TaxTMI 
TaxTMI 
1968 (2) TMI 19
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.... Act, namely, section 3, which says that a tax called wealth-tax shall be charged in accordance with the provisions of the Act in respect of the net wealth of every individual, Hindu undivided family, and company at the rates specified in the Schedule to the Act. Net wealth, according to section 2(m) of the Act, is the amount by which the aggregate value of the assets of a person exceeds the aggregate value of his debts, and, by section 2(e), agricultural land and certain other assets are excluded from the scope of the word " assets ". Section 7 says that, subject to any rules made in that behalf, the value of any asset, other than cash, shall, for the purposes of the Act, be the price which, in the opinion of the Wealth-tax Officer, it would fetch if sold in the open market on the valuation date. Clauses (a) and (b) of Paragraph A of Part I of the Schedule provide for the rates of assessment (with progressively higher rates for the higher slabs) in respect of the net wealth of individuals and Hindu undivided families respectively, while clause (c), which is the provision with which we are here directly concerned, provides for the levy of an additional tax on the value of land (exc....
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....n an area in category C, Rs. 4,000 if situate in an area in category B, and Rs. 3,000 if situate in an area in category A. According to the petitioner, this difference is clearly discriminatory and can have no rational hearing on the objects of the statute. Even if there were any acceptable reason, which there is none, to justify a difference merely on the basis of population, then if that reason justifies the total exemption of rural areas, it should operate to enhance, not to diminish the tax as one proceeds from a less populated to a more populated urban area. Among urban areas the tax should be lightest, not the heaviest, in an area like Cochin falling in category D, and it should be the heaviest, not the lightest, in an area like, say, Bombay or Calcutta, falling in category A. So runs the petitioner's argument. The revenue seeks to justify the seeming differences on the ground that, owing to pressure of population and shortage of accomodation, the value of immovable property and the return therefrom are artificially high in urban areas, that unaccounted money, therefore, seeks investment in urban areas, in turn, artificially pushing up the price of properties in such areas, ....
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....mpanies may come up. If this tendency develops, Government will deal with it at the appropriate time." All this might explain why property in what we have called rural areas should be exempt from the additional tax. But it can scarcely explain the seemingly contrary trend of a higher tax in respect of property in a smaller urban area than in respect of property of the same market value in a bigger urban area. The evil sought to be mitigated, one should have thought, would progressively increase with an increase of population. The real explanation for the seeming discrimination is, we think, to be found elsewhere. Perhaps there is a hint of it in this rather cryptic passage in the Finance Minister's speech. " In view of differences in urban property values in towns of different sizes, I have decided to provide for different exemption limits according as the population of the town is between I lakh and 4 lakhs, 4 lakhs and 8 lakhs, 8 lakhs and 16 lakhs and over 16 lakhs. The exemption would vary from Rs. 2 lakhs in the smalles of these ranges to Rs. 5 lakhs in the highest of these ranges. Honourable Members will see that the classification of towns that I have adopted for this pur....
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....es a difference between one area and another. Now, it is notorious that immovable property of the same market value fetches a higher income in all urban than in a rural area. Therefore, in relation to its market value, the capital value of an asset situate in an urban area is higher than the capital value of all asset situate in a rural area. And, since the tax is really on the capital value, although it is the market value that the Act adopts for arriving at the capital value, this provides ample justification for the total exemption in respect of immovable property in a rural area. But, as we progress from a smaller to a bigger urban area, owing to several factors, property hunger and sentiment not the least, generally speaking, the market value of an asset increases out of proportion to its productivity, in other words, out of proportion to its capital value. Thus, generally speaking, it would be correct to say that if a man buys immovable property for Rs. 10 lakhs in a rural area he would get a smaller return for his investment than if he had bought property for the like sum in an urban area. At the same time he would get a larger return on such an investment in a smaller urban....