1986 (7) TMI 40 - HC - Wealth-tax

Summary

Issues:
1. Challenge to the legality of notices issued under the Wealth-tax Act for assessment years 1973-74 to 1980-81.
2. Interpretation of section 5(1)(i) of the Wealth-tax Act regarding wealth-tax liability on properties held under trust for charitable purposes.
3. Determination of whether an association can be considered an assessee under section 3 of the Wealth-tax Act.

Analysis:
The petitioner, an association promoting cricket, challenged notices issued by the Wealth-tax Officer under the Wealth-tax Act for the assessment years 1973-74 to 1980-81. The petitioner contended that, as per section 5(1)(i) of the Wealth-tax Act, wealth-tax is not payable on properties held under trust for public charitable purposes. The association, registered under the Bombay Public Trusts Act and the Societies Registration Act, received certificates under the Income-tax Act confirming its charitable nature. The petitioner argued that it is not liable to pay wealth-tax on its assets, making the notices illegal.

The second contention raised was regarding whether the petitioner, being an association, could be considered an assessee under section 3 of the Wealth-tax Act. The petitioner argued that the association did not fall under the categories specified in section 3, citing precedents from the High Court. Despite the Revenue's reference to a contrary view from the Madras High Court, the judge upheld the decisions of the Division Bench of the Bombay High Court, stating that they were binding.

Furthermore, the petitioner argued that the notices were issued based on an audit report, which, as per the Supreme Court decision in Indian and Eastern Newspaper Society v. CIT, cannot confer jurisdiction on the Wealth-tax Officer to claim that wealth has escaped assessment. The Revenue did not refute this claim in an affidavit, leading the judge to conclude that initiating proceedings solely based on an audit report was illegal. As a result, the judge ruled in favor of the petitioner, making the rule absolute and not awarding costs to either party.