TaxTMI 
TaxTMI 
2002 (9) TMI 263
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....als, these appeals are being disposed of by this common order for the sake of convenience. 2. The assessees concerned in these appeals are the beneficiaries of the H.E.H. the Nizam's Jewellery Trust. H.E.H. Nawab Mir Osman Ali Khan created the said Trust on 29-3-1951, by transferring 107 items (115 pieces) of jewellery specified in the 1st Schedule to the deed and Govt. Securities specified in 2nd Schedule thereof for the benefit of his family members. Item Nos. 94 & 95 consisted of 5 pieces. Thus the total items of jewellery of the Trust originally consisted of 115 pieces. Out of them, 24 items were directly given to a beneficiary in terms of the trust deed and two items were transferred to another trust by the settler himself and the balance 89 pieces/items constituted the corpus of the Jewellery Trust. What is involved in these appeals is mainly the valuation of these 89 items on the relevant valuation dates. The assessees have also claimed for their exemption in terms of section 5(1)(xii) of the Wealth-tax Act as "Works of Art" and validity of this claim is also to be examined. 3. All these assessees concerned in these appeals are the children and relatives of the Settler....
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.... jewellery under section 5(1)(xii) of the Wealth-tax Act. He did not exempt any of the items. He also levied interest under section 17B for the delay in the filing of the returns by the assessees before us. 4.1 On appeal the Commissioner of Wealth-tax (Appeals)-I rejected the claim of the assessee that the value determined by the Departmental Valuation Officer for the assessment year 1989-90 should be adopted for the subsequent four assessment years in terms of rule 19 of Schedule III of the Wealth-tax Act subject to the adjustments specified in the said rule. He, however, upheld the claim of the assessee that the value of the jewellery has to be determined on the basis of the report of the Valuation Officer in terms of Schedule III to the Wealth-tax Act and not with reference to the compensation ultimately sanctioned by the Apex Court. He held that the value for the assessment year 1989-90 should be adopted as per the report of the Valuation Officer dated 1-8-1995 determining the value as on 31-3-1989 i.e. valuation date for the relevant assessment year 1989-90 and that this value should be adopted in terms of rule 19 of the Schedule III for the subsequent four assessment years....
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....and not with reference to report of the Valuation Officer determining the value as on 31-31988; (b) Restriction of discount to 15% on the value determined by the Valuation Officer as against 90% claimed by the assessee. (c) Denial of exemption under section 5(1)(xii) to some or all the 89 items. (d) Levy of interest under section 17B up to the date of filing of returns by the trustees." That is how these appeals and cross-appeals have arisen. These issues are common to all the appeals before us except appeal No. 194/Hyd./98 in case of Taqhia Begum for the assessment year 1984-85 where the issue altogether different. In this appeal, the issue, is already mentioned relates to the validity of the reopening of the assessment. We shall deal separately with this appeal and the rest of the discussion in this order is common for for all the order appeals. 5. So the common issues that arise for consideration in all these appeals except appeal No. 194/Hyd./98 are as under: 1. (i) Whether the value of the corpus of the Trust for the assessment year 1988-89 and subsequent years should be worked out on the basis of the compensation amount received by the Trust as done by the A....
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.... a memorial submitted to the then Prime Minister, Smt. Indira Gandhi.ALopy of the Memorial may be seen at page 30 of the assessees's paper-book volume - V. As the Memorial gives a flavour of the past and of the intentions of the Trustees and as the said Memorial ultimately culminated in the purchase/acquisition of the jewellery by the Union Government, we deem it fit to reproduce it hereunder: "Memorial Submitted to Shrimati Indira Gandhi, Prime Minister of India. By The Trustees of H.E.H., the Nizam's Trusts. His late Exalted Highness, Nawab Mir Oman Ali Khan Bahadur, the Nizam of Hyderabad, had created, among others, the following three jewellery Trusts: 1. H.E.H. the Nizam's Jewellery Trust (created on the 29th March, 1951). 2. H.E.H. the Nizam's Jewellery for Family Trust. (created on the 27th January, 1952). 3. H.E.H. the Nizam's Supplemental Jewellery Trust (created on the 28th February, 1952). Copies of the relevant Trust Deeds are annexed to this Memorial for ready reference. A copy of the Validation Act, 1950, Act No. XXIV of 1950 is also enclosed. The Trustees of these Trusts feel that if these articles of jewellery are sold in the open....
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....est office, different expert committees have been constituted at different points of time by the Central Government to examine jewellery of the Main Trust from the angle of (a) antiquities; and (b) 'art treasures' in the light of the said enactment. Out of the 89 items, 23 items were finally declared as antiquities and 7 items were declared as 'art treasures'. 8.1 In August, 1973, the Ministry of Education and Social Welfare, Government of India set up an Expert Committee to assess and value the jewellery, which could be taken over by the Union of India keeping in view the provisions of the Antiquities Act. The jewellery was examined in the presence of the Deputy Secretary, Ministry of Education and, in August, 1975, the Government of India conveyed to the Trustees its intention to acquire 18 selected pieces of jewellery, at a mutually negotiated price. In August, 1977, a decision was taken by the Government of India to set up a Gems and Jewellery museum and another Expert Committee was constituted for making fresh selection of the jewellery. In November, 1977, the Committee inspected the jewellery and selected 41 items and classified them into three grades, approximately valued....
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....nding before it, and directed that the jewellery be sold by auction to be conducted in the Supreme Court premises itself. Shri R.N. Malhotra, the then Finance Secretary, was asked to act as the Officer of the Court, and to advertise the sale of the jewellery. On 20-9-1979, the Union of India filed an application before the Supreme Court seeking stay of the auction in order to enable it to take a decision whether it would allow the export of jewellery. On 21-9-1979, the Apex Court was informed by the Solicitor General that the Cabinet Committee on Political Affairs had decided that the jewellery of the Nizam were 'art treasures' and, in national interest, they should not be allowed to be taken out of the country. 8.4 On 24-10-1979, the Cabinet also decided to amend the Rules of the Antiquities Act to provide for a Committee to be set up to examine the jewellery items from the angle of 'art treasures' and, accordingly, Rule 2A was amended, and also an expert committee was constituted to examine the 37 items of jewellery from the angle of 'art treasures'. This decision of the Government of India was challenged by Prince Muffakham Jah in Writ Petition No. 1429 of 1979 before the Ape....
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....the same Department dated 26-4-1987 and may be seen at pages 29 to 31 of the assessees' paperbook. 8.8 In the meantime, the Government of India set up another committee, under the chairmanship of Shri Sharada Prasad, which recommended that, instead of limiting the acquisition to the items which have been declared as 'art treasures', all the items of jewellery belonging to the principal Trust, along with the 84 items of jewellery belonging to the Supplementary Trust, be acquired by the Government of India, as the collection was of historic interest. Based on the report of Sharada Prasad Committee, negotiations were conducted with the Trusts for the purchase of all the 173 items of jewellery belonging to both the Trusts. As a result of the said negotiations, the Union Government and the Trustees entered into a compromise agreement, which was filed in the Apex Court on 14-2-1989. The Court was informed that the parties had agreed to settle as a package deal all the issues, relating to the jewellery of the late Nizam, which was held in the two Trusts. The parties agreed to have the disputes resolved through arbitration. 9. The compromise agreement dated 14-2-1989 referred to abov....
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....reed to be taken over by the Central Government. (b) In the event of the Central Government not acquiring all the items as agreed then, the items to be acquired by the Central Government shall be decided upon by mutual consent failing which the differences shall be referred to the Arbitrators whose decision shall be final and binding on both the parties. It is further agreed that the Trustees of the above Trusts shall have the right to export for sale all the items not acquired by the Central Government at that time, subject to the existing laws relating thereto and that me Arbitrators shall give appropriate directions to the concerned authorities for this purpose. (c) The Arbitrators shall decide the apportionment of the fees and expenses, which may be incurred in respect of the Arbitration and the A ward. (d) The Arbitrators shall decide on all the issues specified in clauses 1, 2, 3 and 5 above in accordance with law. The parties shall implement the Award of the Arbitrators within three months from the date of the Award. Both parties shall tak all reasonable steps to implement the Award expeditiously. 6. The Central Government shall record necessary permits and facil....
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.... Appellants Versus Union of India & Ors. Princess Fatima Fransis & Ors. Respondents ORDER This group of writ petitions and civil appeals has been settled between the parties and an application for compromise duly signed by appellants and respondents and their case has been filed. We direct the writ petitions and the Civil appeals to be disposed of in terms of the compromise and the petition of compromise shall form part of the Order. Advocate for Fatima Fransia states that she has disputes pending before the suit is recorded. Counsel for the parties in these matters have explained that the lady is one of the several beneficiaries in respect of the trust assets and it would be open to represent her stand before the Board of Arbitrators to be appointed under the terms of settlement. We are satisfy this group of cases should be disposed of on the basis of t....
