1984 (12) TMI 154 - AT - Wealth-tax

ITAT Nagpur: Exemption based on new asset eligibility post-conversion. Tribunal rules in favor of assessee.

The ITAT Nagpur allowed the appeal, holding that the exemption under section 5(1A) of the Wealth-tax Act, 1957 should be based on the new asset's ... Assessment Year, House Property, Sale Proceeds, Valuation Date Issues:Interpretation of exemption under section 5(1A) of the Wealth-tax Act, 1957 in the case of a converted asset.Detailed Analysis:The appeal before the Appellate Tribunal ITAT Nagpur concerned the interpretation of the exemption under section 5(1A) of the Wealth-tax Act, 1957 in a case involving a converted asset. The assessee had sold a property and deposited the proceeds in a bank account. The dispute arose regarding the eligibility for exemption under section 5(1A) in relation to the bank deposit. The key question was whether the exemption should be based on the original asset's eligibility prior to conversion or on the new asset's entitlement after conversion. The assessee claimed exemption of Rs. 1,50,000, while the WTO restricted it to Rs. 1 lakh due to ownership period criteria not being met.The AAC, in his decision, considered the period prior to conversion for determining the ownership period and concluded that the exemption should be limited to Rs. 1 lakh, the original asset's exemption limit. The assessee, aggrieved by this decision, appealed to the ITAT Nagpur. The representative argued that all conditions for exemption under section 5(1A) were satisfied, including the ownership period and acquisition of the new asset within 30 days of the original asset's cessation. The representative emphasized that the exemption ceiling under section 5(1A) was Rs. 1,50,000, and the AAC erred in restricting it to Rs. 1 lakh based on a hypothetical scenario.After a thorough examination of the relevant provisions, the ITAT Nagpur held that the exemption of Rs. 1,50,000 was admissible for the bank deposit under section 5(1A). The Tribunal clarified that the exemption applied to the new asset, not the original asset prior to conversion. The Explanation to section 5 supported this interpretation, emphasizing the ownership period and acquisition of the new asset. The Tribunal highlighted that the AAC's restriction to Rs. 1 lakh based on the original asset's exemption limit was incorrect. The ITAT Nagpur directed the WTO to allow the exemption up to Rs. 1,50,000 for the bank deposit.In conclusion, the ITAT Nagpur allowed the appeal filed by the assessee, emphasizing that the exemption under section 5(1A) should be determined based on the new asset's eligibility after conversion, with a cumulative ceiling of Rs. 1,50,000, as per the provisions of the Wealth-tax Act, 1957.