1987 (10) TMI 44 - HC - Wealth-tax

Summary

Issues:
1. Inclusion of gross interim dividend declared but encashed after the valuation date in the net wealth of the assessee for the assessment year 1974-75.
2. Whether gross dividend or net dividend (interim dividend declared less tax deducted at source) should be included as the value of the asset in the net wealth of the assessee for the assessment year 1975-76.

Analysis:
The case involved a dispute regarding the inclusion of a gross interim dividend declared but encashed after the valuation date in the net wealth of the assessee for the assessment year 1974-75. The assessee contended that the tax deducted at source under the Income-tax Act should not be considered part of her assets for the purpose of assessment under the Wealth-tax Act. The Revenue argued that the tax deducted at source was income of the assessee and should be included in her net wealth. The court analyzed the provisions of the Income-tax Act, emphasizing that tax deducted at source represents income received by the assessee, as per section 198 of the Act.

The court further explained that the liability to pay income tax is on the assessee, but the machinery for collection places the responsibility on the company deducting the tax. The court highlighted that the assessee is deemed to have received the entire dividend and paid the tax when the tax was deducted at source. Therefore, the tax deducted at source is considered part of the net wealth of the assessee. The court referred to the definition of "net wealth" under the Wealth-tax Act and concluded that tax already paid should not be treated as a debt owed by the assessee.

Regarding the second issue, the court addressed whether the gross dividend or the net dividend (after tax deduction at source) should be included in the net wealth of the assessee for the assessment year 1975-76. The court ruled in favor of the assessee, stating that the net dividend should be considered for the assessment, not the gross dividend. Consequently, the court declined to answer the first question and directed the parties to bear their respective costs. The judgment was to be forwarded to the Income-tax Appellate Tribunal, Cochin Bench for further action.