1971 (7) TMI 36 - HC - Wealth-tax

Court excludes certain assets from net wealth for assessment year; intangible right and investment value included.

The court held that the sum of Rs. 58,62,248, representing certain assets, was not includible in the assessee's net wealth for the assessment year ... Net wealth - Whether the sum of Rs. 58,62,248 being the value of 3 1/2% war loan securities and foreign bank balances, was includible in the net wealth – Held, no. But the value of the intangible right of the assessee's claim to the said assets was includible in her net wealth - Whether, the sum of Rs. 4,81,181 representing the value of debentures and shares standing in the names of the assessee and her sons were includible in the wealth of the assessee – Held, yes Issues Involved:1. Inclusion of Rs. 58,62,248, being the value of 3 1/2% war loan securities and foreign bank balances, in the net wealth of the assessee for the assessment year 1957-58.2. Inclusion of Rs. 4,81,681, representing the value of debentures and shares standing in the names of the assessee and her sons, in the wealth of the assessee for the assessment year 1957-58.Detailed Analysis:Issue 1: Inclusion of Rs. 58,62,248 in Net Wealth for 1957-58The primary question was whether the sum of Rs. 58,62,248, representing the value of 3 1/2% war loan securities and foreign bank balances, was includible in the net wealth of the assessee for the assessment year 1957-58.The late Maharaja had joint accounts with the National Bank of India, London, which were transferred to the assessee's sole name upon his death. The present Maharaja claimed these funds as part of the late Maharaja's estate. This led to an interpleader action by the bank in the High Court of Justice, Queens Bench, which ordered that the funds be transferred into court pending adjudication.The present Maharaja and the assessee later reached an amicable settlement, recorded in a letter of agreement dated July 9, 1956. The settlement terms included the withdrawal of the case in England and the transfer of joint accounts to the assessee.The Wealth-tax Officer included the value of these assets in the assessee's wealth for 1957-58, but the Appellate Tribunal directed their deletion for that year, reasoning that the agreement did not confer absolute ownership on the assessee as of December 31, 1956.The court held that the funds and securities did not become the property of the assessee until January 24, 1958, when the court ordered their transfer to Lloyds Bank Ltd. The assessee's right was only an actionable claim on the valuation date, December 31, 1956. Therefore, the sum of Rs. 58,62,248 was not includible in the net wealth for 1957-58. However, the value of the intangible right of the assessee's claim to the assets was includible.Issue 2: Inclusion of Rs. 4,81,681 in Net Wealth for 1957-58The second issue was whether Rs. 4,81,681, representing the value of debentures and shares held jointly by the assessee and her sons, was includible in the assessee's wealth for 1957-58.The assessee had included this amount in her returns for 1957-58 and 1958-59 but not for subsequent years. The Wealth-tax Officer included the value in the assessee's net wealth, and the Appellate Assistant Commissioner upheld this inclusion. The Tribunal, however, excluded the value, reasoning that the assessee was not the absolute owner and that there was no material to suggest that the sons were benamidars.The court disagreed with the Tribunal, noting that the debentures and shares were acquired from the assessee's funds, were in her possession, and that she collected and admitted the dividends as her income. The court concluded that the assessee was the real owner and her sons were benamidars, making the entire value of Rs. 4,81,681 includible in her net wealth for 1957-58.Conclusion:1. The sum of Rs. 58,62,248, being the value of 3 1/2% war loan securities and foreign bank balances, was not includible in the net wealth of the assessee for the assessment year 1957-58, but the value of the intangible right of the assessee's claim to the said assets was includible.2. The sum of Rs. 4,81,681, representing the value of debentures and shares standing in the names of the assessee and her sons, was includible in the net wealth of the assessee for the assessment year 1957-58.In the circumstances, the parties were directed to bear their own costs.