1978 (8) TMI 45 - HC - Wealth-tax

Summary

Issues:
1. Justification of deleting the amount from the assessment under the Wealth-tax Act.
2. Treatment of amounts drawn by directors as debts owed to the company.
3. Reopening of assessment under s. 17(1)(a) of the Act.

Analysis:
1. The case involved the deletion of an amount from the assessment under the Wealth-tax Act. The assessee, a public limited company, had settled a concealed income amount with the Investigation Commission for the assessment years 1940-41 to 1947-48. The Wealth Tax Officer (WTO) initiated proceedings under s. 17 of the W.T. Act for not disclosing the settled amount in the original return. The Appellate Assistant Commissioner (AAC) reduced the amount by expenses of personal nature. Both the assessee and the department appealed to the Tribunal. The Tribunal found that the company did not have any secret funds on relevant valuation dates, as the disclosed income was utilized and no amount was brought into the company's books. Consequently, the Tribunal deleted a portion of the amount from the assessment, leading to a favorable judgment for the assessee.

2. The revenue contended that amounts drawn by directors, which belonged to the company, could be treated as debts owed to the company. However, the court disagreed, stating that the directors did not receive loans from the company, and the transactions could not be considered as loans. Moreover, the events in question occurred more than ten years before the assessment years, and the debts had become time-barred. Therefore, the court upheld the Tribunal's decision that the amounts drawn by directors did not represent assets of the company on the valuation dates.

3. The Tribunal also raised a question regarding the reopening of assessment under s. 17(1)(a) of the Act. However, in light of the court's opinion on the first question, the party did not press the second question. Consequently, the court answered the first question in favor of the assessee and against the department, leaving the second question unanswered. The assessee was awarded costs amounting to Rs. 200.