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PETITIONER: COMMISSIONER OF WEALTH TAX

       Vs.

RESPONDENT: DR. KARAN SINGH AND OTHERS ETC.

DATE OF JUDGMENT04/02/1993

BENCH: SHARMA, L.M. (CJ) BENCH: SHARMA, L.M. (CJ) BHARUCHA S.P. (J) PANDIAN, S.R. (J) MOHAN, S. (J) JEEVAN REDDY, B.P. (J)

CITATION:  1993 SCR  (1) 560        1993 SCC  Supl.  (4) 500  JT 1993 (2)   321        1993 SCALE  (1)270

ACT: Wealth Tax Act, 19.57. S.1(2),  2,  3, 4, 5, 6, 7-Application of  the  Act  (not including  within its Purview agricultural lands/assets)  to State  of  Jammu  and Kashmir-Held the  Act  as  originally, enacted is covered by Entry 86 of List I of Schedule Vii  to the Constitution of India and its extension to the State  of Jammu and Kashmir is constitutional. Wealth  Tax- Held, is a net wealth tax-The tax is  not  upon the  assets as such but is upon individuals, companies  etc. with reference to Capital value of the assets held by  them- The tax is an annual levy on total value of all assets Owned by an assessee after deductions of debts and liabilities. Constitution of India, 1957. Article  246,  Seventh Schedule, List I, Entry  86-Taxes  on capital  value of assets exclusive of agricultural land,  of individuals  and companies-Held the tax contemplated by  the Entry  is a tax upon the net wealth and is a net wealth  tax and  is  a net Wealth-tax  Net wealth of an  assessee  Means "What  all  he owns minus what all he ows"-Wealth  Tax  Act, 1957 as originally enacted is covered by Entry 86. Interpretation of Statutes- Taxing Act-Interpretation of. Court judgrnents-Principles of interpretation-Explained.

HEADNOTE: The  respondents riled writ petitions before the High  Court challenging  the application of the Wealth Tax Act, 1957  to the  State of Jammu and Kashmir on the ground that- the  Act was relatable only and exclusively to Entry 97 of list 1  of Seventh Schedule to the Constitution of India and 569 570 since  the  said entry had no application to  the  State  of Jammu  &  Kashmir, the application of the Act  to  the  said State  was  incompetent  The High  Court  allowed  the  writ petitions the revenue flied the appeals by special leave. The  assessee-respondents contended that the question as  to the  Entry  to  which the Wealth Tax Act  Is  relatable  was concluded  by  the decision of a seven Judge Bench  of  this

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Court* which laid down that the Act is covered by Entry  97. On  merits  it was contended that  the  expression  ’capital value  of the assets’ in Entry 86 did not signify  the  same thing  as net wealth as defined in the Wealth Tax  Act,  and that for calculating the ’capital value of assets’ only  the incumbrainces  charged on the assets could be deducted  from the  market  value  of  the  assets  and  not  the   general liabilities of the Individual owning the assets, which  were to  be taken into account for the purpose of the Wealth  Tax and that, as such, the Act was relatable to Entry 97 and not to Entry 86 of list 1. The revenue contended that the Act, so far as It applied  to nonagricultural assets, was relatable to Entry 86 and not to Entry  97 of list 1 and, since the Act as applied  to  Jammu and  Kashmir  did  not take  in  agricultural  lands/assets, section 1(2) of the Act extending the application of the  Ad to  the  State of Jammu & Kashmir could not be  said  to  be ultra  vires  the powers of Parliament; that this  Court  in Dhillon’s  case*  did  not  finally  determine  which  Entry covered  the  Wealth Tax Act as originally  enacted  as  the issue  did  not  arise for decision in that  case,  and  the controversy  was confined to the validity of section  24  of the Finance Act, 1969, amending the provisions of the Wealth Tax Act, 1957. Allowing the appeals, this Court, HELD- 1.1 The Wealth Tax Act, 1957, was covered by Entry  86 of  list  1 of the Constitution, and Its  extension  to  the State  of  Jammu and Kashmir was  perfectly  constitutional. The High Court was not right in holding otherwise. [593D] Banarasi  Dos v. Wealth Tax Officer, 56 I.T.R.  224;  Sudhir Chandra  Nawan  v.  Wealth Tax Officer, 69  I.T.L.  897  and Assistant   Commissioner  of  Urban  Land  Tar,  Madras   v. Buckingham and carmatic Co. ltd, 75 I.T.R. 603, relied on. 571 Karan  Bahadur Chowakkaram Kaloth Mammad Keyi v. Wealth  Tax Officer,  44 I.T.R. 277; Vysyaraju Badri Narayanavnurthy  v. Commissioner of Income Tax Bihar and Orissa, 56 ITR 298  and Sri Krishna Rao L. Balekai v. Third Wealth Tax Officer, City Circle 1, Bangalore, 48 I.T.R. 472, referred to   as approved. *Union  of India v. H.S. Dhillon [1972] 2 SCR 33,  explained and distinguished. V.Padmanabha   v.  Dy.   Tahsildar,  Chittur,  AIR   1963 (Kerala) 155; M.B. Thakar v. S.P. Pande, A.I.R. 1964  (Bom.) 170  and Income Tax Officer, Alleppey v. M.C. Poonnoose  and others, [1970] 1 SCR 678, cited., 1.2The Wealth Tax Act, 1957 (which was extended to J&K) Is a ’net wealth tax’ Act imposed upon the Individuals,  groups of  individuals like H.U.F. and companies.  The tax  Is  not upon  assets as such but is upon the individuals, groups  of individuals  and  companies with reference to  the  ’capital value of the assets’ held by them. [590GH, 591A] Assistant  Commissioner  of  Urban Land  Tax  v.  Buckingham Camatic  Co.   Ltd., 75 ITR 603 and Sudhir Chandra  Nawn  v. Wealth Tar Officer, 69 I.T.R. 897, relied on. Sir  Byramjee Jeejeebhoy v. Province of Bombay  and  Others, 1940  (Bombay)  65;  Municipal  Corporation,  Ahmedabad   v. Gordhandas,  1954 (Bombay) 188 and New Manek Chowk Mills  v. Municipal Corporation [1967] 2 SCR 679, relied on. Ralle  Ram  v. Province of East Punjab AIR 1949  FC  81  and Municipal Corporation v. Gordhandas AIR 1954 (Bombay) 188 at 194, inapplicable. OECD  Committee on ’Fiscal Affairs, reported in  Indian  Tar Reforms by Kaldor, referred to.

