Supreme Court of India
COMMISSIONER OF WEALTH TAX, BIHAR, PATNAversusMAHARAJA KUMAR KAMAL SINGH
- Citation
- 1984 INSC 38
- Decided
- 20 February 1984
- Disposal
- Dismissed
- Bench
- V D TULZAPURKAR
Holding
The Court held that while arrears of agricultural income‑tax must be taken into account in estimating the market value of the compensation right, they do not constitute a prohibited indirect deduction, and the High Court’s finding that the asset’s value was nil stands.
Summary
The Commissioner of Wealth Tax, Bihar appealed against the Patna High Court’s decision that Maharaja Kumar Kamal Singh’s right to receive compensation under the Bihar Land Reforms Act should be valued at nil because of arrears of agricultural income‑tax. The central issue was whether such tax arrears could be deducted from the asset’s market value when computing net wealth under the Wealth Tax Act, 1957, and whether the compensation right constituted a taxable asset. The Supreme Court examined the two‑step process prescribed by the Wealth Tax Act – first estimating the open‑market value of the asset under Section 7(1) and then deducting permissible debts under Section 2(m). It held that the existence of agricultural tax arrears is a factor that must be considered in estimating the market value, but it does not amount to an indirect deduction prohibited by Section 2(m). Consequently, the Full Bench’s conclusion that the asset’s value was effectively nil was affirmed. The appeal was dismissed with costs.
Issues considered
- Whether the right to receive compensation under the Bihar Land Reforms Act is an asset to be included in net wealth for wealth‑tax purposes.
- Whether arrears of agricultural income‑tax, outstanding for more than twelve months, can be deducted from the valuation of that compensation right under Section 2(m) of the Wealth Tax Act, 1957.
- Whether considering such arrears in the valuation process amounts to an indirect deduction prohibited by the statute.
Legislation cited
- Bihar Land Reforms Act, 1950s. 3, s. 4(c)
- Bihar Land Reforms Rules, 1951s. Rule 34
- Estate Duty Act, 1953
- Expenditure Tax Act, 1957
- Gift Tax Act, 1958
- Income Tax Act
- Wealth Tax Act, 1957s. 2(m), s. 3, s. 4, s. 5, s. 6, s. 7(1)
Subjects
wealth taxasset valuationcompensation rightBihar Land Reforms Actagricultural income taxSection 2(m) deductionnet wealth computationtax arrears
Judgment
')
A 634
'
COMMISSIONER OF WEALTH TAX, BIHAR, PATNA.
v.
MAHARAJA KUMAR KAMAL SINGH .
.
-
B
February 20, 1984
c [ V.D. TULZAPURKAR, R.S. PATHAK an
' . dSAnYA~ACHI
-· .
Muu1ARJI, JJ.] ..,,..
· Wea/ih Tax Act, 1957, s.2'..m}-Net wc~lth~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' d~tt:act1n1
fro1n Value of aSSet which a willing purchaser , would pay for. buying that assci i11
D ope,JJ·market 1n11st be. taken into acconnt. POssibility of deducti'or/ofduesofassessqe
'for agricu!iura/inco111e·tax froinan1ount of con1pensation rmcfer s.4(c)ofBihar Land.
RejOnns Act, 1950 1"s Qfactor to be taken b1to consideration in esti"1ati11g the. value of
· t~e righi to .CQlnpensalion which it would/etch ·if Juld in opeh ·litarket. ·
, .
E
, ...
,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 the·asscssee's right to compensation which
had accrued to hi1n on vesting of his estate in the Stci.te ~f B~har under the Bihai
Land Reforms Act, 1950 on the ba~is of market vaJUe on the vaiuatio~1 date. ~~is ,
F. was ·contested by.. tl)-e assessee on the grouncj.'that after adjµsting his outstanding-
ag,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$see contended that the unpaid agricultural income-tax as a debt was deductible·
while CotnPuting his net wealth. The Jrib~nal accepting the ·Revenue's contention
G held that the an1ouiits claimed by .the aSsessee were not deductible as a debt·-under
s.2(n1) as .the arrears of agricultural incoIDe-tax Were outstanding for inore than -'
. - _. " . '
twelve -n1onths. On a reference being made, a Full Bench of the High. Court \vas
of the, opinion that the market value of the right of ihc assessee to receive ad-interim.
compen.sation. shotild be deterritlned in view of the provisions of· s.4(c) of the Bihar
. Land Reforms Act, 1950 and held that in the facts and· circumstances of the ca~e as·
H nothing was receivable by the '~sSessee fro1n the State of .Bihar in vie'Y .of the
arrear$ of ag~icult~ral, inco1!1e-tax, the value· of ~e asset to the assessoe was nil,
.•
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I
635.
