1989 (12) TMI 128 - AT - Wealth-tax

Tribunal adjusts ship's value for wealth tax, allowing appeal for 1976-77, partially allowing for other years.

MJ Durairaj. Versus Wealth-Tax Officer/Income-Tax Officer And Another.

The Tribunal determined the ship's value for wealth-tax purposes at Rs. 3 lakhs for each year under appeal, except for the assessment year 1976-77 where ... Tax Authorities, Valuation Date Issues Involved:1. Determination of the value of the ship 'S.S. Transhuron' for wealth-tax purposes for the assessment years 1976-77 to 1980-81.Issue-Wise Detailed Analysis:1. Assessment of Ship Value by Wealth-Tax Officer (WTO):The Wealth-Tax Officer (WTO) estimated the value of the ship 'S.S. Transhuron' at Rs. 30,50,000 based on the balance sheet prepared by the assessee as of 31-3-1980. The WTO observed that the assessee had claimed the ship as stock-in-trade and should be valued at cost price. However, the WTO adopted the value of Rs. 30,50,000 as shown by the assessee.2. Assessee's Filing and Valuation:The wealth-tax returns were filed on 22-2-1982, a year after a search at the assessee's premises. The assessee claimed the ship was acquired in 1979, but actual possession was obtained on 16-10-1981. The assessee showed the value of rights in the ship as 'nil' for the years 1976-77 to 1978-79 and Rs. 2,00,860 for the years 1979-80 and 1980-81, based on the Customs Department's valuation.3. Appeal to CIT(A):The assessee appealed to the Commissioner of Income Tax (Appeals) [CIT(A)], arguing for a reduction in the ship's value by Rs. 2,00,860. The CIT(A) considered the findings of the WTO for the year 1981-82, noting the ship was purchased for 10 Dollars (Rs. 110) and not 10,000 Dollars as previously assumed. The CIT(A) balanced various figures provided by the assessee and confirmed the value of Rs. 30,50,000 for each year under appeal.4. Historical Context and Valuations:The ship, grounded in 1974, was sold by the US Government to the assessee for 10 Dollars on 19-7-1976. A survey report in 1978 by M/s. Kamath & D'Abreo concluded that the ship was a total loss and recommended breaking it up. The Administrator of Lakshadweep, acting as the receiver, valued the ship at 'Nil' and released it to the assessee under certain conditions. The Customs Department valued the ship at Rs. 2,75,860, leading to a customs duty of Rs. 1,24,140.5. Proforma Balance-Sheet and Bank Letters:On 31-3-1980, the assessee prepared a proforma balance-sheet showing the ship's value at Rs. 30,50,000. The assessee also wrote letters to various banks, estimating the ship's value at Rs. 2.97 crores to obtain loans, but these figures were not used for credit facilities.6. Assessee's Argument:The assessee argued that the balance-sheet prepared on 31-3-1980 was for projection purposes and not reflective of the actual value. The figures given to banks were for obtaining advances and should not be considered for wealth-tax valuation. The assessee contended that the ship's value should be taken at 'nil' based on the statutory authorities' valuations.7. Departmental Representative's Argument:The Departmental Representative emphasized the assessee's offer of Rs. 31 lakhs to the US Government in April 1975 as evidence of the ship's market value. He argued that the value of Rs. 30,50,000 was fair and reasonable, considering the higher figures provided by the assessee to various entities.8. Tribunal's Conclusion:The Tribunal noted the ship's sale by the US Government for 10 Dollars and the subsequent valuations by statutory authorities. The Tribunal determined that the value of Rs. 2,75,860, as assessed by the Customs Department, was the highest statutory valuation. The Tribunal concluded that the value for wealth-tax purposes should be Rs. 3 lakhs for each year under appeal, considering the customs duty and other dues. For the assessment year 1976-77, no value was taken as the assessee was not the owner on the valuation date.Final Judgment:- The appeal for the assessment year 1976-77 was allowed, deleting the entire value of Rs. 30,50,000.- For the remaining assessment years, the figure of Rs. 3 lakhs was substituted for Rs. 30,50,000, allowing the appeals in part.