1987 (2) TMI 116 - AT - Wealth-tax

Summary

Issues Involved:
1. Whether an Association of Persons (AOP) is an assessable entity under the Wealth-tax Act, 1957.
2. Whether the Wealth-tax Officer (WTO) was justified in treating the AOP as an individual for wealth-tax purposes.
3. Applicability of Section 21AA of the Wealth-tax Act, 1957, to the assessment years in question.

Issue-wise Detailed Analysis:

1. Assessability of AOP under the Wealth-tax Act, 1957:
The primary issue was whether the AOP, the Grand Lodge of India, is an assessable entity under the Wealth-tax Act, 1957. The AAC had held that the AOP is not an individual and hence not an assessable entity under the said Act. The WTO, however, contended that based on the Supreme Court judgment in WTO v. C.K. Mammed Kayi, the term 'individual' in Section 3 of the Act includes a 'body of individuals' (BOI), and thus, the AOP is liable to wealth-tax. The AAC's decision was based on various judgments, including those from the Gujarat and Bombay High Courts, which held that an AOP does not fall within the ambit of the term 'individual' as used in Section 3 of the Wealth-tax Act.

2. Justification of WTO's Treatment of AOP as an Individual:
The WTO's decision to treat the AOP as an individual was challenged. The WTO had relied on the Supreme Court's judgment in C.K. Mammed Kayi and the Allahabad High Court's decision in Smt. Prem Lata Agarwal v. CWT. The revenue argued that the WTO was justified in changing the status of the assessee from an AOP to an individual based on these judgments. However, the assessee cited various judgments from the Calcutta, Bombay, and Gujarat High Courts, which supported the view that an AOP is not an individual for wealth-tax purposes. The Tribunal noted that the Supreme Court's observations in C.K. Mammed Kayi were specific to the context of Mappilla Maru Makkathyam Tarwads and did not provide a basis for treating an AOP as an individual under the Wealth-tax Act.

3. Applicability of Section 21AA:
Section 21AA, introduced with effect from 1-4-1981, provides for the taxation of an AOP where the individual shares of its members are indeterminate or unknown. The revenue argued that this section is clarificatory in nature and should apply to the assessments in question. However, the Tribunal disagreed, stating that there was no indication in the Act that Section 21AA was intended to be retrospective. Moreover, the conditions for its application, such as the indeterminate or unknown shares of the members, were not established in this case. Therefore, Section 21AA was not applicable to the assessment years 1970-71 to 1975-76.

Conclusion:
The Tribunal concluded that the AAC was justified in holding that the AOP is not an individual and hence not an assessable entity under the Wealth-tax Act. The assessments made by the WTO were not in accordance with the law, and the AAC's orders canceling the assessments were confirmed. The appeals by the revenue were dismissed.