' ;:" .. . COMMISSIONER OF WEALTH TAX, PATNA ~ ' ' v. RAGHUBIR NARAIN SINGH \ Pebruary 20

"Qu.stion No. 2. ·Whether, in the fact• and circumstances of the case, the decrees obtained by the assessee against Shri A.H. I,al arid Shri D'.D. Tulsi for Rs:. 1,11.747 and Rs. ·51,525 respec tively, have been valued under the Wealth Tax Act, 1957, by·. correctly applying the provisions of section 9 of the Act for the ' purpose of including their values fa th~ net w~alth of. the ustssee? Question· J'{o. 3~Whether, ,the sum of Rs. 32,266, the amount of Agricultural income-tax due from. thb asessee, falls • for deduction in hands ·of the assessee in arriving at his total . wealth for the years 1957-58, 1958-59, 1959-60 and 1960:61? .. ,.).,· ' • ·011.stion No .. 4-Whether, the sum• of Rs. 597909 due from Tikait Girja .·Prasad Singh,+.Rs. 40001 due (rom Sri Gangeshwar Prasad Singh, Rs. 64000 due from Mahanth Maha bir Das, Rs .. 37773 due from Sri Lakshmi Narain Singh, Rs. 2600 due from Sri Jamuna Prasad Missir, Rs. 1250 due from Sri. · Sarj~g Kumar, Rs. 15344 due from Sri .NandJoshore Singh, and Rs. 388760 due from Raja ·Prithivichand Lal Chaughiiry under claim decrees obtained against them by. •ne .assessee under the Bihar ·Land Reforms Act are. assets of tno as.essee within . the meaning of Wealth Tax Act, 1957, and have been valued under the. 'said Act by correctly applyin~ ,he orovisions of section 7 of the Act for the purpose of incl.ud.ing their values in 'the net wealth of the assessee"? j. ;. • G. H ., \ · c.w.T: v. RAGHUllIR N.ARAIN (Mukharji, 1.). ··' 629 • .. .,,_ Regarding Question Na.· 3 which is the question whether!the . • amount of agricultural income-tax dues from the assessee is a factor· f which has to be taken into accou·nt for 'valuing the compensatfol} pay-· able to the assessee, we·have held that agricultural.income-tax ~.ues from the asscssee which are deductible from the. compensation under . Section 4 (c) of the -Bihat Land RefotmsAct, .1950, if the sal]le has not • been deducted .before the issue <if the compensation bond, then the · · .. 'possibility a11d the hazafd ·of its being ~.eduded fro,m th~ compen sation involved is a factor which has.to be taken into account in esti- · mating the value of the right of compensation for the purpose of esti 'ffiating -'tI1e net wealth cif the assessee on the valuation d~te under the : • ·. Wealth Tax Act. The ·~dears, of a_gricultural incofTle-tax is not io be deducted frcim the net wealth ·as such but is a factor which a willing purcha.ser will take into consideration in· estimating the .value of these assests and .that isa factor which should be taken into consideration. The point h&s been discussed by this Court in the case ~f Com~issioner · '.\ of Wealth. Tax,'Bihar, J!atna v. Maharaja Kumar Kamal Singh (Civil "· ·Appeal Nos. 1238 to 1240 (NT) of 1973)~ ,The qµestion, is, ·therefore · aµswered as•the ans>yere~ given in the said appeals and the Tribunal will estinwte the Value by taking into C'<nsideration the possibility for deduction on account. of the liability of the assessee on account. of agricultural income-tax if it had not be2n already deducted in' accor-. dance wi_th the" provisions of the Act a:nel determine the net value of . the assets of the assessee, accordingly. . , , I - ,. ~· \ . ·: .; . . . • \ , ' . • I These. questions are for the wealth ta-x assessments of. the asses- · ., ' ' ' . ..... sec for the assessment years 1957-58, 1958-59, 1959-60, 1960-61 and 1961-62. J'he assessments involved were for those years in which the relevant valuation dates we're 20th September, 1956,.2lst March, 1958; 21st March, 1959, 21st. March 1%0 and 20th March 1'96hespectively. In the firs\)'ear the'assessee had filed return of wealth for Rs. 447065. The Wealth Tax Officer, however, determined the total wealth of the .assessee at 'Rs: 1608863. The Wealth Tax Officer included in the net wealth of the assessec, v~rious amounts of money due under. the ' decrees which the assessee hal,l obtained against certain debtQrs, as•, well as t.he compensation payable to him under the Bihar 'Land Re forms A.Gt after valuing the bonds.· It may be mentioned that the as ses see· had appealed to the· Appellate A~sistant Commissioner arid thereafter he . had carried appeals ,to the Tribunal also and ·had obtained. snme srelief in _the processc For the subsequent assess- ment years of 1958-59. 1959-.60, 1960-61 and 1961-6.2, 'similar con siderations had come \IP before the Wealth Tax Officer, o~ the assessee filing separate· returns and similar results were followed. In each year I A.' .B ·.c ' .. "'· ., .E F G 'H '· '· \ ' \ .. ,, L . SUPREME COURT REPORTS . 630 .. the as~essee had claimed ~ertain deductions: including an amount of R•. 32266 due as agricultural income tax. The later sum hns . been · consi5tently disallowed. This point we have 'd,isposed of in terms of · tlo.o deeisioa of this Court in Civil Appeal Nos. 1238 to· 1240 (NT) of [1984) 2 • C:S.R. n . . .

