Judgment Case ID: 4757

Judgment:
Civil Appeal Nos. 1233 1237 of 1973. Appeals from the Judgment and order dated the 5th May	 1972 of the Patna High Court in Tax Cases Nos. 64 to 68 of 1967 G.C; Sharma	 B. B. Ahuja & Miss A. Subhashini for the Appellant. 628 P.K. Chatterjee and Rathin Dass for the Respondent. The Judgment of the Court was delivered by SABYASACHI MUKHARJI	 J. 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 as follows: "QUESTION No. 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 and 1960 61? Question No. 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. 15344 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 ' ? 629 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 have 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 vs 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. These questions are for the wealth tax assessments of the assessee for the assessment years 1957 58	 1958 59	 1959 60	 1960 61 and 1961 62. The assessments involved were for those years in which the relevant valuation dates were 20th September	 1956	 21st March	 1958	 21st March	 1959	 21st March 1960 and 20th March 1961 respectively. In the first year the assessee had filed return of wealth for Rs. 447065. The Wealth Tax officer	 however	 determined the total wealth of the assessee at Rs. 1608863. The Wealth Tax officer included in the net wealth of the assessee	 various amounts of money due under the decrees which the assessee had obtained against certain debtors	 as well as the compensation payable to him under the Bihar Land Reforms Act after valuing the bonds. It may be mentioned that the assessee had appealed to the Appellate Assistant Commissioner and thereafter he had carried appeals to the Tribunal also and had obtained some relief in the process. For the subsequent assessment years of 1958 59	 1959 60	 1960 61 and 1961 62	 similar considerations had come up before the Wealth Tax officer	 on the assessee filing separate returns and similar results were followed. In each year 630 the assessee had claimed certain deductions	 including an amount of Rs. 32266 due as agricultural income tax. The later sum has been consistently disallowed. This point we have disposed of in terms of the decision of this Court in Civil Appeal Nos. 1238 to 1	240 (NT) of 1973. So far as Question No. 2 is concerned	 while computing the net wealth	 the Wealth Tax Officer had included the sums of Rs. 8000 and Rs. 13011 for the year 1957 58	 due from Sri A.K.Hazra and Sri N. Sahay respectively	 on the basis of usfructuary mortgage in favour of the assessee as his assets. On the last point the assessee has obtained relief from the Appellate Tribunal for the year 1957 58 and for that reason these two sums were excluded from the net wealth of the assessee for the subsequent assessment years and that point had given rise to the reference in Tax Cases Nos. 23 to 271 of 1966. On the other questions raise(l by the assesses	 reference in Tax Cases Nos. 64 to 68 of 1967 had arisen. Now the facts material for question No. 2 are as follows: The assessee had obtained civil court decrees for Rs. 111747. and Rs. 51525 against Sri A.H. Lal and Shri D.D. Tulsi. The decrees are still pending execution. In the books of the assessee these two decretal amounts were shown as tstill outstanding. So far as the decree obtained against Shri D.D. Tulsi	 the position seems to be that Tulsi owed a decree to the assessee and the assessee owed money to the bank. In connection with the decree obtained against D.D. Tulsi	 it had been contended before the Tribunal that at the instance of the official Liquidator	 the Calcutta High Court had issued a Garnishi order on 13th January	 1960 for setting of the assessee 's liability to the Pacific Bank and	 therefore	 the decree did not represent wealth which could be valued under the Act. lt was recorded by the Tribunal that the order Of the Calcutta High Court had been passed after the relevant dates of the first three assessment years and it held that even for the assessment years 1960 61 and 1961 62	 the order of attachment could not indicate that the value of the decree was 'nil '	 as was the assesses case. Hence	 the decree against Sri Tulsi was valued by the Wealth Tax officer at Rs. 51525. As regards the decree against Sri A.H. Lal	 the attachment order passed by the Calcutta High Court was on 21st June	 1961	 that is to say	 even after the valuation date for the 631 assessment year 1961 62. The decree was therefore valued by the Wealth Tax Officer at the figure of Rs. 111747. It was the contention of the assessee that the two decrees had been erroneously valued and the principles for valuation under Section 7 (1) had not been followed. On the other hand it was contended on behalf of the revenue that decrees had. been correctly valued under Section 7 (2) (a) Of the Act. The High Court held and in our opinion rightly that two decrees had not been valued under Section 7 (2) of the Act at all and had been valued under Section 7 (1) of the Act. We are in agreement with the High Court that merely because the assessee had shown the full decretal amounts in his books as still due	 would not ipso facto lead to the conclusion that they would be valued at those sums without taking into consideration the hazards of realisation of the decrees. These decrees had not been executed and in the process of execution	 there may be hazards and the Wealth Tax officer must estimate the price of the decree by anticipating what a willing purchaser would have. paid for those decrees taking the hazards into consideration in open market on the valuation date and should estimate the price of the asset in question accordingly. The High Court answered this question in the negative. We are of the opinion that in view