·'
Hence this: 'appeal. A ,•
Disn1issing· the appeal,
frEL'ri: For con1pu.ti"ng net wealth Under' s.2(m) of the Wealth Tax Act, 1957 ·
'
t~cre are two different steps. Th'e fi1~st 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 de~ilct thcrefro~ the debts O\Ved· by the assesSee -eXcept ·the debts ex-
cluded by that·se,ction. For·estimating 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
·---r·. 1
rharkct on the valuation 'ctate. The ·Wealth Tax Officer n1ust take into aCcoullt any
factor 'which detr~cts fron1 the valuC o(an asset which a willing purchasef v:rould ·
pay for buY.ing that asset in,ppen market. [~43 ~-C] · - ·C
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 con~eQue1lces.
Clause .(c) of s.4 provideS_ th~t the arrea.rS of r~ve~~e arid cesses rcn1aining lawfully
due in reSp~ect 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
D
amou~t paYable. [~;1-3 -G~li] · ' · - •
I11 the instant caSc; the possibility of deduction of the dues -of the nsscsSe~·for
ai?;ricultural 'incon1e tax und~r s.4(c) of the Bihai:· Lilnd Reforms Act from the con1-
I peo.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 agricultur~l 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 as~ess.ee-is prepa~ "._
·red. _Exce'PtJn cases whe~e 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 F
Court, is concerned with· the question· whether ·thai .f3.ctor ,is a. matter which ·
_has to- pe 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 talc~·n into cO~side.ration
in estimating wh~t. it w6u1d fetch in the <'ipen ·n1~rke.t« (644 H; "645 AMC],
.,
,- i
'
The-·coiitention that a debt \Vhkh _ls not deductible ·:becaus~ of _,p~ovisions. 0 (.
G
"l,.· ~.2(m) should not 6e t'a~en into consid~ration in estimating the value of asset au
is not acceptable in the facts and circnn1stances of this ~se. (645 F] · .
, ' 1
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CtVIL APPEL~AT~}URismcT;ON : Civil Appeal_Nos. 1238 to 1240 · H',
'of 1973. · ·
'1 , I
.,
•
636 SUPREME COURT REPORTSP.984] 2 S.C.R .
A
.,. , . '.
·. 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.
. "J
, B.JJ. Ahuja & Ms. A,. Subhashini, for the Appellant.
B
l>r.Y.S. Chita/e, and U.P. Singh, for Re•pondent .
.
_ ,.
c
.
.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
D 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) meatione·c'. in the judgment of B.D. Singh. J .
.and .th~ question ic. as follows:-
E
"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 . in-
come tax instead of.taking the figure of compensation receivable
F from Government of Bihar at mil'.
'
Tn ord~r 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
G .. valuation .dates of· which were the 3lst October, 1958, 3rd Octob~r, ·
'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 · "
H ·question arose about the inclusion in the, assessee's "net wealth" the
value. of the estimated amourit of compensation receivable· by him
• ; '
, •
' .....
'.
/.
c.w.T. v. M.K. KA,MAL SINGH,:(Mukha~ii J.) . . 637
.. • ·~ I .
.. I
~~ 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 C~llector; 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 ass~ssee 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 D
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 estiniat~d amount of · za1nind1ri colTjpensation
,..,. .. payable· to th~ assessee 'was an ·as'set and had 1to. 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 re~eiveci. by the assess_ee .at
, E
· . · L65% even for the rst year, i.e 1959-.60, as w!'ts <'.one by,the Appellate\
·.Assistant Commissipner whh regard to .th.e s~cond 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
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 respe~t of th• assessee's
zamindari was less than the a·gricu'ltµral ii\com.,.,tax dues outstanding H. .- .
aganist ·him,.and·so.it was hot possible to effect r.ealisatiort of t~e dues
·'
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I
I
638 SUPREME COURT · REPORTS "
[1984] 2 S.C.R:]
. \ .
