2002 (9) TMI 78 - HC - Income Tax

Whether there was jurisdiction to assess the company in liquidation for wealth-tax for the assessment years 1984-85 to 1986-87 unless and until the assessing authority established from the books that the assets exceed the liabilities in value? - The fact that the Wealth-tax Act does not contain a provision similar to section 178 of the Income-tax Act would not make any difference to the taxability of the net wealth of a closely held private company which has been subjected to a winding up order. - The Assessing Officer therefore was competent to make the assessment of the net wealth of a closely held private company the assessee herein even though that company had been subjected to a winding up order made by the company court. - The Assessing Officer having ascertained all the liabilities set out in the statement filed along with the return there was no further need for the Assessing Officer to verify the books of account of the company. - The question referred to us is therefore answered in favour of the Revenue and against the assessee.

Summary

Issues involved:
Jurisdiction to assess a company in liquidation for wealth-tax without establishing assets exceeding liabilities in value for assessment years 1984-85 to 1986-87.

Analysis:
The case involved a company in liquidation with valuable properties, including a building and land. The Assessing Officer assessed the company for wealth-tax after allowing all liabilities claimed in the return, totaling Rs. 59.55 lakhs. The main issue was whether a company in liquidation can be assessed for wealth-tax without proving assets exceed liabilities in value. The Commissioner reduced property valuations and granted relief to the assessee after examining the matter in detail. The Tribunal held that companies in liquidation are not exempt from wealth-tax assessment and upheld the Commissioner's valuation.

Legal Interpretation:
The Wealth-tax Act defines a company as one registered under the Companies Act, 1956, and mandates wealth-tax on the net wealth of companies not substantially owned by the public. The absence of a winding-up order requirement in the Act implies that a company remains a legal entity until dissolution, even during liquidation proceedings. Assets of a company in liquidation do not vest in the court but remain with the company until sold or distributed. The Act's lack of a provision like the Income-tax Act's section 178 does not affect the taxability of a closely held private company in liquidation.

Conclusion:
The court ruled in favor of the Revenue, stating that the Assessing Officer had the jurisdiction to assess the net wealth of a closely held private company in liquidation, even without verifying the company's books, as all liabilities were ascertained from the return. The judgment clarified that a company in liquidation can be subject to wealth-tax assessment, and the absence of specific provisions regarding winding-up orders does not impact the taxability of such companies.