1982 (8) TMI 81 - AT - Wealth-tax

Summary

Issues Involved:

1. Valuation of shares for wealth tax purposes.
2. Inclusion of bad debts in the net wealth.
3. Inclusion of disputed sale proceeds in the net wealth.

Issue-wise Detailed Analysis:

1. Valuation of Shares for Wealth Tax Purposes:

The Wealth Tax Officer (WTO) included the value of shares held by the assessee in the net wealth at specific figures for the assessment years 1957-58 to 1961-62. The assessee claimed a 10% reduction in the aggregate value of shares due to various reasons, including the non-marketability of some shares, brokerage costs, and the fact that some shares were under attachment by the Income Tax Department.

The Tribunal noted that for wealth-tax purposes, valuation is based on a hypothetical market where a willing seller and a willing purchaser come into contact. The Tribunal found no justification for the reduction claimed by the assessee. The assessee, despite holding a substantial number of shares, failed to provide concrete evidence showing that the listed price was excessive or unrealizable. The claim was based on assertions and probabilities without specific evidence. Therefore, the Tribunal rejected the assessee's claim for a reduction in the value of shares for all the years under appeal.

2. Inclusion of Bad Debts in the Net Wealth:

The assessee claimed that certain amounts due from Kohinoor Traders P. Ltd. had become bad and irrecoverable and should not be included in the net wealth. The amounts due were listed for each assessment year, and the assessee argued that the winding-up petition against Kohinoor Traders P. Ltd. indicated no chance of recovery.

The Tribunal upheld the WTO's and the Commissioner of Wealth Tax (Appeals) (CWT (A))'s decisions, noting that on the valuation dates relevant to the years under appeal, there was no evidence of the amounts being irrecoverable. The winding-up petition was filed only in 1964, and there was insufficient evidence to show that the debt had become of no value during the years under appeal. However, the Tribunal directed the deletion of interest amounts debited to the account of Kohinoor Traders P. Ltd. during these years, as no recovery had been made.

3. Inclusion of Disputed Sale Proceeds in the Net Wealth:

The assessee claimed a deduction of Rs. 25 lakhs, representing the balance of the sale price of Harinagar Cane Farm, which was disputed by Harinagar Sugar Mills Ltd. The company argued that no amount was due and payable, and any amount, if at all due, was barred by limitation. A suit for recovery was pending, and the assessee argued that this amount should not be included in the net wealth.

The Tribunal found that the assessee had treated the amount as owing to the HUF and noted that the balance of Rs. 25 lakhs was shown as outstanding to the assessee. The Tribunal rejected the claim that the amount belonged to individuals rather than the HUF. However, the Tribunal acknowledged the substantial challenge to the assessee's title to the amounts due to ongoing litigation and rival claims. Therefore, the Tribunal decided to value this asset at Rs. 15 lakhs, considering the continuing litigation and the substantial interest of the assessee in the company.

Conclusion:

The Tribunal partly allowed the appeals, rejecting the claims for a reduction in the value of shares and the exclusion of bad debts but directing the deletion of interest amounts debited to Kohinoor Traders P. Ltd. The Tribunal also adjusted the value of the disputed sale proceeds, setting it at Rs. 15 lakhs.