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13  In view of ss. 2(e), 2(m) and 3 to 7 of the  Wealth  Tax Act, Wealth- tax is an annual levy on the total value of all assets  owned by an assessee excluding exempted  properties. Such  value is the price which the property would  fetch  if sold In the market; in other words its capital value.   From the  capital value, certain liabilities and debts are to  be deducted to arrive at the net wealth.  The basis of the  tax is capital value 572 and net wealth assessable is capital value after  deductions of debts and liabilities. [p.589AB] 1.4The  expression  ’capital  value’  of  as-gets  is  not capable  of  any  prescribed definition  but  the  taxes  on capital  are the net worth tax, the real property  tax,  and the  capital  levy under the, Equalisation of  Burdens  law. [P.589BC] "Harvard  Law  School  World Tax  Series:  Taxation  in  the Federal Republic of Germany, referred to. 1.5In construing the language of constitutional enactments conferring  legislative power’ he most liberal  construction should be put upon the words so that the same have effect in their widest amplitude.  The heads of legislation should not be  construed in a narrow and pedantic sense but  should  be given a large and liberal interpretation. [p.588C-F] Navinchandra  Mafatlal  v. The Commissioner of  Income  Tax, Bombay  city,  [1955]  1 SCR 829, 836,  837;  Sri  Ram  Rant Naarain  Medhi v. The State of Bombay, [1959] Suppl.  1  SCR 489 and British Coal Corporation v. The King, (1935)  Appeal cases p.500, referred to. 1.6None  of  the  items in the Legislative  lists  of  the Constitution is to be read in a narrow or restricted  sense. Each general word should be held to extend to all  ancillary or  subsidiary  matters which can fairly and  reasonably  be said to be comprehended in it. [p.577CD] 1.7The tax contemplated by Entry 86 is a tax upon the  net wealth  of  an  individual.  It is a net  wealth  tax.   Net wealth of an individual necessarily means "what all he  owns minus what all he owes"  and this is what the Act  purports to tax.  The language of Entry 86 clearly indicates that the tax is upon the individuals and not directly upon the assets or  upon their value.  It cannot be said that since the  tax is  contemplated to be levied upon the capital value of  the assets  of  an individual, the exclusion of  his  debts  and other  liabilities changes the nature and character  of  the tax. [p.591D-G] 2.1The question whether the Wealth Tax Act, 1957  (without reference  to ’the Finance Act, 1969) falls within Entry  86 did  not arise for consideration in Dhillon’s case* and  the majority  judgment cannot be understood to have  recorded  a concluded  opinion  on the issue, which was  left  open  for future when such occasion arose. [pp.582B, 584G, 586G] 573 *Union  of  India  v.  H.S. Dhillon [1972]  2  SCR  33,  and distinguished. 2.2Every  judgment  most  be  mad  as  applicable  to  the particular facts proved or assumed and the generality of the expressions used most be read as qualified by the particular facts of the case and the issues raised therein. [p.581E] The  State  of  Orissa v. Sudhansu Sekhar  Misra  and  Ors., [1968] 2 SCR 154,- Additional District Magistrate,  Jabalpur v.  Shivakant  Shukla  [1976] 2 SCC 521 (p.  714  pr.  474); Sreenivasa  General  Traders and others v. State  of  Andhra Pradesh  and  Others,  [1983] 4 SCC 353 p. 379  pr.  30  and Rajput  Ruda Maha and Others v. State of Gujarat,  [1980]  2 SCR 353 (354H, 356D-E), referred to.

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Guardian; of Poor v. Guardians of Poors, 1889 (24) QBD  117; Overseers of Manchester v. Guardians of Ormskrik Union, 1890 (24) QBD 678, Rustom Cavasjee Cooper v. Union of India, 1970 (3)  and  Ramesh  Birch and others v.  Union  of  India  and others, 119891 Supp.  1 SCC 430, referred to. Constitution  of India by D.D. Basu, (6th Edition) Vol.   H, referred to. 2.3  The basic rules of interpreting Court judgments are the same as   those  of  construing  other  documents.The   only difference  is  that  the Judges are presumed  to  know  the tenancy  of parties concerned              to interpret  the language in the judgments differently to suit their purposes and, consequently, It is Important that the words am  chosen very  carefully so as not to give room  for  controversy.The principle  Is  that  if  the in  a  judgment  is  plain  and unambiguous  and can be reasonably interpreted In  only  one way it has to be understood in that sense, and any  Involved principle  of  artificial construction has  to  be  avoided. Further,  If  there  be any doubt about  the  decision,  the entire  Judgment  has  to be considered, and a  stray  or  a casual remark cannot be treated as a decision. [p.584DE]

JUDGMENT: CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 129093/85. From  the Judgments and Orders dated 14.11.1984 &  19.8.1983 of   the   Jammu  &  Kashmir  High  Court   in   W.P.   Nos. 695/82,694/82, 207/81 and 206/81. 574 Clvil Appeals Nos. 986-1080 of 1985. D.P. Gupta, Solicitor General V. Gauri Shankar, B.B.  Ahuja, Soli  J. Sorabjee, M.H. Beg, D.D. Thakur,  P.  Parmeshwaran, Ranbir Chandra, S. Rajappa, Ms. A. Subhashini, P. H. Parekh, Fazal, Ms. Madhu Khatri L.K Gupta, Arun Madan, E.C. Aggarwat Ms.  Purnima  Bhatt, Atul Sharma, M.N.  Bhat,  Manoj  Arora, Avant Pauli, Vijay Pandita, R.F. Nariman, J.P. Pathak and M. Veerappa for the appearing parties. The Judgment of the Court was delivered by SHARMA,   CJ.   The  respondents  in  these   appeals   have successfully contended before the High Court that the Wealth Tax  Act, 1957 is not applicable to the State of  Jammu  and Kashmir inasmuch as Section 1(2) of the Act in so far as  it extends  the  Act to Jammu and Kashmir, is ultra  vires  the power  of  Parliament.   The High  Court  hag  upheld  their argument that in view of the special provisions contained in Article 370, the Parliament had no legislative competence to extend the Act to the State of Jammu and Kashmir. 2.   The provisions in Article 370 (omitting the parts which are not relevant here) are in the following terms:-               "Temporary  provisions  with  respect  to  the               State    of    Jammu    and    Kashmir-    (1)               Notwithstanding   anything   in   this    Con-               stitution,-               (b)   the power of Parliament to make laws for               the said State shall be limited to               (i)   those matters in the Union List and  the               Concurrent  List which, in  consultation  with               the  Government of the State, are declared  by               the   President  to  correspond   to   matters               specified  in  the  Instrument  of   Accession               governing  the accession of the State  to  the               Dominion of India as the matters with  respect               to  which  the Dominion Legislature  may  make               laws for that State; and

