1994 (12) TMI 104 - AT - Wealth-tax

Summary

Issues:
1. Whether income-tax refunds not yet determined by the assessing authority can be considered as an asset for wealth-tax purposes.
2. Whether the excess advance tax paid can be treated as an asset of the assessee for wealth tax assessment.

Analysis:
The judgment by the Appellate Tribunal ITAT Bangalore dealt with the issue of whether income-tax refunds not yet determined by the assessing authority could be considered as an asset for wealth-tax purposes. The case involved two wealth-tax assessments where the AO had treated the excess of advance-tax paid over income-tax liabilities as an asset by way of income-tax refund due to the assessees. The CWT(A) relied on the decision of the Gujarat High Court and concluded that income-tax refunds could not be considered as assets until determined and ordered to be paid by the AO. The Department appealed this decision, citing the Madras High Court's ruling that excess advance tax paid is an asset of the assessee. The Tribunal noted conflicting decisions by various High Courts but ultimately agreed with the CWT(A) that income-tax refunds cannot be considered assets until determined by the taxing authority.

The Departmental Representative argued that advance tax or excess advance tax paid should be considered as assets of the assessee based on the Madras High Court's decision in T. V. Srinivasan v. CWT. The Madras High Court held that advance tax paid is an asset of the assessee, and the excess advance tax retains the character of an asset until the income-tax liability is determined. However, the Tribunal noted that other High Courts, including Gujarat and Rajasthan, disagreed with this view. The Tribunal agreed with the CWT(A) and held that income-tax refunds cannot be treated as assets for wealth-tax purposes solely based on excess advance tax paid.

In conclusion, the Tribunal dismissed the departmental appeals, upholding the decision of the CWT(A) to delete the additions of income-tax refunds as assets in the wealth-tax assessments. The Tribunal followed the view that income-tax refunds should not be considered assets until determined by the taxing authority, in line with the decisions of the Gujarat and Rajasthan High Courts. The judgment clarified that the mere possibility of receiving an income-tax refund in the future does not constitute an asset for wealth-tax purposes.