1 "" • I
A of ai;ricu1tural income-tax only by adjustment from the final compen-
sation 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 amo-
unts 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 con-
B tained under Section. 2 .(m)of the Act and the Government 'Jetter was.·
not f>t all .
h.elpful to the assess.ee. Then reference was·made 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.
c 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.
,
D • •
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
E
assessee--in view of.. the .'jj
.
arrears of. agricultural·
the asset to the assessee . was nil. ·
'
· .inCcmc-taX,
-·-
t.he value of
·
•
Though at one point of time .there was certain controversy as ·•r.} . '
11. to whether the right t~ receive comp!n~sati9n 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,.
F· 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
G. .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 legi~lature, namely, permitting deduction of arrears of .agricul\ural
income-tax•outstanding for more than 12. months by indirect meihod
H 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. .. · ·
J,
,.
c.w.T. v. _M.K. KAMAL SINGH.(Mukh11rji, J.)
·i
·we may at a glance examine. the pro~isiori," or"the llihar Land A
Reforths Act, under which compensation was pa'yable .t 0 the asseisee
· and the 'value of which was under consideratio.n in this case. Before ·
we do that, it is necessary to note the r~levant pro~isions ofthe Wealth
Tax Act and to find out the scheme under ih~ W_ealth 'fax Act~. to
how the assets have to be val~ed. Section 3 of the said Act is the charg-
1
. ing section which imposes a tax for. every assessment year in respect of' B /
_ • 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 - 'C
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,se~tion (l) or sub-sMion (JA).11\ere ·shall be D
·ded'uced· from such valuQ>any debts owing on the valuation <late by·
the tfansferree
' . mentioned
. '
i~ that
.. clause in. so f~r as such
'
debts are
. --. . .
referable to' such assets; .and the provisions of Section 5 shall apply
..._ in·rehitiOn to s~cli.~ssets as Ir s·ucJi a·}sE:ts'.were assets -beJoJ1ging ~o th.~
· assessee. S~ction 5 deals with the exemption of certain assets.
I· Section 6 excludes.. ce.rtain -l,;sets an_d ·debts ?utside India_: . Section E
'-<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
-, '_'n~t wealth" _upon wliich tax is levied and read• as follows :
,,. (
..
. "2 (m)-"nei wealth" me~ns the ~mount by which. the
i aggregate value· co~puted. 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. G
~-·
excess.of the. aggregate value pf all the debts m;,ed by the aoie.. ec
on the valuation c.,;te other than-. . . •
(i) .debts which ·under section 6·are not t• bO tak•a ·isl@ H
account;
,
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SUPRE~fE COURT REPORTS [1984] 2 s.c.R.
A (ii) debtn~hich 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 incon-
B sequcnce of any order passed under or in pursuance of this.·
Act or any law relating to taxation of income or profits,
- 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),- . . . - -~
.J .
c ' , (a) which is outstanding on the valuation date and- is clai-
med by the assessee in appeal, revision or other proceed-
ing as not being payable by liim; or ~
D (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,
E 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 procced-
illgs as not being payable by him and which, although not claimed by
. the assessee as not .being payable by him, is ll!'vertheless_ outstanding
F 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
I
aggregate value of all debts exclml.ing the debts mentioned in Section
G. 2 (m) of the Act. Therefore the scheme of·imposition 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 fir~t 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
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_ _,,_ \
· c:w.T, v. M.K. KAMAL SINGH (lefukharji, J.)'
. '' '
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
64\
A
enjoins,hc-,Wea•th·tax 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 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
.
' .. c
the nature of compensation under Bihar Lant! Reforms Act, 1950 ..
Section 3 provides• for th~ notification vesting an cst~te 'or tenure in
the .State and from-'the date· specified·in 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 disp~ted 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
· ' tenure in the State and stipulates different conseque&es. We are riot !·
•-y really concerned with-.all the various consequences. We may,'h-.;wever, • '
mention clause (c) of SectiQn 4 which is important for our pi·esent
. f purpose. It provides as it in<\icates .that the arrears of re.venue and E
'-.....:. QCSSCS remainin)I ]awfully due in respect of the estate Of tenure shall
_. coritinue to be recoverable from him in spite o~the 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__pro~isions r~lating to certairi-
debts 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 ofCompeu-
s~tion · Assessmeni-rdll. Section. 32 provides for the .manner of pay-
- ' ......' .
' .
.ment of compen•ation. 'Secti-on 32A provides as follows:-
. . - .
G •
/'
"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; ·
•.
•
' ...
