judgement:
le 2B clearly provides that where the market value of an asset exceeds its written down value or book value by more than 20 percent, the value of that asset for the purposes of Rule 2A shall be taken to be its market value.
[49 B] In the instant case, the Wealth tax Officer was of the view that the book values of specific house properties as indicated in the returns filed by the appellant No. 2 were far below their market values.
He was therefore justified in making a reference to the Valuation Officers under section 16A and the notices issued by the Valuation Officers were valid.
[49 E] & CIVIL APPELLATE JURISDICTION: Civil Appeal No. 816 of 1978.
From the Judgment and Order dated the 4th October, 1977 of the High Court of Judicature at Allahabad in Writ Petition No. 88 (Tax) of 1975.
38 V.S. Desai, Ravindra Narain, Harish Salve, Miss Rainu Walia and P.K. Ram, for the Appellants.
B.B. Ahuja for the Respondents.
The Judgment of the Court was delivered by TULZAPURKAR, J.
This appeal by certificate is directed against the judgment and order dated 4th October, 1977.
of the Allahabad High Court whereby the High Court upheld the reference made by the Wealth Tax Officer (Respondent No. 1) to the Valuation Officers (Respondents Nos. 2 and 3) for valuing certain buildings belonging to the appellant No. 1 firm as well as the notices issued by the Valuation Officers to appellant No.2 in furtherance of the Reference.
The appellants had by means of a writ petition challenged the reference as well as the notices on certain grounds and had prayed for a mandamus restraining respondents Nos. 2 and 3 from valuing the buildings.
The writ petition having been dismissed, the appellants have come up in appeal to this Court.
Most of the material facts giving rise to this appeal are not in dispute and may briefly be stated as follows: Appellant No. 1 (M/s. Juggi Lal Kamlapat, Bankers) is a partnership firm.
Appellant No. 2 (Padampat Singhania) was one of the partners in the firm in his capacity as a 'Karta ' of a Hindu Undivided Family upto 15 3 1972.
He was being assessed to wealth tax in the status of H.U.F. and the assets so assessed for wealth tax included the interest of the family in appellant No. 1 firm.
For the assessment years 1967 68 to 1972 73 wealth tax returns were submitted by appellant No. 2 in the status of H.U.F. and therein the family 's interest in appellant No. 1 firm was included.
Since appellant No. 1 firm owned a number of buildings in Kanpur in the returns so submitted the book value of those buildings had been adopted by appellant No.2 for valuing the interest of the family in appellant No. 1 firm.
Respondent No. 1 felt that the market value of those buildings was much more than such book value.
He, therefore, referred the question of valuation of those buildings to respondents Nos. 2 and 3 (the concerned Valuation Officers) under s.16A of the Wealth Tax Act 1957 (hereinafter referred to as 'the Act ').
Respondents Nos. 2 and 3 issued notices under section 38A (1) (b) of the Act to appellant No. 2 intimating that they would inspect the buildings for determining the fair market value thereof and requested him to afford necessary facilities for such inspection and to produce certain records connected with those build 39 ings.
On receiving the notices appellant No. 2 realised that respondent No.1 had referred the question of valuation of the concerned buildings to respondents Nos. 2 and 3 under section 16A of the Act and that the notices issued by respondents Nos. 2 and 3 were in furtherance of such reference.
On 9th of September, 1974 appellant No.2 addressed a letter to respondent No. 1 contending that none of the properties referred to the Valuation Officers belonged to him and that the reference to them was unauthorised and the same should be with drawn.
He also addressed letters to respondents Nos. 2 and 3 in which he contended that reference made to them by respondent No.1 was invalid and requested each one of them to return the reference back to the Wealth Tax Officer.
Since these contentions were not accepted by the respondents, the appellants filed a writ petition in the High Court challenging the reference made by respondent No.1 as well as the notices issued by respondents Nos. 2 and 3.
On behalf of the appellants the following contentions were urged in support of the writ petition: (1) For the assessment of appellant No. 2, respondent No. 1 could not refer to respondents nos.
2 and 3 the valuation of building which did not belong to him but belonged to appellant No. 1 firm: (2) the interest of a H.U.F. in a partnership firm was not exigible to wealth tax; (3) the interest of appellant No. 2 in appellant No. 1 firm had to be valued in accordance with Rule 2 of Wealth Tax Rules 1957 and hence section 16A of the Act had no application; (4) the valuation of the concerned buildings forming part of the assets of the business of appellant No. 1 firm had to be determined in accordance with the commercial principles under s.7 (2) (a) and not under s.7 (1) of the Act and (5) the respondents nos.
2 and 3 could not issue the notices to appellant No.2 as he was neither the owner of the buildings nor was in occupation thereof.
In regard to the first contention the High Court took the view that though it was true that a partner of a firm could not claim ownership in specific properties belonging to the partnership firm either during the continuance of the partnership or even on its dissolution but was entitled to get a share in the profits during its continuance and was further entitled, upon its dissolution or his retirement there from, to the value of his share in the surplus of the partnership assets left after a deduction of liabilities and prior charges on the date of dissolution or retirement, it was clear that having regard to section 29 of the Partnership Act (which enables a partner to transfer his interest in the partnership firm) and s.2 (e) and 4 (1) (b) of the Act the interest of a partner in the partnership firm will have to be regarded as a part 40 of his net wealth under the Act.
As regards the second contention which was elaborated to the effect that even if the interest of an individual in a partnership firm could be regarded as an asset within the meaning of s.2(e) of the Act, the interest of a H.U.F. in the partnership firm could not be regarded as such asset and was not, therefore, exigible to wealth tax (for which reliance was placed on the circumstances that under s.4 (1) (b) of the Act provision has been made for determining the value of an individual 's interest in a partnership firm but no corresponding provision obtains in the Act for inclusion of the interest of H.U.F. in a partnership firm for purposes of assessment), the High Court took the view that from the said circumstances relied upon it did not follow that the interest of a H.U.F. in a partnership firm could not be regarded as a part of net wealth of such family or was not liable to wealth tax, especially when the charging provision namely, s.3 of the Act expressly levied wealth tax on the net wealth of every Hindu undivided family and there was no reason why its interest in a partnership firm, which was property, could not be regarded as a part of its assets liable to the charge under the section.
