2013 (8) TMI 1059 - AT - Income Tax

Summary

Issues involved:
The judgment involves the interpretation of section 2(m) of the Wealth Tax Act regarding the treatment of advances received against plot booking and JDA charges as deductible debts for calculating the net wealth of the assessee. The key issues include whether such advances constitute debts under the Act, the utilization of these advances in acquiring taxable assets, and the proper calculation of wealth based on these debts.

WTA NO. 2 & 3/JP/2012:
The issue raised was whether the CIT (A) was justified in directing to calculate the wealth at the rate of 2% of the creditors shown by the assessee. The CIT (A) found that the advances received against plot booking and JDA charges were utilized for acquiring gold and car, considering them as advance sale receipts rather than debts deductible under section 2(m) of the Act.

C.O. NO. 24/JP/2012 & C.O. NO. 25/JP/2012:
The contention was that the CIT (A) erred in directing the calculation of net wealth at 2% of the outstanding creditors without appreciating that the advances received against plots/lands were utilized in purchasing taxable assets. The argument was that the net profit on advances received against land/plots was not available for investing in taxable assets.

Summary of Judgment:
The assessee filed returns of wealth for assessment years 2007-08 and 2008-09, declaring NIL wealth but disclosing assets like motor cars and jewelry/bullion. The Assessing Officer disallowed the claim made under section 2(m) of the Wealth Tax Act for debts incurred in relation to the assets, stating that advances received were not related to the wealth of the assessee.

The CIT (A) found that the advances were used for acquiring assets and were part of business transactions, not to be treated as deductible debts. The Ld. CIT (A) directed the Assessing Authority to calculate the wealth of the assessee at 2% of the credits of the outstanding creditors for both years under appeal.

The Tribunal modified the decision, stating that the advances against plot booking and JDA charges were utilized for acquiring assets, making them deductible debts under section 2(m) of the Act. The debts outstanding on the valuation dates were required to be deducted from the value of assets declared by the assessee, leading to the allowance of both appeals and cross objections for statistical purposes.