THAKUR GOPAL SINGH Vs. COMMISSIONER OF WEALTH TAX

JUDGEMENT

(1.) THESE are two references, one under the Wealth-tax Act and the other under the Gift-tax Act. The assessee in both the cases is the same and the basic question involved in both the references is common. We, therefore, propose to decide them by one common judgment.

(2.) THE facts leading to the wealth-tax reference are as follows: Thakur Gopalsingh was a jagirdar in the erstwhile State of Udaipur. His jagir was resumed in 1954 under the provisions of the Rajasthan Land Reforms and Resumption of Jagirs Act, 1952. Compensation in respect of the jagir was awarded to the jagirdar. THE Wealth-tax Act, 1957 (Act No. XXVII of 1957), came into force on the first day of April, 1957. THE matter relates to the wealth-tax assessment years 1957-58 and 1958-59. THE valuation dates for each year are September 30, 1956, and September 30, 1957, respectively. THE compensation awarded in lieu of the jagir was not declared in the return of net wealth by the assessee and it was contended by him that the jagir was the ancestral property and it pertained to the Hindu undivided family consisting of himself, his wife and minor sons. Accordingly, it was urged that it was not taxable as individual in his hands. It was also asserted that the compensation was not ascertained on the valuation dates and it became quantified only in 1961. Thus, there being no ascertained wealth, it could not be included in the assessee's net wealth. THEse contentions did not find favour with the Wealth-tax Officer. He held that, in view of the fact that the rule of primogeniture was applicable, the jagir was the absolute property of the assessee and the compensation awarded to him in lieu of jagir will be treated as his assets and will be liable to wealth-tax. As regards the second contention, he was of the opinion that the compensation was ascertainable in view of the provisions of the Rajasthan Land Reforms and Resumption of Jagirs Act, 1952, though it was payable in instalments. It cannot, therefore, be said that the property had no value on the valuation dates. THE assessment for the year 1957-58 was thus made by the Wealth-tax Officer on 28th February, 1962. THE assessment for the year 1958-59 was made on similar lines by the Wealth-tax Officer by his order dated 31st August, 1962. THE Appellate Assistant Commissioner of Wealth-tax, Udaipur Range, Udaipur, disposed of both the appeals of the assessee by his separate orders on February 13, 1963. THE same contentions amongst others were raised before him. Reliance was placed by the assessee on a Privy Council case, Commissioner of Income-tax v. Dewan Bahadur Dewan Krishna Kishore, 1941 9 ITR 695 PC and it was argued that the impartible estate is owned by the joint family and the income from the estate was assessable in the hands of the Hindu undivided family. On this authority it was also urged that the position under the Income-tax Act prior to the Privy Council case is the same as existed under the Wealth-tax Act in the relevant years. After the Privy Council case was decided, Section 9(4) was added in the Income-tax Act which provided that for the purpose of Section 9 the holder of an impartible estate shall be deemed to be the individual owner of all the property comprised in the estate. Learned Appellate Assistant Commissioner did not agree with the argument raised by the assessee and he held that the jagir obtained by the assessee was not by inheritance and it was given to him by His Highness after the death of the assessee's father. He was of the opinion that the jagir in the hands of the assessee was a fresh jagir and he was thus the full and absolute owner of the jagir. He also held that the compensation that has been awarded to the assessee was also his absolute property and the assessee being the sole owner is liable to tax under the provisions of the Wealth-tax Act. He also found no merit in the second contention that the compensation could not be included for the purpose of taxation as it was not quantified on the date of valuation. THE assessee went in appeal before the Appellate Tribunal. THE Appellate Tribunal agreed with the view taken by the department. In its opinion, the assessee succeeded to the jagir in his own right by the rule of primogeniture and, in his hands, he had the absolute domain over it. THE bonds received by him as compensation on the resumption of the jagir were, therefore, the absolute property of the assessee. THE Tribunal also held that though the compensation amount became ascertained in a subsequent year, yet there was some value in regard to the jagir which was resumed. According to it, the market value on the date of the valuation has to be taken note of while computing the net wealth of the assessee. It, therefore, remanded the case to the Wealth-tax Officer to ascertain the worth of the compensation amount on the date of the valuation. THE appeals were decided by separate orders on November 19, 1963. THE assessee submitted separate applications with regard to both the assessments and requested the Appellate Tribunal to refer the questions of law arising out of its order to this court. Both the applications were consolidated and the following question was referred to this court:

(3.) SIR Dinshah Mulla for the Board in the case of Shiba Prasad Singh v. Rani Prayag Kumari Debi, AIR 1932 PC 216, 222, 138 IC 861, 867 (PC) stated the law in this regard as follows :