With regard to the third and fourth contentions the High Court held that Rule 2, sec. 7 and sec.
16A (1) (4) (ii) had to be read harmoniously and Rule 2 did not exclude the application of secs.
7 and 16A for valuing an asset of a partner in a partnership firm and that notwithstanding the non obstante clause contained in sec.
7 (2) it was an enabling provision giving a discretion to the Wealth Tax Officer either to value the assets of a business as a whole or valuing each asset thereof separately and in that behalf the Wealth Tax Officer had the power to refer such valuation to the Valuation Officer under sec.
As regards the last contention the High Court negatived the same by observing that appellant No. 2 as a partner could be regarded as an agent of appellant No. 1 firm and the Valuation Officers could issue Notices to him requiring him to afford facilities for inspection of the concerned buildings and to produce books, documents and records relevant for the valuation of those buildings.
In this view of the matter the High Court dismissed the writ petition but its decision is challenged in this appeal.
Counsel for the appellants raised substantially two contentions in support of the appeal.
In the first place counsel has contended that there is no provision for the inclusion of a Karta 's interest in a partnership firm in the H.U.F. 's net wealth for wealth tax purposes under the Act and this would be clear from sec.
4 of the Act.
Elaborating this contention counsel has pointed out that sec.
4 (1) is applicable to the computation of the net wealth of an individual and 41 that the said provision is a deeming provision whereunder certain tassets though held in reality by some others are to be treated as belonging to that individual and included in his net wealth for purposes of his wealth tax assessment and one such deeming provision is to be found in cl.
(b) thereof which provides that where the assessee is a partner in a firm the value of his interest in a firm determined in the prescribed manner shall be included in computing the net wealth of such individual and what is urged is that there is no provision to be found in the Act which provides for the inclusion of Karta 's interest in a firm in the H.U.F. 'section net wealth.
Counsel strenuously urged that but for the deeming provision which is to be found in cl.
(b) even the interest of partner (in his individual capacity) would not have become includible in his net wealth.
In otherwise, according to counsel, there is a lacuna in the Act as regards the inclusion of a Karta 's interest in the partnership firm in his H.U.F. 'section net wealth and, therefore, the Department 's attempt to include the interest of appellant No.2 (as a Karta) in appellant No.
I 's firm in the net wealth of his H.U.F. is not warranted by any of the provisions of the Act.
Secondly, counsel has urged that assuming that appellant No.2 's interest (as a Karta of his H.U.F.) in appellant No. 1 's firm is exigible to the wealth tax under the Act, the valuation of such interest being governed by sec.
7 (2) (a) of the Act read with Rule 2A of the wealth Tax Rules, 1957 it is not open to the Wealth Tax officer to refer the valuation of specific house properties belonging to the firm to the Valuation officers under section 16A of the Act; in fact; according to him, the valuation of the assets of the partnership business of appellant No.1 as a whole having regard to its balance sheets for the concerned years ought to have been undertaken by the Wealth Tax officer and as such the book values of the house properties as appearing in the Balance Sheets ought to have been accepted by him and, therefore, the reference made by the Wealth Tax officer to Valuation officers as well as the notices issued by the latter being incompetent and unjustified in law, are liable to be quashed.
For the reasons which we shall presently indicate neither of the contentions has any substance and both are liable to be rejected.
In order to deal with the first contention mentioned above it will be necessary to set out the material provisions of s.4 of the Act Clauses (a) (b) of sub section
(1) of sec.
4 run as follows: "Net wealth to include certain assets: 4.(1) In computing the net wealth of an individual, there shall be included, as belonging to that individual 42 (a) the value of assets which on the valuation date are held (i) by the spouse of such individual to whom such assets have been transferred by the individual, directly or indirectly, otherwise than for adequate consideration or in connection with an agreement to live apart, or (ii) by a minor child, not being a married daughter, of such individual, to whom such assets have been transferred by the individual, directly or indirectly, otherwise than for adequate consideration, or (iii) by a person or association of persons to whom such assets have been transferred by the individual directly or indirectly otherwise than for adequate consideration for the immediate or deferred benefit of the individual, his or her spouse or minor child (not being a married daughter) or both, or (iv) by a person or association of persons to whom such assets have been transferred by the individual otherwise than under an irrevocable transfer, or (v) by the son 's wife, or the son 's minor child, of such individual, to whom such assets have been transferred by the individual, directly or indirectly, on or after the 1st day of June, 1973, otherwise than for adequate consideration, whether the assets referred to in any of the sub clauses aforesaid are held in the form in which they were transferred or otherwise: Provided that where the transfer of such assets or any part thereof is either chargeable to gift tax under the Gift tax Act, 1958(18 of 1958), or is not chargeable under section 5 of that Act, for any assessment 43 year commencing after the 31st day of March, 1964 but before the 1st day of April, 1972, the value of such assets or part thereof, as the case may be, shall not be included in computing the net wealth of the individual; (b) where the assessee is a partner in a firm or a member of an association of persons not being a co operative housing society, the value of his interest in the firm or association determined in the prescribed manner".
It is true that sec.
4 (1) deals with the computation of the net wealth of an individual and it is also true that same enacts a deeming provision in the sense that certain assets which do not in fact or in reality belong to that individual (the assessee) but to some one else are to be treated as belonging to that individual and are to be included in his net wealth.
But, in our view, a careful reading and analysis of cls.
(a) and (b) thereof will make it clear that there is a great difference between the cases covered by sub cls.