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             (ii)  such other matters in the said Lists as,               with the               75               concurrence  of the Government of  the  State,               the President               may be order specify.               (d)   such  of  the other provisions  of  this               Constitution  apply in relation to that  State               subject  to such exception  and  modifications               as the President may by order specify." By the Presidential order made under Article 370 (1)  called the  Constitution  (Application to Jammu &  Kashmir)  Order, 1954,  the  provisions  of the Constitution  of  India  were applied  to  the  State  of Jammu  &  Kashmir  with  several exceptions  and modifications.  The  words  "Notwithstanding anything  in Clauses (2) and (3)" occurring in  Clause  (1), and  Clauses (2), (3) and (4) of Article 246  were  omitted. Article  248  and Entry 97 of List I, List I1 and  List  III (concurrent List) of the Seventh Schedule too were  omitted. Thus  the Parliament was vested with the power to make  laws only with respect to the matters enumerated in Entries 1  to 96 of List I. The residuary power was retained by the State. Some  modifications have been made from time to time in  the 1954  order,  but  they are not  relevant  for  the  present purpose   and  need  not  be  noticed.   According  to   the respondents,  the Act is relatable only and  exclusively  to Entry  97  of  List I  and since  the  said  Entry  has  no application  to the State of Jammu and Kashmir,  application of  the Act to their State is incompetent.  The  High  Court has  upheld  this  contention.   If  the  above  premise  is correct,  there is no doubt that these appeals should  fail. The appellant however, submits that the Act, in so far as it applies to non-agricultural assets, is relatable to Entry 86 of List I and not to Entry 97. it is common ground that  the Act  as  applied  to  Jammu and Kashmir  does  not  take  in Agricultural lands/asserts. 3.   The  Parliament has been vested by Article 246  (1)  of the Constitution, with the exclusive power to make laws with respect  to any of the matters enumerated in List I  of  the Seventh  Schedule.   Entry 86 of the Union List  is  in  the following terms:-               "86.   Taxes  on  the  capital  value  of  the               assets,  exclusive  of agricultural  land,  of               individuals   and  companies;  taxes  on   the               capital of companies." The Act as it was initially passed in 1957 did not apply  to agricultural land. It was only by an amendment in 1969  that the agricultural land was also 576 brought within the purview of the Act. 4.   The principal question that arises for consideration in these  appeals  is to, which entry does the Act  (minus  the agricultural  land)  relate  to Entry  86  as  contended  by appellant or to Entry 97 as contended by the respondents? 5.   According  to  the learned counsel  for  the  assessee- respondents the issue is concluded  by  the  decision  of  a seven-Judge Bench of this court in Union of  India  v.  H.S. Dhillon,  [1972] 2 SCR 33.  According to them, the  decision does lay down in unmistakable terms that the Act is  covered by   Entry  97.   Even  on  merits, they  say,  the  Act  is relatable to Entry 97 List I and not to Entry 86 of List  I. The  learned counsel for the appellants, on the other  hand, say  that  Dhillon does not lay down any  such  proposition. According to them, the earlier decisions of the Constitution Benches holding the said Act as relatable to entry 86 are in

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no manner shaken by      Dhillon.  They argued further  that independent  of any decision, the Act is  clearly  relatable only and exclusively to Entry 86 List I. Reliance upon Entry 97  of List I is necessary to sustain the extension  of  the Act  to  agricultural lands.  But inasmuch as  the  Act,  as applied to the State of Jammu and Kashmir has no application to  agricultural lands/assets Entry 97 is irrelevant in  the present case they say- 6.   The  Wealth Tax Act, 1957 as passed imposing a  tax  on the  capital  value of the net wealth  of  every  individual Hindu Undivided Family and company., Section 3 provides  for a  tax  in  respect  of  net  wealth  on  the  corresponding valuation  date.   The  expression  "net  wealth’  has  been defined  by  section  2  (m) as  the  amount  by  which  the aggregate  value computed in accordance with the  provisions of  the  Act of all the assets on the valuation date  is  in excess  of the aggregate value of all the debts owed by  the assessee.   Section  2  (e)  declares  ’assets"  to  include property   of   every  description  movable   or   immovable excepting,  agricultural land inter alia.  By section 24  of the Finance Act, 1969 (Act 14 of 1969) agricultural land was prospectively  included  within the ambit  of  "assets.   It would be instructive to examine the decisions of this  Court dealing with the Act prior to the amendment Act 14 of 1969. 7.   In Banarsi Das v. Wealth Tax Officer, 56 I.T.R. 224 the contention  raised was that under entry 86 of List I of  the Seventh Schedule, the 577 Parliament was competent to levy tax only upon the wealth of individuals  but not on the wealth of groups of  individuals like  H.U.F. It was argued that tax on the wealth  of  Hindu Undivided  Families cannot also be sustained with  reference to  Entry 97, inasmuch as the said Entry refers  to  matters other than those specified in the Entries I to 96 in List I. Since the wealth-tax falls expressly under Entry 86, it  was argued, Entry 97 cannot be resorted to.  Entry 97 reads "any other matter not enumerated in List I1 or List III including any  tax  not  mentioned in either of  those  Lists".   This argument was repelled by a Constitution Bench of this  Court holding that the word ’individuals’ in Entry 86 takes within its  sweep  groups  of  individuals  like  Hindu   Undivided Families  and  that  there  was  no  basis  for  placing   a restricted  meaning upon the word "individuals’ in the  said entry.    The   Court  reiterated   the   well   established proposition that none of the items in the Legislative  Lists of the Constitution is to be read in a narrow or  restricted sense and that each general word should be held to extend to all  ancillary  or subsidiary matters which can  fairly  and reasonably  be  said  to be comprehended in  it.   Both  the parties before the Court proceeded on the basis that the Act is relatable to Entry 86 alone.  This was also the basis  of the decision of the Court. 8.   In Sudhir Chandra Nawn v. Wealth Tax Officer, 69 I.T.R. 897,  the  constitutional validity of Section 7 (1)  of  the Wealth  Tax  Act  was  challenged.   It  was  urged  by  the assessee-petitioners  that Entry 86 of List I is, really,  a tax  upon lands and buildings-which tax can be imposed  only by  the State Legislature under Entry 49 of List II.  (Entry 49  of  List I1 reads as follows: "49.  Taxes on  lands  and buildings").   The argument was that the "capital  value  of the assets" occurring in Entry 86 takes in the value of  the lands  and buildings and, therefore, the Parliament was  not competent  to  levy tax on such assets.  This  argument  was repelled by a Constitution Bench holding that in the case of wealth-tax,  the charge is on the valuation of  the  total.’

