COMMISSIONER OF WEALTH TAX Vs. VASANTHA

JUDGEMENT

(1.) THE following question has been referred to us by the Income-tax Appellate Tribunal, under Section 27 of the Wealth-tax Act, at the instance of the revenue :

(2.) THE circumstances under which the reference came to be made are these. THE assessee is the widow of one Ramanathan Chettiar who was a partner in two firms, (1) Valimalai Rubber Estate, and (2) Peramboocoly Coffee Estate. THE assets of these firms mainly consisted of agricultural lands. Ramanathan Chettiar died on April 12, 1960, and his widow, the assessee, filed a wealth-tax return valuing the net wealth of the deceased as on the date of his death at Rs. 5,80,645. In computing the value of the net wealth the assessee did not take into account the value of the share of the deceased in the agricultural lands owned by the two firms. THE Wealth-tax Officer, however, took the view that the agricultural lands of the two firms were not as such owned by the deceased and that, therefore, the value of the interest of the deceased in the two firms taking into account all the assets of the firm including the agricultural lands should be valued at Rs. 5,50,352. He, therefore, added this sum to the amount of net wealth as disclosed by the assessee in her return .

(3.) SECTION 2(m) gives the definition of ." net wealth ". According to that definition, "net wealth " means the amount by which the aggregate value computed in accordance with the provisions. of this Act of all the assets, wherever located, belonging to the assessee on the valuation date, exceeds the aggregate amount of debt due by him, and " valuation date" is defined in SECTION 2(q). SECTION 3, which is the charging section, provides for a tax in respect of the net wealth on the corresponding valuation date of every individual. Hindu undivided family and company at the rate or rates specified in the Schedule. SECTION 4(1)(b) provides that in computing the net wealth of an individual, the value of his interest in a firm of which he is a partner or an association of which he is a member as determined in the prescribed manner shall be included. SECTION 5 provides for certain exemptions in respect of certain assets. SECTION 7(1) states that, subject to any rules made in this behalf, the value of any asset other than cash, for the purpose of the Act, shall be estimated to 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. SECTION 46 enables the Central Board of Direct Taxes to make rules for carrying out the purposes of the Act including the manner in which the market value of any asset is to be determined. In pursuance of the rule-making power contained in SECTION 46 read with SECTION 4(1)(b), Rule 2 of the Wealth-tax Rules, 1957, has been made, prescribing the manner and method of valuing the interest in any partnership or association of persons. Rule 2(1), which is material, is set out below :