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....Nizam and seeking orders to the effect that the scope of arbitration proceedings be limited to the items of jewellery which were the Trust's property, and not to include those which were the State's property. The application was based on the plea that some of the items of the jewellery comprised in the Principal trust and the Supplemental Trust did not belong to the Nizam but vested in the nation after the merger of the Hyderabad State with the Union of India, and therefore, the Nizam had no right to execute any Trust in respect of those items of jewellery and, therefore, the Trust could not claim any compensation for the said items of jewellery. The said application was dismissed by the Apex Court as withdrawn. 10.1 However, the same pleas were raised again before the Umpire. The Umpire gave his award on 27-7-1991, and a copy of the Award may be seen at Vol.-VI of the assessees' paper-book. This volume consists of 66 pages, which is exclusively the award. On the ownership of the jewellery and the Nizam's right to create the Trust in question, the Umpire held as under:-- "In my opinion, there is considerable force in the contentions raised on behalf of the Trust and this appl....
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....f the Union of India is not maintainable and must therefore be dismissed." Regarding the valuation of the jewellery, the Trustees filed before the Umpire a statement of claim, relying on a valuation made by Sothebys', an International Auctioneer and claimed at Rs. 1192.32 crores. They also relied on a similar valuation given by another International Auctioneers, 'Christies' and an Indian Valuer, Shri Vithaldas. Union of India, on the other hand, relied on the report given by Jayant Chowlera, Valuation Officer of the Income-tax department and assessed the value at Rs. 65.25 crores. The extent of difference between the rival claims was, of course, phenomenal. 10.2 The Umpire rejected the claim of the Trustees based upon the valuations of Sothebys and Christies, as applicable only to the international market, which was not available to the Trustees. He determined the value of the 173 items of jewellery of both the trusts at Rs. 225.35 crores, and the relevant observations of the Umpire and the other terms of the award are as under: "It is of interest to note that there is a_wide gulf of difference in the valuation of the items of valuers on behalf of the Trusts, there is cons....
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.... of these items of jewellery for wealth tax purposes. Mr. Chowlera himself has admitted that his valuation which was accepted by the parties for wealth tax purposes was only for wealth tax purposes and was therefore on the law side. In source of his evidence, he has also admitted that there are errors in the valuation made by him and as the valuation was for wealth tax purposes he had also not considered a particular item to be real alexandrite but an imitation one and if it were real alexandrite the value would be much more as real alexandrite is vary rate and valuable it appears that the Union of India itself has considered the valuation made by Mr. Chowlera as rather law and has itself added to the said valuation 20% more on account of aesthetiction in price. The addition of 20% on account of aesthetic value and the further addition of 20% for escalation in price appear to be arbitrary. There is a huge quantity of gold in many items of jewellery. The hike in the price of gold is indeed huge. The escalation in price should further he considered after taking into consideration the increased valuation on account of aesthetic value. The valuation made for wealth tax purposes cannot ....
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....m is shown in the Schedule hereto annexed. The Schedule contains the price of all the 173 items and the respective price fixed for each item and the total sum of Rs. 225,37,33,959-00. Bearing in mind the terms of the Arbitration agreement and taking into consideration every aspect of the matter I make the following Award:-- The Central Government will pay to the Trusts the sum of Rs. 225,37,33,959.00 which is fixed as the just and fair price/compensation of the 173 items of jewellery within (eight) weeks from the date of the Award: 1. On receipt of the said sum of Rs. 225,37,33,959-00, the trustees will make over possession of the said 173 items of jewellery to the Central Government which will then becomes the owner of the said 173 items of jewellery. 2. If the Central Government be not willing or agreeable to purchase/acquire all the 173 items of jewellery by paying the said sum of Rs. 225,37,33,959-00 as just and fair price/compensation within the stipulated period of 8(eight) weeks and the Central Government intends to exercise its option of acquiring some of the items on terms of the option given to the Central Government under clause 5(b) of the Agreement, the Cen....
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....nder clause 5(b) and any dispute arising inconsequence thereof the dispute will be referred to arbitration within 10(ten) weeks from the date of the Award and the dispute will be decided in terms of clause 5(b). 9. In the event of the Central Government acquiring/purchasing all the 173 items of jewellery in terms of this Award each party will pay and bear its own costs and all costs and charges including the remuneration paid to the Arbitrator/Umpire and other incidental expenses of the arbitration shall be borne by the parties in equal share. 10. In the event of the Central Government not acquiring all the 173 items of jewellery in terms of this Award the Central Government will pay to the Trustees a sum of Rs. 1,50,000-00 only towards the cost of the arbitration proceeding. This Order for costs is made in view of the fact that the Union in course of the proceeding has reiterated that the Union intends to buy the entire lot and the reference has continued for determination of the just and fair value of the 173 items of jewellery: 10.3 The above award dated 27th July, 1991 was filed in the Supreme Court. The Trustees did not have a smooth sail, even after the award. Fir....
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....easons therefor vide its judgment dated 20-10-1994 [1994 (4) SCALE 566], and it may be seen at pages 139 to 149 of the assessee's paper-book, Vol. 1. The Apex Court held that the applicants had no locus standi to seek intervention and that too at the belated stage and also that there was no public interest involved and also that Dr. L.P. Sihare the intervener participated throughout the arbitration proceedings and also that the ownership of the jewellery stood settled in a white paper on the Indian States brought out by the Government of India. 10.4 It is the claim of the assessee before us that till the above orders of the Apex Court dated 10-2-1994 and 20-10-1994 came to be passed, the entire question relating to the ownership of the jewellery was in doubt and so the entire matter was subject to grave risks and hazards. 10.5 In terms of the compromise agreement mentioned hereinbefore, the terms of reference to arbitration required the award of the Umpire to be reported to the Supreme Court for appropriate orders. The Supreme Court passed the appropriate orders on the award, finally, vide its judgment dated 20-10-1994, 1994(4) SCALE 571, in which it also disposed off the IA ....
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....of the Union of India to purchase 173 items of jewellery within the period of 8 weeks as prescribed by clause (1) of the Award, clauses (6) and (8) of the Award had become operative and that the Central Government had lost the option to purchase 173 items of jewellery for the price determined by the Umpire. The submission of Mr. Sanghi that the Union of India could not avoid compliance with the Award by merely filing I.A. 8/91 in this Court overlooks the fact that it was not only the Union of India which had questioned the correctness of the Award but also the Trusts which had filed I.A. 9/91 seeking remission of the Award. The enforceability of the Award was, in view of clause (7) of the agreement contingent upon the orders of this Court on those applications. We, therefore, hold that clauses (6) and (8) of the Award did not come into operation, after the expiry of the period prescribed under clause (1) of the Award, automatically and that till the adjudication of I.A. 8 and I.A. 9, the Award could not be said to be capable of implementation and enforceable." "The question of purchase/acquisition of jewellery has been pending since 1972 when the Trustees made their first offer ....
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....make over possession of the said 173 items of jewellery to the Central Government which will then become the owner of the said 173 items of jewellery. 3. If the Central Government be not willing or agreeable to purchase/acquire all the 173 items of jewellery by paying the said sum of Rs. 180,37,33,959.00 as just and fair price/compensation till 31-12-1994 and the Central Government intends to exercise its option of acquiring, some of the items in terms of the option given to the Central Government under clause 5(b) of the Agreement, the Central Government shall within one month from the date of the order of this Court inform the Trustees accordingly and the Central Government will intimate to the Trustees the particular items of jewellery which the Central Government wishes to purchase/acquire. 4. On the intimation by the Central Government of the selected items of jewellery within one month of the date of the order of this Court, the remaining items of jewellery in respect of which the option has not been exercised by the Central Government, shall be available to the Trustees for sale and if necessary by export also subject to the existing law. 5. The Central Government s....
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....to the awarded amount, ignoring their plea that the beneficial interest should be worked out in terms of Schedule-III of the Wealth-tax Act. 11.2 The Department referred to the claims made by the assessees before the Umpire in the course of the hearing before the Tribunal in the context of appeals for the assessment years 1982-83 to 1986-87, in the case reported at WTO v. Trustees of H.E.H. the Nizam's Jewellery Trust [1995] 35 ITD 402 (Hyd.). However, the reference was made after the hearing was over, and the Tribunal in the said decision rejected the plea of the Department with the following remarks: "76. These group cases relating to the H.E.H. Nizam's Trust were posted for final hearing before us on the 8th day of February, 1990. After the hearing was concluded, the learned D.R. brought to our notice an article said to have been reported in "India Today" issue dated 15th February, 1990. The article was captioned "The Nizam's Jewels Treasure Hunt - Waiting to encash a legacy". A xerox copy of the same was filed before us, Since it was placed before us when the hearing was concluded we decline to comment on the same," 12. For all the years up to assessment year 1986-87, ....
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.... shall indicate the position for assessment year 1989-90 hereinafter. 13. After the receipt of the compensation amount as per the modified award, the Assessing Officer sought to reopen the assessments for the assessment years 1984-85 to 1989-90 on the ground that the corpus of the Trust in question had to be valued as per the compensation amount received, and that as the assessments had been completed with reference to the relevant reports of the Valuation Officer, there was under-assessment of wealth. 13.1 The matter was then taken to the Hon'ble A.P. High Court under its writ jurisdiction, and the judgment of the Hon'ble High Court on this issue is reported as H.E.H. Nizam's Jewellery Trust v. Asstt. CWT [1997] 226 ITR 111 (AP). The Hon'ble High Court observed, as per the relevant portion of the head-note, as under: "A reading of section 16A of the Wealth-tax Act, 1957, shows that the entire procedure of valuation after enquiry, which was earlier done by the Wealth-tax Officer was transferred to the exclusive jurisdiction of the Valuation Officer. In other words a part of the assessment which was the valuation of the asset, which was being done by the Assessing Officer, ....
