COMMISSIONER OF WEALTH-TAX MADRAS Vs. MARTINAMMAL MACHADO

JUDGEMENT

(1.) THE following question, which arose in the course of the assessment to Wealth tax of the Assessee for the year 1959-60, has been referred for our opinion under s. 27 (1) of the Wealth Tax Act. 1957: "whether in the circumstances and on the facts of the case, the leasehold interest of the assessee in the salt pans is an asset within the meaning of section 2 (e) (v) of the Wealth Tax Act, 1957 and its value includible in the net wealth of the assessee?"

(2.) FOR the assessment year in question, the assessee made a return that on the valuation dated 31-3-1959, her net wealth was Rs. 4,95,977/ -. In making that return, she did not put any value on the leasehold interest she possessed in certain salt pans. By an agreement dated 7-5-1942 the Central Government had granted a lease in favour of the assessee in respect of a number of salt pans in milavittan Village, near Tuticorin. The lease was to endure for a period of twenty-five years. The Wealth Tax Officer valued that property at Rupees 1,25,000/-, at five times the annual rent, and included the same in the total asset. Although this was confirmed, on appeal by the Department, the Appellate Tribunal on further appeal held that the interest of the assessee in the salt pans could not be regarded as an asset, it being not a valuable to the assessee for a period exceeding six years. This conclusion was reached on a construction of clause (1) of the lease deed which gave an option to the Government to put an end to the lease by giving six months notice ending with the salt manufacturing season every year. That clause stated:

(3.) THE covenant contained in the clause extracted above, while it purports to be a grant of a lease for a term of 25 years, enables either party, by notice, to determine the lease at an earlier time. In other words, the lease, which contains a power or option to determine it in either party, would expire earlier than the stipulated time in accordance with the terms of the option in the lease, provided of course the option is validly exercised. The question that falls for our consideration is, whether a revocable lease of the king before us, could be treated as an asset includible in the total wealth of the assessee.