(i) to (v) of cl.
(a) and the case covered by cl.
(a) refers to five situations in all of which the asset is held by some one other than the individual concerned (the assessee) (e.g. held by the spouse or minor child of such individual to whom such asset has been transferred by such individual directly or indirectly otherwise than for adequate consideration, etc.) and it is provided that such asset held by that some one else shall be treated as belonging to the assessee a deeming provision in the real sense of creating a legal fiction, while under cl.
(b) it is provided that where the individual assessee is a partner in a firm it is the value of his interest in the firm determined in the prescribed manner that is to be treated as belonging to him and is includible in his net wealth.
In other words cl.
(b) is not a deeming provision in the sense in which a deeming provision is made in cl.
It cannot be said that the interest of a partner in a firm does not belong to him; it in fact belongs to him and no legal fiction is required for treating it as belonging to him and the proper way to interpret cl.
(b) would be that the deeming part of it relates to the quantum of his interest in the firm determined in the prescribed manner which is to be treated as belonging to him and includible in his net wealth.
It is impossible to accept the contention that but for cl.
(b) of s.4 (1) the interest of a partner (where he happens to be an individual assessee) in a firm would not have been exigible to wealth tax under the Act.
As we shall presently point out a partner 's interest in a firm either in his individual capacity or in his capacity as a Karta of H.U.F is otherwise exigible 44 to wealth tax under the other provisions of the Act and the deeming provision contained in s.4 (1) (b) properly understood must be held to be referable to the quantification of his interest in the firm determined in the prescribed manner that is made includible in his net wealth.
Section 3 of the Act read with the definitions of "net wealth" as given in sec.
2 (m) and "assets" given in sec.
2 (e) clearly brings out the exigibility of a partner 's interest in a firm either in his individual capacity or his capacity as a Karta of a H.U.F. to wealth tax under the Act.
Section 3 which is a charging provision runs thus: "Charge of wealth tax.
Subject to the other provisions contained in this Act, there shall be charged for every assessment year commencing on and from the first day of April, 1957, a tax (hereinafter referred to as wealth tax) in respect of the net wealth on the corresponding valuation date of every individual, Hindu undivided family and company at the rate or rates specified in Schedule I." Section 2 (m) defines "net wealth" thus: "net wealth" means the amount by which the aggregate value computed in accordance with the provisions of this Act of all the assets, wherever, located, belonging to the assessee on the valuation date, including assets required to be included in his net wealth as on that date under this Act, is in excess of the aggregate value of all the debts owed by the assessee on the valuation date other than (here follow three types of debts which are not to be reckoned with which we are not concerned).
" Section 2 (e) defines "assets" thus: "assets" includes property of every description, movable or immovable, but does not include (here follow certain specified properties with which we are not concerned.)" On reading the aforesaid provisions together it will appear clear that wealth tax has been levied on the net wealth of an individual 45 or a H.U.F. meaning thereby the aggregate value of all the assets belonging to such assessee minus all the debts owed by him.
Under the definition of 'assets" property of every description, movable or immovable is included, and since it cannot be disputed and was not disputed before us that a partner 's interest in a firm either in his individual capacity or in his capacity as a Karta of a H.U.F. is property.
the same would be includible in the expression "assets" which will have to be taken into account while computing the net wealth of such individual or H.U.F. and on such net wealth the charge of wealth tax has been imposed under sec.
It is thus clear that there is no lacuna in the Act as regards the making of a Karta 's interest (representing his H.U.F.) in the partnership firm exigible to wealth tax.
The first contention, therefore, must fail.
The second contention of counsel for the appellant has been that even if it be held that appellant No. 2 's interest (as a Karta of his H.U.F.) in the appellant No. 1 's firm is exigible to the tax under the Act the valuation of such interest would be governed by sec. 7 (2) (a) of the Act read with Rule 2A of the Wealth Tax Rules 1957 and since it is a case of valuing such interest in the partnership business of appellant No. 1 firm the Wealth Tax Officer while first valuing the assets of the business should have, having regard to the balance sheets of the said business as on the valuation dates, accepted the book values of the specific house properties as appearing in the balance sheets and could not refer the valuation thereof to the Valuation officers under sec.
16A of the Act which being inapplicable could not be resorted to; in this connection reference was also made by counsel to sub s (2) of sec.
4 whereunder it is provided that in making any rules with reference to the valuation of the interest referred to in cl.
(b) of sub section
(1) (being a partner 's interest in a firm) the Board shall have regard to the law for the time being in force relating to the manner in which accounts are to be settled between partners of a firm on the dissolution of a firm.
The substance of the argument, in brief, has been that sec.
7 (1) which enables the Wealth tax officer to determine the value of any asset, other than cash, at the market price thereof on the valuation date for the purposes of the Act is inapplicable to the instant case and, therefore, sec.
16A is not attracted and hence the valuation reference made by the Wealth tax officer to the Valuation officers regarding specific house properties is liable to be set aside.
As we shall demonstrate presently, the contention proceeds on an entire misconception of the relevant provisions of the Act and the Rules.
We have already indicated above that a partner 's interest in a 46 firm, either in his individual capacity or as a Karta of a H.U.F., is property or asset liable to be included in the net wealth of the concerned assessee and is exigible to wealth tax under the Act.
Once that position is accepted it is clear that such asset will have to be valued for the purposes of the Act and in this behalf Rule 2 (1) of the Wealth tax Rules, 1957 prescribes the manner of valuing such interest, It runs thus: "Valuation of interest in partnership or association of persons.
(1) The value of the interest of a person in a firm of which he is a partner or in an association of persons of which he is a member, shall be determined in the manner provided herein.
The net wealth of the firm or the association on the valuation date shall first be determined.
That portion of the net wealth of the firm or association as is equal to the amount of its capital shall be allocated among the partners or members in the proportion in which capital has been contributed by them.