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....riginal assessments. The other appeals arise out of the first assessments. In the original assessments, which were set aside by the CWT(A), the interest of the beneficiaries in the Trust was adopted by the Assessing Officer provisionally based on the value determined for the wealth-tax assessment year 1988-89 by the valuation officer and the actuary. In a typical case, i.e. in the case of Nawab Mir Jaffar Ali Khan, in his order dated 31-3-1992, the Assessing Officer included the beneficial interest in the jewellery trust with the following remarks: "......... 1. Proportionate share of corpus in Family Trust through father is provisionally adopted subject to revision later on Rs. 3,00,000 2. Reminder interest in Family Trust through mother provisionally adopted subject to revision later on ....
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....t the Assessing Officer is not correct in adopting provisional figures. In view of this the Assessing Officer is directed to adopt correct figures after giving an opportunity to the appellant. He may also consider the objections of the appellant raised before me. ........." It may be observed that the CWT(A) did not give any particular directions as to how the correct value of the interest should be arrived at. 16.2 In the orders passed by the Assessing Officer to give effect to the order of the CWT(A), as in all other cases where the assessments are made for the first time, the Assessing Officer worked out the value of the beneficial interest on the basis of the compensation awarded by the Umpire vide his award dated 27-7-1991, which was ultimately approved, with some modifications, by the Supreme Court vide its order dated 2010-1994. The Assessing Officer completed the re-assessments in the typical case of Nb. Jaffaar Ali Khan, vide his order date 30-3-1995, with the following remarks: "Asst. was completed on 31-3-1992 adopting the assessee's proportionate share of corpus in the Jewellery trust at Rs. 16,30,426 provisionally subject to revision on receipt of Actuary's....
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....h-tax Act, and it was based only on the award of the Umpire, as mentioned herein before. 16.4 For the wealth-tax assessment years 1990-91 and 1992-93, the orders were passed by the Assessing Officer adopting the beneficial interest of the assessees on the basis of the compensation received. For all the years, the Assessing Officer rejected the claim of the assessee that, on the relevant valuation dates, the award was only a remote possibility, and so cannot be the basis for arriving at the assessable wealth on the relevant valuation dates. The Assessing Officer gave detailed reasons for all the years from 1989-90 to 1992-93, in separate annexures to the assessment orders, which may be seen at the pages 17910 197 of the assessees' paperbook Volume-I. A specimen of such annexures for assessment year 1989-90 is reproduced below for ready reference: "ANNEXURE TO THE ASSESSMENT ORDER WEALTH-TAX ASSESSMENT YEAR 1989-90 BENEFICIAL INTEREST IN H.E.H. THE NIZAM'S JEWELLERY TRUST The value of the principal fund of the Jewellery trust has been returned at Rs. 20.86 crores in the returns filed by the trustees in their representative capacity. The trustees have discounted the value ....
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....rtistic value of all these items. While determining thotal valuation of Rs. 65.25 crores, of 173 items of Jewellery as the fair and just price as on the 16th April, 1991, and that the valuation made by the Valuation Officer appointed under section 16A of the Wealth-tax Act, 1957 was final and binding on the Assessing Officer for the purpose of making assessments under the provisions of the Wealth-tax Act, 1957. that, as pointed by the Departmental Valuer, Mr. Jayant N. Chowlera, in his affidavit, the trustees have neither questioned his competence to value the items of the Jewellery for the purpose of wealth-tax nor questioned his estimation on the value in the absolute terms, but that their grievance has always been that the risks, hazards, uncertainties, clogs and other relevant factors have to be taken into consideration for the purpose of the levy of tax under the provisions of the Wealth-tax Act, 1957, which had been accepted by the Hon'ble Tribunal. that the valuation report of Mr. Jayant N. Chowlera for the wealth-tax assessment year 1988-89 was subject-matter of appeal in connection with the evaluation of interest in H.E.H. the Nizam's Jewellery Trust and that the Hon'ble T....
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....It is of utmost importance and great significance to note that the Hon'ble Supreme Court had passed another order on October 20, 1994 in I.A. No. 10 of 1993 in W.P. (C) No. 1429 of 1979 reported in 1994(4) SCALE 566 upholding the ownership of the Trust to the items of the Jewellery of H.E.H. the Nizam's Jewellery Trust and that the question of ownership of the Trust to the items of Jewellery was challenged both by the Government and also by some public spirited citizens. Till the order on the ownership was passed by the Orders of the Supreme Court on 20-10-1994, the whole question of receiving compensation was a total uncertainty, because the government questioned the ownership of the jewellery before the Umpire and also before the Hon'ble Supreme Court. These applications were pending in some form or the other as on the valuation dates right from the assessment year 1990-91 till the matter was decided by the Hon'ble Supreme Court on 20th October, 1994. Most of the beneficiaries were in total distress and they were willing to sell their interest in H.E.H. the Nizam's Jewellery Trust for whatever be the consideration in order to salvage the situation. This helpless condition of the ....
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....been accepted by the department and accordingly, the discounting of the value cannot be allowed. The decision of the ITAT in allowing exemption under section 5(1)(xii) of the WT Act for the seven items of Jewellery is also not accepted and references are pending. The trustees have not fulfilled all the conditions laid down in section 5(1)(xii). The decision in the case of Rajendra Kumar Sethia, 194 ITR 218, clearly lays down this proposition. The contention that the Departmental Valuer has stated that he has valued the jewellery for the wealth-tax assessment year 1989-90 is factually incorrect. The Departmental Valuer as furnished his report for the valuation date 31-3-1988 and as such, the provisions of rule 19 of the Schedule III are not applicable. Thus the contentions raised, to the effect that the value of the Jewellery should be adopted at 'NIL' cannot be accepted. A reference has been made to the department value for furnishing a report on the value of the Jewellery of the Jewellery Trust. The Departmental Valuer has yet to furnish his report. The assessment is to be completed in view of the limitation. The value of the Jewellery is adopted at 138.34 Crores by applying....
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....ssment year 1989-90 and further subsequent four years in the light of the said rule 19 even though the said report for the assessment year 1989-90 became available only after the completion of the assessments, i.e., during the course of the hearing before CWT(A). He also allowed the contention of the assessee that, in principle, a reduction from the value of the corpus determined by the Valuation Officer had to be allowed, in view of the risks and hazards that beset the sale process mentioned hereinabove. He, however, rejected the contention of the assessee that such adjustment for reduction was to be of the order of 90% of the value of the corpus determined by the Valuation Officer. He restricted the said reduction to 15% of the value as against 50% allowed by the Tribunal in its decision reported at Trustees of H.E.H. the Nizam's Jewellery Trusts case for earlier years. He also rejected the contention of the assessees that all the items of jewellery were entitled for exemption under Section 5(1)(xii) of the Wealth-tax Act, as they were acquired/purchased by the Government of India as works of art. He differed from the earlier order of the Tribunal for the assessment years 1981-82....
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.... Ali Khan, Hyderabad, even the CWT(A)-I (Shri S. Lahiri) by his order dated 18-11-1996 for the assessment year 1989-90, followed the order of CWT(A)-II (Shri B.L. Rao) dated 30-1-1996 noted above. A copy of the said order of the CWT(A)-I is furnished at pages 87 to 92 of the Department's paper-book. He [CWT(A)-I, Shri Lahiri], however, seems to have had a change of mind while passing the orders impugned in the present appeals, as by that time, the decision of the jurisdictional High Court reported at H.E.H. Nizam's Jewellery Trusts case become available, and he took guidance from it. It may be mentioned that CWT(A)-II (Shri B.L. Rao), while passing the orders noted above, did not have the benefit of the decision of the jurisdictional High Court in H.E.H. Nizam's Jewellery Trusts case. 18. Before us, the learned counsel for the assessees filed as many as fifteen paper-books running into hundreds of pages. The paper-books contain relevant orders of the Tribunal, A.P. High Court and Supreme Court passed at different stages of litigation referred to hereinabove, and they also contained the submissions made by the assessees at different stages before the Assessing Officer, the CWT(A)....
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....urposes annual levy of tax, like wealth-tax, and valuation for the purposes of acquisition of the property. In this context, he invited our attention to the following remarks of Justice Dixon in Commissioner of Succession Duties v Executor Trustee & Agency Co. of South Australia 74 CLR 358: "I should like, however, to add for myself that there is some difference of purpose in valuing properly for revenue cases and in compensation cases. In the second, the purpose is to ensure that the person to be compensated is given a full money equivalent of his loss, while in-the first it is to ascertain what money value is plainly contained in the asset so as to afford a proper measure of liability to tax. While this difference cannot change the test of value, it is not without effect upon a court's attitude in the application of the test. In case of compensation, doubts are resolved in favour of a more liberal estimate, in a revenue case, of a more conservative estimate." The above remarks were approvingly quoted by the jurisdictional High Court in the decision reported at H.E.H. Nizam's Jewellery Trusts case. It is further pleaded that the action of the Assessing Officer in working out....
