1977 (12) TMI 2 - HC - Wealth-tax

High Court ruling: Agricultural land income excluded from asset definition in Wealth-tax Act

The High Court upheld the Tribunal's finding that income from agricultural land is excluded from the definition of 'asset' under the Wealth-tax Act, ... Agricultural Land Issues:1. Interpretation of section 2(e)(v) of the Wealth-tax Act, 1957 regarding interest in non-agricultural property.2. Inclusion of capitalized value of sayar income in the net wealth of the assessee under section 2(e)(v) of the Wealth-tax Act, 1957.Detailed Analysis:The High Court of Allahabad addressed the first issue concerning the interpretation of section 2(e)(v) of the Wealth-tax Act, 1957. The Appellate Tribunal had to determine whether interest in non-agricultural property was exempt under section 2(e)(i) of the Act. The Tribunal found that the income in question derived by the assessee was from various sources related to agricultural land. The Court upheld the Tribunal's finding, emphasizing that agricultural land is excluded from the definition of 'asset' under the Act. As such, income derived from agricultural land cannot be considered an asset for wealth tax purposes, preventing its inclusion in the net wealth calculation.Moving on to the second issue, the Court examined the inclusion of the capitalized value of sayar income in the net wealth of the assessee under section 2(e)(v) of the Wealth-tax Act, 1957. The department argued that since sayar income was a continuous source, it should be treated as interest in property exceeding six years. However, the Court rejected this argument, stating that even if the income accrued for more than six years, it would still be classified as income from agricultural land and not as interest in property other than agricultural land. The Court clarified that section 2(e)(v) pertains to non-agricultural land, while agricultural land falls under the exemption provided in section 2(e)(i) of the Act.In conclusion, the High Court answered both questions by affirming that section 2(e)(v) of the Wealth-tax Act refers to interest in non-agricultural land, and interest in agricultural land is exempt under section 2(e)(i) of the Act. Additionally, the Court ruled that the capitalized value of sayar income could not be included in the net wealth of the assessee as it was considered exempt under the provisions of the Act. The assessee was awarded costs amounting to Rs. 250.