of the well settled principles which we have discussed in the case of Commissioner of Wealth Tax Bihar	 Patna vs Maharaja Kumar Kamal Singh (Civil Appeal Nos. 1238 to 1240 (NT) of 1973	 the High Court was right in its decision. So far as the Question No. 3 is concerned	 the same question would have to be answered in the manner indicated above and the High Court has done the same and we affirm the said decision in view of the decision of this Court in Civil Appeal Nos. 1238 to 1240 (NT) of 1973. The facts regarding question No. 4 after taking into consideration statement of this case as also the supplementary statement of the case sent to the High Court pursuant to its directions are as follows: 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 632 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 the hazards. On the 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 vs 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	 namely: (1) 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 fact	 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 in 633 terfere 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 value independently. About proposition 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 vs 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 arrived 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 asset 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. In the aforesaid view of the matter	 we affirm the decision of the High Court in all these points and dismiss these appeals with costs. S.R. Appeals dismissed.

Summary:
The assessee is an individual and his estate stood vested in the State of Bihar under the Bihar Land Reforms Act	 1950 as and from 1st of July 1952	 and he is entitled to receive compensation under the Act from the Government. The assessors during the relevant assessment years had obtained two monetary decrees from his debtors	 but the amounts receivable by the assessee were attached by two garnishee orders issued by the Calcutta High Court on 13th January 1960 and 21st June 1961. The assessee also had some claim decrees but as they were not yet executed	 they were shown in his book of accounts as still outstanding. The assessee had to pay Agricultural Income Tax to the Government and this debt has to be deducted from the compensation receivable by the assessee. In these five appeals by certificate of fitness	 question arose as to whether the answers of the High Court of Patna given in the Tax references on the question of correctness of valuation of the "net wealth" under section 7 of the Wealth Tax Act	 1957 are correct. The Revenue urged the following five propositions: (l) 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. 626 (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 he separately evaluated. (4) What is the market value of a certain asset or the residue asset as referred to above	 is a question of fact	 to be determined finally by the Income tax Appellate Tribunal taking into account the relevant evidence and considerations put forward by both the sides and the High Court cannot interfere with such a fielding 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 value independently. Dismissing the appeals the. Court	 ^ HELD: 1.1 Section 7 and 2(M} of the Wealth Tax Act	 1957	 though must be read harmoniously	 apply at two different stages. Section 7 deals with the estimation of the market value of the asset	 while section 2(M) enjoins that from the same	 the debt owned by the assessee to be deducted. The debts may be deducted from the value of assets but the valuation of an asset has to he done in terms of Section 7(1) taking into consideration 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. [633 EF 1.2. 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 willing purchaser will take into consideration in estimating the value of these ' assets and that is a factor which should be taken into consideration. The Tribunal will estimate the values taking into consideration the possibility of 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. [629A D] 627 kumar Kamal Singh (Civil Appeal Nos. 1238 to 1240 (NT)/1973 decided on 20 2 84 relied on. If there is an asset which is subject to certain hazards including	 the liability of certain debt to be deducted from the said asset	 then that factor would be a relevant factor diminishing the market value of the asset in open market and has to be estimated taking into consideration that factor. [633D] B 2.2. Merely because the assessee had shown the full decretal amounts in his books as still due	 would not upso facto lead to the conclusion that they 'should be valued at those slums without taking into consideration the lizards of realisation of the decrees. These decrees had not been executed and in the process of execution there may be hazards and the Wealth Tax officer must estimate the price of the decree by anticipating what a willing purchaser would have paid for those decrees taking the hazards into consideration in open market on the valuation date and should estimate the price of the asset in question accordingly. [631C D] 2.3 When assesses 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	 and value in open market considering that this claim decree can only be satisfied	 wholly opartly from the compensation which the debtor would receive under the Bihar Land Reforms Act	 1950. The claim decree is an asset	 but it should be valued by estimating that it would fetch in the open market on the valuation date taking into consideration all the hazards. [631H	 632A] 3.1. 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 separatly. [632E] 3.2. The difference between the aggregate value of the assets an the aggregate value of the debts represents his net wealth [632F]