VADREVU VENKAPPA RAO Vs. COMMISSIONER OF WEALTH TAX

JUDGEMENT

(1.) The Income-tax Appellate Tribunal has referred the case on the following two questions for our decision, namely :

(2.) The assessee is a Hindu undivided family and the assessment in question is in respect of the year 1960-61 for which the relevant valuation date is June 30, 1959. The assessee returned a net wealth of Rs. 5,04,200 which included Rs. 11,624.87 being the interest which accrued to the assessee on the loans made to its constituents in connection with money-lending business. The Wealth-tax Officer, however, determined the net wealth at Rs. 6,00,801, and amongst other additions, he made an addition of Rs. 80,000 as representing the amount of compensation payable to the assessee under section 54A of the Madras Estates (Abolition and Conversion into Ryotwari) Act, XXVI of 1948, hereinafter called the Abolition Act. It may be stated that some of the estates of the assessees were taken over by the Government under the Abolition Act and a sum of Rs. 1,60,000 was provisionally fixed as the total compensation payable to the assessee under section 54A(1) of the Abolition Act. Out of this amount Rs. 80,000 was paid to the assessee. The amount in question roughly represented one half of the final compensation which was ultimately payable to the assessee under section 39 of the Abolition Act. The final compensation has not so far been determined. The Wealth-tax Officer took the sum of Rs. 80,000 which represented the compensation to which assessee was entitled, as constituting its wealth and added the same in it s assessment. The Wealth-tax Officer had also assessed in the hands of the assessee the accrued interest on the monies which remained outstanding on the date of valuation, as per its return.

(3.) Before the Appellate Assistant Commissioner before whom the matter was taken up in appeal, it was contended that compensation amount which was stated to be due to the assessee from the Government was not liable to wealth-tax and that since it was not an ascertained amount it could not be said that the same could constitute a part of wealth of the assessee. The Appellate Assistant Commissioner rejected both the contentions of the assessee and held that since on the valuation date the assessee had a legally enforceable right in respect of the sum of Rs. 80,000, it fell for inclusion in the net wealth of the assessee. With regard to the other contention of the assessee, he was of the view that for wealth-tax purposes, the interest had to be added to the principal amount advanced on accrual basis.