2002 (6) TMI 22 - HC - Wealth-tax

Compulsory deposit exempt from wealth tax under amended law

The High Court held that the compulsory deposit under the Compulsory Deposit (Income-tax Payers) Scheme, 1974, is exempt from wealth-tax as per the ... 'Whether, the amount paid as compulsory deposit under the Compulsory Deposit (Income-tax Payers) Scheme, 1974, is to be treated as exempt from wealth-tax?' - Since a specific exemption was granted by virtue of the amendment made in the Wealth-tax Act, the amount standing to the credit of the assessee as compulsory deposits would not be liable to wealth-tax. It appears that the Tribunal's attention has not been drawn to this provision when the Tribunal has decided the matter following the decision of the Delhi Bench in the case of WTO v. S. D. Nargolwala. In any case, the view taken by the Tribunal does not call for any interference by this court for the reasons stated hereinabove. - We, therefore, answer the question referred to us Issues:Whether the amount paid as compulsory deposit under the Compulsory Deposit (Income-tax Payers) Scheme, 1974, is to be treated as exempt from wealth-taxRs.Analysis:The case involved the assessment years 1982-83 and 1983-84, where the Wealth-tax Officer rejected the assessee's claim to exclude the compulsory deposit under the Compulsory Deposit (Income-tax Payers) Scheme, 1974, from assessable wealth. The Appellate Assistant Commissioner upheld this decision, but the Tribunal ruled in favor of the assessee, directing the deposit to be treated as exempt from wealth-tax. The Tribunal referred the question of law to the High Court for consideration.During the proceedings, the Revenue relied on a Calcutta High Court judgment stating that the compulsory deposit should be considered in computing the net wealth. However, the Finance (No. 2) Act, 1980, introduced section 7A in the Compulsory Deposit Scheme (Income-tax Payers) Act, 1974, deeming the compulsory deposit as a deposit with a banking company for exemption under the Wealth-tax Act. This legislative intent indicated that the deposits should be treated as assets and granted exemption under the Wealth-tax Act.The High Court noted that the Tribunal had not considered the specific exemption granted by the amendment to the Wealth-tax Act, which rendered the compulsory deposits not liable to wealth-tax. The Court found no reason to interfere with the Tribunal's decision, ultimately ruling in favor of the assessee and against the Revenue. The question was answered in the affirmative, and the reference was disposed of with no order as to costs.