#1973. . . . . • B So far as Question No. 2;is concerned, while' computing the net wealth, the Wealth Tax Ofi\oer had incluc:e<l the sums of Rs. 8000 and ~s.'130.11 for the ;iear 1957-58, due from S;i A.K.Hazr~ and Sri N. · Sabay respectively, on the b~sis o( l)sufructuary mortgatge in favour · of the asse~see as his assests. On th~ last point the assessee has obtained ~- . ~ relief from the Appellate Tribunai for the year 1957-58 and for .that -' D reafon thes·~ two sums were excluded from .the net wealth of the asses- · see for the subsequent assessment years and that point had given· rise · to the reference in Tax Cases Nos. 23 to 27 of 1966. On the other questions raised by the assessee, reference in Tax. Cases No~: 64. to '· 68 of 1967 had arisen. . . •. ' No,,; the facts thaterial for Questi~n No. 2 are.as follows: . ' . ' The assessee had obtained civ]J court decrees for Rs. 11 i747. and Rs. 51525 again·st Sri A.H. Lai and Shri D.D. Tulsi. The decrees are sti.li pending e~ecution. In the books of the assessee'lfthese two decretal aniounts were showff as tstill outstanding. So far as the decree obtained against Shri D.D. Tulsi, th~ position seems to be that .Tulsi owed a decree to the assessee and the assessee owed money to the bank. In .c;onnection with the decr~e obtained against D.D. Tulsi, it liad l>een contended before ihe Tribunal that at the instance ofo the Official Liqwdator, the Calcutta High Court had issuef.1 a Garnishj order· on 13th January, 1960 for setting off the assessee's liability to the Pacific Bank and, therefore, the decree-.did not represent wealth wh.ich could . be valued under the Act. It was recorded by the Tribunal that the order· .of the Caltuita High ¢ourt had been passed after the relevant dates of the first three assessment years and it held that even for the ·assess~ m.ent years 1960,61 and 1961-62, tlie 'order of attachment could not indicate that the value of the decree was 'nil', as was the assessee's ·~se. Hence, the decree against. Sri tulsi was valued by the Wealth Tax Officer at Rs. 51525. As regards the decree against Sri A.H. Lal, tlie attachment order passed by the Calcutta High- Court was on · :m1t 1'!11e, 1961, ~hat, is to say,. even aftet the valuation date for the .. H . • c.w.T. v .. RAGHUll!R NA~AiN' (Mukharji, J.) 631 ' •.' ' assessment year 1961-62. Tl;ede'cree.was therefore valued by the Wealth Tax Officer at the figure of Rs.· JI 1747. · It was- die contention. of the assessee. that the hvo decrees had been erroneously valued and 'the . . . principles for valuation unde'r Se~tion 7 (I~ had· hot been followed: On the other hand it was cbntended 'on. behalf of the revenue !bat . decrees had been correctly valued· unde~ Section 7 (2) (a) of the .AC't. ·'The High Court held and in our opinion rightly·that .two d.ecrees had :not been.valued under. Section .7 (2) of the Act at all and. had been· · valued under Section 7 (I) of the Act.,We are in agreement with the . High Cour~ that merely becausetJ;e assessee had shown the_ full dec;e- tal amounts in his books as still due, would notdpsofacto lead to the ~ conclusion that they would be valued at those sums without taking.into .. co~sideration tlie haz_ards of realisa6on pf the ·decrees. These decrees ·had not been executed and in the process of execution, there may be hazards and the Welath'Tax Officer n!ust, sJimate the price ·of the decree by anticipating what a willing purchaser won.Id have paid for those deerees taking the hazards Into consideration ·-in open market on• the . val_uation date and should estimate the price of thi; asset in question in the negative .. accordingly. The High Court. answered this question We are of the opinion that in view of the well-settled principles which we have discussed In the case of Cimimi~sioner of Wealth Tax, Bihar, Patna v. Maharaja · Kumar Kaina/ Singh '(Civil A,ppeal Nos~ ·1238 to:· · · 1240 (NT) of 1973, the. High Court was right in its decision' .. { . sf r ar as the~ Q·uestion. No. 3 is concerned,. the same question ~-.; would. have to be answered in the manner indicated above and the . High Court has done the same and we affirm the said decision in view ·of the decision of this Court in Civil Appeal Nos.· 1238 tci J240 (NT) . of 1973. The facts regarding question. No .. 