COMMISSIONER OF WEALTH TAX Vs. P SANKARAN NAIR

JUDGEMENT

(1.) THIS reference under the Wealth-tax Act relates to the assessment years 1959-60 to 1963-64, the corresponding valuation dates being the 31st day of March preceding the respective assessment years. The assessee, who was at the relevant time serving in the army, purchased under a document dated November 2, 1955, 17 acres and 39 cents of lands in Velachery village, Saidapet Taluk, Chingleput District, for a sum of Rs. 33,000. The lands were covered by certain cowles granted in 1861, 1863 and 1864. The then Government wanted to encourage the planting of trees so as to cover the surface of the country with verdure to attract rain and for this purpose, granted the cowles. The lands was to be free of rent for 20 years from the date of grant. The holder of the cowle was at liberty to grow any fruit or forest trees, or plantation for fuel. 20% of the land was to be planted with trees, within the first year of the cowle and another 20 in each succeeding year, so that the whole area would be planted with trees within five years. The cowle was liable to be cancelled unless good and sufficient reasons could be shown for not planting the area. If the cowle-holder thought proper, he could plant trees on a portion only and pay for the remainder the full assessment, but each acre of land planted should contain 40 standards at the least. The cowle-holder was not to be charged any rent for cultivation so long as he used his own water. If he elected to make use of water from Government tanks or channels, he would have to pay the water charges levied usually therefor. When coconut or other trees were planted on registered two crop land by the aid of Government water, the second crop charge was not to be levied unless the planter had used Government water throughout the year. At the end of the 20 year period, if the land was still irrigated with Government water, then the rent then demanded would be that of the neighbouring wet land. The cowle-holder was to replant a tree for every one that was cut. At the relevant time there were 700 palmyrah trees and 150 palm trees on the said lands. The assessee was deriving an amount income of approximately Rs. 1,000 from the land, part of which was cultivated with blackgram, horsegram, etc. There is a well in the middle of the property and the property has been described in the revenue records as "punjai" and it was also so described in the sale deed dated 2nd November, 1955.

(2.) THE assessee submitted wealth-tax returns offering these lands for assessment at the value at which they were purchased in 1955. Before the assessment orders for the relevant year were communicated, the assessee wrote on 6th April, 1965, claiming that these lands were exempt from assessment under Section 2(e) of the Wealth-tax Act. THE Wealth-tax Officer had completed the assessment for each of these years on 26th March, 1965, but the relevant assessment orders were served on the assessee only on 12th April, 1965. In the assessment orders the Wealth-tax Officer referred to the area as a "fast developing industrial area" so that there was a great demand for building sites for factories and house sites. He conducted a spot enquiry to find out the value of adjacent land. He found that the assessee had entered into an agreement with some housebuilding society by June, 1964, or thereabouts to sell the entire plot at Rs. 2,000 per ground. He, therefore, took the value of this property at a progressively increasing valuation per ground. As the question of valuation is not relevant for the disposal of this reference we do not think it necessary to refer to the details of valuation.

(3.) BEFORE proceeding to discuss the contentions and the cases cited before us, we may point out that the Wealth-tax Act has been enacted by Parliament in exercise of the powers conferred by entry 86 of List I of the Seventh Schedule to the Constitution. The said entry is in the following terms: