 7 (I) _which enjoins, hc-, Wea•thtax Officet"rn case Of an asset other _t:ha!'- cash(to estimate the. prk'- which, in his opinion, it would fetch if sold in t]\~. open market on rne valuation date. 1:hcrefore tlw first step in the facts and circumstances of this case was .that the Wealth-tax Officer to esti! mate the. price .which in his opinion the right to compensation of the

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B. . ' assessee would fetch if sold ju the open market, and after determining the value in the manner aforesaid to deduct therefrom debts owed by . the assessee excluding however the debts which are m'entioned in clause ' '~~ (i), (ii) and (iii) of Section 2 (m) of the Act.

.. . . . ' ' ( - . ' .. _ Keeping this scheme Jr, the Act in "mird. we have to examine the nature of compensation under Bihar Lant! Reforms Act, 1950 ..

Section 3 provides• for th~ notification vesting an cstte 'or tenure in the .State and from-'the date specifiedin the notification, the estates or . '

tenures of a proprietor or te_nureholder,·pecified in the notification,

-~, will pass oi: to and become vested in the State. , It is 'not dispted that D iii"this case this has happened in respect of, the property in question. / . , section'. 4_ deals with the consequences of the vesting of an estate or r

•-y ' tenure in the State and stipulates different conseque&es. We are riot ! really concerned with-.all the various consequences. We may,'h-.; wever, •

mention clause (c) of SectiQn 4 which is important for our piesent

E . f purpose. It provides as it in<\icates .that the arrears of re.venue and

'-.....:. QCSSCS remainin)I ]awfully due in respect of the estate Of tenure shall

_. coritinue to be recoverable from him in spite othe vesting of the estate

and "shall without_ prejudice to any other 'rnod, e af recovery, be recoverable (emphasis supplied) ••. when so ordert:<l, by the Collector, by the (!, eduction thereof from the amount payable to such interrne- . .. • .

I , diary under Section 32, Section 32A or Section 33". Reference was made to Section, 14 which _deals with__proisions rlating to certairidebts of proprietors and tenure-holde!S. 'sections 19 '23 arid-24 were also referred to. which we do not thiJi, k are material for our present purpose. Section 26 onwards deal with the p1iblication ofCompeustion Assessmeni-rdll. Section. 32 provides for the .manner of pay- . ment of compen•ation. 'Secti-on 32A provides as follows:- - ' ...... ' ' . . . . - .

"32A-Where the Compensation Officer considers that delay is likel,- to occur in.payment of compensation under section 32, he may, subject to the provisions of section 32B, pav).n the H . manner, io far as may. be applicable, provided in section 32; ·

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. . \ I to the person entitled thereto under thi~ Act a sum not exceeding .fifty per centum of the approximate aniount of compensation payable in him under .section 32. calculated in the mal\l)er prescribed in this behalf. ·

Provided that, if subsequently it .is tund.by th~ Compensation Officeror the Collector that any amount has been paid to ahy person fo excess of the amount payable to him under section .\ ' 32 or that the person to .whom the aomount has been paid was . not entitled to it under this Act. the amount so paid shall, after~ giving the , person concerned , a reasonable opportunity of being, - heard, be recoverable frnm him together 'with interet at 6t per centum per annum as if it were a public d.e1nand".

sectio~ 40 is also. important and is as follows~ \ ..

. ) . . ' . ' ' . "40--(1) The Collector, the Claims Officer or the Compensation0fficer may,.at any time either before or after the date of vesting, by a written order served in the presecribM manner, 'require any intermediary or any other, person in possession of ar

estate or tenure or any part thereof or any agents or employees of such intermediary or other person, as the case m;\y be, 'to pro- ' . duce, at a tifl!e and place specified in the order, such documents,. __ ).. or.to furnish an affidavit otherwise such information relating to hny estate or tenure of s.uch intermediary as the Collector; Claims Officer or the Compensatipn Officer may, from time to time require fr any of the purposes of this Act or for giving effect to any provision thero( ·

