1965 (7) TMI 5 - HC - Wealth-tax

Net Wealth - agricultural Land - forest lands trees in which are of spontaneous growth not constitute agricultural lands within the meaning of s. 2(e)(i) of the WT Act and therefore not liable to exemption

Summary

Issues Involved:
1. Whether the forest lands, trees in which are of spontaneous growth, constitute agricultural lands within the meaning of section 2(e)(i) of the Wealth-tax Act and liable to exemption.
2. Whether the department was right in including in the total wealth of the assessee the sum of Rs. 71,279 being the probable amount of compensation receivable by the assessee from Government under the Madras Estates (Abolition and Conversion into Ryotwari) Act of 1948.
3. Whether the value of the property situate in Yanam was includible in the total wealth of the assessee.

Detailed Analysis:

1. Forest Lands as Agricultural Lands:
The primary issue was whether forest lands, with trees of spontaneous growth, qualify as "agricultural lands" under section 2(e)(i) of the Wealth-tax Act, thus exempting them from wealth tax. The assessee argued that these lands should be considered agricultural because they were capable of agricultural use. However, the court, referencing the Supreme Court's interpretation in Commissioner of Income-tax v. Raja Benoy Kumar Sahas Roy, emphasized that "agriculture" involves basic operations like tilling and sowing, requiring human skill and labor. Since the forest lands in question did not involve such operations, they did not qualify as agricultural lands. The court concluded that land must be ordinarily used for agriculture or purposes subservient to it to be considered agricultural. Thus, the forest lands were not exempt from wealth tax.

2. Inclusion of Compensation Amount:
The next issue was whether the sum of Rs. 71,279, being the probable compensation receivable by the assessee from the government, should be included in her total wealth. The assessee initially included this amount in her return, but later contended that it was unascertained since the final determination was pending. The Tribunal noted that the compensation was a debt due to the assessee, even if indeterminate, and directed a revision of the assessment if the final amount differed. The court upheld this view, stating that the amount, even if considered an actionable claim, constituted assets under section 2(e) of the Act. The court affirmed the inclusion of Rs. 71,279 in the total wealth, noting the assessee's own estimation in her return.

3. Value of Property in Yanam:
The final issue concerned whether the value of the property in Yanam should be included in the assessee's total wealth. The court noted that under section 6 of the Act, exclusion of assets outside India applies only to non-citizens or non-residents of India, which did not apply to the assessee. The court found no legal provision supporting the exclusion of the Yanam property from the assessee's wealth. Rule 4 of the Schedule to the Act, which provides for reduction of wealth tax for assets located outside India, was applied by the Tribunal. Thus, the court affirmed the inclusion of the Yanam property's value in the assessee's total wealth.

Conclusion:
The court answered all three questions against the assessee, affirming the Tribunal's decision. The forest lands were not considered agricultural, the compensation amount was includible in the total wealth, and the property in Yanam was also includible. The assessee was ordered to pay the department's costs, with an advocate's fee of Rs. 400.