The residue of the net wealth of the firm or association shall be allocated among the partners or members in accordance with the agreement of partnership or association for the distribution of the assets in the event of dissolution of the firm or association, or, in the absence of such agreement, in the proportion in which the partners or members are entitled to share profits.
The sum total of the amounts to so allocated to a partner or member shall be treated as the value of the interest of that partner or member in the firm or association.
" The aforesaid rule clearly says that in order to determine valuation of a partner 's interest in the firm, first the net wealth of the firm has to be determined, which determination, of course, is governed by sec.
7 of the Act and the rule goes on to provide as to how the net wealth of the firm so determined shall be allocated among the partners of the firm, which allocated amount will be regarded as the value of the interest of each partner in the firm.
Coming to the precise contention raised by counsel, the material provisions of the Act and the Rules having a bearing thereon would be sec.
7 (1), 7 (2) (a), 7 (3) and Rules 2A and 2B and these are as under: "Value of assests, how to be determined.
(1) Subject to any rules made in this behalf the value 47 of any asset, other than cash, for the purposes of this Act, shall be estimated to the price which in the opinion of the Wealth tax Officer it would fetch if sold in the open market on the valuation date.
(Explanation. . . . . . . ) (2) Notwithstanding any thing contained in sub section (1), (a) where the assessee is carrying on a business for which accounts are maintained by him regularly, the Wealth tax officer may, instead of determining separately the value of each asset held by the assessee in such business, determine the net value of the assets of the business as a whole having regard to the balance sheet of such business as on the valuation date and making such adjustments therein as may be prescribed.
(3) Notwithstanding any thing contained in sub section (1), where the valuation of any asset is referred by the Wealth tax officer to the Valuation officer under section 16A, the value of such asset shall be estimated to be the price which, in the opinion of the Valuation Officer, it would fetch if sold in the open market on the valuation date, or, in the case of an asset being a house referred to in sub section (4), the valuation date referred to in that sub section.
" Rules 2A and 2B run thus: "Determination of the net value of assets of business as a whole.
Where the Wealth tax officer determines under clause (a) of sub section (2) of section 7 the net value of the assets of the business as a whole having regard to the balance sheet of such business, he shall make the adjustments specified in rules 2B, 2C, 2D, 2E, 2F and 2G." "Adjustments in the value of an asset disclosed in the balance sheet.
2B. (1) The value of an asset disclosed in the Balance sheet shall be taken to be 48 (a) in the case of an asset on which depreciation is admissible, its written down value; (b) in the case of an asset on which no depreciation is admissible, its book value; (c) in the case of closing stock, its value adopted for the purposes of assessment under the Income tax Act, Act, 1961, for the previous year relevant to the corresponding assessment year.
(2) Not withstanding any thing containing in sub rule (1) where the market value of an asset exceeds its written down value or its book value or the value adopted for purposes of assessment under the Income tax Act, 1961, as the case may be, by more than 20 per cent, the value of that asset shall, for the purposes of rule 2A, be taken to be its market value.
" On a fair reading of the aforesaid provisions it will appear clear that the primary method of determining the value of assets for the purposes of the Act is the one indicated in sec.
7 (1), inasmuch as it provides that the value of any assets, other than cash, for the purposes of this Act shall be estimated to be its market price on the valuation date.
Then comes sub sec.
(2) which provides that in the case of a business for which accounts are maintained by the assessee regularly the Wealth tax officer may instead of determining separately the valuation of each asset held by the assessee in such business, determine the net value of the business as a whole having regard to the balance sheet of such business as on the valuation date and making such adjustments therein as may be prescribed.
It is true that sub sec.
(2) commences with a non obstante clause, but even so, the provision itself is an enabling one conferring discretion on the Wealth tax officer to determine the net value of the assets of the business as a whole having regard to its balance sheets as on the valuation date, instead of proceeding under sub sec.
In other words, it is optional for the Wealth tax officer to resort to either of the methods even in the case where the net value of a business carried on by the assessee is to be determined.
Thirdly, even when he proceeds under sub sec.
(2) he has to determine the net value of the business as a whole having regard to the balance sheet of such business as on the valuation date; the phrase "having regard to the balance sheet of such business" as judicially interpreted means that the Wealth tax officer has to take into consideration or account the balance 49 sheet of such business for such valuation and not that such balance sheet is conclusive or binding or decisive of the values of assets appearing therein.
Fourthly, the said sub section also says that the Wealth tax officer has to "make such adjustments therein as may be prescribed" and in this behalf Rule 2A and 2B already quoted above indicate what adjustments the Wealth tax officer has to make while determining the net value of the business as a whole.
Particularly sub rule (2) of Rule 2B clearly provides that where the market value of an asset exceeds its written down value or book value by more than 20 per cent, the value of that asset for the purposes of Rule 2A shall be taken to be its market value.
In other words, it is clear that even where the Wealth tax officer has resorted to sec.
7 (2) for determining the value of assets of a business as a whole the written down values or book values of specific assets as appearing in the balance sheet are not sacrosanct and when the market value exceeds the written down value or book value by more than 20 per cent, the Wealth tax officer has to adopt the market value of such assets for the purposes of this Act.
This is apart from the position that the resort to sec. 7 (2) itself is discretionary and optional, the provision being an enabling one.
Since in the instant case the Wealth tax officer was of the view that the book values of specific house properties as indicated in the returns filed by appellant No. 2 were far far below their market values, he was justified in making a reference to the Valuation officers under sec.
16A of the Act and the notices issued by the Valuation officers in pursuance of such reference were also valid.
In the result the appeal fails and is dismissed with costs.

summary:
The assessee (Appellant No. 2) who was Karta of a Hindu Undivided Family was a partner of the family firm (Appellant No. 1) and was being assessed to wealth tax as a HUF.
For the purpose of evaluating the interest of the family 's interest in the firm, the assessee adopted the book value of buildings owned by the firm.