4 after taking into co~·side~ ration statement of this. case as also the suppiementary statement 6f . its. dirc.tions are as . . the .case sent to the High Court pursuant to · follows : . .. \: - In respect of sums · due from. Tikait Girja Prasad Singh; . the / ., . A B c D .. F . High ·Court-h~s ~liserved that assessee was entitled in respect; of the G ·. , zamindari compe~sation of Tikait Girja Prasad Singh which had. vested in the G,overnn1ent ·and the. valne of.the compensation 11ad Men". estimated 'at 75 per cent . of' certain, figure. The High Court directed that . when assessee had a claim. decree against . its debtor, the Wealth Tax. Officer should_ ascertain the price that a·reason- H al:lle. person would have paid for. ii on the relevant -date, . valuation ... . ' . ' ' .. • ' \ A B c D ', ,632 SUPREME COURT REPORTS ' . [1984) 2 5.C.R. . . in op~n market Considering that this claim decree Cal) only be Satisfied wholly or partly from the compensation which the·. 'debtor would receive under ·the Bihar Land Reforms ·Act. 1950.~ The claim decree was ·an a~set, the High Court held, but -it was wrongly valued by the authorities and directM to be valued by estimating what it would fetch in the open market on the valuation date taking into considc ·ration all the hazarils. .,__ __ ' ·on the same principle, the other decrees mentfoned in the. q~estidns ha~e been disposed of by the High Court. We are of' the opinion th'at · i~ view of the principles :discussed by this Court in the case of Commis- ~·" . s10ner of JV,a/th ·Tax, B1har, Patna 'v. Maharaja Kuma.r Kaflutl Singh ,,,_ the High Co,urt was right in its conclusion. Indeed this question was hot seriously pressed before us sewrately ... . .- • We. may. reiterat<; that learned. ·counsel ,, before U& certain propositions, namely: for the revenue urged · (1) For the ·purposes of computation of. net-wealth of an asses see e~ch asset belongini: to him and each debt owed by hill} has to be valued s.cparately, · ' · · • · (2) , The difference between the 'assets and the agrcgate value of the debts ,represents his - net-wealth. · · . ai:i:reagate value 0f .:r F (3) ' , In determining the market value of an asset( or the_ residue · of the asset diminishCd by an over-tiding title. on the asset itself), any ·liability or debt incu\red in relation to it h~s. to be ii:nored as the debt or liability has tci be separately evalua- ted. · ' • G H (4) What is the market value of a certain asset· P• he residue asset as referred to 'above: i; a question of fact, to be deter~ mined finally by the Income-tax Appellate ·.Tribunal taking .' ir1Jo account 111e relevant evidence and: consid" ·utions put fore ward by both the sides and the High Cow cannot in"·, .. ,,, ' "I i~ '' • ---..:i. .. ' J' . C.W.T.)'. RAGIIUBIR NARAIN (Mukhar}i.-J.) 633 ' . ~' . \' ,# terfere with such a finding of fact ~nless it isJou~d t~. be basect ~n irrelevant consideration or is arrived at by' ignor ing 'relevant' evidence. '---. : -.. :o-.'" ;;--;· . .. ·.A ' - ' ~ (5) When the debt is representedasm) asset, its market. value ' . has. to be determined in ·the same manner as the. market" . value of any other asset irrespective of the fact whether such an asset-debt"is encumbered by another debt owed from the assessee, because the later-mentioned debt can qualify for deduction at its mark~t value independently: · I c D E / ' ' j \ · About proposition No. (l) and (2) above, there cannot be' any dispute.' But as regards Proposition No. (3), as this Court has discussed in Commissioner of Wealth Tax, Pihar Patnq v. Mahdraja Kumar . Kamal Singh, if there is an' asset, whicli_.is -subject 'to certain hazards · including the liability. of certain debts to be deducted from the .said ttsset, then that factor ~ould be relevant factor diminishing the market . value of the asset in open market and has to be estimated taking into· consideration that f~ct9r. Regarding Proposition No. ( 4), it may be stated that while it is a question of fact but if the Tribunal has arrived at the conclusion by takit1g wrong principles into consideration, then · such a findi'ng )VOU!d not bind the High Court. Regarding Propositon No. (5), it 'may ·be· stated that (de bis may be deducted from' the value of a$,sets but the· valuation of an asset has to be \!one in terms of Section 7 (I) taking into considerations a!I the hazard$ including the po.sibility "---. of au amount on account, of. debt being deducted fron\ the value of the ·asset is a factor which will. influence a prospective buyer in the open market, depending upon the facts and· circumstances of each case .. / ..;;. . i ' . . . ' ·~ . -·-·. In the aforesaid view of the matter, we affirm the decision of the .· High Couri in all these points and dism.iss the~e appeals with costs: , .&pplifals dismissed. · ·, S.R. ~~ ... :i