2009 (7) TMI 834 - HC - Wealth-tax

Asset u/ s2(ea)(vi) - Cash in hand - Parliament deliberately brought to tax cash in hand in the case of individuals and HUFs for the purpose of levy of wealth-tax in excess of the limit of Rs.50,000 by treating it as non-productive asset - Cash in hand of businessmen should be treated as productive asset also is meaningless - The Departmental appeals, reversing the orders of the Tribunal and by upholding the orders of the lower authorities holding that cash in hand in excess of Rs. 50,000 held by the individual assessees formed part of assets under section 2(ea)(vi) of the Act.

Summary

Issues:
Interpretation of the term "assets" under section 2(ea)(vi) of the Wealth-tax Act.

Analysis:
The High Court of Kerala heard wealth-tax appeals filed by the Revenue against the Tribunal's order regarding cash in hand exceeding Rs. 50,000 for individual assessees. The assessees argued that cash in hand is a business asset and not part of the definition of "assets" under the Wealth-tax Act. The court considered the scope of section 2(ea)(vi) and analyzed the pre and post-amendment provisions of the Act. The court noted that cash in hand above Rs. 50,000 is assessable for individuals and Hindu undivided families, while for companies, it is the amount not recorded in the books of account. The court emphasized that the Act specifically identifies taxable assets, and there is no ambiguity in the section. Cash in hand exceeding Rs. 50,000 for individuals and HUFs is considered an asset, while unrecorded cash in hand for companies is also taxable.

The court rejected the argument that cash in hand should be excluded as a productive asset, as there is no provision in the Act authorizing such exclusion. The court highlighted that Parliament identified non-productive assets for wealth-tax purposes and did not leave room for adjudication on the productivity of assets. Cash in the bank account is excluded as it is utilized for business purposes, but cash in hand exceeding Rs. 50,000 is considered a non-productive asset. The court emphasized that there is no basis for treating cash in hand of businessmen as a productive asset, as it is subject to wealth-tax. The court concluded that the Finance Minister's Budget Speech and the circular by the Central Board of Direct Taxes did not provide for the exclusion of cash in hand exceeding Rs. 50,000 for individuals and HUFs from the definition of "assets." Consequently, the court allowed the Departmental appeals, overturning the Tribunal's orders and upholding that cash in hand exceeding Rs. 50,000 for individual assessees constitutes part of assets under section 2(ea)(vi) of the Wealth-tax Act.