2019 (8) TMI 5 - AT - Wealth-tax

Addition on account of cash in hand - treating the same as taxable wealth u/s 2(ea)(vi) - wealth tax appeal is against the finding of CIT(A) treating the cash in hand held by the assessee in his sole proprietorship concern M/s Kargil Bullion as a taxable asset liable for wealth tax - HELD THAT - Both the lower authorities erred in including the business asset i.e. cash in hand as wealth of the assessee. Ld. CIT(A) failed to appreciate that the alleged cash was part of regular cash in hand maintained by the assessee for the business purpose and due to the holiday on the last date of financial year and on the 1st 2nd April of the subsequent financial year, the cash received by the assessee on account of sale of gold at Noida and Agra branch on 30.03.2007 31.03.2007 remained as cash in hand which was subsequently, deposited in parts in the bank account on 3rd April 2007 4th April 2007 and 5th April 2007. As a result of which cash in hand as on 30.04.2007 was only ₹ 13,230/-. Therefore, the alleged amount being held by the assessee as a business asset in the capacity as proprietor of business concern M/s Kargil Bullion the same is not liable to be included as assets in the wealth of the assessee for the purpose of levying wealth tax. Thus, ground no.1 of the assessee s appeal is allowed.

Summary

Issues Involved:
1. Whether the cash in hand of ?4,91,38,518/- should be treated as taxable wealth under Section 2(ea)(vi) of the Wealth Tax Act.
2. Whether the debts owed against the assessed wealth should be allowed as deductions.

Issue-Wise Detailed Analysis:

1. Taxability of Cash in Hand:
The primary issue revolves around whether the cash in hand amounting to ?4,91,38,518/- should be treated as taxable wealth under Section 2(ea)(vi) of the Wealth Tax Act. The Assessing Officer (AO) observed that the cash in hand exceeded ?50,000/- and thus included the excess amount in the total wealth of the assessee. The AO was not convinced by the assessee's argument that the cash was a business asset and was deposited in the bank shortly after the financial year ended. The CIT(A) upheld this view, relying on the Kerala High Court's decisions in A.A. Salam and CIT vs. Smt. K.R. Ushasree.

The Tribunal, however, noted that the cash in hand was part of the business assets of the assessee's sole proprietorship, M/s Kargil Bullion. It referred to the Kolkata Tribunal's decision in Surendra Pal Singh vs. DCWT, which held that cash in hand as a business asset should not be included in the wealth tax. The Tribunal concluded that the cash in hand, being a business asset, should not be treated as taxable wealth under Section 2(ea)(vi) of the Wealth Tax Act.

2. Deduction of Debts Owed:
The second issue was whether the debts owed against the assessed wealth should be allowed as deductions. The assessee argued that the capital and liabilities, including unsecured loans and sundry creditors, should be deducted from the assets to compute the net wealth. The AO and CIT(A) did not accept this contention, focusing solely on the cash in hand exceeding ?50,000/-.

Given that the Tribunal allowed the first ground of appeal, it found that the second ground, which was an alternate claim, did not require adjudication. The Tribunal deemed it academic in nature since the primary issue had already been resolved in favor of the assessee.

Conclusion:
The Tribunal allowed the appeal, holding that the cash in hand of ?4,91,38,518/- was a business asset and should not be included in the taxable wealth under Section 2(ea)(vi) of the Wealth Tax Act. Consequently, the alternate ground regarding the deduction of debts owed was not adjudicated. The order was pronounced in the open court on 26.07.2019.