On the view that the market value of the buildings was much more than their book value, the Wealth Tax Officer (Respondent No. 1) referred, under section 16A on the Wealth Tax Act, 1957, to the Valuation Officers (Respondent Nos. 2 Valuation Officers issued notices under section 38A(1) (b) for inspection of buildings and records relating to them, and the assessees objections to such procedure were overruled.
The High Court dismissed the assessee 's writ petition holding: (1) having regard to section 29 of the Partnership Act which enables a partner to transfer his interest in the partnership firm and Section 2(e) and Section 4(1) (b) of the Act the interest of a partner in the partnership firm will have to be regarded as a part of his net wealth under the Act.
(2) Section 3 the charging provision expressly levied wealth tax on the net wealth of every Hindu undivided family, and consequently the interest of a H.U.F. in a partnership firm, which is property, could be regarded as a part of its assets liable to be charged under this Section.
(3) Rule 2, section 7 and section 16A (1) (i) (ii) had 36 to be read harmoniously and Rule 2 did not exclude the application of sections 7 and 16A for valuing an asset of a partner in a partnership firm.
(4) Section 7(2) was an enabling provision giving a discretion to the Wealth tax Officer either to value the assets of a business as a whole or valuing each asset thereof separately and in that behalf he had the power to refer such valuation to the Valuation Officer under Section 16A. (5) Appellant No. 2 as a partner could be regarded as an agent of appellant No. 1 firm and the Valuation Officers could issue notices requiring affording of facilities for inspection of buildings and production of books, documents and records.
In the Appeal to this Court it was contended that: (1) there was no provision for inclusion of a 'Karta 's interest in a partnership firm in the H.U.F. 's net wealth for wealth tax purposes under the Act, and (2) even assuming that appellant No.2 's interest (as a Karta of his H.U.F.) in the appellant No.1 's firm is eligible to tax under the Act, the valuation of such interest would be governed by section 7(2) (a) of the Act read with rule 2A of the Wealth Tax Rules 1957 and it was not open to the Wealth Tax Officer to refer the valuation to the valuation Officer under section 16A. Dismissing the Appeal, ^ HELD: 1(i) Section 3 of the Act read with the definitions of "net wealth" as given in Section 2(m) and "assets" given in section 2(e) clearly brings out the exigibility of a partner 's interest in a firm either in his individual capacity or his capacity as Karta of a H.U.F. to wealth tax under the Act.
[44 B C] (ii) There is no lacuna in the Act as regards the making of a Karta 's interest (representing his H.U.F.) in the partnership firm exigible to wealth tax.
[45 C] (iii) Section 4 (1) deals with the computation of the net wealth of an individual.
It enacts a deeming provision.
Certain assets which do not in fact or in reality belong to the individual (the assessee) but some one else are to be treated as belonging to that individual and are to be included in his net wealth.
Analysis of Clauses (a) and (b) of section 4(1) make it clear that there is a great difference between the cases covered by clause (b).
Clause (a) refers to five situations in all of which the asset is held by some one other than the individual concerned (the assessee).
It is provided that such asset held by that some one else shall be treated as belonging to the assessee.
Clause (b) provides that where the individual assessee is a partner in a firm it is the value of his interest in the firm determined in the prescribed manner that is to be treated as belonging to him and is includible in his net wealth.
[43 C F] (iv) It cannot be said that the interest of the partner in a firm does not belong to him.
The proper way to interpret clause (b) would be that the deeming part of it relates to the quantum of his interest in the firm determined in the prescribed manner which is to be treated as belonging to him and includible in his net wealth.
[43 F G] (v) A partner 's interest in a firm, either in his individual capacity or in his capacity as a Karta of a HUF, is property and is otherwise exigible to wealth tax under the other provisions of the Act.
[43 H] 37 2(i) Even where the Wealth tax Officer has resorted to section 7(2) for determining the value of assets of a business as a whole the written down values or book values of specific assets as appearing in the balance sheet are not sacrosanct and when the market value exceeds the written down value or book value by more than 20 per cent, the Wealth tax Officer has to adopt the market value of such assets for the purposes of the Act.
[49 C D] (ii) In order to determine the valuation of a partner 's interest in the firm, first the net wealth of the firm has to be determined under section 7 of the Act and Rule 2 provides that the net wealth of the firm so determined shall be allocated among the partners of the firm, which allocated amount will be the value of the interest of each partner in the firm.
[46 F G] (iii) The primary method of determining the value of the assets for the purposes of the Act is the on indicated in section 7(1), which provides that value of any assets, other than cash, shall be estimated to be its market price on the valuation date.
Sub section (2) provides that in the case of a business for which accounts are maintained by the assessee regularly the Wealth tax Officer may instead of determining separately the valuation of each asset held by the assessee in such business, determine the net value of the business as a whole having regard to the balance sheet of such business as on the valuation date and making such adjustment to therein as may be prescribed.
[48 D F] (iv) It is optional for the Wealth tax Officer to resort to either of the methods even in the case where the net value of a business carried on by the assessee is to be determined.
Even when he proceeds under sub section (2) he has to determine the net value of the business as a whole having regard to the balance sheet of such business as on the valuation date.
[48 G H] (v) The phrase "having regard to the balance sheet of such business" as judicially interpreted means that the Wealth tax Officer has to take into consideration or account the balance sheet of such business for such valuation and not that such balance sheet is conclusive or binding or decisive of the values of assets appearing therein.
[48 H;


judgement:
Civil Appeal No. 544 of 1981.
From the Judgment and Order dated 23rd December, 1980 of the Madras High Court at Madras in Election Petition No. 1 of 1980.
Dr. Y.S. Chitale, P.N. Ramalngam and A.T.M. Sampath for the Appellant.
M.C. Bhandare, K. Rajendra Chowdhary and K.S. Chowdhary for the Respondents.