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assets (inclusive of lands and buildings) minus the value of debts  and  other  obligations which  the  assessee  has  to discharge   whereas,  in  the case of  tax  on  lands  and buildings,  the  value   capital  or  annual   would  be determined by taking the land or building or both as a  unit and  subjecting  the  value of a percentage to  tax  It  was observed  :  "Merely  because  in  determining  the  taxable quantum  under  taxing statutes made in  exercise  of  power under  Entries  86,  List I and 49, List II,  the  basis  of valuation of assets is adopted, trespass on the field of one legislative power over another 578 may not be assumed".  Shah, J. referred with approval to the decisions  of High Court of Kerala (44 I.T.R.  277),  Orissa (.56 I.T.R. 298) and (48 I.T.R. 472) holding that the  power to  levy tax on lands and buildings under Entry 49  List  II does not trench upon the power conferred upon the Parliament by  Entry  86, List I. Accordingly, the learned  Judge  held that the Wealth Tax Act is not ultra vires the powers of the Parliament.  The entire decision proceeded on the basis that the Wealth Tax Act is referable to Entry 86 of List I. 9.   In Assistant Commissioner of Urban Land Tay, Madras  v. Buckingham  and  Camatic  Co., Ltd, 75  I.T.R.  603  it  was contended that the Madras Urban Land Tax Act, 1966  imposing a  tax  on  urban land at a percentage of  market  value  is outside  Entry  49 of List II and falls within Entry  86  of List I and, therefore, the State Legislature was incompetent to  enact the said law.  The argument was rejected.  It  was pointed  out that by a legislation in exercise of the  power under  Entry 86 of List I, tax is contemplated to be  levied on  the value of the assets (subject to certain  deductions) whereas,  for the purpose of levying tax under Entry  49  of List  II,  the  State Legislature may adopt  the  annual  or capital  value of the lands and buildings as the  basis  for taxation.  It was also held that the adoption of the  annual or capital value of lands and buildings for determining  the tax  liability under Entry 49 of List II will not amount  to trenching  upon the field reserved to the  Parliament  under Entry 86 of List I. Accordingly, the validity of the  Madras Act was upheld. 10.  Now  to  Dhillon.   The main contention  urged  by  the learned  counsel  for  the respondents  calls  for  a  close examination   of  the  judgment  to  determine   the   ratio underlying it.  As stated hereinbefore, by section 24 of the Finance Act, 1969, agricultural land was included within the meaning of the expression ’assets’ as defined in the  Wealth Tax  Act.  The validity of the Amending Act  was  challenged before  the High Court of Punjab and Haryana on  the  ground that  the  Parliament was not competent to  levy  wealth-tax upon  agricultural  land  inasmuch  as  entry  86  expressly excludes agricultural land from its purview.  The High Court upheld this submission by a majority of 4 to 1. The Union of India filed an appeal before this Court, which was heard  by a  Bench of seven Judges.  Three judgments  were  delivered- one  by  S.M. Sikri, CJ., for himself and for S.C.  Roy  and D.G. Palekar, JJ., holding the Amendment  as valid; second a separate but 579 concurring  judgment by G.K Mitter, J., and the  third  (the dissenting opinion) by J.M.,Shelat, J., on behalf of himself and  A.N. Ray and I.D. Dua, JJ.  The reasoning of  Mr.  Soli Sorabjee,  learned  counsel  for  the  respondents  runs  as follows:  Shelat,  J. (minority opinion)  addressed  himself pointedly to the question whether Entry 86 could be held  to cover the enactment in question and the definite  conclusion

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was that it did.  Since agricultural land has been  excluded from the purview of Entry 86 in express terms, he held  that entry  97 cannot be relied upon or resorted to  sustain  the amendment impugned therein.  Accordingly, he concluded  that the  amending  Act  was  ultra  vires  the  powers  of   the Parliament.   Mitter,  J.  on the other  hand,  declared  in unhesitating  terms that Entry 86 did not cover  either  the Act  as originally enacted or as amended by Act 24 of  1969. Sikri,   CJ.,  no  doubt,  adopted  a   different   approach altogether.  According to the learned Chief Justice, it  was not  really  necessary  to  examine  whether  the   impugned amendment  is  relatable to Entry 86 or 97 of  List I;  the correct  approach was to find out whether the  impugned  Act related to any of the entries in List II; and if it did not, no further enquiry was needed to be made and Parliament must be  held to be competent to enact the impugned  legislation. On this reasoning, the impugned Act was held intra vires the Parliament.  In view of this finding it was unnecessary  for the  learned Chief Justice to go into the  question  whether the  impugned  amendment is relatable to Entry 86 or  97  of List I, but even then he thought it appropriate to do so  as otherwise the minority view would have become binding on the principle  affirmed  in  V  Padmanabha  v.  Dy.   Tahsildar, Chittur,  AIR 1963 (Kerala) 155; M.B. Thakar v. S.P.  Panda, A.I.R. 1964 (Bombay) 170 and Income Tax Officer,  Allegheny, v.  M.C. Poonnoose and Others, 119701 1 SCR 678 at  681G  to 682A.  In this view of the matter, the learned Chief Justice expressly  dealt  with  this issue and held  that  even  the principal  Act  is  relatable only to Entry 97  of  List I. Particular  emphasis is laid on the passage at p.73 G to  p. 74 E of the judgment published in the Supreme Court Reports. This  opinion, supported as it is by the opinion of  Mitter, J., concludes the issue- says Mr. Sorabjee. 11.  Mr.  Sorabjee further contended that whatever has  been said  in the judgment of Mitter, J., must be treated  to  be the  majority  view.  In support of  this  proposition,  Mr. Sorabjee  relied upon the observations in Guardians of  Poor v.  Guardians  of Poors, 1889 (24) Q.B.D. 117  at  120,  and Overseers of Manchester v. Guardians of Omukrik Union,  1890 Q.B.D.  678 at 682.  Describing the views expressed by  D.D. Basu on Article 141 in his 580 Commentary on the Constitution of India (6th edition, volume H   at  pages  14  and  15)  as  the  Correct  approach   of interpreting  a  judgment  where  the  judges  holding   the majority give independent judgments, Mr. Sorabjee  contended that when one of the Judges expounds the law on a particular point,  but  others do not openly dissent from  it  must  be taken  that  all  the concurring in  the  majority  decision agreed to that exposition.  He on the following observations from the case of Guardian of Poor v. of Poors, 1889 (24) QBD 117:               "We  know  that  each of  them  considers  the               matter separately, and then they consider  the               matter jointly, interchanging their  judgment,               so  that  every  one  of  them  has  seen  the               judgments  of others.  If they mean to  differ               in  their view, they say so openly  when  they               come to deliver their judgments and if they do               not  do  this, it must be taken that  each  of               them agrees with the judgments of the others." The  learned  counsel  also  recommended  adoption  of   the practice  followed England for considering the judgments  of the House of Lords indicated case of Overseers of Manchester v. Guardians of Ormskrik Union, 1890 24)     QBD 678 in  the

