2004 (6) TMI 286 - AT - Wealth-tax

Summary

Issues Involved:
1. Jurisdiction under Section 17 of the Wealth Tax Act.
2. Non-passing of order on the first ground of appeal by the learned CWT(A).
3. Validity of the order under Section 16(5) of the Wealth Tax Act.
4. Valuation of unquoted equity shares of the Delhi Stock Exchange Ltd.
5. Charging of interest under Section 17(B) from the due date.

Detailed Analysis:

1. Jurisdiction under Section 17 of the Wealth Tax Act:
The primary issue was whether the initiation of reassessment proceedings under Section 17 was valid. The assessee contended that the reassessment was based on a mere change of opinion, which is not permissible. The Tribunal examined various precedents, including CIT vs. Foramer France, CIT vs. Tarajan Tea Co. (P) Ltd., and CIT vs. Kalvinator of India Ltd., which established that reassessment cannot be initiated on a mere change of opinion. However, the Tribunal found that the AO had new material information regarding the non-disclosure of the value of the stock exchange membership, which constituted valid grounds for reassessment. Therefore, the action under Section 17 was upheld as valid.

2. Non-passing of order on the first ground of appeal by the learned CWT(A):
The Tribunal noted that the learned CWT(A) did not pass any order regarding the first ground of appeal. This procedural lapse was acknowledged, but it did not affect the overall decision on the merits of the case.

3. Validity of the order under Section 16(5) of the Wealth Tax Act:
The assessee argued that the order under Section 16(5) was passed in a mechanical manner without proper application of mind. The Tribunal found that the AO had indeed considered all relevant facts and materials before passing the order. Hence, this ground was rejected.

4. Valuation of unquoted equity shares of the Delhi Stock Exchange Ltd.:
The Tribunal addressed multiple sub-issues under this heading:
- Separate Valuation of Shares and Ticket: The AO's method of valuing the shares and the trading ticket separately was contested. The Tribunal upheld the AO's method, stating that the ticket had a distinct value.
- Ignoring Clause 11 of Part C of Schedule III: The Tribunal found that the AO had followed the correct statutory provisions for valuation.
- Taxability of the Ticket: The Tribunal rejected the argument that the ticket was not taxable, referencing the binding precedent of the Hon'ble Bombay High Court in the case of Vijay Bubna.
- Intangible Nature of the Ticket: The Tribunal held that the ticket was a tangible asset and thus taxable.
- Integral Nature of the Ticket and Share: The Tribunal found that the ticket and share could be valued separately.
- Charitable Objectives of the Delhi Stock Exchange Ltd.: The Tribunal rejected the claim that the shares had no commercial value due to the charitable objectives of the exchange.
- Application of Clauses 11 and 20 Simultaneously: The Tribunal found no error in the AO's application of both clauses for valuation.
- Directive for Valuation: The Tribunal upheld the AO's valuation method and did not direct a change.
- Interest under Section 17(B): The Tribunal directed the AO to reconsider the charging of interest in accordance with the law after hearing the assessee.

5. Charging of interest under Section 17(B) from the due date:
The Tribunal noted that the AO should reconsider the charging of interest under Section 17(B) from the due date and make a decision in accordance with the law after providing the assessee an opportunity to be heard.

Conclusion:
The Tribunal upheld the validity of the reassessment proceedings under Section 17, the method of valuation of the unquoted equity shares, and the separate valuation of the trading ticket. The appeals were partly allowed for statistical purposes, directing the AO to reconsider certain aspects like the charging of interest under Section 17(B).