A.V. Rangam for the Respondent No. 7.
975 The Judgment of the Court was delivered by CHINNAPPA REDDY, J.
3, 26, 112 adult men and women voters of Rasipuram Parliamentary Constituency reserved for the Scheduled Castes accepted the candidature of the first Respondent, B. Devarajan for the reserved seat, apparently considered him as a member of the Scheduled Castes, voted for him and elected him to the Lok Sabha, by a convincing majority of nearly sixty thousand votes at the election held in January 1980.
And, it was not the first time.
He was in fact a sitting member of the Lok Sabha having been elected from the same reserved constituency at the previous general election also, But the verdict of the people was not sufficient for the appellant, section Anbalagan, who secured 1,76,240 votes in the January 1980 poll and lost the election.
He wanted the verdict of an Election Tribunal on the question whether the respondent was a Charistian and not a member of the Scheduled Castes, as claimed by him.
So he filed an election petition questioning the election on that ground.
The Election Tribunal on an eleborate consideration of the evidence held that the appellant belonged to the Scheduled Castes and, on that finding, upheld the election.
Anbalagan has preferred this appeal.
Dr. Chitale, learned counsel for the appellant, canvassed the finding of the Election Tribunal that the respondent was a Hindu Adi Dravida and, therefore, a member of the Scheduled Castes.
He argued that the parents and the sisters of the respondent were shown to be Christians and the respondent though obviously a Christian himself was pretending to be, a member of the Scheduled Castes for the purpose of gaining some advantages.
He invited our attention to the Baptismal certificate and certain other documents and urged that the Respondent was born a Christian and there was no way he could acquire a caste and become an Adi Dravida on conversion to Hinduism.
In order to properly appreciate the questions involved, it is necessary first to understand the legal position in regard to caste status on conversion or reconversion to Hinduism.
In Administrator General of Madras vs Anandachari & Others(1), a learned single Judge of the Madras High Court held that the conversion of a Hindu Brahmin to Christianity rendered him, according to Hindu Law, an out caste and degraded.
It was also observed that the degradation might be atoned for and the convert readmitted to his status as a Brahmin, if he at any time during his 976 life renounced Christianity and performed the rites of expiation enjoined by his caste.
In Muthusami Mudaliar & Anr.
vs Masilamani & Others(1) Shankaran Nair, J. explained at length the process of formation of castes and also pointed out how simple the matter of reconversion to Hinduism was when a Hindu changed his religion and later reverted back to Hinduism.
In Gurusami Nadar vs Irulappa Konar(2), Varadachariar, J. explained the observations made in certain cases by Ananta Krishna Iyer, J. about the necessity of expiatory ceremonies for reconversion to Hinduism and pointed out that in those cases, the alleged reconversion was into the Brahmin community of Hindus and it was possible to suggest that certain vedic rites would have been adopted in such cases.
Expiatory ceremonies, it was further pointed out, would be necessary if such was the practice of the community and not otherwise.
One had, therefore, only to look to the sense of the community and no more.
In Ramayya vs Mrs. Josephine Elizabeth(3) Venkatasubba Rao, OCJ and Venkataramana Rao, J. approved the observations of Varadachariar, J. and thought it unnecessary to pursue the matter further.
Mookett and Krishnaswami Ayyangar, JJ.
in Goona Durgaprasad Rao vs Sudarsanaswami(4) observed that a convert from the Baliji caste to Christianity, on reconversion went back into the fold of the Baliji community and where there was no evidence about the necessity for expiatory ceremonies, it was hardly right for the court to erect a barrier which the autonomy of the caste did not require, simply because, in some other community expiatory ceremonies were thought necessary.
In Rajagopal vs Armugam and others(5), the appellant was elected from a constituency reserved for members of the Schedule Castes and the election was questioned on the ground that he was not a Hindu but a Christian and that he was not qualified be elected from a constituency reserved for the Scheduled Castes.
The 977 court found that the appellant had become a Christian in 1949 and that from about 1967 onwards he certainly started professing the Hindu religion.
The court however, held that the appellant had lost his Adi Dravida Hindu caste on embracing Christianity and, on the evidence before the court, it was not possible to hold that he had regained his caste on reconversion to Cinduism.
The general question whether membership of a caste could be acquired by conversion or reconversion to Hinduism was not decided in the case, Rajagopal, who succeeded at the election held in 1967, but whose election was set aside on the ground that he was a Christian and not a member of the Scheduled Castes and Armugam who lost the election in 1967, but successfully challenged the election of Rajagopal by way of an election petition (vide Rajagopal vs Armugam(1) referred to in the previous paragraph) were again contestants at the election held in 1972 from the same constituency reserved for members of the Scheduled Castes, Rajgopal was again Successful in the election.
His election was once more impeached by Arumugam.
But this time Rajgopal farred better.
His election was upheld first by the High Court and then by the Supreme Court: ; The Supreme Court held that the Question whether Rajagopal embraced Christianity in 1949 and whether he was reconeverted to Hinduism was concluded by the earlier dectsion of the court.
The view of the High Court ie the immediate case before them that on reconversion to Hinduism, he could revert to his original caste if he was accepted as such by the other members of the caste was accepted as correct On the evidence, it was found that after reconversion to Hinduism he was recognised and accepted as a member of the Adi Dravida Hindu caste by the other members of the community.
The court consisting of Chandrachud, J. (as he then was), Bhagwati and Sarkaria, JJ.
noticed that it was not an infrequent phenomenon in South India for a person to continue to be regarded as belonging to his original caste even after conversion to Christianity The decisions of the High Court of Andhra Pradesh in Kothapalli Narasayya vs Jammana Jogi and K. Narasimha Reddy vs
G. Bhupatti were noticed.
It was then observed: "It cannot, therefore, be laid down as an absolute 978 rule uniformly applicable in all cases that whenever a member of a caste is converted from Hinduism to Christianity, he loses his membership of the caste.
