AHMED G. H. ARIFF & ORS. vs. COMMISSIONER OF WEALTH TAX, CALCUTTA

CIVIL APPEAL No. 2129/1968Supreme Court[1970] 2 S.C.R. 1920 August 1969Bench: 3 JudgesAuthor: J.C. SHAH, V. RAMASWAMI, A.N. GROVER9 pages
AI SummaryDismissed

What were the facts?

The assessee, beneficiaries under a wakf-alal-aulad deed, were assessed to wealth tax for assessment years 1957-58 and 1958-59. The wakf deed, created by Golam Hossain Kasim Ariff, provided for beneficiaries to receive specified shares of the net income from the wakf property. The total value of the wakf's immoveable property was valued at 20 times its annual municipal valuation, and 1/6th of this value was taken as the net wealth of each assessee. Appeals to the Appellate Assistant Commissioner and the Income Tax Appellate Tribunal were dismissed. The Tribunal held that the right to receive a share of the rents and profits was property or an interest in property, falling within the definition of 'assets' under the Wealth Tax Act, and rejected the contention that it was a mere right to an annuity.

What did the Supreme Court hold?

The Supreme Court held that the right of the assessee to receive a specified share of the net income from the wakf estate is an asset assessable to wealth tax. The Court reasoned that 'property' is a term of widest import and includes every possible interest a person can hold or enjoy. The definitions of 'assets' in Section 2(e) and 'net wealth' in Section 2(m) of the Wealth Tax Act are comprehensive, and Section 3, which imposes the wealth tax, necessarily includes every description of property. The Court found no justification for a restricted meaning of 'assets'. Even if the share of income was intended for maintenance, it would still be an asset. Regarding Section 7(1), the phrase 'if sold in the open market' implies a hypothetical sale, not an actual one, and the value is to be ascertained on that basis. The contention that the right was a mere annuity was rejected, as the term 'annuity' should be interpreted in its legal sense as judicially interpreted, not its popular meaning. The appeals were dismissed.

What were the issues?

1. Whether the right of the assessee to receive a specified share of the net income from the wakf estate is an asset assessable to wealth tax under the Wealth Tax Act, 1957, specifically concerning the definition of 'assets' under Section 2(e) and 'net wealth' under Section 2(m), and the charge of tax under Section 3. 2. Whether the phrase 'if sold in the open market' in Section 7(1) of the Wealth Tax Act contemplates an actual sale or a hypothetical valuation. 3. Whether the right to receive a share of the income constitutes a mere right to an annuity, as contemplated by Section 2(e)(iv) of the Wealth Tax Act, precluding its assessment as an asset. Assessee's Contentions: The right to receive a share of the income was a mere right to an annuity, not transferable and personal, lacking the attributes of property, and therefore not assessable to wealth tax. The deed should be construed to preserve its validity, implying the right is for maintenance and not transferable. Revenue's Contentions: The revenue contended that the right to receive a share of the income was an asset within the meaning of the Act and liable to be included in the net wealth of the assessee. They relied on the comprehensive definitions of 'assets' and 'net wealth' and the general charging provision.

Which sections of the Income-tax Act were involved?

Section 2(e),Section 2(m),Section 7(1),Section 3

AI-generated summary — verify with the full judgment below

A B c D E F G H AHMED G. JI. ARIFF & ORS. v. COMMISSIONER OF WEALTH TAX, CALCUTTA August 20, 1969 19 (J. C. SHAH, ACTING C.J., V. RAMASWAMI AND A. N. GROVER, JJ.] Wealth Tax Act (27 of 1957), ss. 2(e), (m) and 7(1)-Right to receive share from wakf-alal-aulad-Whether asset assessable to wealth tax-"lf sold in open market" meaning of. A hanafi Muslim created a wakf-alal-aulad and appointed himself as the sole Mutwalli and provided that after his death his widow and sons would act as Mutawallis jointly.

The wakf was for the benefit of the settler's wife, children and their descendants, and they were each to be paid a specified share of the net monthly income of the property.

The ultimate benefit in the case of complete intestacy of the descendants of the settler was reserved for poor musalmans of sunni community deserv- ing help.

On the question \vhether the right of the assessee who were the beneficiaries under the deed of wakf, to receive a specified share of the net income from the estate, was an asset assessable to weath tax, this Court, HELD : (i) The right in question was assessable to wealth tax. (i) "Property" is a term of widest import and su

The order continues below.

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