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....estion in the case of the assessees before us, has to be determined by the Valuation Officer in terms of Schedule-III of the W.T. Act and such valuation is binding on the Revenue authorities, and they cannot by-pass a statutorily prescribed procedure, and invoke an award, even though approved by the Apex Court, which was not existing on the relevant valuation dates. 19.3 It is also claimed that Schedule-III of the W.T. Act, which was introduced with effect from 1-4-1989 has retrospective operation, in the light of the decision of the Apex Court in the case of CWT v. Sharvan Kumar Swarup & Sons [1994] 210 ITR 886, wherein analogous provisions of Rule 1BB of the W.T. Rules were held to be procedural and not substantive, and so applicable to all pending proceedings as on 1st April, 1989 when the rule came into operation. It is claimed that the ratio of this decision is applicable even in the context of Schedule III as has been held, on the basis of the said judgment of the Apex Court, by so many High Courts like the following: (1) CWT v. P.M. Itoop [2000] 243 ITR 232 (Mad.) (2) Dy. CIT v. Hajee Abdul Sattar Sait [2001] 251 ITR 113 (Kar.) (3) CWT v. Bhanwar Lal Gupta [1997]....
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....hip to the assessees. 3. The matter has been considered by the Board. It has been decided that the report of the Registered Valuer obtained for one assessment year can also be used in subsequent four assessment years subject to the following adjustments, namely:-- (a) where the jewellery includes gold or silver or any alloy containing gold or silver, the value of such gold or silver or such alloy as on the valuation date relevant to the concerned subsequent assessment year shall be substituted for the value of such gold or silver or alloy on the valuation date relevant to the first assessment year. (b) where any jewellery or part of jewellery is sold or otherwise disposed of by the assessee, or any jewellery or part of the jewellery is acquired by him, on or before the valuation date relevant to the concerned subsequent year, the value of the jewellery determined for the first assessment year shall be reduced or increased, as the case may be, and the value as so reduced or increased shall be the value of the jewellery for such subsequent assessment years. 4. In such subsequent four assessment years, the requirement of rule 18(2)(ii) can be taken to have been complied wi....
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....the arbitration proceedings, the value of the jewellery was taken at a lesser figure even after the arbitration award, as in his report dated August 1, 1995, he has taken the value for 1989-90 Rs. 56.06 crores." In the light of the above remarks of the Hon'ble High Court, it is claimed that the jurisdictional High Court was fully aware and conscious of the fact that the valuation report for the wealth-tax assessment year 1989-90 was received in August, 1995 from the Valuation Officer after the receipt of the compensation. It is claimed that, even then, the Hon'ble High Court thought it fit to adopt the valuation report for the assessment year 1988-89 as the basis for application of Rule 19 for the four subsequent assessment years, viz., 1989-90 to 1992-93, i.e., the years under appeal herein. So it is urged that the decision of the jurisdictional High Court has to be followed. 19.5 To put it briefly, the main contention of the learned counsel for the assessee is that the value of the jewellery in question should be determined on the basis of the report of the Valuation Officer for the assessment year 1988-89 for all the years from assessment years 1989-90 to 1992-93 and not o....
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....sentative, full impact of the compromise agreement, which removed all risks and hazards and uncertainties for the Trustees, should be reflected in the valuation of the jewellery as on 31-3-1989. In other words, according to the learned Departmental Representative, the full significance of the compromise agreement will be so reflected only if the compensation awarded by the Supreme Court is taken as the basis for the valuation of the jewellery. It is claimed that, for determining the fair market value, actual sale on the valuation date is not required, but only a hypothetical market with a willing buyer and willing seller is contemplated, and the fair market value is the reasonable value that a willing seller can expect from a willing buyer, and in this context, reliance is placed on the following decisions: (a) Debi Prosad Poddar v. CWT [1977] 109 ITR 760(Cal.) (b) Ahmed C.H. Ariff v. CWT [1970] 76 ITR 471(SC) (c) CIT v. P.I. George [1988] 171 ITR 620(Ker.) It is claimed that by virtue of the compromise agreement dated 14-2-1989 entered into by the Trustees and the Union Government, a willing buyer and a willing seller came into existence, and it is the amount awarded b....
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.... that there are errors in the valuation made by him and as the valuation was for wealth tax purposes he had also not considered a particular item to be real alexandrite, but an imitation one and if it were real alexandrite the value would be much more as real alexandrite is very rare and valuable. It appears that the Union of India itself has considered the valuation made by Mr. Chowlera as rather law and has itself added to the said valuation 20% more on account of aesthetic value of items of jewellery and 20% more on account of escalation in price. The addition of 20% on account of aesthetic value and the further addition of 20% for escalation in price appear to be arbitrary. There is a huge quantity of gold in many items of jewellery. The hike in the price of gold is indeed huge. The escalation in price should further be considered after taking into consideration the increased valuation on account of aesthetic value. The valuation made for wealth tax purposes cannot therefore determine the fair and just value of these items of jewellery. I may also add that the wealth tax paid on the basis of valuation made was in discharge of a legal obligation and the wealth tax so paid on the....
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....he asset to be valued is not the jewellery, but the compensation receivable. In this context, his written submissions read as under:-- "Alternative submissions: Without prejudice to whatever is stated above, it is submitted that as regards valuation of jewellery in the assessee's hands as on 31-3-1989 for subsequent valuation dates, the jewellery was no longer in the assessee's hand on 31-3-1989, but "sold" by the assessee. In this regard, kind reference may be made to the compromise agreement which speaks of the jewellery "sold" otherwise disposed of. As per Sale of Goods Act, section 20 (DPB Vol. 2, Pg. 27) read with the compromise agreement (APB Vol. 1, Pg. 27) and with the Arbitration Act, the factum of sale is complete in this case, on the date of signing of the agreement. The irrevocability of the arbitration proceedings has been discussed by the S.C. in its Order at APB Vol. I, pg. 167, para 14. Therefore assessee no longer is in constructive possession of the goods as on 31-3-1989 or thereafter. What the assessee does have is a right to fair price, as per terms of compromise agreement. This arbitration agreement is recorded by Supreme Court and no further tinkering ab....
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.... an issue that is not argued cannot be said to have been decided. The issue before the High Court was regarding validity of reopening of assessments up to the assessment year 1988-89 by way of change of opinion on the Valuation. The issue of quantum of valuation for 1989-90 was never before the High Court. The solitary sentence in the Order relied upon by assessee cannot be pulled out of context. The revenue has not had the opportunity to labour the point of applicability of valuation for assessment year 1988-89 to subsequent years before the High Court. Hence the remark of the High Court at best is a passing remark and no dicta arises from it, especially in view of its other remarks at APB, V, A7, Pg. 47. Hence it cannot be said that the High Court has heard and decided on the matter as to whether the 31-3-1988 valuation has to be applied to assessment year 1989-90 and subsequent years by operation of Rule 19 of Schedule III]. Secondly: Schedule-III Rule-18 was introduced with effect from 1-41989. The earliest year to which, Rule 18 applies is therefore assessment year 1989-90. As per Schedule-III, the value of the asset should first be determined in accordance with Rule 18, Ru....
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.... for the purposes of this Act shall be its value as on the valuation date determined in the manner laid down in Schedule-III. (2) .................." Section 16A, involving reference to Valuation Officer, to the extent relevant for our purposes, reads as under:-- "16A(1) For the purpose of making an assessment (including an assessment in respect of any assessment year commencing before the date of coming into force of this section) under this Act, where under the provisions of section 7 read with the rules made under this Act or, as the case may be, the rules in Schedule III, the market value of any asset is to be taken into account in such assessment, the Assessing Officer may refer the valuation of any asset to a Valuation Officer:-- (a) in a case where the value of the asset as returned is in accordance with the estimate made by a registered valuer, if the Assessing Officer is of opinion that the value so returned is less than its fair market value; (b) in any other case, if the Assessing Officer is of opinion:-- (i) that the fair market value of the asset exceeds the value of the asset as returned by more than such percentage of the value of the asset as retur....
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....he fair market value as estimated by the Valuation Officer: The form mentioned in the above rule, viz. 18(2)(1) is prescribed by Rule 13(c) of the Wealth-tax Rules, and the said Form 0-8A reads as under-- "FORM 0.8A (See rule 18 of Schedule III) Statement of Valuation of Jewellery --------------------------------------------------------------------------------------- Sl.No. Description Gross Net weight Description Value of Total value of item Weight of precious and weight each of the item ....
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....; such stones --------------------------------------------------------------------------------------- (1) (2) (3) (4) (5) (6) (7) --------------------------------------------------------------------------------------- -------------------------------------....
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....-III to Wealth-tax Act. The word used in section 7 is "shall" indicating the mandatory nature of the provision. In terms of Rule 18 of Schedule-III, as it stood before 1-4-1990, a return has to be supported by a statement in Form 08A, where the net wealth did not exceed Rs. 5lakhs, and where it is so supported, the value of the jewellery returned by the assessee cannot be disturbed by the Assessing Officer and it has to be accepted. In any other case, i.e. where the value declared exceeded Rs. 5 lakhs; as in the cases of the assessees concerned in these appeals, or where the statement in the prescribed form is not given, the value of the jewellery shall be taken to be the value determined by the Valuation Officer. 22.1 For the assessment year 1989-90, the assessees returned the value of the jewellery on the basis of the report of the Valuation Officer for the assessment year 1988-89, which is the immediately preceding assessment year. As the wealth exceeded Rs. 5lakhs, their cases have to be considered under Rule 18(b). If the Assessing Officer wanted to disturb the said valuation, in terms of Rule 18(b), he had necessarily to refer the matter to the Valuation Officer. It appear....