It is true that ordinarily that on conversion to Christianity, he would cease to be a member of the caste, but that is not an invariable rule.
It would depend on the structure of the caste and its rules and regulations.
There are castes, particularly in South India, where the consequence does not follow on conversion since such castes comprise from Hindus and Christians".
The learned Judges than proceeded to consider the question whether Rajagopal could once again become a member of Adi Dravida caste even if it was assume that he had ceased to be such on conversion to Christianity.
After referring to the Madras cases already noticed by us earlier, it was held: "These cases show that the consistent view taken in this country from the time Administrator General of Madras vs Anandachari was decided, that is, since 1886, has been that on reconversion to Hinduism, a person can once again become a member of the caste in which he has born and to which he belonged before conversion to another religion, if the members of the caste accept him as a member.
There is no reason either on principle or on authority which should compel us to disregard this view which has prevailed for almost a century and lay down a different rule on the subject.
If a person who has embraced another religion can be reconverted to Hinduism, there is no rational principle why he should not be able to come back to his caste, if the other members of the csste are prepared to readmit him as a member.
It stands to reason that he should be able to come back to the fold to which he once belonged provided of course the community is willing to take him within the fold . " ". .
A Mahar or a Koli or a Mala would not be recognised as anything but a Mahar or a Koli or a Mala after reconversion to Hinduism and he would suffer from the same social and economic disabilities from which he suffered before he was converted to another religion.
It is, therefore, obvious that the object and purpose of the Constitution (Scheduled Castes) 979 order, 1950 would be advanced rather than retarded by taking the view that on reconversion to Hinduism a person can once again become a member of the Scheduled Caste to which he belonged prior to his conversion.
We accordingly agree with the view taken by the High Court that on reconversion to Hinduism, the 1st respondent could once again revert to his original Adi Dravida caste if he was accepted as such by the other members of the cast." In Perumal Nader vs Ponnuswami,(1) the question arose whether Annapazham, daughter of an Indian Christian and herself a Christian by birth.
could be converted to Hinduism without the performance of any expiatory ceremonies ? The court held that formal ceremony of purification or expiation was unnecessary.
It was observed: "A person may be a Hindu by birth or by conversion.
A mere theoretical allegiance to the Hindu faith by a persion born in another faith does not convert him into a Hindu, nor is a bare declaration that he is a Hindu sufficient to convert him to Hinduism, But a bona fide intention to be converted to the Hindu faith, accompanied by conduct unequivocally expressing that intention may be sufficient evidence of conversion.
No formal ceremony of purification or expiation is necessary to effectuate conversion.
" All the cases so far considered are from South India.
To conclude the discussion, we may also refer to Vermani vs Vermani(2) and Ghatturbhuj Vithaldas Jasani vs Moreshwer Parashram & others(3) both of which are cases from elsewhere.
In Virmani vs Virmani, a Full Bench of the Lahore High Court following the decision of the Madras High Court in ILR 1940 MADRAS 653 held that it was not necessary for a Hindu convert to Christianity to undergo any expiatory ceremonies before he could revert to his original religion.
His conduct and the circumstance that 980 he was received by his community were sufficient to establish his reversion to Hinduism.
In Chatturbhnj 's case, a question arose whether a member of the Mahar caste which was one of the Scheduled Castes continued to be a member of the Mahar caste despite his conversion to the tenets Mahanubhava Panth, a sect, the founder of which repudiated the caste system and a multiplicity of Gods.
Bose, J. after noticing the complexities brought in the train of conversion, observed: "Looked at from the secular point of view, there are three factors which have to be considered: (1) the reactions of the old body, (2) the intentions of the individual himself and (3) the rules of the new order.
If the old order is tolerant of the new faith and sees no reason to outcaste or ex communicate the convert and the individual himself desires and intends to retain his old social and political ties, the conversion is only nominal for all practical purposes and when we have to consider the legsl and political rights of the old body the views of the new faith hardly matter.
The new body is free to ostracise and outcaste the convert from its fold if he does not adhere to its tenets, but it can hardly claim the right to interfere in matters which concern the political rights of the old body when neither the old body nor the convert is seeking either legal or political favours from the new as opposed to purely spiritual advantage.
On the other hand, if the convert has shown by his conduct and dealings that his break from the old order is so complete and final that he no longer regards himself as a member of the old body and there is no reconversion and readmittance to the old fold, it would be wrong to hold that he can nevertheless claim temporal privileges and political advantages which are special to the old order.
" Bose, J. found that whatever the views of the founder of the Mahanubhava sect night have been about caste, it was evident that there had been no rigid adherance to them among his followers in later years.
They had either changed their view or they had not been able to keep a tight enough control over converts who choose to retain their old caste customs.
On a consideration of the evidence it was 981 found that the convert from the Mahar caste retained his caste even after conversion.
These precedents, particularly those from South India, clearly establish that no particular ceremony is prescribed for conversion to Hinduism of a person who had earlier embraced another religion.
Unless the practice of the caste makes it necessary, expiatory rites need be performed and, ordinarily, he regains his caste unless the community does not accept him.
In fact, it may not be accurate to say that he regains his caste; it may be more accurate to say that he never lost his caste in the first instance when he embraced another religion.
The practice of caste however irrational it may appear to our reason and however repugnant it may appear to our moral and social science, is so deep rooted in the Indian people that its mark does not seem to disappear only conversion to a different religion.
If it disappears, only to reappear on reconversion.
The mark of caste does not seem to really disappear even after some generations after conversion.
In Andhra Pradesh and in Tamil Nadu, there are several thousands of Christian families whose forefathers became Christians and who, though they profess the Christian religion, nonetheless observe the practice of Caste.
There are Christian Reddies, Christian Kammas, Ceristian Nadars, Christian Adi Andhras, Christian Adi Dravidas and so on.
