1986 (11) TMI 144 - AT - Wealth-tax

Tribunal Decides on State Payment, Land Value, House Property Valuation

The Tribunal partly allowed the appeals by restoring the WTO's order on the nature of the amount received from the State Government and the valuation of ... A Firm, Debt Owed, High Court, Net Wealth, Wealth Tax Issues Involved:1. Nature of the amount received by the firm from the State Government.2. Valuation of agricultural land owned by the firm.3. Valuation of house property owned by the firm.4. Exemption under section 5(1)(iv) and (iva) of the Wealth-tax Act, 1957.Issue 1: Nature of the Amount Received by the Firm from the State GovernmentThe main issue raised by the department was whether the amount of Rs. 2,79,543 received by the firm of Industrial Housing & Plots Co. from the Government of Maharashtra should be regarded as a loan. The firm received this amount as additional compensation and interest following a decision by the Civil Judge. The AAC held that, pending the High Court's decision, the amount should be considered a loan and thus a deduction should be given for this amount as debt owed in the computation of the net wealth of the firm. The firm had credited the amount to the Government of Maharashtra's account in its books and shown it as a liability.The Tribunal disagreed with the AAC's conclusion, stating that the receipt was not in the nature of a loan. The Tribunal emphasized that a loan implies that the lender retains ownership of the money, which was not the case here. The relationship between the State Government and the firm was not that of a lender and borrower. The Tribunal clarified that until the High Court modified the Civil Judge's award, there was no debt due from the firm to the Government of Maharashtra. Therefore, the Tribunal set aside the AAC's order and restored the WTO's order, concluding that the amount received was not a loan and no deduction was warranted.Issue 2: Valuation of Agricultural Land Owned by the FirmThe next dispute concerned the valuation of 18 acres of agricultural land owned by the firm in village Cunj Kheda, Tehsil Deoli. The firm valued the land at Rs. 55,000, estimating the rate at Rs. 3,500 per acre. However, the WTO valued the land at Rs. 25,000 per acre, resulting in a total valuation of Rs. 4,50,000. The AAC accepted the firm's valuation, but the department appealed this decision.The Tribunal decided that the matter of land valuation should be re-examined. It restored the issue to the file of the WTO, directing that the value should be determined after referring the matter to the departmental valuer.Issue 3: Valuation of House Property Owned by the FirmThe third issue involved the valuation of house property owned by the firm. The WTO had increased the value of the property from Rs. 1,06,898 to Rs. 1,25,025. The AAC directed the WTO to take the value as shown by the assessee. The Tribunal agreed with the AAC, stating that the WTO was not justified in increasing the property's value. Therefore, the Tribunal upheld the AAC's order on this matter.Issue 4: Exemption under Section 5(1)(iv) and (iva) of the Wealth-tax Act, 1957The final issue was whether the exemption under section 5(1)(iv) and (iva) of the Wealth-tax Act, 1957, should be allowed in the individual assessments of the partners or at the stage of the firm's net wealth computation. The department argued that the exemption should be given at the firm's net wealth computation stage, while the AAC allowed the exemption in the individual assessments of the partners.The Tribunal referred to the Special Bench of the Tribunal's decision in L. Gulabchand Jhabakh v. WTO and the Bombay High Court's decision in CWT v. Vasudeva V. Dempo, which held that the exemption should be considered in the hands of the partner, not the firm. The Tribunal also cited the Special Bench's decision in N.R. Karia v. WTO, supporting the view that the exemption should be allowed in the individual assessments of the partners. Consequently, the Tribunal upheld the AAC's decision to allow the exemption in the partners' individual assessments.Conclusion:The appeals were partly allowed. The Tribunal restored the WTO's order regarding the nature of the amount received from the State Government and the valuation of agricultural land. It upheld the AAC's decisions on the valuation of house property and the exemption under section 5(1)(iv) and (iva) of the Wealth-tax Act, 1957.