Supreme Court Dismisses Appeals of Beneficiaries of Wakf Estate in Wealth Tax Matter, Upholding Assessment as 'Asset'. Right to Receive Income Share from Wakf-alal-aulad is Property Assessable Under Section 2(e) of Wealth Tax Act, 1957.

Wealth tax assessment on beneficiaries' right to income from wakf estate

Appellants sought exclusion of their right to receive income from wakf from their net wealth; sought to quash the assessment

The Wealth Tax Officer included the capitalised value of the income share as an asset in the net wealth of the assessees under the Wealth Tax Act

Appellate Assistant Commissioner and Income Tax Appellate Tribunal dismissed appeals; High Court on reference held the right to be an asset assessable to wealth tax

Whether the right of the assessee to receive a specified share of the net income from the wakf estate is an 'asset' within section 2(e) of the Wealth Tax Act, 1957. Whether the right is excluded from the definition of 'assets' as a right to an annuity under section 2(e)(iv). Whether the right has any market value for the purpose of inclusion in net wealth under section 7(1), given its alleged non-transferability.

Appellants: The right to receive a share of income under a wakf-alal-aulad is not 'property' in any sense; it is a personal privilege for maintenance and not an asset. Even if considered an asset, it is an annuity not commutable into a lump sum, thus excluded under section 2(e)(iv). The right is non-transferable and therefore cannot be sold in the open market; it has no market value for inclusion in net wealth. Revenue: The definition of 'assets' is wide and includes property of every description; the right to an aliquot share of income from property is a clear interest in property and falls within the definition. The term 'annuity' in the Act must be understood in its legal sense and the present right is not an annuity but a share in income. Valuation under section 7(1) requires a hypothetical sale in an assumed open market, and the market value can be determined actuarially even if the right is non-transferable.

The right to receive a share of the net income from wakf property is 'property of every description' and thus an 'asset' under section 2(e). The term 'annuity' in section 2(e)(iv) bears its legal meaning and does not cover an aliquot share of income. For valuation, section 7(1) mandates a hypothetical open market sale; the officer must assume a market and value accordingly. Non-transferability does not render the asset incapable of valuation.

The right of an assessee to receive a specified share of the net income from an estate in respect of which Wakf-alal-aulad has been created is an asset assessable to Wealth Tax. When the statute uses the words 'if sold in the open market' it does not contemplate actual sale or the actual state of the market, but only enjoins that it should be assumed that there is an open market and the property can be sold in such a market and on that basis the value has to be found out. The word 'annuity' could not be given its popular and dictionary meaning, but should be given the signification which it has assumed as a legal term owing to judicial interpretation.

The Wealth Tax Officer assessed the appellants for assessment years 1957-58 and 1958-59 by including their share in the wakf property as an asset. Appeals to the Appellate Assistant Commissioner of Wealth Tax were dismissed. Further appeals to the Income Tax Appellate Tribunal were also dismissed. On a reference under section 27 of the Wealth Tax Act, the Calcutta High Court answered the common question of law in the affirmative and against the assessees. The present appeals were filed by special leave before the Supreme Court.

• Wealth Tax Act, 1957: Section 2(e), 2(m), 3, 4, 5, 7(1)
• Transfer of Property Act, 1882: Section 6(dd)
• Mussalman Wakf Validating Act, 1913: Section 3