(2>) Where any intermediary or other person, referred to in ·l!b-scctiol\ (!), if so required by'a written order of the Col)ector, fails without sufficient cause, to prcc.uce s11ch docments, or to furnish such information at' such time and pla~ as may be specified in the circler, such intermediary or other person, as the .case may be:shall be liable to.a, penalty which may; extend to fifty rupees for eveiy day after the expiration .of such time until such documents have been produced or such infotmatfon has ·

ben furnished and such penalty' shall be realised as a public demand:. ·

. "

C.W.T. v. M.K. KAMAL' siNGH (M_ukharji, J.) 643

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Provided that where the sum of sch penalty exceeds five hunded rupees, the Collector shall 'refer the mauer to. the Commissioner .whose orders thereon shall be final: ' .

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' Pr0vided further that the Commissioner may at any time, of his own motion or oh the _application of any iriterinediary.- .revise any .order of the Collector imposing any pe.iJalty and the

order of the Commisionr on revision shall be fia]".

I . .

- section 33 which provides for !]laking ad interim payments to

1 proprietors, sub, scction (2) of. which contains the . followirig

'-.C proviso :.

' ' ' . • ".Provided that the Collector. shall 'have the . power. to refuse, suspend or stop any sue\" ad inteq111, payment in the case . of any proprietor or tenure-holder wh6 in his opinion has failed tpr neglected to comply wii)l any.order under sectioii: 40":.

. ,, ft . . . . '

The Patna High: Court was of the opinio;· that in view .of the ' ; facts an<l spocially. the letter given by the Collector, the market value of the right of ihe asseSsc _to rece!e 1 ad, intefim coJhpt;:satiori' • ..,, .. shul,<l be Mtennined in veiw, of the p'rovisions of Section 4(9 of

Binar.Land Reforms Act, 1950, and. keepjng in .view' the correspon-· . . - - "(_ dence passing. behveeri the collector.and the' assessee. It is frue.ihat the tax1.ng authority has adopted 65 % of the fa_ce value of the amount discounting the rest oi\ accouJ!t bf delayed payment. It may be .mentioned tha.t these compensations were payable in 40 years .. That is a factor which has to be taken into. account and discounted but the other vital factor affecting the value of the asset namely, the liability. aiid the obligation to have the amount deductedmider Section 4 (c} of the Bihar Land Reforms Act has not'beentaken into account at. 'all. 'In case ; here bonds have_' been issed .after' taking inio °C9nsidera- - . tiqn the_Iiability under Section 4.(c) of the BiharLand Reforms Act

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or where liability , under .Section 4 (c) has been determined and dedu- • '' G "cted frm' the compensaiton,

0 in such a cas.e up question of <le_duction · ' • on accouiit of the arrears of agricultural incorrie-tax mentioned in c Section 4 (c) of the, Bihar Land Reforms' Act' would.arise but in all 1 other. cases, !his is a liability; a hzard, a factor, .. a clog or a jeopardy whiCh _detracts from' the val.ue. of the asset and. in estimating ' the value which-, one_has todo on the bas.is .which a. wiliing purchaser

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• 644

SUPREME COURT REPORTS

[1984] 2 S.C.:R ' . . ' would pay for buying the said asset in open market, the Wealth-ta;

Officer must take that factor into account, otherwise it woi.ild be an unreal estimate. This chance and hazard inust influence all .buyers. . . . . - , . . There are two different stages. One is estimation o{ the value of

the assets agd the other deduction therfrom the debts owed by the

assssee .. In last mentioned stage, surely in view of the provisions of Section 2 (m), the.debt in respect of income-tax which is outstanding for more than 12 months ca11not be dtdui:ted. But in estimating the .:....- value of the assets, this possibility, which is indeed in the nature of an j . • • obligation of the Compensation Officer, is a hazard,. a clog or a hindr:ince which if a proper estimate is made under Section 7 (1) by the W<ealth-tax Officer, he has to take into consideration. It is not a quc •. stion of deducting the,. debt 'but a quest1n of estimation of the alue of tl11: asset rn question. •