The practice of their caste is so rigorous that there are intermarriages with Hindus of the same caste but not with Christians of another caste.
Now, if such a Christian becomes a Hindu, surely he will revert to his original caste, if he had lost it at all.
In fact this process goes on continuously in India and generation by generation lost sheep appear to return to the casts fold and are once again assimilated in that fold.
This appears to be particularly so in the case of members of the Scheduled Castes, who embrace other religions in their quest for liberation, but return to their old religion on finding that their disabilities have clung to them with great tenacity.
We do not think that any different principle will apply to the case of conversion to Hinduism of a person whose fore fathers had abandoned Hinduism and embraced another religion from the principle applicable to the case of reconversion to Hinduism of a person who himself had abandoned Hinduism and embraced another religion.
Now, what are the facts of the present case ? The birth extract of the first respondent, Devarajan shows that his parents as Hindu Adi Dravidas.
Through out his educational career, he was treated as a Hindu student belonging to the Scheduled Castes and was 982 awarded scholarships on that basis.
The school records relating to his children also show them as Hindu Adi Dravidas.
On one occasion in the admission register of a school, he was wrongly shown as Adi Dravida Christian, but it was corrected as Adi Dravida as far back as in 1948.
He never attended a church.
On the other hand, there is acceptable evidence to show that he was offering worship to Hindu deities in Hindu temples and that his marriage was performed according to Hindu custom and rites.
Our attention was however, drawn to the finding of the Tribunal that the sisters of the first respondent professed Christianity as revealed by their service registers.
Our attention was further invited to certain evidence indicating that the parents of the first respondent had become Christians and that the first respondent himself had been baptised when he was seven months old.
Even assuming that the parents and sisters of the first respondent had become Christians and that the first respondent himself had been baptised when he was seven months old, we see no difficulty in holding, on the evidence in the case, that the first respondent had long since reverted to Hinduism and to the Adi Dravida caste.
There is not a scrap of acceptable evidence to show that he ever professed Christianity after he came of age.
On the other hand, every bit of evidence in the case shows that from his childhood, he was always practising Hindism and was treated by everyone concerned as an Adi Dravidh.
There is then the outstanding circumstance that the voters of the Rasipuram Parliamentary Constituency reserved for the Scheduled Castes accepted his candidature for the reserved seat and elected him to the Lok Sabha twice.
We have no doubt whatsoever that at all relevant times, he was a Hindu Adi Dravida and professed no religion other than Hinduism.
The case was rightly decided by the Election Tribunal and the appeal is accordingly dismissed with costs.
H.S.K. Appeal dismissed.

dataset_name: IN-Abs

summary:
The first respondent was elected to the Lok Sabha from a constituency which was reserved for the Scheduled Castes, The appellant challenged the election of the first respondent on the ground that he was not a member of the Scheduled Castes.
The election Tribunal found that the first respondent belonged to the Scheduled Caste and upheld the election.
Hence this appeal.
The appellant urged that the parents and the sisters of the respondent were shown to be Christians and the respondent was born a Christian and there was no way he could acquire a caste and become an Adi Dravida on conversion to Hinduism.
Dismissing the appeal.
^ HELD: At all relevant time, the first respondent was a Hindu Adi Dravida and professed no religion other than Hinduism.
The precedents particularly those from South India, clearly establish that no particular ceremony is prescribed for reconversion to Hinduism of a person who had earlier embraced another religion.
Unless the practice of the Caste makes it necessary no expiatory rites need be performed and, ordinarily, he regains this caste unless the community does not accept him.
In fact, it may not be accurate to say that he regains his caste, it may be more accurate to say that he never lost his caste in the first instance when he embraced another religion.
The practice of caste however irrational it may appear to our reason and however repugnant it may appear to our moral and social sense, is so deeprooted in the Indian people that its mark does not seem to disappear on conversion to a different religion.
If it disappears, it disappears only to re 974 appear on reconversion.
The mark of caste does not seem to really disappear even after some generations after conversion.
[981A C] Administrator General of Madras vs Anandachari & Ors.
ILR 9 MADRAS 466, Muthusami Mudalia & Anr.
vs Masilamani & Ors.
ILR 33 MADRAS 342, Gurusami Nadar vs Irulappa Konar, , Ramayya vs Mrs. Josephine Elizabeth, AIR 1937 MAD 172, Goona Durgaprasad Rao vs Sudarsanaswami, ILR , Rajgopal vs Armugon & Ors.
[1969] I SCR 254, Rajgopal vs Armugam [1969] I SCR 254, Perumal Nadar v; Ponnuswami [1971] I SCR 49, Vermani vs Vermani AIR 1943 LAHORE 51 and Chatturbhuj Vithaldas Jasani vs Moreshwer Parashram & Ors.[1954] SCR 817, referred to.
In the instant case the birth extract of the first respondent shows his parents as Hindu Adi Dravidas.
Through out his educational career, he was treated as a Hindu student belonging to the Scheduled Castes and was awarded scholarships on that basis.
The school records relating to his children also show them as Hindu Adi Dravidas.
He never attended a church.
On the other hand there is acceptable evidence to show that he was offering worship to Hindu deities in Hindu temples and that his marriage was performed according to Hindu custom and rites.
Even assuming that the parents and sisters of the first respondent had become Christians and that the first respondent himself had been baptised when he was seven months old, there is no difficulty in holding, on the evidence in the case, that the first respondent had long since reverted to Hinduism and to the Adi Dravida Caste.
There is not a scrap of acceptable evidence to show that he ever professed Christianity after he came of age, On the other hand, every bit of evidence in the case shows that from his childhood, he was always practising Hinduism and was treated by everyone concerned as an Adi Dravida.
There is then the outstanding circumstance that the voters of the Constituency reserved for the Scheduled Castes accepted his candidature for the reserved seat and elected him to the Lok Sabha twice.
[891H; 892A E]