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....icable for the assessment year 1989-90 and onwards for subsequent years. It was also applicable for assessments for earlier years pending on 1-4-1989 as we shall see presently. So the question is whether, in the circumstances, the Assessing Officer was justified in jettisoning the procedure prescribed in Schedule-III for determining the value of the beneficial interests of the assessees. 22.5 Admittedly, the returns were filed by the assessees in question adopting the values determined by the Valuation Officer for the assessment year 1988-89 and the returns were not accompanied by the reports of the Registered Valuer as required under rule 18(2)(ii) of the III Schedule from the assessment year 1990-91 onwards. So does this lapse, if it is one, give a handle to the WTO to ignore the procedure laid down in Schedule III read with section 16A of the W.T. Act? We are of the view that it does not. This is because of two reasons. Firstly, the Valuation Officer is a Departmental Officer and his report has greater validity from the angle of the revenue than that of the Registered Valuer who may entertain a bias in favour of the assessee. So, when the returns are based on the value determ....
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....sets returned by the assessee and the fair market value of the assets as estimated by the Wealth-tax Officer is more than the limit prescribed under rule 3B. The Wealth-tax Officer is not required to convey his estimated value to the assessee and wait for a request from the assessee to make a reference. It would be a different matter if the assessee, on coming to know about the estimated value whether as result of the communication from the Wealth-tax Officer or on his own, accepts in writing the estimated value to be the correct value," The same principle applies in respect of the word 'may' as distinct from the word 'shall' used in Rule 18(3) of the Third Schedule, in the context of the reference of the valuation of the jewellery to the Valuation Officer by the Assessing Officer. That the valuation of the jewellery has to be done in terms of Schedule-ill emerges from, as urged by the learned counsel of the assessee before us, the decision of the Apex Court in the case of Bharat Hari Singhania. So, we find that when the Assessing Officer wanted to disturb the returned values of the jewellery, he had necessarily to resort to the mode of referring the valuation to the Valuation O....
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....adjustments can be made by the appellate authorities. It does not mean that reference to Valuation Officer can be dispensed with to the prejudice of the assessees. The Valuation Officer is also like the Assessing Officer in one respect. Both are Departmental Officers with specified roles in assessment as clarified by the Central Board of Direct Taxes in the memorandum explaining the provisions of the Taxation Law Amendment Act, 1972. The board explained as under:-- "With the introduction of the new procedure and appointment of Valuation Officers who are experts in their respective fields, the job of valuation is entrusted to the experts instead of being left to the Wealth-tax Officer who is layman. The procedure outlined creates wheels within wheels. The work of the assessment is thereby divided into two distinct limbs. The valuation of the assets is to be done by the Valuation Officer in case and circumstances outlined in the section. The Wealth-tax Officer has to complete the assessment adopting the value of such asset as determined by the Valuation Officer. The valuation report is to be defended by the Valuation Officer and not by the Wealth-tax Officer in the appellate proce....
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....t is enough to state that to our mind, the procedure laid down under section 16A and Schedule-III of the W.T. Act stipulating a reference to Valuation Officer cannot be ignored irrespective of the impact of the compromise agreement dated 14-2-1989 or the subsequent events. 23.5 The learned Departmental Representative, as already mentioned, pleaded that the Valuation Officer, Shri Chowlera, participated in the arbitration process and even admitted having committed certain errors, which resulted in low valuation of the jewellery in the reports for the earlier years. If that was so, the Department was free to have opted for another Valuation Officer. The Hon'ble A.P. High Court in their judgment reported at H.E.H. the Nizam's Jewellery Trusts case referred to above, have noted that the Government of India must have found the Valuation Officer pliable to their requirements. We need not go into this aspect of the matter. As already mentioned, the Department could have changed the Valuation Officer if so required, but to totally ignored the procedure laid down in section 16A and Schedule-III is totally untenable. 24. Now the question is whether the report for the assessment year 19....
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....86 (MP). Also see M.V. Kibe v. CWT [1988] 169 ITR 40 (MP), CWT v. A.A. Patel [1990] 181 ITR 543, 546 (MP)]. However, dissenting from the above view, the Calcutta High Court has held that the Tribunal was justified in remanding the matter to the officer concerned to enable him to make a reference to the Valuation Officer under section 16A [Raja Baldeodas Birla Santatikosh v. CWT [1991] 189 ITR 613, 616-17 (Cal.). Also see CWT v. Smt. Manorama Devi Birla [1993] 199 ITR 250, 256, 257 (Cal.)]." 24.1 It may be observed that there is a difference of opinion between the Hon'ble M.P. High Court and the Hon'ble Calcutta High Court. Neither of the decisions of these two High Courts is binding on this Bench of the Tribunal, as they are not of the jurisdictional High Court. We may, in this context, refer to the decision of the Hon'ble Bombay High Court in the case of CIT v. Thana Electricity Supply Ltd. wherein it has been observed as under:-- "....(d) The decision of one High Court is neither binding precedent for another High Court nor for courts or Tribunals outside its own territorial jurisdiction. It is well-settled that the decision of a High Court will have the force of binding....
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....the basis for the assessment years 1989-90 and onwards. We are of the view that this plea, though appears attractive at the first blush, has really no merit. Firstly, Schedule-III has to be held to be retrospective in its applicability, and it is applicable for the pending assessments of earlier years also. We have already referred to the case-law relied upon by the learned counsel for the assessee, for this proposition. What would have been the position, if the assessments for the earlier years were completed after 1-4-1989, when Schedule-III came on the statute book? If the assessment for the assessment year 1988-89 was completed after 14-1989, clearly the reference to the Valuation Officer would have been made under the provision of Rule 18 of Schedule-III. Actually in the cases of the assessee before us the assessments for assessment year 1988-89, and the reference to the Valuation Officer for that year, was made after 1-4-1989, which means that the Assessing Officer had invoked the provisions of Rule 18 of Schedule-ill for the assessment year 1988-89. So, the plea of the learned Departmental Representative that Rule 18 was not there on the statute book when valuation was made ....
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....presentative before us that the above remarks of the High Court did not conclude the issue in favour of the assessees herein, is to our mind, without any merit. It is mentioned by the learned Departmental Representative that the writ petition considered by the Hon'ble AP. High Court in the above judgment does not cover the assessment year 1989-90. We find that this statement is factually incorrect, and the said Writ Petitions did involve the question of reopening of the assessment for the assessment year 1989-90 also along with earlier years. So, we do not see why the above remarks of the Hon'ble High Court should not be taken as conclusive of the issue on hand. 24.5 We also do not find merit in the other alternative plea taken by the learned Departmental Representative that what is assessable on the relevant valuation dates is the compensation receivable in terms of the Compromise Agreement dated 4-2-1989, and not the value of the jewellery. Firstly, it is nobody's case that what is assessable is not the value of the jewellery, and such a plea is taken for the first time before this Tribunal. When neither the Assessing Officer nor the CWT(A) considered the matter from such an a....
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....he Trustees have no right of sale till the matter is finally decided. (ii) In view of the fact the Central Government had agreed to purchase/acquire all the items of jewellery, the exemption under section 5(1)(xii) of the Wealth-tax Act, 1957 should be granted for all the items of jewellery. (iii) The Union of India after entering into the compromise has filed a petition before the Supreme Court questioning the ownership of the items of jewellery for the first time. Considering this risk and hazard, the value of the jewellery can at best be fixed at not more than 10% of the value estimated by the Departmental Valuer. (iv) The award passed by the Hon'ble Umpire, Mr. Justice A.N. Sen on 27th July, 1991 has no relevance to the question of determination of value of the items of jewellery under the Wealth-tax Act, 1957. The award passed by the Hon'ble Umpire Mr. Justice A.N. Sen was challenged by the Union of India and no finality could be reached till date." It may be seen that the assessees have claimed 90% discount and as such claimed to be taxed only on 10% of the value determined by the Valuation Officer. The Trustees have also claimed exemption for all the items und....
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....step into the shoes of the Trustees and the beneficiaries to appreciate the agony resulting from protracted litigations." 25.3 After the above remarks, the CWT(A) referred to the decisions of the Apex Court in CWT v Maharaja Kumar Kamal Singh [1984] 146 ITR 202 of the Calcutta High Court in CWT v. Sampatrai Bhutoria & Sons [1982] 137 ITR 868 and of the A.P. High Court in CWT v. Amatul Kareem [1981] 127 ITR 549 wherein certain deductions were allowed considering the pending litigations and such other factors, and held that, in principle, a deduction for risks and hazards was allowable. He, however, was of the view that the claim for 90% deduction made by the assessee was highpitched. He accordingly restricted the deduction to 15%. The CWT(A)-II in his order dated 18-1-1996, on the other hand, held that after the agreement dated 14-2-1989, the matter was clear and there was no more uncertainty about the sale process, and so, he held that no deduction for risks and hazards was allowable. His remarks in this regard are as under: "......This would mean that the different factors put forth in the appeal proceedings before the ITAT in regard to the earlier assessment years which wer....
