1998 (2) TMI 150 - AT - Wealth-tax

Summary

Issues:
- Charging of interest for more than one year at a time for non-payment of wealth-tax
- Non-application of provisions of section 220(2) read with rule 118

Analysis:
The assessee appealed against an order by DC(A) charging interest for non-payment of wealth-tax for more than one year at a time. The assessee argued that interest should have been charged year after year and demanded cancellation of the interest. The DC(A) concluded that there was no provision comparable to rule 118 in the Wealth-tax Rules and dismissed the appeals. The counsel argued that the provisions of rule 118 should apply for calculating interest under section 31(2) of the Wealth-tax Act. The counsel relied on various case laws to support the applicability of rule 118 and emphasized the need to charge interest for each year separately. The DC(A) order was set aside, and the Assessing Officer was directed to recompute interest for each financial year separately based on rule 118 of the Income-tax Rules, 1962.

The provisions of section 31(2) of the Wealth-tax Act and section 220(2) of the Income-tax Act were found to be identical. The provisions were amended in 1987, changing the interest calculation method. The Tribunal observed that the provisions of both acts were in pari materia before the amendment. The Tribunal accepted the counsel's arguments, considering the decisions in S.M. Zaki's case and Sundaram Industries Ltd.'s case. It was noted that while the Income-tax Rules had rule 118 for calculating interest under section 220(2), no similar rule existed for the Wealth-tax Act. The Tribunal concluded that the omission of a corresponding rule for wealth tax was inadvertent. The Tribunal directed the Assessing Officer to apply the provisions of rule 118 for calculating interest under section 31(2) before its amendment in 1989. The order of the DC(A) was set aside, and the Assessing Officer was instructed to recompute interest for each financial year separately.

In light of the decision regarding the application of rule 118 for calculating interest under the Wealth-tax Act, the Tribunal did not find it necessary to address other contentions raised by the counsel. Consequently, both appeals were allowed, and appropriate relief was granted to the assessee.