Wealth Tax Reference No. 52 of 1990, R.A. No. 140/Nag/1988 (Arising Out of WTA No. 154/Nag/86), R.A. No. 141/Nag/1988 (Arising Out of WTA No. 155/Nag/86), R.A. No. 142/Nag/1988 (Arising Out of WTA No. 177/Nag/86), R.A. No. 143/Nag/1988 (Arising Out of WTA No. 152/Nag/86), R.A. No. 144/Nag/1988 (Arising Out of WTA No. 165/Nag/86), R.A. No. 145/.... Case: Ramkrishna Bajaj and Ors. Vs The Commissioner of Wealth Tax (Vidarbha), Nagpur. High Court of Bombay (India)
| Case Number | Wealth Tax Reference No. 52 of 1990, R.A. No. 140/Nag/1988 (Arising Out of WTA No. 154/Nag/86), R.A. No. 141/Nag/1988 (Arising Out of WTA No. 155/Nag/86), R.A. No. 142/Nag/1988 (Arising Out of WTA No. 177/Nag/86), R.A. No. 143/Nag/1988 (Arising Out of WTA No. 152/Nag/86), R.A. No. 144/Nag/1988 (Arising Out of WTA No. 165/Nag/86), R.A. No. 145/... |
| Counsel | For Appellant: C.J. Thakkar, Advocate and For Respondents: S.N. Bhatthad, Advocate |
| Judges | B. P. Dharmadhikari and V. M. Deshpande, JJ. |
| Issue | Income Tax Act, 1961 - Sections 3, 3(1)(d)(i), 3(1)(f), 45, 48; Wealth-tax Act, 1957 - Sections 2, 2(e), 2(q), 4, 4(1)(b), 4(b), 5, 7, 7(1), 7(2) |
| Judgement Date | January 29, 2016 |
| Court | High Court of Bombay (India) |
Judgment:
B. P. Dharmadhikari, J.
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This reference under the Wealth-tax Act, 1957 is arising out of total eight reference applications moved by different assessees after adjudication of their grievances by the Income Tax Appellate Tribunal, Nagpur Bench (hereinafter referred to as 'the ITAT' for short) in eight wealth tax appeals. The assessment year with which we are concerned is 1981-82. The questions referred are identical in all matters and, therefore, only one/common reference has been made, which governs the eight wealth tax matters.
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The questions referred to by the ITAT vide its order dated 18th June, 1990, are as under:
"(i) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in upholding the value of the interest of the partners in the firms on the basis of the value of the shares as quoted in the market as on 31/03/1981 notwithstanding the fact that the firms' previous year ended on 30/06/1981?
(ii) Whether on the facts and in the circumstances of the case, where the assessees' valuation date did not coincide with the valuation date of the firms in which they were partners, the Tribunal was justified in upholding the revaluation of the assets of the firms as on the valuation date of the assessees?
(iii) Whether the Tribunal was right in holding that unlike section 3(1)(f) of the Income Tax Act, there was no similar specific provision in the Wealth-tax Act or in the Rules that while ascertaining the partner's interest, the valuation date would be the last date of the accounting year of the partner?"
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However, during arguments, Shri Thakkar, learned Advocate appearing for the respective assessees has submitted that answer to question No. 1 is sufficient to decide the entire controversy. He further stated that method of valuation of interest of partners in the firms on the basis of value of shares as quoted in market as on 31/03/1981 or validity of its use, is not in dispute and, hence, the only issue to be gone into is - Whether on 31/03/1981, when previous year of respective firms had not ended and was scheduled to end on 30/06/1981, interest of partners in such firms could have been subjected to valuation in terms of Section 7(1) of the Wealth-tax Act read with Rule 2 of the Wealth-tax Rules? Answer to this issue answers first two questions mentioned supra. We are mentioning this at the threshold, because in compilation handed over by Advocate Shri Thakkar for the applicants for consideration, if written submissions are seen, at Step-1, the challenge to correctness of valuation procedure also appears to have been raised. However, the learned Advocate has not argued it and has submitted that as profit does not accrue on day to day basis, and it is only at the end of previous year of firms i.e. on 30/06/1981, overall view of business of the firms could have been taken and then interest of partners therein could have been worked out, the exercise undertaken on these lines on 31/03/1981 is not legal. He has added that when computation provision cannot be applied in present facts, the charging section also does not apply.
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Before proceeding further, brief mention of the facts is called for. Total eight assessees as partners filed applications before the ITAT seeking reference of above mentioned questions. On 18/03/1981, the assessees became partners either in M/s. Anant Trading Company or M/s. Kushagra Trading Company. They contributed equity shares held by them in M/s. Bajaj Tempo Limited as their capital in these new firms. These new firms closed their first account on 30/06/1981. The valuation date of assessees was 31/03/1981 and it is not in dispute even today for the assessment year 1981-82, the assessees did show their respective interest in these firms by submitting value of shares contributed by them at costs as their capital. The Wealth-tax Officer while passing assessment order substituted market value of those shares as on 31/03/1981, though firms' first year of account was to end & ended only on 30/06/1981.
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Respective assessees contended that as M/s. Anant Trading Company or M/s. Kushagra Trading Company had no previous year for the year which ended on 31/03/1981 and balance-sheet of these new firms was not prepared as on 31/03/1981, the cost of shares disclosed by them as capital in said firms should be taken as its cost value. Said contention came to be rejected through out and the ITAT has on 18/04/1988 dismissed the appeals of assessees against it. Thereafter, the assessees sought reference...
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