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following terms:               "Where  in  the  House of  Lords  one  of  the               learned  Lords gives an elaborate  explanation               of  the meaning of a statute, and some of  the               other  learned  Lords present  concur  in  the               explanation,  and none express  their  dissent               from  it,  it must be taken that all  of  them               agreed in it." By  way of further elaboration Mr. Sorabjee  contended  that this principle is applicable even to the views of dissenting Judges, unless the majority opinion expressly disagrees with the  same.  He referred to the decision in  Rustom  Cavasjee Cooper  v.  Union  of  India,  [1970]  3  SCR  530,  as   an illustration  of this proposition where the observations  in the judgment of Ray, J. cannot be treated to be the majority view  for  the  reason that at stage  561G  reservation  was expressed  by  Shah,  J. in express  terms.   The  argument, therefore, is that since in judgment of Sikri CJ. we do  not find any dissent or reservation from the views of Mitter, J. on  the  non-apapplicability of Entry 86 of the  Wealth  Tax Act, the said view mum be treated to be that of all the four Judges  forming the majority.  Reliance was also  placed  on paragraph 20 of the Judgment in Rwnesh Birch and Others v. 581 Union of India and others, [1989] Supp.  1 SCC 430. 12.  Dr.  Gouri Shankar, on the other hand,  submitted  that the question as to which entry covered the Wealth Tax Act as originally enacted did not arise for decision in the case at all and that the controversy in Dhillon was confined to  the validity of section 24 of the Finance Act, 1969 in so far as it amended the provisions of the Wealth Tax Act.   According to  hint,  the  judgment  of  Sikri  CJ.,  did  not  finally determine  the issue which Entry covered the main Act.   The observations  relied upon in the judgment of Sikri CJ.,  are mere  passing observations in the nature of  loud  thinking. They  do  not carry the force of precedent.   They  must  be treated  as obiter.  Mr. Solicitor General,  while  adopting the approach of Dr. Gauri Shankar, proceeded further to deal with  the principle relating to precedents.  He referred  to Basu’s commentary (Vol.  H at pages 16 and 17) and relied on Stephen (Commentaries Vol.  I p. 11) stating:-               "The   underlying   principle   of   ajudicial               decision which forms its authoritative element               for the future, is termed ratio decidendi.  It               is  contrasted with an obiter dictum  or  that               part  of  a  judgment which  consists  of  the               expression  of the Judge’s opinion on a  point               of  law  which is not directly raised  by  the               issue between the litigants.’ The  learned  counsel  also  referred  to  the  oft   quoted proposition  that every judgment must be read as  applicable to the particular facts proved or assumed and the generality of  the  expressions used must be read as qualified  by  the particular facts of the case and the issues raised  therein. The  learned Solicitor General also placed reliance  on  the decisions  in The State of Orissa v. Sudhonsu  Sekhar  Misra ’and  Ors, [1968] 2 SCR 154 162E-163B;  Additional  District Magistrate, Jabalpur v. Shivakant Shukla, 119761 2 SCC  521; Sreenivasa  General  Traders and Others v. State  of  Andhra Pradesh  and Others, [1983] 4 SCC 353 and Rajput  Ruda  Maha and others v.  State of Gujarat, [1980] 2 SCR 353. 13.  During  the course of the hearing, the  counsel  placed learned  and  interesting arguments dealing with  the  rules relating  to precedents as mentioned above, and attempt  was made to distinguish the foreign judgments on the ground that

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Article 141 of the Constitution of India in tory terms  lays down that the law declared by the Supreme Court 582 shall  be  binding  on all Courts within  the  territory  of India.   It was also suggested that the expression  ’courts’ within  the meaning of Article 141 does not include  Supreme Court  and  the  Supreme  Court is  not  bound  by  its  own decisions  Punjab Land Development Corpn.  Ltd  v.  Resident Officer  Labour Court and Other, [1990] 3 SCC 682.  We  have also  examined  all the three judgments given  in  Dhillon’s case  placed  by the learned advocates in great  detail  and analysed  at considerable length and since in our  view  the majority  judgment cannot be understood to have  recorded  a concluded  opinion on the applicability of Entry 86  to  the main  Wealth Tax Act, we do not think it necessary  to  deal with  the elaborate arguments on the rules for  interpreting the judgments.  We now proceed to indicate our reasons. 14.  As  mentioned earlier, the challenge in Dhillon’s  case was  limited to section 24 of the Finance Act, 1969  insofar it  amended the relevant provisions of the Wealth  Tax  Act, 1957.   Initially the value of agricultural land was  exempt from the charge of wealth tax.  The exemption was  withdrawn by  this amendment.  This was challenged as ultra  vires  by the  assessee  H.S. Dhillon and the High Court  agreed  with him.   The  judgment was appealed against by  the  Union  of India.   Mr. Setalvad, appearing in support of  the  appeal, contended  that the impugned Act was not a law with  respect to any Entry (including Entry 49) in List II and if this was so   it  must  necessarily  fall  within   the   legislative competence  of parliament.  He reminded the court  that  the Parliament was competent to legislate with respect to  Entry 86  read  with  Entry 97 or Entry 97  by  itself  read  with Article  248  of the Constitution.  The argument  was  being addressed pointedly with reference to the impugned Act i.e., the Finance Act, 1969.  Mr. Setalvad urged "that the  proper way  of testing the validity of a parliamentary  statute  in our Constitution was first to see whether the  parliamentary legislation was with respect to a matter or tax mentioned in List I1;  if it was not, no other  question  would  arise". This approach was taken note of by the judgment of Sikri CJ. in  the  last paragraph of page 45 and second  paragraph  at page 46 of the Supreme Court Reports. the judgment read as a whole  including the passage, which has been relied upon  by Mr.  Sorabjee,  in  our  view  leads  to  the   irresistible conclusion  that Sikri, CJ. accepted the fine  suggested  by Mr. Setalvad and, therefore, it did not remain necessary for the  learned Chief Justice to express a final opinion as  to the  particular Entry covering the Wealth Tax Act.   In  the very next paragraph at page 46 Sikri, CJ. said, 583               "It  seems to us that the best way of  dealing               with  the  question  of the  validity  of  the               impugned  Act and with the contentions of  the               parties  is  to ask ourselves  two  questions;               first,  is the impugned Act  legislation  with               respect to entry 49 List II ? and secondly, if               it  is not, is it beyond the legislative  com-               petence of Parliament?               The  learned  Chief Justice did  not  stop  at               that.  He proceeded to say further,               ’We have put these questions in this order and               in this form because we are definitely of  the               opinion, as explained a little later, that the               scheme  of  our Constitution  and  the  actual               terms  of the relevant articles, namely,  Art.

