F.S. GANDHI (DEAD) BY LRS. vs. COMMISSIONER OF WEALTH TAX, ALLAHABAD

CIVIL APPEAL No. 3752/1982Supreme Court[1990] 2 S.C.R. 88602 May 1990Bench: 2 JudgesAuthor: KULDIP SINGH, S.C. AGRAWAL14 pages
AI SummaryAllowed

What were the facts?

The assessee, F.S. Gandhi, owned properties on leasehold lands. The leases expired in 1958 and 1963, and the lessor, the State Government, issued notices to the assessee to hand over vacant possession. The properties were let out, and the assessee received rental income. For assessment years 1971-72 to 1974-75, the assessee valued the properties at ten times the annual rental income. The Wealth Tax Officer valued them at fifteen times, and the Appellate Assistant Commissioner at twelve and a half times. The Income Tax Appellate Tribunal valued them at ten times but referred certain questions of law to the High Court. The High Court held the tenancy, though month-to-month, was an asset under Section 2(e) and not excluded under sub-clause (v) as it was available for over six years. The Supreme Court granted a certificate of fitness to appeal.

What did the Supreme Court hold?

The Supreme Court held that the properties, in respect of which leases had expired and notices to hand over possession were received, were not assets within the meaning of Section 2(e)(2)(iii) of the Wealth Tax Act, 1957, and their valuation was not liable to be included in the net wealth of the assessee. The Tribunal was not right in holding that the interest of the assessee in respect of the properties was for a period over six years for the purpose of Section 2(e)(2)(iii). The Court reasoned that the word 'is' in Section 2(e)(2)(iii) must be construed as referring to the present and future, not the past ('has been'), as interpreted by the High Court. The Court emphasized that the nature of the interest on the date it vests in the assessee is crucial. The month-to-month tenancy was precarious and could be terminated at any time, thus not constituting an interest available for a period exceeding six years. The appeals were allowed, and the High Court's judgment on these questions was set aside.

What were the issues?

1. Whether the properties, in respect of which leases had expired and notices to hand over possession were issued, were assets within the meaning of Section 2(e)(2)(iii) of the Wealth Tax Act, 1957, and their value was liable to be included in the net wealth of the assessee, and whether the Tribunal was right in holding that the interest of the assessee was for a period over six years for the purpose of Section 2(e)(2)(iii) of the Act. Assessee's Contention: The assessee implicitly argued that the properties, given the expired leases and possession notices, should not be considered assets for wealth tax purposes, and their value should not be included in net wealth. The assessee relied on the valuation of ten times the annual rental income. Revenue's Contention: The Revenue, through the Wealth Tax Officer and Appellate Assistant Commissioner, argued for a higher valuation of the properties, implying they were taxable assets. The High Court's interpretation that the month-to-month tenancy constituted an asset available for over six years supported the Revenue's position that the interest was taxable.

Which sections of the Income-tax Act were involved?

Section 2(e)(2)(iii),Section 106,Section 29(1)

AI-generated summary — verify with the full judgment below

A B c D E F G H F.S. GANDHI (DEAD) BY LRS. V. COMMISSIONER OF WEALTH TAX, ALLAHABAD MAY 2, 1990 [KULDIP SINGH AND S.C. AGRAWAL, JJ.] Wealth Tax Act, 1957: Section 2(e) 2(iii)-Interest in respect of properties-Lease of lands on which properties were standing expired-Tenancy continued on month to month bas'is for unstated period-Whether liable to tax.

Words and Phrases-'Js' and 'has been'-meaning of -i ' - The appellant-assessee owned certain properties on lease-hold lands. The leases in respect of these lands expired in 1958 and 1963 and the lessor-State Government issued notices to the assessee to hand over vacant possession of the leasehold lands. The properties were let out to the tenants and the assessee was receiving rental income from the same.

In the Wealth Tax Returns for the assessment years 1971-72, 1972-73, 1973-74 and 1974-75, the assessee valued the properties at ten times of the annual rental income. In the assessment order the Wealth Tax Officer valued the properties at fifteen times of the annual rental ') income. On appeal, the Appellate Assistant Commissioner of Wealth Tax valued the said properties at twelve and a half times of the a

The order continues below.

Read the full judgment

A free account opens 10 full judgments a month. Re-reading one you have already opened does not count again.

Create a free accountSign in

See plans and prices

The summary, the parties, the sections and the citations above are open to everyone and always will be. Only the text of the order and the PDF are metered.

More judgments on Section 106

All 25 judgments and leading authorities on Section 106 →

Recent GST High Court judgments

Search GST case law →