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....s the question of ownership of the jewellery was raised not only by the Union of India, but also by the public interest litigants. According to him, the discount to be allowed should even be 90%, and in this context the relevant portion of the written submissions read as under: "5.11 In the matter of quantification of discount, there is an element of judgment and subjectivity. However, such judgment should be based on objective considerations. In the present case, the relevant factors have been copiously stated in the preceding paragraphs and an honest attempt is made with regard to quantification based on the objective considerations detailed below: (i) The Hon'ble Tribunal allowed discount of 50% for the risks, hazards and uncertainties prevailing on each of the valuation dates following the various pronouncements on the subject including the decision of the Andhra Pradesh High Court in CWT v. Amatul Kareem reported in 127 ITR 549. For the risk of litigation and court process, the Hon'ble High Court held that 50% discount is reasonable. The risk of litigation is continuing for all the assessment years 1989-90 to 1992-93. Therefore, 50% is the minimum discount to be allowed ....
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....Officer. Alternatively, it is pleaded that if any discount is to be allowed, it has to be allowed only from the amount worked out by the Assessing Officer, with reference to the award of the Umpire, as approved by the Supreme Court. He also mentioned that the decision of the Tribunal in Trustees of H.E.H. the Nizam's Jewellery Trust's case is not applicable for the years under consideration, as all uncertainties had been removed by the compromise agreement dated 14-2-1989, as held by the CWT(A)-II. He also mentioned that the proximity of the dates between 31-3-1989, i.e., the valuation date for the assessment years 1989-90 and 27-7-1991 i.e., the date of award given by the Umpire and the massive difference between the two valuations proved that the valuation of the jewellery by the Valuation Officer was grossly below the fair market value, and so, no further discount was to be granted from the valuation of the Valuation Officer. He also pleaded that the risks had not increased due to compromise agreement, but rather substantially decreased. It is pleaded that after the agreement, the only uncertainty was about the quantum of compensation and so, overall uncertainty decreased after ....
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....has made the following observation: "97. We have discussed in detail the rival submissions in respect of cumulative tax liability. In our opinion, if there is any asset, which is subjected to the liability of tax the incidence of unpaid tax liability indeed influences the valuation of the asset and ought to be treated as a depressing factor." It is not clear whether, while making the above observation, the Tribunal had in mind the tax liability of the vendor, i.e., the Trustees or the buyer of jewellery. So, the remark does not really give much guidance in the matter. The decision of the Apex Court in the case of Maharaja Kumar Kamal Singh is altogether on a different issue. In that case, the Apex Court was interpreting a statutory provision, viz., section 4(c) of the Bihar Land Reforms Act, 1950 in terms of which arrears of agricultural income-tax of the owner of the land has to be reduced from the compensation payable to him on the acquisition of the land. It is because of the said statutory provision that the Apex Court has found a hazard, clog or jeopardy which detracts from the value of the asset and would influence all buyers. There is no analogous statutory provision, ....
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.... Government does not acquire any of the items in terms of the Compromise Agreement, the Trustees do not get the absolute right to sell in the international market or even in the local market, without again going through the procedure laid down under the Antiquities Act. So, it appears to us that it is too much to state that the compromise agreement has removed all the uncertainties and hazards in. the sale process and what was thereafter was only for the trustees to receive the compensation determined by the Umpire. It also requires to be mentioned that the Compromise Agreement itself did not acquire any sanctity till 25-1-1989, when the Hon'ble Supreme Court passed its Order approving the compromise. So, at least for the assessment year 1989-90, the compromise agreement had no value, as it was not applicable for the concerned valuation date, viz., 31-3-1988, and for the subsequent valuation dates, so many factors had intervened, like the questions raised both by the Union Government and the other interveners in public interest questioning the very ownership of the Nizam over the jewellery and so on. When the very ownership was questioned, we cannot say that the transaction/possess....
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.... Nizam's Jewellery Trusts case. While some depressing factors might have reduced, others like the questioning of the very ownership over the jewellery, cropped up in the years under appeal. On a balance, we are of the view that the same discount of 50% can be allowed even for the years subsequent to 1988-89. Issue-III: Whether any of the items of jewellery are entitled for exemption under section 5(1)(xii) of the Wealth-tax Act, and if so, whether such exemption should be extended to all items or restricted to some items only? If so, the items to which such exemption should be given? 28. We have already covered the ground relating to the litigation involved in the sale of jewellery. Some of the important events may be recapitulated for the purpose of examining the claim for exemption under section 5(1)(xii) of the Act. 28.1 Out of the 89 items of the main trust, 23 items were declared as Antiquities by the Director of Archaeological Survey of India, as early as in February 1978, and 65 items were declared as non-antiquities and one important item viz. Jacob Diamond, was left undecided. When the Trustees sought to put up the 37 items out of the 65 items declared as non-anti....
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....of 7 art treasures and after giving to the owners the opportunity of being heard in the matter within a period of 90 days from the date of receipt of the representations and forwarded the representations with the findings thereon; Whereas the Collector, Bombay issued notices to the owners of jewellery, vide No. GSC/SCL/Nizam Jewellery dated 31st January 1986, directing them to make representation to him under sub-sections (2) and (3) of section 19 of the aforesaid Act and held an enquiry on behalf of Government of India, and after hearing to their objections in the matter; concluded that the Trust had failed to make a good case for the rescisation of the order No. 1/23/76-ANT. dated 12-10-1984 and, therefore, recommended that the said order be confirmed as provided in section 19(4) of the aforesaid Act, vide his letter No. GEN/SCL/A&ATA dated 28-5-1986. We, therefore, the Central Government, in exercise of the powers conferred upon it under sub-section (4) of section 19 of the aforesaid Act, hereby confirm the letter No.1/23/76-ANT. issued on 12-10-1984. Sd/- (M.S. Nagaraja Rao) Director General & Ex-officio Joint Secretary Archaeological Survey of India" ....
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....nder clause (a)(I)(iii) of sub-section (1) of section 2 of the said Act, be compulsorily acquired. Whereas the Central Government, vide its order No. 1/23/76-ANT dated the 14th November, 1986, in exercise of the powers conferred upon it under sub-section (4) of section 19 of the said Act, authorized the Collector, City of Bombay & B.S.D., Old Customs House, Fort, Bombay, to entertain the representation of the owners of 23 items of jewellery declared as antiquities and after giving to the owners the opportunity of being heard in the matter within a period of 90 days from the date of receipt of the representations and forward the representations with his findings thereon; Whereas the Collector, Bombay issued notice to the owner of jewellery, vide his No. GSC/SCL/Nizam Jewellery dated the 3rd December, 1986, directing him to make representation to him under sub-sections (2) and (3) of section 19 of the said Act and held an enquiry on behalf of the Government of India, and after hearing his objections in the matter, concluded that the Trust had failed to make a good case for the rescission of the order No. 1/23/76-ANT dated the 30th September, 1986 and, therefore, recommended tha....
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....x Act. Alternatively, it is claimed that at least the 30 items, (23 + 7) declared as antiquities and art treasures are eligible for exemption under section 5(1)(xii) as works of art. As a third alternative, it is claimed that, at least, the seven items declared as art treasures deserve to be exempted under section 5(1)(xii). The revenue resists all the claims. 29. The Assessing Officer declined to follow the order of the Tribunal in Trustees of H.E.H. the Nizam's Jewellery Trusts case on the ground that the decision of the Tribunal was not accepted by the Department and that jewellery does not count as works of art or even as art collections in terms of the decision of the Hon'ble Calcutta High Court in Rajendra Kumar Sethia v. CWT [1992] 194 ITR 218. 29.1 On appeal, both the Commissioners (A) declined to allow the claims for exemption under section 5(1)(xii) in respect of all the items of the jewellery on the ground that there was intention to sell the jewellery, and so, one of the conditions stipulated in section 5(1)(xii) was not fulfilled. The CWT(A)-I specifically rejected the claim in respect of the seven items declared as art treasures and impliedly declined the claim ....
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.... reference to all the items inclusive of these 7 items. This would mean that appellant had an intention to sell all the items of jewellery inclusive of those 7 items which otherwise were categorized as 'Antiquities and Art Treasures' and it is because of such an intention that the agreement was arrived at and which was also of binding nature because of the reference to the Arbitrator as referred to earlier. It is also clear from clause 5(a) of the agreement which inter alia provides that the Arbitrators shall have regard to the principles and factors prescribed under Rule 20 of the Antiquities and Art Treasures Act, 1972 in the matter of determination of price/compensation for the items agreed to be taken over by the Central Government. The very mention for determination for price/compensation for the items would indicate that the amount on account of price/compensation for these 7 items was to be determined according to the agreement by the Arbitrators and whatever compensation/price was payable would have reflected the fair market value as on the relevant valuation dates taking into account the acquisition order and, therefore, it cannot be said that there was no intention to sel....
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....". This averment may be seen at page 98 of the assessees' paper-book Vol. III. 30.1 Next, reference is made to the averments made by the Director General of National Museum in another Interim Application dated 23-41991 filed before the Umpire, Mr. Justice A.N. Sen, in which it was stated as under: "(15) There is another aspect of the 173 items as well. Irrefutable documents establish beyond the shadow of doubt that almost all these items fall under the categories of antiquities and art treasures under the Antiquities and Art Treasures Act, 1972. Therefore these cannot be exported out of India. When the Jacob Diamond itself has become 100 years old, it is obvious that all the remaining 106 items included in that list are also antiquities. Therefore, most of these items cannot be exported out of India. Their valuation has, therefore, to be determined with reference to the Indian market and with the attached conditions that the heirloom and antiquity items would be kept substantially in original shape (i.e., these cannot be dismantled and reset for making new jewellery), that these shall be open for periodical inspection; and that they are accessible to scholars for research. As....
