SULOCHANAMMA M Vs. COMMISSIONER OF WEALTH TAX

JUDGEMENT

(1.) : The following four questions have been referred under S. 27 (1) of the WT Act, 1957, at the instance of the assessees by the Tribunal, Hyderabad Bench, for the opinion of this Court :

(2.) IN order to appreciate the scope of the reference, it is necessary to refer to the material facts which gave rise to the aforesaid questions : M. Sulochanamma, A. Jayalakshmamma and A. Sudarsanamma, the assessees, are three sisters who inherited the rights to exploit and win mica from the mines known as the Sitarama Mica Mine, the Siddeswara Mica Mine, the Rajyalakshmi Mica Mine and the Satyanarayana Mica Mine, in respect of which each of them had a one-third share. The Sitarama Mica Mine was granted on lease to the assessees' predecessor-in-title by the Central Government for a period of thirty years w.e.f. 30th Oct., 1939. Parliament enacted the Mines and Minerals (Regulation and Development) Act, 1948 (53 of 1948), which came into force on 8th Sept., 1948, for the purpose of regulating the mines and oil fields and to develop minerals. IN exercise of its rule-making power under S. 5 of that Act, the Mineral Concession Rules, 1949, which came into force on 25th Oct., 1949, for regulating the grant of prospecting licences and mining leases for minerals other than petroleum and natural gas, have been promulgated by the Central Government. Under r. 40 of the Mineral Concession Rules, 1949, the period for which a mining lease may be granted shall be 20 years in the case of minerals other than coal, iron ore and bauxite. The lessee shall have the option of renewal for one or two periods each not exceeding the duration of the original period. The Central Government, by virtue of the powers vested in it under S. 7 of Act 53 of 1948 to make rules for the purpose of modifying or altering the terms and conditions of any mining lease granted prior to the Act so as to bring the terms of such lease in conformity with the Rules made under S. 5 and 6 thereof, framed the Mining Leases (Modification of Terms) Rules, 1956, and published on 15th Sept., 1956. Rule 4 of the aforesaid rules requires the Controller of Mining Leases to pass an order, after issuing show cause notice and affording an opportunity to the lessee, making such modifications and alterations in the terms and conditions of the existing mining leases as may be necessary for the purpose of bringing into conformity with the Mineral Concession Rules, 1949. Sub-r. (4) of r. 6 of the rules prohibited the Controller of Mining Leases from reducing the term of any existing mining lease due to expire within 15 years from 15th Sept., 1956, when the Rules came into force. However, the aforesaid sub-rule, along with sub-rr. (2), (3) and (5) to (9), had been omitted by G.S.R. No. 437, dt. 1st June , 1958. On 26th Aug., 1958, a notice to the assessees to show cause as to why the period of the lease relating to Sitarama Mica Mine should not be curtailed to 20 years, was issued by the Controller of Mining Leases under r. 4 of the Mining Leases (Modification of Terms) Rules, 1956. After considering the representations of the assessees, the Controller of Mining Leases, by his order, dt. 27th June, 1959, reduced the term of the lease from 30 years to 21 years. The lease thus became terminable on 30 Oct., 1960. On 30 June , 1960, the assessees were granted renewal of the lease for a period of 20 years w.e.f. 30th Oct., 1960. For the asst. yrs. 1957-58, 1959-60 and 1960-61, whose relevant valuation date are on 31st March, 1957, 31st March, 1958, 31st March, 1959, and 31st March, 1960, respectively, each of the assessees, in the status of an individual, originally returned a one-third share in the Sitarama Mica Mine and valued the asset at Rs. 1,50,000. However, they sought to reduce the figure to Rs. 50,000 by a letter dt. 9th Feb., 1961, on the ground that the lease of the mine available to them was of a short duration on the respective valuation dates. The claim of the assessees that the unexpired portion of the lease on the relevant valuation dates was less than six years and, hence, no value at all should be adopted for that asset, was rejected by the WTO who valued the one-third share of each assessee in the mine at Rs. 2,47,969, Rs. 2,50,421, Rs. 2,45,435 and Rs. 2,47,354 respectively, for the four assessment years on the basis of taking the unexpired leasehold periods on the relevant valuation dates as 13, 12, 11 and 10 years respectively. The WTO, however, valued the Siddeswara, Rajyalakshmi and Satyanarayana Mica Mines at Rs. 60,000, Rs. 7,500 and Rs. 7,500 respectively for the asst. yrs. 1957-58 and 1958-59 subsequent to which they (mines) were gifted away by the applicants. IN the case of Sudarsanamma, the assessee had gifted away a rice mill at Kota and a property at Madras in favour of her minor sons, in the year of account relevant for the asst. yr. 1959-60. The value of the house property, No. 67, Md. Osman Road, Thyagarayanagar, Madras, purchased by the assessee in the year 1958 in the names of her minor sons, Dayakar Reddy and Rajasekhara Reddy, was added in her net wealth by virtue of the provisions of S. 4(1)(a) of the WT Act. The value of the aforesaid two items, i.e., Rs. 70,000 and Rs. 7,500 respectively was included in the assessments for the asst. yrs. 1959-60 and 1960-61. The appeals to the AAC were not successful. On further appeals to the Tribunal, the plea of the assessees that their leasehold right in respect of the mines to win mica does not constitute an asset within the meaning of S. 2(e) of the WT Act, and, in any event, they are entitled to exemption from wealth-tax under S. 2(e)(v) of the Act in respect of the leasehold interest in the Sitarama Mica Mine as the period of lease on the respective valuation dates was less than six years, was rejected by the Tribunal. The Tribunal also has found that the valuation adopted by the WTO relating to Siddeswara, Rajyalakshmi and Satyanarayana Mica Mines was proper and reasonable. It was also held that the value of the rice mill at Kota and the house property in Madras gifted by Sudarsanamma in relevant previous years 1959-60 and 1960-61 in favour of her minor sons is liable to be included by virtue of the provisions of S. 4(1)(a) of the WT Act in her net wealth. Hence, this reference.

(3.) WE feel it convenient to dispose of question No. 3 which lies in a short compass. The question relates to the reasonableness and propriety of the valuations of the Siddeswara, Rajyalakshmi and Satyanarayana Mines on the respective valuation dates. The finding of the Tribunal relating to the valuation of the aforesaid assets is one of fact supported by ample material on record. Hence, we have no hesitation to answer question No. 3 in the affirmative and against the assessee.