The interpretation of Sections 5(1)(viii), 5(1)(xv), and 7(1) of the Wealth Tax Act, 1957, in relation to the computation of net assets for wealth tax purposes.

R.L.Narasimham, J.

1. This is a reference under Sub-section (1) of Sec.27 of the Wealth Tax Act, 1957 (hereinafter referred to as the Act), by the Income-tax Appellate Tribunal, Patna, stating the following questions of law for the opinion of this Court:

"1. Whether, in computing the market value of the shares, the assessee is entitled to the deduction of a sum of Rs. 2,30, 546 by way of brokerage commission?

"2. Whether, on a true construction of Sections 5 (1) (viii) and 5(1) (xv) of the Wealth-Tax Act, the assessee is entitled to the exclusion of the value of jewellery amounting to Rs. 27, 27, 330 from the computation of his total wealth?

"3. Whether any part of the amount of Rs. 36, 87, 419 fixed as compensation payable to the assessee under the Bihar Land Reforms Act is liable for inclusion in the total wealth of the assessee?"

2. The assessee was the late Maharajadhiraj of Darbhanga. While computing his net assets for the purpose of the Wealth Tax Act, a dispute arose in respect of (1) the deduction from the market value of the shares held by the assessee of the brokerage commission (question No. 1), (2) complete exclusion from the assets of those ornaments and jewellery of the Darbhanga Raj which were intended for the personal or household use of the Maharajadhiraj (question No. 2), and (3) the exclusion from the total assets of any part of the amount of compensation which was not actually paid to him by the State (question No. 3).

3. Question No. 3 -- Mr. Lalnarayan Sinha for the assessee, quite fairly, stated that, in view of a Bench decision of this Court in Maharai Kumar Kamal Singh V/s. Commissioner of Wealth-Tax. Bihar, AIR 1966 Pat 282, this question must be answered against the assessee. In that decision, It was held that, as soon as the estate of an ex-proprietor vests in the Government under the provisions of the Bihar Land Reforms Act, that proprietor is entitled to receive compensation, though the date of payment of the compensation and the manner in which it will be paid have been left to the discretion of the State Government. Hence, merely because the sum of Rs. 36, 87. 419 payable to the assessee for the vesting of his estate with the State Government has not yet been paid and there is likely to be much delay in paying the same, that sum cannot be deducted from his assets for the purpose of the Wealth-Tax Act. The Bench decision is binding on us, and this is not a fit case to refer the question to a larger Bench. Hence, Mr. Lalnarayan Sinha, while reserving the right to challenge the correctness of the decision before a superior Court if and when the occasion may arise, conceded that this question should be answered against the assessee.

4. Question No. 1 -- The assessee was holding shares and stocks in various limited companies. While correctly quoting the value of these shares and stocks as given in the Stock Exchange quotation and the quotation furnished by well-known share brokers, the assessee claimed deduction of a sum of Rs. 2, 30, 546 by way of brokerage commission. This was, however, disallowed by the Department on the ground that Sub-section (1) of Section 7 did not permit of any deduction of brokerage commission. That sub-section may now be quoted:

"7. (1) Subject to any rules made in this behalf, the value of any asset, other than cash, for the purposes of this Act, shall be estimated to be the price which in the opinion of the Wealth-Tax Officer it would fetch if sold in the open market on the valuation date."

The question for consideration is the correct interpretation of the words "price it would fetch if sold in the open market". Do they mean the quoted price or else the net price receivable by the seller? Mr. Sinha produced before us the Investors India Year Book 1945-47 compiled by Place, Siddons and Gough in which it is stated that, in accordance with the rules and regulations of the Calcutta Stock Exchange Association Limited, the buyer of shares "pays brokerage, this being in