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....of Human Resource Development, Department of Culture, Government of India addressed to the Secretary, H.E.H. the Nizam's Trusts, a copy of which is filed at page-20 of the assessees' paper-book Volume-XIV, which reads as under: "With reference to your letter No. JT/5/94 dated 26-12-1994, it is confirmed that the Government of India, in accordance with the orders of the Supreme Court of India is acquiring 173 items of the Art Collection comprising 89 items of H.E.H. Nizam's Jewellery Trust and 84 items of H.E.H.'s the Nizam's Supplemental Jewellery Trust. The Jewellery items are being acquired for the purpose of display in one of the important museums of India as works of art for public viewing." Attention is also invited to the letter written by Director General of National Museum and Joint Secretary, Department of Culture, addressed to the Secretary of the Nizam's Jewellery Trust, dated February 1, 1996, a copy of which is filed at page-21 of the assessees' paper-book Volume-XIV. The said letter reads as under: "With reference to your letter No. JT/5/94 dated 1-2-1996, it is confirmed that the Government of India, in accordance with the orders of the Supreme Court of Indi....
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....e up to 16-1-1995. The Government has acquired 173 items of Jewellery belonging to the two trusts of the erstwhile Nizam of Hyderabad. A sum of Rs. 1,80,37,33,959 and 6% interest thereon from 27-7-1991 to 10-11995 was paid to the trusts. The Government decided that the jewels/jewellery of the Nizam being art treasures and heritage items should not be allowed to be taken out of the country and they should be acquired by the Government for public view. (c) There is already a jewellery gallery established in National Museum, New Delhi. These items of jewellery are being kept for display in that Museum for public view." In the light of the above, it is claimed that the entire jewellery was acquired by the Government as heritage items and art treasures, and so, they are eligible for exemption under section 5(1)(xii) of the Wealth-tax Act. 30.5 Next, reference is made to a letter dated 10-9-1987 of the Department of Culture, Government of India, addressed to the Secretary of the Trust, a copy of which is filed at page-22 of the assessees; paper-book Vol. XIV. The said letter reads as under: "Please refer to your letter No. 555/97 dated 21st July, 1997 regarding the display of....
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....work of art, the item should a motto for replication by the society. For example, the painting of Mona Lisa has been replicated by several painters throughout the world. (ii) Art production, Customs etc.: The artistic activity related to a work of art may influence a vast series of social phenomenon and may shape the taste and style of an epoch. (iii) Dealing and Collection: Society tends not only to assimilate and utilize the values of art but also tends to take permanent possession of the works themselves. (iv) Preservation of Art heritage: The community in its various forms like Church, State and City has always been profoundly interested in art and has generally accepted it to make, manifest. Or to clarify by means of symbols, allegories or historical representation. (v) Teaching: A work of art can be and object for teaching also and lastly. (vi) Art Criticism: A work of art has to be an object of criticism and above all art history. G. Several attempts were made to evaluate the items of jewellery of the Trust, against the above yard sticks and it is found there is no reported criticism or teaching on the jewellery. The jewellery was also not any model for rep....
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....heritage item" to a nation but it cannot be automatically termed as work of art. It is only the skill of the photographer, type of equipment used etc., that makes it a work of art. On a crude piane, the stone used by Jack, the Repper to hill people may be of "historical interest" the remember the misery caused by him. But the one may perhaps agreed to the fact that the stone is a work of art. I. Upon careful consideration of the evidence on record it is noticed that only 23 items are declared as antiquities and 7 items as art treasures. Therefore, it will be in the fitness of things to assume that these 30 items are works of art. In addition, after going through the documents obtained from Archaeological Survey of India, It is felt that the Jacob Diamond also deserves to be termed as work of art. There is certain evidence available on the nature of this diamond from the communication issued by Mr. L.K Srinivasan, Director (Antiquities), Archaeological Survey of India to Dr. L.P. Shih are, Director General, National Museum, New Delhi in F. No. 1/23/76-AWT dated 17-3-1988. From Levantine jew named Jacob to the Nizam and the author of a book entitled "Fabulous Mogul" by name F.D....
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....rket, wealth-tax exemption under section 5(1)(xii) should be granted, as the entire jewellery was acquired by Government of India as works of art or art collection for display in the National Museum. So, it is claimed that all the conditions specified in section 5(1)(xii) are fulfilled, and so, all the items of jewellery should be exempted and no value is assessable. 30.8 In this context, in support of his plea, he has sought to file before us, a copy of the written submissions made on behalf of the Union of India before the Umpire to the effect that the entire collection was exempt from both the levy of tax on capital gains in terms of section 47(ix) of the Income-tax Act, and Wealth-tax in terms of section 5(1)(xii) of the Wealth-tax Act. The learned Departmental Representative resisted the admission of these written submissions, as according to him, they constituted additional evidence, as they were not filed before the Revenue authorities. It is, however, mentioned by the learned counsel for the assessee that they were filed before the revenue authorities in the Income-tax Proceedings, and by oversight, the same were not filed before the Revenue authorities in Wealth-tax Pro....
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....ded that the decision of the Hon'ble Calcutta High Court in Rajendra Kumar Sethia's case relied on by the Assessing Officer actually supports the case of the assessee, or at least is distinguishable, and in this context, he invited our attention to the concluding remarks of the Hon'ble Calcutta High Court in the said judgment, which read as under: "In our view, jewellery having been considered separately, it will not come within the purview of "work of art" and comes within the purview of section 5(1)(xii), it cannot be an ordinary piece of jewellery which is meant for personal use and which, by its very nature, is liable to be sold whenever such occasion arises." 31.2 In the light of the above remarks, it is claimed that the jewellery of the Nizam Jewellery Trust, having been acquired by the Government of India, as heritage items and art treasures and works of art/art collections, the same cannot be regarded as ordinary pieces of jewellery, which are meant for personal use. So, it is claimed that the decision of the Calcutta High Court, in fact, supports the case of the assessee. 31.3 He further referred to the report of the Collector, Bombay in the context of the compuls....
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.... section 5(1)(xii) of the Wealth-tax Act. It is also explained that an art treasure is a higher category of work of art, and as such, a work of art need not qualify as an art treasure. It is also claimed that an antiquity includes a works of art if the same has been in existence for hundred years in terms of section 2 of the Antiquities Act, and so, antiquities declared as such under the said Act, should be regarded as works of art, so as to be eligible for exemption under section 5(1)(xii) of the Wealth-tax Act. It is also claimed that the statutory orders declaring the 23 items as antiquities and 7 items as art treasures, were never withdrawn, and hence notwithstanding the compromise agreement dated 14-2-1989, it has to be held that the acquisition proceedings under the Antiquities Act were continuing till the entire collection of jewellery has been acquired by the Government, and as such the intention to sell them is ruled out because of the pending acquisition as held by the Tribunal in 35 ITD 402. 32. The learned Departmental Representative, on the other hand, invited our attention to the relevant provisions of the Trust Deed in terms of which the items of jewellery in ques....
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....eferring to the letters given by the Joint Secretary, Ministry of Culture, stating that the entire art collection was acquired as works of art for display in the museum, it is stated that the said functionary had used the expression 'works of art' in a loose fashion, without regard to the legal implications. It is contended that too much should not be read into the said expression in that communication. It is also claimed that the Deputy Minister for Culture in his reply to the Parliament, which is extracted hereinabove, clearly mentioned that the items had been acquired as art treasures and heritage items, and so the entire collection, except the seven items declared as art treasures, were acquired only because of the historical interest. It is also claimed that the claim that all the items were exempt was never made in the return of income, and it is not a pure question of law, and so, it cannot be entertained for the first time, by the ITAT. 33. We are of the view that the assessee deserves to succeed in its claim for the exemption of the seven items declared as art treasures and the 23 items declared as antiquities, and the assessees do not deserve to succeed in relation ....
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....i) any article, object or thing illustrative of science, art crafts, literature, religion, customs, morals or polities in bygone ages; (iv) any article, object or thing of historical interest; (v) any article, object or thing declared by the Central Government by notification in the Official Gazette, to be an antiquity for the purposes of this Act, which has been in existence for not less than one hundred years; and (II) any manuscript, record or other document which is of scientific, historical, literary or aesthetic value and which has been in existence for not less than seventy-five years. (b) "art treasure" means any human work of art, not being an antiquity, declared by the Central Government by notification in the Official Gazette, to be an art treasure for the purposes of this Act having regard to its artistic or aesthetic value: Provided that no declaration under the clause shall be made in respect of any such work of art so long as the author thereof is alive.' The other salient provisions of the Antiquities Act, read as under: '19, Power of Central Government to compulsorily acquire antiquities and art treasures.--(1) If the Central Government is of o....
