1982 (3) TMI 119 - AT - Wealth-tax

Summary

Issues:
1. Whether the sum received by the assessee as provident fund and gratuity is exempt under section 5 of the Wealth-tax Act, 1957 for the assessment year 1976-77.

Analysis:
The appeal before the Appellate Tribunal ITAT Chandigarh involved the question of whether the sum of Rs. 87,870 received by the assessee, constituted of provident fund and gratuity, was exempt under section 5 of the Wealth-tax Act, 1957. The assessee, a retired professor, had not received the amounts due to him on account of provident fund and gratuity by the valuation date of 31-3-1976. The revenue argued that since the assessee had retired before the valuation date, the amounts were taxable as debts owed. On the other hand, the assessee contended that without the amounts being sanctioned by the Government, he had no right of disposal over them, and thus, they were not taxable. The AAC had ruled in favor of the assessee, holding that the amounts were exempt from wealth-tax as they remained with the Government until sanctioned. The Tribunal upheld the AAC's decision, emphasizing that the amounts were not includible in the net wealth of the assessee as they were sanctioned after the valuation date.

The Tribunal considered the timing of the sanctioning of the provident fund and gratuity amounts. It noted that both amounts were sanctioned after the valuation date of 31-3-1976. The Tribunal highlighted that as per Government rules, the assessee was entitled to receive the amounts only after the orders sanctioning them were made. Since the orders were issued post the valuation date, the Tribunal concluded that the amounts were not includible in the net wealth of the assessee as of 31-3-1976. Additionally, the Tribunal pointed out that the provident fund amount included interest calculated after the valuation date, making it ineligible for inclusion in the net wealth. The Tribunal emphasized that gratuity had to be calculated based on a specific formula and sanctioned before being considered an asset for wealth-tax purposes. Therefore, the Tribunal upheld the AAC's decision to exempt the amounts from wealth-tax, dismissing the revenue's appeal.