642 SUPREME COURT REPORTS ·. [1984) 2 S.C.R.
'
. . \ I
to the person entitled thereto under thi~ Act a sum not exceeding
.fifty per centum ·of the· approximate aniount of compensation
.. I
.~.~
payable in him under .section 32. calculated in the mal\l)er ·pres-
cribed in this behalf. · ·
B Provided that, if subsequently it .is t~und.by th~ Compen-
sation Officer·or 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, -
.c heard, be recoverable frnm him together 'with intere~t at 6t per
centum per annum as if it were a public d.e1nand".
' '-
sectio~ 40 is also. important and is as follows~ \ ..
D . ) . . ' . ' '
"40--(·1) The Collector, the Claims Officer or the Com-
.
"--.. pensation·0fficer 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
E 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 f~r any of the purposes of this· Act or for giving effect·
F•• r
I
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 evei·y day after the expiration .of such time un-
til such documents have been produced or such infotmatfon has ·
H b~en furnished and such penalty' shall be realised as a public
demand:. ·
"
."
C.W.T. v. M.K. KAMAL' siNGH (M_ukharji, J.) 643
-; . .
Provided that where the· sum of s~ch· penalty exceeds A
five hund~ed rupees, the Collector shall 'refer the mauer to. the
Commissioner .whose orders thereon shall be final:
. I -
·' .
'
Pr0vided further that the Commissioner may at any time,
of his own motion or oh the _application of any· iriterinediary.- B
.revise any .order of the Collector imposing any ·pe.iJalty and the
order of the Commi~sion~r on revision shall be fi~a]".
1
)
I . .
- section 33 which provides for !]laking ad interim· payments to
- 1
proprietors, sub,scction (2) of. which contains the . followirig
proviso :.
. •
' ' '
".Provided that the Collector. shall 'have the . power. to
'-.·C
\
'
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":. D
. ,,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 asseSs~c _to rece!~e ad, intefim coJhpt;:~satiori' 1
• ..,, .. sh~ul,<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 .men-
tioned tha.t these compensations were payable in 40 years .. That is a
factor which has to be taken into. account and discounted but the F
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 iss~ed .after' taking inio °C9nsidera- -
·,
. tiqn the_Iiability under Section 4.(c) of the BiharLand Reforms Act
or where liability ,under .Section 4 (c) has been determined and dedu- • '' G ·
"cted fr~m' the compensaiton, in ·such a cas.e up question of <le_duction · ·
0
'·
· • 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 h~zard, a factor, .. a clog or a
jeopardy whiCh _detracts from' the val.ue. of
the· asset and. in estimating ' H.
... 1
the value which-,one_has to·do on the bas.is .which a. wiliing purchaser
. ' ~' '
,J
•
644 SUPREME COURT REPORTS [1984] 2 S.C.:R
' . .
A ' 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
.
.B the assets agd the other deduction ther~from the debts owed by the
ass~ssee ..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 hind-
•
.-.,.
.....
..
c r: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 quest1~n of estimation of the ~alue·
of tl11: asset rn question. •
'- ./ ~,
D '';~ .Learned counsel for the aS:Sessec drew our attention · to the 'i:ci-
sion of this Court in the case of Standard Mills Co. ;Ltd. v. Commis-
sioner 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&r 12 1• These decisions; in our
opnion, are not relevant at an.:Reliance was also pliced on a dCcison
E 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 reiterat~d 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- •
F 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 pw·pose of Wealth _Tax Act.
'
G
We are ~!early of .the opinion that the possibility of deductj~n
of the dues· of the assessee for agricultural income tax under Section
-;-·--------
(!) 63 I.T.R. p. 470.
.
H . (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 rec~ivable by the a~sessee 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 the·value of the asset.
To what ,
extent that·would
.. - I,
affect' the' value Of the
. •
asset . is a matter
. '
of
. 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 c~nsideration 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· D
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 a~cordance
wi~h· ~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 intqlc~l'--
. sideratfon the view pomt of a willmg purchaser. . F E
. I
( We ~ust mention-that' our attention was drawn to certain cit~er
'--"provisions of the Inc.ome-tax Act. a~d 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) F.
should .not be takewinto-consideration in estimating the v~luc.of an
asset. 'we are unable to accept this position in the facts and circumst~n-
ces 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.
"'H.S.K'.
.
. Appeal . dismissed.,
•ff
, I
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