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....ired under section 19, there shall be paid compensation, the amount of which shall be determined in the manner and in accordance with the principles hereinafter set out, that is to say,-- (a) where the amount of compensation can be fixed by agreement, it shall be paid in accordance with such agreement; (b) where no such agreement can be reached, the Central Government shall appoint as arbitrator a person who is, or has been, or is qualified for appointment as, a Judge of a High Court; (c) the Central Government may, in any particular case, nominate a person having expert knowledge as to be the nature of antiquity or art treasure compulsorily acquired to assist the arbitrator and where such nomination is made, the person to be compensated may also nominate an assessor for the same purpose. (d) at the commencement of the proceeding before the arbitrator, the Central Government and the person to be compensated shall state what, in their respective opinion, is a fair amount of compensation; (e) the arbitrator shall, after hearing the dispute, make an award determining the amount of compensation which appears to him to be just and specifying the person or persons to whom ....
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....onsider this claim. 34.1 For being eligible for exemption under section 5(1)(xii), as already mentioned, two conditions are to be satisfied simultaneously, viz., (a) the items should be works of art or art collections or other specified items; and (b) they should not be intended for sale. The closest category into which the jewellery in question can fall in terms of section 5(1)(xii) is either works of art or art collection. The jewellery cannot fall under any other categories specified in section 5(1)(xii). Similar is the position under section 47(ix) of the Income-tax Act. The jewellery in question is described in the first Schedule to the Trust Deed dated 29th March, 1959. A copy of it may be seen in Vol. XIV of the assessees' paper-book. The jewellery is referred to in the preamble of the Trust Deed, "as precious gems, jewels, ornaments and other articles of jewellery and antique pieces specified in first schedule". It may be observed that there is no reference to works of art or art collections in the Trust Deed in the context of description of the jewellery. So, normally, in the context of the Wealth-tax Act, jewellery cannot be regarded as works of art or art collection, ....
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....1-2-1996 in which it has been mentioned that the entire collection had been acquired as works of art for display in the National Museum, it is difficult not to assume that, when the Director General Archaeological Survey of India declared 23 items as antiquities, he did not consider them as objects illustrative of art crafts in bygone ages, and that he took them as simple objects illustrative of, say, customs in bygone ages. Now, the question is whether 'objects illustrative of art crafts in bygone ages' can be equated to art collections referred to in section 5(1)(xii) of the Wealth-tax Act. We are of the view that the line of distinction between objects of art crafts and art collection, which are the only effective words to be interpreted for our present purpose is too thin and making any such distinction between these two categories would amount to an exercise in hair-splitting. We are not deciding the issue on our own appreciation of the aesthetic value of the Jewellery in question. We are going by the statutory definition of the terms 'antiquity' and 'art treasure' given in the Antiquities Act. We are considering whether the items so declared as art treasures and antiquities u....
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....)(xii) of the Wealth-tax Act. 34.3 Now, the question is whether the second limb of section 5(1)(xii) is also satisfied for conferring exemption under section 5(1)(xii) in respect of these thirty items (seven art treasures and 23 antiquities), viz. whether they are not intended for sale. Commenting on this aspect of the matter in respect of seven items declared as art treasures and claimed as exempt under section 5(1)(xii), the Tribunal in its decision reported at Trustees of H.E.H. The Nizam's Jewellery Trusts case remarked as under:-- ".....106. Coming now to the exemption as contempated under section 5(1)(xii) of the Act, we find that seven items have been declared as "art treasures". The trust is prohibited to sell any of these items. Since the sale of these items was restricted by the provision of the statute, it is obvious that intention of the person cannot transgress the limits of law. The condition precedent for enabling exemption is that the article must not be intended for sale. In our opinion, the intention is presumed to cause that which is the natural consequence of something consciously done or omitted. The intention of a party ought to be subservient to or in a....
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....y to the 23 items declared as antiquities. But the contention of the learned Departmental Representative that there was intention to sell holds good in respect of the rest of the S9 items including the Jacob Diamond, which were not the subject of acquisition proceedings under the Antiquities Act. So, we see no reason for not extending the benefit of exemption to the seven items declared as art treasures as held by the Tribunal in its decision in Trustees of H.E.H. the Nizam's Jewellery Trusts case of the 23 items declared as antiquities which stand on par with the seven art treasures so far as acquisition is concerned. 35. So far as the 59 items inclusive of Jacob Diamond are concerned, they have not been declared as either 'antiquities' or as 'art treasures' under the Antiquities Act. They were all examined from the angle of 'antiquities' but were not so declared. Further, 30 (out of 37) of the 59 items were examined from the angle of 'art treasures' but were not so declared. The rest of 29 items were not examined from the angle of 'art treasures'. So far as the Jacob Diamond is concerned, it was examined from the angle of 'art treasures' but its status was undecided. As alread....
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.... of art' or 'art collection'. As there are no exceptional circumstances like the statutory orders in respect of the 23 items declared as 'antiquities' and the 7 items declared as 'art treasure' considered hereinabove, we are of the view that the exemption under section 5(1)(xii) cannot be granted for the 59 items which includes the Jacob Diamond. We, however, need not give a firm finding as to whether the 59 items in question constitute 'Art Collections' within the meaning of section 5(1)(xii) of the Wealth-tax Act. Whether they so constitute or not, the 59 items in question cannot qualify for exemption under section 5(1)(xii) of the Wealth-tax Act for the simple reason that they have all along been intended for sale. As per the terms of the Trust Deed, these items were meant to be sold after the death of the eldest son of the Settler in 1970 and the Trustees have all along been trying to effect their sale. There are no statutory orders of acquisition which render the trustees' intent of sale subservient to the provisions of law, as in the case of the 23 items declared as 'Antiquities' and 7 items declared as 'art treasures'. As we have already mentioned, the compromise agreement e....
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....d' are not entitled for exemption under section 5(1)(xii) of the Wealth-tax Act. Issue IV: Levy of interest under section 17B. 36. The last issue relates to the levy of interest under section 17B of the Wealth-tax Act. Detailed submissions filed on behalf of the assessee on this issue are contained in Vol. 13 filed before us. The Trustees of H.E.H. the Nizam's Jewellery Trust filed returns in their representative character under sub-section (1) of section 21 of the Wealth-tax Act declaring the ultimate beneficial interest of the various beneficiaries. The Trustees did not file the returns before the date and there was some delay. The Assessing Officer did not complete the assessments in the hands of the Trustees but had exercised his option to make a direct assessment in the hands of the concerned beneficiary under sub-section (2) of section 21 of the Act. The ultimate beneficiaries are the appellants before us. The Assessing Officer had levied interest under section 17B of the Act for the delay in filing the returns by the Trustees in the assessments made in the hands of the ultimate beneficiaries. The Commissioner of Wealth-tax (Appeals) held that the liability of the benef....
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....satisfied that it is a fit case for granting interim order. The levy is prima facie illegal inasmuch as there is no obligation on the beneficiary to file the return and the interest is imposed for default in filing the return. In the circumstances there shall be interim direction as prayed for." It is claimed that, even though above order passed by the Hon'ble High Court was an interim order, the finding of the Hon'ble High Court on the absence of obligation on the part of the beneficiary to file return of wealth is final and binding especially in view of the judgment of the Hon'ble High Court reported in H.E.H. the Nizam's Jewellery Trusts's case. 36.2 The learned Departmental Representative on the other hand submitted that there is an obligation on the beneficiary to file his return of wealth declaring his beneficial interest in the Trust under section 14 of the Wealth-tax Act, he also pleaded that the fact that the trustees have filed returns of wealth in their representative capacity on behalf of the beneficiary would not absolve the beneficiary from payment of compensatory interest under section 17B arising out of the violation of the statutory provisions, viz., the dela....
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....ons 159 to 168. There is a difficulty here, for, it is not necessary that in such cases the representative assessee will be liable to be assessed in respect of the total income of the beneficiary. To give some examples, in the case of a receiver or trustee, he may be assessable only in respect of some income of the beneficiary, the other income of the beneficiary being assessable in the hands of some other trustee or receiver or even directly as the income of the beneficiary. Again, the agent of a non-resident is assessable only in respect of income of the non-resident falling under section 9(1) and the non-resident may have other assessable income. If the intention of the Act is to lay an obligation on such a person to file a return of the total income of the beneficiary, that may be difficult, if not impractical, in cases like the above. On the other hand, if the intention is that such a representative assessee should file a return showing such income as he receives or is entitled to receive on behalf of a beneficiary that will not be a return of total income. The precise scope of the obligation would therefore seem to need further statutory clarification. ('Law of Income-tax'....
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....h interest under section 17B for the delayed filing of the return. We are informed that the assessees before us have nor other wealth and so they were under no obligation to file the returns. Accordingly, we delete the interests levied under section 17B in respect of all these assessees. However, the Assessing Officer may verify whether the assessees in question have any other wealth and, as such whether they are under obligation to file returns in respect of the separate wealth and we clarify that, if they are under such an obligation, the levy of interest need not be cancelled. Subject to verification and the above remarks, the interest levied in all these cases are hereby deleted. 36.5 In view of the above, the Assessing Officer may modify the assessments adopting the values of the corpus as per the report of the Valuation Officer for the assessment year 1988-89 subject to modifications mentioned in rule 19 of the IIIrd Schedule to the Wealth-tax Act and allow 50% discount thereon and exempt the 7 items declared as 'art treasures' and 23 items declared as antiquities and subject the result to actuarial valuation about which there is no dispute before us. Interest under sectio....