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of <h1>Court upholds Revenue's jurisdiction to assess closely held company in liquidation without book verification</h1> <h3>Pilot Pen Co. India Pvt. Ltd. Versus Commissioner of Wealth-Tax.</h3> Pilot Pen Co. India Pvt. Ltd. Versus Commissioner of Wealth-Tax. - [2003] 259 ITR 494, 178 CTR 492, 125 TAXMANN 481 Issues involved:Jurisdiction to assess a company in liquidation for wealth-tax without establishing assets exceeding liabilities in value for assessment years 1984-85 to 1986-87.Analysis:The case involved a company in liquidation with valuable properties, including a building and land. The Assessing Officer assessed the company for wealth-tax after allowing all liabilities claimed in the return, totaling Rs. 59.55 lakhs. The main issue was whether a company in liquidation can be assessed for wealth-tax without proving assets exceed liabilities in value. The Commissioner reduced property valuations and granted relief to the assessee after examining the matter in detail. The Tribunal held that companies in liquidation are not exempt from wealth-tax assessment and upheld the Commissioner's valuation.Legal Interpretation:The Wealth-tax Act defines a company as one registered under the Companies Act, 1956, and mandates wealth-tax on the net wealth of companies not substantially owned by the public. The absence of a winding-up order requirement in the Act implies that a company remains a legal entity until dissolution, even during liquidation proceedings. Assets of a company in liquidation do not vest in the court but remain with the company until sold or distributed. The Act's lack of a provision like the Income-tax Act's section 178 does not affect the taxability of a closely held private company in liquidation.Conclusion:The court ruled in favor of the Revenue, stating that the Assessing Officer had the jurisdiction to assess the net wealth of a closely held private company in liquidation, even without verifying the company's books, as all liabilities were ascertained from the return. The judgment clarified that a company in liquidation can be subject to wealth-tax assessment, and the absence of specific provisions regarding winding-up orders does not impact the taxability of such companies.
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