2015 (4) TMI 1316 - AT - Income Tax

Valuation of motor cars - HELD THAT - As decided in own case we find that the Assessing Officer had valued the motor cars as per Rule 14(2)(a)(i) of Schedule-III of the Wealth Tax Act, 1957. That the Schedule-III of the Wealth Tax Act provides the rules for the valuation of the assets. The Assessing Officer has valued the assets as per rules prescribed under the Act for the valuation of assets. In view of the above, we find no merit in ground No.1, 1.1 1.2 of the assessee s appeal. The same are rejected. Non-allowance of deduction for the debt owed by the assessee in respect of taxable assets - AO did not accept the assessee s claim on the ground that the assessee has not been able to prove that the debt was Incurred in relation to the motor cars - HELD THAT - The assessee has referred to the balance sheet of the assessee as on the valuation date from which it is evident that the share capital and reserves and surplus taken together is ₹ 45.88 crores while the accumulative loss was ₹ 85.73 crores. Therefore, all the assets of the assessee company have been acquired out of the loan funds only. When the assessee has no funds of its own, then, in our opinion, the Assessing Officer was not justified in denying the deduction under Section 2(m) to the assessee

Summary

Issues:
1. Valuation of motor cars for wealth tax assessment.
2. Allowance of deduction for debt owed by the assessee in relation to taxable assets.

Analysis:

Issue 1: Valuation of motor cars for wealth tax assessment

The assessee appealed against the order of the Ld. Commissioner of Income Tax (Appeals) for the assessment year 2009-10, challenging the substitution of the taxable value of motor cars at a higher amount than declared. The CIT(A) upheld the assessing officer's action, valuing the motor cars based on the written down value (WDV) as per Rule 14 of the Wealth Tax Rules, 1957. The assessee contended that the WDV should not be adopted as the taxable value. The ITAT, Delhi Bench had previously dealt with similar grounds in the assessee's case for the assessment year 2008-09. The ITAT rejected the appeal, stating that the Assessing Officer had valued the motor cars in accordance with the rules under the Wealth Tax Act, and therefore, found no merit in the grounds raised by the assessee.

Issue 2: Allowance of deduction for debt owed by the assessee in relation to taxable assets

The second issue revolved around the non-allowance of a deduction for the debt owed by the assessee concerning taxable assets. The assessee claimed that the debt owed in relation to motor cars exceeded their value. The Assessing Officer denied the deduction, stating that the assessee failed to prove the debt was incurred in relation to the motor cars. The ITAT, in the previous case for the assessment year 2008-09, allowed the deduction, emphasizing that since the assessee had no funds of its own and all assets were acquired through loan funds, the denial of deduction under Section 2(m) was unjustified. Consequently, the ITAT decided in favor of the assessee on this issue, allowing the appeal partially.

In conclusion, the ITAT partly allowed the Wealth Tax Appeal filed by the assessee, following the precedent set in the previous case for the assessment year 2008-09. The judgment addressed the valuation of assets and the allowance of deductions, providing clarity on the application of rules and provisions under the Wealth Tax Act.