1981 (9) TMI 169 - AT - Wealth-tax

Summary

Issues:
1. Inclusion of gross interim dividend in net wealth for assessment year 1974-75.
2. Whether tax deducted at source on the dividend should be included in the net wealth.

Analysis:
1. The appeal concerned the inclusion of a gross interim dividend from a company in the net wealth of the assessee for the assessment year 1974-75. The dispute revolved around whether the entire gross dividend or only the net dividend should be included. Both the WTO and the Commissioner (Appeals) held that the gross dividend should be included in the net wealth.
2. The assessee argued that the tax deducted at source should not be considered as part of the net wealth, citing provisions of the Income-tax Act and Wealth-tax Act. The contention was that until the dividend warrant is encashed, the dividend cannot be considered an asset of the assessee. The department, on the other hand, argued that the tax deducted at source forms part of the asset as defined under the Wealth-tax Act, and the right to claim a refund from the ITO establishes its inclusion in the net wealth.

3. The Tribunal agreed with the lower authorities that the entire dividend, including the tax component, should be included in the net wealth of the assessee. It was noted that the assessee did not dispute the inclusion of the net dividend, and the question focused on the tax deducted at source. The Tribunal emphasized that the dividend had been paid by the company to the assessee before the valuation date, making it a perfected debt.
4. Referring to relevant provisions of the Income-tax Act, the Tribunal concluded that the tax component deducted at source was part of the amount accrued to the assessee. The right to receive the dividend had already arisen before the valuation date, and the tax deduction was a subsequent compliance. Therefore, the entire dividend amount should be considered part of the net wealth of the assessee.

5. The Tribunal rejected the argument that the right to receive credit for the tax deducted at source was a personal right and not saleable in an open market. It emphasized the need to consider the existence of an open market for assessing the value of assets, even personal rights. Consequently, the Tribunal upheld the lower authorities' decision to include the entire dividend, including the tax component, in the net wealth of the assessee for the assessment year 1974-75.