1985 (8) TMI 118 - AT - Income Tax

Summary

Issues:
- Assessment of pendente lite interest as part of net wealth for wealth tax purposes
- Ownership of pendente lite interest as an asset
- Treatment of pendente lite interest as an asset for wealth tax assessment

Analysis:
The judgment by the Appellate Tribunal ITAT Gauhati involved appeals by the revenue arising from a consolidated order passed by the AAC regarding the assessment of pendente lite interest as part of the net wealth for wealth tax purposes. The assessee, an individual contractor, received pendente lite interest under decrees passed by the sub-Judge, Silchar, which were later set aside by the Gauhati High Court. The revenue argued that the pendente lite interest should be included in the net wealth of the assessee as it was still in his possession. However, the Tribunal considered the nature of pendente lite interest and its treatment as an asset for wealth tax assessment.

The Tribunal noted that the right to receive pendente lite interest is not an actionable claim or property until awarded by a competent court. The pendente lite interest accrues only when awarded by the court and ceases to exist if the decree is set aside. In this case, the decrees awarding pendente lite interest were set aside by the High Court, extinguishing the assessee's right to retain the amount. Despite the assessee holding the money, the property in the amount did not belong to him, as it was a debt or liability owed to the State Government. The Tribunal emphasized that liability to wealth tax arises from ownership of assets, and mere possession without ownership does not constitute an asset for wealth tax purposes.

Based on the analysis, the Tribunal upheld the AAC's decision to delete the additions made by the WTO for the assessment years in question. The Tribunal concluded that the amount of pendente lite interest could not be considered part of the net wealth of the assessee and therefore could not be subject to wealth tax. Consequently, all departmental appeals were dismissed, affirming the consolidated order of the AAC on the matter.