TaxTMI 
TaxTMI 
2006 (8) TMI 235
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....n the books of account and held in the business of the assessees as on the valuation date is an asset within the meaning of s. 2(ea) of the WT Act. 3. The facts in brief can be stated that both the assessees are cashew exporters and it is not disputed that the status of both the assessees is individual. It was noticed by the AO that in the balance sheet filed by the assessees, huge cash in hand was reflected on the valuation date as under: ---------------------------------------------------- Sl. WTA No. Asst. yr. Cash in hand reflected No. in the balance sheet as on 31st March ---------------------------------------------------- 1. 35/2002 1994-95 57,32,470 2. 36....
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....e cash in hand is a part of the business assets of the assessee, then separate treatment should be given in respect of the individuals and HUFs and companies. As far as the Finance Bill is concerned, the Finance Minister's speech while presenting the Bill in the House is very important. Moreover, subsequently, the CBDT has explained the provisions of the Finance Act, 1992, vide Circular No. 636, dt. 31st Aug., 1992, in which it has categorically been made clear that legislative intent is only to bring to wealth-tax those assets which are non-productive. Even on the reading of the language used in cl. (vi) to s. 2(ea) of the Act, the legislature has not specified the category and only stated that in the case of other persons without referring to specific category of the assessees. If the legislative intent was to exclude the companies alone, then it was not difficult for the legislature to specify the category of the assessee as only three types of assessees are subjected to wealth-tax. It was further argued that as far as companies are concerned, normally, they are engaged in the business or trade, but it may not be the case of individuals and HUFs. The individuals and HUFs may be ....
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....e definition of "asset" for the purpose of WT Act which reads as under: "(ea) 'assets' in relation to the assessment year commencing on the 1st day of April, 1993, or any subsequent assessment year, means- (i) any guest-house and any residential house (including a farm house situated within twenty-five kilometres from the local limits of any municipality (whether known as a municipality, municipal corporation, notified area committee, town area committee, town committee or by any other name) or a cantonment board, but does not include- (1) a house meant exclusively for residential purposes and which is allotted by a company to an employee or an officer or a director who is in whole-time employment, having a gross annual salary of less than two lakh rupees; (2) any house for residential purposes which forms part of stock-in-trade; (ii) motor cars (other than those used by the assessee in the business of running them on hire or as stock-in-trade); (iii) jewellery, bullion and furniture, utensils or any other article made wholly or partly of gold, silver, platinum or any other precious metal or any alloy containing one or more of such precious metals: Provided tha....
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....incurred in relation to the said assets;' shall be substituted". 8. While moving the Finance Bill, 1992, which is popularly known as Budget Speech, the Hon'ble Finance Minister explained the reasons and object for introducing changes to the WT Act, 1957. The relevant part of his speech is as under: "67. The WT Act, 1957, has far too many exemptions making its administration enormously complicated. The valuation of certain assets such as shares also presents problems, since very high market values reflecting speculative activity can lead to a heavy burden on shareholders who are long-term investors. There is also no distinction at present between productive and non-productive assets. The Chelliah Committee has suggested that, in order to encourage the tax-payers to invest in productive assets such as shares, securities, bonds, bank deposits, etc., and also to promote investments through mutual funds, these financial assets should be exempted from wealth-tax. Wealth-tax should be levied on individuals, HUFs and all companies only in respect of non-productive assets such as residential houses including farm houses and urban land, jewellery, bullion, motor cars, planes, boats and....
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....force in the argument of the learned Authorised Representative that after referring to the Hon'ble Finance Minister's speech while moving the Finance Bill, 1992, and subsequent circular by the CBDT explaining the provisions of the said Act, it is clear that the Government was more concerned for stimulating the investment in the productive assets. Now, the meaning of the term "productive asset" should be ascertained from the speech of the Hon'ble Finance Minister as well as the aforesaid circular of the CBDT. It appears from the speech of the Hon'ble Finance Minister that the Chelliah Committee appointed by the Government of India had suggested that in order to encourage the taxpayers to invest in the productive assets such as shares, securities, bonds, bank deposit, etc. and also to promote investment to the mutual funds, those assets should be exempted from wealth-tax. While indirectly defining the non-productive assets, more stress was given on residential houses including farm houses and urban land, jewellery, bullion, motor car, plane, boat and yacht which are not used for commercial purposes. Hence, while interpreting the term "productive asset", we have to interpret it in the....
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.... as CBDT circulars are concerned, the Hon'ble Supreme Court in the case of K.P. Varghese vs. ITO (1981) 24 CTR (SC) 358 : (1981) 131 ITR 597 (SC) has held that "CBDT circulars are clearly in the nature of contemporanea expositio furnishing legitimate aid in constructing the statutory provisions. The rule of construction by reference to contemporanea expositio is well established rule for interpreting a statute by reference to the exposition it has received from the contemporary authorities, though it may not give weight where the language of the statute is plain and unambiguous. This rule has been succinctly and felicitously expressed in Grover on Statutory Construction, 1940 Edition where it is stated on p. 219 that "administrative construction (i.e. contemporaneous construction placed by administrative or executive officers charged with executing a statute) should generally be clearly wrong before it is over-turned and such construction, commonly referred to as practical construction, although non-controlling, is nevertheless entitled to considerable weight, it is highly persuasive." 14. In s. 2(ea), the assets like motor car, jewellery, bullion or furniture which are held by ....
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....ereunder, a company cannot keep the cash without recording the same in the books of account, but there is no statute controlling the individuals and HUFs like Companies Act specifying that every individual and HUF must record the cash in hand in the books of account. Moreover, every individual and HUF is not expected to engage in the commercial activity like business or trade. Moreover, if two interpretations are possible then the interpretation in favour of the assessee should be preferred as held by the Hon'ble Supreme Court in the case of CIT vs. Vegetable Products Ltd. 1973 CTR (SC) 177 : (1973) 88 ITR 192 (SC). 15. We are, therefore, of the opinion that the cash in hand which is reflected in the balance sheet and duly recorded in the books of account is not an asset within the meaning of s. 2(ea) of the Act even in the case of the individual and HUF. In our opinion, the cash in hand duly recorded in the books of account by the assessees who are the individuals and HUFs are the commercial assets and hence productive assets. 16. Another aspect which we can also consider is that wealth-tax is charged on the specific valuation date. Now, bank accounts are not included in the....
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.... the WT Act. It was further argued that these cars are productive assets as the same are the commercial assets of the assessees and hence the same are not included in computing the net wealth. On the other hand, the learned Departmental Representative supported the orders of the AO as well as CWT(A). 19. We have heard the rival submissions of the parties. We have also carefully considered the facts as per material placed before us. As per cl. (ii) to s. 2(ea), the motor cars other than those used by the assessee in the business of running them on hire or stock-in-trade are included in the definition of "asset". It is not the case of the assessees that the assessees are engaged in the business of running the cars on hire or they are held as a stock-in-trade. We do not agree with the argument of the learned Authorised Representative because the legislature has in clear terms excluded motor car considering its holding as a stock-in-trade or nature of business of the assessee. As far as the treatment to be given to motor cars is concerned, there is no ambiguity in the language used by the legislature and the legislature has already considered the nature of motor car as a productive ....