K V SATHYANARAYANA RAJU Vs. UNION OF INDIA

JUDGEMENT

(1.) THE validity of Sections 2(ea)(i) and 2(ea)(ii) and 2(m) of the Wealth tax Act as inserted by the Finance Act, 1992, with effect from April 1, 1993, has been assailed in this petition. It is stated that prior to its amendment Section 2(m) which defined "net wealth" included all the assets belonging to the assessee on such valuation date, minus debts owed by him. Now by an amendment it is only debts in respect of that assets which could be reduced and therefore it has gone beyond the scheme of the Act.

(2.) IT is submitted that the levy of tax on land and building which is exclusively within the legislative competence of the State Legislature under entry 49, List II, Schedule VII, of the Constitution of India cannot be made liable to tax under the Wealth-tax Act. Reliance is placed on the judgment given by the apex court in the case of Sudhir Chandra Nawn v. WTO [1968] 69 ITR 897, where it was observed that the tax which is imposed by entry 86, List, I, of the Seventh Schedule is not directly a tax on lands and buildings. IT is a tax imposed on the total assets of individuals and companies, on the valuation date. The tax is not imposed on the components of the assets of the assessee, it is imposed on the total assets which the assessee owns and in determining the net wealth not only the encumbrances specifically charged against any item of asset, but the general liability of the assessee to pay his debts and to discharge his lawful obligations have to be taken into account.

(3.) ARGUMENTS of both learned counsel for the parties have been heard.