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             246,  Art. 248 and entry 97 List I, show  that               any matter, including tax, which has not  been               allotted exclusively to the State Legislatures               under List II or concurrently with  Parliament               under List III, falls within List I, including               entry 97 of that list read with Art. 248." 15.  In  his  learned judgment, Sikri, CJ.,  considered  the constitutional  scheme specially with reference to  Articles 246,  248, 250 and 253 and section 104 of the Government  of India  Act, 1935.While considering the Constituent  Assembly Debates  and  other  relevant  documents  dealing  with  the process   which  ultimately  led  to  the  making   of   the Constitution  as  it  was  finally  adopted,  the  following interpretation   of  Dr.  B.R.  Ambedkar  was   specifically referred to :-               "Anything not included in List II or III shall               be deemed to fall in List I". Besides, Constitutions of several foreign countries as  also many decisions were and   the  conclusion  reached  in   the following words at page 72G of     the Reports ;-               "In  our  view  the High Court  was  right  in               holding  that the impugned Act was not  a  law               with respect to entry 49, List II, or did  not               impose a tax mentioned in entry 49, List H. If               that  is  so, then the  legislation  is  valid               either under entry 86, List I, read with entry               97, List I. or entry 917 List I,               584               standing by itself.’ It  was only after arriving at the conclusion  finally  that the  question whether the impugned Act (we will  prefer  *to call it as the Finance Act, 1969) fell within Entry 86, List I,  read with  Entry 97, List I, or Entry 97, List  I  alone, was  adverted to; and while so doing the fact, that  it  was not  necessary  to decide this issue was taken note  of  Mr. Sorabjee is right that the observations in this part of  the judgment  from  p. 73G to p. 74E were made in  view  of  the judgment  of Shelat, J. on Entry 86, and these  observations were  critical  of the minority view on Entry  86,  but  the respondents  before  us  are failing to  appreciate  that  a critical  comment made on a certain statement does  not,  in absence of an expression to that effect, necessarily lead to the  inference that the converse is true.  It may mean  that the  statement  requires further consideration or  that  the grounds given in support of the statement are fallacious  or inadequate or that the matter requires a fuller  examination and until that is done, the assumed correctness of statement cannot  be accepted.  The basic rules of interpreting  Court judgments  are  the  same  as  those  of  construing   other documents.   The  only  difference is that  the  Judges  are presumed  to  know  the tendency  of  parties  concerned  to interpret the language in the judgments differently to  suit their purposes and the consequent importance that the  words have to be chosen very carefully so as not to give room  for controversy.   The  principle is that if the language  in  a judgment  is  plain and unambiguous and  can  be  reasonably interpreted in only one way it has to be understood in  that sense, and any involved principle of artificial construction has to be avoided.  Further, if there be any doubt about the decision,  the entire judgment has to be considered,  and  a stray  sentence  or a casual remark cannot be treated  as  a decision.   Examined in this light, the judgment of  learned Chief Justice indicates that the main question agitating his mind was  if levy of wealth-tax on agricultural land is not within the purview of List II, if it is not warranted by any

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Entry  in List III and if it is also not within the  purview of Entry 86 of List I, then which is the authority competent to levy it?  Evidently, there cannot be a subject matter  or tax,  which no legislature under the Constitution can  levy. Accordingly, he held, the said tax is warranted by Entry  97 of List I read with Article 248.  The question, whether  the Wealth  Tax Act (without reference to the  impugned  Finance Act,  1969) falls within Entry 86 did not for  consideration and  was not answered but left undetermined by  the  learned Chief  Justice,  though Mitter, J.,  did  certainly  express himself  on  it.   A reference to other parts  of  the  very Passage relied upon by Mr. Sorabjee 585 as indicated below, will be helpful. 16.  After pointing out two or three features which, in  the opinion  of Sikri CJ., were inconsistent with the  views  of Shelat J., the judgment stated--               "Therefore,  it seems to us that the whole  of               the impugned Act clearly falls within entry 97               List I.’ At  the cost of repetition we would like to point  out  that the   impugned  Act  was  the  1969  Amendment   Act.    The distinction  between  the  Amendment Act  and  the  original Wealth Tax Act was always present in the mind of the learned Chief justice as is clear from the very next sentence, which reads thus :-               "We may mention that this Court has never held               that  the original Wealth Tax Act  fell  under               entry 86 List I. It was only assumed that  the               original  Wealth Tax Act fell within entry  86               List  I and on that assumption this entry  was               analysed  and  contrasted with entry  49  List               II." Mr. Sorabjee laid great emphasis on the above sentences  and urged that ,an inference should be drawn therefrom about the majority  view holding that Entry 86 was not attracted.   We do  not  agree  with him.  In his judgment  Shelat,  J.  had referred to several decisions in favour of holding Entry  86 applicable  and the last sentence quoted above, was  only  a comment  on  that part of the judgment.  Besides,  there  is further  indication given in the very next sentence,  which, in  our view, reiterates the conclusion already reached  and recorded  at  page  72G (quoted above) and that  is  in  the following words :-               "Be  that  as it may, we are  clearly  of  the               opinion   that   no  part  of   the   impugned               legislation  falls  within entry 86  List  I."               (emphasis added) In  the next paragraph the permissibility of the  parliament combining  its powers under Entry 86 with its  powers  under Entry  97  was considered and answered in  the  affirmative. This was apparently the conclusion made at page 72G  (quoted above) that the legislation should be held to be valid under Entry 86 List I, read with Entry 97 List I. 586 17.  We, therefore, interpret the judgment of Sikri CJ.  (on behalf  of himself and two other learned Judges) as  holding that               (i)   the  proper way of testing the  validity               of   a   parliamentary   statute   under   our               Constitution was first to see whether the      parliamentary               legislation  was with respect to a  matter  or               tax  mentioned in List II; if it was  not,  no               other question win arise;               (ii)  the  impugned  Act was not  a  law  with

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             respect to Entry 49 List II or for that matter               any other entry in that List;               (iii) consequently  the legislation  (that  is               the 1969 Amendment Act) was valid either under               Entry 86 List I read with Entry 97 List I,  or               Entry 97 List I standing by itself;               (iV)  it.  was  not necessary  to  decide  the               question whether the      impugned  Act   fell               within Entry 86 List I read with Entry 97 List I, or Entry 9 7 List I alone;               (v)   there  were  several  fallacies  in  the               reasoning  of  the minority  judgment  holding               Entry  86 applicable, and the assumption  made               therein that this question was settled earlier               by this Court was not correct.               (vi)  be  that  as  it  may,  so  far  as  the               impugned legislation (The 1969 Amendment  Act)               was  concerned, it did not fall  within  Entry               86;               (vii) there is nothing in the Constitution  to               prevent  the  Parliament  from  combining  its               powers  under Entry 86 List I with its  powers               under Entry 97, List I. 18.  We, therefore, hold that the issue, whether the  Wealth Tax  Act,  1957 falls in Entry 86 or not,  was  not  finally decided in the judgment of Sikri, CJ., and was left open for future when such an occasion arose.  While so doing  certain observations  critical to the views of Shelat, J.  were  ex- pressed  but merely on account of this,  Dhillon’s  judgment cannot be treated to be a binding precedent preventing  this Bench from considering the main issue on merits. 587 19.  The  position,  therefore,  is that  the  issue  as  to whether  the  Wealth’ Tax Act, 1957 (without  its  amendment Act,  1969,  as  it  has been  conceded  on  behalf  of  the appellant  to  be  inapplicable to the State  of  Jammu  and Kashmir), extends to the State of Jammu and Kashmir or  not, is, as mentioned earlier, dependent on the question  whether the  Act falls under Entry 86, List I quoted in paragraph  3 above or not.  The residuary power in the case of Jammu  and Kashmir  is  with  the State and cases relied  upon  by  the parties are of no help. 20.  The.  argument of Mr. Sorabjee is that  the  expression "capital  value of assets" in Entry 86 does not signify  the same thing as not wealth as defined in Wealth Tax Act.   For calculating   the  ’capital  value  of  assets’   only   the encumbrances  which  are  charged  on  the  assets,  can  be deducted  from the market value of the assets, and  not  the general  liabilities  of the individual owning  the  assets, which  are  to  be taken into account  for  the  purpose  of wealth-tax.  Adopting the observations of HJ.  Kania, J. (as he then was) in Sir Byramjee v. Province of Bombay, AIR 1940 (Bombay) 65 at 75, it was asserted that under Entry 86, ’the tax  should  be  on  the total capital  assets  and  not  on individual   portions  of  a  person’s  capital".   In   Sir Byramjee’s case the relevant entry was Entry 55 in List I of the  Government of India Act, 1935, similar to  the  present Entry  86.   The  learned counsel pointed  out  that  Bombay decision was approved by the Federal Court in.’ Ralla Ram v. Province of East Punjab, AIR 1949 FC 81.  Reference was also made to the judgment in Municipal Corporation v. Gordhandas, AIR  1954, Bombay 188 at 194.  In support of his stand  that Wealth Tax Act is covered by Entry 86 Dr. Gauri Shanker took us  through the background in which the Wealth Tax  Act  was enacted.   He placed before us the legislative  practice  in