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'';~ . Learned counsel for the aS:Sessec drew our attention to the 'i:cision of this Court in the case of Standard Mills Co. ; Ltd. v. Commissioner of Wealth-tax, Bombay"> and to Bench decision of the Bombay High Court in the case of Commissioner of Wealth-tax Bombay City II , v: Purshottam N. 'Amersey and Anoth&r121• These decisions; in our opnion, are not relevant at an.: Reliance was also pliced on a dCcison of1this Court i.n the case, of Pandil Lakshmi Kant Jha v. Commissioner of Wealth-tax Bihar and Orissa'l. This question was not in issue but it was reiteratd that under e Bihar Land Reforms Act, 1950 as soon.'_) as the esta.te or,1 tenure of a proprietor or tenll!l' holcler vested in the State, he becan1e entitled-to receive compensation. The rjght to receive compensation from the State was a valuable right. The fact that com- • pensation was not . payable immediately and its P';'Yment might be • spread over a period of 40 years would be relevant only for the purpose .. of evaluating his right of compensa, tion. The right to receive compen- . • sation even though the date of payment ls d•ferred fa property and constituted an asset for the pwpose of Wealth _Tax Act.

We are ~!early of .the opinion that the possibility of deductjn of the dues of the assessee for agricultural income tax under Section -;-·-------- (!) 63 I.T.R. p. 470. . (2) 71 I.1.R. p. 180.

(3) 90 I, T.R.j p, 97. .

c.w.T v. M.K. KAMAL SINGH (Mukharji, J.) . 645 . . . , . . ' 4 (c) of the Bihar Land :Reforms Act from the compensation money . is a factor that aifects•price or value of the compensation money recei:

vable by the assessee .under .the Bihar Land Reforms Act and nntil it has been finallydetermii1ed that no arrears of agrienltural income tax is payable at all; will remain a hindrance and the value of which must' be quantified and deducted before a proper estimate of the value of the asset money recivable by the asessee is prepared ... Except in cases where the question of arrears of 'agricultural income. tax is settled, this is a factor which goes to the , diminution.of thevalue of the asset.

To what extent thatwould affect the value Of the asset is a matter of

, .. - I, ' ' . • . . ' . quantification. We are not concerned with that question. of actual

-,,.:-~--quantification: We are concerned. with _the question whether that . " factor is a matter which hastb be taken into ccrnsideration in estimating the value of the asset in question. We are of the opinion that it is a factor cerfainly td. be taken into cnsideration in estimating what it . • would fetclt in the pen market. ft is .not a case as was contci1ded on . behalfof the revenue, that this was permitting indirectly deduction of debt hich ;.s prohibited by the legislation. Sectio; 7 and 2 (m) of the Act though must be read harmoniousiy apply to two different stages. Section 7 is the estimation,..of the market valu~ of the asset, section 2 (m.) enjoins that from the same the debt owed by the assessee to be deducted. Such debt owed ·, would be computed in acordance

wih ection 2 (in) but the estimat, i.on of the value of asset is on. the basis which such as, set :vould fetch i~ the open market taking intqlcl'-- . sideratfon the view pomt of a willmg purchaser. .

F .

I ( We ust mention-that' our attention was drawn to certain citer '--"provisions of the Inc.ome-tax Act. ad also Wealth. Tax Act. and it was contended that any debt which is exclude<\ under thie provi; ions of · Wealth Tax Act cannot be deducted . and on the same principle a .i.ebt which is not deductible befanse of provision of Section 2 (m) should .not be takewinto-consideration in estimating the vluc.of an asset. 'we are unable to accept this position in the facts and circumstnces of this case. . . . · .. :.our attention was .dr~ t~ certa.in other. rules namely,··" Rule 34 of'the Bihar Land Reforms Rules, 1951. We do not think it fa. material , to discuss these ruies any further.

In the view_ we have taken, we.are of the opinion that the Full Bench of the Patna High Court was ight in its conc!U:sion. The'appeais thGrefore fail and are accordingly dismissed with costso

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"'H.S.K'.

Appeal . dismissed.,

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