1986 (12) TMI 80 - AT - Wealth-tax

Summary

Issues:
Whether the sum of Rs. 8,81,666 can be included as an asset in the net wealth of the assessee for the assessment years 1975-76 to 1978-79.

Analysis:
The case involved a dispute over the inclusion of a sum of Rs. 8,81,666 as an asset in the net wealth of the assessee for the relevant assessment years. The dispute arose from a complex set of facts involving a property lease, subsequent ownership disputes, and an agreement between the Indian Hotel Co. Ltd. (IHCL) and the assessee and others. The IHCL intended to set up a five-star hotel on a property previously occupied by Fonseca (P.) Ltd. A memorandum of understanding was signed in March 1975, but before the shares could be transferred, the Ministry of Works & Housing took possession of the property, leading to a legal dispute. An arbitrator awarded the sum of Rs. 8,81,666 to the assessee, which was received in subsequent accounting periods.

The Income Tax Officer (ITO) initially held that the amount received was a capital receipt and not taxable under the Income-tax Act, 1961. However, the Wealth Tax Officer (WTO) included the sum in the net wealth of the assessee for the relevant assessment years. The assessee appealed these wealth tax assessments, arguing that the amount did not belong to him on the valuation dates and was received post the valuation dates. The Appellate Authority Commissioner (AAC) upheld the assessee's claim, stating that the amount did not become due on the valuation dates and hence should not be considered as part of the net wealth.

The Tribunal concurred with the AAC's decision, emphasizing that the amount in question was received by the assessee as a result of the arbitration award dated 17-3-1979, which was post the valuation dates for the wealth tax assessments. Since the assessee did not have a disposable right to the sum on the valuation dates, it could not be included as an asset in the net wealth. The Tribunal dismissed the revenue's appeals, affirming that the amounts were rightly deleted by the AAC, and there was no basis for interference in the order.