1987 (10) TMI 45 - HC - Wealth-tax

Summary

Issues:
1. Inclusion of discounted value of gross dividend in net wealth calculation.
2. Exclusion of tax deducted at source in determining market value of deferred dividends.
3. Inclusion of interest due on deferred dividends in net wealth calculation.

Analysis:

Issue 1:
The Tribunal held that only the discounted value of the gross dividend should be included in the net wealth calculation. The Tribunal applied a discount of 15% on the gross amount of dividend remaining unpaid on each valuation date, and 20% on the second instalment of interest. The High Court disagreed with the Tribunal's approach, stating that any discount, whether actuarial or rough, was not justified by the Wealth-tax Act. The Court emphasized that the accrued right to receive payment of the dividend was part of the net wealth, regardless of the deferred payment. The Court declined to answer this question further, as the point regarding discounting required reconsideration by the Tribunal.

Issue 2:
The Tribunal ruled in favor of the assessee, stating that tax deducted at source from the dividends should be excluded in determining the market value of deferred dividends. This decision was based on a previous judgment. The High Court upheld the Tribunal's decision on this issue, ruling in favor of the assessee and against the Revenue.

Issue 3:
Regarding the interest due on deferred dividends, the High Court analyzed the legislative intent behind the Companies (Temporary Restrictions on Dividends) Amendment Act, 1975. The Court noted that the accrual of interest was also deferred to the respective periods stated in the Act. As a result, the Court answered this question in favor of the assessee and against the Revenue.

In conclusion, the High Court's judgment clarified the treatment of gross dividends, tax deductions, and interest on deferred dividends in the calculation of net wealth. The Court emphasized the accrued rights of the assessee and the legislative intent behind the relevant Acts, ruling in favor of the assessee on issues 2 and 3, while deferring further consideration on issue 1 to the Tribunal for reconsideration.