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other countries also as reported by OECD Committee on Fiscal Affairs and the discussion by Kaldor in his book "Indian Tax Reforms".   Dealing  with the deductions which  are  allowed under  the  Wealth Tax Act for liabilities  and  debts,  the learned counsel proceeded to say that is the methodology  of levy  of  this  form of capital  taxation  adopted  interna- tionally.   Paragraph  1.39 of the OECD  Committee’s  Report stated that               "Just  as all assets to which a value  can  be               attached  should in principle be  included  in               the tax base, so in principle all debts should               be  deducted  from the taxpayer’s  assets,  in               order to arrive at his net wealth." 588 In the next paragraph of the Report, the equity of  allowing debts  not  related to the acquisition of assets    is  also discussed    The           counsel summed up by saying  that the substance of the practice adopted in other countries and the economic concept underlying the theory of  equi-marginal sacrifice, which is called the ability to pay, is that there will be no true measure of a person’s net worth unless  from the gross aggregate capital value, deductions are given  for liabilities and debts, and that is the rationale of Entry 86 as also that of the Wealth Tax Act. 21.  We must, therefore, ascertain the correct nature of the tax  under the Wealth-tax Act and the scope of Entry  86  by reference  to the expressions "capital value’ and  "assets". It  is  firmly  established  that  in  co  the  language  of constitutional  enactments conferring legislative power  the most liberal construction should put upon the words so  that the  same  have  effect  in  their  widest  amplitude.   See Navinchandra  Mafatlal  v. The  Commissioner  of  Income-Tax Bombay  City,  [1955] 1 SCR 829, 836, 837.  In Sri  Ram  Ram Narain  Medhi v. The State of Bombay, [1959] Suppl.   I  SCR 489,  this  Court followed the I approach indicated  by  the Privy Council in British Coal Corporation v. The King,  1935 Appeal Cases p. 500, 518 in the following words :-               "Indeed,  in  interpreting  a  constituent  or               organic   statute  such  as  the   Act,   that               construction  most  beneficial to  the  widest               possible  amplitude  of  its  powers  must  be               adopted." and  further declared that the heads of  legislation  should not  be construed in a narrow and pedantic sense but  should be  given  a large and liberal interpretation.  It  is  also settled  that for finding out the true nature and  character of  a taxing Act, the charging section has to  be  construed with the help of the other relevant provisions.  In the case of  the Wealth-tax Act Sections 3 to 7 read with Sections  2 (e)  and  2 (m) have to be examined.  Section  3  levies  an annual  tax  in respect of the net wealth on  the  valuation date  on every individual etc. at the rate specified in  the schedule.  Section 7 mandates that the value for the purpose of charge shall be the value estimated to be the price which in  the opinion of the assessing officer it would  fetch  if sold in the open market on the valuation date.  The  expres- sion "net wealth’ is defined in section 2 (m) as the  amount by which the aggregate value computed in accordance with the prescribed  provisions, is in excess of the aggregate  value of all the debts owned by, the assessee. 589 Thus it appears that the tax is an annual levy on the  total value of all assets owned by an assessee excluding  exempted properties.   Such  value is the price  which  the  property would  fetch  if  sold in the market;  in  other  words  its

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capital value.  From the capital value, certain  liabilities and  debts are to be deducted to arrive at the  net  wealth. The  base  of  the  tax is  capital  value  and  net  wealth assessable  is capital value after deductions of  debts  and liabilities.   The expression ’capital value" of  assets  is not capable of any prescribed definition but as pointed  out in  Harvard  Law School World Tax Series,  Taxation  in  the Federal  Republic  of Germany, quoted by Sikri, CJ.  in  his judgment,               "the taxes on capital which are summarised  in               this  chapter are the net worth tax, the  real               property  tax, and the capital levy under  the               Equalisation of Burdens Law." The  distinction  between  a net-wealth tax  levied  upon  a person and a tax on the property directly is pointed out  in the same work in the following words               "Some of the taxes on capital are deemed to be               imposed  on the person of the  taxpayer  while               others are deemed to be imposed on an  object.               Examples  of the former are the net worth  tax               and the capital levy under the Equalisation of               Burdens  Law, while the real property tax  and               the   trade  tax  on  business   capital   are               classified  in the latter category.  The  main               importance  of this distinction is that  taxes               in the first group pre-suppose a taxpayer with               independent  legal  existence,  that  is,   an               individual   or  a  legal   entity   Guridical               person),  while  in the case of taxes  in  the               second  group,  the taxable object  itself  is               deemed liable for the tax, in addition to  its               owner,   so  that  the  taxpayer  can   be   a               partnership, association of the civil law,  or               other combination of persons without  separate               legal existence.  Taxes of the first type give               consideration  to the tax-payer’s  ability  to               pay,  while those of the second type  consider               merely  the value of the taxable object,  such               as  the capital of a business, in the case  of               the  trade  tax on business  capital,  or  the               assessed  value of real property, in the  case               of the real property tax."               590 If  we may point out with respect, Sikri CJ.  having  quoted the  above  passage  with approval at page 72  of  [1972]  2 S.C.R., says rather inexplicably at page 74.               "It seems to us that the other part of  entry,               i.e.,  ’tax  on the capital of  companies"  in               entry  86 List I also seems to  indicate  that               this  entry  is not  strictly  concerned  with               taxation  of net wealth because capital  of  a               company  is  in one sense a liability  of  the               company  and  not its asset.  Even  if  it  is               regarded as an asset, there is nothing in  the               entry  to  compel Parliament  to  provide  for               deduction of debts.  It would also be  noticed               that   entry  86  List  I  deals   only   with               individuals  and companies but net wealth  tax               can  be levied not only in individuals but  on               other  entities and associations also.  It  is               true that under entry 86 List I aggregation is               necessary  because it is a tax on the  capital               value  of assets of an individual but it  does               not  follow  from  this  that  Parliament   is               obliged  to provide for deduction of debts  in

