1966 (3) TMI 6 - HC - Wealth-tax

Inclusion of Probable Balance Compensation in Wealth Tax Assessment Upheld

V Chandramani Pattamaha Devi Versus Commissioner Of Wealth-Tax, Andhra Pradesh.

The High Court affirmed the Wealth-tax Officer's decision to include both the advance payment and the probable balance compensation in the total wealth of ... Total wealth - a present liability to pay a sum of money which is ascertainable only in the future constitutes a `debt` in law - the balance amount of compensation which is to be ascertained in future u/s 39 of Act XXVI of 1948 and paid to the assessee is a debt owing to the assessee - therefore, it is an asset of the assessee which has to be included in assessing the total wealth of the assessee Issues Involved:1. Inclusion of advance compensation under section 54A of the Madras Estates (Abolition and Conversion into Ryotwari) Act (XXVI of 1948) in the assessee's total wealth.2. Inclusion of probable balance compensation under section 39 of the same Act in the assessee's total wealth.Detailed Analysis:1. Inclusion of Advance Compensation:The assessee, the deceased Rani Saheba of Chemudu, had her estate taken over by the Government under the Madras Estates (Abolition and Conversion into Ryotwari) Act (XXVI of 1948). The Wealth-tax Officer included a sum of Rs. 2,20,200, representing advance compensation paid under section 54A of the Act, in the total wealth of the assessee. The assessee contended that this amount, paid for agricultural lands, should be excluded from taxable wealth as it represented agricultural property. Additionally, it was argued that since the estate was impartible, the compensation should retain this character, and only the interest on the amount should be considered for wealth tax purposes. These contentions were rejected by the Wealth-tax Officer, and subsequent appeals to the Appellate Assistant Commissioner and the Appellate Tribunal were unsuccessful. The Tribunal, however, directed that the assessment should be revised in accordance with the final compensation amount determined under section 39 of the Act.2. Inclusion of Probable Balance Compensation:The second issue involved the inclusion of Rs. 2,20,200 as the probable balance compensation yet to be ascertained and paid under section 39 of the Act. The assessee argued that this amount was not a 'debt' due to her by the Government and therefore could not be included in her total wealth. The argument was that an unascertained future payment could not be regarded as a 'debt' and thus not an asset within the meaning of section 2(e) of the Wealth-tax Act. The Wealth-tax Officer and the appellate authorities dismissed this argument.Legal Analysis and Judgment:The High Court examined whether the probable balance compensation payable in the future could be considered a 'debt' and thus an asset of the assessee. The court referred to several legal precedents to establish that a debt is a sum of money that is now payable or will become payable in the future due to a present obligation (debitum in praesenti, solvendum in futuro). Cases such as Webb v. Stenton and Banchharam Majumdar v. Adyanath Bhattacharjee were cited to support this view. The court concluded that a present liability to pay a sum of money, even if ascertainable only in the future, constitutes a 'debt' in law.The court held that the balance compensation to be ascertained and paid under section 39 of the Act is a debt owing to the assessee and thus an asset to be included in the total wealth for the purposes of the Wealth-tax Act. The Appellate Tribunal's direction to revise the assessment based on the final compensation amount was deemed fair and appropriate.Conclusion:The High Court answered the reference in the affirmative, affirming that the Wealth-tax Officer was justified in including both the advance payment and the probable balance compensation in the total wealth of the assessee. The assessee was ordered to pay the costs of the department, with counsel's fee set at Rs. 250.