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             order to determine the capital value of assets               of an individual or a company.’               (emphasis supplied) According  to the learned Chief Justice it is not  incumbent on   Parliament  to  provide  for  deduction  of  debts   in ascertaining  the capital value of the assets.  But,  having said so, the learned Chief Justice does not proceed  further and  say  that  such deduction,  if  provided,  changes  the character  of tax from a tax on capital value  to  something else.  Indeed on principle, such a statement could ’not have been   made  or  supported.   The  learned   Chief   Justice repeatedly  stated  that the Parliament or  the  legislature need  not provide for such deductions, but without  carrying the  thought to its logical conclusion, concluded that  "the whole   of   the  impugned  Act’  (which  as   pointed   out hereinbefore  means the Act 24 of 1969 amending  the  Wealth Tax Act) "clearly falls within entry 97 of List I.’ We  have already   indicated  in  paragraph  16  earlier   that   the expression ’the whole of the impugned Act’, did not refer to the wealth tax as origniahy enacted.  We are, therefore,  of the  opinion that the Wealth Tax Act (as originally  enacted and  extended  to J & K) is a ’net-wealth tax’  Act  imposed upon  the individuals group of individuals like  H.U.F.  and companies.  The Tax is not upon the 591 assets as such but is upon the individual and companies with reference to the ’capital value of the assets’ held by them. As explained in Assistant Commissioner of Urban Land Tar  v. Buckingham Camatic Co. Ltd, 75 ITR 603.               "It is not a tax directly on the capital value               of the assets of individuals and companies  on               the  valuation date....... Me tax under  entry               86  proceeds on the principle  of  aggregation               and is imposed on the totality of the value of               all  the assets.  It is imposed on  the  total               assets   which  the  assessee  owns   and   in               determining  the  net  wealth,  not  only  the               encumbrances specifically charged against  any               item  of assets but the general  liability  of               the assessee to pay his debts and to discharge               his  lawful obligations have to be taken  into               account." This was also the view expressed in Nawn. 22.  The  language of Entry 86 also clearly  indicates  that the  tax is upon the individuals and not directly  upon  the assets  or upon their value.  The wealth-tax  is  determined with reference to the capital value of the assets minus  the debts and other deductions mentioned in the Act.  We  cannot accept the argument that since the tax is contemplated to be levied upon the capital value of the assets of an individual the exclusion of his debts and other liabilities changes the nature  and  character  of the  tax.   Indeed,  the  learned counsel for the respondents could not suggest any  enactment relatable to Entry 86 except the Wealth Tax Act. 23.  It is argued for the respondents that ’capital value of the  assets’ on a true interpretation can only  mean  market value  of the assets minus any encumbrances    charged  upon the assets themselves.  The expression does not take in,  it is submitted, general liabilities of the person owning them. This  argument, in our opinion, ignores the basic nature  of the tax contemplated by Entry 86.  It is a tax upon the  net wealth of an individual.  It is a net-wealth tax Net  wealth of  an individual necessarily means ’what all he owns  minus what  all  he owes’  and this is what the Act  purports  to tax.

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24.  Mr.  Sorabjee relied upon the decisions of  the  Bombay High Court in Sir Byramjee Jeejeebhoy v. Province of  Bombay and others, 1940 Bombay 592 65, and Municipal Corporation Ahmedabad v. Gordhandas,  1954 Bombay 188.  In the first case, the question was whether the Bombay  Finance  Act,  1932  which  levied  tax  upon  urban immovable property was outside the competence of the  Bombay legislature on the ground that the tax levied was one in the nature  of  Income  Tax Act relatable to  Entry  54  of  the Federal List in the VII schedule to the Government of  India Act, 1935.  All the three Judges constituting the full Bench repelled  the  said  argument.   In  the  course  of   their discussion  they  also referred to Entry 55 of  the  Federal List;  but  that  aspect did not arise  in  that  case  and, therefore, any passing observation made with respect to  the content of the said Entry cannot be of any assistance to  us in  this  case.  Similarly, in Gordhandas the  question  was with   respect  to  the  power  of  the   Bombay   Municipal Corporation   to   levy  tax  on  land.    The   petitioners contentions was that the said tax falls outside Entry 42  of List I1 of the VII Schedule to the 1935 Act  (corresponding to Entry 49 of List I1 of our Constitution) and that the tax on  land imposed by the said Act is really in the nature  of tax contemplated by Entry 55 of the Federal List.   Reliance was  placed  upon the decision in AIR 1940 Bombay  65.   The said  argument was dealt with by Gajendragadkar, J.  (as  he then was) in the following words:               "I  have  dealt  with  this  question  on  the               assumption  that  Entry 55 in List  I  confers               jurisdiction  on  the Central  Legislature  to               levy  a tax on the capital value, not only  of               all  the  assets, but of even a  part  of  the               assets.   In AIR 1940 Bom. 65 a Full Bench  of               this Court had to consider the construction of               Entry 54 in List I as against Entry 42 in List I1.  Incident ally an argument was urged before               the Full Bench even as to Entry 55 in List  I.               Chief  Justice  Beaumont  said  that  it   was               unnecessary to consider the argument based  on               Entry 55; but, nevertheless, he observed  that               an  analysis  of  the  language  employed   in               Entries  54 and 55 respectively affords  scope                             for the argument that the assets mentioned  in               Entry 55 must mean the totality of the assets.               According  to  Mr.  Justice  Broomfield,   the               meaning of the expression capital value of the               assets"  in  Entry 55 was by no  means  clear.               He,  however, added that it may be  that  what               was  intended was a tax on the total value  of               the  assets in the nature of a  capital  levy.               Mr.   Justice  Kania,  on  the   other   hand,               expressed  his clear opinion that under  Entry               55 the 593               tax should be on the total capital assets  and               not  on  individual  portions  of  a   persons               capital." It  was  held that the said earlier decision  in  no  manner supported the assessee’s contention. 25.  Lastly,  reference  was made to the  decision  of  this Court  in  New Manek Chowk Mills v.  Municipal  Corporation, [1967]  2 SCR 679.  In that case, it was held by this  Court that Entry 49 in List II of the VII Schedule permits levy of tax on lands and buildings but not on machinery installed on

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land or in the building.  It was held that rule 7 (2) of the Rules  framed under Bombay Provincial Municipal  Corporation Act,  1949  which  provided that  all  plant  and  machinery contained  or  situated  in any building or  land  shall  be deemed to form part of such building or land was held to  be beyond  the  legislative competence of the  State.   We  are unable  to see how the principle of this decision is of  any assistance to the respondents herein. 26.  For  the  reasons  mentioned above, we  hold  that  the wealth-tax, as originally enacted was covered by Entry 86 of List  I of the Constitution, and its extention to the  State of   Jammu  &  Kashmir  was  perfectly  constitutional   and consequently the impugned judgment of the High Court is  not correct.    Accordingly  these  appeals  are  allowed,   the impugned judgment is set aside and the Writ Petitions  filed before  the Jammu & Kashmir High Court are dismissed but  in the circumstances without costs. R.P. Appeals allowed. 594